AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 25, 2002.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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CENDANT CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
06-0918165
(I.R.S. Employer Identification No.)
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9 WEST 57TH STREET
NEW YORK, NY 10019
(212) 413-1800
FAX: (212) 413-1922
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of each Registrant's Principal Executive Offices)
------------------------------
JAMES E. BUCKMAN, ESQ.
VICE CHAIRMAN AND GENERAL COUNSEL
CENDANT CORPORATION
9 WEST 57TH ST
NEW YORK, NY 10019
(212) 413-1800
FAX: (212) 413-1923
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
COPY TO:
VINCENT J. PISANO, ESQ. ERIC J. BOCK, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP SENIOR VICE PRESIDENT, LAW AND SECRETARY
4 TIMES SQUARE CENDANT CORPORATION
NEW YORK, NY 10036 9 WEST 57TH STREET
(212) 735-3000 NEW YORK, NY 10019
FAX: (212) 735-2000 (212) 413-1800
FAX: (212) 413-1922
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box.
/ /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please 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(c)
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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
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CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER DEBENTURE OFFERING PRICE REGISTRATION FEE
3 7/8% Convertible Senior Debentures due
2011........................................ $1,200,000,000(1) 97.4375%(2)(3) $1,169,250,000(2)(3) $107,571
CD Common Stock, par value, $0.01 per
share....................................... 49,896,050(4) -- -- (5)
(1) Represents the aggregate principal amount at maturity of the debentures that
were originally issued by the Registrant in November 2001.
(2) This estimate is made pursuant to Rule 457(c) of the Securities Act of 1933,
as amended, solely for purposes of determining the registration fee. The
above calculation is based on the average bid and ask prices for the
Registrant's debentures in secondary market transactions executed by the
Initial Purchaser of the debentures on Februry 19, 2002, as reported to the
Registrant by the Initial Purchaser.
(3) Exclusive of accrued interest.
(4) Represents the number of shares of CD common stock that are currently
issuable upon conversion of the debentures registered hereby.
(5) No separate consideration will be received for the shares of CD common stock
issuable upon conversion of the debentures and, therefore, no registration
fee is required pursuant to Rule 457(i) under the Securities Act.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING SECURITYHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING
OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED FEBRUARY 25, 2002
PROSPECTUS
$1,200,000,000
[LOGO]
3 7/8% CONVERTIBLE SENIOR DEBENTURES DUE 2011 AND SHARES
OF CD COMMON STOCK ISSUABLE UPON CONVERSION OF THE DEBENTURES
------------------
We issued the debentures in a private placement in November 2001 at an issue
price of $1,000 per debenture. Under this prospectus, the selling
securityholders named in this prospectus or in prospectus supplements may offer
and sell their debentures and the shares of CD common stock issuable upon
conversion of their debentures.
The debentures will mature on November 27, 2011. We will pay interest on the
debentures on May 30 and November 30 of each year, beginning May 30, 2002. We
will pay additional interest in the event of an upward interest adjustment as
described below.
We may redeem for cash some or all of the debentures at any time on or after
November 27, 2004 at a price equal to 100% of the principal amount of the
debentures to be redeemed plus accrued and unpaid interest to the redemption
date.
Holders may convert their debentures into 41.58 shares of our CD common
stock for each $1,000 principal amount of debentures (equivalent to an initial
conversion price of $24.05 per share based on the principal amount of the
debentures) under any of the following circumstances: (i) during any conversion
period (as defined in this prospectus) if the closing sale prices of our
CD common stock for at least 20 trading days in the 30 consecutive trading days
ending on the first day of such conversion period is more than 120%, declining
ratably to 110% as provided in this prospectus, of the accreted conversion price
per share of CD common stock on the first day of the conversion period; (ii) if
the debentures have been called for redemption; and (iii) upon the occurrence of
specified corporate transactions. The conversion rate may be adjusted as
described in this prospectus. The "accreted conversion price" as of any day will
equal 100% of the principal amount of the debenture plus accrued and unpaid
interest (excluding any accrued and unpaid interest payable as cash interest),
if any, divided by the number of shares of our CD common stock issuable upon
conversion of such debenture on that day.
The interest rate on the debentures will be 3 7/8% per year through
November 27, 2004. If the average of the sale prices of our CD common stock is
less than or equal to 45% of the accreted conversion price of the debentures for
any 20 out of the last 30 trading days ending five business days prior to each
May 30 and November 30 after November 27, 2004, then the interest rate on the
debentures will be subject to an upward interest adjustment to the reset rate
for the subsequent six-month period. The upward interest adjustment will result
in the interest rate on the debentures being equivalent to the per year reset
rate (as defined in this prospectus). If an upward interest adjustment is in
effect for a particular six-month period, we will pay a portion of the interest
adjustment as cash interest at a rate of 0.25% per year (0.125% per six-month
period) of the principal amount, plus accrued and unpaid interest (excluding
interest payable in cash), and the remaining additional interest will be accrued
and payable at maturity. Following a tax event (as defined in this prospectus),
we may elect to pay interest entirely in cash. After November 27, 2004, if the
average of the sale prices of our CD common stock is not less than or equal to
45% of the accreted conversion price of the debentures for any 20 out of the
last 30 trading days of the six-month period ending on the fifth business day
preceding each May 30 and November 30, then the interest rate on the debentures
for the subsequent six-month period will revert to 3 7/8% per year. For United
States federal income tax purposes, holders will be required to treat the
debentures as contingent payment debt instruments. You should read the
discussion of certain United States federal income tax consequences relevant to
the debentures beginning on page 40.
Holders may require us to purchase all or a portion of their debentures on
November 27, 2004 and November 27, 2008 at a price equal to 100% of the
principal amount of the debentures to be purchased plus accrued and unpaid
interest to such purchase date. We may choose to pay the purchase price in cash,
shares of our CD common stock or a combination of cash and shares of our
CD common stock.
Holders may also require us to purchase debentures for cash upon a change in
control. In the case of a purchase upon a change in control, the purchase price
will be equal to 100% of the principal amount of the debentures plus accrued and
unpaid interest.
The debentures are senior unsecured obligations and rank equally in right of
payment with all of our existing and future senior unsecured indebtedness.
Our CD common stock is listed on the New York Stock Exchange under the
symbol "CD." On February 22, 2002, the last reported sale price of our
CD common stock was $15.68.
INVESTING IN OUR DEBENTURES OR SHARES OF OUR CD COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 14 OF THIS PROSPECTUS.
We will not receive any of the proceeds from the sale of the debentures or
the shares of CD common stock by any of the selling securityholders. The
debentures and the shares of CD common stock may be offered in negotiated
transactions or otherwise, at market prices prevailing at the time of sale or at
negotiated prices. The timing and amount of any sale are within the sole
discretion of the selling securityholders. In addition, the shares of CD common
stock may be offered from time to time through ordinary brokerage transactions
on the New York Stock Exchange. See "Plan of Distribution." The selling
securityholders may be deemed to be "underwriters" as defined in the Securities
Act of 1933, as amended. Any profits realized by the selling securityholders may
be deemed to be underwriting commissions. If the selling securityholders use any
broker-dealers, any commission paid to broker-dealers and, if broker-dealers
purchase any debentures or shares of CD common stock as principals, any profits
received by such broker-dealers on the resale of the debentures or shares of CD
common stock may be deemed to be underwriting discounts or commissions under the
Securities Act.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS OR THE ACCOMPANYING PROSPECTUS SUPPLEMENT IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is , 2002.
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER
CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY CENDANT.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF CENDANT SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SECURITIES OTHER THAN THOSE
SPECIFICALLY OFFERED HEREBY OR OF ANY SECURITIES OFFERED HEREBY IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. THE INFORMATION CONTAINED IN THIS PROSPECTUS SPEAKS ONLY AS OF
THE DATE OF THIS PROSPECTUS UNLESS THE INFORMATION SPECIFICALLY INDICATES THAT
ANOTHER DATE APPLIES.
2
TABLE OF CONTENTS
PAGE
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Cautionary Statement Concerning
Forward-looking Statements......... 4
Incorporation of Certain Documents by
Reference.......................... 5
Prospectus Summary................... 7
The Offering......................... 9
Risk Factors......................... 14
Use of Proceeds...................... 17
Dividend Policy...................... 17
Ratio of Earnings to Fixed Charges... 17
PAGE
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Description of Debentures............ 18
Description of CD Common Stock....... 37
Certain United States Federal Income
Tax Consequences................... 40
Selling Securityholders.............. 46
Plan of Distribution................. 51
Legal Matters........................ 54
Experts.............................. 54
Where You Can Find More Information.. 54
3
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Forward-looking statements in this prospectus about Cendant are subject to
known and unknown risks, uncertainties and other factors which may cause our
actual results, performance or achievements to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. These forward-looking statements were based on
various factors and were derived utilizing numerous important assumptions and
other important factors that could cause actual results to differ materially
from those in the forward-looking statements. Forward-looking statements include
the information concerning our future financial performance, business strategy,
projected plans and objectives.
Statements preceded by, followed by or that otherwise include the words
"believes", "expects", "anticipates", "intends", "project", "estimates",
"plans", "may increase", "may fluctuate" and similar expressions or future or
conditional verbs such as "will", "should", "would", "may" and "could" are
generally forward-looking in nature and not historical facts. You should
understand that the following important factors and assumptions could affect our
future results and could cause actual results to differ materially from those
expressed in such forward-looking statements:
- the impacts of the September 11, 2001 terrorist attacks on New York City
and Washington D.C. on the travel industry in general, and our travel
businesses in particular, are not known at this time, but are expected to
include negative impacts on financial results due to reduced demand for
travel in the near term; other attacks, acts of war or measures taken by
governments in response thereto may negatively affect the travel industry,
our financial results and could also result in a disruption of our
business;
- the impact of the anthrax attacks through the United States mail system on
the marketing programs of our FISI Madison/BCI subsidiaries and on
Trilegiant are not known at this time, but may have negative impacts on
the financial results of such businesses if consumers become reluctant to
open and respond to such programs;
- the effect of economic conditions and interest rate changes on the economy
on a national, regional or international basis and the impact thereof on
our businesses;
- the effects of a decline in travel, due to political instability, adverse
economic conditions or otherwise, on our travel related business;
- the effects of changes in current interest rates, particularly on our real
estate franchise and mortgage businesses;
- the resolution or outcome of our unresolved pending litigation relating to
the previously announced accounting irregularities and other related
litigation;
- our ability to develop and implement operational, technological and
financial systems to manage growing operations and to achieve enhanced
earnings or effect cost savings;
- competition in our existing and potential future lines of business and the
financial resources of, and products available to, competitors;
- failure to reduce quickly our substantial technology costs in response to
a reduction in revenue, particularly in our computer reservations and
global distribution systems businesses;
- our failure to provide fully integrated disaster recovery technology
solutions in the event of a disaster;
- our ability to integrate and operate successfully acquired and merged
businesses and risks associated with such businesses, including the
acquisitions of Avis Group Holdings, Inc., Fairfield Resorts, Inc.,
Galileo International Inc. and Cheap Tickets, Inc., the compatibility of
the
4
operating systems of the combining companies, and the degree to which our
existing administrative and back-office functions and costs and those of
the acquired companies are complementary or redundant;
- our ability to obtain financing on acceptable terms to finance our growth
strategy and to operate within the limitations imposed by financing
arrangements and rating agencies;
- competitive and pricing pressures in the vacation ownership and travel
industries, including the car rental industry;
- changes in the vehicle manufacturer repurchase arrangements in our Avis
car rental business in the event that used vehicle values decrease; and
- changes in laws and regulations, including changes in accounting standards
and privacy policy regulation.
Other factors and assumptions not identified above were also involved in the
derivation of these forward-looking statements, and the failure of such other
assumptions to be realized as well as other factors may also cause actual
results to differ materially from those projected. Most of these factors are
difficult to predict accurately and are generally beyond our control.
You should consider the areas of risk described above in connection with any
forward-looking statements that may be made by us and our businesses generally.
Except for our ongoing obligations to disclose material information under the
federal securities laws, we undertake no obligation to release publicly any
revisions to forward-looking statements, to report events or to report the
occurrence of unanticipated events unless required by law. You are advised,
however, to consult any additional disclosures we make in our Quarterly Reports
on Form 10-Q, Annual Report on Form 10-K and Current Reports on Form 8-K to the
Securities and Exchange Commission (the "Commission"). See "Where You Can Find
More Information." Also note that we provide a cautionary discussion of risks
and uncertainties under "Risk factors" on page 14 of this prospectus. These are
factors that we think could cause our actual results to differ materially from
expected results. Other factors besides those listed here could also adversely
affect us. This discussion is provided as permitted by the Private Securities
Litigation Reform Act of 1995.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission allows us to "incorporate by reference" the information we
file with the Commission, which means that we can disclose important information
to you by referring to another document filed separately with the Commission.
The information that Cendant files after the date of this prospectus with the
Commission will automatically update and supersede this information. Cendant
incorporates by reference into this prospectus the documents listed below and
any future filings made with the Commission under sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
until all of the securities offered by this prospectus are sold.
- Annual Report on Form 10-K/A for the year ended December 31, 2000, filed
on July 3, 2001;
- Quarterly Report on Form 10-Q for the quarter ended September 30, 2001,
filed on November 14, 2001;
- Quarterly Report on Form 10-Q for the quarter ended June 30, 2001, filed
on August 14, 2001;
- Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2001,
filed on July 3, 2001;
- Current Reports on Form 8-K dated January 9, 2001, January 18, 2001,
February 7, 2001 (filed on February 8, 2001), February 8, 2001,
February 20, 2001, March 1, 2001 (filed on March 9, 2001), March 12, 2001,
April 2, 2001 (filed on April 3, 2001), April 18, 2001 (filed on
April 19, 2001), April 18, 2001 (filed on April 19, 2001), May 2, 2001,
May 4, 2001, May 10, 2001 (filed on
5
May 11, 2001), May 24, 2001 (filed on May 25, 2001), June 13, 2001 (filed
on June 15, 2001), June 15, 2001 (filed on June 18, 2001), July 2, 2001
(filed on July 3, 2001), July 10, 2001, July 18, 2001 (filed on July 19,
2001), July 19, 2001, July 23, 2001, July 30, 2001 (filed on July 31,
2001), July 31, 2001 (filed on August 1, 2001), August 1, 2001 (filed on
August 2, 2001), August 16, 2001, August 24, 2001 (filed on August 27,
2001), August 30, 2001, October 1, 2001 (filed on October 2, 2001),
October 15, 2001, October 17, 2001 (filed on October 18, 2001),
October 23, 2001, December 6, 2001, January 31, 2002, February 6, 2002
(filed on February 7, 2002) and February 14, 2002;
- Current Reports on Form 8-K/A dated January 19, 2001, March 21, 2001 and
July 23, 2001 (filed on July 24, 2001); and
- The description of Cendant's CD common stock contained in the Proxy
Statement dated February 10, 2000, filed on February 11, 2000.
All documents filed by Cendant with the Commission from the date of this
prospectus to the end of the offering of the debentures and shares of CD common
stock shall also be deemed to be incorporated herein by reference.
Any statement contained in a document incorporated or considered to be
incorporated by reference in this registration statement shall be considered to
be modified or superseded for purposes of this prospectus to the extent that a
statement contained in this registration statement or in any subsequently filed
document that is or is considered to be incorporated by reference modifies or
supersedes such statement. Any statement that is modified or superseded shall
not, except as so modified or superseded, constitute a part of this prospectus.
You may request a copy of any of the documents which are incorporated by
reference in this prospectus, other than exhibits which are not specifically
incorporated by reference into such documents and our Certificate of
Incorporation and By-laws, at no cost, by writing or telephoning Cendant at the
following:
Investor Relations
Cendant Corporation
9 West 57th Street
New York, NY 10019
Telephone: (212) 413-1800
6
PROSPECTUS SUMMARY
This prospectus constitutes part of a registration statement on Form S-3
that we filed with the Commission using a "shelf" registration process. Under
this shelf process, any selling securityholder may sell any combination of the
securities described in this prospectus in one or more offerings. This
prospectus provides you with a general description of the securities the selling
securityholders may offer. All references to "we," "us," "our," or "Cendant" in
this prospectus are to Cendant Corporation.
CENDANT
We are one of the foremost providers of travel and real estate services in
the world. We currently operate in five business segments: Real Estate Services,
Hospitality, Vehicle Services, Travel Distribution and Financial Services. Our
businesses provide a wide range of consumer and business services which are
intended to complement one another and create cross-marketing opportunities both
within each segment and between segments.
- Our Real Estate Services segment franchises real estate brokerage
businesses, provides home buyers with mortgages and assists in employee
relocations.
- Our Hospitality segment franchises hotel businesses and facilitates the
sale and exchange of vacation ownership interests.
- Our Vehicle Services segment operates and franchises car rental
businesses, provides fleet management services to corporate clients and
government agencies and operates parking facilities in the United Kingdom.
- Our Travel Distribution segment, created through the acquisitions of
Galileo International, Inc. and Cheap Tickets, Inc. in October 2001,
provides travel agencies, internet travel sites, corporations and
consumers with the ability to electronically access schedule and fare
information, book reservations and issue tickets for more than 500
airlines utilizing our computerized reservation system and provides
corporations and consumers with travel agency services.
- Our Financial Services segment provides marketing strategies primarily to
financial institutions by offering an array of financial and
insurance-based products to consumers, franchises tax preparation service
businesses and provides consumers with access to a variety of discounted
products and services.
Our principal executive offices are located at 9 West 57th Street, New York,
New York 10019. Our telephone number is (212) 413-1800. Our web site is
www.cendant.com. The information contained on our web site is not incorporated
by reference in this prospectus.
***
We continually explore and conduct discussions with regard to acquisitions
and other strategic corporate transactions in our industries and in other
franchise, franchisable or service businesses in addition to the transactions
previously announced. As part of our regular on-going evaluation of acquisition
opportunities, we currently are engaged in a number of separate, unrelated
preliminary discussions concerning possible acquisitions. The purchase price for
the possible acquisitions may be paid in cash, through the issuance of CD common
stock or other of our securities, borrowings, or a combination thereof. Prior to
consummating any such possible acquisition, we will need to, among other things,
initiate and complete satisfactorily our due diligence investigations; negotiate
the financial and other terms (including price) and conditions of such
acquisitions; obtain appropriate Board of Directors, regulatory and other
necessary consents and approvals; and, if necessary, secure financing. No
assurance can be given with respect to the timing, likelihood or business effect
of any possible
7
transaction. In the past, we have been involved in both relatively small
acquisitions and acquisitions which have been significant.
In addition, we continually review and evaluate our portfolio of existing
businesses to determine if they continue to meet our business objectives. As
part of our ongoing evaluation of such businesses, we intend from time to time
to explore and conduct discussions with regard to joint ventures, divestitures
and related corporate transactions. However, we can give no assurance with
respect to the magnitude, timing, likelihood or financial or business effect of
any possible transaction. We also cannot predict whether any divestitures or
other transactions will be consummated or, if consummated, will result in a
financial or other benefit to us. We intend to use a portion of the proceeds
from any such dispositions and cash from operations to retire indebtedness, make
acquisitions and for other general corporate purposes.
