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SECURITIES AND EXCHANGE COMMISSION
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act ofPROXY STATEMENT PURSUANT TO
SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934 (Amendment No. )
Filed by the Registrant /X/)/x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X//x/ Preliminary Proxy Statement
/ / Confidential, forFor Use of the Commission Only (as
permitted by Rule 14a-
6(e)14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c)Rule 14a-11(c) or Section240.14a-12Rule 14a-12
AVIS GROUP HOLDINGS, INC.,
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(Name of Registrant as Specified In Its Charter)(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
/X// / No fee required.
/ /required
/x/ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------Class A Common Stock, Par Value $0.01 per share, of Avis Group Holdings, Inc.
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(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------25,708,652 shares of Class A Common Stock and 7,793,435 options to purchase
shares of Class A Common Stock.
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(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
-----------------------------------------------------------------------The filing fee was determined based upon the sum of (a) the product of
25,708,652 shares of Class A Common Stock and the merger consideration of $33.00
per share in cash and (b) the difference between $33.00 and the exercise price
per share of Class A Common Stock of each of the 7,793,435 shares covered by
outstanding options. In accordance with Rule 0-11 under the Securities Exchange
Act of 1934, as amended, the filing fee was determined by multiplying the amount
calculated pursuant to the preceding sentence by 1/50 of one percent.
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(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------$936,763,069
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(5) Total fee paid: -----------------------------------------------------------------------$187,352
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/ / Fee paid previously with preliminary materials.materials: $__________
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/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Formform or Scheduleschedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------previously paid:
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(2) Form, Schedule or Registration Statement No.no.:
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(3) Filing Party:
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(4) Date Filed:
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[LOGO]
AVIS GROUP HOLDINGS, INC.
900 OLD COUNTRY ROAD
GARDEN CITY, NEW YORKOld County Road
Garden City, New York 11530
NOTICE OF 2000 ANNUALSPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 16, 2000
NOTICE IS HEREBY GIVEN that_____________, 2001
To the annualStockholders of Avis Group Holdings, Inc.
A special meeting of the stockholders of Avis Group Holdings, Inc. (the "Company"),
will be held on Tuesday, May 16, 2000 at
10:00 a.m. Eastern Daylight Time at the corporate offices of Avis Group Holdings, Inc., 900 Old
Country Road, Garden City, Hotel, 45 Seventh Street,
Garden City, NYNew York 11530 (the "Meeting") foron _______ __, 2001 at _____ a.m.
local time, to consider and vote upon the following purposes:matters:
1. To elect eleven directors forconsider and vote upon a one-year termproposal to adopt the Agreement and
until their successors
are duly electedPlan of Merger, dated as of November 11, 2000, by and qualified;
2. To ratifyamong Avis, Cendant
Corporation, a Delaware corporation, PHH Corporation, a Maryland corporation and
an indirect wholly-owned subsidiary of Cendant, and Avis Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of PHH Corporation, pursuant
to which, among other things (a) Avis Acquisition Corp. will be merged with and
into Avis, with Avis being the appointmentsurviving corporation and (b) each outstanding
share of Deloitte & Touche LLP as the auditors of
the Company's financial statements for the year ending December 31, 2000;
3. To approve an amendment to the Company's Amended and Restated
Certificate of Incorporation to (i) reclassify the Company's 100,000,000 shares
of authorized Common Stock asour Class A Common Stock and (ii) authorize 15,000,000
shares of non-voting Class B Common Stock which maycommon stock, par value $0.01 per share will be converted
into Class A
Common Stock under certain circumstances;
4. To approve the Company's 2000 Incentive Compensation Plan; and
5. To transact such other business as may properly come before the Meetingright to receive $33.00 in cash without interest (other than shares
held by any of our subsidiaries, held in our treasury, held by Cendant, or any
adjournmentsubsidiary of Cendant or postponement thereof.held by stockholders who perfect their appraisal rights
under Delaware law); and
2. To vote to adjourn the meeting, if necessary.
The Boardboard of Directorsdirectors has fixedspecified ________ __, 2001, at the close of
business, on Wednesday,
March 22, 2000 as the record date for the Meeting. Onlypurpose of determining the stockholders who
are entitled to receive notice of and to vote at the special meeting. A list of
the stockholders entitled to vote at the special meeting will be available for
examination by any stockholder at the special meeting. For ten days prior to the
special meeting, this stockholder list will also be available for inspection by
stockholders at our corporate offices at 900 Old Country Road, Garden City, New
York 11530, during ordinary business hours.
Please read the proxy statement and other materials concerning Avis and
the merger, which are mailed with this notice, for a more complete statement
regarding the matters to be acted upon at the special meeting.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" ADOPTION
OF THE MERGER AGREEMENT.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING, PLEASE COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY CARD AND RETURN
IT IN THE ENCLOSED PREPAID ENVELOPE. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY
REVOKE YOUR PROXY AND VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY CARD. YOUR PROMPT COOPERATION WILL BE GREATLY APPRECIATED.
By Order of the Board of Directors
/s/ Karen C. Sclafani
Karen C. Sclafani
Vice President, General Counsel and
Secretary
Dated and Mailed: ________ __, 200_
PRELIMINARY COPY - SUBJECT TO COMPLETION
NOVEMBER __, 2000
AVIS GROUP HOLDINGS, INC.
900 Old County Road
Garden City, New York 11530
________ __, 200_
Dear Fellow Stockholder:
You are cordially invited to attend a special meeting of the stockholders
of recordAvis Group Holdings, Inc. ("Avis"), to be held at that timethe corporate offices of
Avis, 900 Old Country Road, Garden City, New York 11530 on ________ __, 2001, at
_______ a.m. local time. A notice of the special meeting, a proxy statement and
related information about Avis and a proxy card are enclosed. All holders of the
outstanding shares of our Class A common stock, par value $0.01 per share, as of
________ __, 2001 will be entitled to notice of and to vote at the Meetingspecial
meeting. You may vote shares at the special meeting only if you are present in
person or represented by proxy.
At the special meeting, you will be asked to consider and any
adjournment or postponement thereof. A list of stockholders entitled to vote on a
proposal to adopt the Agreement and Plan of Merger, dated as of November 11,
2000, by and among Avis, Cendant Corporation, PHH Corporation, and Avis
Acquisition Corp., pursuant to which Avis Acquisition Corp. will be merged with
and into Avis, with Avis continuing as the surviving corporation and an indirect
wholly-owned subsidiary of Cendant. If the merger agreement is adopted and the
merger becomes effective, each outstanding share will be converted into the
right to receive $33.00 in cash other than shares held by any of our
subsidiaries, held in our treasury, held by Cendant or any subsidiary of Cendant
or held by stockholders who perfect their appraisal rights under Delaware law. A
copy of the merger agreement is attached as Appendix A to the accompanying proxy
statement, and we urge you to read it in its entirety.
A special committee of the board of directors of Avis, consisting of two
independent directors, was formed to consider and evaluate the merger. The
special committee has unanimously recommended to the board of directors of Avis
that the merger agreement be approved. In connection with its evaluation of the
merger, the special committee engaged Morgan Stanley & Co. Incorporated to act
as its financial advisor and to advise the special committee and our board of
directors. Morgan Stanley has rendered its opinion dated as of November 10, 2000
to the effect that, as of such date and based upon and subject to the
assumptions, limitations and qualifications set forth in such opinion, the
merger consideration of $33.00 per share in cash is fair from a financial point
of view to the stockholders of Avis, other than Cendant and its affiliates. The
written opinion of Morgan Stanley is attached as Appendix B to the accompanying
proxy statement, and you should be read it carefully.
OUR BOARD OF DIRECTORS, BASED ON THE UNANIMOUS RECOMMENDATION OF THE
SPECIAL COMMITTEE, HAS UNANIMOUSLY APPROVED AND DECLARED THE ADVISABILITY OF THE
MERGER AGREEMENT, AND HAS UNANIMOUSLY DETERMINED THAT THE MERGER CONSIDERATION
OF $33.00 PER SHARE OF COMMON STOCK IS FAIR TO OUR PUBLIC STOCKHOLDERS AND THAT
THE MERGER IS ADVISABLE AND IN THE BEST INTERESTS OF AVIS AND OUR STOCKHOLDERS.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" ADOPTION OF
THE MERGER AGREEMENT.
Adoption of the merger agreement requires both the affirmative vote of the
holders of a majority of all outstanding shares and the affirmative vote of the
holders of a majority of the votes cast at the Meeting willspecial meeting by holders of
shares other than Cendant or any subsidiary of Cendant. Cendant has agreed to
cause its shares, representing approximately 17.8% of our outstanding shares, to
be available for examination 10 days before the Meeting during
ordinary business hours at the officesvoted in favor of adoption of the Company, 900 Old Country Road,
Garden City, New York 11530.
The enclosedmerger agreement. We urge you to read the
accompanying proxy is solicited by the Board of Directorsstatement carefully as it sets forth details of the Company.
Reference is madeproposed
merger and other important information related to the attached Proxy Statement for further information with
respect to the business to be transacted at the Meeting. The Board of Directors
urges you to date, sign and return the enclosed proxy promptly. A reply envelope
is enclosed for your convenience. You are cordially invited to attend the
Meeting in person. The return of the enclosed proxy will not affect your right
to vote if you attend the Meeting in person.
By Ordermerger.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING, PLEASE COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY CARD AND RETURN
IT IN THE ENCLOSED PREPAID ENVELOPE. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY
REVOKE YOUR PROXY AND VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY CARD. YOUR PROMPT COOPERATION WILL BE GREATLY APPRECIATED.
Sincerely,
/s/ A. Barry Rand
Chairman of the Board of Directors
KAREN C. SCLAFANI
Secretary
Dated: April 14, 2000
AVIS GROUP HOLDINGS, INC.
900 OLD COUNTRY ROAD
GARDEN CITY, NEW YORK 11530
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, MAY 16, 2000and
Chief Executive Officer
This Proxy Statementproxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Avis Group Holdings, Inc., a Delaware
corporation (the "Company"), to be voted at the 2000 Annual Meeting of
Stockholders,dated _______, 200_ and any adjournment or postponement thereof (the "Meeting"), to be
held on the date, at the time and place, and for the purposes set forth in the
foregoing notice. This Proxy Statement, the accompanying notice and the enclosed
proxy card areis first being mailed to
stockholders on or about April 14, 2000.
The_______, 200_.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE FAIRNESS OR MERITS OF THIS TRANSACTION NOR UPON THE ACCURACY OR
ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: What is the proposed transaction?
A: An indirect wholly-owned subsidiary of Cendant will merge into Avis with Avis
being the surviving corporation in the merger. As a result of the merger,
Avis will become an indirect wholly-owned subsidiary of Cendant.
Q: What will I receive in the merger?
A: If the merger is completed, each of your shares of common stock will be
converted into the right to receive $33.00 in cash, without interest.
Q: What does our board of directors recommend?
A: Our board of directors recommends that you vote "FOR" adoption of the merger
agreement. Our board of directors has determined, based on the unanimous
recommendation of our special committee of independent Avis directors, that
the merger consideration of $33.00 per share in cash is fair to our public
stockholders and the merger is advisable and in the best interests of Avis
and our public stockholders. To review the background of and reasons for the
Merger, see "SPECIAL FACTORS--Background of the Merger" and "SPECIAL
FACTORS--Reasons for the Recommendations of the Special Committee and our
Board of Directors does not intendDirectors".
Q: What vote is required to bring any matter beforeadopt the Meeting except as specifically indicated inmerger agreement?
A: Both the notice, nor doesaffirmative vote of the Boardholders of Directors knowa majority of any matters which anyone else proposes to present for actionall outstanding
common stock and the affirmative vote of the holders of a majority of the
votes cast at the Meeting. However, if anyspecial meeting by holders of common stock, other matters properly come beforethan
Cendant and its subsidiaries, are required to adopt the Meeting,merger agreement. See
"INTRODUCTION--Voting Rights; Vote Required for Approval." Cendant, which
beneficially owns 17.8% of our outstanding common stock, has agreed to cause
its shares to be voted in favor of the persons namedmerger.
Q: What should I do now? How do I vote?
A: After you read and consider carefully the information contained in this proxy
statement, please fill out, sign and date your proxy card and mail your
signed proxy card in the enclosed return envelope as soon as possible so that
your shares may be represented at the special meeting. Failure to return your
proxy or their duly constituted substitutes
actingvote in person at the Meeting,meeting will have the same effect as a vote
against the merger for purposes of the vote based on the shares outstanding.
See "INTRODUCTION--Voting and Revocation of Proxies."
Q: What if I oppose the merger? Do I have appraisal rights?
A: Stockholders who object to the merger may elect to pursue their appraisal
rights to receive the statutorily determined "fair value" of their shares
(which could be authorizedmore or less than the $33.00 per share merger consideration),
but only if they comply with the procedures of Delaware law. In order to
qualify for these rights, you must not vote in favor of the merger. For a
comprehensive summary of these procedures, see "THE MERGER--Appraisal
Rights."
Q: If my shares are held in "street name" by my broker, will my
broker vote my shares for me?
A: Yes, but only if you provide instructions to your broker on how to vote. You
should fill out, sign, date and return the proxy card and otherwise follow
the directions provided by your broker regarding how to instruct your broker
to vote your shares. See "INTRODUCTION--Voting and Revocation of Proxies."
Q: Can I change my vote or otherwise act thereon in
accordance with their judgment on such matters.
Shares of the Company's Common Stock, par value $.01 per share (the "Common
Stock"), represented by proxies received by the Company, where the stockholder
has specified his or her choice with respect to the proposals described in this
Proxy Statement (including the election of directors), will be voted in
accordance with the specifications so made. In the absence of such
specifications, the shares will be voted "For" the election of all eleven
nominees for the Board of Directors, "For" the ratification of the appointment
of Deloitte & Touche LLP as auditors of the Company's financial statements for
the fiscal year ending December 31, 2000, "For" the approval of the amendment to
the Company's Amended and Restated Certificate of Incorporation to reclassify
existing Common Stock as Class A Common Stock and authorize Class B Common Stock
and "For" the approval of the Company's 2000 Incentive Compensation Plan.
Except as provided below, anyrevoke my proxy may be revokedafter I have mailed my
signed proxy card?
A: Yes, you can change your vote at any time priorbefore your proxy is voted at the
special meeting. You can do this in one of three ways. First, you can send a
written notice stating that you would like to its
exerciserevoke your proxy. Second, you
can complete and submit a new proxy card. If you choose either of these
methods, you must submit your notice of revocation or your new proxy card to
us by notifying__________, 2001. Third, you can attend the Secretaryspecial meeting and vote in
writing, by delivering a duly executed
proxy bearing a later date or byperson. Simply attending the Meetingmeeting, however, will not revoke your proxy;
you must vote at the meeting. If you have instructed a broker to vote your
shares, you must follow directions received from your broker to change your
vote. See "INTRODUCTION--Voting and votingRevocation of Proxies."
Q: Should I send in person.
The accompanying formmy share certificates now?
A: No. Shortly after the merger is completed, you will receive a letter of
proxy is being solicited on behalftransmittal with instructions informing you how to send in your stock
certificates to Cendant's paying agent. You should use the letter of
transmittal to exchange stock certificates for the merger consideration to
which you are entitled as a result of the Boardmerger. YOU SHOULD NOT SEND ANY
STOCK CERTIFICATES WITH YOUR PROXY CARDS. You should follow the procedures
described in "THE MERGER--Payment of DirectorsMerger Consideration and Surrender of
Stock Certificates."
Q: When do you expect the merger to be completed?
A: We are working towards completing the merger as soon as possible. For the
merger to occur, it must be approved by our stockholders and we must obtain
certain governmental and other third party approvals. If the stockholders
approve the merger, we expect to complete the merger on or about _______,
2001. See "THE MERGER--Regulatory Approvals and Other Consents."
Q: What are the tax consequences of the Company.merger to me?
A: The expensesreceipt of cash in exchange for common stock surrendered in the merger
will constitute a taxable transaction for U.S. federal income tax purposes
and under most state, local, foreign and other tax laws. In general, a
stockholder who surrenders common stock pursuant to the merger will recognize
a gain or loss equal to the difference between $33.00 per share and such
stockholder's adjusted tax basis in such share. Each holder of an option to
acquire common stock who receives a cash payment equal to the difference
between $33.00 and the exercise price per share of such option will have
ordinary income to the extent of the cash received. We urge you to consult
your own tax advisor regarding the U.S. federal, foreign, state and local tax
consequences of the disposition of shares in the merger. To review the tax
considerations of the merger in greater detail, see "SPECIAL
FACTORS--Material U. S. Federal Income Tax Consequences of the Merger to our
Stockholders."
Q: Who can help answer my other questions?
A: If you have more questions about the merger, you should contact our proxy
solicitation agent:
Morrow & Co., Inc.
445 Park Avenue
New York, New York 10022
Telephone: (212) 754-8000
Call Toll-Free (800) 654-2468
SUMMARY TERM SHEET
This summary term sheet highlights material information from this proxy
statement and does not contain all of proxies for the Meetinginformation that is important to you.
To understand the merger fully, you should read carefully this entire proxy
statement (including the information incorporated by reference), the appendices
and the additional documents referred to in this proxy statement.
THE SPECIAL MEETING
Date, Time, Place and Matters to be Considered
O The special meeting of stockholders of Avis Group Holdings, Inc. will
be paid byheld on _______ __, 2001 at ____ a.m. local time, at the Company. In addition to the mailingcorporate
offices of the proxy
material, such solicitation may be made in person or by telephone by directors,
officers and employees of the Company, who will receive no additional
compensation therefor. Upon request, the Company will reimburse brokers,
dealers, banks and trustees, or their nominees, for reasonable expenses incurred
by them in forwarding material to beneficial owners of shares of Common Stock.
A copy of the Annual Report on Form 10-K filed by the Company with the
Securities and Exchange Commission for its latest fiscal year is available
without charge to stockholders upon written request to the Corporate
Communications Department, Avis Group Holdings, Inc., 900 Old Country Road, Garden
City, New York 11530.
TABLE OF CONTENTS
PAGE
--------
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF............. 1
Outstanding Shares and Voting Rights...................... 1
Security Ownership of Certain Beneficial Owners and
Management.............................................. 2
ELECTION OF DIRECTORS [Proposal 1].......................... 3
General................................................... 3
Information Regarding Directors and Nominees Standing for
Election................................................ 3
Committees and Meetings of the Board of Directors......... 5
EXECUTIVE OFFICERS.......................................... 6
EXECUTIVE COMPENSATION AND OTHER INFORMATION................ 8
Summary Compensation Table................................ 8
Option Grants Table....................................... 9
Option Exercises and Year-End Option Value Table.......... 9
Defined Benefit Plan...................................... 9
Pension Plan Table........................................ 10
Compensation Committee Report on Executive Compensation... 10
Performance Graph......................................... 12
Employment Contracts and Termination, Severance and Change
of Control Arrangements................................. 12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 13
Relationship with Cendant................................. 13
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT........... 14
RATIFICATION OF APPOINTMENT OF AUDITORS [Proposal 2]........ 14
APPROVAL OF CERTIFICATE AMENDMENT [Proposal 3].............. 15
APPROVAL OF 2000 INCENTIVE COMPENSATION PLAN
[Proposal 4].............................................. 18
STOCKHOLDER PROPOSALS....................................... 25
FINANCIAL INFORMATION....................................... 25
APPENDIX A--CERTIFICATE AMENDMENT........................... A-1
APPENDIX B--2000 INCENTIVE COMPENSATION PLAN................ B-1
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
OUTSTANDING SHARES AND VOTING RIGHTSAt the special meeting, stockholders will
consider and vote upon a proposal to adopt the Agreement and Plan of
Merger, dated as of November 11, 2000, among Avis, Cendant, PHH
Corporation, an indirect wholly-owned subsidiary of Cendant, and Avis
Acquisition Corp., an indirect wholly-owned subsidiary of Cendant,
pursuant to which Avis Acquisition Corp. will be merged into Avis. A
copy of the merger agreement is attached as Appendix A to this proxy
statement. For additional information regarding the matters to be
considered at the special meeting see "INTRODUCTION--Proposal to be
Considered at the Special Meeting."
Record Date for Voting
O Only holders of record of the Company's Common Stockshares of Avis at the close of business on
March 22, 2000_______ __, 2001 are entitled to notice of and to vote at the Meeting.special
meeting. On that date, the Company had outstanding 31,131,712there were approximately ______ holders of
record of common stock, and _____ shares of Common
Stock.our common stock
outstanding, of which ____ shares are held by stockholders other than
Cendant and its subsidiaries. Each share of common stock is entitled
to cast one vote at the special meeting. For additional information
regarding the record date for voting see "INTRODUCTION--Voting Rights;
Vote Required for Approval."
Procedures Relating to Your Vote at the Special Meeting
O The presence, in person or by proxy, of the holders of a majority of
the
issued andall outstanding shares as of Common Stock entitledthe record date is necessary to voteconstitute
a quorum at the Meeting
will constitutespecial meeting. Abstentions and broker non-votes are
counted for the purpose of establishing a quorum.
On all matters voted upon atO Adoption of the Meeting and any
adjournment or postponement thereof,merger agreement requires both the affirmative vote of
the holders of the Common Stock vote
together as a single class, with each record holdermajority of Common Stock entitled to
one vote per share.
Directors shall be elected by a plurality of the votes of theall outstanding shares of
Common Stock present at the Meeting, in person or by proxy, and entitled to vote
in the election of directors. Under applicable Delaware law, in determining
whether the nominees have received the requisite number of affirmative votes,
abstentions and broker non-votes will be disregarded and will have no effect on
the outcome of the vote.
Approval of the proposals relating to the adoption of the Company's 2000
Incentive Compensation Plan and ratification of the appointment of auditors of
the Company's financial statements require the affirmative
vote of the holders of a majority of the shares of Common Stock presentvotes cast at the Meeting, in person orspecial
meeting by proxy,holders of common stock other than Cendant and entitled to vote. Under applicable Delaware law, in determining
whether each such proposal has received the requisite number of affirmative
votes, abstentionsits
subsidiaries. Abstentions and broker non-votes will be counted and will have the same
effect asof
a vote against"AGAINST" the proposal.
The Company's Amended and Restated Certificate of Incorporation and Delaware
law require the affirmative voteadoption of the holders of a majority of the outstanding
shares of Common Stock entitled to vote to approve the amendment to such
Certificate. Under applicable Delaware law, in determining whether such proposal
has received the requisite number of affirmative votes, abstentions and broker
non-votes will be counted and will have the same effect as a vote against the
proposal.
1
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth on the following table is furnished as of
March 10, 2000 with respect to any person (including any "group" as that term is
used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) who is known to the Company to be the beneficial owner of more
than 5% of any class of the Company's voting securities, and as to those shares
of the Company's equity securities beneficially owned by each of its directors
and nomineesmerger agreement for director, its named executive officers, and all of its
executive officers and directors as a group.
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME OWNERSHIP CLASS
- ---- ---------- ----------
PRINCIPAL STOCKHOLDERS
Cendant Corporation ("Cendant")(1).......................... 5,535,800 17.8%
6 Sylvan Way
Parsippany, NJ 07054
T. Rowe Price Associates, Inc.(2)........................... 2,378,650 7.6%
100 E. Pratt Street
Baltimore, MD 21202
DIRECTORS AND EXECUTIVE OFFICERS(3)
Thomas J. Byrnes............................................ 17,620 *
W. Alun Cathcart............................................ 20,000 *
Leonard S. Coleman, Jr...................................... 20,000 *
Alfonse M. D'Amato.......................................... 0 *
Martin L. Edelman........................................... 35,000 *
Deborah L. Harmon........................................... 20,000 *
Stephen P. Holmes........................................... 21,000 *
Michael J. Kennedy.......................................... 20,000 *
Maria M. Miller............................................. 13,400
Michael P. Monaco........................................... 21,000 *
A. Barry Rand............................................... 0 *
F. Robert Salerno........................................... 260,780 *
Kevin M. Sheehan(4)......................................... 177,200 *
DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP (21 persons).... 784,273 2.5%
- ------------------------
* Less than 1%
(1) Cendant beneficially owns 5,535,800 shares of Common Stock, which shares are
held of record by its indirect wholly-owned subsidiary, Cendant Car Rental
Holdings, Inc.
(2) Based upon the information contained in a Schedule 13G dated December 31,
1999 by T. Rowe Price Associates, Inc. ("T. Rowe"). T. Rowe beneficially
owns 2,378,650 shares of Common Stock with sole power to dispose of all of
such shares and sole power to vote only 177,850 of such shares. These
securities are owned by various individuals and institutional investors for
which T. Rowe serves as investment adviser with power to direct investments
and/or sole power to vote the securities. For purposes of
the reporting
requirements of the Exchange Act, T. Rowe is deemed to be a beneficial owner
of such securities; however, T. Rowe expressly disclaims that it is, in
fact, the beneficial owner of such securities.
(3) Includes shares which could be acquired within 60 days of March 10, 2000
through the exercise of options to purchase Common Stock of the Company
under the Company's 1997 Stock Option Plan as follows: Messrs. Cathcart,
Coleman, Holmes, Kennedy and Monaco and Ms. Harmon--20,000 each;
Mr. Edelman--35,000; Mr. Byrnes--17,620; Ms. Miller 13,400,
Mr. Salerno--253,780; Mr. Sheehan--173,200 and all directors and executive
officers as a group--684,473.
(4) Includes 1,000 shares of Common Stock held by Mr. Sheehan's children.
2
ELECTION OF DIRECTORS
[PROPOSAL 1]
GENERAL
The Board of Directors presently consists of eleven members. The Board of
Directors has nominated all eleven incumbent members as candidates to be elected
at the Meeting to serve as directors for a one-year term ending at the 2001
annual meeting of stockholders when their successors are duly elected and
qualified.
Each nominee has consented to being named in the Proxy Statement and to
serve if elected. If prior to the Meeting any nominee should become unavailable
to serve,vote based on the shares of Common Stock represented by a properly executed and
returned proxy will be voted for such additional person as shall be designated
by the Board of Directors, unless the Board determines to reduce the number of
directors in accordance with the Company's Amended and Restated Certificate of
Incorporation and By-Laws.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION
OF EACH NOMINEE AS DIRECTOR. UNLESS MARKED TO THE
CONTRARY, PROXIES RECEIVED BY THE COMPANY WILL BE VOTED FOR
THE ELECTION OF THE ELEVEN NOMINEES LISTED BELOW.
Certain information regarding each nominee is set forth below, including
such individual's age and principal occupation, a brief account of such
individual's business experience during the last five years and other
directorships currently held by such nominee.
INFORMATION REGARDING DIRECTORS AND NOMINEES STANDING FOR ELECTION
W. Alun Cathcart Michael J. Kennedy
Leonard S. Coleman, Jr. Michael P. Monaco
Alfonse M. D'Amato A. Barry Rand
Martin L. Edelman F. Robert Salerno
Deborah L. Harmon Kevin M. Sheehan
Stephen P. Holmes
MR. CATHCART, age 56, has been a Director of the Company since
September 1997. Mr. Cathcart has been non-Executive Chairman of Avis Europe plc
since April 1, 1999. From January 1, 1999 until April 1, 1999 Mr. Cathcart
served as Executive Chairman of Avis Europe plc. and for more than five years
prior thereto Mr. Cathcart was Chairman and Chief Executive of Avis Europe plc.
MR. COLEMAN, age 51, has been a Director of the Company since
September 1997. Mr. Coleman has been a senior advisor to Major League Baseball
since November 1999 and served as President of the organization from March 1994
to October 1999. From 1992 to March 1994, Mr. Coleman served as Executive
Director-Market Development of Major League Baseball. Mr. Coleman also is a
director of the following corporations which file reports pursuant to the
Exchange Act: Cendant, H.J. Heinz Company, New Jersey Resources, The Omnicom
Group, Owens Corning and Radio Unica.
SEN. D'AMATO, age 62, has been a Director of the Company since June 1999. He
has been Managing Director of Park Strategies, a business consulting firm in New
York City, since its formation in January 1999. From January 1981 until
January 4, 1999, Sen. D'Amato served in the United States Senate representing
the State of New York where he was Chairman of the Committee on Banking, Housing
and Urban Affairs from 1995 until he left office.
MR. EDELMAN, age 58, has been a Director of the Company since
September 1997 and served as Interim Chairman of the Board from December 1998 to
November 1999. From January 1996 to March 1998,
3
Mr. Edelman served as President and a director of Chartwell Leisure, Inc. He was
a partner with Battle Fowler, a New York City law firm, from 1972 through 1993
and since January 1, 1994 has been Of Counsel to that firm. Mr. Edelman is also
a partner of Chartwell Hotels Associates, Chartwell Leisure Associates L.P.,
Chartwell Leisure Associates L.P. II, and of certain of their respective
affiliates. Mr. Edelman also serves as a director of the following corporations
which file reports pursuant to the Exchange Act: Arcadia Realty and Capital
Trust, each a real estate investment trust, and Cendant.
MS. HARMON, age 40, has been a Director of the Company since
September 1997. Ms. Harmon has been a principal in the Office of the President
at JER Real Estate Partners, L.P., an institutional, private equity fund for
investment in real estate assets, since 1991. Prior to joining JER, Ms. Harmon
served as Managing Director of the Real Estate Finance Group at Banker's Trust
Company.
MR. HOLMES, age 43, has been a Director of the Company since October 1996.
Mr. Holmes was appointed a Vice Chairman of Cendant in December 1997 and from
September 1996 through December 1997 Mr. Holmes served as Vice Chairman of HFS
Incorporated ("HFS"), the predecessor company of Cendant. From July 1990 through
September 1996, Mr. Holmes served as Executive Vice President, Treasurer and
Chief Financial Officer of HFS. Mr. Holmes also serves as a director of Avis
Europe plc and as a director of the following corporations which file reports
pursuant to the Exchange Act: Cendant and PHH Corporation.
MR. KENNEDY, age 63, has been a Director of the Company since
September 1997. Mr. Kennedy has been an attorney with his own law firm since
1976.
MR. MONACO, age 52, has been a Director of the Company since May 1997.
Mr. Monaco has been Chairman and Chief Executive Officer of @ccelerator Inc., an
incubator designed to serve technology and new media ventures, since March 2000.
He also served as a Vice Chairman of Cendant from December 1997 to March 2000
and as Chief Executive Officer of the Direct Marketing Division of Cendant from
November 1998 to March 2000. From December 1997 until November 1998, Mr. Monaco
was Chief Financial Officer of Cendant and from October 1996 to December 1997,
Mr. Monaco served as Vice Chairman and Chief Financial Officer of HFS.
Mr. Monaco served as Executive Vice President and Chief Financial Officer of the
American Express Company from September 1990 to June 1996. Mr. Monaco is also a
director of Cendant.
MR. RAND, age 55, has been Chairman and Chief Executive Officer of the
Company, its car rental subsidiary, Avis Rent A Car System, Inc. ("ARACS") and
its car leasing and vehicle management services subsidiary, PHH Vehicle
Management Services, LLC ("PHH"), since November 1999. Prior thereto, he held
various positions with Xerox Corporation during a 30-year career including
Executive Vice President for Worldwide Customer Operations from 1996 to 1999,
Executive Vice President--Business Operations from 1992 to 1996 and
President--U.S. Operations from 1986 to 1992. Mr. Rand is a director of Abbott
Laboratories, which files reports pursuant to the Exchange Act.
MR. SALERNO, age 48, has been President and Chief Operating Officer--Rental
Car Group of the Company since August 1999 and President and Chief Operating
Officer of ARACS since November 1996. He has also been serving as a Director of
the Company since May 1997. From November 1996 to August 1999, Mr. Salerno was
President and Chief Operating Officer of the Company. From September 1995 to
November 1996, Mr. Salerno was Executive Vice President of Operations of
Avis, Inc., the predecessor of the Company, and ARACS. From July 1990 to
September, 1995, Mr. Salerno was Senior Vice President and General Manager Rent
A Car of Avis, Inc. and ARACS.
MR. SHEEHAN, age 46, has been President--Corporate and Business Affairs and
Chief Financial Officer of the Company since August 1999 and a Director of the
Company since June 1999. From December 1996 to August 1999 Mr. Sheehan was
Executive Vice President and Chief Financial Officer of the Company. He has also
been serving as Executive Vice President and Chief Financial Officer of ARACS
since December 1996 and of PHH since June 1999. From September 1996 to
September 1997, Mr. Sheehan was
4
a Senior Vice President of HFS. From December 1994 to September 1996,
Mr. Sheehan was Chief Financial Officer for STT Video Partners, a joint venture
between Time Warner, Telecommunications, Inc., Sega of America and HBO. Prior
thereto, he was with Reliance Group Holdings, Inc., an insurance holding
company, and some of its affiliated companies for ten years and was involved
with the formation of the Spanish language television network, Telemundo
Group, Inc. and from 1991 through 1994 was Senior Vice President--Finance and
Controller.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors held five meetings during 1999. All incumbent
directors attended at least 75% of the aggregate number of meetings of the Board
and of the committees of the Board on which they served.
The Executive Committee of the Board of Directors, which was designated by
the Board in September 1997, is composed currently of Messrs. Edelman, Holmes
and Rand. The Executive Committee is authorized to exercise all powers and
authority of the Board of Directors in the management of the business and
affairs of the Company except those powers reserved, by law or resolution, to
the Board of Directors. The Executive Committee met four times in 1999.
In September 1997 the Board of Directors designated an Audit Committee which
is composed currently of Messrs. Edelman and D'Amato. The Audit Committee
reviews and evaluates the Company's internal accounting and auditing procedures,
recommends to the Board of Directors the firm to be appointed as independent
accountants to audit the Company's financial statements, reviews with management
and the independent accountants the Company's interim and year-end operating
results, reviews the scope and results of the audit with the independent
accountants, and reviews the non-audit services to be performed by the firm of
independent accountants and considers the effect of such performance on the
accountants' independence. The Audit Committee met six times in 1999.
The Board of Directors has designated a Compensation Committee composed of
Ms. Harmon and Mr. Kennedy, who were appointed to the Committee in
September 1997. The Compensation Committee determines compensation arrangements
for executives, reviews and makes recommendations to the full Board regarding
the adoption or amendment of employee benefit plans, and administers the
Company's 1997 Stock Option Plan (the "1997 Plan"). The Compensation Committee
met three times in 1999.
The Policy Committee of the Board of Directors, which was designated by the
Board in September 1997, is composed of Ms. Harmon and Messrs. Coleman and
D'Amato. The Policy Committee establishes and implements corporate policy with
respect to the business operations of the Company, including its code of
conduct. The Policy Committee met once in 1999.
The Company has no standing nominating committee. The Board of Directors
makes nominations for the Board. In accordance with Delaware law, stockholders
may make nominations for the Board of Directors in advance of or at the Meeting.
Non-employee directors receive an annual retainer of $30,000, plus $4,000
for chairing a committee and $2,000 for serving as a member of a committee other
than Chair. Non-employee directors are also paid $1,000 for each Board meeting
attended and $500 ($1,000 for committee chair) for each Board committee meeting
if held on the same day as a Board meeting and $1,000 ($2,000 for committee
chair) for each Board committee meeting attended on a day on which there is no
Board meeting. Non-employee directors are reimbursed for expenses incurred in
attending meetings of the Board of Directors and committees.
Under the 1997 Plan, each non-employee director is granted options to
purchase 50,000 shares of Common Stock on the date of his or her initial
election to the Board of Directors. Such options have an exercise price of the
fair market value on the date of grant, vest over a five-year period from the
date of grant at the rate of 20% per year, and have other terms which are the
same as all other options granted under the 1997 Plan.
5
Directors shall be elected by the affirmative vote of a plurality of the
shares of Common Stock present at the Meeting, in person or by proxy, and
entitled to vote in the election of directors. Pursuant to applicable Delaware
law, abstentions and broker non-votesoutstanding, but will have no effect on
the outcome of the vote.
EXECUTIVE OFFICERS
The executive officersvote based on the votes cast.
O You should complete, date and sign your proxy card and mail it in the
enclosed return envelope as soon as possible so that your shares may be
represented at the special meeting, even if you plan to attend the
meeting in person. Unless contrary instructions are indicated on your
proxy, all of your shares represented by valid proxies will be voted
"FOR" the adoption of the Company asmerger agreement.
O If your shares are held in "street name" by your broker, your broker
will vote your shares, but only if you provide instructions on how to
vote. You should follow the procedures provided by your broker
regarding the voting of your shares.
O You can revoke your proxy and change your vote in any of the datefollowing
ways:
O Deliver to our secretary at our corporate offices at 900 Old
Country Road, Garden City, New York 11530, on or before the
business day prior to the special meeting, a later dated, signed
proxy card or a written revocation of your proxy.
O Deliver a later dated, signed proxy card or a written revocation
to us at the special meeting.
O Attend the special meeting and vote in person. Your attendance at
the meeting will not, by itself, revoke your proxy; you must vote
in person at the meeting.
O If you have instructed a broker to vote your shares, you must
follow the directions received from your broker to change those
instructions. For additional information regarding the procedure
for delivering your proxy see "INTRODUCTION--Voting and
Revocation of Proxies" and "INTRODUCTION--Solicitation of
Proxies."
REASONS FOR ENGAGING IN THE TRANSACTION
O The principal purposes of the merger are to enable Cendant to acquire
all of the equity interests in Avis not owned by it and to provide you
the opportunity to receive a cash price for your shares at a
significant premium over the market price at which the common stock
traded before Cendant's announcement on August 15, 2000 of its proposal
to acquire Avis at $29.00 per share. Our board of directors believes
that the transaction is fair to and in the best interests of our public
stockholders. See "SPECIAL FACTORS--Reasons for the Recommendations of
the Special Committee and our Board of Directors" and "SPECIAL
FACTORS--Purpose and Structure of the Merger."
THE PARTIES TO THE TRANSACTION
O Avis. Avis is a Delaware corporation and one of the world's leading
service and information providers for comprehensive automotive
transportation and vehicle management solutions. Avis operates Avis
Rent A Car System, Inc., the world's second largest general-use car
rental business, with locations in the United States, Canada,
Australia, New Zealand and the Latin American Caribbean region; PHH
North America, one of the world's leading vehicle management companies;
and Wright Express, the world's largest fleet card provider. For
additional information and news concerning Avis, please log onto the
Avis web site at www.avis.com or call Company News on Call
(800-758-5804, access code #078975). Avis' website, and the information
contained in the website, is not a part of this Proxy Statement
are set forth in the table below. All executive officers are appointed at the
annual meeting or interim meetings of the Board of Directors. Each executive
officerproxy statement. Avis'
common stock is appointed by the Board to hold office until his or her successor is
duly appointed and qualified.
NAME OFFICE OR POSITION HELD
- ---- ----------------------------------------------------------
A. Barry Rand.......................... Chairman and Chief Executive Officer
F. Robert Salerno...................... President and Chief Operating Officer--Rental Car Group
and Director
Kevin M. Sheehan....................... President--Corporate and Business Affairs, Chief Financial
Officer and Director
Mark E. Miller......................... President and Chief Operating Officer--Vehicle Management
Services Group
Thomas J. Byrnes....................... Senior Vice President--Sales
Lawrence E. Kinder..................... Senior Vice President and Chief Information Officer
Maria M. Miller........................ Senior Vice President--Marketing
Michael P. Collins..................... Vice President--International
Richard S. Jacobson.................... Vice President--Tax
Gerard J. Kennell...................... Vice President and Treasurer
James A. Keyes......................... Vice President--HR, Staffing and Diversity
Karen C. Sclafani...................... Vice President, General Counsel and Secretary
Timothy M. Shanley..................... Vice President and Controller
For biographical information concerning Messrs. Rand, Salerno and Sheehan,
see "Election of Directors".
MR. MILLER, age 40, has been President and Chief Operating Officer--Vehicle
Management Services Group of the Company since June 1999. Mr. Miller has also
been serving as President of PHH since July 1997. From June 1994 to July 1997
Mr. Miller was President of GE Capital Financial. Prior thereto, he was Senior
Vice President of World Travel Partners and held various strategic sales
management positions with American Express Company.
MR. BYRNES, age 55, has been Senior Vice President--Sales of the Company and
ARACS since February 1998 and Vice President--Sales North America for the
Company or its predecessor and ARACS since 1987.
MR. KINDER, age 45, has been Senior Vice President and Chief Information
Officer of the Company since March 2000. Mr. Kinder has also been serving as
Senior Vice President--Information Technology Services and Chief Information
Officer of PHH since October 1997. From September 1998 to November 1999
Mr. Kinder also served as Chief Operating Officer of PHH. From August 1996 to
October 1997 Mr. Kinder was Vice President--Information Technology Services of
PHH. Prior thereto, he was a principal of American Management Systems, Inc. a
systems and management consulting firm which provided technology consulting
services to Fortune 500 companies and government organizations.
MS. MILLER, age 43, has been Senior Vice President--Marketing of the Company
since February 1998. From January 1997 to February 1998, Ms. Miller was the
principal in her own consulting firm, which provided marketing consulting
services to small and mid-sized businesses and nonprofit organizations. From
1987 to 1995, Ms. Miller held various positions with American Express Company
including Vice
6
President, Platinum Card Operations from September 1993 to October 1995 and Vice
President, Small Business Services Marketing from December 1990 to August 1993.
MR. COLLINS, age 52, has been Vice President--International of the Company
or its predecessor and ARACS, and General Manager of their international
operations, since 1987.
MR. JACOBSON, age 56, has been Vice President--Tax of the Company and ARACS
since September 1998. From November 1997 until August 1998, Mr. Jacobson was
Staff Vice President of ARACS and for more than five years prior thereto he was
employed by ARACS as Director of Corporate Tax.
MR. KENNELL, age 55, has been Vice President and Treasurer of the Company or
its predecessor and ARACS since February 1987.
MR. KEYES, age 54, has been Vice President-HR, Staffing and Diversity of the
Company since March 1999 and of ARACS since January 1999. From July 1997 until
December 1998, Mr. Keyes was Vice President--Staffing, Diversity & Management
Development of ARACS. From June 1993 until December 1996, Mr. Keyes was
Corporate Director of Human Relations at The Dun and Bradstreet Corporation.
MS. SCLAFANI, age 48, has been Vice President, General Counsel and Secretary
of the Company and ARACS since August 1998. From April 1990 until March 1997,
Ms. Sclafani was Vice President, Deputy General Counsel and Assistant Secretary
of Avis, Inc. and ARACS. In March 1997, Ms. Sclafani was elected Vice President
and Secretary of the Company.
MR. SHANLEY, age 51, has been Vice President and Controller of the Company
and ARACS since November 1996. From November 1989 to November 1996, Mr. Shanley
was Vice President--Planning and Analysis of Avis, Inc. and ARACS.
7
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth the 1997, 1998 and 1999 cash and non-cash
compensation awarded to or earned by the Chief Executive Officer of the Company
and the four other most highly compensated executive officers of the Company
(the "Named Executive Officers"):
LONG TERM
COMPENSATION
AWARDS
-------------------------------
ANNUAL COMPENSATION SECURITIES
-------------------- OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION(1) OPTIONS(#)(2) COMPENSATION($)(3)
- --------------------------- -------- --------- -------- --------------- ------------- ------------------
A. Barry Rand.............. 1999 91,539 700,000
Chairman & Chief
Executive Officer
F. Robert Salerno.......... 1997 336,346 351,752 533,200 6,197
President & Chief 1998 356,730 420,000 392,500 11,844
Operating Officer-- 1999 373,077 456,000 110,000 20,009
Rental Car Group
Kevin M. Sheehan........... 1997 264,414 289,330 355,500 4,156
President--Corporate & 1998 279,950 302,501 265,000 12,011
Business Affairs & Chief 1999 361,052 432,000 90,000 27,252
Financial Officer
Thomas J. Byrnes........... 1997 162,692 108,331 71,100 7,738
Senior Vice President-- 1998 196,769 170,176 10,000 10,917
Sales 1999 198,153 180,000 7,000 13,770
Maria M. Miller............ 1998 158,173 169,902 23,600 60,000 1,107
Senior Vice President-- 1999 181,288 166,500 5,940 7,000 1,804
Marketing
- ------------------------
(1) Amounts listed represent relocation reimbursement.
(2) Amounts listed represent options to acquire the Company's Common Stock.
(3) Payments included in these amounts for the fiscal year ended December 31,
1999 consist of (i) the value of group term life insurance premiums paid for
by the Company and (ii) Company matching contributions to the Avis Voluntary
Investment Savings Plan, which is a defined contribution salary reduction
401(k) plan qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended, and/or under a non-qualified deferred compensation plan
established by the Company in 1998 as follows: Mr. Salerno--(i) $10,409 and
(ii) $9,600; Mr. Sheehan--(i) $3,890 and (ii) $23,363;
Mr. Byrnes--(i) $8,970 and (ii) $4,800 and Ms. Miller--(i) $1,404 and
(ii) $400.
8
OPTION GRANTS TABLE
The following table describes the options to acquire shares of Common Stock
of the Company granted to the Named Executive Officers in the last fiscal year:
INDIVIDUAL GRANTS
---------------------
PERCENT OF
TOTAL
NUMBER OPTIONS
OF GRANTED
SECURITIES TO EXERCISE OR GRANT DATE
UNDERLYING EMPLOYEES BASE PRICE PRESENT
OPTIONS IN FISCAL PER EXPIRATION VALUE
NAME GRANTED YEAR SHARE($)(1) DATE ($)(2)
- ----------------------------------- ------- ------ -------- -------- ----------
A. Barry Rand(3)................... 500,000 18.70% 18.9375 11/9/09 4,826,350
200,000 7.48% 18.9375 11/9/09 1,930,540
F. Robert Salerno.................. 110,000 4.11% 26.0625 3/22/09 1,461,273
Kevin M. Sheehan................... 90,000 3.37% 26.0625 3/22/09 1,195,587
Thomas J. Byrnes................... 7,000 .26% 26.0625 3/22/09 92,990
Maria M. Miller.................... 7,000 .26% 26.0625 3/22/09 92,990
- ------------------------
(1) Options granted at $26.0625 per share vest 20% per year beginning March 22,
2000.
(2) The amount shown in this column represents the Grant Date Present Value
using the "Black-Scholes" valuation method.
(3) The grant of 500,000 shares vests 33 1/3% per year beginning November 9,
2000 and the grant of 200,000 shares vests 20% per year beginning
November 9, 2000.
OPTION EXERCISES AND YEAR-END OPTION VALUE TABLE
The following table summarizes the exercise of options by the Named
Executive Officers during 1999 and the value of unexercised in-the-money options
to acquire Common Stock of the Company held by the Named Executive Officers at
December 31, 1999:
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN THE MONEY OPTIONS AT
SHARES FY END (#) FY END ($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ------------ ----------- ------------- ----------- -------------
A. Barry Rand................... 700,000 4,634,000
F. Robert Salerno............... 231,780 803,920 1,854,537 4,107,955
Kevin M. Sheehan................ 155,200 555,300 1,237,512 2,742,968
Thomas J. Byrnes................ 14,220 149,888 16,220 57,660 124,843 377,650
Maria M. Miller................. 12,000 55,000 18,720 74,880
- ------------------------
(1) Based upon the closing price of the Common Stocktraded on the New York Stock Exchange on December 31, 1999under the symbol
"AVI." Avis' principal address is 900 Old Country Road, Garden City,
New York 11530 and applicable exercise prices.
DEFINED BENEFIT PLAN
The Company maintainsthe telephone number is (516) 222-3000.
O Cendant. Cendant is a defined benefit pension plan for employees who metDelaware corporation and a global provider of
real estate, travel and direct marketing related consumer and business
services. Cendant's core competencies include building franchise
systems, providing outsourcing solutions and direct marketing. As a
franchiser, Cendant is among the eligibility requirements asworld's leading franchisers of December 31, 1983. The eligibility
requirements are non-union, full time employees hired priorreal
estate brokerage offices, hotels, rental car agencies, and tax
preparation services. As a provider of outsourcing solutions, Cendant
is a major provider of mortgage services to December 31, 1983
who were age 25 or above on January 1, 1985. The plan was amended to curtail all
benefit accrualsconsumers, the global
leader in employee relocation, and to add two years of credited service to the accrued benefit
of each participant employed by the Company on December 31, 1998.
9
The plan provides that the benefit for each participant, payable monthly, be
equal to 1 1/2% of his or her final average compensation (average compensation
being the average of the highest five consecutive years of compensation in the
last ten years of employment) for each year of service, not to exceed 35, minus
1 3/7% of the estimated Social Security benefit for each year ofworld's largest vacation
exchange service. In general,direct marketing, Cendant provides access to
insurance, travel, shopping, auto, and other services primarily to
customers of its affinity partners. Other business units include NCP,
the effect is to provide a participant who has worked for the Company
for 35 years prior to retirement, with a pension, including Social Security,
equal to at least 52% of the average compensation (including bonus, overtimeUK's largest private car park operator, and commissions) earned during the highest five consecutive years of his or her
employment.
To the extent that applicable federal laws limit a participant's pension
plan benefit toWizCom, an amount less than the amount otherwise provided by the plan's
formula,information
technology services provider. Headquartered in New York, NY, the
Company has adoptedapproximately 28,000 employees and operates in over 100
countries. Cendant's common stock is traded on the NYSE under the
symbol "CD." More information about Cendant, its companies, brands and
current SEC filings may be obtained by visiting Cendant's website at
www.cendant.com or by calling 87-4INFO-CD (877-446-3623). Cendant's
website, and the information contained in the website, is not a retirement equalization benefit plan to
compensatepart of
this proxy statement. Cendant's principal address is 9 West 57th
Street, New York, New York 10019 and the participanttelephone number is (212)
413-1800.
O PHH Corporation. PHH Corporation is a Maryland corporation and an
indirect wholly-owned subsidiary of Cendant. PHH Corporation was
originally formed for the reductionspurpose of providing mortgages, fleet
management and relocation services worldwide. PHH Corporation currently
operates in two business segments, (1) providing home buyers with
mortgages and (2) assisting employers with employee relocations. In the
mortgage segment, PHH Corporation's Cendant Mortgage Corporation
subsidiary originates, sells and services residential mortgage loans in
the retirement benefit.United States, marketing such services to consumers through
relationships with corporations, affinity groups, financial
institutions, real estate brokerage firms and mortgage banks. In lightthe
relocation segment, PHH Corporation's Cendant Mobility Services
Corporation subsidiary is the largest provider of corporate relocation
services in the world, offering relocation clients a variety of
services in connection with the transfer of a client's employees. PHH
Corporation's principal address is 6 Sylvan Way, Parsippany, New Jersey
07054 and the telephone number is (973) 428-9700.
O Avis Acquisition Corp. Avis Acquisition Corp. is a Delaware corporation
and an indirect wholly-owned subsidiary of Cendant that was formed
solely for the purpose of effecting the transactions contemplated by
the merger agreement and has not engaged in any business except in
furtherance of such purpose. Avis Acquisition Corp.'s principal address
is 6 Sylvan Way, Parsippany, New Jersey 07054 and the telephone number
is (973) 428-9700.
EFFECTS OF THE MERGER
O Upon completion of the curtailmentmerger, Avis will be an indirect wholly-owned
subsidiary of benefit accrualsCendant. The shares will no longer be traded on the NYSE.
In addition, the registration of the shares under the Company's defined benefit
plan, no additional employeesSecurities and
Exchange Act of 1934 will be designated as participants in this
retirement equalization benefit plan.
Theterminated. Accordingly, following table shows the
estimated annual pension benefit payable under
the plans under normal retirement in 2000 after selected periods of service
(assuming such employees and their spouses elect a straight life annuity rather
than a form of joint and survivor or other form of annuity, in which case the
benefits would generally be lower than shown in the following table.) The
estimated maximum benefits for employees who retire in years other than 2000merger, there will be different fromno publicly traded Avis common stock outstanding.
RECOMMENDATIONS OF THE SPECIAL COMMITTEE AND OUR BOARD OF DIRECTORS
O The special committee of our board of directors, consisting of two
independent Avis directors, was formed to consider and evaluate the
amount shown inmerger. The special committee has determined unanimously that the
table because pension benefits
will be offset by different Social Security benefits; however,merger consideration is fair to our public stockholders and
recommended to our board of directors that they declare the benefit shown
in the table will not be reduced by the amount of Social Security benefits
actually paid.
PENSION PLAN TABLE
ESTIMATED ANNUAL PENSION BENEFIT(1)
YEARS OF SERVICE
----------------------------------------------------
ANNUAL PAY 15 20 25 30 35
- ------------------------------------------ -------- -------- -------- -------- --------
$200,000.................................. $ 39,194 $ 52,258 $ 65,323 $ 78,387 $ 91,452
250,000.................................. 49,881 66,508 83,135 99,762 116,390
300,000.................................. 60,569 80,758 100,948 121,137 141,327
350,000.................................. 71,256 95,008 118,760 142,512 166,265
400,000.................................. 81,944 109,258 136,573 163,887 191,202
450,000.................................. 92,631 123,508 154,385 185,262 216,140
500,000.................................. 103,919 137,758 172,198 206,637 241,077
- ------------------------
(1) A portion of the benefit will be paid by the Company under its retirement
equalization benefit plan, if the benefit exceeds the maximum pension
payable from the tax qualified retirement plan under federal law.
As of December 31, 1999, the specified Named Executive Officers had the
following years of service under the defined benefit plan: Mr. Salerno, eighteen
years, seven months; Mr. Byrnes, thirty-two years, eleven months.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERALL POLICY. The Compensation Committee of the Board of Directors, which
was established in September 1997merger is
advisable and is comprised of members who are
non-employee directors, is responsible for administering the Company's executive
compensation policies and programs.
The Compensation Committee's goal is to attract and retain the best possible
executive talent, to motivate these executives to achieve the goals inherent in
the Company's business strategy and to link executive and stockholder interests
through equity-based compensation plans.
10
The key elements of the Company's executive compensation program include
base salary, annual bonus and stock options. Each executive's compensation
package is designed to condition a significant portion of the executive's
overall anticipated compensation on the Company's success in achieving specified
performance targets or on appreciation in the value of the Common Stock or both.
BASE SALARIES. The 1999 base salaries for Messrs. Rand, Salerno and Byrnes
are set forth in their respective employment agreements.
ANNUAL BONUS. In 1999 the executive officers were eligible to earn bonuses
equal to a percentage of base salary based upon the degree of achievement of
pre-tax profit goals and attainment of a strategic employee loyalty goal. The
percentages of base salary for the executive officers ranged from 30%, if the
budgeted profit plan goal was achieved, to a maximum of 120%, if the highest
level of pre-tax profit was achieved and the strategic goal was met. The 1999
bonuses for the Named Executive Officers are set forth in the Summary
Compensation Table.
STOCK OPTIONS. On September 23, 1997, the 1997 Plan was approved by the
Board of Directors and stock options have been granted to the Company's
executive officers pursuant thereto. Information with respect to option grants
to the Named Executive Officers is set forth in the "Option Grants Table". The
stock option awards for the Named Executive Officers, which were approved at the
time of grant by the Compensation Committee of the Board of Directors, are
intended to provide a long term incentive to such executives.
CEO COMPENSATION. Mr. Rand was elected Chairman of the Board and Chief
Executive Officer of the Company in November 1999. At that time his compensation
package was determined by the Executive and Compensation Committees of the Board
of Directors of the Company in accordance with their executive compensation
guidelines.
DEDUCTIBILITY OF COMPENSATION. The deductibility for corporate tax purposes
of compensation paid to individual executive officers of the Company in excess
of $1 million in any year commencing with 1994 may be restricted. However, where
it is deemed necessary, in the best interests of Avis and our public
stockholders, approve the Company,merger agreement and determine to continuerecommend
that our stockholders vote to attractadopt the merger agreement. Our board of
directors, based on the unanimous recommendation of the special
committee, has unanimously determined that the merger consideration is
fair to our public stockholders, and retainthat the merger is advisable and
in the best possible executive talent,interests of Avis and to motivate such
executives to achieveour public stockholders and declared
that the goals inherent in the Company's business strategy, the
Compensation Committee will recommend, and the Companymerger agreement is expected to pay,
compensation to executive officers which may exceed the limits of deductibility.
THE COMPENSATION COMMITTEE
Michael J. Kennedy, Chair
Deborah L. Harmon
11
PERFORMANCE GRAPH
Set forth below is a line graph comparing percentage change in the
cumulative total return* of the Common Stock, the Russell 2000 Index and the
Company's Peer Group for the period from September 1, 1997 (September 24, 1997
for the Company) through December 31, 1999.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
SEP-97 1997 1998 1999
Avis Group Holdings, Inc. $100 188 142 $150
Russell 2000 Index $100 97 94 $114
Peer Group $100 81 62 $52
9/97* 12/31/97 12/31/98 12/31/99
Avis Group Holdings,
Inc...................... $100 $188 $142 $150
Russell 2000 Index......... $100 $ 97 $ 94 $114
Peer Group................. $100 $ 81 $ 62 $ 52
* Assumes $100 invested on September 1, 1997 for the Russell 2000 Index and
the Company's Peer Group and September 24, 1997 for the Company (the first day
of trading in the Common Stock).
EMPLOYMENT CONTRACTS AND TERMINATION, SEVERANCE AND CHANGE OF CONTROL
ARRANGEMENTS
Three of the Named Executive Officers have written employment agreements.
Mr. Rand has an employment agreement with the Company which terminates on
January 1, 2005. Under the terms of his agreement, Mr. Rand is entitled to a
base salary of $700,000 which may be increased annually at the Company's
discretion after review by the Compensation Committee of the Board of Directors.
If the employment of Mr. Rand is terminated by the Company for any reason other
than "cause" or if Mr. Rand terminates his employment for "good reason" (as each
term is defined in the agreement), and such termination does not occur in
connection with or within 24 months following a
12
change-of-control, he is entitled to receive a lump sum cash severance equal to
the sum of (i) 24 times his average monthly base salary during the 24 months (or
lesser period) preceding his termination and (ii) twice the average annual
amount of any bonus for which he was eligible for the last two fiscal years
prior to his termination, plus a prorated share of his bonus for the year in
which his termination occurs if the cause for termination is disability.
However, if the employment of Mr. Rand is terminated by the Company with or
within 24 months following a change-of-control, the cash severance formula in
the preceding sentence is increased to 36 times average monthly base salary and
three times average annual bonus, plus he is entitled to a prorated share of his
bonus for the year in which his termination occurs, provided that he was
employed by the Company for at least eight months during that year. If the
employment of Mr. Rand is terminated by the Company as a result of his death,
his estate is entitled to receive all accrued salary, vacation pay and bonus
prorated until the date of his death. Furthermore, if the employment of
Mr. Rand is terminated by the Company during the term of his employment
agreement for reasons other than "cause", or if he terminates his employment for
"good reason" during such term, Mr. Rand may exercise his vested stock options
until the earlier of two years after the date of termination or the expiration
date for such options. If such termination occurs after the expiration of his
employment agreement, Mr. Rand may exercise his vested options until the earlier
of five years after the date of termination or their expiration date.
Mr. Salerno and Mr. Byrnes have employment agreements with a predecessor
company of the Company which terminate on February 8, 2001 and September 20,
2000, respectively. Under the terms of their agreements, Mr. Salerno and
Mr. Byrnes are entitled to receive an annual base salary of not less than
$373,077 and $198,153, respectively, which salary may be increased by the Board
of Directors during the term of their agreements. If the employment of
Mr. Salerno is terminated by the Company for reasons other than "just cause", or
if Mr. Salerno terminates his employment for "good reason" (as each term is
defined in the agreement), he is entitled to receive his remaining salary and
full bonus and certain perquisites through the term of his agreement. However,
if the employment of Mr. Salerno is terminated by the Company on or after a
change-in-control, he is entitled to receive his remaining salary, full bonus
and certain perquisites under the agreement in a single lump sum within 30 days
following his termination. If the employment of Mr. Byrnes is terminated by the
Company as a result of his death, his estate is entitled to receive his salary
for a period of one year as a death benefit. If the employment of Mr. Byrnes is
terminated without "just cause" (as defined in his agreement), he is entitled to
receive his salary for a period of one year and a pro rated share of his bonus
for the year in which his termination occurs.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIP WITH CENDANT
Cendant, which beneficially owns 17.8% of the Company's outstanding Common
Stock, licenses the Avis trademark to ARACS pursuant to a 50-year master license
agreement and receives royalty fees from ARACS equal to 4% of its gross revenue.
Cendant also provides the Company at cost with (i) office space at its
headquarters in Garden City, New York and at facilities in Virginia Beach,
Virginia, and Tulsa, Oklahoma, and (ii) with reservation center services and
computer services to process reservation and rental transactions and for
accounting and fleet control. In addition, until March 4, 2002, ARACS has agreed
to pay Cendant $1.75 per call transferred and $8.00 per resulting rental for
transferring Cendant's lodging customers to ARACS for vehicle rentals with a
minimum fee of $2.25 million per year. ARACS paid Cendant approximately
$2.8 million in call transfer fees for the fiscal year ended December 31, 1999.
Four of the Company's directors, Messrs. Coleman, Edelman, Holmes and Monaco,
are directors of Cendant and Mr. Holmes is also an executive officer of Cendant.
In connection with the Company's stock repurchase program, on January 15, 1999
and April 26, 1999 the Company repurchased 1.3 million shares and 314,200 shares
of its Common Stock from Cendant at a cost of approximately $31.5 million and
$9.3 million, respectively. A subsidiary of Cendant owns 7,200,000 shares of
preferred stock issued to it on June 30, 1999 by a subsidiary of the Company
which shares (a) accrue dividends at the rate of 5% and
13
(b) under certain circumstances, may be convertible into Common Stock. See
"APPROVAL OF CERTIFICATE AMENDMENT [Proposal 3]."
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission and
the New York Stock Exchange. Officers, directors and greater than ten percent
owners are required to furnish the Company with copies of all Forms 3, 4 and 5
they file.
Based solely on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons, except as
set forth below, the Company believes that all of its officers, directors, and
greater than ten percent beneficial owners complied with all filing requirements
applicable to them with respect to transactions during 1999.
On June 8, 1999, Cendant filed a Form 4 which reported three sales of Common
Stock which, through an oversight, were not timely reported in 1998 and 1999.
RATIFICATION OF APPOINTMENT OF AUDITORS
[PROPOSAL 2]
Deloitte & Touche LLP has been appointed by the Board of Directors as the
auditors for the Company's financial statements for the fiscal year ending
December 31, 2000. A representative of Deloitte & Touche LLP is expected to be
present at the Meeting and will have the opportunity to make a statement if he
desires to do so and will be available to respond to appropriate questions from
stockholders.
Pursuant to applicable Delaware law, the ratification of the appointment of
auditors of the Company requires the affirmative vote of the holders of a
majority of the shares of Common Stock present at the Meeting, in person or by
proxy, and entitled to vote. Abstentions and broker non-votes will be counted
and will have the same effect as a vote against this proposal.
THEadvisable. ACCORDINGLY, OUR BOARD OF
DIRECTORS HAS APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR THIS PROPOSAL.
14
APPROVAL OF CERTIFICATE AMENDMENT
[PROPOSAL 3]
On June 29, 1999,"FOR" THE PROPOSAL TO ADOPT THE MERGER AGREEMENT. For a
discussion of the material factors considered by the special committee
and our board of directors in reaching their conclusions and the
reasons why the special committee and the board of directors
determined that the merger is fair see "SPECIAL FACTORS--Reasons for
the Recommendations of the Special Committee and our Board of
Directors approved a resolution to submit a
proposed amendment to subparagraphs (a)Directors."
OPINION OF MORGAN STANLEY
O In connection with the merger, the special committee and (b)our board of
Article "Fourth"directors considered the opinion of the Company's Amended and Restated Certificate of Incorporation (the "Certificate")special committee's financial
advisor, Morgan Stanley & Co. Incorporated, as to the fairness of the
merger consideration to the holders of shares, other than Cendant and
its affiliates, from a financial point of view. Morgan Stanley
delivered its opinion to the special committee on November 10, 2000
that, as of the date of the opinion and based on and subject to the
assumptions, limitations and qualifications described in the opinion,
the consideration to be received by the holders of shares, other than
Cendant and its affiliates, pursuant to the merger agreement is fair
from a financial point of view to such holders. Morgan Stanley's
opinion was provided for the information of the special committee and
the board of directors of Avis and does not constitute a
recommendation to any stockholder with respect to any matter relating
to the proposed merger. See "SPECIAL FACTORS--Opinion of Morgan
Stanley."
O The full text of Morgan Stanley's written opinion is attached as
Appendix B to this proxy statement. We encourage you to read Morgan
Stanley's opinion in its entirety for a description of the assumptions
made, matters considered and limitations on the review undertaken.
INTERESTS OF OUR DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER
O In considering the recommendation of our board of directors with
respect to the merger agreement and the transactions contemplated
thereby, you should be aware that, in addition to the matters
discussed above, our executive officers and members of our board of
directors have various interests in the merger that are in addition to
or different from the interests of our stockholders generally and that
such interests create potential conflicts of interest.
O Our executive officers and directors have options to purchase common
stock. These options will become fully vested at the time of the
merger. Our executive officers and directors will be entitled to
receive, for approval (the "Certificate Amendment"). The provisionseach share covered by the their options, an amount in
cash equal to the difference between the $33.00 per share merger
consideration and the per share exercise price of that Article set fortheach option.
Alternatively, at the election of any of our executives or directors,
rather than receiving such cash payment, such executive officer or
director may receive an option to purchase shares of Cendant common
stock with approximately the same value. Our executive officers and
directors in aggregate hold options to purchase 3,986,075 shares and
the aggregate numberspread for such options is $48,719,840.
O Some of our executive officers are entitled to receive severance
payments and designationsbenefits if, following the merger, their employment
terminates under specified circumstances. See "SPECIAL
FACTORS--Interests of sharesExecutive Officers and Directors in the Merger -
Employment Agreements."
O The members of the special committee have each received compensation
of $100,000 from Avis in connection with serving on the special
committee.
O Three of our directors are also directors and/or executive officers of
Cendant.
O Indemnification arrangements and directors' and officers' liability
insurance for our present and former directors and officers will be
continued by the surviving corporation after the merger. In addition,
Cendant will provide an indemnity for our present and former directors
and officers. See "SPECIAL FACTORS--Interests of Executive Officers
and Directors in the Merger."
ACCOUNTING TREATMENT
O The merger will be accounted for under the purchase method of
accounting. For a discussion of the accounting treatment for the
Merger see "THE MERGER--Accounting Treatment."
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
O The receipt of $33.00 in cash for each share pursuant to the merger
will be a taxable transaction for U.S. federal income tax purposes and
under most state, local, foreign and other tax laws. For U.S. federal
income tax purposes, each of our stockholders generally will realize
taxable gain or loss as a result of the merger measured by the
difference, if any, between the tax basis of each share of our common
stock whichowned by such stockholder and $33.00. Each holder of a
compensatory option to acquire our common stock who receives a cash
payment equal to the Company has authority to issuedifference between $33.00 and the rights and restrictionsexercise price
per share of such option will have ordinary income to the extent of
the Company's Common Stock. Specifically, the Board of Directors recommends
that the Company's stockholders vote in favorcash received. For additional information regarding material U.S.
federal income tax consequences of the Certificate Amendmentmerger to eliminate the existing subparagraphs (a) and (b) of Article "Fourth"our stockholders, see
"SPECIAL FACTORS--Material U.S. Federal Income Tax Consequences of the
Certificate and substitute a new Article "Fourth" which provides for:
(i) reclassificationMerger to our Stockholders."
THE MERGER AGREEMENT
O Effective Time of the Company's 100,000,000 shares of authorized Common
Stock as Class A Common Stock, par value $.01 per share, and (ii) authorization
of 15,000,000 shares of non-voting Class B Common Stock, par value $.01 per
share, which may be converted into Class A Common Stock under certain
circumstances.Merger
The 20,000,000 shares of authorized preferred stock of the
Company would remain unchanged.
Uponmerger will become effective upon the filing of the Certificate Amendmenta duly executed
certificate of merger with the Secretary of State of the State of Delaware, each shareDelaware. The
filing will occur after all conditions to the merger contained in the merger
agreement have been satisfied or waived. Avis, Cendant, PHH Corporation and Avis
Acquisition Corp. anticipate that the merger will be consummated on or about
_________, 2001. For additional information regarding the effective time of the
Company's Common Stock issued and
outstanding immediately priormerger see "THE MERGER--Effective Time of Merger."
O Conditions to the filing will be reclassified asMerger
The respective obligations of Avis, Cendant, PHH Corporation and converted into one shareAvis
Acquisition Corp. to effect the merger are subject to the satisfaction of
Class A Common Stock authorized by subparagraph
(a) of Article "Fourth"various conditions, including, among others:
O the adoption of the Certificate Amendment. Themerger agreement by both the holders of (1) a
majority of all outstanding shares as of Class A
Common Stock will be identical to the sharesrecord date and (2) a
majority of Common Stock now authorized
except for the reclassification. The shares of Class B Common Stock will have
the same rights as the shares of Class A Common Stock (including with respect to
dividends), except that the shares of Class B Common Stock (1) will be
non-voting, (2) under certain circumstances described below, will be convertible
into Class A Common Stock and (3) will not be included in determining the number
of shares voting or entitled to vote on any matter, unless otherwise required by
law. Holders of shares of Class A Common Stock and Class B Common Stock will
have no preemptive rights. Each share of Class B Common Stock will be
convertible into a share of Class A Common Stock (a)votes cast at the optionspecial meeting by stockholders
other than Cendant and its subsidiaries;
O the absence of any injunction or other order issued by any court or
governmental authority prohibiting or restricting the holder
(i) if, after giving effect to a conversion,merger or
restricting the aggregate numberownership or operation of shares of
Class A Common Stock ownedAvis by Cendant or its
affiliates does not exceed 20%subsidiaries;
O the absence of any action, pending or threatened by a governmental
entity seeking to (1) prohibit or restrain the merger, (2) obtain
damages that would result in a material adverse effect on Avis, or (3)
restrict the ownership or operation of Avis by Cendant or its
subsidiaries;
O the termination or expiration of any waiting period applicable to the
merger under the Hart-Scott-Rodino Antitrust Improvements Act and any
applicable foreign competition or antitrust law;
O the absence of any change in our board of director's or the special
committee's recommendation of the outstanding numbermerger agreement and the absence of
sharesany recommendation by our board of Class A Common Stockdirectors or (ii) upon the occurrencespecial committee
of any acquisition proposal of a bankruptcy or insolvencythird party;
O the absence of any event which might reasonably be expected to result
in a material adverse effect on Avis; and
O the receipt by Avis of certain other governmental and third party
approvals and consents relating to certain of Avis' activities and
agreements.
If Avis waives a condition to the merger that is for Avis' benefit, we
will then consider resoliciting stockholder approval of the Companymerger agreement.
The decision to resolicit stockholder approval will depend on whether
stockholders could reasonably be expected to consider the waiver of the
condition to be important in deciding how to vote on the merger.
For additional information regarding the conditions of each party's
obligation to effect the merger see "THE MERGER--The Merger
Agreement--Conditions to the Merger" and "THE MERGER--The Merger
Agreement--Termination of the Merger Agreement."
O No Solicitation of Other Offers
The merger agreement provides that neither we nor any of our
representatives will take any action:
O to solicit, initiate, invite or a change of control
(as defined inencourage the Certificate Amendment) and (b) automatically upon the
transfer or salemaking of any shares of Class B Common Stockproposal
with respect to certain acquisition proposals by third parties; or
O except as provided below, to participate in any discussions or
negotiations with, or furnish any information to, any person relating
to any such acquisition proposal.
If Avis, our board of directors or the special committee receives an
unsolicited acquisition proposal from a third party which could reasonably be
expected to result in a proposal superior to the merger, we may furnish
information and access to the third party pursuant to a confidentiality
agreement not less restrictive than the confidentiality agreement between us and
Cendant, and participate in discussions or negotiations with such third party.
We have agreed to keep Cendant informed of the status of any other proposals and
negotiations.
However, if the special committee determines in good faith, that failure
to take such action would constitute a breach of our board of directors'
fiduciary duties to the stockholders, the special committee and our board of
directors may change their recommendation of the merger and, following the
special meeting, if our stockholders do not approve the merger, terminate the
merger agreement to accept a superior proposal, subject to certain conditions,
including the payment of a termination fee of $28 million to Cendant and
transaction expenses of up to $2.5 million.
For additional information regarding the agreement not to solicit other
offers see "THE MERGER--The Merger Agreement--No Solicitation of Other Offers."
O Termination of Merger Agreement
The merger agreement may be terminated at any time prior to the effective
time of the merger:
O by mutual consent of the parties to the merger agreement, if approved
by the boards of directors of both Cendant and Avis, and the special
committee;
O by either Avis or Cendant if the merger is not completed on or prior
to June 30, 2001, and the terminating party is not in breach of the
merger agreement;
O by either Avis or Cendant if a governmental entity issues a
non-appealable final ruling permanently restraining or prohibiting the
merger;
O by either Avis or Cendant if the merger agreement is not approved by
both the holders of (1) a majority of all outstanding shares as of the
record date, and (2) a majority of the votes cast at the special
meeting by stockholders, other than Cendant or its affiliates. A complete descriptionsubsidiaries;
O by Cendant, if (1) Avis commits a material breach of any covenant in
the merger agreement which is not cured prior to the earlier of 60
days after notice of the rightsbreach and restrictionsJune 30, 2001, (2) any of Class A Common Stock and Class B Common Stock is containedAvis'
representations in the Certificate
Amendment,merger agreement are untrue and result in a
copy ofmaterial adverse effect on Avis which is set forth on Appendix A hereto. The Company
intends to applynot cured prior to the
New York Stock Exchange for listing and registrationearlier of 60 days after notice of the shares of Class A Common Stock.