8
THE OFFERING
DEBENTURES..................... $1,200,000,000 aggregate principal amount of 3 7/8%
convertible senior debentures due 2011.
MATURITY....................... November 27, 2011.
RANKING........................ The debentures are senior unsecured obligations and rank
equally in right of payment with all of our existing and
future senior unsecured indebtedness. However, we are a
holding company and the debentures are effectively
subordinated to all existing and future obligations of our
subsidiaries.
INTEREST....................... 3 7/8% per year on the principal amount payable semiannually
on May 30 and November 30 of each year. We will pay
additional interest in the event of an upward interest
adjustment described below. See "Description of
Debentures--Interest."
INTEREST ADJUSTMENT............ The interest rate on the debentures is 3 7/8% per year
through November 27, 2004. If the average of the sale prices
of our CD common stock is less than or equal to 45% of the
accreted conversion price of the debentures for any 20 out
of the last 30 trading days ending five business days prior
to each May 30 and November 30, as applicable, commencing
after November 27, 2004, then the interest rate on the
debentures will be subject to an upward interest adjustment
to the applicable reset rate (as defined below) for the
subsequent six-month period. If an upward interest
adjustment is in effect and the average of the sale prices
of our CD common stock is not less than or equal to 45% of
the accreted conversion price of the debentures for any 20
out of the last 30 trading days of any six-month period
ending on the fifth business day preceding each May 30 and
November 30, as applicable, then the interest rate on the
debentures for the subsequent six-month period will revert
to 3 7/8% per year. If an upward interest adjustment is in
effect for a particular six-month period, we will pay a
portion of the interest adjustment as cash interest at an
annualized rate of 0.25% per year (0.125% per six-month
period) of the principal amount, plus any accrued and unpaid
non-cash interest, and the remaining interest will be
accrued and payable at maturity. Following a tax event (as
described below), we may elect to pay interest entirely in
cash.
The "applicable reset rate" for any six-month period in
which there is an upward interest adjustment will be set as
of each November 27 beginning on November 27, 2004 (each, a
"purchase date") and will be equal to the rate (the
"reference fixed rate") that would, in the sole and
reasonable judgment of the reset rate agent (as defined in
this prospectus) and one other nationally recognized
investment bank, result in a trading price of par for a
hypothetical issue of senior, non-convertible, fixed-rate,
callable debt securities of Cendant with (i) a final
maturity equal to the term from such purchase date until the
earlier of the next purchase date or maturity, (ii) an
aggregate principal amount equal to the then principal
amount of the debentures plus accrued and unpaid non-cash
interest and (iii) provisions that are, insofar as would be
practicable for an issue of senior, nonconvertible,
9
fixed-rate, callable debt securities, substantially
identical to those of the debentures; provided that the
reset rate from and after November 27, 2004 shall not
exceed 10% per year. If the reset rate agent determines in
its reasonable judgment that there is no suitable reference
fixed rate, the applicable rate of accretion for that period
will be the applicable rate of accretion then in effect,
such rate of accretion to remain in effect until the reset
rate agent determines that there is a suitable reference
fixed rate at which time the reset rate agent shall
determine a new applicable reset rate for the period ending
on the next reset rate determination date. The applicable
reset rate for a debenture that is subject to an upward
interest adjustment shall be determined as to any period for
which such adjustment is applicable until a new applicable
reset rate is in effect or until the original interest rate
is again in effect. See "Description of Debentures--Interest
Adjustment."
TAX EVENT...................... We can elect to pay all the interest on the debentures in
cash upon the occurrence of a tax event from and after the
date a tax event occurs instead of allowing that interest on
the debentures to accrete. If that happens, the principal
amount on which we pay interest will be restated and will be
equal to the principal amount of the debentures plus accrued
and unpaid non-cash interest on the date of restatement. See
"Description of Debentures--Tax Event."
CONVERSION RIGHTS.............. Holders may convert their debentures prior to stated
maturity under any of the following circumstances:
(i) during any conversion period if the closing sale prices
of our CD common stock for a period of at least 20 trading
days in the period of 30 consecutive trading days ending on
the first day of such conversion period is more than 120%,
declining ratably to 110% as provided in this prospectus, of
the accreted conversion price per share of CD common stock
on the first day of the conversion period. A conversion
period will be the period from and including the twelfth
trading day in a fiscal quarter to but not including the
twelfth trading day in the immediately following fiscal
quarter; or
(ii) if the debentures have been called for redemption; or
(iii) upon the occurrence of specified corporate
transactions described under "Description of
Debentures--Conversion Rights."
For each debenture surrendered for conversion, a holder will
receive 41.58 shares of our CD common stock. This represents
an initial conversion price of $24.05 per share of CD common
stock based on the principal amount of the debentures. As
described in this prospectus, the conversion rate may be
adjusted for certain reasons, but it will not be adjusted
for accrued interest. Upon conversion, holders will not
receive any cash payment representing accrued and unpaid
interest. Instead, accrued and unpaid interest will be
deemed paid by the CD common stock received by holders on
conversion. Debentures called for redemption may be
surrendered for conversion until the close of business two
business days prior to the redemption date. See "Description
of Debentures--Conversion Rights."
10
OPTIONAL REDEMPTION............ On or after November 27, 2004, we may redeem for cash all or
part of the debentures at any time, upon not less than 30
nor more than 60 days notice by mail to holders of
debentures, for a price equal to 100% of the principal
amount of the debentures to be redeemed plus any accrued and
unpaid interest to the redemption date. See "Description of
Debentures--Optional Redemption."
PURCHASE OF DEBENTURES BY
CENDANT AT THE OPTION OF THE
HOLDER....................... You have the right to require us to purchase all or a
portion of the debentures on November 27, 2004 and
November 27, 2008. In each case, the purchase price payable
will be equal to 100% of the principal amount of the
debentures to be purchased plus any accrued and unpaid
interest to the purchase date. We may choose to pay the
purchase price in cash or shares of our CD common stock, or
a combination of cash and shares of our CD common stock,
provided that we will pay accrued and unpaid cash interest
in cash. See "Description of Debentures--Purchase of
Debentures by Cendant at the Option of the Holder."
CHANGE IN CONTROL.............. If we undergo a change in control (as described in this
prospectus), you will have the option to require us to
purchase for cash all or any portion of your debentures not
previously called for redemption. We will pay a purchase
price equal to 100% of the principal amount of the
debentures to be purchased plus any accrued and unpaid
interest to the purchase date. See "Description of
Debentures--Change in Control."
EVENTS OF DEFAULT.............. If there is an event of default on the debentures, an amount
equal to 100% of the principal amount plus any accrued and
unpaid interest may be declared immediately due and payable.
These amounts automatically become due and payable in some
circumstances.
The following are events of default with respect to the
debentures:
- our failure for 30 days to pay when due any cash interest
(including additional interest payable pursuant to an upward
interest adjustment) on the debentures;
- our failure to pay the principal amount, plus accrued and
unpaid interest on the debentures, at maturity, upon
redemption, purchase at the option of the holder or
following a change in control, when the same becomes due and
payable;
- our default under any of our other instruments of
indebtedness with an outstanding principal amount of
$50,000,000 or more, individually or in the aggregate, which
has caused the holders of such indebtedness to declare such
indebtedness due and payable prior to its stated maturity;
- our default in the payment of principal or premium under
any of our other instruments of indebtedness, which default
is in an aggregate principal amount exceeding $50,000,000
and continues unremedied or unwaived for more than
30 business days;
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- our failure to comply with any of our covenants or
agreements in the debentures or the indenture for 60 days
after written notice is given by the trustee or by the
holders of at least 25% in principal amount of all
outstanding debentures; and
- some events involving bankruptcy, insolvency or
reorganization of Cendant.
See "Description of Debentures--Events of Default."
TAX............................ Pursuant to the indenture, for U.S. federal income tax
purposes, each holder has agreed to treat the debentures as
"contingent payment debt instruments" and be bound by our
application of the Treasury regulations that govern
contingent payment debt instruments, including our
determination that the rate at which interest will be deemed
to accrue for federal income tax purposes will be 9.29% per
year, which is the rate comparable to the rate we would have
to pay as of the initial issue date, on a fixed
nonconvertible debt security with no contingent payments,
both with terms and conditions otherwise comparable to those
of the debentures. Based on this agreement, (i) each holder
will be required to accrue interest on a constant yield to
maturity basis at that rate, with the result that a holder
will recognize taxable income significantly in excess of
cash received while the debentures are outstanding, and (ii)
a holder will recognize ordinary income upon a conversion of
a debenture into our CD common stock equal to the excess, if
any, between the value of the CD common stock received on
the conversion and the sum of the original purchase price of
the holder's debenture and accrued but unpaid interest.
The proper application of the regulations that govern
contingent payment debt instruments to a holder of a
debenture is uncertain in a number of respects, and if our
treatment were successfully challenged by the Internal
Revenue Service, it might be determined that, among other
differences, a holder should have accrued interest income at
a lower rate, should not have recognized income or gain upon
the conversion, and should not have recognized ordinary
income upon a taxable disposition of its debenture.
HOLDERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF AN
INVESTMENT IN THE DEBENTURES AND WHETHER AN INVESTMENT IN
THE DEBENTURES IS ADVISABLE IN LIGHT OF THE AGREED UPON TAX
TREATMENT AND THE HOLDER'S PARTICULAR TAX SITUATION. See
"Certain United States Federal Income Tax Consequences."
USE OF PROCEEDS................ We will not receive any of the proceeds from the sale by any
selling securityholder of the debentures or shares of CD
common stock offered under this prospectus.
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BOOK-ENTRY FORM................ The debentures were issued in book-entry form and are
represented by permanent global certificates deposited with,
or on behalf of, DTC and registered in the name of a nominee
of DTC. Beneficial interests in any of the debentures are
shown on, and transfers will be effected only through,
records maintained by DTC or its nominee and any such
interest may not be exchanged for certificated securities,
except in limited circumstances.
TRADING........................ The debentures issued in the initial private placement are
eligible for trading in The Portal Market. However,
debentures sold using this prospectus will no longer be
eligible for trading in The Portal Market. Our shares of CD
common stock are traded on the New York Stock Exchange under
the symbol "CD."
RISK FACTORS
An investment in the debentures or shares of our CD common stock involves
significant risks. You should carefully consider all of the information in this
prospectus. In particular, you should evaluate the specific risk factors set
forth under "Risk Factors" beginning on page 14.
13
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS AND OTHER INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS BEFORE DECIDING TO
PURCHASE ANY DEBENTURES OR SHARES OF CD COMMON STOCK.
WE HAVE HAD ACCOUNTING IRREGULARITIES AND RELATED LITIGATION AND GOVERNMENTAL
INVESTIGATIONS.
Cendant was created in December 1997, through the merger of HFS Incorporated
into CUC International, Inc. 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 report 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.
Following 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
were 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 SEC and the United States Attorney for the District of New Jersey have
conducted investigations relating to the matters referenced above. As a result
of the findings from our internal investigations, we made all adjustments
considered necessary by Cendant, which are reflected in our 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 we had violated certain financial reporting
provisions of the Exchange Act and ordered us to cease and desist from
committing any future violations of such provisions. No financial penalties were
imposed against us.
On December 7, 1999, we announced that we had 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. A portion of the PRIDES litigation had
previously been settled through the issuance of rights. Under the settlement
agreement, we would pay the class members approximately $2.85 billion in cash
and 50% of any recovery we may obtain in connection with claims we have asserted
against CUC's former public auditor. The definitive settlement document was
approved by the U.S. District Court by order dated August 14, 2000. Certain
parties in the class action appealed various aspects of the District Court's
orders approving the settlement. In August 2001, the U.S. Court of Appeals for
the Third Circuit affirmed the judgment of the District Court approving the
settlement (but remanded the case back to the District Court for further
proceedings concerning an award of fees to the class attorneys, a matter in
which we have no interest). One party in the class action has petitioned the
U.S. Supreme Court to hear her challenge to the plan of allocation of the
settlement funds among the class members. That petition is pending. The
settlement agreement required us to post collateral in the form of credit
facilities and/or surety bonds by November 13, 2000, which we have done.
14
The settlement does not encompass all litigations asserting claims against
us associated with the accounting irregularities. We do 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, we do not believe that the impact of such unresolved proceedings should
result in a material liability to us in relation to our financial position or
liquidity.
OUR HOLDING COMPANY STRUCTURE RESULTS IN STRUCTURAL SUBORDINATION AND MAY AFFECT
OUR ABILITY TO MAKE PAYMENTS ON THE DEBENTURES.
The debentures are obligations exclusively of Cendant. We are a holding
company and, accordingly, substantially all of our operations are conducted
through our subsidiaries. As a result, our cash flow and our ability to service
our debt, including the debentures, depends upon the earnings of our
subsidiaries. In addition, we depend on the distribution of earnings, loans or
other payments by our subsidiaries to us.
Our subsidiaries are separate and distinct legal entities. Our subsidiaries
have no obligation to pay any amounts due on the debentures or to provide us
with funds for our payment obligations, whether by dividends, distributions,
loans or other payments. In addition, any payment of dividends, distributions,
loans or advances by our subsidiaries to us could be subject to statutory or
contractual restrictions. Payments to us by our subsidiaries will also be
contingent upon our subsidiaries' earnings and business considerations.
Our right to receive any assets of any of our subsidiaries upon their
liquidation or reorganization, and therefore the right of the holders of the
debentures to participate in those assets, will be effectively subordinated to
the claims of that subsidiary's creditors, including trade creditors. In
addition, even if we were a creditor of any of our subsidiaries, our rights as a
creditor would be subordinate to any security interest in the assets of our
subsidiaries and any indebtedness of our subsidiaries senior to that held by us.
At September 30, 2001, our subsidiaries had $10.3 billion of indebtedness
(including debt under management and mortgage programs) and $375 million of
mandatorily redeemable preferred securities outstanding, without giving effect
to the use of proceeds from the offering of the debentures, in addition to other
liabilities, to which the debentures would have been structurally subordinated.
AN ACTIVE TRADING MARKET FOR THE DEBENTURES MAY NOT DEVELOP.
The debentures are a new issue of securities for which there currently is no
active trading market. We cannot assure you that an active trading market for
the debentures will develop or as to the liquidity or sustainability of any such
market, the ability of the holders to sell their debentures or the price at
which holders of the debentures will be able to sell their debentures. Future
trading prices of the debentures will depend on many factors, including, among
other things, trading prices of our CD common stock, prevailing interest rates,
the market for similar securities, our performance and other factors. In
addition, the debentures have a number of features, including conditions to
conversion, which, if not satisfied, could result in a holder receiving less
than the value of the CD common stock into which a debenture is otherwise
convertible. These features could adversely affect the value and trading price
for the debentures.
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE
IN CONTROL PURCHASE OR ANY PURCHASE AT THE OPTION OF THE HOLDERS.
On November 27, 2004 and November 27, 2008, and upon the occurrence of a
change in control of Cendant, holders of the debentures may require us to
purchase their debentures. However, it is possible that we would not have
sufficient funds at that time to make the required purchase of
15
debentures. In addition, certain important corporate events, such as leveraged
recapitalizations that would increase the level of our indebtedness, may not
constitute a change in control under the indenture. See "Description of
Debentures--Purchase of Debentures by Cendant at the Option of the Holder" and
"--Change in Control."
YOU SHOULD CONSIDER THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF OWNING
THE DEBENTURES.
While the proper tax treatment of a holder of the debentures is uncertain,
we and each holder have agreed in the indenture to treat the debentures as
"contingent payment debt instruments" and to be bound by our application of the
Treasury regulations that govern contingent payment debt instruments. Pursuant
to this agreement, a holder is required to accrue interest on a constant yield
to maturity basis at the rate as of the initial issue date on a fixed rate
nonconvertible debt security with no contingent payments but with terms and
conditions otherwise comparable to those of the debentures (9.29%). A holder
will recognize taxable income significantly in excess of cash received while the
debentures are outstanding. In addition, under the indenture, a holder will
recognize ordinary income, if any, upon a sale, exchange, conversion or
redemption of the debentures at a gain. See "Certain United States Federal
Income Tax Consequences."
16
USE OF PROCEEDS
We will not receive any of the proceeds from the sale by any selling
securityholder of the debentures or the shares of CD common stock.
DIVIDEND POLICY
We have never paid a cash dividend on our capital stock. We do not
anticipate paying cash dividends on our capital stock in the foreseeable future
and intend to retain all earnings to finance the operations and expansion of our
business and to reduce debt. The payment of cash dividends in the future will
depend on our earnings, financial condition and capital needs and on other
factors deemed relevant by our board of directors at that time. For further
information regarding our payment of dividends, see "Summary Comparison of Terms
of Existing Common Stock with Terms of CD Common Stock and Move.com Common
Stock" in our Proxy Statement, dated February 10, 2000, which is incorporated
herein by reference.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of
Cendant and its consolidated subsidiaries for each of the periods indicated:
NINE MONTHS ENDED FISCAL YEAR ENDED DECEMBER 31
SEPTEMBER 30, ----------------------------------------------------
2001 2000 1999 1998 1997 1996
--------------------- -------- -------- -------- -------- --------
2.71x 2.67x * 1.33x 1.50x 2.64x
------------------------
* Earnings were inadequate to cover fixed charges for the year ended
December 31, 1999 (deficiency of $688 million) as a result of unusual
charges of $3,032 million, partially offset by $1,109 million related to net
gains on dispositions of businesses. Excluding such charges and net gain,
the ratio of earnings to fixed charges was 2.98x.
The ratio of earnings to fixed charges is computed by dividing (i) income
(loss) before income taxes, minority interest and equity in Homestore.com, plus
fixed charges, less equity income (loss) in unconsolidated affiliates and
minority interest by (ii) fixed charges. Fixed charges consist of interest
expense on all indebtedness (including amortization of deferred financing costs)
and the portion of operating lease rental expense that is representative of the
interest factor (deemed to be one-third of operating lease rentals).
17
DESCRIPTION OF DEBENTURES
We issued the debentures under an indenture dated as of November 27, 2001,
between us and The Bank of Nova Scotia Trust Company of New York, as trustee.
The terms of the debentures include those provided in the indenture and those
provided in the registration rights agreement dated as of November 27, 2001,
between us and J.P. Morgan Securities Inc.
The following description is only a summary of the material provisions of
the debentures, the indenture and the registration rights agreement. We urge you
to read these documents in their entirety because they, and not this
description, define your rights as holders of these debentures. You may request
copies of these documents at our address set forth below under "Where You Can
Find More Information."
In this section, references to "Cendant," "we," "our" or "us" refer solely
to Cendant Corporation and not its subsidiaries.
GENERAL
The debentures are senior unsecured obligations of ours and are limited to
an aggregate principal amount of $1,200,000,000. The debentures will mature on
November 27, 2011. The debentures rank equally with all of our existing and
future senior unsecured indebtedness.