REASONS FOR THE CERTIFICATE AMENDMENT
Onbreach and June 30, 1999,2001, (3)
the Company acquired the car leasing, vehicle management
and fuel card businesses (the "Businesses")special committee or our board of PHH Corporation, a subsidiary of
Cendant ("PHH"). As partial consideration for the Businesses, Avis Fleet Leasing
and Management Corporation, a wholly owned Texas subsidiarydirectors (a) withdraws or
changes its approval or recommendation of the Company
("Avis Fleet")merger agreement in any
manner which Cendant reasonably determines to be adverse to Cendant;
(b) approves or recommends to our stockholders a third party
acquisition; (c) violates any of the no solicitation provisions of the
merger agreement; (d) takes a public position or makes any disclosures
to our stockholders which have the effect of (a), issued(b) or (c) above; or
(e) resolves to PHH 7,200,000 shares of Series A Cumulative
Participating Redeemable Convertible Preferred Stock of Avis Fleet (the
"Series A Preferred")enter into an acquisition agreement with a liquidation preference of $50 per share plus
accrued but unpaid dividends. Dividends on the Series A Preferred accrue
annually at the rate of 5% and are payable semi-annually on January 1 and
July 1 of each year. Under the termsthird-party
or (4) Avis enters into a definitive agreement relating to a third
party acquisition or violates any of the Series A Preferred,no-solicitation provisions of
the merger agreement; or
O by Avis, if (1) Cendant commits a material breach of any covenant in
the merger agreement which is also
required to pay an annual dividend in additionnot cured prior to the Series A Preferred
dividends atearlier of 60
days after notice of the ratebreach and June 30, 2001, (2) any of
2%,Cendant's representations in the merger agreement are untrue in a
material respect which is not cured prior to the extent Avis Fleet meets certain stated
earnings thresholds.earlier of 60 days
after notice of the breach and June 30, 2001, or (3) following the
special meeting, (a) stockholder approval is not obtained, (b) we
execute a definitive agreement with a third party with respect to a
proposal superior to the merger, (c) the special committee determines
in good faith, after receipt of advice of its outside legal counsel,
that it would be a breach of fiduciary duties not to terminate the
merger agreement in order to enter into a definitive agreement with
such third party, and (d) we provided Cendant three business days'
prior notice of our intent to terminate the merger agreement and paid
Cendant a fee of $28 million and transaction expenses of up to $2.5
million.
For additional information regarding the ability of the parties to
terminate the merger agreement see "THE MERGER--The Merger
Agreement--Termination of the Merger Agreement."
O Termination Fees; Expenses
The 2% dividend will accrue whether or not the Company has
earnings or profits, whether or not there are funds legally availablemerger agreement provides for the payment to Cendant of such dividenda fee by us of
$28 million and whethertransaction expenses of up to $2.5 million if the merger
agreement is terminated in certain circumstances, including the following:
O by Cendant or Avis if the merger does not dividends are declared. The
Series A Preferred, by their terms, but subjectoccur on or prior to June
30, 2001, and (1) prior to the approval by the Company's
stockholders of the Certificate Amendment, are convertible into shares of
Class B Common Stock of the Company
15
(a) at the option of the holder if (i) after the date the Businesses meettermination, we became aware that a
stated earnings threshold for the preceding year, the market price of the
Company's Class A Common Stock has equaledthird party made or exceeded $50 a share at any time,
(ii) Avis Fleet failsintended to comply with its redemption or dividend obligations or
its obligation to retire shares upon conversion or redemption with respect to
the Series A Preferred or the Series B Preferred (as defined below) (a
"Non-Compliance Event"), (b) at the option of Avis Fleet if, after June 30,
2004, the market price of the Company's Class A Common Stock has exceeded $55 a
share (the "Minimum Price") for at least 20 trading daysmake an acquisition proposal, and (2)
within a 30-day
consecutive period, provided that Avis Fleet converts all of the Series A
Preferred and (c) automatically upon the bankruptcy of Avis Fleet or any of the
Company's Significant Subsidiaries as defined in the certificate of designation
for the Series A Preferred (a "Bankruptcy Event"). Each share of Series A
Preferred is convertible currently into one share of Class B Common Stock (the
"Conversion Rate"). The Conversion Rate may be adjusted from time to time to
avoid dilution to the holder thereof if, prior to conversion of the Series A
Preferred, the Company (w) declares a dividend on the Common Stock payable in
kind, (x) splits outstanding Common Stock into a greater number of shares,
(y) combines outstanding Common Stock into a smaller number of shares or
(z) issues any Common Stock by reclassification (each an "Adjustment Event").
Upon an Adjustment Event, the Minimum Price will also be appropriately adjusted.
Until June 30, 2004, dividends on the Series A Preferred are payable at the
option of Avis Fleet in shares of its Series B Cumulative PIK Preferred Stock
(the "Series B Preferred") which, by their terms, but subject to the approval by
the Company's stockholders of the Certificate Amendment, are also convertible
into shares of Class B Common Stock of the Company (a) at the option of PHH upon
a Non-Compliance Event and (b) automatically upon a Bankruptcy Event. Dividends
on the Series B Preferred accrue annually at the rate of 5% and are payable
semi-annually on January 1 and July 1 of each year. Until January 1, 2005,
dividends on the Series B Preferred are payable in kind at the option of Avis
Fleet. On January 1, 2000, Avis Fleet issued 180,000 shares of Series B
Preferred to PHH in payment of its dividend obligation for the Series A
Preferred on such date.
Each share of Series B Preferred is convertible currently into that number
of whole shares of Class B Common Stock equal to the quotient obtained by
dividing $50 by the average trading price of the Company's Class A Common Stock
for the 30-day consecutive period precedingtwelve months following the date of conversion. This
conversion ratethe termination, an
acquisition of Avis is also subject to adjustment upon an Adjustment Event.
Under the terms of both the Series A and the Series B Preferred (i) after
June 30, 2004, Avis Fleet will have the option to redeem any of the Series A or
the Series B Preferred and (ii) after June 30, 2011, Avis Fleet will be required
to redeem all the shares of the Series A and/or the Series B Preferred, by
payment in cash equal to the liquidation preference of $50 per share.
Based upon the current conversion rates and assuming that (a) the
Certificate Amendment is approved by the Company's shareholders and becomes
effective and (b) the required earnings threshold and $50 market price for the
Company's Class A Common Stock are met, the shares of the Series A Preferred
currently held by PHH would have been convertible into 18.8% of the total
outstanding shares of the Company's Common Stock as of February 14, 2000,
adjusted to give effect to such conversion, and Cendant's beneficial ownership
of the Company's Common Stock as of such date would have been 33.2%, of which
only 20% would have been voting Class A Common Stock.
In the event the Company's stockholders do not approve the Certificate
Amendment, the dividend rate on the Series A Preferred and the Series B
Preferred will automatically increase from the existing 5% to 12% on June 30,
2000 and such increase will be retroactive from the issue dates for such shares.
This increase in the dividend rate on the Series A Preferred and the Series B
Preferred would require an additional $25.8 million in dividends to be paid to
PHH, which payment would have a significant dilutive effect on the Company's
earnings in 2000. It is anticipated that this dilution would also be compounded
in future years as dividends on the Series A Preferred and the Series B
Preferred are paid in shares of Series B Preferred.
16
The Board of Directors believes that it is in the best interest of the
Company for the stockholders to approve the Certificate Amendment in order to
avoid the increase in the dividend rate on the Series A Preferred and the
Series B Preferred and the resulting dilutive effect on earnings.
No further vote of the stockholders will be required prior to issuance of
the Class B Common Stock except as otherwise required by applicable law or the
rules of the New York Stock Exchange. However, the Board of Directors of the
Company may only issue shares of Class B Common Stock to PHH in the limited
circumstances described in the preceding paragraphs.
The Certificate Amendment is not intended to have an anti-takeover effect.
However, if the Certificate Amendment is approved by the Company's stockholders,
Avis Fleet will have the right to cause the Series A Preferred and the Series B
Preferred to be converted into Class B Common Stock of the Company under certain
circumstances. If these circumstances were to exist, the Company could cause the
conversion of the Series A Preferred and the Series B Preferred into Class B
Common Stock to make any attemptconsummated by a third party or an acquisition
agreement is entered into with a third party;
O by Cendant if there is a material breach of any of our covenants or
any of our representations or warranties, and the breach is not cured
on or prior to gainthe earlier of 60 days after notice of the breach and
June 30, 2001, and (1) prior to the termination, we became aware that
a third party made or intended to make an acquisition proposal, and
(2) within twelve months following the date of the termination, an
acquisition of Avis by a third party is consummated or an acquisition
agreement is entered into with a third party;
O by Cendant if (1) the special committee or our board of directors (a)
withdraws or changes its approval or recommendation of the merger
agreement in any manner which Cendant reasonably determines to be
adverse to Cendant; (b) approves or recommends to our stockholders a
third party acquisition of Avis; (c) violates any of the no
solicitation provisions of the merger agreement; (d) takes a public
position or makes a disclosure to our stockholders which has the
effect of (a), (b) or (c) above; or (e) resolves to enter into an
acquisition agreement with a third-party, or (2) Avis executes an
agreement relating to an acquisition of Avis by a third party or
violates any of the non-solicitation provisions of the merger
agreement;
O by Cendant if the merger agreement is not adopted by our stockholders
and (1) an acquisition of Avis by a third party is publicly announced
or otherwise made known to the public at or prior to the special
meeting and (2) within twelve months following the date of the
termination, an acquisition of Avis by a third party is consummated or
an acquisition agreement is entered into with a third party; or
O by Avis following the special meeting if (1) the merger agreement is
not adopted by our stockholders, (2) Avis executes an acquisition
agreement with a third party with respect to a proposal superior to
the merger, (3) the special committee terminates the merger agreement
because it determines in good faith, after receipt of advice of its
outside legal counsel, that it would be a breach of the board of
directors' fiduciary duties not to terminate the merger agreement in
order to enter into the acquisition agreement with such third party
and (4) we provided Cendant three business days' prior notice of our
intent to terminate the merger agreement.
The effect of the fee and expense reimbursement provisions is to make it
more expensive for any other potential acquiror of Avis to acquire control of
Avis. This might discourage a potential acquiror from making an offer to acquire
Avis. For additional information regarding the Company
more difficult, costly or time consuming.
Furthermore, if the Certificate Amendment is approvedfees and expenses that must be
paid by the Company's
stockholders, PHH will be entitled, (i)us under certain circumstances see "THE MERGER--The Merger
Agreement--Termination Fees; Expenses."
O Amendments to convert
the Series A Preferred and the Series B Preferred into Class B Common StockMerger Agreement
The merger agreement may be amended only in writing by each of the Company and (ii) upon the occurrence of a change of control (as defined in
the Certificate Amendment) and under certain other circumstances, to convert the
Class B Common Stock into Class A Common Stock. If this were to occur, Cendant's
beneficial ownership of the Class A Common Stock, and therefore its voting
power, would increase accordingly. PHH also has the right to sell Class B Common
Stock to third parties in which case, the Class B Common Stock would be
automatically converted into the voting Class A Common Stock. The issuance of
Class A Common Stock upon conversion of Class B Common Stock would dilute the
voting power of the existing holders of the Company's Common Stock and could be
used to frustrate a third party's attempt to gain control of the Company.
Pursuant
to the Certificate and Delaware law, the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock entitled to vote
is required formerger agreement. After approval of the Certificate Amendment. Abstentionsmerger agreement by our
stockholders, no amendment to the merger agreement may be made which by law
requires further approval of the stockholders without obtaining this further
approval. For additional information regarding the ability of the parties to
amend the merger agreement see "THE MERGER--The Merger Agreement--Amendments to
the Merger Agreement."
O Regulatory Approvals
O Avis is required to make filings with or obtain approvals from certain
United States and broker
non-votes willforeign antitrust regulatory authorities in
connection with the merger, including a filing under the
Hart-Scott-Rodino Antitrust Improvements Act. An application and
notice was filed with the Federal Trade Commission and the Department
of Justice on November 22, 2000, and the applicable waiting period
under the Hart-Scott-Rodino Act is expected to expire on December 22,
2000. For additional information regarding regulatory approvals see
"THE MERGER--Regulatory Approvals and Other Consents".
O If the merger agreement is adopted by our stockholders, we expect to
complete the merger on or about ________, 2001.
O Financing of the Merger
O The total amount of funds required to consummate the merger and to pay
related fees and expenses is estimated to be countedapproximately $959
million. Cendant and will havePHH Corporation plan to fund the same effect aspurchase price,
directly or indirectly, through a vote against this
proposal.combination of the issuance of debt,
the sale of Cendant common stock, and cash on hand at the effective
time of the merger. The merger is not conditioned on any financing
arrangements. For additional information regarding financing of the
merger see "THE MERGER--Financing of the Merger".
FORWARD LOOKING STATEMENTS MAY PROVE INACCURATE
This Proxy Statementproxy statement contains statements related to future results,events, which
are forward-looking statements that are made pursuant to the Safe Harbor
Provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve risks and uncertainties, including the impact
of competitive products and pricing, changing market conditions; and risks which
are detailed from time to time in the Company'sAvis' publicly-filed documents, including its
Annual Report on Form 10-K for the period ended December 31, 1999.1999, and Quarterly
Reports on Form 10-Q for the quarters ended March 31, 2000, June, 30, 2000 and
September 30, 2000. Actual results may differ materially from those projected.
These forward-
lookingforward-looking statements represent the Company's judgementsAvis' judgments as of the date of
this Proxy Statement.proxy statement.
INTRODUCTION
This proxy statement is furnished in connection with the solicitation of
proxies by our board of directors for a special meeting of stockholders to be
held on ___________, 2001 at ____ a.m. local time, at the corporate offices of
Avis, 900 Old Country Road, Garden City, New York 11530, or at any adjournment
of the special meeting. Shares of our Class A common stock, par value $0.01 per
share, represented by properly executed proxies received by us will be voted at
the special meeting or any adjournment of the special meeting in accordance with
the terms of such proxies, unless revoked.
PROPOSAL TO BE CONSIDERED AT THE BOARDSPECIAL MEETING
At the special meeting, you will consider and vote upon a proposal to
adopt a merger agreement, dated as of November 11, 2000, among Avis, Cendant
Corporation, PHH Corporation, an indirectly wholly-owned subsidiary of Cendant,
and Avis Acquisition Corp., a wholly-owned subsidiary of PHH Corporation.
The merger agreement provides for the merger of Avis Acquisition Corp.
with and into Avis. Upon the effective time of the merger, the separate
corporate existence of Avis Acquisition Corp. will cease, and Avis will be the
surviving corporation and an indirect wholly-owned subsidiary of Cendant.
Pursuant to the merger:
O each outstanding share will be converted into the right to receive an
amount in cash equal to $33.00 per share, without interest (other than
shares held by any of our subsidiaries, held in our treasury, held by
Cendant or any subsidiary of Cendant or held by stockholders who
perfect their appraisal rights under Delaware law);
O each outstanding option to purchase Avis common stock will be canceled
in exchange for the right to receive a cash payment equal to the
difference between the $33.00 per share merger consideration and the
per share exercise price of the option multiplied by the number of
shares subject to the option or, alternatively, rather than receiving
such cash payment, an option holder may elect to convert outstanding
options into options to acquire Cendant common stock with
approximately the same value; and
O each outstanding share of Avis Acquisition Corp. will be converted
into a share of the surviving corporation in the merger.
Stockholders who perfect their appraisal rights under Delaware law will be
entitled to receive from the surviving corporation in the merger a cash payment
in the amount of the "fair value" of such shares, determined in accordance with
Delaware law, but after the merger such shares will not represent any interest
in the surviving corporation other than the right to receive such cash payment.
See "THE MERGER--Appraisal Rights."
VOTING RIGHTS; VOTE REQUIRED FOR APPROVAL
Only holders of record of shares at the close of business on ________,
2001, referred to as the "record date", are entitled to notice of and to vote at
the special meeting. At that date, there were approximately ______ holders of
record of common stock, and ________ shares outstanding, of which _____ shares
held by stockholders other than Cendant or its subsidiaries. Each share entitles
its holder to one vote on all matters properly coming before the special
meeting. Any stockholder entitled to vote may vote either in person or by
properly executed proxy. A majority of the shares entitled to vote, represented
in person or by proxy, will constitute a quorum at the special meeting.
Abstentions and broker non-votes (i.e., shares held by brokers in "street name",
voting on certain matters due to discretionary authority or instructions from
the beneficial owner, but not voting on other matters due to lack of authority
to vote on such matters without instructions from the beneficial owner) are
counted for the purpose of establishing a quorum at the special meeting. The
merger agreement must be adopted by both the holders of at least a majority of
the outstanding shares and the affirmative vote of the holders of at least a
majority of the votes cast at the special meeting by the holders of common stock
other than Cendant and its subsidiaries. Abstentions and broker non-votes will
have the effect of a vote "AGAINST" approval of the merger for purposes of the
vote based on the shares outstanding, but will have no effect on the outcome of
the vote based on the votes cast. Votes will be tabulated by our transfer agent,
Computershare Investor Services.
Each of our directors and executive officers has indicated that he or she
intends to vote his or her shares in favor of the merger agreement. See "SPECIAL
FACTORS--Reasons for the Recommendations of the Special Committee and Our Board
of Directors" and "SPECIAL FACTORS--Interests of Executive Officers and
Directors in the Merger." Cendant, which beneficially owns approximately 17.8%
of the outstanding common stock, has agreed to cause its shares to be voted in
favor of the merger agreement. If the special committee changes its
recommendation of the merger agreement and the merger, and the merger agreement
has not been terminated, we will still hold the special meeting for stockholders
to vote on the merger agreement, solicit proxies impartially and, at the special
meeting, vote the proxies we receive.
VOTING AND REVOCATION OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTEPROXIES
All shares represented by properly executed proxies received prior to or
at the special meeting and not revoked will be voted in accordance with the
instructions indicated in such proxies. IF NO INSTRUCTIONS ARE INDICATED, SUCH
PROXIES WILL BE VOTED FOR THIS PROPOSAL.THE PROPOSAL TO ADOPT THE MERGER AGREEMENT AND TO
ADJOURN THE SPECIAL MEETING, IF NECESSARY.
The stockholder giving the proxy may revoke it by:
O delivering to our secretary at our executive offices at 900 Old
Country Road, Garden City, New York 11530, on or before the business
day prior to the special meeting, a later dated, signed proxy card or
a written revocation of such proxy;
O delivering a later dated, signed proxy card or a written revocation to
us at the special meeting;
O attending the special meeting and voting in person; or
O if you have instructed a broker to vote your shares, following the
directions received from your broker to change those instructions.
Revocation of the proxy will not affect any vote previously taken.
Attendance at the special meeting will not in itself constitute the revocation
of a proxy; you must vote in person at the meeting.
Our board of directors is not currently aware of any business to be brought
before the special meeting other than that described in this proxy statement. No
proxies marked "AGAINST" the proposal to adopt the merger agreement will be
voted in favor of a motion to adjourn or postpone the special meeting for the
purpose of soliciting further proxies in favor of the merger agreement.
SOLICITATION OF PROXIES
We will bear the expenses in connection with the solicitation of proxies.
Upon request, we will reimburse brokers, dealers and banks, or their nominees,
for reasonable expenses incurred in forwarding copies of the proxy material to
the beneficial owners of shares which such persons hold of record. Solicitation
of proxies will be made principally by mail. Proxies may also be solicited in
person, or by telephone or telegraph, by our officers and regular employees.
Such persons will receive no additional compensation for these services, but
will be reimbursed for any transaction expenses incurred by them in connection
with these services. For information about the solicitation of proxies for the
special meeting, see "THE MERGER--The Merger Agreement--Special Meeting."
We have also retained Morrow & Co., Inc. for a fee of $7,500 plus
transaction expenses, to assist in the solicitation of proxies from
stockholders, including brokerage houses and other custodians, nominees and
fiduciaries.
We are mailing this proxy material to stockholders on or about __________
___, 2001.
COMPARATIVE MARKET PRICE DATA
The common stock is listed on the NYSE under the symbol "AVI". The
following table sets forth the high and low sales price per share on the NYSE
Composite Tape for the calendar quarters indicated:
2000 Quarters Ended: High Low
-------------------- ---- ---
March 31, 2000 $25.37 $13.25
June 30, 2000 21.62 17.00
September 30, 2000 31.87 18.75
December 31, 2000
(through November 24, 2000) 32.25 26.50
1999 Quarters Ended:
March 31, 1999 $29.75 $21.31
June 30, 1999 37.88 23.81
September 30, 1999 32.00 19.50
December 31, 1999 25.69 17.00
1998 Quarters Ended:
March 31, 1998 $38.25 $27.00
June 30, 1998 33.13 20.00
September 30, 1998 28.25 15.25
December 31, 1998 24.50 11.38
On August 14, 2000, the last full trading day prior to Cendant's
announcement of its preliminary proposal to acquire Avis, the last reported
sales price per share was $25.50. On ___________, 200_, the last full day of
trading prior to the date of this proxy statement, the last reported sales price
per share was $__________. Stockholders should obtain current market price
quotations for the common stock in connection with voting their shares.
DIVIDENDS
Avis has not declared a dividend since its initial public offering in
September 1997. Under the merger agreement, Avis has agreed not to declare or
pay any dividends on the common stock prior to the closing of the merger.
OUR SELECTED CONSOLIDATED FINANCIAL INFORMATION
Set forth below is the selected historical consolidated financial
information of Avis and our subsidiaries. The historical financial information
was derived from the audited consolidated financial statements included in our
Annual Report on Form 10-K for the years ended December 31, 1997, 1998 and 1999
and from the unaudited summary consolidated financial statements included in our
Quarterly Report on Form 10-Q for the period ended September 30, 2000, and other
information and data contained in the Annual Reports and the Quarterly Report.
More comprehensive financial information is included in such reports and the
financial information which follows is qualified in its entirety by reference
to, and should be read in conjunction with, such reports and all of the
financial statements and related notes, copies of which may be obtained as set
forth below under the caption "OTHER MATTERS--Available Information."
AVIS GROUP HOLDINGS, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
($ in thousands except per share data)
Years Ended December 31, Predecessor Companies(2)
-------------------------------------- Combined October 17 ------------------------
Year Ended to January 1 Year Ended
December 31, December 31, to October 16, December 31,
1999 1998 1997 1996(1) 1996 1996 1995
--------- ---------- ---------- ----------- ---------- -------------- -------------
STATEMENTS OF OPERATIONS
DATA:5
Revenue
Vehicle rental... $2,500,746 $2,297,582 $2,046,154 $1,867,517 $362,844 $1,504,673 $1,615,951
Vehicle leasing.. 692,935
Other fee based.. 139,046
--------- ---------- ---------- ---------- -------- ---------- ----------
3,332,727 2,297,582 2,046,154 1,867,517 362,844 1,504,673 1,615,951
--------- ---------- ---------- ---------- -------- ---------- ----------
Costs and expenses(2) 3,166,810 2,185,354 1,995,831 1,795,457 360,583 1,434,874 1,555,251
Income before provision
for income taxes 165,917 112,228 50,323 72,960 2,261 69,799 60,700
Provision for income
taxes........... 73,332 48,707 22,850 32,238 1,040 31,198 34,635
Net income.......... 92,585 63,521 27,473 39,822 1,221 38,601 26,065
Preferred stock
dividends(3)..... (9,110)
Earnings applicable to
common stockholders --------- ---------- ---------- ---------- -------- ---------- ----------
$83,475 $63,521 $27,473 $39,822 $1,221 $38,601 $26,065
========= ========== ========== ========== ======= ========== ==========
Earnings per share(4)
Basic............ $2.66 $1.86 $.89 $.04 $1.25 $.84
Diluted.......... $2.61 $1.82 $.88 $.04 $1.25 $.84
STATEMENTS OF FINANCIAL
POSITION DATA:
Vehicles, net rental $3,367,362 $3,164,816 $3,018,856 $2,243,492 $2,243,492 $2,404,275 $2,167,167
Vehicles, net leasing $3,134,009
Total assets....... $11,078,258 $4,497,062 $4,274,657 $3,131,232 $3,131,232 $3,186,503 $2,824,798
Debt and minority
interest $8,569,110 $3,014,712 $2,826,422 $2,542,974 $2,542,974 $2,645,095 $2,289,747
Common stockholders'
equity............ $661,684 $622,614 $453,722 $76,415 $76,415 $740,113 $688,260
Nine Months Ended
September 30, September 30,
2000 1999
------------- -------------
STATEMENTS OF OPERATIONS DATA:5
Revenue:
Vehicle rental................ $1,989,167 $1,913,929
Vehicle leasing.............. 1,051,794 346,064
Other fee based.............. 198,815 67,199
---------- ----------
3,239,776 2,327,192
Costs and expenses................. 3,051,199 2,181,044
---------- ----------
Income before provision
for income taxes............... 188,577 146,148
Provision for income taxes 83,162 64,305
---------- ----------
Net income......................... 105,415 81,843
Preferred stock dividends (3) (14,118) (4,555)
---------- ----------
Earnings applicable to
common stockholders.............. $91,297 $77,288
========== ==========
Earnings per share:(4)
Basic.............................. $2.93 $2.46
Diluted............................ $2.89 $2.40
STATEMENTS OF FINANCIAL POSITION DATA:
Vehicles, net rental............... $4,009,732 $3,531,642
Vehicles, net leasing.............. $3,013,687 $2,936,844
Total assets....................... $10,270,459 $11,183,579
Debt and minority interest......... $7,453,463 $8,716,227
Common stockholders' equity........ $743,843 $657,384
See Notes to the Selected Consolidated Financial Information
Notes to Avis' Selected Consolidated Financial Information
(1) Presented on a combined twelve-month basis and includes the results of Avis
for the period from October 17 to December 31, 1996 and the results of the
predecessor companies for the period from January 1 to October 16, 1996.
(2) See Notes 1 and 5 to the audited consolidated financial statements included
in the 1999 Annual Report on Form 10K. Costs and expenses includes royalty
fees payable to Cendant for the years ended December 31, 1999, 1998, 1997
and charges from Cendant for the period from October 17, 1996 to December
31, 1996.
(3) Represents dividends on the preferred stock of Avis Fleet Leasing and
Management Corporation.
(4) Basic earnings per share for the years ended December 31, 1999, 1998 and
1997 are computed based upon 31,330,536 shares, 34,172,249 shares and
30,925,000 shares outstanding, respectively. Diluted earnings per share for
the years ended December 31, 1999, 1998 and 1997 are computed based on 31,
985,569 shares, 34,952,557 shares and 31,181,134 shares, respectively,
which include the dilutive effect of the assumed exercise of outstanding
stock options. Basic and diluted earnings per share are computed based on
30,925,000 shares outstanding for the interim periods ended December 31,
1996, October 16, 1996 and for the year ended December 31, 1995. Basic
earnings per share for the nine months ended September 30, 2000 and 1999
are computed based upon 31,133,834 and 31,394,335 shares outstanding,
respectively. Diluted earnings per share for the nine months ended
September 30, 2000 and 1999 are computed based upon 31,609,275 and
32,172,196 shares, respectively.
(5) Includes the results of operations of Avis Fleet Leasing and Management
Corporation subsequent to the date of acquisition on June 30, 1999.
APPROVALCONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES AND BOOK VALUE PER SHARE
Set forth below is the ratio of earnings to fixed charges for each of the
last five fiscal years and for the nine months ended September 30, 2000 INCENTIVE COMPENSATION PLAN
[PROPOSAL 4]
The Compensation Committee has approved, and the
book value per common share of Avis as of December 31, 1997, 1998 and 1999 and
as of September 30, 2000.
Fiscal Years Ended December 31, Nine Months Ended
1995 1996 1997 1998 1999 September 30, 2000
---- ---- ---- ---- ---- ------------------
Ratio of Earnings to
Fixed Charges1 1.3X 1.3X 1.2X 1.4X 1.3X 1.4X
As of December 31, As of September 30,
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
Book Value per
Common Share
Outstanding2 --- --- $14.55 $17.81 $20.69 $23.53
- -------------------------------------------------------------------------------------------------------------------
- -----------
1 For purposes of calculating the ratio of earnings to fixed charges,
"earnings" consists of earnings before equity in earnings of affiliates,
taxes on earnings and "fixed charges." "Fixed charges" consists of interest,
amortization of debt financing costs and the estimated interest components
of rent and preferred dividends.
2 Book value per common share outstanding is calculated as total common
stockholders' equity divided by the diluted number of common shares
outstanding at the end of the period. Prior to September 1997, Avis was not
a public company.
RECENT DEVELOPMENTS
On August 15, 2000, five stockholders of Avis filed lawsuits in the
Delaware Court of Chancery on behalf of a class of Avis stockholders against
Cendant, Avis and the members of the Board of Directors of Avis. The complaints
in these lawsuits alleged, among other things, that the defendants breached
fiduciary duties to Avis stockholders in connection with Cendant's preliminary
proposal to acquire all of the outstanding shares of Avis that Cendant does not
own at a price of $29.00 per share. On September 14, 2000 the Court of Chancery
consolidated these lawsuits as a single consolidated action captioned In re Avis
Group Holdings, Inc., Consolidated C.A. No. 18223.
On August 23, 2000, an Avis stockholder filed a lawsuit (Index No.
29005/00) in the Supreme Court of the State of New York, Kings County, on behalf
of a class of Avis stockholders against Avis, Cendant and certain members of our
board of directors. The complaint alleged, among other things, that the
defendants breached fiduciary duties to Avis stockholders in connection with
Cendant's preliminary proposal to acquire all of the outstanding shares of Avis
that Cendant does not own at a price of $29.00 per share. A stipulation was
filed on October 12, 2000 extending the defendant's time to answer indefinitely
until 20 days after plaintiff's request that defendants so respond.
SPECIAL FACTORS
BACKGROUND OF THE MERGER
On October 17, 1996, a subsidiary of Cendant acquired all of the
outstanding shares of a predecessor of Avis for an aggregate purchase price of
$806 million. On September 24, 1997, Avis completed an initial public offering,
or "IPO" of Avis common stock, at a price of $17 per share which diluted
Cendant's ownership in Avis to approximately 27.5% of the outstanding shares.
Cendant received no proceeds from the IPO. Since the IPO, Cendant has ratified,continued
to review Avis' performance and monitor industry developments and Cendant has
had representatives on Avis' board of directors.
On March 23, 1998, Avis sold 5 million additional shares through a public
offering in which Cendant reduced its beneficial ownership interest in Avis by
selling 1 million shares at a price of $34 per share. In addition, pursuant to a
stock repurchase program, Avis repurchased from Cendant 1.3 million shares in
January 1999 for total proceeds of $31.5 million and 314,200 shares in April
1999 for total proceeds of $9.3 million. In addition, in August 1999, Cendant
sold 350,000 shares for total proceeds of $7.8 million. As a result of these
sales and repurchases, Cendant's beneficial ownership of common stock was
reduced to its current level of 5,535,800 shares, or approximately 17.8% of the
outstanding shares.
On June 30, 1999, Avis acquired PHH Corporation's vehicle management and
fuel card businesses for approximately $1.8 billion, comprised of 7.2 million
shares of preferred stock of Avis Fleet Leasing and Management Corporation, a
subsidiary of Avis, with a liquidation value of $360 million and the assumption
of approximately $1.44 billion of indebtedness. The preferred stock is
convertible into a number of shares of Avis common stock and Avis non-voting
class B common stock which, based on current conversion rates, would result in
Cendant having beneficial ownership of up to a 20% voting interest in Avis and a
33% economic interest. The preferred stock is convertible only upon the
attainment of certain earnings and market price thresholds which presently have
not been met, and upon certain other events that have not occurred; thus, the
preferred stock is not convertible as of the date of this proxy statement and is
not likely to be convertible prior to the special meeting, and, therefore,
cannot be voted in connection with the merger.
In the spring of 2000, Avis entered into discussions with BNP Paribas
concerning the formation of a joint venture for their respective European
vehicle fleet leasing and management operations. On April 17, 2000, Avis and BNP
Paribas entered into a letter of intent with respect to the formation of such a
joint venture.
On April 19, 2000, A. Barry Rand, Chairman and Chief Executive Officer of
Avis, met with Henry R. Silverman, Chairman of the Board, Chief Executive
Officer and President of Cendant, and Stephen P. Holmes, Cendant's Vice Chairman
and the Chairman and Chief Executive Officer of Cendant's Travel Division and a
director of Avis, to discuss Avis' strategy to increase shareholder value. At
that meeting, Mr. Rand expressed his desire to reunite the ownership of the Avis
name with Avis' car rental business, thereby eliminating the negative impact on
margins of the royalty fee paid to Cendant and better positioning Avis to
participate in possible consolidation in the industry, and expressed his view
that the "overhang effect" of Cendant's equity position in Avis was cumbersome
to Avis. In anticipation of Avis' expected increased cash flow as a result of
the repayment of Avis indebtedness with the proceeds received by Avis upon the
closing of the BNP Paribas joint venture, Mr. Rand asked whether Cendant would
be willing to consider selling its ownership rights to the Avis name to Avis.
Mr. Silverman and Mr. Holmes stated that Cendant was not interested in selling
its rights to the Avis name.
On June 30, 2000, Avis and BNP Paribas entered into a definitive agreement
with respect to the formation of a joint venture for their respective European
vehicle fleet leasing and management operations. Such agreement provided for
Avis to receive a 20% interest in such joint venture.
On July 11, 2000, Messrs. Silverman and Holmes met again with Mr. Rand to
discuss Avis' strategic alternatives to increase shareholder value. At that
meeting, Mr. Rand reiterated his views that Avis' royalty obligations under the
license agreement with Cendant were cumbersome to Avis. Mr. Silverman suggested
that, based upon the significant business pressures faced by Avis as described
by Mr. Rand, leveraging Avis further in connection with any strategy to increase
shareholder value seemed imprudent. Mr. Rand then sought to determine whether
if, in exchange for the possible sale by Cendant of the Avis name, (1) Cendant
would be receptive to increasing its equity investment in Avis and (2) if not,
whether Cendant would oppose a third party investment in Avis. Mr. Silverman
agreed to consider an increased equity investment in Avis, and also raised the
possibility of an acquisition by Cendant of 100% of Avis, provided that Cendant
could have access to additional Avis information by which to evaluate such a
transaction. At the conclusion of this meeting, Messrs. Silverman and Rand
determined that their respective management teams should meet to commence a
preliminary due diligence process in connection with such evaluation.
On July 27, 2000, a representative of Cendant's legal counsel, Skadden,
Arps, Slate, Meagher & Flom LLP, spoke to a representative of Avis' legal
counsel, White & Case LLP, to discuss a confidentiality agreement and proposed
standstill agreement. The Skadden Arps representative indicated that Cendant was
unwilling to sign a standstill agreement. Following such conversation, James E.
Buckman, Vice Chairman and General Counsel of Cendant, spoke with Kevin Sheehan,
President, Corporate and Business Affairs and Chief Financial Officer of Avis,
to discuss the proposed confidentiality and standstill agreement. Mr. Buckman
informed Mr. Sheehan of Cendant's unwillingness to enter into a standstill
agreement. Mr. Buckman reiterated such unwillingness to Mr. Rand over the course
of the next several days.
On July 31, 2000, Avis and Cendant executed a confidentiality agreement.
Over the course of the next few days, representatives of Cendant met with
representatives of Avis to conduct financial and business due diligence and to
discuss changes in the Avis business since the time of the IPO.
On August 4, 2000, Cendant engaged Lehman Brothers as its financial
advisor in connection with a potential transaction with Avis.
On August 9, 2000, Avis' joint venture with BNP Paribas was consummated,
and Avis received $800 million in cash as a result of such transaction,
repayment of intercompany debt of $225 million, the first of 40 quarterly
payments for licensing of technology, and a 20% interest in the joint venture.
Immediately after the closing of the BNP Paribas transaction, Avis received a
cash dividend of $32 million. Avis used these proceeds to repay a portion of its
outstanding indebtedness.
That same day, our board of directors approved a stock repurchase program
authorizing Avis to repurchase up to $100 million of common stock, with the
funds for such repurchases to come from Avis' cash flow. A press release was
issued on August 10, 2000 announcing the closing of the joint venture with BNP
Paribas and approval of the stock repurchase program.
On August 14, 2000, representatives of Cendant met with representatives of
Lehman Brothers and Skadden Arps at Cendant's offices in New York to discuss
Cendant's proposed increase in its ownership position in Avis. At the meeting, a
decision was made to propose an acquisition of 100% of the outstanding Avis
shares not owned by Cendant.
During the evening of August 14, 2000, Mr. Silverman contacted Mr. Rand by
telephone to inform Mr. Rand that Cendant was sending a proposal letter to our
board of directors, by which Cendant would make a preliminary, non-binding
proposal to acquire all of the outstanding Avis shares not beneficially owned by
Cendant at a price of $29.00 per share in cash (the "Preliminary Proposal"). Mr.
Silverman described to Mr. Rand the terms of the Preliminary Proposal. Cendant
thereafter sent the proposal letter to Mr. Rand and the other members of our
board of directors. The proposal letter stated that the Preliminary Proposal was
subject to satisfactory completion of legal and financial due diligence and did
not represent a binding offer or proposal.
On August 15, 2000, Cendant issued a press release announcing the
Preliminary Proposal and the terms of the proposal letter.
Subsequent to the issuance of the press release, Messrs. Rand and
Silverman discussed the process by which the Preliminary Proposal would be
evaluated by our board of directors. By letter dated August 16, 2000, Mr.
Silverman expressed to Mr. Rand Cendant's view that the Preliminary Proposal
should be reviewed and considered by an independent committee of our board of
directors, consisting of non-management directors not affiliated with Cendant.
Mr. Rand responded by letter dated August 17, 2000 that our board of directors
would be meeting to determine the appropriate process to be implemented in
response to the Preliminary Proposal.
On August 18, 2000, our board of directors held a special meeting at which
it determined to establish a special committee of directors who were independent
of Cendant and not members of Avis management, consisting of Deborah Harmon and
Michael Kennedy, to evaluate the Preliminary Proposal and to take all action
necessary in connection with or in response to the Preliminary Proposal,
including hiring its own financial and legal advisors to assist it in evaluating
the Preliminary Proposal. Following the meeting, a press release was issued by
Avis announcing that the special committee had been appointed to review and
consider the Preliminary Proposal.
On August 19, 2000, the special committee retained Cahill Gordon & Reindel
as its independent legal advisor.
On August 22, 2000, Cendant filed a statement on Schedule 13D with the SEC
reporting the Preliminary Proposal and Cendant's intention to acquire all of the
outstanding shares of Avis common stock not beneficially owned by Cendant.
On August 23, 2000, Ms. Harmon and Mr. Kennedy held a meeting of the
special committee with representatives of Cahill Gordon present. The special
committee received presentations from three internationally recognized
investment banks, including Morgan Stanley, in order to assist the special
committee in selecting a financial advisor. After these presentations,
representatives of Cahill Gordon made a presentation to the special committee
regarding their fiduciary duties in evaluating the Preliminary Proposal.
On August 29, 2000, the special committee determined to retain Morgan
Stanley as its financial advisor, subject to finalizing terms of an engagement
letter, which was subsequently finalized. On September 1, 2000, Morgan Stanley
began its due diligence investigation of Avis.
On August 31, 2000, Hertz Corp., which Avis views as its leading
competitor in the car rental industry, issued a press release announcing that it
did not expect to achieve its earnings projections for the third quarter of
2000. The next day, Avis issued a press release stating that it remained
comfortable with its earnings projections for the third and fourth quarters of
2000.
On September 7, 2000, representatives of Cahill Gordon met with
representatives of Skadden Arps by telephone concerning the special committee's
request that Cendant execute a standstill agreement. It was determined during
that call that no standstill agreement would be executed by Cendant.
On September 14, 2000, representatives of Cendant, as well as
representatives of Lehman Brothers and Skadden Arps, met with the special
committee and representatives of Morgan Stanley and Cahill Gordon to discuss the
Preliminary Proposal. At this meeting, Mr. Silverman made a presentation to the
special committee as to the background of the transaction and the discussions
that had taken place, the financial terms of the Preliminary Proposal,
developments in the industry in general and the market valuation of competitors
in the industry following the August 31, 2000 Hertz press release.
On September 18, 2000, the special committee and its legal and financial
advisors met with Mr. Rand and other members of Avis management, together with
representatives of White & Case and Bear Stearns & Co., which had been advising
Avis in connection with various strategic alternatives, including the
Preliminary Proposal. At the meeting, Avis' management presented information
with respect to Avis in view of the Preliminary Proposal.
On September 21, 2000, Ford Motor Company announced that it had made a
preliminary proposal to acquire the approximately 18.5% of the equity of Hertz
not owned by Ford at a price of $30 per share.
On September 21, 2000, a meeting of the special committee was held at
which representatives of Cahill Gordon and Morgan Stanley were present. Morgan
Stanley made a presentation to the special committee reporting its preliminary
view as to the relevant valuation considerations regarding the Preliminary
Proposal to purchase Avis for $29.00 per share. The attendees at the meeting
then discussed strategic options available to Avis. The special committee
determined that an auction process would most likely not result in a third-party
acquiror who would be prepared to pay more than Cendant, could cause disruption
of Avis' business and could delay or put at risk a possible value maximizing
transaction with Cendant. The special committee also took into account the fact
that the Preliminary Proposal had been made public more than a month earlier,
and no third party had come forward with an offer or proposal to acquire Avis.
Accordingly, the special committee determined to attempt to negotiate a
transaction with Cendant that would both provide value to shareholders superior
to the likely value that would be realized by continuing to operate Avis
independently and achieve the best sale price for Avis. In furtherance of these
objectives, the special committee instructed Morgan Stanley to inform Cendant
that the special committee did not believe its $29.00 price was compelling and
that Cendant should put forth its best offer.
On September 22, 2000, representatives of Morgan Stanley telephoned Mr.
Silverman and communicated the response of the special committee.
On September 25, 2000, representatives of Morgan Stanley had a telephone
conversation with Mr. Johnson and representatives of Lehman Brothers to discuss
the status of the Preliminary Proposal. Cendant indicated that it was not
willing to increase its price at that time.
On September 26, 2000, a conference call was held among the special
committee and representatives of Morgan Stanley and Cahill Gordon to update the
special committee on Morgan Stanley's recent discussions with Cendant and Lehman
Brothers. After learning of the substance of these discussions, the special
committee indicated that its view of the $29.00 offer remained unchanged. After
the call, Morgan Stanley informed Lehman Brothers of the special committee's
views and reiterated the need for Cendant to put forth its best offer.
From September 27 to October 1, Morgan Stanley and Lehman Brothers
continued their discussions regarding the Preliminary Proposal. On October 2,
2000, a conference call was held with the special committee and representatives
of Morgan Stanley and Cahill Gordon to update the special committee on Morgan
Stanley's recent discussions with Cendant and Lehman Brothers. The special
committee instructed Morgan Stanley to inform Cendant that the special committee
believed that a transaction would likely not be recommended by the special
committee to our board of directors unless Cendant increased its offer price to
the mid-30s dollar range. The special committee also instructed Morgan Stanley
to seek a face-to-face meeting with Mr. Silverman.
On October 6, 2000, representatives of Morgan Stanley met with Mr.
Silverman, other members of Cendant's management team and representatives of
Lehman Brothers. At this meeting, Mr. Silverman reiterated his view that $29.00
per share was a compelling offer, particularly in light of developments since
the Preliminary Proposal was made. Representatives of Morgan Stanley reiterated
the special committee's position that the transaction would need to be improved
to the mid-30s dollar range.
By letter dated October 10, 2000, Mr. Silverman requested a face-to-face
meeting with the members of the special committee to negotiate the financial
terms of the proposed transaction.
On October 11, 2000, the special committee met telephonically with
representatives of Morgan Stanley and Cahill Gordon. Morgan Stanley provided an
update on the October 6 meeting with Mr. Silverman, other members of Cendant's
management team and Lehman Brothers, and the attendees discussed Mr. Silverman's
October 10 letter. Following this meeting, Ms. Harmon and Mr. Kennedy determined
to meet personally with Mr. Silverman.
On October 17, 2000, at Cendant's offices in New York, representatives of
Cendant, Skadden Arps and Lehman Brothers met with the special committee and
representatives of Cahill Gordon and Morgan Stanley to discuss valuation and
pricing of the proposed transaction. The special committee and Cendant engaged
in negotiations regarding the price at which the special committee would be
willing to recommend a transaction to our board of directors. During the course
of that meeting, Cendant offered to increase its price to $32.00 per share. The
special committee indicated that it was not willing to recommend a transaction
at that price. No agreement was reached on price, and the Cendant
representatives terminated the meeting. Following the meeting, the special
committee instructed Morgan Stanley to contact Mr. Silverman to make clear that
the special committee's views on price were firm and that Cendant would need to
show meaningful improvement in its offer to conclude a transaction.
Representatives of Morgan Stanley contacted Mr. Silverman and informed him of
the special committee's views.
On October 18, 2000, representatives of Lehman Brothers contacted
representatives of Morgan Stanley and requested the opportunity for Cendant to
conduct further due diligence in order to determine whether Cendant would be
willing to raise its offer. After discussions with representatives of Morgan
Stanley and Cahill Gordon, the special committee agreed to permit Cendant to
conduct a due diligence review of Avis.
On October 20, 2000, Cendant commenced its business due diligence which
continued through October 21, 2000, at which time representatives of Lehman
Brothers contacted representatives of Morgan Stanley and informed them that
Cendant would be prepared to meet with the special committee on October 26, 2000
to discuss the results of their business due diligence. The special committee
and Cendant agreed to a meeting on October 26, 2000.
On October 23, 2000, representatives of Cendant met with representatives
of Skadden Arps and Deloitte & Touche LLP, Cendant's independent accounting
firm, to discuss the structure of the proposed acquisition of Avis.
On October 23, 2000, representatives of Cendant and Lehman Brothers met
with representatives of Avis at Avis' Garden City, New York headquarters to
conduct a financial due diligence review. On October 24, 2000, representatives
of Cendant and Lehman Brothers conducted a financial due diligence review of
Avis' fleet leasing and management operations in Hunt Valley, Maryland.
On October 26, 2000, the special committee, representatives of Cendant,
their respective financial advisors and counsel to the special committee met to
discuss the results of Cendant's business due diligence. At this meeting, the
special committee and representatives of Cendant continued price negotiations
and also discussed issues relating to approvals and consents in connection with
the proposed transaction. At this meeting, Cendant expressed a willingness to
agree on a price between $32.00 and $33.00, but no final agreement was reached
on a mutually acceptable price.
Following this meeting, representatives of Cendant discussed with
representatives of Lehman Brothers and Skadden Arps the status of negotiations
and Cendant's alternatives. During this discussion, a decision was made to
increase Cendant's offer price to $33.00 per share; but, if no agreement were
reached at this price, the proposal would be withdrawn. Representatives of
Cendant and its financial and legal advisors also discussed Cendant's
alternatives if the proposal were withdrawn.
On October 27, 2000, representatives of Lehman Brothers telephoned
representatives of Morgan Stanley and stated that Cendant was willing to
increase the price of its proposal to $33.00 per share, but that such price was
its best and final offer. In addition, a representative of Skadden Arps
telephoned representatives of Cahill Gordon to emphasize that Cendant's proposal
at $33.00 per share was firm, and that Cendant's proposal would be withdrawn if
an understanding could not be reached at that price. Skadden Arps also further
clarified that the proposal remained subject to completion of due diligence and
negotiation of a definitive merger agreement. That same day, after discussions
among the special committee and its legal and financial advisors, during which
Morgan Stanley indicated that it believed it would be able to render a fairness
opinion at the proposed price of $33.00 per share, representatives of Morgan
Stanley informed representatives of Lehman Brothers that the special committee
would be willing to recommend a transaction at $33.00 per share in cash, subject
to the satisfactory negotiation of a definitive merger agreement. On this basis,
Cendant agreed to proceed with negotiation of a transaction, and the special
committee agreed to permit Cendant to conduct additional due diligence.
On October 27, 2000, Skadden Arps distributed a draft merger agreement to
the special committee and its legal and financial advisors. From October 31
through November 11, 2000, Cendant and the special committee and their
respective counsel negotiated the terms of the draft merger agreement.
From October 31 through November 10, representatives of Cendant, Skadden
Arps and Deloitte & Touche LLP conducted further due diligence review of Avis.
On November 1, 2000, representatives of Avis and White & Case met
telephonically with representatives of Cendant, Skadden Arps, and Deloitte &
Touche LLP to conduct due diligence relating to the structure and terms of the
BNP Paribas joint venture. On November 2, 2000, representatives of Cendant and
Avis met with representatives of BNP Paribas to discuss the joint venture.
On November 2, 2000, with the approval of counsel to the special
committee, Mr. Rand met with Mr. Silverman and Mr. Holmes to discuss their views
with respect to (1) potential benefits of the proposed acquisition to Avis and
Cendant; (2) the impact of such transaction upon Avis' senior management team;
and (3) the placement of Avis' three business units within Cendant's
organizational structure.
On November 6, 2000, the Cendant board of directors met and approved the
acquisition of all outstanding shares not beneficially owned by Cendant at a
price of $33.00 per share in cash. The Cendant board authorized Cendant's
management to finalize the terms of the merger agreement and, once finalized, to
execute and deliver the merger agreement. The boards of directors of PHH
Corporation and Avis Acquisition Corp. subsequently approved the merger and the
merger agreement.
On November 8, 2000, Mr. Buckman and a representative of Skadden Arps
telephoned representatives of Cahill Gordon to finalize negotiations with
respect to the significant outstanding issues on the draft merger agreement.
On November 9, 2000, a meeting of the special committee was held with
representatives of Morgan Stanley and Cahill Gordon present. At this meeting,
Morgan Stanley reviewed with the special committee its financial analysis of the
proposed transaction and its draft fairness opinion (subsequently finalized,
executed and delivered at the November 10, 2000 Avis board meeting) and informed
the special committee that Morgan Stanley was prepared to opine that the
consideration to be received in the merger was fair, from a financial point of
view, to holders of common stock (other than Cendant and its affiliates). In
addition, at this meeting, Cahill Gordon reviewed the terms of the merger
agreement with the special committee. After full discussion, the special
committee unanimously determined that the $33.00 per share merger consideration
was fair to the public holders of Avis common stock and to recommend to our
board of directors that the board declare the merger advisable and in the best
interests of Avis and its stockholders, approve the merger agreement and
determine to recommend that the Avis stockholders vote to adopt the merger
agreement.
On November 10, 2000, our board of directors met to receive the special
committee's recommendation and to consider and vote upon the merger agreement.
At this meeting, the special committee described for our board of directors the
process it had followed in connection with the transaction, as well as the
factors considered and reasons for the special committee's recommendation. In
addition, at this meeting, Morgan Stanley reviewed with our board of directors
its financial analysis of the proposed transaction and delivered to the special
committee and the board its written opinion to the effect that, as of that date
and based on and subject to the matters described in the written opinion, the
consideration to be received by the holders of common stock (other than Cendant
and its affiliates) pursuant to the merger agreement was fair, from a financial
point of view, to such holders. In addition, at this meeting, White & Case
reviewed with our board of directors its fiduciary duties in connection with its
consideration of the merger agreement. After the discussion, our board of
directors unanimously determined that the $33.00 per share merger consideration
was fair to the holders of Avis common stock and that the merger was advisable
and in the best interests of Avis and its stockholders, approved the merger
agreement and determined to recommend that the Avis stockholders vote to adopt
the merger agreement.
Following our board of directors' meeting, Avis and Cendant and their
respective legal advisors finalized the disclosure letter required by the merger
agreement, and as of November 11, 2000, executed the merger agreement. Cendant
and Avis announced the merger by press release issued on November 13, 2000.
OPINION OF MORGAN STANLEY
Morgan Stanley has acted as financial advisor to the special committee in
connection with the proposed merger as described under "SPECIAL
FACTORS--Background of the Merger." On November 10, 2000, Morgan Stanley
delivered its opinion to the special committee on behalf of the Avis board that,
as of the date of the opinion and based on and subject to the assumptions,
limitations and qualifications described in the opinion, the consideration to be
received by the holders of shares of Avis common stock, other than Cendant and
its affiliates, pursuant to the merger agreement was fair from a financial point
of view to such holders.
THE FULL TEXT OF THE WRITTEN OPINION OF MORGAN STANLEY, DATED NOVEMBER 10,
2000, WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON
THE REVIEW UNDERTAKEN IN CONNECTION WITH THAT OPINION, IS ATTACHED TO THIS PROXY
STATEMENT AS APPENDIX B AND IS INCORPORATED HEREIN BY REFERENCE. AVIS
STOCKHOLDERS ARE URGED TO, AND SHOULD, READ THE MORGAN STANLEY OPINION IN ITS
ENTIRETY. THE MORGAN STANLEY OPINION WAS PROVIDED FOR THE INFORMATION OF THE
SPECIAL COMMITTEE AND OUR BOARD OF DIRECTORS IN THEIR EVALUATION OF THE MERGER,
AND THE MORGAN STANLEY OPINION IS NOT INTENDED TO BE, NOR DOES IT CONSTITUTE, A
RECOMMENDATION AS TO HOW ANY HOLDER OF SHARES SHOULD VOTE WITH RESPECT TO THE
MERGER.
In arriving at its opinion, Morgan Stanley, among other things:
o reviewed certain publicly available financial statements and other
information of Avis;
o reviewed certain internal financial statements and other financial and
operating data concerning Avis prepared by or on behalf of the management
of Avis;
o reviewed certain financial projections prepared by the management of Avis;
o discussed the past and current operations and financial condition and
prospects of Avis with senior executives of Avis;
o reviewed the reported prices and trading activity for the common stock;
o compared the financial performance of Avis and the prices and trading
activity of the common stock with that of certain other comparable publicly
traded companies and their securities;
o reviewed the financial terms, to the extent publicly available, of certain
transactions that Morgan Stanley deemed comparable to the proposed
transaction;
o participated in discussions and negotiations among representatives of Avis
and Cendant and their respective financial and legal advisors;
o reviewed a draft of the merger agreement and certain related documents; and
o performed such other analyses and considered such other factors that Morgan
Stanley deemed appropriate.
In rendering its opinion, Morgan Stanley assumed and replied upon, without
independent verification, the accuracy and completeness of the information
reviewed by it for purposes of its opinion. With respect to the financial
projections, Morgan Stanley assumed that they had been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
future financial performance of Avis. In addition, Morgan Stanley assumed that
the merger would be consummated substantially in accordance with the terms set
forth in the Merger Agreement. Morgan Stanley did not make any independent
valuation or appraisal of the assets or liabilities of Avis, nor was it
furnished with any such appraisals. The Morgan Stanley opinion is necessarily
based on financial, economic, market and other conditions as in effect on, and
the information made available to it as of, the date of the Morgan Stanley
opinion. In arriving at its opinion, with the consent of the special committee,
Morgan Stanley did not solicit interest from any party with respect to the
acquisition of Avis or any of its assets.
In connection with rendering its opinion, Morgan Stanley made a
presentation to the special committee on November 9, 2000 and to our board of
directors on November 10, 2000 with respect to the material analyses it
performed in evaluating the fairness of the consideration proposed to be paid in
the merger to holders of shares, other than Cendant and its affiliates. The
following is a summary of the material aspects of those presentations, which
includes information presented in tables. IN ORDER TO FULLY UNDERSTAND THE
FINANCIAL ANALYSES USED BY MORGAN STANLEY, THE TABLES MUST BE READ TOGETHER WITH
THE TEXT THAT ACCOMPANIES THEM. THE TABLES ALONE DO NOT CONSTITUTE A COMPLETE
DESCRIPTION OF THE FINANCIAL ANALYSES PERFORMED BY MORGAN STANLEY. The following
quantitative information, to the extent based on market data, is as of November
8, 2000, and does not necessarily indicate current or future market conditions.
Market and Merger Analysis. Morgan Stanley reviewed for the special
committee the background of discussions with Cendant and its representatives
regarding a possible transaction, and summarized the terms of the proposed
merger as follows:
11/8/2000 8/15/2000 FINAL
OFFER SUMMARY MARKET PRICE CENDANT OFFER CENDANT OFFER
Price Per Share $30.63 $29.00 $33.00
Implied Market Premium:
One Day Prior to Announcement of Cendant Bid - 20.1% 13.7% 29.4%
8/14/2000 ($25.50)
One Week Prior to Announcement of Cendant Bid - 30.7% 23.7% 40.8%
8/7/2000 ($23.44)
One Month Prior to Announcement of Cendant Bid 30.0% 23.1% 40.1%
- 7/14/2000 ($23.56)
Pre-Announcement 52 Week High - 12/31/1999 19.8% 13.5% 29.1%
($25.56)
Pre-Announcement 52 Week Low - 3/7/2000 ($13.38) 128.9% 116.7% 146.7%
Avis Indexed Price ($24.09) 27.1% 20.4% 37.0%
Ratio of Price to Estimated Fiscal Year 2000 Diluted 9.6x 9.1x 10.3x
Earnings per Share
Ratio of Price to Estimated Fiscal Year 2001 Diluted 7.6x 7.2x 8.2x
Earnings per Share
Ratio of Price to Book Value as of June 30, 2000 1.4x 1.3x 1.5x
Ratio of Adjusted Aggregate Value as of June 30, 4.7x 4.5x 4.9x
2000 to Adjusted Estimated Fiscal Year 2000 EBITDA
Ratio of Adjusted Aggregate Value as of June 30, 4.6x 4.4x 4.8x
2000 to Adjusted Estimated Fiscal Year 2001 EBITDA
As used in this table, the "Avis Indexed Price" was determined by indexing the
price of a share of Avis common stock on August 14, 2000, the date prior to
Cendant's announcement of its bid for Avis, to the performance of the Standard &
Poors 500 Index. Estimated Avis diluted earnings per share for fiscal year 2000
and 2001 were based on IBES mean earnings estimates as of November 8, 2000.
IBES, or the Institutional Brokerage Estimate System, is a data service that
compiles earnings estimates of securities research analysts. "Adjusted Aggregate
Value" for Avis was the aggregate value of Avis as of November 8, 2000 based on
the relevant price for Common Stock, adjusted to exclude debt incurred by Avis
to finance the acquisition of vehicles for its rental and leasing fleets.
"Estimated Adjusted EBITDA" (earnings before interest, taxes, depreciation and
amortization, adjusted to exclude vehicle-related depreciation and
vehicle-related interest expense) amounts for fiscal years 2000 and 2001 were
based on Avis management's forecasts provided to Morgan Stanley. Financial
information for Avis was as of June 30, 2000.
Relative Trading Analysis. Morgan Stanley reviewed with the special
committee its analysis of the trading history of Avis common stock against the
S&P 500 Index, Hertz Corporation and an index of publicly traded car rental
companies consisting of ANC Rental Corporation, Dollar Thrifty Automotive Group,
Inc. and Budget Group, Inc. Morgan Stanley noted that:
o during the period commencing on December 31, 1997 and ending on
November 8, 2000, market prices for car rental stocks had generally
shown declines and had underperformed the broader market. During this
period, the market price of the common stock had decreased by 4.1%,
while the car rental index had decreased by 71.5%, the market price of
Hertz Corporation common stock had decreased by 15.7% and the S&P 500
Index had increased by 45.2%; and
o during the period commencing on December 31, 1999 and ending on
November 8, 2000, common stock had shown improved trading performance
relative to the S&P 500 Index. During this period, the market price of
common stock had increased by 19.8% while the car rental index had
decreased by 45.5%, the market price of Hertz Corporation common stock
had decreased by 32.3% and the S&P 500 Index had decreased by 4.1%.
Comparable Company Trading Analysis. Morgan Stanley analyzed the multiples
of market price to IBES 2001 earnings per share estimates for a group of
publicly traded companies that shared similar characteristics with Avis. This
group included Hertz Corporation, ANC Car Rental Corporation, Dollar Thrifty
Automotive Group, Inc. and Budget Group, Inc. Based on this analysis, Morgan
Stanley applied a reference range of price-to-earnings multiples for the peer
group of 5.0x to 6.5x, which implied indicative reference ranges for the value
of Avis Common Stock of:
o approximately $20 to $26, based on IBES estimates for Avis' 2001
earnings per share, and
o approximately $21 to $27, based on Avis management projections of
Avis' 2001 earnings per share.
Component Trading Analysis. Morgan Stanley determined an equity value range
for each of Avis' three principal lines of businesses, represented by its
vehicle rental operations, PHH North America and Wright Express, based on the
portion of Avis management's estimated 2001 pre-tax income and 2001 net income
for Avis allocable to each of those businesses and a range of multiples of price
to estimated 2001 earnings derived from the financial and market data of
publicly traded companies that Morgan Stanley deemed comparable to each of these
businesses. In determining the net income allocable to each of the three
businesses, Morgan Stanley assumed a pro rata allocation of $60 million in
pre-tax corporate expenses of Avis and $19 million in dividends on Avis
preferred stock to each of the businesses based on its contribution to pre-tax
income.
Morgan Stanley used reference ranges of peer price to estimated earnings
ratios of 4.5x to 6.0x for the vehicle rental business, 6.0x to 8.0x for the
peers of the PHH North America business, and 14.0x to 16.0x for the peers of the
Wright Express business.
This analysis resulted in the following implied equity value reference
ranges:
o for the Avis vehicle rental business, $393 to $524 million;
o for the PHH North America business, $217 to $289 million; and
o for the Wright Express business, $173 to $198 million.
Morgan Stanley noted that this corresponded to a per share equity value
reference range for Avis as a whole of approximately $25 to $33.
Precedent Premiums Paid. Morgan Stanley reviewed publicly available
information for selected completed or pending transactions to determine the
implied premiums payable in transactions over recent trading prices. The
transactions selected were transactions that were announced between January 1,
1995 and November 8, 2000 in which the acquiring company was affiliated with the
target company prior to the transaction. Based on this review, Morgan Stanley
applied a range of market premiums from 20% to 30% to the implied reference
valuation ranges derived from the Comparable Company Trading Analysis described
above and to the market price for Avis common stock on August 14, 2000, the day
before the public announcement of Cendant's initial bid. Based on the foregoing,
the indicative reference value ranges for shares of Avis common stock were
approximately: (1) $24 to $34 when the premium range was applied to the
Comparable Company Trading values based on IBES earnings estimates; (2) $25 to
$35 when the premium range was applied to the Comparable Company Trading values
based on management earnings forecasts; and (3) $31 to $33 when the premium
range was applied to the $25.50 Avis closing price of August 14, 2000.
Discounted Cash Flow Analysis. Morgan Stanley performed a discounted cash
flow analysis to determine an indicative range of present values per share of
common stock, assuming Avis continued to operate as a standalone entity. This
range was determined by adding (1) the present value of the estimated future
unlevered free cash flows that Avis could generate over the four-year period
from 2000 to 2004, and (2) the present value of Avis' "terminal value" at the
end of year 2004, and then adjusting these aggregate values to equity values by
subtracting net debt and preferred stock. To determine the unlevered free cash
flows and the Avis terminal value, Morgan Stanley utilized financial information
provided in Avis management's financial forecasts. The Avis "terminal value" at
the end of the period was determined by applying a range of multiples of
Adjusted Aggregate Values to forward Adjusted EBITDA to estimated 2005 Adjusted
EBITDA. Year 2005 Adjusted EBITDA was determined by extrapolating 2004 Adjusted
EBITDA at its forecast growth rate for 2004. Morgan Stanley used a forward
Adjusted Aggregate Value to Adjusted EBITDA multiple range of 2.75x to 3.25x,
and a discount rate range to discount cash flows back to present value of 9 to
11%. Based on the above analysis, the indicative per share value reference range
for the common stock was approximately $29 to $38.
The preceding is a summary of the material financial analyses furnished by
Morgan Stanley to the special committee and our board of directors, but does not
purport to be a complete description of the analyses performed by Morgan Stanley
in connection with the Morgan Stanley opinion. The preparation of financial
analyses and fairness opinions is a complex process involving subjective
judgments and is not necessarily susceptible to partial analysis or summary
description. Morgan Stanley made no attempt to assign specific weights to
particular analyses or factors considered, but rather made judgments as to the
significance and relevance of all of the analyses and factors considered as a
whole to give its fairness opinion as described above. Accordingly, Morgan
Stanley believes that its analyses, and the summary set forth above, must be
considered as a whole, and that selecting portions of the analyses and of the
factors considered by Morgan Stanley, without considering all of the analyses
and factors, could create a misleading or incomplete view of the processes
underlying the analyses conducted by Morgan Stanley and its opinion. With regard
to the comparable companies or transactions used in various of the analyses
summarized above, Morgan Stanley selected comparable public companies or
transactions, as the case may be, on the basis of various factors, including the
size and similarity to Avis or the line of business in question or the merger,
as applicable. However, no company or transaction used as a comparison in these
analyses is identical to Avis or the merger, as the case may be. As a result,
these analyses are not purely mathematical, but also take into account
differences in financial and operating characteristics of the subject companies
or transactions to which Avis or the merger is being compared. In its analyses,
Morgan Stanley made numerous assumptions with respect to Avis, industry
performance, general business, economic, market and financial conditions, and
other matters, many of which are beyond the control of Avis. Any estimates
contained in Morgan Stanley's analyses are not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than those suggested by these analyses. Estimates of
values of companies do not purport to be appraisals or necessarily to reflect
the prices at which companies may actually be sold. Because these estimates are
inherently subject to uncertainty, none of Avis, the special committee, our
board of directors, Morgan Stanley or any other person assumes responsibility if
future results or actual values differ materially from the estimates.
Morgan Stanley's analyses were prepared solely as part of Morgan Stanley's
analysis of the fairness of the consideration to be paid to holders of common
stock, other than Cendant and its affiliates, pursuant to the merger agreement
and were provided to the special committee and to our board of directors in that
connection. The Morgan Stanley opinion was only one of the factors taken into
consideration by the special committee in making its determination to recommend
that our board of directors approve the merger agreement.
The special committee retained Morgan Stanley based upon its experience and
expertise. Morgan Stanley is a nationally recognized investment banking and
advisory firm. Morgan Stanley, as part of its investment banking business, is
continuously engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes.
Morgan Stanley is a full-service securities firm engaged in securities
trading and brokerage activities, financing and financial advisory services in
addition to its investment banking activities. In the ordinary course of
business, Morgan Stanley may from time to time trade in the securities or
indebtedness of Cendant or Avis for its own account, the accounts of investment
funds and other clients under management of Morgan Stanley and for the accounts
of its customers and, accordingly, may at any time hold a long or short position
in these securities or indebtedness.
Pursuant to Morgan Stanley's engagement letter, Avis agreed to pay Morgan
Stanley an advisory fee upon commencement of its engagement of $750,000 and
$50,000 per month for each month of the engagement thereafter. Avis also agreed
to pay Morgan Stanley an opinion fee of $2 million upon and in connection with
Morgan Stanley delivering its fairness opinion, and an additional fee of
$100,000 for each "bring down" or other opinion letter Morgan Stanley provides.
If a sale of Avis (including the merger) is accomplished, Avis has agreed to pay
Morgan Stanley a transaction fee equal to approximately $8.5 million, against
which fee any fees paid pursuant to the immediately preceding two sentences will
be credited. In addition, Avis also has agreed to reimburse Morgan Stanley for
its reasonable travel and other transaction expenses incurred in connection with
its engagement and to indemnify Morgan Stanley and its affiliates against
certain liabilities and expenses relating to or arising out of its engagement.
The full text of Morgan Stanley's presentation to the special committee on
November 9, 2000 and to the Avis board of directors on November 10, 2000 has
been included as Exhibit (c)(2) to the Schedule 13E-3 filed by Avis and Cendant
in connection with the merger, and the foregoing summary is qualified by
reference to that exhibit.
REASONS FOR THE RECOMMENDATIONS OF THE SPECIAL COMMITTEE AND OUR
BOARD OF DIRECTORS
In view of the wide variety of factors considered in connection with the
evaluation of Cendant's offer, the special committee and our board of directors
did not find it practicable to, and did not, quantify or otherwise attempt to
assign relative weights to the specific factors they considered in reaching
their determinations. In reaching their recommendations, the special committee
and our board of directors considered a number of factors both for and against
recommending the merger, including the following:
O The presentations made by Morgan Stanley to the special committee on
November 9, 2000 and to our board of directors on November 10, 2000
and their opinion as of November 10, 2000 that, based on and subject
to the assumptions, limitations and qualifications described in the
opinion, the merger consideration of $33.00 per share was fair from a
financial point of view to Avis stockholders (other than Cendant and
its affiliates). The special committee and our board of directors
considered Morgan Stanley's presentations and opinion to be factors
that weighed in favor of the merger.
O The merger consideration of $33.00 per share represents a premium of
29.4% over the closing price per share on August 14, 2000, the day
before Cendant first publicly announced its preliminary non-binding
proposal to acquire Avis, and a premium of 40.8% over the closing price
per share on August 7, 2000, one week prior to Cendant's announcement.
The special committee and our board of directors considered these
premiums to be a factor that weighed in favor of the merger.
O The special committee's belief that, after extensive arm's-length
negotiations by and on behalf of the special committee with Cendant
and its representatives, Avis has obtained the highest price per share
that Cendant is willing to pay. The special committee and our board of
directors considered this to be a factor that weighed in favor of the
merger.
O The fact that our board of directors delegated broad powers to the
special committee in conducting its evaluation of Cendant's offer,
negotiating with Cendant and in considering and pursuing other
strategic alternatives to a transaction with Cendant. The special
committee and our board of directors considered this to be a factor in
favor of the merger.
O The likelihood that a third party would be willing to offer a higher
price than Cendant in light of:
(1) Cendant being Avis' largest stockholder with approximately 17.8%
voting common equity interest and an approximately 33% economic
interest, taking into account Cendant's convertible preferred stock
investment on an as converted basis (recognizing, however, that such
preferred stock is not likely to be convertible prior to the special
meeting and, therefor cannot be voted in connection with the merger);
(2) the fact that Cendant owns the Wizard System and the Avis System
License, and that Cendant's rights under the master license agreement
with Avis could be a deterrent to any potential third party acquiror
involved in a change of control transaction with Avis.
(3) the fact that Avis must pay a royalty to Cendant under the master
license agreement, which significantly reduces Avis' operating
margins;
(4) the likelihood that Cendant stands to realize more operational
benefits and cost savings by acquiring Avis' business than would other
third party acquirors; and
(5) the fact that, in the nearly three months between Cendant's August
15, 2000 public announcement of its preliminary offer to acquire Avis
and the special committee's decision to recommend approval of the
Merger on November 9, 2000, no third party came forward with an offer
or proposal to acquire Avis.
The special committee and our board of directors considered these to
be factors which would significantly impede the likelihood of a
superior offer and, as such, considered them to be factors weighing in
favor of the merger.
O The internally generated financial forecasts for Avis compiled by
Avis' management, the risks associated with meeting those projections,
the fact that Avis has historically achieved the results projected in
management produced projections, and the possible future values of
Avis' stock if the projections are, or are not, met. Although
different assumptions about the future performance of Avis in relation
to these projections may have dictated in favor or against the merger
depending on the assumptions made, on balance, the special committee
and our board of directors considered these projections to be a factor
in favor of the merger.
O Avis' position as one of the industry leaders in terms of market share
and revenue in the car rental and fleet leasing industries and Avis'
strong historical financial performance relative to its peers. The
special committee and our board of directors considered this to be a
factor that weighed against the merger.
O The current and prospective environment in which Avis operates,
including the pricing volatility in the car rental market. The special
committee and our board of directors considered this to be a factor
that weighed in favor of the merger.
O The fact that Avis currently has a high proportion of debt capital
relative to its peers and that it has significant future debt
obligations and a high level of future interest rate exposure. The
special committee and our board of directors considered this to be a
factor that weighed in favor of the merger.
O The fact that stock market prices for public car rental companies have
generally shown declines since mid-1999 and have underperformed the
S&P 500 Index during 1999 and 2000. The special committee and our
board of directors considered these to be factors that weighed in
favor of the merger.
O The likely trading prices of Avis' stock, in the short term and long
term, in the event that Cendant's offer was withdrawn or rejected. The
special committee and our board of directors considered this to be a
factor that weighed in favor of the merger.
O The fact that, under the merger agreement, Cendant's offer is not
subject to a financing condition. The special committee and our board
of directors considered this to be a factor in favor of the merger.
O The fact that, under the merger agreement, Avis has the right to
terminate the merger agreement after the special meeting (if
stockholders do not vote to adopt the merger agreement) if the special
committee, after receiving an unsolicited superior proposal to be
acquired by a third party, determines (after receipt of advice from
its outside legal counsel) that a failure to take such action would
constitute a breach of its fiduciary duties, and that our board of
directors and special committee have the right to change their
recommendations to Avis stockholders (after receipt of advice from its
outside legal counsel) if a failure to take such action would
constitute a breach of their respective fiduciary duties. The special
committee and our board of directors also considered that if Avis so
terminates the merger agreement or the special committee or our board
of directors makes a determination to change their recommendations,
Avis will be required to pay a $28 million fee to Cendant and to
reimburse up to $2.5 million of Cendant's transaction expenses. The
special committee and our board of directors considered these to be
factors that weighed in favor of the merger.