The debentures were initially offered at a price to investors of $1,000 per
debenture. The debentures accrue interest at a rate of 3 7/8% per year from the
most recent interest payment date to which interest has been paid or duly
provided, payable semiannually on May 30 and November 30 of each year, beginning
May 30, 2002. In addition, we will pay an upward interest adjustment (as defined
below) if it becomes payable. The maturity value of each debenture may exceed
$1,000 in the event an upward interest adjustment becomes payable on the
debentures. The debentures will be issued only in denominations of $1,000
principal amount and multiples of $1,000 principal amount.
Interest, including additional amounts in the event of an upward interest
adjustment, will be paid to the person in whose name a debenture is registered
at the close of business on May 15 or November 15, as the case may be,
immediately preceding the relevant interest payment date. Interest on the
debentures will be computed on the basis of a 360-day year composed of twelve
30-day months.
You have the option to convert your debentures into shares of our CD common
stock at a conversion rate of 41.58 shares of CD common stock per debenture.
This is equivalent to an initial conversion price of $24.05 per share of CD
common stock. The conversion rate is subject to adjustment if certain events
occur. Upon conversion, you will receive only shares of our CD common stock. You
will not receive any cash payment for interest accrued to the conversion date.
If any interest payment date, maturity date, redemption date or purchase
date of a debenture falls on a day that is not a business day, the required
payment of principal and interest will be made on the next succeeding business
day as if made on the date that the payment was due and no interest will accrue
on that payment for the period from and after the interest payment date,
maturity date, redemption date or purchase date, as the case may be, to the date
of that payment on the next succeeding business day. The term "business day"
means, with respect to any debenture, any day other than a Saturday, a Sunday or
a day on which banking institutions in The City of New York are authorized or
required by law, regulation or executive order to close.
Each holder has agreed in the indenture, for United States federal income
tax purposes, to treat the debentures as "contingent payment debt instruments"
and to be bound by our application of the Treasury regulations that govern
contingent payment debt instruments, including our determination that the rate
at which interest will be deemed to accrue for United States federal income tax
purposes will be 9.29%, which is the rate as of the initial issue date on a
fixed rate nonconvertible debt security with
18
no contingent payments but with terms and conditions otherwise comparable to
those of the debentures. Accordingly, each holder is required to accrue interest
on a constant yield to maturity basis at that rate, with the result that a
holder will recognize taxable income significantly in excess of cash received
while the debentures are outstanding. In addition, a holder will recognize
ordinary income upon a conversion of a debenture into shares of our CD common
stock equal to the excess, if any, of the value of the shares of CD common stock
received on the conversion and the sum of the original purchase price of the
holder's debenture and accrued but unpaid interest. However, the proper
application of the regulations that govern contingent payment debt instruments
to a holder of a debenture is uncertain in a number of respects, and if our
treatment were successfully challenged by the Internal Revenue Service, it might
be determined that, among other differences, a holder should have accrued
interest income at a lower rate, should not have recognized income or gain upon
the conversion, and should not have recognized ordinary income upon a taxable
disposition of its debenture.
EACH INVESTOR SHOULD CONSULT ITS TAX ADVISOR REGARDING THE TAX TREATMENT OF
AN INVESTMENT IN THE DEBENTURES AND WHETHER AN INVESTMENT IN THE DEBENTURES IS
ADVISABLE IN LIGHT OF THE AGREED UPON TAX TREATMENT AND THE INVESTOR'S
PARTICULAR TAX SITUATION.
INTEREST ADJUSTMENT
The interest rate on the debentures is 3 7/8% per year through November 27,
2004. If the average of the sale prices of our CD common stock is less than or
equal to 45% of the accreted conversion price of the debentures for any 20 out
of the last 30 trading days ending five business days prior to each May 30 and
November 30, as applicable, commencing after November 27, 2004, then the
interest rate on the debentures will be subject to an upward interest adjustment
to the applicable reset rate for the subsequent six-month period. If an upward
interest adjustment is then in effect and the average of the sale prices of our
CD common stock is not less than or equal to 45% of the accreted conversion
price of the debentures for any 20 out of the last 30 trading days of any
six-month period ending on the fifth business day preceding each May 30 and
November 30, then the interest rate on the debentures for the subsequent
six-month period will revert to 3 7/8% per year. If an upward interest
adjustment is in effect for a particular six-month period, we will pay a portion
of the interest adjustment as cash interest at a rate of 0.25% per annum (0.125%
per six-month period) of the principal amount, plus any accrued and unpaid
non-cash interest, and the remaining interest will be accrued and payable at
maturity. Following a tax event, we may elect to pay interest entirely in cash.
In the event of an upward interest adjustment, the maturity value of the
debentures will exceed their initial maturity value of $1,000.
The "sale price" of our CD common stock on any date means the closing per
share sale price (or if no closing sale price is reported, the average of the
bid and ask prices or, if more than one in either case, the average of the
average bid and the average ask prices) on that date as reported on the New York
Stock Exchange or, if our CD common stock is not listed on the New York Stock
Exchange, then as reported by the Nasdaq system.
In the event of any upward interest adjustment, we will disseminate a press
release through Dow Jones & Company, Inc. or Bloomberg Business News containing
this information or publish the information on our Web site or through such
other public medium as we may use at that time.
The "applicable reset rate" for any six-month period in which there is an
upward interest adjustment will be set as of the purchase date on which such
adjustment is required or, if the adjustment is required as of a date that is
not a purchase date, the immediately preceding purchase date, as determined by
the reset rate agent (as defined below). The applicable reset rate will be equal
to the rate (the "reference fixed rate") that would, in the sole and reasonable
judgment of the reset
19
rate agent, result in a trading price of par for a hypothetical issue of senior,
nonconvertible, fixed-rate, callable debt securities of Cendant with:
(i) a final maturity equal to the term from the most recent purchase date
until the earlier of the next purchase date or maturity;
(ii) an aggregate principal amount equal to the then principal amount of
the debentures plus accrued and unpaid interest (other than interest
payable in cash); and
(iii) provisions that are, insofar as would be practicable for an issue of
senior, nonconvertible, fixed-rate, callable debt securities,
substantially identical to those of the debentures.
In no case, however, will the applicable reset rate for the period from and
after November 27, 2004 be greater than 10% per year without the prior written
consent of Cendant. Also, if the reset rate agent determines in its reasonable
judgment that there is no suitable reference fixed rate, the applicable rate for
that period will be the applicable rate then in effect such rate to remain in
effect until the reset rate agent determines that there is a suitable reference
fixed rate at which time the reset rate agent shall determine a new applicable
reset rate for the period ending on the next reset rate determination date. The
applicable reset rate for a debenture that is subject to an upward interest
adjustment shall be determined as to any period for which such adjustment is
applicable until a new applicable reset rate is in effect or until the original
interest rate is again in effect.
RESET RATE AGENT; DETERMINATIONS CONCLUSIVE
J.P. Morgan Securities Inc. will act as the reset rate agent. For the
determination of the applicable reset rate, the reset rate agent shall seek
indicative reference rates from one other nationally recognized investment bank.
The determination of any applicable reset rate shall be made by the reset rate
agent by averaging the indicative reference rates of J.P. Morgan Securities Inc.
and obtained from such other investment bank. The determination of any
applicable reset rate by the reset rate agent will be conclusive and binding
upon the reset rate agent, Cendant, the trustee and the holders of the
debentures, in the absence of manifest error.
The reset rate agent may be removed at any time with or without cause by
Cendant giving at least sixty (60) days' written notice to the reset rate agent.
The reset rate agent may resign at any time upon giving at least thirty
(30) days' written notice to Cendant. A successor reset rate agent will be
appointed by Cendant.
INTEREST
We will pay interest on the debentures at a rate of 3 7/8% per year. In
addition, we will pay additional interest in the event of an upward interest
adjustment. Interest will be based on a 360-day year comprised of twelve 30-day
months, and will be payable semiannually on May 30 and November 30. Cash
interest as a result of an upward interest adjustment will be paid at the rate
of 0.25% per year (0.125% per six-month period). The record date for the payment
of interest to holders will be May 15 and November 15 of each year. Following a
tax event, we may elect to pay interest entirely in cash. We will give notice to
the holders of the debentures, no later than 30 days prior to each record date,
of the amount of cash interest to be paid as of the next interest payment date.
We will pay interest on the debentures by wire transfer or by check mailed to
the address of the registered holders of the debentures as of the record date
relating to each interest payment date.
You should be aware that interest that accrues for the period you hold the
debentures must be included in your gross income for United States federal
income tax purposes in accordance with the Treasury regulations that govern debt
instruments providing for contingent payments. For more information, see the
discussion below in the section captioned "Certain United States Federal Income
Tax Consequences."
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TAX EVENT
We can elect to pay the entire interest adjustment on the debentures in cash
from and after the date a tax event (as defined below) occurs instead of
allowing that interest to accrete. If that happens, the principal amount on
which we pay interest will be restated and will be equal to the principal amount
of the debentures as of the day of restatement plus accrued and unpaid non-cash
interest. This restated principal amount will be the amount due at maturity. If
we elect this option, interest will be based on a 360-day year comprised of
twelve 30-day months. Cash interest at the higher rate will accrue from our
option exercise date and will be payable semiannually on May 30 and November 30
(each, an "Interest Payment Date").
The term "tax event" means the receipt by us of an opinion of a nationally
recognized independent tax counsel experienced in such matters to the effect
that, as a result of:
- any amendment to or change (including any announced prospective change
(which will not include a proposed change)) in the laws (or any
regulations thereunder) of the United States or any political subdivision
or taxing authority of the United States or any political subdivision,
provided that a tax event will not occur more than 90 days before the
effective date of any prospective change in such laws or regulations; or
- any judicial decision or official administrative pronouncement, ruling,
regulatory procedure, notice or announcement, including any notice or
announcement of intent to adopt such procedures or regulations (an
"administrative action"); or
- any amendment to or change in the administrative position or
interpretation of any administrative action or judicial decision that
differs from the theretofore generally accepted position, in each case, by
any legislative body, court, governmental agency or regulatory body,
irrespective of the manner in which such amendment or change is made
known,
which amendment or change is effective or such administrative action or decision
is announced, in each case, on or after the date of this prospectus; there is
more than an insubstantial risk that interest on the debentures, including
interest pursuant to an upward interest adjustment, either:
- would not be deductible on a current accrual basis; or
- would not be deductible under any other method, in whole or in part, by us
for United States federal income tax purposes.
OPTIONAL REDEMPTION
No sinking fund is provided for the debentures. Prior to November 27, 2004,
the debentures are not redeemable. On or after November 27, 2004, at our option,
we may redeem the debentures for cash at any time in whole, or from time to time
in part, for a cash price equal to 100% of the principal amount of the
debentures to be redeemed, plus any accrued and unpaid interest. We will give
not less than 30 days' or more than 60 days' notice of redemption by mail to
debenture holders.
If we decide to redeem fewer than all of the outstanding debentures, the
trustee will select the debentures to be redeemed by lot, or on a pro rata basis
or by another method the trustee considers fair and appropriate.
If the trustee selects a portion of your debenture for partial redemption
and you convert a portion of the same debenture, the converted portion will be
deemed to be from the portion selected for redemption.
21
In the event of any redemption in part, we will not be required to:
- issue, register the transfer of or exchange any debenture during a period
beginning at the opening of business 15 days before any selection of
debentures for redemption and ending at the close of business on the
earliest date on which the relevant notice of redemption is deemed to have
been given to all holders of debentures to be so redeemed; and
- register the transfer of or exchange any debenture so selected for
redemption, in whole or in part, except the unredeemed portion of any
debenture being redeemed in part.
CONVERSION RIGHTS
Subject to the conditions described below, holders may convert each of their
debentures into shares of our CD common stock at a conversion ratio of 41.58
shares of our CD common stock per $1,000 principal amount of debentures
(equivalent to an initial conversion price of $24.05 per share of CD common
stock based on the principal amount of the debentures). The conversion rate and
the equivalent conversion price in effect at any given time are referred to in
this prospectus as the applicable conversion rate and the applicable conversion
price, respectively, and will be subject to adjustment as described below. A
holder may convert fewer than all of such holder's debentures so long as the
debentures converted are an integral multiple of $1,000 principal amount.
Holders may surrender their debentures for conversion into shares of our CD
common stock prior to stated maturity if any of the following conditions is
satisfied:
- during any conversion period (as defined below) if the closing sale prices
of our CD common stock for at least 20 trading days in the 30 trading day
period ending on the first day of such conversion period is more than
120%, declining ratably to 110% as provided below, of the accreted
conversion price per share of the CD common stock on the first day of the
conversion period;
- if we have called the debentures for redemption; or
- upon the occurrence of specified corporate transactions.
CONVERSION UPON SATISFACTION OF MARKET PRICE CONDITION
A holder may surrender any of its debentures for conversion into shares of
our CD common stock during any conversion period if the closing sale prices of
our CD common stock on the principal national securities exchange on which the
CD common stock is listed, for a period of at least 20 trading days in the
period of 30 consecutive trading days ending on the first day of such conversion
period is more than a specified percentage of the accreted conversion price per
share of CD common stock on the first day of the conversion period. The
"accreted conversion price" per share of our CD common stock as of any day will
equal 100% of the principal amount of the debentures, plus accrued and unpaid
non-cash interest, divided by the number of shares of CD common stock issuable
upon conversion of such debenture on that day. A conversion period will be the
period from and including the twelfth trading day in a fiscal quarter to but not
including the twelfth trading day in the immediately following fiscal quarter.
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From the date of initial issuance of the debentures through November 27,
2002, the specified percentage is 120% of the accreted conversion price. Such
percentage will decline ratably to 110% as set forth below:
PERIOD PERCENTAGE
------ ----------
11/28/02-11/27/03 118.88%
11/28/03-11/27/04 117.76%
11/28/04-11/27/05 116.64%
11/28/05-11/27/06 115.52%
11/28/06-11/27/07 114.40%
11/28/07-11/27/08 113.28%
11/28/08-11/27/09 112.16%
11/28/09-11/27/10 111.04%
11/28/10-11/27/11 110.00%
CONVERSION UPON REDEMPTION
A holder may surrender for conversion any of the debentures called for
redemption at any time prior to the close of business two business days prior to
the redemption date, even if it is not otherwise convertible at such time. If a
holder has already delivered a purchase notice or a change in control purchase
notice with respect to a debenture, however, the holder may not surrender that
debenture for conversion until the holder has withdrawn the notice in accordance
with the indenture.
CONVERSION UPON SPECIFIED CORPORATE TRANSACTIONS
Even if the market price condition described above has not occurred, if we
elect to:
- distribute to all holders of our CD common stock certain rights entitling
them to purchase, for a period expiring within 60 days, shares of our CD
common stock at less than the sale price at the time, or
- distribute to all holders of our CD common stock our assets, debt
securities or certain rights to purchase our securities, which
distribution has a per share value exceeding 10% of the sale price of our
CD common stock on the day preceding the declaration date for such
distribution,
we must notify the holders of the debentures at least 20 days prior to the
ex-dividend date for such distribution. Once we have given such notice, holders
may surrender their debentures for conversion at any time until the earlier of
the close of business on the business day prior to the ex-dividend date or our
announcement that such distribution will not take place. No adjustment to the
ability of a holder to convert will be made if the holder will otherwise
participate in the distribution without conversion.
In addition, if we are party to a consolidation, merger or binding share
exchange pursuant to which our CD common stock would be converted into cash,
securities or other property, a holder may surrender debentures for conversion
at any time from and after the date which is 15 days prior to the anticipated
effective date of the transaction until 15 days after the actual date of such
transaction. If we are a party to a consolidation, merger or binding share
exchange pursuant to which our CD common stock is converted into cash,
securities or other property, then at the effective time of the transaction, the
right to convert a debenture into CD common stock will be changed into a right
to convert it into the kind and amount of cash, securities or other property
which the holder would have received if the holder had converted its debentures
immediately prior to the transaction. If the transaction also constitutes a
"Change in Control," as defined below, a holder can require us to purchase all
or a portion of its debentures as described below under "--Change in Control."
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We will determine at the end of each quarter if the debentures are
convertible and notify the trustee and the conversion agent, which is The Bank
of Nova Scotia Trust Company of New York.
The initial conversion rate is 41.58 shares of CD common stock for each
debenture. This is equivalent to an initial conversion price of $24.05 per share
of CD common stock based on the principal amount of the debentures. You will not
receive any cash payment representing accrued and unpaid interest upon
conversion of a debenture. However, if debentures are converted after the record
date for payment of interest, holders of such debentures at the close of
business on the record date will receive the interest payable on such debentures
on the corresponding interest payment date notwithstanding the conversion. In
such case, the debentures upon surrender must be accompanied by funds equal to
the amount of interest payable on the principal amount of the debentures so
converted, unless such debentures have been called for redemption, in which case
no such payment shall be required. Upon conversion we will deliver to you a
fixed number of shares of our CD common stock and any cash payment to account
for fractional shares. The cash payment for fractional shares will be based on
the sale price of our CD common stock on the trading day immediately prior to
the conversion date. Delivery of shares of CD common stock will be deemed to
satisfy our obligation to pay the principal amount of the debentures, including
accrued interest. Accrued and unpaid interest will be deemed paid in full rather
than canceled, extinguished or forfeited. We will not adjust the conversion rate
to account for the accrued interest.
If you wish to exercise your conversion right, you must deliver an
irrevocable conversion notice, together, if the debentures are in certificated
form, with the certificated security, to the conversion agent who will, on your
behalf, convert the debentures into shares of our CD common stock. You may
obtain copies of the required form of the conversion notice from the conversion
agent.
Based on our treatment of the debentures for United States federal income
tax purposes, as discussed above, a holder would be required to recognize
ordinary income upon a conversion of a debenture into shares of our CD common
stock equal to the excess, if any, between the value of the shares of our CD
common stock received on the conversion and the sum of the original purchase
price of the holder's debenture and accrued but unpaid interest. For a more
detailed discussion, see "Certain United States Federal Income Tax
Consequences."