O The fact that the merger agreement provides that, among other
conditions, in order for the merger to occur, in addition to the
requirements of Delaware law, a majority of the shares held by
stockholders other than Cendant and its subsidiaries which are
represented and voted at the special meeting will have to be voted in
favor of adoption of the merger agreement. The special committee and
our board of directors considered this to be a factor that weighed in
favor of the merger.
O The likelihood that while some stockholders will prefer to receive
cash for their shares, some may have preferred to continue as
stockholders of Avis, Group Holdings, Inc.and that if the merger is completed, all
stockholders (other than Cendant and its subsidiaries) will receive
cash for their shares, and thus it will no longer be possible for
stockholders, other than Cendant and its subsidiaries, to maintain an
equity ownership interest in Avis and that the merger will be a
taxable transaction to Avis stockholders who receive cash in the
merger. The special committee and our board of directors considered
this to be a factor that weighed against the merger.
O The fact that appraisal rights will be available under Delaware law
with respect to the merger. The special committee and our board of
directors considered this to be a factor that weighed in favor of the
merger.
O The fact that three members of our board of directors are also members
of Cendant's board of directors, one of whom is also an executive
officer of Cendant. While the special committee and our board of
directors did not consider this to be a factor in favor of or against
the merger, it was a significant factor in the manner in which the
special committee conducted itself with respect to ensuring that
vigorous arm's-length negotiations with Cendant on behalf of Avis'
public stockholders took place.
O The special committee and our board of directors did not consider book
value to be a material factor in their consideration of the merger
because they did not believe that Avis and its publicly traded peers
trade on the basis of book value.
OUR FORECASTS
In connection with Cendant's review of Avis and in the course of the
negotiations between Avis, the special committee and Cendant described in
"SPECIAL FACTORS--Background of the Merger," Avis provided Cendant with certain
non-public business and financial information. This information was also
provided to Morgan Stanley and was used by Morgan Stanley in its analysis of the
fairness of the cash merger consideration to be received by the public
stockholders. See "SPECIAL FACTORS--Opinion of Morgan Stanley." The non-public
information provided by Avis included certain forecasts of the future operating
performance of Avis. The Avis forecasts include management forecasts of: (1)
Avis' revenues, (2) adjusted EBITDA, (3) pre-tax income, and (4) diluted
earnings per share, Avis provided to Cendant and Morgan Stanley certain
forecasts as of July 28, 2000 Incentive
Compensation Plan (the "Plan")which covered the years 2000 through 2004. The
special committee and our board or directors also reviewed the Avis forecasts in
connection with approving the merger agreement and the merger.
Avis does not, as a matter of course, publicly disclose forecasts as to
future revenues or earnings. The Avis forecasts were not prepared with a view to
public disclosure and are included in this proxy statement only because such
information was made available to Cendant in connection with its due diligence
investigation of Avis and was considered by the special committee and our board
of directors in connection with approving the merger agreement and the merger.
Accordingly, it is expected that there will be differences between actual and
forecasted results, and actual results may be materially different than those
set forth below. The Avis forecasts were not prepared with a view to comply with
the published guidelines of the SEC regarding forecasts, nor were they prepared
in accordance with the guidelines established by the American Institute of
Certified Public Accountants for preparation and presentation of financial
forecasts. Moreover, Deloitte & Touche LLP, Avis' independent auditors, has not
examined, compiled or applied any procedures to the Avis forecasts in accordance
with standards established by the American Institute of Certified Public
Accountants and expresses no opinion or any assurance on their reasonableness,
accuracy or achievability. These forward-looking statements reflect numerous
assumptions made by Avis' management, many of which are inherently uncertain and
subject to stockholder approval.change. In addition, factors such as industry performance, rental car
pricing, general business, economic, regulatory, and market and financial
conditions, all of which are difficult to predict, may cause the Avis forecasts
or the underlying assumptions to be inaccurate. Accordingly, there can be no
assurance that the Avis forecasts will be realized, and actual results may be
materially more or less favorable than those contained in the Avis forecasts.
The Plan is
intended to promote the long-term successinclusion of the CompanyAvis forecasts herein should not be regarded as an
indication that the special committee, our board of directors, Avis, Cendant or
any of their respective financial advisors considered or consider the Avis
forecasts to be a reliable prediction of future events, and increase
shareholder value by attracting, motivating, and retaining key employeesthe Avis forecasts
should not be relied upon as such. To the extent the Avis forecasts represent
Avis management's best estimate of possible future performance, such estimate is
made only as of the Companydate of such forecasts and is not made as of any later date,
and stockholders should take this into account when evaluating any factors or
analyses based on the Avis forecasts.
The Avis forecasts that Avis provided to Cendant and that Morgan Stanley
used in rendering its fairness opinion and the special committee and our board
of directors reviewed in connection with approving the merger agreement and the
merger are summarized below:
($ in millions except diluted earnings per share)
Fiscal Years Ended December 31,
2000 2001 2002 2003 2004
---- ---- ---- ---- ----
Revenue.............. $4,215 $4,311 $4,559 $4,822 $5,105
Adjusted EBITDA...... $412 $419 $467 $522 $583
Pre-tax Income....... $217 $278 $318 $364 $419
Diluted Earnings Per
Share................ $3.23 $4.15 $4.83 $5.58 $6.48
AVIS' POSITION AS TO THE FAIRNESS OF THE MERGER
We believe the merger to be fair to our stockholders, other than Cendant
and its subsidiaries, based upon numerous factors, including the following
material factors:
O the fact that the merger consideration represents a 29.4% premium over
the closing price of our common stock on the last full trading day
prior to Cendant's August 15, 2000 announcement of the Preliminary
Proposal and exceeds recent historical market prices of our common
stock (see "INTRODUCTION--Comparative Market Price Data");
O the approval of the merger by all of the members of the special
committee and the fact that the members of the special committee,
based on the factors described in "SPECIAL FACTORS--Reasons for the
Recommendations of the Special Committee and our Board of Directors,"
determined that the merger is fair to and in the best interests of
Avis and our stockholders, other than Cendant and its subsidiaries,
and affiliates, anddeclared that the merger agreement is advisable;
O the opinion of Morgan Stanley that the merger consideration to be
received by motivating consultants who
provide significant services to the Companyour stockholders, other than Cendant and its subsidiaries,
was fair from a financial point of view to our stockholders, other
than Cendant and affiliates.
To achieveits subsidiaries;
O the fact that the merger agreement was extensively negotiated on an
arms-length basis between the representatives of the special committee
and representatives of Cendant;
O The fact that the special committee engaged Morgan Stanley, a leading
internationally recognized investment bank, and that Morgan Stanley
rendered an opinion as to the fairness of the merger consideration,
from a financial point of view, to our stockholders, other than
Cendant and its affiliates, was a relevant factor in the determination
by our board of directors that the merger is fair to our stockholders,
other than Cendant and its subsidiaries; and
O the factors considered by the special committee and our board of
directors, and the analysis of the special committee and our board of
directors referred to under "SPECIAL FACTORS--Reasons for the
Recommendations of the Special Committee and our Board of Directors."
After considering the foregoing, we believe the merger consideration to be
fair to our stockholders, other than Cendant and its subsidiaries. In reaching
this determination we have not assigned specific weights to particular factors,
and considered all factors as a whole. None of the factors that we considered
led us to believe that the merger was unfair to the stockholders, other than
Cendant and its subsidiaries.
None of the members of our board of directors, in their respective
capacity as such, received any reports, opinions or appraisals from any outside
party relating to the merger or the fairness of the consideration to be received
by the stockholders, other than those received from Morgan Stanley. See "SPECIAL
FACTORS--Interests of Executive Officers and Directors in the Merger."
CENDANT'S POSITION AS TO THE FAIRNESS OF THE MERGER; CENDANT'S
REASONS FOR THE MERGER
Cendant, PHH Corporation and Avis Acquisition Corp. believe that the
consideration to be received in the merger by Avis stockholders (other than
Cendant and its subsidiaries) is fair to such holders. This belief is based on
the following factors:
O the conclusions and recommendations of the special committee that the
merger is fair to and in the best interests of Avis' public
stockholders;
O the merger consideration and the other terms and conditions of the
merger agreement were the result of arm's-length, good faith
negotiations between Cendant and the special committee, consisting of
non-management directors not affiliated with Cendant, and their
respective advisors and that the special committee received a fairness
opinion from Morgan Stanley as to the $33.00 per share merger
consideration;
O the special committee and its advisors successfully negotiated to
increase the consideration to be paid to Avis stockholders in the
merger from $29.00 to $33.00 per share;
O the merger is conditioned upon approval by the holders of a majority
of the votes cast at the special meeting by holders of shares other
than Cendant and its subsidiaries;
O the consideration to be paid in the merger represents a 29.4% premium
over the reported closing price of shares on the last full trading day
prior to Cendant's August 15, 2000 announcement of the Preliminary
Proposal, and a 40.1% premium to the closing price one month prior to
such announcement;
O the merger will provide consideration to the Avis stockholders
entirely in cash and is not subject to any financing conditions;
O the consideration to be paid in the merger represents a multiple of
10.6 times Avis' earnings per share for the twelve month period ended
September 30, 2000;
O the historical and forecasted financial performance of Avis;
O since August 15, 2000, Cendant's Preliminary Proposal and Avis'
availability as an acquisition candidate have been known in the
investment community and in the business community, and neither Avis
nor its advisors has received any proposals to date for the
acquisition of Avis;
O the ability of stockholders to obtain "fair value" for their shares if
they exercise and perfect their appraisal rights under the Delaware
law; and
O the other factors referred to above as having been taken into account
by the special committee and our board of directors under "SPECIAL
FACTORS--Reasons for the Recommendations of the Special Committee and
our Board of Directors."
None of Cendant, PHH Corporation or Avis Acquisition Corp. found it
practicable to assign, nor did it assign, relative weights to the individual
factors considered in reaching its conclusion as to fairness. The liquidation of
Avis' assets was not considered to be a viable course of action based on
Cendant's desire for Avis to continue to conduct its business following the
merger as an indirect subsidiary of Cendant. Therefore, no appraisal of
liquidation value was sought for purposes of valuing the Avis shares. Cendant,
PHH Corporation and Avis Acquisition Corp. do not consider the book value of
Avis to be a material factor in their belief that the merger consideration is
fair because they believe that net book value is not a true indication of the
value of Avis. Although Lehman Brothers generally assisted in this transaction
and, in particular, analyzed the financial aspects of the proposed transaction,
advised Cendant on negotiating strategies, participated in negotiations with
Avis and Morgan Stanley and analyzed Avis' forecasts and assumptions thereto,
Lehman Brothers did not deliver a fairness opinion as to the $33.00 per share
price to be received by holders of Avis shares and did not provide Cendant, PHH
Corporation or Avis Acquisition Corp. with any reports, opinions or appraisals.
The foregoing discussion of the information and factors considered and
weight given by Cendant, PHH Corporation and Avis Acquisition Corp. is not
intended to be exhaustive but is believed to include all material factors.
PURPOSE AND STRUCTURE OF THE MERGER
The purpose of the Plan allowsmerger is for Cendant to increase its ownership of Avis
from approximately 17.8% to 100%. As a result of the grantingmerger, Avis will become an
indirect wholly-owned subsidiary of Cendant. The reason the acquisition has been
structured as a merger is to effect a prompt and orderly transfer of ownership
of Avis from the public stockholders to Cendant and provide Avis stockholders
with cash for all of their shares. Avis and Cendant also considered structuring
the acquisition as a tender offer, to be followed by a merger of Avis into a
subsidiary of PHH Corporation. Such alternative structure was not pursued,
however, in light of the governmental and third party consents required to
consummate the acquisition, which could postpone the closing of such tender
offer, thereby negating any potential benefit of such structure.
The board of directors of each of Cendant, PHH Corporation and Avis
Acquisition Corp. believes that undertaking the proposed transaction in this
form and at this time represents the most attractive way of accomplishing
several strategic business objectives, including Cendant's interest in
increasing its investment in the rental car business and further enhancing its
travel-related businesses, and also joining ownership of the Avis trademark and
the reservation system technology with the business operations of Avis.
Moreover, the acquisition of the publicly held Avis shares is expected to be
accretive to Cendant's earnings. For further background on Cendant's reasons for
the merger, see "SPECIAL FACTORS--Background of the Merger" and "SPECIAL
FACTORS--Cendant's Position as to the Fairness of the Merger; Cendant's Reasons
for the Merger."
CERTAIN EFFECTS OF THE MERGER; PLANS OR PROPOSALS AFTER THE MERGER
Following the merger, Avis will be an indirect wholly-owned subsidiary of
Cendant. Cendant currently intends to cause all of the vehicle management and
fuel card businesses operated by Avis Fleet Leasing and Management Corporation
to be retained under PHH Corporation, and all of the Avis car rental operations
to be transferred to Cendant Car Holdings, Inc., an indirect wholly-owned
subsidiary of Cendant that is not part of the PHH Corporation line of
subsidiaries.
Cendant and PHH Corporation will continue after these transactions to
review Avis and its assets, corporate structure, capitalization, operations,
property, management, personnel and policies to determine what changes, if any,
are desirable to best organize and integrate the activities of Avis with
Cendant's other operations. Cendant and PHH Corporation expressly reserve the
right to make any changes that they deem necessary or appropriate in light of
their review or in light of future developments. Cendant does not anticipate
that Mr. Rand would continue as Chairman and Chief Executive Officer of Avis
after the merger.
Except as otherwise described herein, neither Cendant nor PHH Corporation
has any current plans or proposals which relate to or would result in: (1) an
extraordinary corporate transaction, such as a reorganization or liquidation
involving Avis; (2) any purchase, sale or transfer of a material amount of
assets of Avis; (3) any change in the management of Avis or any change in any
material term of the employment contract of any executive officer; or (4) any
other material change in Avis' corporate structure or business.
As a result of the merger, the interest of Cendant in Avis' net book value
and net earnings will increase to 100% and Cendant and its subsidiaries will be
entitled to all benefits resulting from that interest, including all income
generated by Avis' operations and any future increase in Avis' value and the
right to elect all members of the Avis board of directors. Similarly, Cendant
will also bear the risk of losses generated by Avis' operations and any decrease
in the value of Avis after the merger. Upon consummation of the merger, Avis
will be a privately held corporation. Accordingly, stockholders will not have
the opportunity to participate in the earnings and growth of Avis after the
merger and will not have any right to vote on corporate matters. Similarly,
stockholders will not face the risk of losses generated by Avis' operations or
decline in the value of Avis after the merger.
Following completion of the merger, the shares will no longer be traded on
the NYSE. In addition, the registration of the shares under the Exchange Act
will be terminated upon application by Avis to the Securities and Exchange
Commission. Accordingly, following the merger, there will be no publicly traded
common stock outstanding.
It is expected that, if the merger is not consummated, Avis' current
management, under the general direction of the our board of directors, will
continue to manage Avis as an ongoing business.
INTERESTS OF EXECUTIVE OFFICERS AND DIRECTORS IN THE MERGER
In considering the recommendation of our board of directors with respect
to the merger agreement and the transactions contemplated thereby, you should be
aware that, in addition to the matters discussed above, our executive officers
and our board of directors have various interests in the merger described in
this section that are in addition to, or different from, the interests of our
stockholders generally and create potential conflicts of interest.
Executive Officers
As of the effective time of the merger, all outstanding options to
purchase common stock will become fully vested. The merger agreement provides
that, for each share covered by outstanding stock options at the time of the
merger, the executive officers will have the right to receive a cash payment
equal to the difference between the $33.00 per share merger consideration and
the per share exercise price of such options, referred to as the "spread",
reduced by applicable withholding tax. Alternatively, at the election of any of
our executive officers, rather than receiving such cash payment, such executive
may receive an option to purchase shares of Cendant common stock appreciation rights ("SARs"with
approximately the same value. Any stock options with an exercise price in excess
of the merger consideration will be automatically converted into an option to
purchase shares of Cendant common stock with approximately the same value.
The following table summarizes the total number of shares covered by
options, and the number of such options that are currently held, vested and
unvested, by each executive officer, and all executive officers as a group, as
well as the aggregate amount to which each executive officer and the executive
officers as a group would be entitled if they elected to receive the spread for
all of their options as of the date of this proxy statement:
Common Shares
Common Shares Subject to Common Shares
Subject to Unvested Subject to All
Vested Options Options1(#) Options (#) Aggregate
Name of Executive Officer (#) Spread ($)
A. Barry Rand 206,667 569,333 776,000 $10,925,564
F. Robert Salerno 528,920 581,096 1,110,016 14,224,530
Kevin M. Sheehan 282,300 426,774 709,074 8,626,487
Thomas J. Byrnes 33,840 55,922 89,762 1,179,049
Maria M. Miller2 25,400 0 25,400 225,713
Michael P. Collins 41,060 56,450 97,510 1,310,537
Richard S. Jacobson 7,320 14,714 22,034 261,069
Gerard J. Kennell 39,060 46,712 85,772 1,198,579
James A. Keyes 4,040 16,884 19,924 193,721
Lawrence E. Kinder 14,000 77,442 91,442 495,434
William E. Madison 0 81,262 81,262 992,511
Mark E. Miller 55,000 301,748 356,748 1,925,916
Karen C. Sclafani 18,340 37,380 55,720 567,355
Timothy M. Shanley 33,973 46,438 80,411 1,114,937
EXECUTIVE OFFICERS AS A GROUP 1,289,920 2,312,155 3,601,075 $43,241,402
- ----------
1 All unvested options vest upon completion of the merger.
2 Maria M. Miller resigned as an officer on July 17, 2000.
Employment Agreements
Mr. Rand has an employment agreement with Avis which terminates on January
1, 2005. Under the terms of his agreement, Mr. Rand is entitled to a base salary
of $700,000, which may be increased annually at Avis' discretion after review by
the Compensation Committee of our board of directors, and a bonus of up to 100%
of base salary. If the employment of Mr. Rand is terminated by Avis other than
for cause (as defined in his agreement) or by Mr. Rand for good reason (as
defined in his employment agreement) within 24 months following a change in
control of Avis, he is entitled to receive a lump sum cash payment equal to the
sum of (1) 36 times his average monthly base salary during the 24 months (or
lesser period) preceding his termination, (2) three times the average annual
amount of any bonus for which he was eligible for the last two fiscal years
prior to his termination, and (3) a prorated share of his bonus for the year in
which his termination provided that he was employed by Avis for at least eight
months during that year. Mr. Rand is also entitled to be fully grossed up, on an
after-tax basis, for any excise taxes imposed under the Internal Revenue Code on
any "excess parachute payment" that he receives in connection with the change in
control.
Mr. Salerno has an employment agreement with a predecessor company of Avis
which terminates on February 8, 2002. Under the terms of his agreement, Mr.
Salerno is entitled to receive an annual base salary of not less than $400,000,
subject to increase by our board of directors. If the employment of Mr. Salerno
is terminated by Avis in connection with a change in control, he is entitled to
receive his salary for the remaining term of his agreement or for a period of 12
months, whichever is greater, 70% of maximum bonus and certain perquisites under
the agreement in a single lump sum within 30 days following his termination.
Mr. Shanley has an employment agreement with a predecessor company of Avis
which terminates on February 8, 2002. Under the terms of his agreement, Mr.
Shanley is entitled to receive an annual base salary of not less than $172,000,
subject to increase by our board of directors. If the employment of Mr. Shanley
is terminated by Avis in connection with a change in control, he is entitled to
receive his salary for the remaining term of his agreement or for a period of 12
months, whichever is greater, 70% of maximum bonus and certain perquisites under
the agreement in a single lump sum within 30 days following his termination.
Mr. Madison's offer letter provides that, following a change of control,
if his employment is terminated or his responsibilities are substantially
reduced, he is entitled to receive separation pay for 18 months following the
date of termination of his employment. The separation pay is the aggregate of
his base salary and targeted bonus (which is 50% of his base salary), restrictedand is
payable bi-weekly. Mr. Madison's current base salary is $267,000.
Mr. Kennell has an employment agreement with a predecessor company of Avis
which terminates on February 8, 2002. Under the terms of his agreement, Mr.
Kennell is entitled to receive an annual base salary of not less than $177,000,
subject to increase by our board of directors. If the employment of Mr. Kennell
is terminated by Avis in connection with a change in control, he is entitled to
receive his salary for the remaining term of his agreement or for a period of 12
months, whichever is greater, 70% of maximum bonus and certain perquisites under
the agreement in a single lump sum within 30 days following his termination.
Non-Management Directors
As of the effective time of the merger, all outstanding options to
purchase common stock awards, performance unit awards,
performanceheld by non-management directors will become fully vested.
The merger agreement provides that, for each share awardscovered by outstanding stock
options at the time of the merger, the directors will have the right to receive
a cash payment equal in amount to the spread, or, at the election of any of our
directors, an option to purchase shares of Cendant common stock with
approximately the same value. Any stock options with an exercise price in excess
of the merger consideration will be automatically converted into an option to
purchase shares of Cendant common stock with approximately the same value.
The following table summarizes the total number of shares covered by
options, and cash-based awards (collectively, "Awards")the number of such options that are currently held, vested and
unvested, by each non-management director, and all non-management directors as a
group, as well as the aggregate amount to eligible persons.
Subjectwhich each non-management director and
the non-management directors as a group would be entitled if they elected to
adjustmentreceive the spread for certain changesall of their options as of the date of this proxy
statement:
Common Shares Common Shares
Subject Subject to Common Shares
to Vested Unvested Subject to
Options (#) Options1 (#) All Options Aggregate
Name of Director (#) Spread ( $)
W. Alun Cathcart 30,000 20,000 50,000 $ 800,000
Leonard S. Coleman, Jr. 30,000 20,000 50,000 800,000
Alfonse M. D'Amato 10,000 40,000 50,000 218,750
Martin L. Edelman 45,000 20,000 65,000 939,688
Deborah L. Harmon 30,000 20,000 50,000 800,000
Stephen P. Holmes 30,000 20,000 50,000 800,000
Michael J. Kennedy 30,000 20,000 50,000 800,000
Michael P. Monaco2 20,000 0 20,000 320,000
Non-Management Directors as a Group 225,000 160,000 385,000 $5,478,438
- ----------
1 All unvested options vest upon completion of the merger.
2 Michael P. Monaco resigned as a director on May 10, 2000.
Messrs. Holmes and Monaco also own 1,000 shares each. As of the effective
time of the merger, they will each receive the $33.00 merger consideration for
each such share.
Special Committee
The members of the special committee each received compensation of
$100,000 from Avis in connection with serving on the special committee. Our
board of directors and the special committee believe that the foregoing payments
do not affect the special committee's independence or impartiality.
Indemnification and Insurance
The merger agreement provides that the surviving corporation's certificate
of incorporation and by-laws will contain the provisions with respect to
indemnification of directors and officers as set forth in Avis' certificate of
incorporation and by-laws and will maintain in effect the current directors' and
officers' liability insurance or substantially similar insurance covering those
persons who are currently covered on the date of the merger agreement by our
directors' and officers' liability insurance policy for a period of at least six
years (provided that the surviving corporation in the Company's capitalization
(described below under "Changesmerger is not required to
pay an annual premium for any such policy in Capital"),excess of 200% of the last annual
premium paid by us prior to the merger agreement). The merger agreement also
provides that Cendant and the surviving corporation will indemnify and hold
harmless any former or current officer or director of Avis against any losses in
connection with any threatened or actual action, suit or proceeding, based in
whole or in part on, or arising in whole or in part out of, the fact that the
person is or was an officer or director of Avis.
CERTAIN RELATIONSHIPS BETWEEN CENDANT AND AVIS
Acquisition of Avis by Cendant and Subsequent Initial Public Offering of Avis
Ownership Interest in Avis. Upon entering into an Agreement and Plan of
Merger to acquire Avis in July 1996, HFS (Cendant's predecessor) announced its
strategy to reduce its interest in Avis' car rental operations while retaining
assets associated with the franchise business, including trademarks, reservation
system assets and franchise agreements. In September 1997, Avis completed an IPO
of its common stock, which diluted Cendant's equity interest in Avis to about
27.5%. Cendant received no proceeds from the IPO. On March 23, 1998, Avis sold 5
million additional shares through a totalpublic offering in which Cendant reduced its
beneficial ownership interest in Avis by selling 1 million shares for $34.00 per
share, which reduced Cendant's common equity interest in Avis to approximately
20%. On January 15, 1999, pursuant to a stock repurchase program, Avis
repurchased from Cendant 1.3 million shares for $24.25 per share or an aggregate
of 1,500,000$31,525,000, and on April 24, 1999, Cendant sold 314,200 shares to Avis for
$29.50 per share or an aggregate of $9,268,990. On August 25, 1999, Cendant sold
350,000 shares of Common Stock (which may be either authorizedAvis for $22.19 per share or an aggregate of $7,766,500. As a
result of these sales and unissued shares (which will not
be subjectrepurchases, Cendant's common equity interest in Avis
was reduced to preemptive rights) or previously issued shares thatits current level of approximately 17.8%.
Appointment to the Company orAvis Board of Directors of Cendant Officers and
Directors. The following individuals, who serve on our board of directors, also
serve as directors of Cendant and, in the case of Mr. Holmes, as an officer of
Cendant in the capacity set forth below:
O Stephen P. Holmes. Mr. Holmes also serves as Cendant's Vice Chairman
and Chairman and Chief Executive Officer of Cendant's Travel Division.
O Leonard S. Coleman, Jr.
O Martin Edelman
In addition, Michael P. Monaco, a subsidiary has reacquired), would be available for issuance underformer officer and director of Cendant, served
on our board of directors from the Plan ifIPO of Avis until May 10, 2000.
Master License Agreement. On July 30, 1997, Avis entered into a 50-year
master license agreement with Cendant which grants Avis the Plan is approved by the stockholders. No more than 300,000 shares of such
authorized total may be issued as restricted stock under the Plan.
The Company has no intentionright to use the
Plan for any corporate purpose other
than to recruit and retain, and provide stock-based performance incentives to,
eligible employees and consultantsAvis trademark in connection with the operation of the CompanyAvis vehicle rental
business in certain specified territories. Pursuant to the master license
agreement, Avis has agreed to pay Cendant a monthly base royalty of 3.0% of
gross revenue of car rental operations. In addition, Avis has agreed to pay a
supplemental royalty of 1.0 % of gross revenue payable quarterly in arrears
which will increase 0.2% effective January 1, 2001 and will increase 0.1% per
year effective August 1, 2001 and in each of the following two years thereafter
to a maximum of 1.5%, or supplemental fee. These fees have been paid by Avis
since January 1, 1997. Until the fifth anniversary of the master license
agreement, the supplemental fee or a portion of the supplemental fee may be
deferred by Avis if Avis does not attain certain financial targets. During 1997,
1998 and 1999, total royalties paid to Cendant by Avis were $82 million, $92
million and $102 million, respectively.
Wizard System. Under a computer services agreement and a reservation
services agreement, Cendant operates a telecommunications and computer
processing system, known as the Wizard System, which services Avis for
reservations, rental agreement processing, accounting and fleet control. Cendant
provides these services to Avis at cost. The Wizard System also processes
incoming customer calls, during which customers inquire about locations, rates
and availability and place or modify reservations.
Call Transfer Agreement. Under a call transfer agreement, until March 4,
2002, Avis has agreed to pay Cendant $1.75 for each call transferred from
Cendant's lodging customers and $8.00 for each resulting rental in connection
with Cendant transferring its subsidiarieslodging customers to Avis for vehicle rentals.
Avis must pay Cendant a minimum fee of $2.25 million per year under the call
transfer agreement. Avis paid Cendant approximately $2.8 million in call
transfer fees in 1999.
Office Space Leases. Cendant provides Avis at cost with office space at
Avis' headquarters in Garden City, New York and affiliates.at facilities in Virginia Beach,
Virginia, and Tulsa, Oklahoma.
Acquisition of the Fleet Leasing Business by Avis
Agreement and Plan of Merger and Reorganization. On June 30, 1999, Avis
acquired PHH Corporation's vehicle management and fuel card businesses in
exchange for 7.2 million shares of preferred stock of Avis Fleet Leasing and
Management Corporation, a subsidiary of Avis, and the assumption of $1.8 billion
of indebtedness. The preferred stock is convertible into a number of shares of
Avis common stock and Avis non-voting class B common stock which, based on
current conversion rates, would result in Cendant having beneficial ownership of
up to a 20% voting interest in Avis and a 33% economic interest. The preferred
stock is convertible only upon the attainment of certain earnings and market
price thresholds which presently have not been met, and upon certain other
events that have not occurred; thus, the preferred stock currently is not
convertible.
Stockholders' Agreement. In connection with the issuance of preferred
stock to PHH Corporation in connection with the acquisition of our fleet leasing
and management business, we entered into a stockholders' agreement with Avis
Fleet Leasing and PHH Corporation. The stockholders' agreement requires Avis to
take all actions necessary to complete the conversion of the preferred stock
issued to Cendant into class B common stock and common stock in accordance with
the terms of the certificate of designations of the preferred stock.
Registration Rights Agreement. In connection with the issuance of
preferred stock to PHH Corporation in connection with the acquisition of our
fleet leasing and management business, we with Avis Fleet Leasing, PHH Holdings
Corporation and PHH Corporation. Under the registration rights agreement, PHH
Corporation can require Avis to register under the federal and applicable state
securities laws the shares of Avis common stock it receives upon conversion of
its Avis Fleet Leasing preferred stock.
Non-Competition Agreement. Avis, Avis Fleet Leasing, PHH Holdings and PHH
Corporation entered into a non-competition agreement that restricts PHH
Corporation from directly or indirectly engaging in or owning any interest in
any business that engages in the vehicle fleet management and fuel card
businesses for a period of five years and also prohibits PHH Corporation, for a
period of two years, from soliciting persons employed by Avis who were formerly
PHH Corporation employees.
Trademark License Agreement. PHH Corporation retained the "PHH" trademark
and certain other trademarks, trade names, logos and service marks after the
sale of the fleet leasing business to Avis. However, pursuant to a trademark
license agreement between Avis Fleet Leasing and PHH Holdings, PHH Holdings
granted Avis a perpetual, worldwide, royalty-free, exclusive right and license
to use certain trademarks, trade names, logos and service marks solely in
connection with Avis' vehicle management and fuel card products and services and
the marketing, promotion and sale thereof.
Information Technology Services Agreement. In connection with the
acquisition of our fleet leasing and management business, Cendant entered into
an information technology services agreement with PHH Vehicle Management and
Services, LLC, a subsidiary of Avis. Under the agreement, Cendant provides PHH
Vehicle Management with information technology services relating to its business
operations, including vehicle leasing, advisory services, card processing and
fleet management services in the United States, Europe, Canada.
Other Agreements. In connection with the acquisition of our fleet leasing
and management business, Avis, Avis Fleet Leasing, PHH Corporation and Cendant
entered into various transitional service agreements and ancillary agreements,
none of which were individually material, but may have been considered material
in the aggregate. Each of these agreements has expired pursuant to its terms.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO OUR STOCKHOLDERS
The following paragraphs provideis a summarydescription of the principal featuresmaterial U.S. federal income tax
consequences of the Planmerger to holders of shares who dispose of such shares in
the merger, who are United States Persons (as defined below), and who, on the
date of disposition, hold such shares as capital assets (as defined in the
Internal Revenue Code) (each, a "United States Holder"). This discussion is
based on the Internal Revenue Code, , proposed and final income tax regulations,
issued under the Internal Revenue Code, and administrative and judicial
interpretations of the Code and regulations, each as in effect and available on
the date of this proxy statement. These income tax laws, regulations and
interpretations, however, may change at any time, and any change could be
retroactive to the date of this proxy statement. Although we will not seek any
rulings from the Internal Revenue Service or an opinion of counsel with respect
to the transactions contemplated by the merger agreement, we believe that the
merger will have the U.S. federal income tax consequences described below to the
United States Holders.
We urge all holders to consult their own tax advisors regarding the U.S.
federal, foreign, state and local tax consequences of the disposition of shares
in the merger. Except as specifically noted otherwise, the following discussion
does not address potential foreign, state, local and other tax consequences, nor
does it address special tax consequences that may be applicable to particular
classes of taxpayers, including financial institutions, real estate investment
trusts, regulated investment companies, brokers and dealers or traders in
securities or currencies, persons whose functional currency is not the U.S.
dollar, insurance companies, tax-exempt organizations, S corporations, persons
who hold common stock as part of a position in a straddle or as part of a
hedging or conversion transaction, persons who acquired common stock pursuant to
an exercise of employee stock options or rights or otherwise as compensation,
persons who hold employee stock options or rights to acquire common stock and
taxpayers subject to alternative minimum tax.
A "United States Person" is a beneficial owner of common stock, who for
U.S. federal income tax purposes is: (1) a citizen or resident of the U.S.,
including some former citizens or residents of the U.S.; (2) a partnership or
corporation created or organized in or under the laws of the U.S. or any state
thereof, including the District of Columbia; (3) an estate if its operation.income is
subject to U.S. federal income taxation regardless of its source; or (4) a trust
if such trust validly has elected to be treated as a United States person for
U.S. federal income tax purposes or if (a) a U.S. court can exercise primary
supervision over its administration and (b) one or more United States persons
have the authority to control all of its substantial decisions.
A United States Holder generally will realize gain or loss upon the
surrender of such holder's shares pursuant to the merger in an amount equal to
the difference, if any, between the amount of cash received and such holder's
aggregate adjusted tax basis in the shares surrendered therefor.
In general, any gain or loss realized by a United States Holder in the
merger will be eligible for capital gain or loss treatment. Any capital gain or
loss recognized by a United States Holder will be long-term capital gain or loss
if the shares giving rise to such recognized gain or loss have been held for
more than one year; otherwise, such capital gain or loss will be short term. A
non-corporate United States Holder's long-term capital gain generally is subject
to U.S. federal income tax at a maximum rate of 20% while any capital loss can
be offset only against other capital gains plus $3,000 ($1,500 in the case of a
married individual filing a separate return) of other income in any tax year.
Any unutilized capital loss will carry over as a capital loss to succeeding
years for an unlimited time until the loss is exhausted.
For corporations, a capital gain is subject to U.S. federal income tax at
a maximum rate of 35% while any capital loss can be offset only against other
capital gains. Any unutilized capital loss generally can be carried back three
years and forward five years to be offset against net capital gains generated in
such years.
Each holder of a compensatory option to acquire shares who receives a cash
payment equal to the spread on such stock option will have ordinary income to
the extent of the cash received or treated as received (including any applicable
withholding taxes).
Under the U.S. federal backup withholding tax rules, unless an exemption
applies, [_____________], the paying agent, will be required to withhold, and
will withhold, 31% of all cash payments to which a holder of shares or other
payee is entitled pursuant to the merger agreement, unless the stockholder or
other payee provides a tax identification number (social security number, in the
case of an individual, or employer identification number, in the case of other
stockholders), certifies that such number is correct, and otherwise complies
with such backup withholding tax rules. Each of our stockholders, and, if
applicable, each other payee, should complete and sign the Substitute Form W-9
included as part of the letter of transmittal to be returned to the paying
agent, in order to provide the information and certification necessary to avoid
backup withholding tax, unless an exemption applies and is established in a
manner satisfactory to the paying agent.
THE U.S. FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE ARE FOR GENERAL
INFORMATION ONLY AND ARE NOT INTENDED TO CONSTITUTE A COMPLETE DESCRIPTION OF
ALL TAX CONSEQUENCES RELATING TO THE MERGER. EACH HOLDER OF SHARES IS URGED TO
CONSULT HIS OR HER OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES
TO SUCH STOCKHOLDER OF THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF
FOREIGN, STATE, LOCAL AND OTHER TAX LAWS.
THE MERGER
The following information describes the material aspects of the merger.
This summarydescription does not purport to be complete and is qualified in its
entirety by reference to the Plan, a complete copy ofappendices hereto, including the merger agreement
which is attached heretoto this proxy statement as Appendix B.
ADMINISTRATIONA and is incorporated
herein by reference. You are urged to read Appendix A in its entirety. See also
"THE MERGER--The Merger Agreement" below.
Our board of directors has determined, based on the unanimous
recommendation of the special committee, that the merger is fair to and in the
best interests of Avis and our public stockholders and has declared that the
merger agreement is advisable and has recommended adoption of the merger
agreement by you. See "SPECIAL FACTORS--Reasons for the Recommendations of the
Special Committee and our Board Of Directors."
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ADOPTION OF THE
PLAN
The PlanMERGER AGREEMENT.
EFFECTIVE TIME OF MERGER
If the merger agreement is adopted by the requisite vote of stockholders
and the other conditions to the merger are satisfied (or waived to the extent
permitted), the merger will be administeredconsummated and become effective at the time a
certificate of merger is filed with the Secretary of State of the State of
Delaware or such other time as otherwise agreed by Cendant and the special
committee. If the merger agreement is adopted by our stockholders we expect to
complete the merger on or about _____, 2001.
The merger agreement may be terminated prior to the effective time of the
merger by Avis or Cendant in certain circumstances, whether before or after the
adoption of the merger agreement by stockholders. See "THE MERGER--The Merger
Agreement--Termination of the Merger Agreement."
PAYMENT OF MERGER CONSIDERATION AND SURRENDER OF STOCK CERTIFICATES
Cendant has designated [__________], an agent reasonably acceptable to the
special committee, to act as paying agent for purposes of making the cash
payments contemplated by the Compensation Committeemerger agreement. Immediately prior to the
effective time of the Boardmerger, Cendant and PHH Corporation will deposit in trust
with the paying agent cash in United States dollars in an aggregate amount equal
to the merger consideration for all stockholders. The paying agent will,
pursuant to irrevocable instructions, deliver to you your merger consideration
according to the procedure summarized below.
At the close of Directors. The Compensation Committeebusiness on the day of the effective time of the merger
our stock ledger with respect to common stock will havebe closed.
As soon as practicable after the exclusive discretionary
authorityeffective time of the merger, Cendant
will cause the paying agent to operate, managemail to you a letter of transmittal and
administerinstructions advising you of the Planeffectiveness of the merger and the procedure
for surrendering to the paying agent your certificates in exchange for the
merger consideration. Upon the surrender for cancellation to the paying agent of
your certificates, together with a letter of transmittal, executed and completed
in accordance with its terms. Subjectinstructions, and any other items specified by the letter
of transmittal, the paying agent will promptly pay to you your merger
consideration. No interest will be paid or accrued in respect of cash payments
of merger consideration. Payments of merger consideration also will be reduced
by applicable withholding taxes.
If the merger consideration, (or any portion of it), is to be delivered to
a person other than you, it will be a condition to the termspayment of the Plan,merger
consideration that your certificates be properly endorsed or accompanied by
appropriate stock powers and otherwise in proper form for transfer, that the
Compensation Committee hastransfer otherwise be proper and not violate any applicable federal or state
securities laws, and that you pay to the sole
discretionpaying agent any transfer or other
taxes payable by reason of the transfer or establish to determine the employeessatisfaction of the
paying agent that the taxes have been paid or are not required to be paid.
YOU SHOULD NOT FORWARD YOUR STOCK CERTIFICATES TO THE PAYING AGENT WITHOUT
A LETTER OF TRANSMITTAL, AND YOU SHOULD NOT RETURN YOUR STOCK CERTIFICATES WITH
THE ENCLOSED PROXY.
At and consultants whoafter the effective time of the merger, you will cease to have any
rights as our stockholder, except for the right to surrender your certificate in
exchange for payment of the merger consideration or, if you exercise your
appraisal rights, the right to perfect your right to receive payment for your
shares pursuant to Delaware law, and no transfer of common stock will be granted
Awards,made on
the sizestock transfer books of the surviving corporation. Certificates presented to
the surviving corporation after the effective time will be canceled and
typesexchanged for cash as described above.
Promptly following the date which is 180 days after the effective date of
such Awards,the merger, the paying agent will return to the surviving corporation all cash,
certificates and other instruments in its possession that constitute any portion
of the merger consideration, and the termspaying agent's duties will terminate.
Thereafter, stockholders may surrender their certificates to the surviving
corporation and conditions(subject to applicable abandoned property laws, laws regarding
property which is not accounted for by the laws of such
Awards.intestacy and similar laws)
receive the merger consideration without interest, but will have no greater
rights against the surviving corporation or Cendant than may be accorded to
general creditors of the surviving corporation or Cendant under applicable law.
None of the paying agent, Avis, Cendant, PHH Corporation or Avis Acquisition
Corp. will be liable to stockholders for any merger consideration delivered to a
public official pursuant to applicable abandoned property laws, laws regarding
property which is not accounted for by the laws of intestacy and similar laws.
ACCOUNTING TREATMENT
The Compensation Committeemerger will determine the form and content of award
agreements which grant Awardsbe accounted for under the Plan. The Compensation Committee will
interpretpurchase method of accounting
under which the Plan and award agreements thereunder and will have authority to
correct any errors, supply any omissions and reconcile any inconsistenciestotal consideration paid in the Plan and/or any award agreements. The Compensation Committee's decisions and
actions concerning the Planmerger will be finalallocated among
the surviving corporation's consolidated assets and conclusive. Withinliabilities based on the
limitationsfair values of the Planassets acquired and applicableliabilities assumed.
FINANCING OF THE MERGER
The total amount of funds required to consummate the merger and to pay
related fees and expenses is estimated to be approximately $959 million. Cendant
and PHH Corporation plan to fund the purchase price, directly or indirectly,
through a combination of the issuance of debt, the sale of Cendant common stock
and cash on hand at the effective time of the merger. The merger is not
conditioned on any financing arrangements.
The fees and expenses in connection with the merger are set forth in the
table below:
Financing Fees $
Morgan Stanley's Fees
Legal, Accounting and Other Professional
Fees
Printing, Proxy Solicitation and Mailing
Costs
Special Committee Fees
Filing Fees
Miscellaneous
TOTAL $
APPRAISAL RIGHTS
Pursuant to Delaware law, if (1) you properly file a demand for appraisal
in writing prior to the Compensation Committee may delegate its
responsibilities undervote taken at the Plan to persons selected by it,special meeting and (2) your shares
are not voted in favor of the Board of
Directorsmerger, you will be permittedentitled to exercise allappraisal rights
under Section 262 of the Compensation Committee's
powers underDelaware General Corporation Law.
SECTION 262 IS REPRINTED IN ITS ENTIRETY AS APPENDIX C TO THIS PROXY
STATEMENT. THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW
RELATING TO APPRAISAL RIGHTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
APPENDIX C. THIS DISCUSSION AND APPENDIX C SHOULD BE REVIEWED CAREFULLY BY YOU
IF WISH TO EXERCISE STATUTORY APPRAISAL RIGHTS OR YOU WISH TO PRESERVE THE RIGHT
TO DO SO, AS FAILURE TO COMPLY WITH THE PROCEDURES SET FORTH IN SECTION 262 WILL
RESULT IN THE LOSS OF YOUR APPRAISAL RIGHTS.
If you make the Plan.
PARTICIPATION
The Compensation Committee may grant Awards under the Plan to officers,
employees and consultants of the Company and its subsidiaries and affiliates
designated by the Compensation Committee. However, only employees of the Company
and its subsidiaries (as defined in the Plan) will be eligible to receive
"incentive stock options" under the Plan. Directors who are not also employees
of the Company or its subsidiaries or affiliates are not eligible to participate
in the Plan.
The actual number of employees and consultants who will receive Awards under
the Plan cannot be determined because selection for participation in the Plan is
in the discretion of the Compensation Committee. Similarly, the performance
goals which may determine the degree of payout and/or vestingdemand described below with respect to your shares, you
are continuously the record holder of your shares through the effective time of
the merger, otherwise comply with the statutory requirements of Section 262 and
neither vote in favor of the merger agreement nor consent to the merger in
writing, you shall be entitled to an appraisal by the Delaware Court of Chancery
of the fair value of your shares.
Under Section 262, where a merger is to be submitted for approval at a
meeting of stockholders, as in the special meeting, not less than 20 days prior
to the meeting we must notify you that appraisal rights are available and
include in the notice a copy of Section 262. This proxy statement constitutes
your notice of your appraisal rights.
If you desire to exercise your appraisal rights you must not vote in favor
of the merger agreement or the merger and you must deliver a separate written
demand for appraisal to us prior to the special meeting. If you sign and return
a proxy without expressly directing by checking the applicable boxes on the
reverse side of the enclosed proxy card that your shares be voted against the
proposal or that an abstention be registered with respect to your shares in
connection with the proposal, you will effectively have waived your appraisal
rights as to those shares because, in the absence of express contrary
instructions, your shares will be voted in favor of the proposal. (See
"INTRODUCTION--Voting and Revocation of Proxies.") Accordingly, if you desire to
perfect appraisal rights with respect to any of your shares you must, as one of
the procedural steps involved in such Awards may varyperfection, either (1) refrain from
year to yearexecuting and returning the enclosed proxy card and from participant to participant.
Therefore,
18
benefits under the Plan are not determinable. No Awards will be granted under
the Plan unless the Plan is approved by the stockholders.
OPTIONS
The Compensation Committee may grant either "incentive stock options"
("ISOs") (within the meaning of Section 422voting in person in
favor of the Internal Revenue Codeproposal to approve the merger agreement or (2) check either the
"Against" or the "Abstain" box next to the proposal on the proxy card or
affirmatively vote in person against the proposal or register in person an
abstention with respect to the proposal.
A demand for appraisal must be executed by you or on your behalf and must
reasonably inform us of 1986,your identity and that you intend to demand appraisal of
your shares. If you have a beneficial interest in shares that are held of record
in the name of another person, such as amended (the "Code"))a broker, fiduciary or options not subjectother nominee, you
must act promptly to Section 422cause the record holder to follow properly and in a timely
manner to perfect whatever appraisal rights are available, and your demand must
be executed by or for the record owner. If your shares are owned of record by
more than one person, as in a joint tenancy or tenancy in common, your demand
must be executed by or for all joint owners. An authorized agent, including an
agent for two or more joint owners, may execute the Code
("NQSOs"). Thedemand for appraisal;
however, the agent must identify the record owner and expressly disclose the
fact that, in exercising the demand, the agent is acting as agent for the record
owner.
A record owner, such as a broker, fiduciary or other nominee, who holds
shares as a nominee for others, may exercise appraisal rights with respect to
the shares held for all or less than all beneficial owners of shares as to which
the person is the record owner. In such case, the written demand must set forth
the number of shares covered by each option will be determined by the Compensation Committee, but during any fiscal year of the Company, no
participant may be granted options for more than 250,000 shares of Common Stock.
The exercise price of each option is set by the Committee but generally
cannot be less than 100% of the fair market value (as defined in the Plan) of a
share of Common Stock on the date of grant, or, in any event, less than $17, the
offering price of the Common Stock in the Company's initial public offering
which occurred on September 23, 1997. Thus, an option will have value only if
the Common Stock appreciates in value after the date of grant. On March 10,
2000, the fair market value of a share of Common Stock was $15.25.
The exercise price of each option must be paid in full in cash at the time
of exercise. The Compensation Committee also may permit payment through the
tender of shares of Common Stock that are already owned by the participant, by
using a "cashless exercise" procedure, or by any other legal means which the
Compensation Committee determines to be consistent with the Plan's purpose.
Options become exercisable at the time and on the terms established by the
Compensation Committee. Options expire at the time established by the
Compensation Committee, but in no event may an option be exercised later than
the tenth anniversary of the date of grant.
STOCK APPRECIATION RIGHTS
SARs are Awards that, upon their exercise, give a participant the right to
receive from the Company an amount equal to (i)demand. Where the number of shares for whichis not
expressly stated, the SAR is exercised, multiplied by (ii)demand will be presumed to cover all shares in the difference between the fair market
value of a share of Common Stock on the date of exercise and the grant price of
the SAR. The Compensation Committee will have the discretion to determine
whether a SAR is settled in cash, shares of Common Stock, or a combination of
cash and shares. SARs may be granted in tandem with options or may be granted on
an independent basis. The Compensation Committee will determine the terms and
conditions of each SAR, including its vesting schedule, and the times and terms
on which SARs may be exercised. However, the grant price of a SAR cannot be less
than 100% of the fair market value of a share of Common Stock on the date of
grantname of
such SAR (except that a SAR granted in tandem with a previously granted
option will have a grant price equal to the exercise price of such option), or,
in any event, less than the offering price of the Common Stock in the Company's
initial public offering. SARs expire at the times established by the
Compensation Committee, but are subject to the same maximum time limits as are
applicable to options granted under the Plan. A SAR granted in tandem with an
option will be exercisable to the extent such related option is exercisable.
Such an option will no longer be exercisable to the extent that the participant
exercises any SAR granted in tandem with such option. Likewise, a SAR will not
be exercisable to the extent of the exercise or expiration of the related
option. The number of shares covered by each SAR will be determined by the
Compensation Committee, but no participant may be granted SARs for more than
150,000 shares of Common Stock in any one fiscal year of the Company.
RESTRICTED STOCK AWARDS
Restricted stock Awards are shares of Common Stock that are granted to a
participant subject to the satisfaction of such terms and conditions as the
Compensation Committee may determine. Vesting may be based on continued
employment (or other period of service) and/or satisfaction of performance goals
or
19
other conditions established by the Compensation Committee. Until such time as
these restrictions lapse, shares of restricted stock are subject to forfeiture
and may not be sold, assigned, pledged or otherwise disposed of by the
participant who holds such shares. Nevertheless, such participant will receive
dividends, if any (which may be subject to the same restrictions as the
restricted stock, if the Compensation Committee so provides), and have voting
rights and all other rights of a stockholder during the restricted period,
unless the Compensation Committee provides otherwise in the grant. The number of
shares of restricted stock granted to a participant will be determined by the
Compensation Committee, but no participant may be granted more than 100,000
shares of Common Stock in the form of restricted stock Awards in a single fiscal
year of the Company. In addition, no more than 300,000 shares of the 1,500,000
shares of Common Stock authorized for issuance under the Plan may be awarded in
the form of restricted stock.
In determining the vesting schedule for each award of restricted stock, the
Compensation Committee may impose whatever conditions to vesting it determines
to be appropriate. For example, the Compensation Committee may (but is not
required to) provide that restricted stock will vest only if one or more
pre-established objective performance goals are satisfied. In order for the
Award to qualify as "performance-based" compensation under Section 162(m) of the
Code (SEE "Certain Federal Income Tax Consequences" below), the Compensation
Committee must use one or more of the following performance criteria in setting
such performance goals: (1) earnings per share, (2) net income, (3) share price
(including return relative to a designated market index), (4) cash flow return
on investments, (5) return measures (such as return on assets, equity or sales)
or (6) earnings before or after taxes. The Compensation Committee may apply the
performance measures on a corporate or business unit basis, as deemed
appropriate in light of the participant's specific responsibilities. The
Compensation Committee may, in its discretion, adjust the determination of the
degree of attainment of any pre-established performance goal; however, with
respect to Awards which are intended to qualify for the "performance-based"
compensation exception to Section 162(m) of the Code, the Compensation Committee
may adjust the degree of attainment of such performance goals upward but not
downward.
When shares of restricted stock vest, they are delivered to the participant
free of restrictions. Upon termination of employment or a period of service, a
participant's shares of restricted stock will vest or be forfeited in accordance
with the terms of the participant's restricted stock award agreement. Shares of
restricted stock subject to performance goals will be forfeited to the extent
such performance goals are not met. However, the Compensation Committee may, in
its discretion, accelerate the vesting, or waive any forfeitures, of restricted
stock Awards not intended to qualify for the "performance-based" compensation
exception to Section 162(m) of the Code.
PERFORMANCE UNITS, PERFORMANCE SHARES AND CASH-BASED AWARDS
Performance units, performance shares or cash-based Awards granted to a
participant are amounts credited to a bookkeeping account established for the
participant. A performance unit has an initial value that is established by the
Compensation Committee at the time of its grant. A performance share has an
initial value equal to the fair market value of a share of Common Stock on the
date of grant. Each cash-based Award has a value that is established by the
Compensation Committee at the time of its grant. The number of performance
units, performance shares and cash-based Awards granted to a participant will be
determined by the Compensation Committee, but the maximum aggregate payout with
respect to performance share Awards, performance unit Awards or cash-based
Awards granted to a participant in any one fiscal year of the Company may not
exceed the value of 150,000 shares of Common Stock at the beginning of the
applicable performance period.
Whether a performance unit, performance share or cash-based Award actually
will result in a payment to a participant will depend upon the extent to which
performance goals established by the Compensation Committee are satisfied. The
applicable performance goals will be determined by the Compensation Committee
using the same performance criteria as are discussed above with respect to
restricted stock.
20
The Compensation Committee may, in its discretion, waive any performance goal
requirements relating to Awards not intended to qualify as "performance-based"
compensation under Section 162(m) of the Code.
After a performance unit, performance share or cash-based Award has vested
(that is, after the applicable performance goals or goal have been achieved),
the participant will be entitled to receive a payout of cash, Common Stock or a
combination thereof, as determined by the Compensation Committee.
TRANSFERABILITY AND CERTAIN OTHER TERMS OF AWARDS
Options, SARs, unvested restricted stock, performance shares, performance
units and cash-based Awards granted under the Plan may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will or
by the applicable laws of descent and distribution, unless permitted by the
Compensation Committee with respect to Awards other than ISOs or performance
shares, performance units or cash-based awards. However, a participant may
designate one or more beneficiaries to receive any exercisable or vested Awards
following his or her death.
The Compensation Committee may permit or require a participant to defer
until a later date delivery of shares or cash otherwise deliverable upon
exercise, vesting or payment of such participant's Award. The Compensation
Committee may also extend loans, on terms and conditions it establishes, to
participants in connection with the exercise or receipt of their Awards.
CHANGE-OF-CONTROL TRANSACTIONS
Upon the occurrence of a Change-of-Control Transaction (as defined in the
Plan), (i) all options and SARs granted under the Plan become fully exercisable,
(ii) any restrictions imposed on outstanding Awards of restricted stock will
lapse and (iii) the target payout opportunities attainable under all outstanding
performance-based restricted stock, performance units, performance shares and
cash-based Awards will be deemed to have been fully earned for the entire
performance period(s) as of or immediately prior to the effective date of the
Change-of-Control Transaction. The Plan also gives the Compensation Committee
discretion, in the event of a Change-of-Control Transaction, to substitute for
shares of Common Stock subject to options or SARs outstanding under the Plan
shares or other securities of the surviving or successor corporation, or another
corporate party to the transaction, with approximately the same value, or to
cash out outstanding options or SARs based upon the highest value of the
consideration received for the Common Stock in such transaction, or, if higher,
the highest fair market value of the Common Stock during the 30 business days
immediately prior to the closing or expiration date of the Change-of-Control
Transaction, reduced by the exercise price or grant price of the option or SAR
cashed out. The Compensation Committee may provide that any Award the payment of
which was deferred under the Plan shall be paid or distributed as of, or
promptly following, a Change-of-Control Transaction. The Compensation Committee
may also provide that any Awards subject to any such acceleration, payment,
adjustment or conversion cannot be exercised after, or will terminate as of, a
Change-of-Control Transaction.record owner.
If a Change-of-Control Transaction disqualifies
an employee's ISOs from favorable "incentive stock option" tax treatment under
the Code or results in the imposition of certain additional taxes on such an
employee, the Compensation Committee has discretion to authorize the Company to
make a cash payment that would leave such an employee in the same after-tax
position that he or she would have been in had such disqualification not
occurred, or to otherwise equalize such employee for such taxes.
CHANGES IN CAPITAL
In order to prevent dilution or enlargement of rights intended to be made
available under the Plan or outstanding Awards, or as otherwise necessary, the
Compensation Committee will, in its discretion, make appropriate and equitable
adjustments in (a) the number, class and type of shares available under the
Plan, (b) the Plan's limits on the number of shares that can be subject to
Awards granted to a single participant
21
during a single fiscal year, and (c) the number, class, type and price (as
applicable) of shares under each outstanding Award, in the event of changes in
the Company's outstanding Common Stock resulting from certain changes in the
Company's corporate capitalization or structure, such as the payment of a stock
dividend, a stock split, a recapitalization, reorganization, merger or
consolidation, a spin-off, liquidation or distribution of assets or the issuance
of warrants or rights or convertible securities with respect to the Common
Stock.
AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors may amend, alter, suspend or terminate the Plan.
However, the Board of Directors will be required to obtain approval of the
shareholders, if such approval is required by any applicable law (including
requirements relating to ISOs) or rule, of any amendment of the Plan that would:
(i) Except in the event of certain changes in capital of the Company (as
described above under "Changes in Capital"), increase the number of shares of
Common Stock that may be delivered under the Plan, or that may be subject to
Awards granted to a single participant during a single fiscal year;
(ii) decrease the minimum option exercise price, or SAR grant price, required by
the Plan; (iii) change the class of persons eligible to receive Awards under the
Plan; or (iv) extend the duration of the Plan or the exercise period of any
options or SARs granted under the Plan. The Compensation Committee may amend
outstanding Awards. However, unless otherwise required by law or specifically
provided for in the Plan, no such amendment or termination of the Plan or
amendment of outstanding Awards may materially impair the previously accrued
rights of any participant under the Plan without his or her written consent.
Additionally, the provisions of the Plan described above under
"Change-of-Control Transactions" may not be amended, terminated or modified on
or after the date of a Change-of-Control Transaction to affect materially
adversely any participant's outstanding Award, without any such participant's
consent.
The Plan will remain in effect until all shares of Common Stock available
under the Plan have been purchased or acquired, unless the Plan is terminated
earlier by the Board of Directors. However, no Awards may be granted under the
Plan on or after May 16, 2010.
TAX WITHHOLDING OBLIGATIONS
If any tax withholding obligations arise under applicable law with respect
to any Award granted to a participant under the Plan, the Plan requires the
participant to pay, or make other satisfactory arrangements to pay, in cash, any
such taxes at the time the income with respect to such Award is first includible
in the participant's taxable income. The Compensation Committee may permit a
participant toyou elect to satisfy allexercise appraisal rights, you should mail or a part of such tax obligations by
requesting that the Company withhold shares otherwise deliverable to such
participant under his or her Award and/or by tendering shares of Common Stock
already owned by such participant for at least six months. The Company may also,
in accordance with applicable law, deduct any such taxes from amounts that are
otherwise due to such a participant.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain significant United States
Federal income tax consequences, under the Code, as in effect on the date of
this summary, applicable to the Company and Plan participants in connection with
Awards under the Plan. This summary is not intended to be exhaustive, and, among
other things, does not describe state, local or foreign tax consequences, or the
effect of gift, estate or inheritance taxes. References to "the Company" in this
summary of tax consequences mean Avis Group Holdings, Inc., or any affiliate of
Avis Group Holdings, Inc. that employs a Plan participant, as the case may be.
The grant of options under the Plan will not result in taxable income to a
participant who receives such an option or an income tax deduction for the
Company. However, the transfer of Common Stock to a
22
participant upon exercise of his or her option may or may not give rise to
taxable income to the participant and a tax deduction for the Company, depending
upon whether such option is an ISO or NQSO.
The exercise of a NQSO by a participant generally results in immediate
recognition of taxable ordinary income by the participant and a corresponding
tax deduction for the Company in the amount by which the fair market value of
the shares of Common Stock purchased, on the date of such exercise, exceeds the
aggregate exercise price. Any appreciation or depreciation in the fair market
value of such shares after the date of such exercise will generally result in a
capital gain or loss to the participant at the time he or she disposes of such
shares.
In general, the exercise of an ISO by a participant is exempt from income
tax (although not from the alternative minimum tax) and does not result in a tax
deduction for the Company at any time unless the participant disposes of the
Common Stock purchased thereby within two years of the date such ISO was granted
or one year of the date of such exercise (known as a "disqualifying
disposition"). If these holding period requirements under the Code are
satisfied, and if the participant has been an employee of the Company at all
times from the date of grant of the ISO to the day three months before such
exercise (or twelve months in the case of termination of employment due to
disability), then such participant will recognize any gain or loss upon
disposition of such shares as capital gain or loss. However, if the participant
makes a disqualifying disposition of any such shares, he or she will generally
be obligated to report as taxable ordinary income for the year in which such
disposition occurs the excess, with certain adjustments, of the fair market
value of the shares disposed of, on the date the ISO was exercised, over the
exercise price paid for such shares. The Company would be entitled to a tax
deduction in the same amount so reported by such participant. Any additional
gain realized by such participant on such a disqualifying disposition of such
shares would be capital gain. If the total amount realized in a disqualifying
disposition is less than the exercise price of the ISO, the difference would be
a capital loss for the participant.
The granting of SARs does not produce taxable income to a participant who
receives a SAR or a tax deduction to the Company. Upon the exercise of a SAR,
the amount of any cash the participant receives and the fair market value as of
the exercise date of any Common Stock received are generally taxable to the
participant as ordinary income and deductible by the Company.
A participant will not recognize any taxable income upon the award of
restricted stock which is not transferable and is subject to a substantial risk
of forfeiture. Dividends paid with respect to restricted stock prior to the
lapse of restrictions applicable to such stock will be taxable as compensation
income to the participant. Generally, a participant will recognize taxable
ordinary income at the first time such stock becomes transferable or no longer
subject to a substantial risk of forfeiture, in an amount equal to the fair
market value of such shares of Common Stock on the date the restrictions lapse.
However, a participant may elect to recognize taxable ordinary income upon the
grant of restricted stock based on the fair market value of the shares of Common
Stock subject to such award on the date of such award. If a participant makes
such an election, dividends paid with respect to such restricted shares, if any,
will not be treated as compensation, but rather as dividend income, and the
participant will not recognize additional taxable income when the restrictions
applicable to such restricted stock lapse. Assuming compliance with the
applicable withholding requirements, the Company will be entitled to a tax
deduction equal to the amount of ordinary income recognized by a participant in
connection with his or her restricted stock award in the Company's taxable year
in which such participant recognizes such income.
The receipt of a performance unit, performance share or cash-based Award
will not generally result in the recognition of taxable income by a participant.
The payment of a performance unit, performance share or cash-based Award will
generally result in immediate recognition of taxable ordinary income by a
participant equal to the amount of any cash paid or the then-current fair market
value of the shares of Common Stock received (and a corresponding tax deduction
by the Company); however, to the extent that such Common Stock is not
transferable and subject to a substantial risk of forfeiture, the tax
consequences
23
to the participant and the Company will be similar to the tax consequences of
restricted stock Awards, described above.
Under Section 162(m) of the Code, the Company may be limited as to Federal
income tax deductions to the extent that total annual compensation in excess of
$1 million is paid to any of the Company's Named Executive Officers. However,
certain "performance-based compensation" the material terms of which are
disclosed to and approved by the Company's stockholders is not subject to this
deduction limitation. The Plan has been structured with the intention that
compensation resulting from options and free-standing SARs granted under the
Plan will be qualified performance-based compensation and, assuming shareholder
approval of the Plan, deductible without regard to the limitations otherwise
imposed by Section 162(m) of the Code. The Plan allows the Compensation
Committee discretion to award tandem SARs, restricted stock, performance shares,
performance units and cash-based Awards that are intended to be qualified
performance-based compensation.
Under certain circumstances, accelerated vesting, exercise or payment of
Awards under the Plan in connection with a "change in control" of the Company
might be deemed an "excess parachute payment" for purposes of the golden
parachute payment provisions of Section 280G of the Code. To the extent it is so
considered, the participant holding such an Award would be subject to an excise
tax equal to 20 percent of the amount of the excess parachute payment, and the
Company would be denied a tax deduction for the excess parachute payment.
REASONS FOR ADOPTION OF THE PLAN
On June 30, 1999, the Company acquired the car leasing, vehicle management
and fuel card businesses of PHH, an acquisition which increased the Company's
revenues from approximately $2.5 billion to $4.1 billion on a pro forma basis.
In order to integrate these businesses successfully with the existing operations
of the Company, key employees of the former PHH businesses were awarded options
under the Company's 1997 Plan. Of the shares authorized for issuance pursuant to
the 1997 Plan, only 388,200 shares remained available for grant as of March 10,
2000. The Board of Directors believes that adoption of the Plan is necessary in
order for the Company to compete with other companies in attracting and
retaining the most experienced and able employees and consultants and in order
to motivate existing and future officers, employees and consultants of the
Company and its subsidiaries and affiliates to achieve the Company's goals.
Inasmuch as the Plan also provides for the granting of Awards which are
performance-based, the Board of Directors believes that the Plan aligns the
economic interests of the employees and consultants of the Company and its
subsidiaries and affiliates with those of the Company's stockholders.
Pursuant to applicable Delaware law, adoption of the Plan requires the
affirmative vote of the holders of a majority of the shares of Common Stock
present at the Meeting, in person or by proxy, and entitled to vote. The
Company's Named Executive Officers have an interest in this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
24
STOCKHOLDER PROPOSALS
Proposals received from stockholders are given careful consideration by the
Company in accordance with Rule 14a-8 under the Exchange Act. Stockholder
proposals are eligible for consideration for inclusion in the proxy statement
and form of proxy for the Company's 2001 annual meeting of stockholders if they
are received by the Company on or before December 16, 2000. Any proposal should
be directed to the attention of the Secretary,deliver your
written demand to: Avis Group Holdings, Inc., 900 Old Country Road, Garden City,
New York 11530.
In orderThe written demand for appraisal should specify your name and mailing
address, the number of shares owned, and that you are demanding appraisal of
your shares. A proxy or vote against the merger agreement will not by itself
constitute a shareholder
proposal submitted outsidedemand. Within ten days after the effective date of Rule 14a-8the merger, the
surviving corporation in the merger must provide notice of the effective time of
the merger to you if you have complied with Section 262.
Within 120 days after the effective date of the merger, either the
surviving corporation or you, if you have complied with the required conditions
of Section 262 and are otherwise entitled to appraisal rights, may file a
petition in the Delaware Court of Chancery, and if you file a petition you must
serve a copy on the surviving corporation, demanding a determination of the fair
value of the shares of all stockholders demanding an appraisal. Accordingly, if
you desire to have your shares appraised you should initiate any petitions
necessary for the perfection of your appraisal rights within the time periods
and in the manner prescribed in Section 262. Avis Acquisition Corp. does not
have any present intentions as to whether it would file any such petition in the
event a stockholder makes a written demand. If appraisal rights are available
and if you have complied with the applicable provisions of Section 262, within
120 days after the effective date of the merger, you will be entitled, upon
written request, to receive from the surviving corporation in the merger a
statement setting forth the aggregate number of shares not voting in favor of
the merger agreement and with respect to which we received demands for
appraisal, and the aggregate number of holders of such shares. The statement
must be mailed within 10 days after the written request for the statement has
been received by the surviving corporation.
If a petition for an appraisal is timely filed and assuming appraisal
rights are available, at the hearing on the petition, the Delaware Court of
Chancery will determine which stockholders, if any, are entitled to appraisal
rights. If you have demanded an appraisal, the Delaware Court of Chancery may
require you to submit your certificates to the Register in Chancery for notation
on the certificates of the pendency of the appraisal proceeding; and if you fail
to comply with the direction, the Delaware Court of Chancery may dismiss the
proceedings as to you. Where proceedings are not dismissed, the Delaware Court
of Chancery will appraise the shares owned by stockholders demanding an
appraisal, determining the fair value of such shares, together with a fair rate
of interest, if any, to be paid upon the amount determined to be the fair value.
In such event, the Delaware Court of Chancery's appraisal may be more than, less
than, or equal to the merger consideration. In determining fair value, the
Delaware Court of Chancery is to take into account all relevant factors. In
relevant case law, the Delaware Supreme Court discussed the factors that could
be considered "timely"in determining fair value in an appraisal proceeding, stating that
"proof of value by any techniques or methods which are generally considered
acceptable in the financial community and otherwise admissible in court" should
be considered, and that "fair price obviously requires consideration of all
relevant factors involving the value of a company." The Delaware Supreme Court
stated that in making this determination of fair value the court must consider
market value, asset value, dividends, earnings prospects, the nature of the
enterprise and any other facts ascertainable as of the date of the merger that
throw light on future prospects of the merged corporation. The Delaware Supreme
Court also stated that "elements of future value, including the nature of the
enterprise, which are known or susceptible of proof as of the date of the merger
and not the product of speculation, may be considered." Section 262, however,
provides that fair value is to be "exclusive of any element of value arising
from the accomplishment or expectation of the merger."
The cost of the appraisal proceeding may be determined by the Delaware
Court of Chancery and taxed against the parties as the Delaware Court of
Chancery deems equitable in the circumstances. Upon application of a stockholder
who has demanded an appraisal, the Delaware Court of Chancery may order that all
or a portion of the expenses incurred by any the stockholder in connection with
the appraisal proceeding, including, without limitation, reasonable attorney's
fees and the fees and expenses of experts, be charged pro rata against the value
of all shares of stock entitled to appraisal.
If you have demanded appraisal in compliance with Section 262 you will
not, after the effective time of the merger, be entitled to vote for any purpose
any shares subject to your demand or to receive payment of dividends or other
distributions on your shares, except for dividends or distributions payable to
you at a date prior to the effective time of the merger.
At any time within 60 days after the meaningeffective date of Rule 14a-4(c)the merger, you
will have the right to withdraw your demand for appraisal; after this period,
you may withdraw your demand for appraisal only with the consent of the
surviving corporation. If no petition for appraisal is filed with the Delaware
Court of Chancery within 120 days after the effective date of the merger, your
rights to appraisal shall cease. You may withdraw your demand for appraisal by
delivering to the surviving corporation a written withdrawal of your demand for
appraisal and an acceptance of the merger, except that (1) any attempt to
withdraw made more than 60 days after the effective time of the merger will
require written approval of the surviving corporation, and (2) no appraisal
proceeding in the Delaware Court of Chancery shall be dismissed to you without
the approval of the Delaware Court of Chancery, and the approval may be
conditioned upon such terms as the Delaware Court of Chancery deems just.
IF YOU FAIL TO COMPLY FULLY WITH THE STATUTORY PROCEDURE SET FORTH IN
SECTION 262 YOU WILL FORFEIT YOUR RIGHTS OF APPRAISAL AND WILL RECEIVE THE
MERGER CONSIDERATION FOR YOUR SHARES.
REGULATORY APPROVALS AND OTHER CONSENTS
Under the Hart-Scott-Rodino Act, certain mergers and acquisitions may not
be consummated unless notice has been given and certain information has been
furnished to the Antitrust Division of the United States Department of Justice
and the Federal Trade Commission and certain waiting period requirements have
been satisfied. The merger is subject to the requirements of the
Hart-Scott-Rodino Antitrust Improvements Act. An application and notice was
filed on November 22, 2000 with the Federal Trade Commission and the Department
of Justice and the applicable waiting period under the Hart-Scott-Rodino Act is
expected to expire on December 22, 2000. In addition, we expect to make all
other filings required under other antitrust or competition laws or by other
antitrust authorities.
In addition, we must obtain the approval of the Foreign Investment Review
Board of Australia, the Commissioner of Insurance of the State of Colorado (with
respect to the change in the ultimate ownership of our subsidiary Pathfinder
Insurance Company only) and the consents of the Federal Deposit Insurance
Corporation and the Federal Reserve Board and the Utah State Department of
Financial Institutions (for the change in ultimate ownership of Wright Express
Financial Services Corporation only).
It is also a condition to Cendant's obligations to complete the merger
that we obtain the consent of various third parties, some of which include
governmental agencies, pursuant to agreements and arrangements to which we are a
party.
THE MERGER AGREEMENT
The following discussion of the material terms of the merger agreement is
qualified in its entirety by reference to the complete text of the merger
agreement, which is included in this proxy statement as Appendix A (exclusive of
all schedules) and is incorporated herein by reference.
General
The merger agreement provides for Avis Acquisition Corp. to merge with and
into us. We will be the surviving corporation in the merger, and, as a result of
the merger, Cendant will indirectly own all of the surviving corporation's
common stock other than common stock of stockholders who have not voted in favor
of the adoption of the merger agreement and have properly exercised appraisal
rights pursuant to Delaware law.
Upon completion of the merger, Avis will amend and restate its certificate
of incorporation which will be the certificate of incorporation of the surviving
corporation, and the by-laws of Avis Acquisition Corp. will be the by-laws of
the surviving corporation. Also, as of the completion of the merger, the
officers of Avis will be the officers of the surviving corporation and the
directors of Avis Acquisition Corp. will be the directors of the surviving
corporation.
Consideration to be Received by the Stockholders
At the effective time of the merger, each share then issued and
outstanding (other than shares held by any of our subsidiaries, held in our
treasury, held by Cendant or any subsidiary of Cendant and held by stockholders
who perfect their appraisal rights under Delaware law) will be converted into
the right to receive $33.00 in cash without interest, reduced by applicable
withholding tax.
Each share of common stock of Avis Acquisition Corp. then issued and
outstanding will, by virtue of the merger and without any action on the part of
Avis Acquisition Corp., become one fully paid and nonassessable share of common
stock of the surviving corporation.