The conversion rate will be subject to adjustment upon the following events:
- the payment of dividends and other distributions payable exclusively in
shares of our CD common stock on our CD common stock;
- the issuance to all holders of our CD common stock of rights or warrants
that allow the holders to purchase shares of our CD common stock at less
than the then current market price; provided that no adjustment will be
made if holders of the debentures may participate in the transaction on a
basis and with notice that our board of directors determines to be fair
and appropriate or in some other cases;
- subdivisions or combinations of our CD common stock;
- the payment of dividends and other distributions to all holders of our CD
common stock consisting of our debt, securities or assets or certain
rights to purchase our securities, except for those rights or warrants
referred to in the second bullet clause above and dividend and other
distributions paid exclusively in cash, and excluding cash dividends or
other cash distributions from current or retained earnings unless the
annualized amount thereof per share exceeds 10% of the closing price of
the shares of CD common stock on the day preceding the date of the
declaration of such dividend or distribution, provided that no adjustment
will be made if all holders of the debenture may participate in the
transactions;
24
- the payment to holders of our CD common stock in respect of a tender or
exchange offer, other than an odd-lot offer, by us or any of our
subsidiaries for our CD common stock to the extent that the offer involves
aggregate consideration that, together with (1) any cash and the fair
market value of any other consideration payable in respect of any tender
offer by us or any of our subsidiaries for shares of our CD common stock
consummated within the preceding 12 months not triggering a conversion
price adjustment and (2) all-cash distributions to all or substantially
all stockholders made within the preceding 12 months not triggering a
conversion price adjustment, exceeds an amount equal to 10% of the market
capitalization of our CD common stock on the expiration date of the tender
offer; and
- the distribution to all or substantially all stockholders of all-cash
distributions in an aggregate amount that, together with (1) any cash and
the fair market value of any other consideration payable in respect of any
tender offer by us or any of our subsidiaries for shares of our CD common
stock consummated within the preceding 12 months not triggering a
conversion price adjustment and (2) all other all-cash distributions to
all or substantially all stockholders made within the preceding 12 months
not triggering a conversion price adjustment, exceeds an amount equal to
10% of the market capitalization of our CD common stock on the business
day immediately preceding the day on which we declare the distribution.
In the event we elect to make a distribution described in the second or
fourth bullet above which, in the case of the fourth bullet, has a per share
value equal to more than 10% of the sale price of our shares of CD common stock
on the day preceding the declaration date for such distribution, we will be
required to give notice to the holders of the debentures at least 20 days prior
to the ex-dividend date for such distribution and, upon the giving of such
notice, the debentures may be surrendered for conversion at any time until the
close of business on the business day prior to the ex-dividend date or until we
announce that such distribution will not take place. No adjustment to the
conversion rate or the ability of a holder of a debenture to convert will be
made if the holder will otherwise participate in the distribution without
conversion or in certain other cases.
If we were to adopt a stockholder rights plan under which we issue rights
providing that each share of our CD common stock issued upon conversion of the
debentures at any time prior to the distribution of separate certificates
representing the rights will be entitled to receive rights, there shall not be
any adjustment to the conversion rate as a result of:
- the issuance of the rights;
- the distribution of separate certificates representing the rights;
- the exercise or redemption of the rights in accordance with any rights
agreement; or
- the termination or invalidation of the rights.
The applicable conversion price will not be adjusted:
- upon the issuance of any shares of our CD common stock pursuant to any
present or future plan providing for the reinvestment of dividends or
interest payable on our securities and the investment of additional
optional amounts in shares of our CD common stock under any plan;
- upon the issuance of any shares of our CD common stock or options or
rights to purchase those shares pursuant to any present or future
employee, director or consultant benefit plan or program of Cendant; or
- upon the issuance of any shares of our CD common stock pursuant to any
option, warrant, right, or exercisable, exchangeable or convertible
security outstanding as of the date the debentures were first issued.
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We may increase the conversion rate as permitted by law for at least
20 days, so long as the increase is irrevocable during the period. If any action
would require adjustment of the conversion rate under more than one of the
provisions described above, only one adjustment will be made and that adjustment
will be the amount of adjustment that has the highest absolute value to the
holders of the debentures. No adjustment in the applicable conversion price will
be required unless the adjustment would require an increase or decrease of at
least 1% of the applicable conversion price. If the adjustment is not made
because the adjustment does not change the applicable conversion price by more
than 1%, then the adjustment that is not made will be carried forward and taken
into account in any future adjustment. Except as specifically described above,
the applicable conversion price will not be subject to adjustment in the case of
the issuance of any of our CD common stock, or securities convertible into or
exchangeable for our CD common stock.
PURCHASE OF DEBENTURES BY CENDANT AT THE OPTION OF THE HOLDER
Holders have the right to require us to purchase all or a portion of the
debentures on November 27, 2004 and November 27, 2008. We will be required to
purchase any outstanding debentures for which a holder delivers a written
purchase notice to the paying agent. This notice must be delivered during the
period beginning at any time from the opening of business on the date that is 20
business days prior to the relevant purchase date until the close of business on
the last day prior to the purchase date. If the purchase notice is given and
withdrawn during the period, we will not be obligated to purchase the related
debentures. Our purchase obligation will be subject to some additional
conditions as described in the indenture. Also, our ability to satisfy our
purchase obligations may be affected by the factors described in "Risk Factors"
under the caption "We may not have the ability to raise the funds necessary to
finance the change in control purchase or any purchase at the option of the
holders."
The purchase price payable will be equal to 100% of the principal amount of
the debentures to be purchased plus any accrued and unpaid interest to such
purchase date.
We may choose to pay the purchase price in cash or shares of our CD common
stock or a combination of cash and shares of our CD common stock, provided that
we will pay any accrued cash interest in cash. For a discussion of the United
States federal income tax treatment of a holder receiving cash, shares of our CD
common stock or any combination thereof, see "Certain United States Federal
Income Tax Consequences."
If we choose to pay the purchase price in whole or in part in shares of our
CD common stock or a combination of cash and shares of our CD common stock, we
will be required to give notice on a date not less than 20 business days prior
to each purchase date to all holders at their addresses shown in the register of
the registrar, and to beneficial owners as required by applicable law (i.e., if
no notice is given, we will pay the purchase price with cash), stating, among
other things:
- whether we will pay the purchase price of the debentures in cash, in
shares of our CD common stock, or any combination thereof, specifying the
percentages of each;
- if we elect to pay with shares of our CD common stock, the method of
calculating the price of our CD common stock; and
- the procedures that holders must follow to require us to purchase their
debentures.
If we pay with shares of our CD common stock, they will be valued at 100% of
the average closing sales prices for the five trading days ending on the third
business day prior to purchase.
Simultaneously with such notice of purchase, we will disseminate a press
release through Dow Jones & Company, Inc. or Bloomberg Business News containing
this information and publish the information on our Web site or through such
other public medium as we may use at that time.
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A holder's notice electing to require us to purchase your debentures must
state:
- if certificated debentures have been issued, the debentures certificate
numbers, or if not certificated, your notice must comply with appropriate
DTC procedures;
- the portion of the principal amount of debentures to be purchased, in
multiples of $1,000;
- that the debentures are to be purchased by us pursuant to the applicable
provisions of the debentures; and
- in the event we elect, pursuant to the notice that we are required to
give, to pay the purchase price in shares of our CD common stock, in whole
or in part, but the purchase price is ultimately to be paid to the holder
entirely in cash because any of the conditions to payment of the purchase
price or portion of the purchase price in shares of our CD common stock is
not satisfied prior to the close of business on the last day prior to the
purchase date, as described below, whether the holder elects:
(1) to withdraw the purchase notice as to some or all of the debentures
to which it relates, or
(2) to receive cash in respect of the entire purchase price for all
debentures or portions of debentures subject to the purchase notice.
If the holder fails to indicate the holder's choice with respect to the
election described in the final bullet point above, the holder will be deemed to
have elected to receive cash in respect of the entire purchase price for all
debentures subject to the purchase notice in these circumstances. For a
discussion of the United States federal income tax treatment of a holder
receiving cash instead of shares of our CD common stock, see "Certain United
States Federal Income Tax Consequences."
You may withdraw any purchase notice by a written notice of withdrawal
delivered to the paying agent prior to the close of business on the last day
prior to the purchase date. The notice of withdrawal must state:
- the principal amount of the withdrawn debentures;
- if certificated debentures have been issued, the certificate numbers of
the withdrawn debentures, or if not certificated, your notice must comply
with appropriate DTC procedures; and
- the principal amount, if any, which remains subject to the purchase
notice.
If we elect to pay the purchase price, in whole or in part, in shares of our
CD common stock, the number of shares to be delivered by us will be equal to the
portion of the purchase price to be paid in shares of our CD common stock
divided by the market price of one share of our CD common stock as determined by
us in our purchase notice. We will pay cash based on the market price for all
fractional shares.
The "market price" means the average of the sale prices of our CD common
stock for the five trading day period ending on the third business day prior to
the applicable purchase date (if the third business day prior to the applicable
purchase date is a trading day, or if not, then on the last trading day prior to
the third business day), appropriately adjusted to take into account the
occurrence, during the period commencing on the first of the trading days during
the five trading day period and ending on the purchase date, of some events that
would result in an adjustment of the conversion rate with respect to our CD
common stock.
The "sale price" of our CD common stock on any date means the closing per
share sale price (or if no closing sale price is reported, the average of the
bid and ask prices or, if more than one in either case, the average of the
average bid and the average ask prices) on that date as reported in composite
transactions for the principal U.S. securities exchange on which our CD common
stock is traded or, if
27
our CD common stock is not listed on a U.S. national or regional securities
exchange, as reported by the Nasdaq system.
Because the market price of our CD common stock is determined prior to the
applicable purchase date, holders of the debentures bear the market risk with
respect to the value of our CD common stock to be received from the date the
market price is determined to the purchase date. We may pay the purchase price
or any portion of the purchase price in shares of our CD common stock only if
the information necessary to calculate the market price is published in a daily
newspaper of national circulation.
Upon determination of the actual number of shares of our CD common stock to
be paid upon redemption of the debentures, we will disseminate a press release
through Dow Jones & Company, Inc. or Bloomberg Business News containing this
information or publish the information on our Web site or through such other
public medium as we may use at that time.
A holder must either effect book-entry transfer or deliver the debentures,
together with necessary endorsements, to the office of the paying agent after
delivery of the purchase notice to receive payment of the purchase price. You
will receive payment on the purchase date or the time of book-entry transfer or
the delivery of the debentures. If the paying agent holds money or securities
sufficient to pay the purchase price of the debentures on the business day
following the purchase date, then:
- the debentures will cease to be outstanding;
- interest, including any interest payable pursuant to an interest
adjustment will cease to accrue; and
- all other rights of the holder will terminate.
This will be the case whether or not book-entry transfer of the debentures
is made or whether or not the debenture is delivered to the paying agent.
We will comply with the provisions of Rule 13e-4 and any other tender offer
rules under the Exchange Act which may be applicable at the time. We will file
Schedule TO or any other schedule required in connection with any offer by us to
purchase the debentures at your option.
RANKING
The debentures are senior unsecured obligations and rank equally in right of
payment with all of our existing and future senior unsecured indebtedness.
We currently conduct substantially all our operations through our
subsidiaries, and our subsidiaries generate substantially all of our operating
income and cash flow. As a result, distributions or advances from our
subsidiaries are the principal source of funds necessary to meet our debt
service obligations. Contractual provisions or laws, as well as our
subsidiaries' financial condition and operating requirements, may limit our
ability to obtain cash from our subsidiaries that we require to pay our debt
service obligations, including payments on the debentures. In addition, holders
of the debentures will have a junior position to the claims of creditors of our
subsidiaries on their assets and earnings. At September 30, 2001, our
subsidiaries had $10.3 billion of indebtedness (including debt under management
and mortgage programs) and $375 million of mandatorily redeemable preferred
securities outstanding, to which the debentures would have been structurally
subordinated.
As of September 30, 2001, after giving pro forma effect to the repayment of
our term loan, the offering of the debentures in the initial private placement
and the application of the net proceeds therefrom, we would have had
approximately $5.8 billion of indebtedness outstanding (including $863 million
of Upper DECS and excluding subsidiary indebtedness), which would have ranked
equally with the debentures.
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CHANGE IN CONTROL
If a Change in Control (as defined below) occurs, a holder of the debentures
will have the right, at its option, to require us to purchase all of its
debentures not previously called for redemption, or any portion of the principal
amount thereof, that is equal to $1,000 or an integral multiple of $1,000. The
price we are required to pay is equal to 100% of the principal amount of the
debentures to be purchased plus accrued and unpaid interest to the purchase
date.
Within 30 days after the occurrence of a Change in Control, we are obligated
to give to the holders of the debentures notice of the Change in Control and of
the purchase right arising as a result of the Change in Control. We must also
deliver a copy of this notice to the trustee. To exercise the purchase right, a
holder of the debentures must deliver on or before the 30th day after the date
of our notice irrevocable written notice to the trustee of the holder's exercise
of its purchase right, together with the debentures with respect to which the
right is being exercised. We are required to purchase the debentures on the date
that is 45 days after the date of our notice.
A Change in Control will be deemed to have occurred at the time after the
debentures are originally issued that any of the following occurs:
(1) any person, including any syndicate or group deemed to be a "person"
under Section 13(d)(3) of the Exchange Act, acquires beneficial
ownership, directly or indirectly, through a purchase, merger or other
acquisition transaction or series of transactions, of shares of our
capital stock entitling the person to exercise 50% or more of the total
voting power of all shares of our capital stock that is entitled to vote
generally in elections of directors, other than an acquisition by us, any
of our subsidiaries or any of our employee benefit plans; or
(2) we merge or consolidate with or into any other person, any merger of
another person into us, or we convey, sell, transfer or lease all or
substantially all of our assets to another person, other than any
transaction in (1) or (2) above:
- that does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of our capital stock, or
- pursuant to which the holders of our CD common stock immediately prior
to the transaction have the entitlement to exercise, directly or
indirectly, 50% or more of the total voting power of all shares of
capital stock entitled to vote generally in the election of directors
of the continuing or surviving corporation immediately after the
transaction, or
- which is effected solely to change our jurisdiction of incorporation
and results in a reclassification, conversion or exchange of
outstanding shares of our CD common stock solely into shares of common
stock of the surviving entity.
However, a Change in Control will not be deemed to have occurred if either:
(A) the closing price per share of our CD common stock for any five trading
days within the period of 10 consecutive trading days ending immediately
after the later of the Change in Control or the public announcement of
the Change in Control in the case of a Change in Control relating to an
acquisition of capital stock, or the period of 10 consecutive trading
days ending immediately before the Change in Control, in the case of
Change in Control relating to a merger, consolidation or asset sale,
equals or exceeds 105% of the conversion price of the debentures in
effect on each of those trading days, or
(B) all of the consideration (excluding cash payments for fractional shares
and cash payments made pursuant to dissenters' appraisal rights) in a
merger or consolidation otherwise constituting a Change in Control under
clause (1) and/or clause (2) above consists of shares of common stock
traded on a national securities exchange or quoted on the Nasdaq National
29
Market (or will be so traded or quoted immediately following the merger
or consolidation) and as a result of the merger or consolidation the
debentures become convertible into such common stock.
For purposes of these provisions:
- the conversion price is equal to $1,000 plus accrued and unpaid interest
(excluding any accrued and unpaid cash interest) divided by the conversion
rate;
- whether a person is a "beneficial owner" will be determined in accordance
with Rule 13d-3 under the Exchange Act; and
- "person" includes any syndicate or group that would be deemed to be a
"person" under Section 13(d)(3) of the Exchange Act.
Rule 13e-4 under the Exchange Act requires the dissemination of prescribed
information to security holders in the event of an issuer tender offer and may
apply in the event that the purchase option becomes available to the holders of
debentures. We will comply with this rule to the extent it applies at that time.
The definition of Change in Control includes a phrase relating to the
conveyance, transfer, sale, lease or disposition of "all or substantially all"
of our assets. There is no precise, established definition of the phrase
"substantially all" under applicable law. Accordingly, the ability of a holder
of the debentures to require us to purchase its debentures as a result of the
conveyance, transfer, sale, lease or other disposition of less than all of our
assets may be uncertain.
The foregoing provisions would not necessarily provide the holders of the
debentures with protection if we are involved in a highly leveraged or other
transaction that may adversely affect the holders.
If a Change in Control were to occur, we may not have enough funds to pay
the Change in Control purchase price. See "Risk Factors" under the caption "We
may not have the ability to raise the funds necessary to finance the change in
control purchase or any purchase at the option of the holders." In addition, we
have, and may in the future incur, other indebtedness with similar change in
control provisions permitting our holders to accelerate or to require us to
purchase our indebtedness upon the occurrence of similar events or on some
specified dates. If we fail to purchase the debentures when required following a
Change in Control, we will be in default under the indenture.
MERGER AND SALES OF ASSETS BY CENDANT
We may not (1) consolidate with or merge into any other person or convey,
transfer, sell or lease our properties and assets substantially as an entirety
to any person, (2) permit any person to consolidate with or merge into us or
(3) permit any person to convey, transfer, sell or lease that person's
properties or assets substantially as an entirety to us unless:
- in the case of (1) and (2) above, either (i) Cendant is the surviving
corporation or (ii) if Cendant no longer exists, the person formed by the
consolidation or into which we are merged or the person to which our
properties and assets are so conveyed, transferred, sold or leased, shall
be a corporation, limited liability company, partnership or trust
organized and existing under the laws of the United States, any State
within the United States or the District of Columbia and assumes the
payment of the principal of and interest on the debentures and the
performance of our other covenants under the indenture, and
- in all cases, immediately after giving effect to the transaction, no event
of default, and no event that, after notice or lapse of time or both,
would become an event of default, will have occurred and be continuing.
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EVENTS OF DEFAULT
The following are events of default with respect to the debentures:
- default for 30 days in payment of any interest due and payable on the
debentures, including additional interest payable upon an upward interest
adjustment;
- default in payment of the principal amount of the debentures and accrued
and unpaid interest at maturity, upon redemption, purchase at the option
of the holder or following a Change in Control when the same becomes due
and payable;
- default by us under any instrument or instruments under which there is or
may be secured or evidenced any of our indebtedness (other than the
debentures) having an outstanding principal amount of $50,000,000 (or its
equivalent in any other currency or currencies) or more, individually or
in the aggregate, that has caused the holders thereof to declare such
indebtedness to be due and payable prior to its stated maturity, unless
such declaration has been rescinded within 30 days;
- default in the payment of the principal or premium, if any, of any bond,
debenture, note or other evidence of our indebtedness, in each case for
money borrowed, or in the payment of principal or premium, if any, under
any mortgage, indenture, agreement or instrument under which there may be
issued or by which there may be secured or evidenced any indebtedness of
ours for money borrowed, which default for payment of principal or
premium, if any, is in an aggregate principal amount exceeding $50,000,000
(or its equivalent in any other currency or currencies) when such
indebtedness becomes due and payable (whether at maturity, upon redemption
or acceleration or otherwise), if such default shall continue unremedied
or unwaived for more than 30 business days after the expiration of any
grace period or extension of the time for payment applicable thereto;
- default in our performance of any other covenants or agreements in respect
of the debentures contained in the indenture or the debentures for
60 days after written notice to us by the trustee or to us and the trustee
by the holders of at least 25% in aggregate principal amount of the
debentures then outstanding; and
- certain events of bankruptcy, insolvency and reorganization.
The indenture requires that we file annually with the trustee a certificate
describing any default by us in the performance of any conditions or covenants
that has occurred under the indenture and its status. We must give the trustee
written notice within 30 days of any default under the indenture that could
mature into an event of default described in the third, fourth or fifth clause
above.