Stock Options
As of the effective time of the merger, all outstanding options to
purchase shares issued to our officers and employees will become fully vested.
The merger agreement provides that each stock option will be converted into the
right to receive (1) an amount in cash equal to the product of (a) the number of
shares subject to the option, multiplied by (b) the difference between the
$33.00 per share merger consideration and the per share exercise price of the
option, reduced by applicable withholding tax, or, (2) at the option holder's
election, an option to purchase shares of common stock of Cendant with
approximately the same value. Any options with an exercise price greater than
the merger consideration will be automatically converted into options to
purchase shares of common stock of Cendant with approximately the same value.
Representations and Warranties
We have made various representations and warranties in the merger
agreement to Cendant, PHH Corporation and Avis Acquisition Corp. relating to:
O corporate organization and existence;
O power and authority of Avis to enter into and perform its obligations
under the merger agreement and enforceability of the merger agreement
against Avis;
O capital structure of Avis and our subsidiaries;
O vote required by Avis' stockholders to approve the merger;
O required consents and approvals of governmental entities and absence
of conflict with our governing documents and certain agreements and
permits;
O the making and accuracy of SEC filings (including our financial
statements);
O absence of certain material changes since June 30, 2000 that may
reasonably be likely to have a material adverse effect on Avis;
O compliance with applicable laws;
O absence of material litigation;
O employee benefit plans;
O tax matters;
O absence of undisclosed material liabilities;
O intellectual property rights;
O identification and enforceability of material contracts;
O accuracy of the proxy statement and related materials;
O utilization of, and payment of fees to, brokers and finders;
O environmental matters;
O non-contravention with state takeover statutes and governing
documents; and
O labor matters.
Covenants
We agreed that we and each of our subsidiaries will, except as expressly
contemplated by the merger agreement or consented to in writing by Cendant,
conduct our respective businesses and operations only according to our ordinary
course of business, consistent with past practice, and use reasonable best
efforts to preserve intact our respective business organization, keep available
the services of our present officers, employees and consultants and maintain
existing relationships with suppliers, creditors, business associates and others
having business dealings with us.
We also agreed that, except as expressly contemplated by the merger
agreement or consented to in writing by Cendant, until the earlier of the
termination of the merger agreement or the effective time of the merger, we will
not and will not permit any of our subsidiaries to:
Organizational Documents
O amend its certificate of incorporation or by-laws;
Capital
0 issue, sell, pledge, dispose of or encumber any shares of capital
stock of any class or any other equity interest, or any options,
warrants, convertible securities or other rights of any kind to
acquire any shares of capital stock, or any other equity interest,
except for the issuance of shares pursuant to the exercise of options
outstanding on the date of the merger agreement;
0 declare, set aside, make or pay any dividend or other distribution in
respect of any of its capital stock or any other equity interest or
make any other payments to stockholders in their capacity as such,
except that our wholly-owned subsidiaries may declare and pay
dividends to their respective parents;
0 split, combine or reclassify any of its capital stock or any other
equity interest or issue or authorize the issuance of any other
securities in respect of, or in substitution for shares of its capital
stock or any other equity interest;
0 redeem, purchase or otherwise acquire any of its capital stock or any
other equity interests;
Acquisitions and Dispositions
0 acquire, lease, encumber or dispose of any material assets, other than
the purchase, sale, rental and lease of vehicles in the ordinary
course of business, consistent with past practice;
0 acquire (by merger, consolidation, acquisition of stock, assets or
otherwise) any corporation, partnership or other business organization
or division thereof;
0 dispose of any of our subsidiaries (by merger, consolidation, sale of
stock or assets or otherwise);
O incur or assume any indebtedness for borrowed money or other
liability, other than in connection with the financing of vehicles in
the ordinary course of business, consistent with past practice;
0 amend or terminate any confidentiality agreements, standstill
agreements or material contracts to which we or our subsidiaries are a
party or by which we or our subsidiaries are bound, or waive, release
or assign any material rights or claims, other than in the ordinary
course of business, consistent with past practice;
0 guarantee or otherwise become liable or responsible for the
obligations of any other person, other than in the ordinary course of
business, consistent with past practice;
0 make any material loans, or capital contributions to, or investments
in, any other person, other than to our wholly-owned subsidiaries in
the ordinary course of business, consistent with past practice;
0 repurchase or take any other action with respect to our issued and
outstanding 11% senior subordinated notes due May 2009;
0 other than in the ordinary course of business, consistent with past
practice, enter into any material commitment, transaction, contract or
agreement;
Employee Benefits
0 increase the compensation, severance or other benefits payable or to
become payable to its directors, officers or employees, other than
increases in salary or wages of our or its employees (who are not our
directors or executive officers) in accordance with past practice or
pursuant to binding commitments;
0 grant any severance or termination pay not currently required;
0 enter into any employment or severance agreement;
0 adopt or amend any collective bargaining agreement, employee benefit
plan, or arrangement for the benefit of any current or former
directors, officers or employees, except, as may be required by law or
as would not result in a material increase in the cost of maintaining
such collective arrangement;
Other Covenants
0 pay or satisfy any of its material claims, liabilities or obligations,
other than in the ordinary course of business, consistent with past
practice, or in accordance with their terms of liabilities reflected
or reserved against, in, or contemplated by, our financial statements;
0 change accounting policies or procedures, except as required by a
change in generally accepted accounting principles, SEC position or
applicable law,
0 approve or authorize any action to be submitted to our stockholders
for approval other than pursuant to the merger agreement;
0 make or change any material election with respect to taxes, agree or
settle any material claim or assessment in respect of taxes, or agree
to an extension or waiver of the limitation period to any material
claim or assessment in respect of taxes;
0 take any action that would or is reasonably likely to result in any of
the conditions to the merger not being satisfied or that would
materially impair the ability of us, Cendant, PHH Corporation or Avis
Acquisition Corp. to consummate the merger or materially delay the
merger; or
0 agree, authorize or announce to take any of the actions described
above.
Employee Benefits
The merger agreement provides that until December 31, 2001, our and our
subsidiaries' employees who are not covered by collective bargaining agreements
will receive salary or wages and bonus opportunities and employee benefits that
are not materially less favorable in the aggregate than those they were entitled
to on the date of the merger agreement. Cendant has further agreed to honor
certain employee benefit arrangements in accordance with their terms, and to
keep in place our current severance and retention plans and policies until
December 31, 2001. Our and our subsidiaries' employees will be given credit for
their service with Avis or any of its subsidiaries under all Cendant employee
benefit plans in which they may participate for purposes of eligibility for and
vesting of benefits and, with respect to certain Cendant employee benefit plans,
for purposes of determination of benefits. In addition, our and our
subsidiaries' employees will be given credit for deductibles paid and expenses
they incur prior to the merger.
Special Meeting
The merger agreement provides that as promptly as practicable after the
date of the merger agreement we must give notice of, convene and hold the
special meeting, and use our reasonable efforts to solicit from you proxies in
favor of the adoption of the merger agreement. We have also agreed not to
postpone or adjourn the special meeting without the consent of Cendant.
No Solicitation of Other Offers
The merger agreement provides that neither we nor our representatives
will:
0 encourage, invite, initiate or solicit any inquiries relating to a
proposal mustby any person with respect to a Third-Party Acquisition (as
defined below); or
0 except as provided below, participate in any negotiations or
discussions with, or furnish or cause to be furnished any information
to, any person relating to a Third-Party Acquisition.
The merger agreement also provides that we will:
0 cease any discussions or negotiations with any person in connection
with any potential Third-Party Acquisition and seek to have returned
to us any confidential information we provided to such person; and
0 take all actions necessary to rescind the stock repurchase program.
If, prior to the special meeting, we, our board of directors or the
special committee, receives an unsolicited bona fide written proposal from any
person with respect to a Third-Party Acquisition which could reasonably be
expected to result in a Superior Proposal (as defined below), then we may
furnish information and access to such person pursuant to a confidentiality
agreement no less restrictive than our confidentiality agreement with Cendant,
and may participate in discussions and negotiations with such person. We have
agreed to keep Cendant informed of the status of any proposals and negotiations
relating to a Third-Party Acquisition.
The merger agreement also provides that neither our board of directors nor
the special committee shall:
0 withdraw, modify or fail at Cendant's request to reaffirm, (1) the
approval by our board of directors of the merger agreement or the
merger, (2) the favorable recommendation of the special committee and
our board of directors of the merger, or (3) our board of directors'
recommendation to stockholders to in favor of adoption of the merger
agreement;
0 approve or recommend, or propose publicly to approve or recommend, any
Third-Party Acquisition; or
0 cause Avis to enter into any agreement or memorandum of understanding
related to any Third-Party Acquisition.
However, if the special committee determines in good faith, after receipt
of advice of its outside legal counsel, that failure to take such action would
constitute a breach of our board of directors' fiduciary duties to the
stockholders, the special committee and our board of directors may:
0 withdraw or modify its approval or recommendation of the merger
agreement and the merger, and inform the stockholders accordingly; and
0 in relation to a Third-Party Acquisition that constitutes a Superior
Proposal (1) recommend the Superior Proposal, and/or (2) following the
special meeting, if our stockholders' approval of the merger agreement
is not obtained, terminate the merger agreement and enter into an
agreement with respect to the Superior Proposal, if prior to the
terminating the merger agreement and entering into an agreement with
respect to a Superior Proposal (a) Avis paid to Cendant the
termination fee of $28 million and transaction expenses up to $2.5
million, and (b) the special committee shall have given Cendant three
business days' prior written notice that Avis intends to terminate the
merger agreement and provided Cendant with a reasonable opportunity to
respond to the Superior Proposal.
If the special committee changes its recommendation of the merger
agreement and the merger, unless the merger agreement has been terminated, we
will still hold the special meeting for stockholders to vote on the merger
agreement, solicit proxies impartially and at the special meeting vote the
proxies we receive.
"Third-Party Acquisition" means: (1) the acquisition of us by a third
party by merger, purchase of stock or assets or otherwise; (2) the acquisition
by a third party of 20% or more of our assets or our common stock; (3) our
adoption of a plan of liquidation, our declaration or payment of an
extraordinary dividend or our repurchase of more than 20% of our common stock.
"Superior Proposal" means any bona fide written proposal to acquire for
cash and/or securities all of our shares or all or substantially all of our
assets that (1) is not subject to any financing conditions, (2) provides
stockholders with consideration that the special committee determines in good
faith, is more favorable from a financial point of view than the consideration
to be received by stockholders in the Companymerger, (3) is determined by the special
committee in its good faith judgment to be likely of being completed, (4) does
not, in the definitive acquisition agreement with the third party, contain any
"due diligence" conditions, and (5) has not been obtained in violation of our no
solicitation obligations.
Access to Information
Subject to the terms of a confidentiality agreement with Cendant, we will
afford to Cendant and its representatives, reasonable access to our properties,
books and records and furnish Cendant with all information concerning the
business it reasonably requests. In addition, Cendant has electronically linked
our financial reporting system to its financial reporting system.
Note Tender Offer
Avis has outstanding 11% senior subordinated notes due May 2009. On a
change of control of Avis the noteholders may require Avis to repurchase the
notes at 101% of their face value. In the merger agreement we have agreed to
permit Cendant to commence a tender offer to purchase the notes with its own
funds and we have agreed to cooperate with any such tender offer. Cendant has
not determined whether it intends to initiate such tender offer.
Conditions to the Merger
Each party's obligations to effect the merger is subject to a number of
conditions, including the following:
0 the adoption of the merger agreement by both the holders of (1) a
majority of all outstanding shares as of the record date, and (2) a
majority of the votes cast at the special meeting by stockholders,
other than Cendant or its subsidiaries;
0 the absence of any injunction or other order issued by any court or
governmental authority prohibiting or restricting the merger or
restricting the ownership or operation of Avis by Cendant or its
subsidiaries;
0 the absence of any action, pending or threatened by a governmental
entity seeking to (1) prohibit or restrain the merger, (2) obtain
damages that would result in a material adverse effect on Avis, or (3)
restrict the ownership or operation of Avis by Cendant or its
subsidiaries; and
0 the termination or expiration of any waiting period applicable to the
merger under the Hart-Scott-Rodino Act and any applicable foreign
competition or antitrust laws.
Our obligation to effect the merger is subject to a number of conditions,
including the following:
0 the representations and warranties of Cendant, PHH Corporation and
Avis Acquisition Corp. shall be true and correct; and
0 Cendant, PHH Corporation and Avis Acquisition Corp. shall have
performed and complied in all material respects with all obligations
under the merger agreement.
The obligation of Cendant, PHH Corporation and Avis Acquisition Corp. to
effect the merger is subject to a number of conditions, including the following:
0 our representations and warranties shall be true and correct except
for such breaches as would not have a material adverse effect on Avis;
0 we shall have performed and complied in all material respects with all
our obligations under the merger agreement except for such failure to
perform or comply as would not have a material adverse effect on Avis;
0 neither our board of directors nor the special committee shall have
(1) withdrawn, modified or changed its approval or recommendation of
the merger agreement or the merger in any manner which Cendant
reasonably determines to be adverse to Cendant, (2) recommended the
approval or acceptance of a Superior Proposal or Third-Party
Acquisition from a third party, or (3) executed an acquisition
agreement with a third party;
0 no event, change, development or circumstance shall have occurred or
shall exist which is reasonably expected to result in a material
adverse effect to our business, results of operations or financial or
other condition; and
0 we shall have obtained those consents, approvals and waivers agreed
upon in the merger agreement.
Termination of the Merger Agreement
The merger agreement may be terminated at any time prior to the effective
time by mutual written consent if approved by the boards of director of both
Cendant and Avis, and the special committee.
Either Cendant or Avis (if approved by the special committee) may
terminate the merger agreement if:
0 the merger does not occur on or prior to February 28, 2001.
FINANCIAL INFORMATIONJune 30, 2001 and the
terminating party has not caused the failure of the merger to occur by
such date;
0 a governmental entity issues a nonappealable final order permanently
restraining or prohibiting the merger; or
0 at the special meeting the merger agreement is not approved by both
the holders of (1) a majority of all outstanding shares as of the
record date, and (2) a majority of the votes cast at the special
meeting by stockholders, other than Cendant or its subsidiaries.
Cendant may terminate the merger agreement if:
0 there is a material breach by us of any covenant in the merger
agreement and the breach is not cured on or prior to the earlier of 60
days after notice of the breach and June 30, 2001;
0 any of our representations or warranties in the merger agreement are
untrue which would result in a material adverse effect on Avis and the
breach is not cured on or prior to the earlier of 60 days after notice
of the breach and June 30, 2001; or
0 (1) the special committee or our board of directors (a) withdraws or
changes its approval or recommendation of the merger agreement in any
manner which Cendant reasonably determines to be adverse to Cendant;
(b) approves or recommends to our stockholders a Third-Party
Acquisition or a Superior Proposal; (c) violates any of the no
solicitation provisions of the merger agreement; (d) takes a public
position or makes any disclosures to our stockholders which have the
effect of (a), (b) or (c) above; or (e) resolves to enter into an
acquisition agreement relating to a Third-Party Acquisition or a
Superior Proposal; or (2) we (a) execute an acquisition agreement
relating to a Third-Party Acquisition or a Superior Proposal, or (b)
violate any of the no solicitation provisions of the merger agreement.
We may terminate the merger agreement (if approved by the special
committee) if:
0 there is a material breach by Cendant, PHH Corporation or Avis
Acquisition Corp. of its covenants in the merger agreement and the
breach is not cured on or prior to the earlier of 60 days after notice
of the breach and June 30, 2001;
0 any representation or warranty of Cendant, PHH Corporation or Avis
Acquisition Corp. shall be untrue in any material respect and the
breach is not cured on or prior to the earlier of 60 days after notice
of the breach and June 30, 2001; or
0 following the special meeting, (1) stockholders do not approve the
merger, (2) we concurrently execute and deliver a definitive agreement
with respect to a Superior Proposal and (3) the special committee
determines in good faith, after receipt of advice of its outside legal
counsel, that a failure to terminate the merger agreement in order to
enter into a definitive agreement with regard to the Superior Proposal
would constitute a breach of its fiduciary duties and, prior to the
termination, (a) we gave Cendant three business days' advance notice
of our intention to accept the Superior Proposal and complied in all
respects with the no-solicitation provisions of the merger agreement
and provisions relating to the special meeting; and (b) we paid
Cendant a $28 million termination fee and transaction expenses up to
$2.5 million as set forth under "THE MERGER--The Merger
Agreement--Termination Fees; Expenses".
Upon termination, the merger agreement will become void and there shall be
no liability on the part of any party except as set forth under "THE MERGER --
The Merger Agreement -- Termination Fees; Expenses". However, no party shall be
relieved from any liability for any breach of the merger agreement.
Termination Fees; Expenses
We shall pay to Cendant a fee of $28 million and transaction expenses up
to $2.5 million if the merger agreement is terminated:
0 by Cendant or us if the merger does not occur on or prior to June 30,
2001, and (1) prior to the termination, we became aware that a third
party made or intends to make a proposal relating to a Third-Party
Acquisition, and (2) within twelve months following the date of the
termination, a Third-Party Acquisition is consummated or a definitive
agreement with respect to a Third-Party Acquisition is executed by us;
0 by Cendant if there is a material breach of any of our covenants or if
any of our representations or warranties are untrue, and the breach is
not cured on or prior to the earlier of 60 days after notice of the
breach and June 30, 2001, and (1) prior to the termination, we became
aware that a person made or intends to make a proposal relating to a
Third-Party Acquisition, and (2) within twelve months following the
date of the termination, a Third-Party Acquisition is consummated or a
definitive agreement with respect to a Third-Party Acquisition is
executed by us;
0 by Cendant if (1) the special committee or our board of directors (a)
withdraws or changes its approval or recommendation of the merger in a
manner which Cendant reasonably determines to be adverse to Cendant;
(b) approves or recommends to our stockholders a Third-Party
Acquisition or a Superior Proposal; (c) violates any of the no
solicitation provisions of the merger agreement; (d) takes a public
position or makes a disclosure to the our stockholders which has the
effect of (a), (b) or (c) above; or (e) resolves to enter into an
acquisition agreement relating to a Third-Party Acquisition or a
Superior Proposal; or (2) we (a) execute an acquisition agreement
relating to a Third-Party Acquisition or a Superior Proposal, or (b)
violate any of the no solicitation provisions of the merger agreement;
0 by Cendant if the approval of the merger by our stockholders is not
obtained at the special meeting and (1) a Third-Party Acquisition is
publicly announced or otherwise made known to the public at or prior
to the special meeting and (2) within twelve months following the date
of the termination, a Third-Party Acquisition is consummated or a
definitive agreement with respect to a Third-Party Acquisition is
executed by us; or
0 by Avis (if approved by the special committee) following the special
meeting, if (1) approval of the merger by our stockholders is not
obtained, (2) we concurrently execute and deliver a definitive
agreement with respect to a Superior Proposal, (3) the special
committee determines in good faith, after receipt of advice of its
outside legal counsel, that a failure to terminate the merger
agreement in order to enter into a definitive agreement with regard to
the Superior Proposal would constitute a breach of the board of
directors' fiduciary duties to our stockholders and, prior to the
termination, and (4) prior to termination we gave Cendant three
business days' advance notice of our intention to accept the Superior
Proposal and complied in all respects with the no-solicitation
provisions of the merger agreement and provisions relating to the
special meeting.
Amendment to the Merger Agreement
The merger agreement may be amended by the parties to the merger agreement
in writing, by action taken by their respective boards of directors and by the
special committee, at any time before or after the approval by our stockholders
of the merger, but after any approval by our stockholders of the merger, no
amendment shall be made which by law requires the further approval of
stockholders without obtaining further approval.
OTHER MATTERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 13(a) of Schedule 14A will be set forth on the following table is furnished as of
October 30, 2000 with respect to any person (including any "group" as that term
is used in Section 13(d)(3) of the Exchange Act, who is known to us to be the
beneficial owner of more than 5% of any class of our voting securities, and as
to those shares of our equity securities beneficially owned by each of our
directors and nominees for director, our named executive officers, and all of
our executive officers and directors as a group.
Amount and Nature of
Beneficial Ownership Percent of
Name of Shares Class
PRINCIPAL STOCKHOLDERS
Cendant1 ............................................ 5,535,800 17.8%
.........6 Sylvan Way
.........Parsippany, NJ 07054
Neberger & Berman2................................... 1,954,368 6.3%
605 Third Avenue
New York, NY 10158
T. Rowe Price Associates ,Inc2....................... 1,721,900 5.5%
100 E. Pratt Street
Baltimore, MD 21202
DIRECTORS AND EXECUTIVE OFFICERS
Thomas J. Byrnes..................................... 33,840 *
W. Alan Cathcart..................................... 30,000 *
Leonard S. Coleman, Jr............................... 30,000 *
Michael P. Collins................................... 42,060 *
Alfonse M. D'Amato................................... 10,000 *
Martin L. Edelman.................................... 45,000 *
Deborah L. Harmon.................................... 30,000 *
Stephen P. Holmes.................................... 31,000 *
Richard S. Jacobson.................................. 7,320 *
Michael J. Kennedy................................... 30,000 *
Gerard J. Kennell.................................... 39,160 *
James A. Keyes....................................... 4,040 *
Lawrence E. Kinder................................... 14,000 *
William E. Madison................................... 0 *
Mark E. Miller....................................... 55,000 *
A. Barry Rand........................................ 0 *
F. Robert Salerno.................................... 534,920 1.7%
Karen C. Sclafani.................................... 18,840 *
Timothy M. Shanley................................... 34,173 *
Kevin M. Sheehan 3................................... 285,300 *
DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP (20 persons) 1,274,653 4.1%
- ------------------
* Less than 1%
1 Cendant beneficially owns 5,535,800 shares, which shares are held of record
by its indirect wholly-owned subsidiary, Cendant Car Holdings, Inc.
2 Based upon information supplied by our stock watch firm,
Morrow & Co., Inc.
3 Includes 1,000 shares held by Mr. Sheehan's children.
TRANSACTIONS IN COMMON STOCK BY CERTAIN PERSONS
The following table sets forth certain information concerning purchases
and dispositions of Common Stock since September 1, 1998 by Avis and our
subsidiaries, directors and officers. The transactions by the listed executive
officers were all exercises of stock options at a strike price of $17.00 per
share.
NUMBER OF NUMBER OF SHARES WHERE AND HOW
NAME DATE SHARES PURCHASED DISPOSED OF PRICE PER SHARE TRANSACTION EFFECTED
- ---- ---- ----------------- ----------------- --------------- --------------------
Avis 9/1/98 60,000 -- $16.50 Open market
Avis 9/1/98 15,000 -- $16.50 Open market
Avis 9/3/98 259,600 -- $18.125 Open market
Avis 9/3/98 117,200 -- $18.25 Open market
Avis 9/14/98 25,000 -- $19.6875 Open market
Avis 9/15/98 634,100 -- $19.375 Open market
Avis 9/16/98 330,000 -- $20.00 Open market
Avis 9/16/98 59,100 -- $20.00 Open market
Avis 10/28/98 884,000 -- $18.625 Open market
Avis 11/24/98 248,700 -- $20.00 Open market
Avis 11/24/98 40,000 -- $20.00 Open market
Avis 1/15/99 1,300,000 -- $24.25 Cendant
James A. Keyes 1/20/99 1,420 1,420 $26.50 Option exercise
Thomas J. Byrnes 1/28/99 4,620 4,620 $27.625 Option exercise
Thomas J. Byrnes 1/28/99 9,600 9,600 $27.50 Option exercise
Avis 2/5/99 10,600 -- $23.8691 Open market
Avis 2/8/99 198,500 -- $24.00 Open market
Avis 2/9/99 76,000 -- $23.00 Open market
Avis 2/10/99 150,000 -- $22.9548 Open market
Avis 2/11/99 25,000 -- $22.375 Open market
Avis 2/11/99 10,000 -- $22.25 Open market
Avis 2/18/99 19,500 -- $21.5215 Open market
Avis 2/26/99 24,000 -- $22.625 Open market
Avis 2/26/99 24,500 -- $23.00 Open market
Avis 3/9/99 150,000 -- $22.375 Open market
Avis 3/10/99 25,000 -- $21.96 Open market
Gerard J. Kennell 3/18/99 7,000 7,000 $27.00 Open market
Timothy M. Shanley 3/29/99 12,087 12,087 $28.00 Option exercise
Michael P. Collins 4/23/99 5,000 5,000 $32.00 Option exercise
Avis 4/26/99 314,200 -- $29.50 Cendant
Richard S. Jacobson 5/4/99 2,660 2,660 $34.00 Option exercise
James A. Keyes 8/15/00 1,400 1,400 $30.00 Option exercise
Kevin M. Sheehan 11/14/00 75,000 75,000 $31.9375 Option exercise
As of November 14, 2000, Bankers Trust Company, as Trustee, holds 133,683 shares
of our common stock for participants in our Avis Voluntary Investment Savings
Plan.
OTHER MATTERS FOR ACTION AT THE SPECIAL MEETING
Our board of directors is not aware of any matters to be presented for
action at the special meeting other than those described herein and does not
intend to bring any other matters before the special meeting. However, if other
matters should come before the special meeting, it is intended that the holders
of proxies solicited hereby will vote thereon in their discretion.
PROPOSALS BY HOLDERS OF SHARES OF COMMON STOCK
Due to the contemplated consummation of the merger, Avis does not
currently expect to hold a 2001 annual meeting of stockholders because,
following the merger, Avis will not be a publicly held company. In the event the
merger is not consummated for any reason, Avis must receive proposals of
stockholders intended to be presented at the 2001 annual meeting of stockholders
at our principal executive offices no later than [________], 2001 for inclusion
in our proxy statement and form of proxy relating to that meeting.
EXPENSES OF SOLICITATION
Avis will bear the cost of preparing, mailing, and soliciting the proxy
statement. In addition to our solicitations by mail, our directors, officers,
and regular employees may solicit proxies personally and by telephone,
facsimile, or other means, for which they will receive no compensation in
addition to their normal compensation. Avis has also retained Morrow & Co., Inc.
located at 445 Park Avenue, New York, New York 10022, telephone number
1-800-654-2468, to assist in the Company'ssolicitation of proxies from stockholders,
including brokerage houses and other custodians, nominees, and fiduciaries and
will pay a fee of $7,500 plus that firm's transaction expenses. Arrangements
will also be made with brokerage houses and other custodians, nominees, and
fiduciaries for the forwarding of solicitation material to the beneficial owners
of common stock held of record by such persons, and Avis may reimburse them for
their reasonable transaction and clerical expenses.
INDEPENDENT PUBLIC ACCOUNTANTS
Our consolidated financial statements for the years ended December 31,
1999, 1998, 1997 and 1995 and for the periods ended December 31, 1996 and
October 16, 1996, incorporated herein by reference, have been audited by
Deloitte & Touche LLP, independent auditors.
It is not anticipated that a representative of Deloitte & Touche LLP will
attend the special meeting.
AVAILABLE INFORMATION
Avis is subject to the informational reporting requirements of the
Exchange Act and in accordance with the Exchange Act, Avis files reports, proxy
statements and other information with the SEC. Such reports, proxy statements
and other information can be inspected and copies made at the Public Reference
Room of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 and the SEC's
regional offices at 7 World Trade Center, New York, New York 10048 and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can also be obtained from the Public
Reference Section of the SEC at its Washington address at prescribed rates.
Information regarding the operation of the Public Reference Room may be obtained
by calling the SEC at 1-800-SEC-0330. Copies of such material may also be
accessed through the SEC's web site at www.sec.gov. Avis' common stock is listed
on the NYSE under the symbol "AVI." Such materials may be inspected at the
offices of the NYSE, 20 Broad Street, New York, New York 10005.
Avis and Cendant have filed a Schedule 13E-3 with the SEC with respect to
the merger. As permitted by the SEC, this proxy statement omits certain
information contained in the Schedule 13E-3. The Schedule 13E-3, including any
amendments and exhibits filed or incorporated by reference as a part of it, is
available for inspection or copying as set forth above. Statements contained in
this proxy statement or in any document incorporated in this proxy statement by
reference regarding the contents of any contract or other document are not
necessarily complete and each such statement is qualified in its entirety by
reference to such contract or other document filed as an exhibit with the SEC.
IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM US, PLEASE DO SO AT LEAST FIVE
BUSINESS DAYS BEFORE THE DATE OF THE SPECIAL MEETING IN ORDER TO RECEIVE TIMELY
DELIVERY OF SUCH DOCUMENTS PRIOR TO THE SPECIAL MEETING.
You should rely only on the information contained or incorporated by
reference in this proxy statement to vote your shares at the special meeting.
Avis has not authorized anyone to provide you with information that is different
from what is contained in this proxy statement. This proxy statement is dated
_________, 200_.
You should not assume that the information contained in this proxy
statement is accurate as of any date other than that date, and the mailing of
this proxy statement to stockholders does not create any implication to the
contrary. This proxy statement does not constitute a solicitation of a proxy in
any jurisdiction where, or to or from any person to whom, it is unlawful to make
such proxy solicitation in such jurisdiction.
INFORMATION INCORPORATED BY REFERENCE
Our Annual Report on Form 10-K for the fiscal yearyears ended December 31, 1997,
December 31, 1998 and December 31, 1999 which informationand our Quarterly Report on Form 10-Q
for the quarter ended September 30, 2000, each filed by us with the SEC
(Commission File No. 000-13315) are incorporated by reference into this proxy
statement. Our 10-Ks and 10-Q are not presented in this proxy statement or
delivered with it, but are available (without exhibits, unless the exhibits are
specifically incorporated in this proxy statement by reference) to any person,
including any beneficial owner, to whom this proxy statement is delivered,
without charge, upon written request directed to us at 900 Old Country Road,
Garden City, New York 11530, Attention: General Counsel at 516-222-3000. Copies
of our 10-Ks and 10-Qs so requested will be sent, within one business day of
receipt of such request, by first class mail, postage paid.
All documents Avis files pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this proxy statement and prior to the date of
the special meeting shall be deemed to be incorporated herein by reference.reference in this
proxy statement and to be a of this proxy statement hereof from the respective
dates of filing of such documents. Any statement contained in this proxy
statement or in a document incorporated or deemed to be incorporated by
reference in this proxy shall be deemed to be modified or superseded for
purposes of this proxy statement to the extent that a statement contained in any
subsequently filed document that also is or is deemed to be incorporated by
reference in this proxy modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this proxy statement.
-------------------------------
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED, OR INCORPORATED BY REFERENCE, IN
THIS PROXY STATEMENT, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY US OR ANY OTHER PERSON.
AVIS HAS SUPPLIED ALL INFORMATION CONTAINED IN THIS PROXY STATEMENT RELATING TO
AVIS, AND CENDANT HAS SUPPLIED ALL INFORMATION CONTAINED IN THIS PROXY STATEMENT
RELATING TO CENDANT, AVIS ACQUISITION CORP. AND THEIR AFFILIATES.
By Orderorder of the Board of Directors
KAREN/s/ Karen C. SCLAFANI
SECRETARY
Dated: April 14,Sclafani
-------------------------------
Vice President, General Counsel and
Secretary
November 28, 2000
25
TABLE OF CONTENTS
Page
QUESTIONS AND ANSWERS ABOUT THE MERGER.......................................1
SUMMARY TERM SHEET...........................................................3
The Special Meeting....................................................3
Reasons for Engaging in the Transaction................................4
The Parties to the Transaction.........................................4
Effects of the Merger..................................................5
Recommendations of the Special Committee and our Board of Directors....5
Opinion of Morgan Stanley..............................................5
Interests of our Directors and Executive Officers in the Merger........6
Accounting Treatment...................................................6
Material U.S. Federal Income Tax Consequences..........................6
The Merger Agreement...................................................7
FORWARD LOOKING STATEMENTS MAY PROVE INACCURATE.............................11
INTRODUCTION................................................................12
Proposal to be Considered at the Special Meeting......................12
Voting Rights; Vote Required for Approval.............................12
Voting and Revocation of Proxies......................................13
Solicitation of Proxies...............................................13
Comparative Market Price Data.........................................14
Dividends.............................................................15
Our Selected Consolidated Financial Information.......................15
Consolidated Ratios of Earnings to Fixed Charges and Book Value
Per Share.......................................................18
Recent Developments...................................................18
SPECIAL FACTORS.............................................................19
Background of the Merger..............................................19
Opinion of Morgan Stanley.............................................24
Reasons for the Recommendations of the Special Committee and our
Board of Directors..............................................29
Our Forecasts.........................................................32
Avis' Position as to the Fairness of the Merger.......................33
Cendant's Position as to the Fairness of the Merger; Cendant's
Reasons for the Merger..........................................33
Purpose and Structure of the Merger...................................35
Certain Effects of the Merger; Plans or Proposals After the Merger....35
Interests of Executive Officers and Directors in the Merger...........36
Certain Relationships Between Cendant and Avis........................39
Material U.S. Federal Income Tax Consequences of the Merger to our
Stockholders....................................................41
THE MERGER..................................................................42
Effective Time of Merger..............................................42
Payment of Merger Consideration and Surrender of Stock Certificates...42
Accounting Treatment..................................................43
Financing of the Merger...............................................43
Appraisal Rights......................................................44
Regulatory Approvals and Other Consents...............................46
The Merger Agreement..................................................46
General...............................................................46
Consideration to be Received by the Stockholders......................47
Stock Options.........................................................47
Representations and Warranties........................................47
Covenants.............................................................48
Employee Benefits.....................................................50
Special Meeting.......................................................50
No Solicitation of Other Offers.......................................50
Access to Information.................................................51
Note Tender Offer.....................................................51
Conditions to the Merger..............................................52
Termination of the Merger Agreement...................................52
Termination Fees; Expenses............................................53
Amendment to the Merger Agreement.....................................54
OTHER MATTERS...............................................................54
Security Ownership of Certain Beneficial Owners and Management........54
Transactions in Common Stock by Certain Persons.......................56
Other Matters for Action at the Special Meeting.......................57
Proposals by Holders of Shares of Common Stock........................57
Expenses Of Solicitation..............................................57
Independent Public Accountants........................................57
Available Information.................................................57
Information Incorporated by Reference.................................58
APPENDIX A - Agreement and Plan of Merger..................................A-1
APPENDIX B - Opinion of Morgan Stanley & Co. Incorporated..................B-1
APPENDIX C - Section 262 of the Delaware General Corporation Law...........C-1
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints [_________] and _____, and either of them,
proxies (each with full power of substitution) to vote, as indicated below and
in their discretion upon such other matters, not known or determined at the time
of solicitation of this proxy, as to which stockholders may be entitled to vote
at the special meeting of the stockholders of Avis Group Holdings, Inc. to be
held on [______, 2001], at [___] a.m., local time, and at any adjournment or
postponement of the special meeting, as indicated on the reverse side.
1. A proposal to adopt the Agreement and Plan of Merger,
dated as of November 11, 2000, by and among Cendant Corporation,
PHH Corporation, Avis Acquisition Corp. and Avis Group Holdings,
Inc.
2. To adjourn the meeting, if necessary.
/ / FOR / / AGAINST / / ABSTAIN
(Continued and to be signed on the reverse side)
This proxy is solicited on behalf of the board of directors. This proxy
also delegates discretionary authority with respect to any matters which may
properly become before any adjournment or postponement of the meeting and
matters incident to the conduct of the special meeting.
The undersigned hereby acknowledges receipt of the notice of the special
meeting and the proxy statement.
PLEASE SIGN AND DATE THIS PROXY BELOW.
Date:
------------------------------
------------------------------
------------------------------
Please sign exactly as your name
appears on left. When signing as
attorney, executor, administrator,
guardian or corporate official, please
give full title.
APPENDIX A
CERTIFICATE AMENDMENT
FOURTH: (a) AUTHORIZED CAPITAL STOCK. The total number--------------------------
AGREEMENT
AND
PLAN OF MERGER
by and among
CENDANT CORPORATION,
PHH CORPORATION,
AVIS ACQUISITION CORP.
and
AVIS GROUP HOLDINGS, INC.
dated as of November 11, 2000
---------------------------
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of November
11, 2000, is by and among Cendant Corporation, a Delaware corporation
("Parent"), PHH Corporation, a Maryland corporation and an indirect wholly owned
Subsidiary (as defined below) of Parent ("PHH"), Avis Acquisition Corp., a
Delaware corporation and a wholly owned Subsidiary of PHH ("Merger Sub"), and
Avis Group Holdings, Inc., a Delaware corporation (the "Company").