The indenture provides that if an event of default occurs and is continuing
with respect to the debentures, either the trustee or the holders of at least
25% in aggregate principal amount of the outstanding debentures may declare the
principal amount plus accrued and unpaid interest, if any, on the debentures to
be due and payable immediately. If an event of default relating to events of
bankruptcy, insolvency or reorganization occurs, the principal amount plus
accrued and unpaid interest, if any, on the debentures will become immediately
due and payable without any action on the part of the trustee or any holder. At
any time after a declaration of acceleration, but before a judgment or decree
for payment of money has been obtained, if all events of default with respect to
the debentures have been cured (other than the nonpayment of principal of the
debentures plus accrued and unpaid interest which has become due solely by
reason of the declaration of acceleration) then the declaration of acceleration
shall be automatically annulled and rescinded.
A holder of debentures may pursue any remedy under the indenture only if:
- the holder gives the trustee written notice of a continuing event of
default for the debentures;
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- the holders of at least 25% in principal amount of the outstanding
debentures make a written request to the trustee to pursue the remedy;
- the holder offers to the trustee indemnity reasonably satisfactory to the
trustee;
- the trustee fails to act for a period of 60 days after receipt of notice
and offer of indemnity; and
- during that 60-day period, the holders of a majority in principal amount
of the debentures do not give the trustee a direction inconsistent with
the request.
This provision does not, however, affect the right of a holder of debentures
to sue for enforcement of payment of the principal of or interest, including
additional interest, on the holder's debenture on or after the respective due
dates expressed in its debenture or the holder's right to convert its debenture
in accordance with the indenture.
The trustee is entitled under the indenture, subject to the duty of the
trustee during a default to act with the required standard of care, to be
indemnified before proceeding to exercise any right or power under the indenture
at the direction of the registered holders of the debentures or which requires
the trustee to expend or risk its own funds or otherwise incur any financial
liability. The indenture also provides that the registered holders of a majority
in principal amount of the outstanding debentures may direct the time, method
and place of conducting any proceeding for any remedy available to the trustee
or exercising any trust or power conferred on the trustee. The trustee, however,
may refuse to follow any such direction that conflicts with law or the
indenture, is unduly prejudicial to the rights of other registered holders of
the debentures, or would involve the trustee in personal liability.
The indenture provides that while the trustee generally must mail notice of
a default or event of default to the registered holders of the debentures within
90 days of occurrence, the trustee may withhold notice of any default or event
of default (except in payment on the debentures) if the trustee in good faith
determines that the withholding of such notice is in the interest of the
registered holders of the debentures.
MODIFICATION AND WAIVER
We may amend or supplement the indenture if the holders of a majority in
principal amount of the debentures consent to it. Without the consent of the
holder of each debenture affected, however, no modification may:
- reduce the amount of debentures whose holders must consent to an
amendment, supplement or waiver;
- reduce the rate of accrual of interest or change the time for payment of
interest on the debentures;
- reduce the value of our CD common stock to which reference is made in
determining whether an interest adjustment will be made on the debentures,
or change the method by which this value is calculated;
- reduce the principal amount of the debentures or change the stated
maturity;
- reduce the redemption or purchase price of the debentures or change the
time at which the debentures may or must be redeemed or purchased;
- make payments on the debentures payable in currency other than as
originally stated in the debentures;
- impair the holder's right to institute suit for the enforcement of any
payment on the debentures;
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- make any change in the percentage of principal amount of debentures
necessary to waive compliance with some provisions of the indenture or to
make any change in this provision for modification;
- waive a continuing default or event of default regarding any payment on
the debentures; or
- adversely affect the conversion or repurchase provisions of the
debentures.
We may amend or supplement the indenture or waive any provision of it
without the consent of any holders of debentures in some circumstances,
including:
- to cure any ambiguity, omission, defect or inconsistency;
- to provide for the assumption of our obligations under the indenture by a
successor upon any merger, consolidation or asset transfer permitted under
the indenture;
- to provide for uncertificated debentures in addition to or in place of
certificated debentures or to provide for bearer debentures;
- to provide any security for or guarantees of the debentures;
- to comply with any requirement to effect or maintain the qualification of
the indenture under the Trust Indenture Act of 1939, as amended;
- to add covenants that would benefit the holders of debentures or to
surrender any rights we have under the indenture;
- to add events of default with respect to the debentures; or
- to make any change that does not adversely affect any outstanding
debentures in any material respect.
The holders of a majority in principal amount of the outstanding debentures
may waive any existing or past default or event of default. Those holders may
not, however, waive any default or event of default in any payment on any
debenture or compliance with a provision that cannot be amended or supplemented
without the consent of each holder affected.
REGISTRATION RIGHTS
We entered into a registration rights agreement with the initial purchaser
of the debentures. If you sell the debentures or shares of CD common stock
issued upon conversion of the debentures under this registration statement, you
generally will be required to be named as a selling securityholder in this
prospectus, deliver this prospectus to purchasers and be bound by applicable
provisions of the registration rights agreement, including some indemnification
provisions.
In the registration rights agreement, we agreed to file a registration
statement that includes this prospectus with the Commission by February 25,
2002. We agreed to use our reasonable best efforts to cause this registration
statement to become effective as promptly as practicable, but before May 27,
2002. We agreed to keep this registration statement effective until the earliest
of (i) two years after the filing date, (ii) the date when all of the securities
registered under this registration statement are sold or (iii) the period
applicable to the debentures and underlying shares of CD common stock held by
non-affiliates under Rule 144(k) of the Securities Act expires. We may suspend
the use of this prospectus under limited circumstances, including pending
corporate developments or public filings with the Commission, for a period not
to exceed 45 days in any 90-day period and 90 days in any 360-day period. We
also agreed to pay liquidated damages to holders of the debentures and shares of
CD common stock issued upon conversion of the debentures if the registration
statement is not timely filed or made effective or if the prospectus is not
available for periods in excess of those permitted above. You should refer to
the registration rights agreement for a description of those liquidated damages.
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CALCULATIONS IN RESPECT OF DEBENTURES
We are responsible for making all calculations called for under the
debentures, except for such calculations made by the reset rate agent. These
calculations include, but are not limited to, determinations of the market
prices of our CD common stock, accrued interest payable on the debentures and
the accreted conversion price of the debentures. We will make all these
calculations in good faith and, absent manifest error, our calculations will be
final and binding on holders of debentures. We will provide a schedule of our
calculations to the trustee, and the trustee is entitled to rely upon the
accuracy of our calculations without independent verification. The trustee will
forward our calculations to any holder of debentures upon the request of that
holder.
GOVERNING LAW
The indenture and the debentures are governed by, and construed in
accordance with, the laws of the State of New York.
TRUSTEE
The Bank of Nova Scotia Trust Company of New York is the trustee, registrar,
conversion agent and paying agent.
If an event of default occurs and is continuing, the trustee will be
required to use the degree of care and skill of a prudent man in the conduct of
his own affairs. The trustee will become obligated to exercise any of its powers
under the indenture at the request of any of the holders of any debentures only
after those holders have offered the trustee indemnity reasonably satisfactory
to it.
If the trustee becomes one of our creditors, it will be subject to
limitations in the indenture on its rights to obtain payment of claims or to
realize on some property received for any such claim, as security or otherwise.
The trustee is permitted to engage in other transactions with us. If, however,
it acquires any conflicting interest, it must eliminate that conflict or resign.
The Bank of Nova Scotia Trust Company of New York is currently serving as the
trustee under other indentures governing our debt issuances.
FORM, EXCHANGE, REGISTRATION AND TRANSFER
The debentures were originally issued in registered form, without interest
coupons. We will not charge a service charge for any registration of transfer or
exchange of the debentures. We may, however, require the payment of any tax or
other governmental charge payable for that registration.
The debentures will be exchangeable for other debentures, for the same total
principal amount and for the same terms but in different authorized
denominations in accordance with the indenture. Holders may present debentures
for registration of transfer at the office of the security registrar or any
transfer agent we designate. The security registrar or transfer agent will
effect the transfer or exchange when it is satisfied with the documents of title
and identity of the person making the request.
We have appointed the trustee as security registrar for the debentures. We
may at any time rescind that designation or approve a change in the location
through which any registrar acts. We are required to maintain an office or
agency for transfers and exchanges in each place of payment. We may at any time
designate additional registrars for the debentures.
In the case of any redemption, the security registrar will not be required
to register the transfer or exchange of any debentures either:
- during a period beginning 15 days prior to the mailing of the relevant
notice of redemption and ending on the close of business on the day of
mailing of the notice, or
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- if the debentures have been called for redemption in whole or in part,
except the unredeemed portion of any debentures being redeemed in part.
PAYMENT AND PAYING AGENTS
Payments on the debentures will be made in U.S. dollars at the office of the
trustee. At our option, however, we may make payments by check mailed to the
holder's registered address or, with respect to global debentures, by wire
transfer. We will make interest payments to the person in whose name the
debentures is registered at the close of business on the record date for the
interest payment.
The trustee has been designated as our paying agent for payments on
debentures. We may at any time designate additional paying agents or rescind the
designation of any paying agent or approve a change in the office through which
any paying agent acts.
Subject to the requirements of any applicable abandoned property laws, the
trustee and paying agent shall pay to us upon written request any money held by
them for payments on the debentures that remain unclaimed for two years after
the date upon which that payment has become due. After payment to us, holders
entitled to the money must look to us for payment. In that case, all liability
of the trustee or paying agent with respect to that money will cease.
NOTICES
Except as otherwise described herein, notice to registered holders of the
debentures will be given by mail to the addresses as they appear in the security
register. Notices will be deemed to have been given on the date of such mailing.
REPLACEMENT OF DEBENTURES
We will replace any debentures that become mutilated, destroyed, stolen or
lost at the expense of the holder upon delivery to the trustee of the mutilated
debentures or evidence of the loss, theft or destruction satisfactory to us and
the trustee. In the case of a lost, stolen or destroyed debentures, indemnity
satisfactory to the trustee and us may be required at the expense of the holder
of the debentures before a replacement debenture will be issued.
PAYMENT OF STAMP AND OTHER TAXES
We will pay all stamp and other duties, if any, which may be imposed by the
United States or any political subdivision thereof or taxing authority thereof
or therein with respect to the issuance of the debentures. We will not be
required to make any payment with respect to any other tax, assessment or
governmental charge imposed by any government or any political subdivision
thereof or taxing authority thereof or therein.
BOOK-ENTRY SYSTEM
The debentures are represented by one or more global securities. Each global
security was deposited with, or on behalf of, DTC and registered in the name of
a nominee of DTC. Except under circumstances described below, the debentures
will not be issued in definitive form.
Upon the issuance of a global security, DTC will credit on its book-entry
registration and transfer system the accounts of persons designated by the
initial purchaser with the respective principal amounts of the debentures
represented by the global security. Ownership of beneficial interests in a
global security will be limited to persons that have accounts with DTC or its
nominee ("participants") or persons that may hold interests through
participants. Ownership of beneficial interests in a global security will be
shown on, and the transfer of that ownership will be effected only through,
records maintained by DTC or its nominee (with respect to interests of persons
other than participants). The
35
laws of some states require that some purchasers of securities take physical
delivery of the securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in a global security.
So long as DTC or its nominee is the registered owner of a global security,
DTC or its nominee, as the case may be, will be considered the sole owner or
holder of the debentures represented by that global security for all purposes
under the indenture. Except as provided below, owners of beneficial interests in
a global security will not be entitled to have debentures represented by that
global security registered in their names, will not receive or be entitled to
receive physical delivery of debentures in definitive form and will not be
considered the owners or holders thereof under the indenture. Principal and
interest payments, if any, on debentures registered in the name of DTC or its
nominee will be made to DTC or its nominee, as the case may be, as the
registered owner of the relevant global security. Neither Cendant, the trustee,
any paying agent or the registrar for the debentures will have any
responsibility or liability for any aspect of the records relating to nor
payments made on account of beneficial interests in a global security or for
maintaining, supervising or reviewing any records relating to such beneficial
interests.
We expect that DTC or its nominee, upon receipt of any payment of principal
or interest, if any, will credit immediately participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of the relevant global security as shown on the records of
DTC or its nominee. We also expect that payments by participants to owners of
beneficial interests in a global security held through these participants will
be governed by standing instructions and customary practices, as is the case
with securities held for the accounts of customers in bearer form or registered
in "street name," and will be the responsibility of the participants.
If DTC is at any time unwilling or unable to continue as a depositary and a
successor depositary is not appointed by us within 90 days, we will issue
debentures in definitive form in exchange for the entire global security for the
debentures. In addition, we may at any time and in our sole discretion determine
not to have debentures represented by a global security and, in such event, will
issue debentures in definitive form in exchange for the entire global security
relating to the debentures. In any such instance, an owner of a beneficial
interest in a global security will be entitled to physical delivery in
definitive form of debentures represented by the global security equal in
principal amount to the beneficial interest and to have the debentures
registered in its name. debentures so issued in definitive form will be issued
as registered debentures in denominations of $1,000 and integral multiples
thereof, unless otherwise specified by us.
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DESCRIPTION OF CD COMMON STOCK
The following description of Cendant's CD common stock does not purport to
be complete and is subject to, and qualified in its entirety by reference to,
the more complete descriptions thereof set forth in our Amended and Restated
Certificate of Incorporation (the "Certificate") and Amended and Restated
By-Laws (the "By-Laws").
We are authorized to issue up to 2,000,000,000 shares of CD common stock,
par value $.01 per share. As of December 31, 2001, there were 977,708,342 shares
of CD common stock outstanding.
GENERAL
In March 2000, our outstanding common stock was reclassified as CD common
stock, and we created a series of common stock designated as Move.com common
stock. The Move.com common stock was designed to track the value of our Move.com
Group, and the CD common stock represents our interests in the remainder of our
business and our interest in Move.com Group. No shares of Move.com common stock
are outstanding. For a description of the terms of our CD common stock, see
"Summary Comparison of Terms of Existing Common Stock with Terms of CD Common
Stock and Move.com Common Stock" in the Proxy Statement dated February 10, 2000,
which is incorporated by reference herein.
Subject to the rights of the holders of any shares of our preferred stock
which may at the time be outstanding, holders of CD common stock are entitled to
such dividends as the Board of Directors may declare out of funds legally
available therefor. The holders of CD common stock will possess exclusive voting
rights in us, except to the extent the Board of Directors specifies voting power
with respect to any preferred stock issued. Except as hereinafter described,
holders of CD common stock are entitled to one vote for each share of CD common
stock, but will not have any right to cumulate votes in the election of
directors. In the event of liquidation, dissolution or winding up of Cendant,
the holders of CD common stock are entitled to receive, after payment of all of
our debts and liabilities and of all sums to which holders of any preferred
stock may be entitled, the distribution of any remaining assets of Cendant.
Holders of the CD common stock will not be entitled to preemptive rights with
respect to any shares which may be issued. All outstanding shares of CD common
stock are fully paid and non-assessable, and any shares of CD common stock
issued upon conversion of the debentures will be fully paid and non-assessable.
The CD common stock is listed on the New York Stock Exchange under the symbol
"CD."
CERTAIN PROVISIONS
The provisions of our Certificate and By-Laws which are summarized below may
be deemed to have an anti-takeover effect and may delay, defer or prevent a
tender offer or takeover attempt that a stockholder might consider in such
stockholder's best interest, including those attempts that might result in a
premium over the market price for the shares held by stockholders.
CLASSIFIED BOARD
Our Board of Directors is divided into three classes that are elected for
staggered three-year terms. A director may be removed by the stockholders
without cause only by the affirmative vote of the holders, voting as a single
class, of 80% or more of the total number of votes entitled to be cast by all
holders of our voting stock, which shall include all capital stock of Cendant
which by its terms may vote on all matters submitted to stockholders of Cendant
generally.
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COMMITTEES OF THE BOARD OF DIRECTORS
Pursuant to the Certificate, the Board of Directors' authority to designate
committees shall be subject to the provisions of the By-Laws. The Board of
Directors may designate one or more directors as alternate members of any
committee to fill any vacancy on the committee and to fill a vacant chairmanship
of a committee occurring as a result of a member or chairman leaving the
committee, whether through death, resignation, removal or otherwise. Pursuant to
the By-Laws, the Board of Directors shall have the following committees:
EXECUTIVE COMMITTEE. An Executive Committee that shall consist of not less
than three directors elected by a majority vote of the Board of Directors.
COMPENSATION COMMITTEE. A Compensation Committee consisting of not less than
three directors elected by a majority vote of the Board of Directors.
AUDIT COMMITTEE. An Audit Committee consisting of not less than four
directors elected by a majority vote of the Board of Directors.
NEWLY CREATED DIRECTORSHIPS AND VACANCIES
Newly created directorships resulting from any increase in the number of
directors and any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other cause shall be filled solely by
the affirmative vote of a majority of the remaining directors then in office,
even though less than a quorum of the Board of Directors. Any directors elected
in accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or the vacancy occurred and until such director's successor shall have
been elected and qualified. No decrease in the number of directors constituting
the Board of Directors shall shorten the term of any incumbent director.
SPECIAL MEETINGS OF STOCKHOLDERS
A special meeting of stockholders may be called only by the Chairman of the
Board of Directors, the President or the Board of Directors pursuant to a
resolution approved by a majority of the entire Board of Directors.
QUORUM AT STOCKHOLDER MEETINGS
The holders of one-third of the shares entitled to vote at any meeting of
the stockholders, present in person or by proxy, shall constitute a quorum at
all stockholder meetings.
STOCKHOLDER ACTION BY WRITTEN CONSENT
Stockholder action by written consent in lieu of a meeting is prohibited
under the Certificate. As a result, stockholder action can be taken only at an
annual or special meeting of stockholders. This prevents the holders of a
majority of the outstanding voting stock of Cendant from using the written
consent procedure to take stockholder action without giving all the stockholders
of Cendant entitled to vote on a proposed action the opportunity to participate
in determining the proposed action.
ADVANCE NOTICE OF STOCKHOLDER-PROPOSED BUSINESS AT ANNUAL MEETINGS
Our By-Laws provide that for business to be properly brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of Cendant. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of Cendant, not less than 60 days nor more than 90 days prior to the
meeting; provided, however, that in the event that less than 70 days' notice or
prior public disclosure of
38
the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the tenth day following the date on which such notice of the date of
the annual meeting was mailed or such public disclosure was made. A
stockholder's notice to the Secretary must set forth as to each matter the
stockholder proposes to bring before the annual meeting: (i) a brief description
of the business desired to be brought before the annual meeting, (ii) the name
and address, as they appear on Cendant's books, of the stockholder proposing
such business, (iii) the class and number of shares of Cendant which are
beneficially owned by the stockholder, and (iv) any material interest of the
stockholder in such business.
In addition, the By-Laws provide that for a stockholder to properly nominate
a director at a meeting of stockholders, the stockholder must have given timely
notice thereof in writing to the Secretary of Cendant. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of Cendant (i) in the case of an annual meeting, at
least 90 days prior to the date of the last annual meeting of Cendant
stockholders and (ii) with respect to a special meeting of stockholders, the
close of business on the 10th day following the date on which notice of such
meeting is first given to stockholders. Such stockholder's notice to the
Secretary must set forth: (i) the name and address of the stockholder who
intends to make the nomination and of the person or persons to be nominated,
(ii) a representation that the stockholder is the holder of record of common
stock and intends to appear in person or by proxy at the meeting to nominate
each such nominee, (iii) a description of all arrangements between such
stockholder and each nominee, (iv) such other information with respect to each
nominee as would be required to be included in a proxy statement filed pursuant
to the proxy rules of the Commission, and (v) the consent of each nominee to
serve as director of the Company if so elected.
FAIR PRICE PROVISIONS
Under the Delaware General Corporation Law and the Certificate, an agreement
of merger, sale, lease or exchange of all or substantially all of Cendant's
assets must be approved by the Board of Directors and adopted by the holders of
a majority of the outstanding shares of stock entitled to vote thereon. However,
the Certificate includes what generally is referred to as a "fair price
provision," which requires the affirmative vote of the holders of at least 80%
of the outstanding shares of capital stock entitled to vote generally in the
election of Cendant's directors, voting together as a single class, to approve
certain business combination transactions (including certain mergers,
recapitalization and the issuance or transfer of securities of Cendant or a
subsidiary having an aggregate fair market value of $10 million or more)
involving Cendant or a subsidiary and an owner or any affiliate of an owner of
5% or more of the outstanding shares of capital stock entitled to vote, unless
either (i) such business combination is approved by a majority of disinterested
directors, or (ii) the shareholders receive a "fair price" for their securities
and certain other procedural requirements are met. The Certificate provides that
this provision may not be repealed or amended in any respect except by the
affirmative vote of the holders of not less than 80% of the outstanding shares
of capital stock entitled to vote generally in the election of directors.
39
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material United States federal income tax
consequences of the purchase, ownership and disposition of the debentures and
the shares of CD common stock into which the debentures may be converted. This
summary deals only with the debentures and the shares of CD common stock held as
capital assets for United States federal income tax purposes. As used in this
offering memorandum, "U.S. Holders" are any beneficial owners of the debentures
or the shares of CD common stock that are, for United States federal income tax
purposes: (1) citizens or residents of the United States, (2) corporations
created or organized in or under the laws of the United States, any state
thereof or the District of Columbia, (3) estates, the income of which is subject
to United States federal income taxation regardless of its source, and
(4) trusts, if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
persons have the authority to control all substantial decisions of the trust. As
used in this offering memorandum, "Non-U.S. Holders" are holders of the
debentures or the shares of CD common stock that are, for United States federal
income tax purposes, (1) nonresident alien individuals, (2) foreign corporations
and (3) foreign estates or trusts that are not subject to United States federal
income taxation on their worldwide income. If a partnership (including for this
purpose any entity treated as a partnership for United States federal income tax
purposes) is a beneficial owner of the debentures or the shares of CD common
stock, the treatment of a partner in the partnership will generally depend upon
the status of the partner and upon the activities of the partnership. A holder
of the debentures or the shares of CD common stock that is a partnership and
partners in such partnership should consult their tax advisors about the United
States federal income tax consequences of holding and disposing of the
debentures or the shares of CD common stock, as the case may be. Unless
otherwise stated, this summary does not deal with special classes of holders
such as banks, thrifts, real estate investment trusts, regulated investment
companies, insurance companies, dealers in securities or currencies, tax-exempt
investors, holders that hold the debentures as part of a hedge, straddle,
"synthetic security" or other integrated transaction for United States federal
income tax purposes and U.S. Holders whose functional currency is not the U.S.
dollar. Further, this summary does not include any description of any
alternative minimum tax consequences, United States federal estate or gift tax
laws or the tax laws of any state, local or foreign government that may be
applicable to the debentures or the shares of CD common stock.
This summary is based on the Internal Revenue Code of 1986, as amended, the
Treasury regulations promulgated thereunder and administrative and judicial
interpretations thereof, all as of the date hereof, and all of which are subject
to change and differing interpretations, possibly on a retroactive basis. No
statutory, administrative or judicial authority directly addresses the treatment
of the debentures or instruments similar to the debentures for United States
federal income tax purposes. Therefore, there can be no assurance that the
Internal Revenue Service (the "IRS") will not successfully challenge one or more
of the conclusions described in this prospectus.
We urge prospective investors to consult their tax advisors with respect to
the tax consequences to them of the purchase, ownership and disposition of the
debentures and the shares of CD common stock in light of their own particular
circumstances, including the tax consequences under state, local, foreign and
other tax laws and the possible effects of changes in United States federal and
other tax laws.
CLASSIFICATION OF THE DEBENTURES
Pursuant to the terms of the indenture, each holder of the debentures
agreed, for United States federal income tax purposes, to treat the debentures
as indebtedness for United States federal income tax purposes subject to the
regulations governing contingent payment debt instruments and to be bound by our
application of those regulations to the debentures, including our determination
of the rate at which interest will be deemed to accrue on the debentures for
United States federal income tax
40
purposes. The remainder of this discussion assumes that the debentures will be
treated in accordance with that agreement and our determinations. However, the
proper application of the regulations governing contingent payment debt
instruments to a holder of a debenture is uncertain in a number of respects, and
no assurance can be given that the IRS will not assert that the debentures
should be treated differently or that such an assertion would not prevail. Such
treatment could affect the amount, timing and character of income, gain or loss
in respect of an investment in the debentures. In particular, it might be
determined that a holder should have accrued interest income at a lower rate,
should not have recognized income or gain upon the conversion, and should have
recognized capital gain upon a taxable disposition of its debentures.
U.S. HOLDERS
Under the rules governing contingent payment debt instruments, a U.S. Holder
will generally be required to accrue interest income on the debentures, in the
amounts described below, regardless of whether the U.S. Holder uses the cash or
accrual method of tax accounting. Accordingly, U.S. Holders would likely be
required to include interest in taxable income in each year in excess of the
accruals on the debentures for non-tax purposes and in excess of any contingent
interest payments actually received in that year.
A U.S. Holder must accrue on its debentures an amount of original issue
discount as ordinary income for United States federal income tax purposes, for
each accrual period prior to and including the maturity date of the debentures
that equals:
- the product of (i) the adjusted issue price (as defined below) of the
debentures as of the beginning of the accrual period; and (ii) the
comparable yield to maturity (as defined below) of the debentures,
adjusted for the length of the accrual period;
- divided by the number of days in the accrual period; and
- multiplied by the number of days during the accrual period that the U.S.
Holder held the debentures.
The "issue price" of a debenture is the first price at which a substantial
amount of the debentures is sold to investors, excluding bond houses, brokers or
similar persons or organizations acting in the capacity of underwriters,
placement agents or wholesalers. The adjusted issue price of a debenture is its
issue price increased by any interest income previously accrued, determined
without regard to any adjustments to interest accruals described below and
decreased by the projected amounts of any payments with respect to the
debentures.
Under the rules governing contingent payment debt instruments, we are
required to establish the "comparable yield" for the debentures. We have
determined that the comparable yield for the debentures is the annual yield we
would incur, as of the initial issue date, on a fixed rate nonconvertible debt
security with no contingent payments, but with terms and conditions otherwise
comparable to those of the debentures including the absence of subordination,
term, timing of payments and general market conditions, but excluding any
adjustments for liquidity or the riskiness of the contingencies with respect to
the debentures. Accordingly, we have determined the comparable yield to be 9.29%
compounded semi-annually.
We are required to provide to U.S. Holders, solely for United States federal
income tax purposes, a schedule of the projected amounts of payments on the
debentures. This schedule must produce the comparable yield. Our determination
of the projected payment schedule for the debentures includes estimates for
payments of contingent interest and an estimate for a payment at maturity taking
into account the conversion feature. U.S. Holders may obtain the projected
payment schedule by submitting a written request for it to Cendant at the
address set forth in "Incorporation of Certain Documents by Reference."
41
THE COMPARABLE YIELD AND THE SCHEDULE OF PROJECTED PAYMENTS ARE NOT
DETERMINED FOR ANY PURPOSE OTHER THAN FOR THE DETERMINATION OF A U.S. HOLDER'S
INTEREST ACCRUALS AND ADJUSTMENTS THEREOF IN RESPECT OF THE DEBENTURES FOR
UNITED STATES FEDERAL INCOME TAX PURPOSES AND DO NOT CONSTITUTE A PROJECTION OR
REPRESENTATION REGARDING THE ACTUAL AMOUNTS PAYABLE TO U.S. HOLDERS OF THE
DEBENTURES.
ADJUSTMENTS TO INTEREST ACCRUALS ON THE DEBENTURES
If a U.S. Holder receives actual payments with respect to the debentures in
a taxable year that in the aggregate exceed the total amount of projected
payments for that taxable year, the U.S. Holder would incur a "net positive
adjustment" equal to the amount of such excess. The U.S. Holder would treat the
"net positive adjustment" as additional interest income for the taxable year.
For this purpose, the payments in a taxable year include the fair market value
of property received in that year.
If a U.S. Holder receives actual payments with respect to the debentures in
a taxable year that in the aggregate are less than the amount of the projected
payments for that taxable year, the U.S. Holder would incur a "net negative
adjustment" equal to the amount of such deficit. This adjustment will
(a) reduce the U.S. Holder's interest income on the debentures for that taxable
year, and (b) to the extent of any excess after the application of (a), give
rise to an ordinary loss to the extent of the U.S. Holder's income on the
debentures during prior taxable years, reduced to the extent such interest was
offset by prior net negative adjustments.
SALE, EXCHANGE, CONVERSION OR REDEMPTION
Generally, the sale or exchange of a debenture, or the redemption of a
debenture for cash, will result in taxable gain or loss to a U.S. Holder. In
addition, as described above, our calculation of the comparable yield and the
schedule of projected payments for the debentures includes the receipt of CD
common stock upon conversion of a debenture into shares of our CD common stock
as a contingent payment with respect to the debentures. Accordingly, we intend
to treat the receipt of our CD common stock by a U.S. Holder upon the conversion
of a debenture, or upon our purchase of a debenture at the option of a holder
where we elect to pay the purchase price in shares of our CD common stock, as a
contingent payment. As described above, holders are generally bound by our
determination of the comparable yield and the schedule of projected payments.
Under this treatment, a sale or exchange, or such a conversion or redemption,
also will result in taxable gain or loss to the U.S. Holder. The amount of gain
or loss on a taxable sale, exchange, conversion or redemption will equal the
difference between (a) the amount of cash plus the fair market value of any
other property received by the U.S. Holder, including the fair market value of
any CD common stock received, and (b) the U.S. Holder's adjusted tax basis in
the debentures. A U.S. Holder's adjusted tax basis in a debenture on any date
generally will equal the U.S. Holder's original purchase price for the
debentures, increased by any original issue discount previously accrued by the
U.S. Holder (determined without regard to any positive or negative adjustments
to interest accruals described above), and decreased by the amount of any
projected payments on the debentures projected to have been made through that
date. Gain recognized upon a sale, exchange, conversion or redemption of a
debenture generally will be treated as ordinary interest income; any loss will
be ordinary loss to the extent of interest previously included in income, and
thereafter, capital loss (which will be long-term if the debenture is held for
more than one year). The deductibility of net capital losses is subject to
limitations.
A U.S. Holder's tax basis in shares of our CD common stock received upon a
conversion of a debenture or upon the redemption of a debenture at the option of
the holder we elect to pay in shares of our CD common stock will equal the then
current fair market value of such CD common stock. The U.S. Holder's holding
period for the shares of our CD common stock received will commence on the day
after the date of conversion or redemption.
42
PURCHASERS OF DEBENTURES AT A PRICE OTHER THAN THE ADJUSTED ISSUE PRICE
A U.S. Holder that purchases debentures in the secondary market for an
amount that differs from the adjusted issue price of the debentures at the time
of purchase will be required to accrue interest income on the debentures in the
same manner as a U.S. Holder that purchased debentures in the initial offering.
A U.S. Holder must also reasonably allocate any difference between the adjusted
issue price and the U.S. Holder's tax basis in the debentures to daily portions
of interest or projected payments over the remaining term of the debentures. If
the purchase price of the debentures is greater than the adjusted issue price,
the amount of the difference allocated to a daily portion of interest or to a
projected payment is treated as a "negative adjustment" on the day the daily
portion accrues or the payment is made, respectively. If the purchase price of
the debentures is less than the adjusted issue price, the amount of the
difference allocated to a daily portion of interest or to a projected payment is
treated as a "positive adjustment" on the day the daily portion accrues or the
payment is made, respectively. Any such negative or positive adjust ment will
decrease or increase, respectively, the U.S. Holder's adjusted tax basis in the
debentures.
Certain U.S. Holders will receive Forms 1099-OID that report interest
accruals on their debentures. Those forms will not reflect the effect of any
positive or negative adjustments resulting from the U.S. Holder's purchase of
debentures in the secondary market at a price different from adjusted issue
price of the debentures on the date of purchase. U.S. Holders are urged to
consult their tax advisors as to whether, and how, such adjustments should be
taken into account in determining their interest accruals with regard to the
debentures.
DISTRIBUTIONS ON CD COMMON STOCK
If a U.S. Holder converts the debentures into shares of our CD common stock,
in general, distributions, if any, on the shares of our CD common stock that are
paid out of our current or accumulated earnings and profits, as defined for
United States federal income tax purposes, will constitute dividends and will be
includible in income by a holder and taxable as ordinary income when received or
accrued, in accordance with that holder's method of accounting for United States
federal income tax purposes. If a distribution exceeds our current and
accumulated earnings and profits, the excess will be treated first as a tax-free
return of the U.S. Holder's investment, up to the U.S. Holder's basis in the
shares of our CD common stock. Any remaining excess will be treated as capital
gain.
CONSTRUCTIVE DIVIDENDS
If at any time we make a distribution of property to our stockholders that
would be taxable to the stockholders as a dividend for United States federal
income tax purposes and, in accordance with the anti-dilution provisions of the
debentures, the conversion rate of the debentures is increased, such increase
may be deemed to be the payment of a taxable dividend to holders of the
debentures.
For example, an increase in the exchange rate in the event of distribution
of our evidences of indebtedness or our assets or an increase in the event of an
extraordinary cash dividend will generally result in deemed dividend treatment
to holders of the debentures, but an increase in the event of stock dividends or
the distribution of rights to subscribe for our CD common stock generally will
not.
TREATMENT OF NON-U.S. HOLDERS
The rules governing United States federal income taxation of Non-U.S.
Holders are complex and no attempt will be made in this offering memorandum to
provide more than a summary of such rules. Non-U.S. Holders should consult with
their tax advisors to determine the effect of United States federal, state,
local and foreign income tax laws, as well as treaties, with regard to an
investment in the debentures and shares of our CD common stock, including any
reporting requirements.
43
PAYMENTS MADE WITH RESPECT TO THE DEBENTURES
The 30% United States federal withholding tax will not apply to any payment
to a Non-U.S. Holder of principal or interest (including amounts taken into
income as interest under the accrual rules described above under "--U.S.
Holders" and amounts attributable to the shares of our CD common stock received
upon a conversion of the debentures) on debentures, provided that: (i) the
Non-U.S. Holder does not own, actually or constructively, 10% or more of the
total combined voting power of our CD common stock, (ii) the Non-U.S. Holder is
not a controlled foreign corporation related, directly or indirectly, to us
through stock ownership; (iii) the Non-U.S. Holder is not a bank which acquired
the debentures in consideration for an extension of credit made pursuant to a
loan agreement entered into in the ordinary course of business; (iv) our common
stock is actively traded within the meaning of Section 871(h)(4)(C)(v)(I) of the
Internal Revenue Code; and (v) either (a) the beneficial owner of debentures
certifies to us or our paying agent on IRS Form W-8BEN, under penalties of
perjury, that it is not a United States person and provides its name, address
and certain other information or (B) the beneficial owner holds its debentures
through certain foreign intermediaries or certain foreign partnerships and such
holder satisfies certain certification requirements.
If the Non-U.S. Holder cannot satisfy the requirements described above,
payments of interest (including amounts taken into income under the accrual
rules described above under "--U.S. Holders" and amounts attributable to our CD
common stock received upon a conversion of the debentures) will be subject to
the 30% United States federal withholding tax unless the Non-U.S. Holder
provides us with a properly executed (1) IRS Form W-8BEN (or successor form)
claiming an exemption from or reduction in withholding under an applicable tax
treaty or (2) IRS Form W-8ECI (or successor form) stating that interest paid on
the debentures is not subject to withholding tax because it is effectively
connected with the Non-U.S. Holder's conduct of a trade or business in the
United States.
If a Non-U.S. Holder of the debentures is engaged in a trade or business in
the United States, and if interest on the debentures is effectively connected
with the conduct of such trade or business, the Non-U.S. Holder, although exempt
from the withholding tax discussed in the preceding paragraphs, will generally
be subject to regular United States federal income tax on interest and on any
gain realized on the sale, exchange or conversion of the debentures in the same
manner as if it were a U.S. Holder. Such a Non-U.S. Holder will be required to
provide to the withholding agent a properly executed IRS Form W-8ECI (or
successor form) in order to claim an exemption from withholding tax. In
addition, if such a Non-U.S. Holder is a foreign corporation, such Non-U.S.
Holder may be subject to a branch profits tax equal to 30% (or such lower tax
rate provided by an applicable treaty) of its effectively connected earnings and
profits for the taxable year, subject to certain adjustments.
SALE OR EXCHANGE OF DEBENTURES OR CD COMMON STOCK
A Non-U.S. Holder will not generally be subject to United States federal
income or withholding tax with respect to gain upon the sale, exchange or other
disposition (other than a conversion or a redemption) of the debentures or
shares of our CD common stock, unless: (1) the income or gain is "U.S. trade or
business income," which means income or gain that is effectively connected with
the conduct by the Non-U.S. Holder of a trade or business, or, in the case of a
treaty resident, attributable to a permanent establishment or a fixed base, in
the United States; (2) such Non-U.S. Holder is an individual who is present in
the United States for 183 days or more in the taxable year of disposition and
certain other conditions are met; (3) such Non-U.S. Holder is subject to tax
pursuant to the provisions of the Internal Revenue Code applicable to certain
United States expatriates; or (4) in the case of an amount which is attributable
to original issue discount, the Non-U.S. Holder does not meet the conditions for
exemption from United States federal withholding tax described above.
U.S. trade or business income of a Non-U.S. Holder will generally be subject
to regular United States federal income tax in the same manner as if it were
realized by a U.S. Holder. A Non-U.S.
44
Holder that realizes U.S. trade or business income with respect of the
debentures or common stock should consult their tax advisors as to the treatment
of such income or gain. In addition, U.S. trade or business income of a Non-U.S.
Holder that is a corporation may be subject to a branch profits tax at a rate of
30%, or such lower rate provided by an applicable income tax treaty.
DISTRIBUTIONS ON CD COMMON STOCK
A Non-U.S. Holder of shares of our CD common stock will generally be subject
to United States federal income or withholding tax at a 30% rate (or lower rate
provided under any applicable income tax treaty) on distributions by us with
respect to our CD common stock that are treated as dividends paid (and on
dividends deemed paid on the debentures or CD common stock, as described above
under "U.S. Holders-Constructive Dividends"). Except to the extent that an
applicable tax treaty otherwise provides, a Non-U.S. Holder generally will be
taxed in the same manner as a U.S. Holder on dividends paid (or deemed paid)
that are effectively connected with the Non-U.S. Holder's conduct of a trade or
business in the United States, and a Non-U.S. Holder that is a corporation may
also be subject to a United States branch profits tax at a 30% rate or such
lower rate as may be specified in an applicable income tax treaty.
BACK-UP WITHHOLDING AND INFORMATION REPORTING
U.S. HOLDERS
Payments of interest or dividends made by us on, or the proceeds of the sale
or other disposition of, the debentures or shares of our CD common stock may be
subject to information reporting and United States federal backup withholding
tax at the rate then in effect if the recipient of such payment fails to supply
an accurate taxpayer identification number or otherwise fails to comply with
applicable United States information reporting or certification requirements.
Any amount withheld from a payment to a U.S. Holder under the backup withholding
rules is allowable as a credit against the holder's United States federal income
tax, provided that the required information is furnished to the IRS.
NON-U.S. HOLDERS
A Non-U.S. Holder may be required to comply with certification procedures to
establish that the holder is not a U.S. person in order to avoid backup
withholding tax requirements with respect to our payments of principal and
interest, including cash payments in respect of original issue discount on the
debentures, or the proceeds of the sale or other disposition of the debentures.
In addition, we must report annually to the IRS and to each Non-U.S. Holder the
amount of any dividends paid to, and the tax withhold with respect to, such
holder, regardless of whether any tax was actually withheld. Copies of these
information returns may also be made available under the provisions of a
specific treaty or agreement to the tax authorities of the country in which the
Non-U.S. Holder resides.
TAX EVENT
The modification of the terms of the debentures by us upon a Tax Event could
possibly alter the amount and timing of income recognition by the holders with
respect to the payments of interest due after the option exercise date.
THE PROPER TAX TREATMENT OF A HOLDER OF THE DEBENTURES IS HIGHLY UNCERTAIN
IN A NUMBER OF RESPECTS. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE
UNITED STATES FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF AN
INVESTMENT IN THE DEBENTURES AND WHETHER AN INVESTMENT IN THE DEBENTURES IS
ADVISABLE IN LIGHT OF THE AGREED UPON TAX TREATMENT AND THE HOLDER'S PARTICULAR
TAX SITUATION.
45
SELLING SECURITYHOLDERS
The debentures were originally issued by us and sold by J.P. Morgan
Securities Inc. (the "Initial Purchaser") in transactions exempt from the
registration requirements of the Securities Act to persons reasonably believed
by the Initial Purchaser to be "qualified institutional buyers" as defined by
Rule 144A under the Securities Act. The selling securityholders may from time to
time offer and sell pursuant to this prospectus any or all of the debentures
listed below and the shares of CD common stock issued upon purchase by us, or
conversion, of such debentures. When we refer to the "selling securityholders"
in this prospectus, we mean those persons listed in the table below, as well as
the pledgees, donees, assignees, transferees, successors and others who later
hold any of the selling securityholders' interests.
The table below sets forth the name of each selling securityholder, the
principal amount at maturity of debentures that each selling securityholder may
offer pursuant to this prospectus and the number of shares of CD common stock
into which such debentures are convertible. Unless set forth below, to our
knowledge, none of the selling securityholders has, or within the past three
years has had, any material relationship with us or any of our predecessors or
affiliates or beneficially owns in excess of 1% of our outstanding CD common
stock.
The principal amounts of the debentures provided in the table below is based
on information provided to us by each of the selling securityholders as of
February 21, 2002, and the percentages are based on $1,200,000,000 aggregate
principal amount of debentures outstanding. The number of shares of CD common
stock that may be sold is based on the current conversion rate of 41.58 shares
of CD common stock per $1,000 principal amount of debentures.
Since the date on which the selling securityholders provided this
information, each selling securityholder identified below may have sold,
transferred or otherwise disposed of all or a portion of their debentures in a
transaction exempt from the registration requirements of the Securities Act.
Information concerning the selling securityholders may change from time to time
and any changed information will be set forth in supplements to this prospectus
to the extent required. In addition, the conversion ratio, and therefore the
number of shares of our CD common stock issuable upon conversion of the
debentures, is subject to adjustment. Accordingly, the number of shares of CD
common stock issuable upon conversion of the debentures may increase or
decrease.
The selling securityholders may from time to time offer and sell any or all
of the securities under this prospectus. Because the selling securityholders are
not obligated to sell the debentures or shares of CD common stock issuable upon
conversion of the debentures, we cannot estimate the amount of debentures or how
many shares of CD common stock that the selling securityholders will hold upon
consummation of any such sales.
NUMBER OF
AGGREGATE SHARES OF CD PERCENTAGE OF
PRINCIPAL AMOUNT PERCENTAGE OF COMMON STOCK SHARES OF CD
OF DEBENTURES DEBENTURES THAT MAY BE COMMON STOCK
NAME THAT MAY BE SOLD OUTSTANDING SOLD(1) OUTSTANDING(2)
---- ---------------- ------------- ------------ --------------
Acacia Life Insurance Company.............. $ 200,00 * 8,316 *
Alta Partners Holdings, LDC................ $ 8,000,000 * 332,640 *
American Country Insurance Company......... $ 500,000 * 20,790 *
American Founders Life Insurance Company... $ 400,000 * 16,632 *
American Pioneer Life Insurance Company.... $ 50,000 * 2,079 *
American Progressive Life and Health
Insurance Company........................ $ 50,000 * 2,079 *
American Public Entity Excess Pool......... $ 60,000 * 2,495 *
Ameritas Life Insurance Company............ $ 400,000 * 16,632 *
Aristeia International Limited............. $ 11,900,000 * 494,802 *
46
NUMBER OF
AGGREGATE SHARES OF CD PERCENTAGE OF
PRINCIPAL AMOUNT PERCENTAGE OF COMMON STOCK SHARES OF CD
OF DEBENTURES DEBENTURES THAT MAY BE COMMON STOCK
NAME THAT MAY BE SOLD OUTSTANDING SOLD(1) OUTSTANDING(2)
---- ---------------- ------------- ------------ --------------
Aristeia Partners, LP...................... $ 3,100,000 * 128,898 *
Arkansas PERS.............................. $ 1,200,000 * 49,896 *
Baltimore Life Insurance................... $ 200,000 * 8,316 *
Banc of America Securities LLC............. $ 7,800,000 * 324,324 *
Bay County PERS............................ $ 150,000 * 6,237 *
BCS Life Insurance Company................. $ 600,000 * 24,948 *
Black Diamond Capital I, Ltd............... $ 850,000 * 35,343 *
Black Diamond Convertible Offshore LDC..... $ 3,021,000 * 125,613 *
Black Diamond Offshore Ltd................. $ 3,004,000 * 124,906 *
Boilermakers Blacksmith Pension Trust...... $ 1,525,000 * 63,410 *
Buckeye State Mutual Insurance Co.......... $ 25,000 * 1,040 *
Catholic Mutual Relief Society of America
Retirement Plan and Trust................ $ 400,000 * 16,632 *
Celina Mutual Insurance Company............ $ 20,000 * 832 *
Central States Health and Life Company of
Omaha.................................... $ 300,000 * 12,474 *
Chrysler Corporation Master Retirement
Trust.................................... $ 4,005,000 * 166,528 *
Chrysler Insurance Company................. $ 1,900,000 * 79,002 *
Colonial Life Insurance Company of Texas... $ 40,000 * 1,663 *
Colonial Lloyds Insurance Company.......... $ 10,000 * 416 *
Commonwealth Dealers--CDLIC................ $ 180,000 * 7,484 *
Concord Life Insurance Company............. $ 150,000 * 6,237 *
Credit Suisse First Boston Corp............ $ 15,000,000 * 623,700 *
Credit Suisse First Boston Corp. London
Branch................................... $ 77,500,000 6.458% 3,222,450 *
CSA Fraternal Life Insurance Company....... $ 130,000 * 5,405 *
Cumberland Insurance Company............... $ 100,000 * 4,158 *
Cumberland Mutual Fire Insurance Company... $ 250,000 * 10,395 *
Dakota Truck Underwriters.................. $ 20,000 * 832 *
Delaware PERS.............................. $ 1,725,000 * 71,726 *
Delta Air Lines Master Trust............... $ 1,110,000 * 46,154 *
Delta Pilots D&S Trust..................... $ 535,000 * 22,245 *
Double Black Diamond Offshore LDC.......... $ 17,365,000 1.447% 722,037 *
Duke Endowment............................. $ 300,000 * 12,474 *
Eagle Pacific Insurance Company............ $ 230,000 * 9,563 *
Educators Mutual Fire Insurance Company.... $ 200,000 * 8,316 *
F.R. Convt. Sec. Fn........................ $ 175,000 * 7,277 *
Farmers Home Mutual Insurance Company...... $ 450,000 * 18,711 *
Farmers Mutual Protective Association of
Texas.................................... $ 120,000 * 4,990 *
Federated Rural Electric Insurance
Exchange................................. $ 350,000 * 14,553 *
First Dakota Indemnity Company............. $ 5,000 * 208 *
First Union National Bank.................. $ 70,000,000 5.833% 2,910,600 5.833%
First Union Securities Inc................. $ 35,750,000 2.979% 1,486,485 *
Founders Insurance Company................. $ 30,000 * 1,247 *
Gaia Offshore Master Fund Ltd.............. $ 4,500,000 * 187,110 *
47
NUMBER OF
AGGREGATE SHARES OF CD PERCENTAGE OF
PRINCIPAL AMOUNT PERCENTAGE OF COMMON STOCK SHARES OF CD
OF DEBENTURES DEBENTURES THAT MAY BE COMMON STOCK
NAME THAT MAY BE SOLD OUTSTANDING SOLD(1) OUTSTANDING(2)
---- ---------------- ------------- ------------ --------------
Goldman Sachs and Company.................. $ 49,960,000 4.163% 2,077,337 *
Goodville Mutual Casualty Company.......... $ 50,000 * 2,079 *
Grain Dealers Mutual Insurance............. $ 130,000 * 5,405 *
Granville Capital Corporation.............. $ 30,000,000 2.500% 1,247,400 *
Guarantee Trust Life Insurance Company..... $ 1,000,000 * 41,580 *
Guaranty Income Life Insurance Company..... $ 350,000 * 14,553 *
Gulf Investment Corporation................ $ 200,000 * 8,316 *
Hannover Life Reassurance Company of
America.................................. $ 1,200,000 * 49,896 *
Holy Family Society........................ $ 100,000 * 4,158 *
ICI American Holdings Trust................ $ 600,000 * 24,948 *
Integrity Mutual Insurance Company......... $ 240,000 * 9,979 *
ISBA Mutual Insurance Company.............. $ 180,000 * 7,484 *
JMG Convertible Investments, LP............ $ 40,000,000 3.333% 1,663,200 *
JMG Triton Offshore Fund, Ltd.............. $ 10,500,000 * 436,590 *
J.P. Morgan Securities Inc................. $ 210,845,000 17.570% 8,766,935 *
Kanawha Insurance Company.................. $ 400,000 * 16,632 *
Landmark Life Insurance Company............ $ 20,000 * 832 *
Lebanon Mutual Insurance Company........... $ 130,000 * 5,405 *
Lincoln Individual/Memorial Life
Insurance................................ $ 130,000 * 5,405 *
Louisiana CCRF............................. $ 350,000 * 14,553 *
Loyal Christian Benefit Association........ $ 120,000 * 4,990 *
Lyxor Master Fund.......................... $ 500,000 * 20,790 *
Main Street America Assurance Company...... $ 450,000 * 18,711 *
Marathon Global Convertible Master Fund,
Ltd...................................... $ 18,000,000 1.500% 748,440 *
Medico Life Insurance Company.............. $ 200,000 * 8,316 *
Medmarc Insurance Company.................. $ 450,000 * 18,711 *
Michigan Mutual Insurance Company.......... $ 900,000 * 37,422 *
Michigan Professional Insurance Exchange... $ 110,000 * 4,574 *
Microsoft Corporation...................... $ 1,405,000 * 58,420 *
Mid America Life Insurance Company......... $ 40,000 * 1,663 *
Middle Cities Risk Management Trust........ $ 120,000 * 4,990 *
Mid-State Surety Company................... $ 40,000 * 1,663 *
Motion Picture Industry Health Plan--Active
Member Fund.............................. $ 370,000 * 15,385 *
Motion Picture Industry Health--Retiree
Member Fund.............................. $ 155,000 * 6,445 *
National Grange Mutual Insurance Company... $ 600,000 * 24,948 *
National Mutual Insurance Company.......... $ 20,000 * 832 *
NCMIC...................................... $ 400,000 * 16,632 *
New Era Life Insurance Company............. $ 190,000 * 7,900 *
NMS Services (Cayman) Inc.................. $ 66,000,000 5.500% 2,744,280 *
Oak Casualty Insurance Company............. $ 40,000 * 1,663 *
OCM Convertible Trust...................... $ 2,325,000 * 96,674 *
48
NUMBER OF
AGGREGATE SHARES OF CD PERCENTAGE OF
PRINCIPAL AMOUNT PERCENTAGE OF COMMON STOCK SHARES OF CD
OF DEBENTURES DEBENTURES THAT MAY BE COMMON STOCK
NAME THAT MAY BE SOLD OUTSTANDING SOLD(1) OUTSTANDING(2)
---- ---------------- ------------- ------------ --------------
Pacific Eagle Insurance Company............ $ 130,000 * 5,405 *
Partner Reinsurance Company Ltd............ $ 645,000 * 26,819 *
Phico Insurance Company.................... $ 500,000 * 20,790 *
Physicians Life Insurance Company.......... $ 300,000 * 12,474 *
Physicians Mutual Insurance Company........ $ 500,000 * 20,790 *
Pioneer Insurance Company.................. $ 80,000 * 3,326 *
Qwest Occupational Health Trust............ $ 140,000 * 5,821 *
Republic Mutual Insurance Company.......... $ 15,000 * 624 *
Scor Life Re Convertible Program........... $ 400,000 * 16,632 *
Standard Mutual Insurance Company.......... 4240,000 * 9,979 *
State Employees' Retirement Fund of the
State of Delaware........................ $ 1,590,000 * 66,112 *
State National Insurance Company........... $ 90,000 * 3,742 *
State of Connecticut Combined Investment
Funds.................................... $ 3,320,000 * 138,046 *
State of Oregon--Equity.................... $ 5,525,000 * 229,730 *
Syngenta AG................................ 300,000 * 12,474 *
Teachers Insurance & Annuity Association... $ 17,000,000 1.417% 706,860 *
Texas Builders Insurance Company........... 4175,000 * 7,277 *
Texas Hospital Insurance Exchange.......... $ 25,000 * 1,040 *
The PIMCO Growth and Income Fund........... $ 1,500,000 * 62,370 *
Transguard Insurance Company of America,
Inc...................................... $ 900,000 * 37,422 *
Tuscarora Wayne Mutual Insurance Company... $ 80,000 * 3,326 *
UBS AG London Branch....................... $ 52,800,000 4.400% 2,195,424 *
UBS O'Connor LLC F/B/O UBS Global Equity
Arbitrage Master Ltd..................... $ 40,000,000 3.333% 1,663,200 *
United National Insurance Company.......... $ 500,000 * 20,790 *
Vesta-Inex Insurance Exchange IASA......... $ 300,000 * 12,474 *
Victory Capital Management as Agent for the
EB Convertible Securities Fund........... $ 275,000 * 11,435 *
Victory Capital Management as Agent for the
Charitable Convertible Securities Fund... $ 270,000 * 11,227 *
Victory Capital Management as Agent for the
Field Foundation of Illinois............. $ 30,000 * 1,247 *
Victory Capital Management as Investment
Manager for the California State Auto
Assoc Inter-Insurance.................... $ 200,000 * 8,316 *
Victory Capital Management as Investment
Manager for the California State Auto
Assoc Retirement Pension Plan............ $ 40,000 * 1,663 *
Victory Capital Management as Investment
Manager for the Potlatch................. $ 250,000 * 10,395 *
Victory Capital Management as Agent for the
Key Trust Fixed Income Fund.............. $ 260,000 * 10,811 *
Victory Capital Management as Agent for
Charitable Income Fund................... $ 160,000 * 6,653 *
49
NUMBER OF
AGGREGATE SHARES OF CD PERCENTAGE OF
PRINCIPAL AMOUNT PERCENTAGE OF COMMON STOCK SHARES OF CD
OF DEBENTURES DEBENTURES THAT MAY BE COMMON STOCK
NAME THAT MAY BE SOLD OUTSTANDING SOLD(1) OUTSTANDING(2)
---- ---------------- ------------- ------------ --------------
Victory Capital Management as Investment
Manager for the Special Distribution of
Oregon Convertible Securities............ $ 15,000 * 624 *
Victory Capital Management as Investment
Manager for the CompSource Oklahoma...... $ 200,000 * 8,316 *
Victory Capital Management as Investment
Manager for Georgia Municipal Employees
Retirement Trust Fdn..................... $ 500,000 * 20,790 *
West Virginia Fire Insurance Company....... $ 5,000 * 208 *
Western Home Insurance Company............. $ 190,000 * 7,900 *
Westward Life Insurance Company............ $ 180,000 * 7,484 *
Wisconsin Lawyers Mutual Insurance
Company.................................. $ 200,000 * 8,316 *
Wisconsin Mutual Insurance Company......... $ 140,000 * 5,821 *
World Insurance Company.................... $ 150,000 * 6,237 *
Zazore Convertible Securities Fund Inc..... $ 940,000 * 39,085 *
Zeneca Holdings Trust...................... $ 425,000 * 17,672 *
All other holders of debentures or future
transferees, pledgees, donees, assignees
or successors of any such holders
(3)(4)................................... $ 353,810,000 29.484% 14,711,470 1.505%
Total...................................... $1,200,000,000 100.000% 49,896,050 5.104%
------------------------
* Less than one percent (1%).
(1) Assumes conversion of all of the holder's debentures at a conversion rate of
41.58 shares of CD common stock per $1,000 principal amount of the
debentures. This conversion rate is subject to adjustment, however, as
described under "Description of Debentures--Conversion Rights." As a result,
the number of shares of CD common stock issuable upon conversion of the
debentures may increase or decrease in the future. Does not include shares
of CD common stock that may be issued by us upon purchase of the debentures
by us at the option of the holder.
(2) Calculated based on Rule 13d-3(d)(i) of the Exchange Act, using 977,708,342
shares of CD common stock outstanding as of December 31, 2001. In
calculating this amount for each holder, we treated as outstanding the
number of shares of CD common stock issuable upon conversion of all of that
holder's debentures, but we did not assume conversion of any other holder's
debentures. Does not include shares of CD common stock that may be issued by
us upon purchase of the debentures by us at the option of the holder.
(3) Information about other selling securityholders will be set forth in
prospectus supplements, if required.
(4) Assumes that any other holders of the debentures, or any future pledgees,
donees, assignees, transferees or successors of or from any other such
holders of the debentures, do not beneficially own any shares of CD common
stock other than the CD common stock issuable upon conversion of the
debentures at the initial conversion rate.
50
PLAN OF DISTRIBUTION
The selling securityholders will be offering and selling all of the
securities offered and sold under this prospectus. We will not receive any of
the proceeds from the offering of the debentures or the shares of CD common
stock by the selling securityholders. In connection with this initial offering
of the debentures, we entered into a registration rights agreement dated
November 27, 2001 with the initial purchaser of the debentures. Securities may
only be offered or sold under this prospectus pursuant to the terms of the
registration rights agreement. However, selling securityholders may resell all
or a portion of the securities in open market transactions in reliance upon
Rule 144 or Rule 144A under the Securities Act, provided they meet the criteria
and conform to the requirements of one of these rules. We are registering the
debentures and shares of CD common stock covered by this prospectus to permit
holders to conduct public secondary trading of these securities from time to
time after the date of this prospectus. We have agreed, among other things, to
bear all expenses, other than underwriting discounts and selling commissions, in
connection with the registration and sale of the debentures and the shares of CD
common stock covered by this prospectus.
We have been advised by the selling securityholders that the selling
securityholders may sell all or a portion of the debentures and shares of CD
common stock beneficially owned by them and offered hereby from time to time:
- directly; or
- through underwriters, broker-dealers or agents, who may receive
compensation in the form of discounts, commissions or concessions from the
selling securityholders and/or from the purchasers of the debentures and
shares of CD common stock for whom they may act as agent.
The debentures and the shares of CD common stock may be sold from time to
time in one or more transactions at:
- fixed prices, which may be changed;
- prevailing market prices at the time of sale;
- varying prices determined at the time of sale; or
- negotiated prices.
These prices will be determined by the holders of the securities or by agreement
between these holders and underwriters or dealers who may receive fees or
commissions in connection with the sale. The aggregate proceeds to the selling
securityholders from the sale of the debentures or shares of CD common stock
offered by them hereby will be the purchase price of the debentures or shares of
CD common stock less discounts and commissions, if any.
The sales described in the preceding paragraph may be effected in
transactions:
- on any national securities exchange or quotation service on which the
debentures or shares of CD common stock may be listed or quoted at the
time of sale, including the New York Stock Exchange in the case of the
shares of CD common stock;
- in the over-the counter market;
- in transactions otherwise than on such exchanges or services or in the
over-the-counter market; or
- through the writing of options.
These transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as an agent on both sides of the
trade.
51
In connection with sales of the debentures and shares of CD common stock or
otherwise, the selling securityholders may enter into hedging transactions with
broker-dealers. These broker-dealers may in turn engage in short sales of the
debentures and shares of CD common stock in the course of hedging their
positions. The selling securityholders may also sell the debentures and shares
of CD common stock short and deliver the debentures and shares of CD common
stock to close out short positions, or loan or pledge the debentures and shares
of CD common stock to broker-dealers that in turn may sell the debentures and
shares of CD common stock.
To our knowledge, there are currently no plans, arrangements or
understandings between any selling securityholders and any underwriter,
broker-dealer or agent regarding the sale of the debentures and the shares of CD
common stock by the selling securityholders. Selling securityholders may not
sell any, or may not sell all, of the debentures and the shares of CD common
stock offered by them pursuant to this prospectus. In addition, we cannot assure
you that a selling securityholder will not transfer, devise or gift the
debentures and the shares of CD common stock by other means not described in
this prospectus. In addition, any securities covered by this prospectus which
qualify for sale pursuant to Rule 144 or Rule 144A of the Securities Act may be
sold under Rule 144 or Rule 144A rather than pursuant to this prospectus.
The outstanding shares of CD common stock are listed for trading on the New
York Stock Exchange.
The selling securityholders and any broker and any broker-dealers, agents or
underwriters that participate with the selling securityholders in the
distribution of the debentures or the shares of CD common stock may be deemed to
be "underwriters" within the meaning of the Securities Act. In this case, any
commissions received by these broker-dealers, agents or underwriters and any
profit on the resale of the debentures or the shares of CD common stock
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act. In addition, any profits realized by the selling
securityholders may be deemed to be underwriting commissions under the
Securities Act. To the extent the selling securityholders may be deemed to be
underwriters, the selling securityholders may be subject to statutory
liabilities, including, but not limited to, liability under Sections 11, 12 and
17 of the Securities Act and Rule 10b-5 under the Exchange Act.
Because the selling securityholders may be deemed to be underwriters within
the meaning of Section 2(11) of the Securities Act, they will be subject to the
prospectus delivery requirements of the Securities Act. At any time a particular
offer of the securities is made, a revised prospectus or prospectus supplement,
if required, will be distributed which discloses:
- the name of the selling securityholders and any participating
underwriters, broker-dealers or agents;
- the aggregate amount and type of securities being offered;
- the price at which the securities were sold and other material terms of
the offering;
- any discounts, commissions, concessions or other times constituting
compensation from the selling securityholders and any discounts,
commissions or concessions allowed or reallowed or paid to dealers; and
- that the participating broker-dealers did not conduct any investigation to
verify the information in this prospectus or incorporated in this
prospectus by reference.
The prospectus supplement or a post-effective amendment will be filed with
the Commission to reflect the disclosure of additional information with respect
to the distribution of the securities. In addition, if we receive notice from a
selling securityholder that a donee or pledgee intends to sell more than 500
shares of our CD common stock, a supplement to this prospectus will be filed.
52
The debentures were issued and sold in November 2001 in transactions exempt
from the registration requirements of the Securities Act to persons reasonably
believed by the Initial Purchaser to be "qualified institutional buyers," as
defined in Rule 144A under the Securities Act. We have agreed to indemnify the
Initial Purchaser and each selling securityholder, and each selling
securityholder has agreed to indemnify us, our directors, our officers who sign
the registration statement to which this prospectus relates and each person, if
any, who controls Cendant within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, against specified liabilities
arising under the Securities Act.
The selling securityholders and any other person participating in such
distribution will be subject to the Exchange Act. The Exchange Act rules
include, without limitation, Regulation M, which may limit the timing of
purchases and sales of any of the debentures and the underlying shares of CD
common stock by the selling securityholders and any such other person. In
addition, Regulation M of the Exchange Act may restrict the ability of any
person engaged in the distribution of the debentures and the underlying shares
of CD common stock to engage in market-making activities with respect to the
particular debentures and the underlying shares of CD common stock being
distributed for a period of up to five business days prior to the commencement
of distribution. This may affect the marketability of the debentures and the
underlying shares of CD common stock and the ability of any person or entity to
engage in market-making activities with respect to the debentures and the
underlying shares of CD common stock.
Under the registration rights agreement, we are obligated to use our
reasonable efforts to keep the registration statement of which this prospectus
is a part effective until the earlier of:
- two years after the last date of original issuance of any of the
debentures;
- the date when the holders of the debentures and the shares of CD common
stock issuable upon conversion of the debentures are able to sell all such
securities immediately without restriction pursuant to the volume
limitation provisions of Rule 144 under the Securities Act; and
- the date when all of the debentures and the shares of CD common stock
issuable upon conversion of the debentures registered under this
registration statement are sold.
Our obligation to keep the registration statement to which this prospectus
relates effective is subject to specified, permitted exceptions set forth in the
registration rights agreement. In these cases, we may prohibit offers and sales
of the debentures and shares of CD common stock pursuant to the registration
statement to which this prospectus relates.
We may suspend the use of this prospectus if we learn of any event that
causes this prospectus to include an untrue statement of a material fact
required to be stated in the prospectus or necessary to make the statements in
the prospectus not misleading in light of the circumstances then existing. If
this type of event occurs, a prospectus supplement or post-effective amendment,
if required, will be distributed to each selling securityholder. Each selling
securityholder has agreed not to trade securities from the time the selling
securityholder receives notice from us of this type of event until the selling
securityholder receives a prospectus supplement or amendment. This time period
will not exceed 45 days in any 90-day period or 90 days in any 360-day period.
53
LEGAL MATTERS
Certain legal matters with respect to the debentures will be passed upon for
us by Eric J. Bock, Esq., Senior Vice President, Law and Secretary of Cendant.
Mr. Bock holds shares of CD common stock and options to acquire shares of CD
common stock. Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York has
advised us as to certain tax matters relating to the debentures.
EXPERTS
The consolidated financial statements of Cendant Corporation and
subsidiaries incorporated in this prospectus by reference from our Annual Report
on Form 10-K/A for the year ended December 31, 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 certain revenue recognition policies regarding the recognition of
non-refundable one-time fees and pro rata refundable subscription revenue and
the restatement of the financial statements to reflect the individual membership
business as part of continuing operations as discussed in Note 1), 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.
WHERE YOU CAN FIND MORE INFORMATION
Cendant is subject to the informational requirements of the Exchange Act,
and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at prescribed rates at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Regional Office of the
Commission located at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, IL 60661. The Commission also maintains a website that contains
reports, proxy and information statements and other information. Please call the
Commission at 1-800-SEC-0330 for further information on the public reference
rooms. The website address is http://www.sec.gov. In addition, such material can
be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
54
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Cendant is paying all of the selling securityholders' expenses related to
this offering, except the selling securityholders will pay any applicable
broker's commissions and expenses. The following table sets forth the
approximate amount of fees and expenses payable by Cendant in connection with
this Registration Statement and the distribution of the debentures and shares of
CD common stock registered hereby. All of the amounts shown are estimates except
the Securities and Exchange Commission registration fee.
Securities and Exchange Commission Registration Fee......... $107,571
Printing and Engraving Fees and Expenses.................... 30,000
Accounting Fees and Expenses................................ 100,000
Legal Fees.................................................. 100,000
Miscellaneous............................................... 200,000
--------
Total................................................... $537,571
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102 of the General Corporation Law of the State of Delaware allows a
corporation to eliminate the personal liability of directors to a corporation or
its stockholders for monetary damages for a breach of a fiduciary duty as a
director, except where the director breached his duty of loyalty, failed to act
in good faith, engaged in intentional misconduct or knowingly violated a law,
authorized the payment of a dividend or approved a stock repurchase or
redemption in violation of Delaware corporate law or obtained an improper
personal benefit.
Section 145 of the Delaware General Corporation Law empowers a Delaware
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 such corporation) by reason of the fact that such person
is or was a director, officer, employee or agent of such corporation, or is or
was serving at the request of such corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided that
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the corporation and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
such person's conduct was unlawful. A Delaware corporation may indemnify
directors, officers, employees and other agents of such corporation in an action
by or in the right of a corporation under the same conditions against expenses
(including attorney's fees) actually and reasonably incurred by the person in
connection with the defense and settlement of such action or suit, except that
no indemnification is permitted without judicial approval if the person to be
indemnified has been adjudged to be liable to the corporation. Where a present
or former director or officer of the corporation is successful on the merits or
otherwise in the defense of any action, suit or proceeding referred to above or
in defense of any claim, issue or matter therein, the corporation must indemnify
such person against the expenses (including attorneys' fees) which he or she
actually and reasonably incurred in connection therewith.
Section 174 of the General Corporation Law of the State of Delaware
provides, among other things, that a director who willfully or negligently
approves of an unlawful payment of dividends or an unlawful stock purchase or
redemption, may be held liable for such actions. A director who was either
II-1
absent when the unlawful actions were approved or dissented at the time, may
avoid liability by causing his or her dissent to such actions to be entered into
the books containing the minutes of the meetings of the board of directors at
the time such action occurred or immediately after such absent director receives
notice of the unlawful acts.
The Registrant's By-Laws contain provisions that provide for indemnification
of officers and directors and their heirs and distributees to the full extent
permitted by, and in the manner permissible under, the General Corporation Law
of the State of Delaware.
As permitted by Section 102(b)(7) of the General Corporation Law of the
State of Delaware, the Registrant's Amended and Restated Certificate of
Incorporation contains a provision eliminating the personal liability of a
director to the Registrant or its stockholders for monetary damages for breach
of fiduciary duty as a director, subject to some exceptions.
Cendant Corporation maintains, at its expense, a policy of insurance which
insures its directors and officers, subject to exclusions and deductions as are
usual in these kinds of insurance policies, against specified liabilities which
may be incurred in those capacities.
ITEM 16. EXHIBITS
The following is a list of all exhibits filed as a part of this registration
statement on Form S-3, including those incorporated in this registration
statement by reference.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- ------------------------------------------------------------
3.1 Amended and Restated Certificate of Incorporation of Cendant
Corporation (incorporated by reference to Exhibit 3.1 to
Cendant Corporation's Quarterly Report on Form 10-Q/A filed
by Cendant Corporation on July 28, 2000 for the quarterly
period ended March 31, 2000).
3.2 Amended and Restated By-Laws of Cendant Corporation
(incorporated by reference to Exhibit 3.2 to Cendant
Corporation's Quarterly Report on Form 10-Q/A filed by
Cendant Corporation on July 28, 2000 for the quarterly
period ended March 31, 2000).
4.1 Indenture dated as of November 27, 2001 between Cendant
Corporation and The Bank of Nova Scotia Trust Company of New
York, as trustee (incorporated by reference to Exhibit 4.1
to Cendant Corporation's Current Report on Form 8-K dated
December 6, 2001).
4.2 Form of 3 7/8% Convertible Senior Debenture due 2011
(included in Exhibit 4.1).
4.3 Registration Rights Agreement dated as of November 27, 2001
between Cendant Corporation and J.P. Morgan Securities Inc.
5.1 Opinion of Eric J. Bock, Esq.
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to
certain U.S. federal income tax matters.
12.1 Statement re: Computation of Ratio of Earnings to Fixed
Charges (incorporated by reference to Exhibit 12 to the
Registrant's Annual Report on Form 10-K/A dated July 2,
2001, filed by Cendant Corporation on July 3, 2001).
12.2 Statement re: Computation of Ratio of Earnings to Fixed
Charges (incorporated by reference to the Registrant's
Quarterly Report on Form 10-Q filed by Cendant Corporation
on November 14, 2001).
23.1 Consent of Deloitte & Touche LLP relating to the financial
statements of Cendant Corporation.
II-2
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- ------------------------------------------------------------
23.2 Consent of Deloitte & Touche LLP relating to the financial
statements of Avis Group Holdings, Inc.
23.3 Consent of KPMG LLP relating to the financial statements of
Galileo International, Inc.
23.4 Consent of Eric J. Bock, Esq. (included in Exhibit 5.1).
23.5 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 8.1).
24.1 Power of Attorney (included on signature page of the
Registration Statement).
25.1 A Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of The Bank of Nova
Scotia Trust Company of New York, trustee under the
indenture.
ITEM 17. UNDERTAKINGS
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:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended;
(b) 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 Securities and
Exchange 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
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
provided, however, that paragraphs (1)(a) and (1)(b) shall not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Securities and Exchange Commission by the Registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, as amended, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall 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.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, 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 in the Registration Statement shall be deemed to be a
II-3
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, 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 Commission such
indemnification is against public policy as expressed in the Securities Act of
1933, as amended, 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, as amended, and will be governed by the final adjudication of such
issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Cendant
Corporation has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
in the State of New York on February 22, 2002.
CENDANT CORPORATION
By: /s/ JAMES E. BUCKMAN
-----------------------------------------
Name: James E. Buckman
Title: Vice Chairman and General Counsel
Each person whose signature appears below hereby constitutes and appoints
each of Eric J. Bock and James E. Buckman, or either of them, each acting alone,
his true and lawful attorney-in-fact and agent, with full power of substitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) under the Securities
Act and to sign any instrument, contract, document or other writing of or in
connection with the Registration Statement and any amendments and supplements
thereto (including post-effective amendments) and to file the same, with all
exhibits thereto, and other documents in connection therewith, including this
power of attorney, with the Securities and Exchange Commission and any
applicable securities exchange or securities self-regulatory body, granting unto
said attorneys-in-fact and agents, each acting alone, full power and authority
to do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as he might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on February 22, 2002.
NAME TITLE
---- -----
/s/ HENRY R. SILVERMAN
------------------------------------------- Chairman of the Board of Directors, President,
Henry R. Silverman Chief Executive Officer and Director
/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/ KEVIN M. SHEEHAN Senior Executive Vice President and Chief
------------------------------------------- Financial Officer (Principal Financial
Kevin M. Sheehan Officer)
/s/ TOBIA IPPOLITO Executive Vice President, Finance and Chief
------------------------------------------- Accounting Officer (Principal Accounting
Tobia Ippolito Officer)
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NAME TITLE
---- -----
/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 MULRONEY
------------------------------------------- Director
The Rt. Hon. Brian Mulroney, 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
/s/ WILLIAM S. COHEN
------------------------------------------- Director
The Honorable William S. Cohen
II-6
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- ------------------------------------------------------------
3.1 Amended and Restated Certificate of Incorporation of Cendant
Corporation (incorporated by reference to Exhibit 3.1 to
Cendant Corporation's Quarterly Report on Form 10-Q/A filed
by Cendant Corporation on July 28, 2000 for the quarterly
period ended March 31, 2000).
3.2 Amended and Restated By-Laws of Cendant Corporation
(incorporated by reference to Exhibit 3.2 to Cendant
Corporation's Quarterly Report on Form 10-Q/A filed by
Cendant Corporation on July 28, 2000 for the quarterly
period ended March 31, 2000).
4.1 Indenture dated as of November 27, 2001 between Cendant
Corporation and The Bank of Nova Scotia Trust Company of New
York, as trustee (incorporated by reference to Exhibit 4.1
to Cendant Corporation's Current Report on Form 8-K dated
December 6, 2001).
4.2 Form of 3 7/8% Convertible Senior Debenture due 2011
(included in Exhibit 4.1).
4.3 Registration Rights Agreement dated as of November 27, 2001
between Cendant Corporation and J.P. Morgan Securities Inc.
5.1 Opinion of Eric J. Bock, Esq.
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to
certain U.S. federal income tax matters.
12.1 Statement re: Computation of Ratio of Earnings to Fixed
Charges (incorporated by reference to Exhibit 12 to the
Registrant's Annual Report on Form 10-K/A dated July 2,
2001, filed by Cendant Corporation on July 3, 2001).
12.2 Statement re: Computation of Ratio of Earnings to Fixed
Charges (incorporated by reference to the Registrant's
Quarterly Report on Form 10-Q filed by Cendant Corporation
on November 14, 2001).
23.1 Consent of Deloitte & Touche LLP relating to the financial
statements of Cendant Corporation.
23.2 Consent of Deloitte & Touche LLP relating to the financial
statements of Avis Group Holdings, Inc.
23.3 Consent of KPMG LLP relating to the financial statements of
Galileo International, Inc.
23.4 Consent of Eric J. Bock, Esq. (included in Exhibit 5.1).
23.5 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 8.1).
24.1 Power of Attorney (included on signature page of the
Registration Statement).
25.1 A Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of The Bank of Nova
Scotia Trust Company of New York, trustee under the
indenture.
II-7