RECITALS
WHEREAS, Cendant Car Holdings, Inc., a Delaware corporation and an
indirect, wholly owned Subsidiary of Parent ("Car Holdings"), is the beneficial
owner of 5,535,800 shares of capitalclass A common stock, which the Corporation shall have authority to issue is 135,000,000 shares
of capital stock, consisting of (i) 100,000,000 shares of Class A Common Stock, par value $.01 per share, of
the Company (the "Class A"Company Common Stock"), (ii) 15,000,000which represents approximately 17.8%
of the outstanding shares of Class BCompany Common Stock;
WHEREAS, Parent and PHH have proposed that PHH acquire (the "Acquisition")
all of the issued and outstanding shares of Company Common Stock not
beneficially owned (within the meaning of Rule 13d-3 of the Exchange Act (as
defined below)) by Parent, PHH, Merger Sub, Car Holdings or any other direct or
indirect Subsidiary of Parent (collectively, the "Acquisition Group") (such
outstanding shares of Company Common Stock not owned by the Acquisition Group
being referred to herein as the "Shares");
WHEREAS, in furtherance of the Acquisition, it is proposed that Merger Sub
shall be merged with and into the Company, with the Company continuing as the
surviving corporation (the "Merger"), in accordance with the General Corporation
Law of the State of Delaware (the "DGCL") and upon the terms and subject to the
conditions set forth herein;
WHEREAS, a special committee of the board of directors of the Company (the
"Board"), consisting entirely of nonmanagement directors of the Company who are
not Affiliates (as defined below) of the Acquisition Group (the "Independent
Committee"), was established for, among other purposes, the purpose of
evaluating the Acquisition and making a recommendation to the Board with regard
to the Acquisition;
WHEREAS, the Independent Committee has received the opinion of Morgan
Stanley & Co., Incorporated ("Morgan Stanley"), financial advisor to the
Independent Committee, that, as of the date hereof, the consideration to be
received by the holders of Shares pursuant to the Merger is fair to such holders
from a financial point of view;
WHEREAS, the Board, based on the unanimous recommendation of the
Independent Committee, has, in light of and subject to the terms and conditions
set forth herein, (i) determined that (x) the Merger Consideration (as defined
below), is fair to the holders of Shares and (y) the Merger is advisable and in
the best interests of the Company and the holders of Shares; (ii) approved, and
declared the advisability of, this Agreement and (iii) determined to recommend
that the stockholders of the Company vote to adopt this Agreement;
WHEREAS, the respective boards of directors of Parent, PHH and Merger Sub
have approved this Agreement; the board of directors of Merger Sub has declared
the advisability of the Agreement; and PHH, as the sole stockholder of Merger
Sub, has adopted this Agreement; and
WHEREAS, the Company, Parent, PHH and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and the other transactions contemplated hereby (collectively, the
"Transactions") and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
I.1 The Merger. At the Effective Time (as defined below), and upon the
terms and subject to the conditions of this Agreement and in accordance with the
DGCL, Merger Sub shall be merged with and into the Company. Following the
Merger, the Company shall continue as the surviving corporation (the "Surviving
Corporation") and as a wholly owned subsidiary of PHH, and the separate
corporate existence of Merger Sub shall cease in accordance with the DGCL.
I.2 Effective Time. Subject to the provisions of this Agreement, the
parties shall cause the Merger to be consummated by filing a certificate of
merger (the "Certificate of Merger") with the Secretary of State of the State of
Delaware in such form as required by, and executed in accordance with, the
relevant provisions of the DGCL as soon as practicable on or after the Closing
Date (as defined below). The Merger shall become effective upon such filing or
at such time thereafter as is agreed by Parent and the Independent Committee and
provided in the Certificate of Merger (the "Effective Time," and the date of
such effectiveness shall be the "Effective Date").
I.3 Closing of the Merger. The closing of the Merger (the "Closing") shall
take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, Four
Times Square, New York, New York, at 10:00 a.m. (local time) on a date to be
specified by the parties, which shall be no later than the second Business Day
after satisfaction or waiver (as permitted by this Agreement and applicable law)
of all of the conditions set forth in Article VI hereof (other than those
conditions that by their nature are to be satisfied at the Closing, but subject
to the fulfillment or waiver of those conditions) (the "Closing Date"), unless
another time, date or place is agreed by Parent and the Independent Committee in
writing.
I.4 Effects of the Merger. The Merger shall have the effects set forth in
Section 259 of the DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all properties, rights, privileges,
powers and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
I.5 Certificate of Incorporation and By-laws. At the Effective Time, the
Amended and Restated Certificate of Incorporation of the Company shall be
amended and restated in its entirety to read as set forth in Annex A and, as so
amended, shall be the certificate of incorporation of the Surviving Corporation
until thereafter amended as provided by law and such certificate of
incorporation, subject to the provisions of Section 5.5. The by-laws of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the by-laws
of the Surviving Corporation until thereafter amended in accordance with its
terms, and as provided by applicable law, and the certificate of incorporation
of the Surviving Corporation, subject to the provisions of Section 5.5.
I.6 Directors. The directors of Merger Sub at the Effective Time, from and
after the Effective Time, shall be the directors of the Surviving Corporation,
each to hold office in accordance with the certificate of incorporation and
by-laws of the Surviving Corporation until such director's successor is duly
elected and qualified in the manner provided in the Surviving Corporation's
certificate of incorporation and by-laws, or as otherwise provided by applicable
law.
I.7 Officers. The officers of the Company at the Effective Time, from and
after the Effective Time, shall be the officers of the Surviving Corporation
until such officer's successor is duly elected or appointed and qualified in the
manner provided in the Surviving Corporation's certificate of incorporation and
by-laws, or as otherwise provided by applicable law.
I.8 Subsequent Actions. If, at any time after the Effective Time, the
Surviving Corporation shall determine or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of the Company acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger or otherwise to
carry out this Agreement, the officers and directors of the Surviving
Corporation shall be authorized to execute and deliver, in the name and on
behalf of either the Company or Merger Sub, all such deeds, bills of sale,
instruments of conveyance, assignments and assurances and to take and do, in the
name and on behalf of the Company, Merger Sub or otherwise, all such other
actions and things as may be necessary or desirable to vest, perfect or confirm
any and all right, title and interest in, to and under such rights, properties
or assets in the Surviving Corporation or otherwise to carry out this Agreement.
ARTICLE II
CONVERSION OF SHARES
II.1 Conversion of Shares. At the Effective Time, by virtue of the Merger,
and without any action on the part of the holder thereof:
(a) subject to Section 2.3, each Share issued and outstanding immediately
prior to the Effective Time shall be converted into the right to receive an
amount in cash, without interest, equal to thirty-three United States Dollars
($33.00) (the "Merger Consideration") in the manner provided in Section 2.2
hereof;
(b) each Share issued and held in the Company's treasury or held by any
Subsidiary of the Company immediately prior to the Effective Time shall, by
virtue of the Merger, cease to be outstanding and shall be cancelled and retired
without payment of any consideration therefor;
(c) each share of Company Common Stock held by any member of the
Acquisition Group immediately prior to the Effective Time shall be converted
into and become one fully paid and nonassessable share of common stock of the
Surviving Corporation; and
(d) each share of common stock, par value $.01 per share, of Merger Sub
("Merger Sub Common Stock") issued and outstanding immediately prior to the
Effective Time shall be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation.
II.2 Delivery of Merger Consideration.
(a) Immediately prior to the Effective Time, Parent and PHH shall deposit
or cause to be deposited in trust (the "Payment Fund") with an agent designated
by Parent and reasonably satisfactory to the Independent Committee (the "Payment
Agent") for the benefit of the holders of certificates representing the Shares
issued and outstanding as of the Effective Time (collectively, "Certificates"),
the aggregate Merger Consideration to be paid in respect of the Shares. The
Payment Fund shall not be used for any other purpose. The Payment Fund shall be
invested by the Payment Agent, as directed by the Surviving Corporation, in (i)
obligations of or guaranteed by the United States, and (ii) certificates of
deposit, bank repurchase agreements and bankers' acceptances of any bank or
trust company organized under federal law or under the law of any state of the
United States or of the District of Columbia that has capital, surplus and
undivided profits of at least $1 billion or in money market funds which are
invested substantially in such investments. Any net earnings with respect
thereto shall be paid to the Surviving Corporation as and when requested by the
Surviving Corporation.
(b) As soon as reasonably practicable after the Effective Time, Parent
shall instruct the Payment Agent to mail to each holder of record of Shares
immediately prior to the Effective Time (excluding any Shares cancelled pursuant
to Section 2.1 hereof):
(i) a letter of transmittal (the "Letter of Transmittal") (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of such Certificates to the
Payment Agent and shall be in such form and have such other provisions as
Parent reasonably specifies), and
(ii) instructions for use in effecting the surrender of each
Certificate in exchange for the Merger Consideration with respect to each
of the Shares formerly represented thereby.
(c) Parent and the Surviving Corporation shall cause the Payment Agent to
pay to the holders of a Certificate, as soon as practicable after receipt of any
Certificate (or in lieu of any such Certificate which has been lost, stolen or
destroyed, an affidavit of lost, stolen or destroyed share certificates
(including customary indemnity or bond against loss) in form and substance
reasonably satisfactory to Parent) together with the Letter of Transmittal, duly
executed, and such other documents as Parent or the Payment Agent reasonably
request, in exchange therefor a check in the amount equal to the Merger
Consideration multiplied by the number of Shares represented by such
Certificate. No interest shall be paid or accrued on any cash payable upon the
surrender of any Certificate. Each Certificate surrendered in accordance with
the provisions of this Section 2.2(c) shall be cancelled forthwith.
(d) In the event of a transfer of ownership of Shares which is not
registered in the transfer records of the Company, the Merger Consideration may
be paid to the transferee only if (i) the Certificate representing such Shares
surrendered to the Payment Agent in accordance with Section 2.2(c) hereof is
properly endorsed for transfer or is accompanied by appropriate and properly
endorsed stock powers and is otherwise in proper form to effect such transfer,
(ii) the Person requesting such transfer pays to the Payment Agent any transfer
or other taxes payable by reason of such transfer or establishes to the
satisfaction of the Payment Agent that such taxes have been paid or are not
required to be paid, and (iii) such Person establishes to the reasonable
satisfaction of Parent that such transfer would not violate any applicable
federal or state securities laws.
(e) Subject to Section 2.3, at and after the Effective Time, each holder of
a Certificate that represented issued and outstanding Shares immediately prior
to the Effective Time shall cease to have any rights as a stockholder of the
Company, except for the right to surrender his or her Certificate in exchange
for the Merger Consideration multiplied by the number of Shares represented by
such Certificate. At the Effective Time, the stock transfer books of the Company
shall be closed, except as otherwise provided by applicable law, and no transfer
of Shares shall be made on the stock transfer books of the Surviving
Corporation. If, after the Effective Time, Certificates are presented to the
Surviving Corporation or the Payment Agent for any reason, they shall be
cancelled and exchanged as provided in this Article II, except as otherwise
provided by applicable law.
(f) The Merger Consideration paid in the Merger shall be net to the holder
of Shares in cash, and without interest thereon, subject to reduction only for
any applicable withholding Taxes (as defined below).
(g) Promptly following the date which is 180 days after the Effective Date,
the Payment Agent shall deliver to the Surviving Corporation all cash (including
any interest received with respect thereto), Certificates and other documents in
its possession relating to the transactions contemplated hereby, and the Payment
Agent's duties shall terminate. Thereafter, each holder of a Certificate (other
than Certificates representing Dissenting Shares (as defined below)) may
surrender such Certificate to the Surviving Corporation and (subject to any
applicable abandoned property, escheat or similar law) receive in consideration
therefor (and only as general creditors thereof) the aggregate Merger
Consideration relating thereto, without any interest thereon. Notwithstanding
the foregoing, no member of the Acquisition Group, nor the Surviving
Corporation, the Company or the Payment Agent shall be liable to a holder of a
Certificate for any Merger Consideration properly delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(h) Any portion of the Merger Consideration made available to the Payment
Agent pursuant to Section 2.2(a) to pay for Shares for which appraisal rights
have been perfected shall be returned to Parent or PHH upon demand.
II.3 Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, Shares that are issued and outstanding immediately before the
Effective Time and that are held by stockholders who have not voted in favor of
the adoption of this Agreement or consented thereto in writing and who have
properly exercised appraisal rights with respect thereto in accordance with
Section 262 of the DGCL shall not be converted into the right to receive the
Merger Consideration as provided in Section 2.1, unless such holders fail to
perfect or withdraw or otherwise lose their rights to appraisal. Instead,
ownership of such Shares shall entitle the holder thereof to receive the
consideration determined pursuant to Section 262 of the DGCL; provided, however,
that if such holder fails to perfect or effectively withdraws such holder's
right to appraisal and payment under the DGCL, each of such Shares shall
thereupon be deemed to have been converted, at the Effective Time, into the
right to receive the Merger Consideration, without any interest thereon, upon
surrender of the Certificate or Certificates in the manner provided in Section
2.2 hereof. The Company shall give Parent (i) prompt notice of any demands (or
withdrawals of demands) for appraisal of any Shares received by the Company
pursuant to the applicable provisions of the DGCL and any other instruments
served pursuant to the DGCL and received by the Company and (ii) the opportunity
to direct all negotiations and proceedings with respect to demands for appraisal
under the DGCL. The Company shall not, except with the prior written consent of
Parent, make any payment with respect to any such demands for appraisal or offer
to settle, or settle, any such demands.
II.4 Treatment of Company Options.
(a) Subject to Section 2.4(b), the Company shall take all action necessary
so that each option to purchase shares of Company Common Stock (each, an
"Option") granted under the Company's 1997 Stock Option Plan and 2000 Incentive
Compensation Plan (collectively, the "Assumed Option Plans" and, individually,
an "Assumed Option Plan") outstanding and unexercised immediately prior to the
Effective Time shall be cancelled immediately prior to the Effective Time in
exchange for the right to receive an amount in cash equal to the product of (i)
the number of shares of Company Common Stock subject to such Option immediately
prior to the Effective Time and (ii) the excess, if any, of the Merger
Consideration over the per share exercise price of such Option, to be delivered
by the Surviving Corporation promptly following the Effective Time. All
applicable withholding taxes attributable to the payments made hereunder shall
be deducted from the amounts payable under this Section 2.4. Notwithstanding the
foregoing, or Section 2.4(b), any Option with an exercise price greater than the
Merger Consideration immediately prior to the Effective Time shall be
automatically converted into an Assumed Option in accordance with Section
2.4(c), whether or not the holder thereof shall have made a Retention Election
with respect to such Option in accordance with Section 2.4(b). The Company shall
use its commercially reasonable efforts to obtain the consent of each holder of
Options to the foregoing treatment of such Options to the extent required under
the Assumed Option Plans pursuant to which such Options were granted.
(b) Notwithstanding the provisions of Section 2.4(a), each person who, on
or prior to the Effective Date, is the holder of an outstanding and unexercised
Option shall be entitled, with respect to all or any portion of such holder's
Option, to make an unconditional election to the Company in writing (a
"Retention Election") on or prior to the Effective Date, to convert, as of the
Effective Time, such portion of their Options as may be specified in such
Retention Election into options to purchase shares of common stock, par value
$.01 per share, of Parent ("Cendant Common Stock"), as set forth in subsection
(c) below, in lieu of receiving a cash payment, if any, in consideration for the
cancellation of such portion of their Options in the manner described in Section
2.4(a).
(c) Any portion of an Option with respect to which a timely Retention
Election has been delivered to the Company (the "Elected Portion") shall, at the
Effective Time, become and represent an option to purchase Cendant Common Stock;
and Parent shall assume each such option (hereinafter, an "Assumed Option")
subject to the terms of the applicable Assumed Option Plan, in each case as
heretofore amended or restated, as the case may be, and the agreement evidencing
the grant thereunder of such Assumed Option; provided, however, that from and
after the Effective Time, (i) the number of shares of Cendant Common Stock
purchasable upon exercise of such Assumed Option shall be equal to the number of
shares of Company Common Stock that were purchasable under such Assumed Option
immediately prior to the Effective Time multiplied by the Exchange Ratio (as
defined below), and rounded up or down to the nearest whole share, and (ii) the
per share exercise price under each such Assumed Option shall be adjusted by
dividing the per share exercise price of each such Assumed Option by the
Exchange Ratio, and rounding up or down to the nearest whole cent; provided,
however, that in the case of any Options intended to qualify as "incentive stock
options" under Section 422 of the Code, the adjustments pursuant to this Section
2.4(c) shall be determined in order to comply with Section 424(a) of the Code.
The terms of the Assumed Option shall be the same as the original Option except
that all references to the Company shall be deemed to be references to Parent.
The terms of each Assumed Option shall, to the extent provided in the applicable
Assumed Option Plan, be subject to further adjustment as appropriate to reflect
any stock split, stock dividend, recapitalization or other similar transaction
with respect to Cendant Common Stock on or subsequent to the Effective Time. The
"Exchange Ratio" shall be equal to the ratio obtained by dividing the amount of
the Merger Consideration by the average closing price of one share of Cendant
Common Stock on the New York Stock Exchange for the ten (10) consecutive trading
days immediately preceding the Effective Date.
(c) The parties acknowledge that each Option to purchase shares of Company
Common Stock under the Assumed Option Plans shall become fully vested and
exercisable in connection with consummation of the Merger in accordance with and
subject to the terms of such Option and the relevant Assumed Option Plan.
II.5 Adjustments. If, during the period between the date of this Agreement
and the Effective Time, any change in the outstanding Shares shall occur in
accordance with the terms of this Agreement, including by reason of any
reclassification, recapitalization, stock split or combination, exchange or
readjustment of Shares, or stock dividend thereon with a record date during such
period, the cash payable pursuant to the Offer, the Merger Consideration and any
other amounts payable pursuant to this Agreement shall be appropriately
adjusted.
II.6 Stockholders Meeting.
(a) The Company, acting through the Board, shall, in accordance with and to
the extent permitted by applicable law:
(i) as promptly as practicable after the date hereof, call, give
notice of, convene and hold a special meeting of its stockholders (the
"Stockholders Meeting") for the purpose of considering and taking action
upon the adoption of this Agreement;
(ii) prepare and file with the Securities and Exchange Commission (the
"SEC") a preliminary proxy statement relating to this Agreement and the
Merger as promptly as practicable after the date hereof, and use its
commercially reasonable efforts to obtain and furnish the information
required to be included in such proxy statement and, after consultation
with Parent, respond promptly to any comments made by the SEC and its staff
with respect to the preliminary proxy statement and cause a definitive
proxy statement relating to this Agreement and the Merger (such proxy
statement, together with any and all amendments or supplements thereto, the
"Proxy Statement") to be mailed to its stockholders at the earliest
practicable time;
(iii) include in the Proxy Statement the recommendations of the
Independent Committee and the Board that stockholders of the Company vote
in favor of the adoption of this Agreement (as the same may be amended,
modified or withdrawn in accordance with Section 5.2(d) hereof); and
(iv) use its reasonable best efforts to solicit from holders of Shares
proxies in favor of the adoption of this Agreement and take all other
action necessary or advisable to secure, at the Stockholders Meeting, the
affirmative vote of (A) the holders of a majority of the outstanding shares
of Company Common Stock (voting as one class, with each share of Company
Common Stock having one vote) and (B) the holders of a majority of the
votes cast at the Stockholders Meeting by holders of Shares in favor of the
adoption of this Agreement (the "Company Stockholder Approval"). The
Company shall cause all Shares for which valid proxies have been submitted
and not revoked to be voted at the Stockholders Meeting in accordance with
the instructions on such proxies.
(b) Once the Stockholders Meeting has been called and noticed, the Company
shall not postpone or adjourn the Stockholders Meeting (other than for the
absence of a quorum) without the prior written consent of Parent.
(c) Parent, PHH and Purchaser agree to promptly provide the Company with
the information concerning Parent, PHH and Purchaser and their respective
Affiliates required to be included in the Proxy Statement. At the Stockholders
Meeting, Parent, PHH and Purchaser shall vote, or cause to be voted, all shares
of Company Common Stock beneficially owned by them or any of their respective
Subsidiaries in favor of the adoption of this Agreement.
(d) Notwithstanding anything to the contrary contained in this Agreement,
in the event that the Independent Committee changes its recommendation of this
Agreement and the Merger in accordance with Section 5.2(d) hereof and this
Agreement has not been terminated pursuant to Article VII hereof, then, without
limiting the Company's ability to disclose the recommendations of the Board and
the Independent Committee in the Proxy Statement:
(i) in performing its obligations under this Section 2.6, the Company
shall not be obligated to solicit from holders of Shares proxies in favor
of the adoption of this Agreement or to take all action necessary or
advisable to secure, at the Stockholders Meeting, the Company Stockholders
Approval, but instead shall be obligated to solicit impartially from
holders of Shares proxies to be voted at the Stockholders Meeting (making
no instructions to vote in favor or against, but merely to return a
completed proxy card) and to take all action necessary or advisable to
maximize, at the Stockholders Meeting, the number of proxies submitted by
holders of Shares;
(ii) the Company shall remain obligated to vote all unspecified but
executed proxies submitted by holders of Shares in favor of the adoption of
this Agreement;
(iii) Parent and its affiliates and agents shall have the right, as a
participant in the Company's solicitation of proxies, to communicate with
and solicit from holders of Shares the submission of Company proxies in
favor of the adoption of this Agreement and to take all actions necessary
or advisable to secure, at the Stockholders Meeting, the Company
Stockholders Approval and otherwise to act as a participant in the
Company's solicitation; and
(iv) The Company shall cooperate with Parent in connection with any
actions taken by it pursuant to clause (d)(ii) above and shall make any
filings under Federal securities laws required in connection therewith.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent, PHH and Merger Sub as of the
date of this Agreement as follows:
III.1 Organization. The Company and each of its Subsidiaries is a
corporation or other entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
and has all requisite corporate or other power and authority to own, lease and
operate its properties and to carry on its business as it is now being
conducted. The Company and each of its Subsidiaries is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary where the failure to be so
duly qualified or licensed or in good standing would, individually or in the
aggregate, result in a Material Adverse Effect (as defined below). As used
herein, the term "Material Adverse Effect" means a material adverse change in,
or effect on, the business, condition (financial or otherwise) or results of
operations of the Company and its Subsidiaries taken as a whole, but shall not
include any change, event, effect, occurrence or circumstance arising in
connection with or as a result of (i) the announcement or performance of the
Transactions contemplated by this Agreement, in and of themselves, or (ii)
Parent's announcement or other communication of Parent of the plans or
intentions of Parent with respect to any conduct of any business of the Company
or any of its Subsidiaries.
III.2 Authority Relative to this Agreement.
(a) The Company has the requisite corporate power and authority to execute
and deliver this Agreement and to consummate the Transactions, including,
without limitation, the Merger. The execution and delivery of this Agreement by
the Company, and the consummation of the Transactions to be consummated by it,
have been duly authorized by the Board and no other corporate proceedings on the
part of the Company are required to authorize this Agreement or to consummate
the Transactions to be consummated by it, other than, with respect to the
Merger, (i) the Company Stockholder Approval and (ii) the filing and recordation
of the Certificate of Merger in accordance with the DGCL. This Agreement has
been duly executed and delivered by the Company and (assuming due authorization,
execution and delivery hereof by Parent, PHH and Merger Sub) constitutes a valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws, now or hereafter in effect, relating to creditors' rights generally and
(ii) equitable remedies of specific performance and injunctive and other forms
of equitable relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
(b) The Company hereby represents and warrants that (i) the Independent
Committee has been duly authorized and constituted; (ii) the Board, based on the
recommendation of the Independent Committee at a meeting duly called and held,
has (A) determined that (x) the Merger Consideration is fair to the holders of
Shares and (y) the Merger is advisable and in the best interests of the Company
and the holders of Shares, (B) approved and declared the advisability of, this
Agreement and (C) determined to recommend that the stockholders of the Company
vote to adopt this Agreement in accordance with the provisions of the DGCL. The
Independent Committee and the Board have received the written opinion (the
"Fairness Opinion") of Morgan Stanley to the effect that, as of the date hereof,
the Merger Consideration to be paid to the holders of Shares is fair to such
holders from a financial point of view, and, as of the date hereof, such
Fairness Opinion has not been withdrawn. The Company has delivered a true,
correct and complete copy of the Fairness Opinion to Parent.
III.3 Vote Required. The affirmative vote of the holders of a majority of
the outstanding shares of Company Common Stock is the only vote of holders of
any class or series of the Company's capital stock required to approve the
Merger and adopt this Agreement under the DGCL, the Company's Amended and
Restated Certificate of Incorporation and the Company's Amended and Restated
By-Laws.
III.4 State Takeover Statutes. The Company has elected not to be governed
by Section 203 of the DGCL in accordance with the provisions of Section 203(b)
of the DGCL. The restrictions on business combinations contained in Section 203
of the DGCL do not apply to the Merger or the other Transactions nor shall they
apply to any member of the Acquisition Group as a result of this Agreement or
the Transactions.
III.5 Capitalization.
(a) The authorized capital stock of the Company consists of 100,000,000
shares of Company Common Stock, 15,000,000 shares of class B common stock, par
value $.01 per share of the Company (the "Class B Common Stock") and
(iii) 20,000,000
shares of preferred stock, par value $.01 per share, (the
of the Company ("Preferred
Stock"). The Class AAs of October 31, 2000, there were (i) 31,156,172 shares of Company
Common Stock issued and outstanding, (ii) 4,768,828 shares of Company Common
Stock held in the Company's treasury, (iii) 9,000,000 shares of Company Common
Stock reserved for issuance upon the exercise of outstanding Options, (iv) no
shares of Company Common Stock reserved for issuance upon the conversion of the
Class B Common Stock, are
sometimes collectively referred to herein as the "Common Stock". Notwithstanding
the foregoing,(v) no shares of Class B Common Stock may be issued, except upon, and
all authorized(vi) no
shares of Class B Common Stock shall be reserved for issuance upon the conversion pursuant to the terms of their respective Certificate of
Designation or the Stockholders Agreement, dated as of June 30, 1999, by and
among the Corporation, Fleet (as hereinafter defined) and PHH Corporation, of
shares of the
Seriesseries A Cumulative Participating Redeemable Convertible Preferred
Stock (the "Fleet Series A Preferred")preferred stock, par value $.01 per share, of Avis Fleet Leasing and
Management Corporation, ("a Texas corporation and a subsidiary of the Company (the
"Avis Fleet") and/or the Seriesand series B Cumulative PIKpreferred stock, par value $.01 per share of Avis
Fleet, and (vii) no shares of Preferred Stock of
Fleet (the "Fleet Series B Preferred" and together with the Fleet Series A
Preferred, the "Fleet Preferred"), as the case may be, being converted. In
addition, any share of Class B Common Stock redeemed, purchased or otherwise
acquired by the Corporation may not be reissued as a share of Class B Common
Stock.
(b) COMMON STOCK. The powers, preferences and rights, and the
qualifications, limitations and restrictions of the Common Stock are as follows:
(1) RANKING. Except as otherwise expressly provided in this Amended and
Restated Certificate of Incorporation, the powers, preferences and rights of
each share of Common Stock, and the qualifications, limitations and
restrictions thereof, shall be in all respects identical. In this regard,
all stock splits, stock combinations and/or other reclassifications shall
apply PARI PASSU to theissued. All issued and outstanding
shares of Class ACompany Common Stock are, and the issued and outstandingall shares of Class B Common Stock.
(2) VOTING. (A) Class A Common Stock. Except as otherwise expressly
required by law or provided in this Amended and Restated Certificate of
Incorporation, each outstanding share of Class ACompany Common Stock
shall be
entitled to vote on each matter on which the stockholdersissuable upon exercise of the Corporation
shall be entitled to vote, and each holder of Class A Common Stock shall be
entitled to one vote for each share of such stock held by such holder.
(B) CLASS B COMMON STOCK. Except as otherwise required by law (in
which case, holders of Class B Common Stock shall vote (at the rate of
one vote for each share of such stock held) as a single class unless
otherwise required by law), each outstanding share of Class B Common
Stock shall not entitle the holder thereof to vote on any matter on which
the stockholders of the Corporation shall be entitled to vote, and shares
of Class B Common Stock shall not be included in determining the number
of shares votingOptions or entitled to vote on any such matters.
(C) NO CUMULATIVE VOTING. The holders of shares of Common Stock shall
not have cumulative voting rights.
(3) CONVERSION. (A) OPTIONAL CONVERSION. Each share of Class B Common
Stock beneficially owned by a Cendant Affiliate (as defined herein) may be
converted at the option of the holder thereof into one share of validly
issued, fully paid and non-assessable share of Class A Common Stock at any
time and from time to time (i) if at the time of such reclassification and
conversion and after giving effect thereto, the aggregate number of the
issued and outstanding shares of Class A Common Stock beneficially owned by
all Cendant Affiliates does not exceed 20% of the aggregate number of all
issued and outstanding shares of Class A Common Stock or (ii) upon or after
the occurrence of (1) a
A-1
bankruptcy or insolvency of the Corporation and/or (2) a Change of Control
(as defined herein). Any conversion of shares of Class B Common Stock into
shares of Class A Common Stock pursuant to this clause (3)(A) shall be
effected by the delivery to the Corporation at its principal executive
office of the certificates representing shares to be converted, duly
endorsed, together with written instructions that the shares are to be
converted pursuant to this clause (3)(A) (and identifying the basis for such
conversion) and accompanied, in the case of a conversion pursuant to
clause (i) above, by a statement setting forth the aggregate number of
shares of Class A Common Stock held by all Cendant Affiliates as of the date
of such delivery. The issuance of a certificate or certificates for shares
of the Class A Common Stock upon conversion of shares of the Class B Common Stock
shall be, made without charge forwhen issued in accordance with the respective terms thereof, duly
authorized and validly issued, fully paid and nonassessable, and free of
preemptive rights.
(b) Except as set forth in subsection (a) above or in Section 3.5(b) of the
disclosure letter delivered by the Company to Parent prior to the execution of
this Agreement (the "Company Disclosure Letter"), the Company does not have any
stampshares of its capital stock issued or outstanding and there are no outstanding
subscriptions, options, warrants, calls, convertible securities, rights or other
agreements or commitments (i) to which the Company or any of its Subsidiaries is
a party of any character relating to the issued or unissued capital stock or
other equity interests of the Company or any of its Subsidiaries, or (ii)
obligating the Company or any Subsidiary of the Company to (A) issue, transfer
or sell any shares of capital stock or other equity interests of the Company or
any Subsidiary of the Company or securities convertible into or exchangeable for
such shares or equity interests, (B) grant, extend or enter into any such
subscription, option, warrant, call, convertible securities or other right,
agreement, arrangement or commitment to repurchase, (C) redeem or otherwise
acquire any such shares of capital stock or other equity interests or (D)
provide a material amount of funds to, or make any material investment (in the
form of a loan, capital contribution or otherwise) in, any Person.
(c) Neither the Company nor any of its Subsidiaries has outstanding bonds,
debentures, notes or other obligations, the holders of which have the right to
vote (or which are convertible into or exercisable for securities having the
right to vote) with the stockholders of the Company or such Subsidiary on any
matter. Except as set forth in Section 3.5(c) of the Company Disclosure Letter,
there are no voting trusts or other agreements or understandings to which the
Company or any of its Subsidiaries is a party with respect to the voting of the
capital stock or other equity interest of the Company or any of its
Subsidiaries.
III.6 Subsidiaries.
(a) Section 3.6(a) of the Company Disclosure Letter sets forth a complete
and accurate list of each Subsidiary of the Company. Except as set forth in
Section 3.6 of the Company Disclosure Letter, all outstanding equity securities
or other equity interests in each Subsidiary of the Company (i) are owned of
record and beneficially by the Company or another of the Company's wholly owned
Subsidiaries, free of all liens, claims, charges or encumbrances, and (ii) have
been duly authorized, and are validly issued, fully paid and nonassessable, and
free of preemptive rights. Section 3.6(a) of the Company Disclosure Letter sets
forth all debt securities in excess of $500,000 issued by the Company or any
Subsidiary of the Company.
(b) Except as set forth in Section 3.6(b) of the Company Disclosure Letter,
neither the Company nor any Subsidiary of the Company owns, directly or
indirectly, a material amount of any capital stock, interest or equity
investment or debt security in any corporation, partnership, limited liability
company, joint venture, business, trust or other entity other than interests in
another Subsidiary of the Company.
III.7 No Conflict; Required Filings and Consents.
(a) Except for (i) applicable requirements of (A) the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), (B) the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and any similar
taxforeign competition laws applicable hereto, and (C) any state securities or blue
sky laws applicable hereto, (ii) the filing and recordation of the Certificate
of Merger, as required by the DGCL, and (iii) as set forth in Section 3.7(a) of
the Company Disclosure Letter, neither the execution and delivery of this
Agreement by the Company nor the consummation by the Company of the Transactions
contemplated hereby shall require on the part of the Company or any Subsidiary
of the Company any filing with, or obtaining of, any permit, authorization,
consent or approval of, or any notice to, any court, tribunal, legislative,
executive or regulatory authority or agency (a "Governmental Entity"), where the
failure to so file or obtain would, individually or in the aggregate, result in
a Material Adverse Effect or would materially impair the Company's ability to
consummate the Transactions.
(b) Except as set forth in Section 3.7(b) of the Company Disclosure Letter,
neither the execution and delivery of this Agreement by the Company nor the
consummation by the Company of the Transactions will (i) conflict with or result
in any breach of any provision of the Amended and Restated Certificate of
Incorporation of the Company or the Amended and Restated By-laws of the Company
or equivalent organizational documents of any Subsidiary of the Company, (ii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default under, or give rise to any right of
termination, cancellation, suspension, modification or acceleration of any
obligation under, or result in the creation of a lien under, any of the terms,
conditions or provisions of, or otherwise require the consent or waiver of, or
notice to, any other party under, any bond, note, mortgage, indenture, other
evidence of indebtedness, guarantee, license, agreement or other contract or
instrument ("Contract") to which the Company or any Subsidiary of the Company is
a party or by which any of them or any of their respective properties or assets
is bound, (iii) violate any law, statute, rule, regulation, order, writ,
injunction or decree applicable to the Company, any Subsidiary of the Company or
any of their respective properties or assets, or (iv) require the Company to pay
any existing indebtedness where such violations, breaches, defaults or rights,
in the case of clause (ii) or (iii), would, individually or in the aggregate,
result in a Material Adverse Effect or would materially impair the Company's
ability to consummate the Transactions.
III.8 SEC Documents and Financial Statements.
(a) The Company has filed all forms, reports and documents required to be
filed with the SEC pursuant to the Exchange Act since December 31, 1998
(collectively, the "Company SEC Reports"). The Company SEC Reports, as of their
respective filing dates, (i) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (ii) complied in all material respects
with the then applicable requirements of the Exchange Act, the Securities Act of
1933, as amended (the "Securities Act") and the applicable rules and regulations
thereunder. No Subsidiary of the Company is required to file any forms, reports
or other documents with the SEC.
(b) The consolidated financial statements (including all related notes)
included in the Company SEC Reports fairly present the consolidated financial
position of the Company and its consolidated Subsidiaries as of the respective
dates thereof, and the results of operations and the changes in cash flows of
the Company and its consolidated Subsidiaries for the respective periods set
forth therein. Each of the consolidated financial statements (including all
related notes) included in the Company SEC Reports has been prepared in
accordance with generally accepted accounting principles consistently applied
("GAAP"), except as otherwise noted therein, and subject, in the case of interim
financial statements, to normal and recurring year-end audit adjustments.
III.9 No Undisclosed Liabilities. Except as and to the extent disclosed in
Section 3.9 of the Company Disclosure Letter or reflected or reserved against in
the Company's consolidated balance sheets included in the Company SEC Reports,
and except for liabilities and obligations incurred in the ordinary course of
business, consistent with past practice since December 31, 1999, neither the
Company nor any Subsidiary of the Company has any liabilities or obligations of
any nature, whether or not accrued, contingent or otherwise, that would be
required by GAAP to be reflected on a consolidated balance sheet of the Company
and its Subsidiaries (or in the notes thereto).
III.10 Absence of Certain Changes. Except as contemplated by this Agreement
or set forth in Section 3.10 of the Company Disclosure Letter or in the Form
10-Q of the Company filed with respect to the quarter ended June 30, 2000, since
June 30, 2000, (a) the businesses of the Company and its Subsidiaries have been
conducted in the ordinary course of business, consistent with past practice, (b)
neither the Company nor any Subsidiary of the Company has taken any action
which, if taken after the date hereof, would violate Section 5.1 hereof if taken
without the approval of Parent, and (c) there has not occurred any event,
circumstance or condition which, individually or together with all such events,
circumstances or conditions, has resulted or would result in a Material Adverse
Effect.
III.11 Proxy Statement. None of the information supplied by the Company for
inclusion or incorporation by reference in the Proxy Statement shall, at the
time it is filed with the SEC, at the time it is first mailed to the Company's
stockholders, or at the time of the Stockholders Meeting, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading, except that no
representation or warranty is made by the Company as to any information supplied
by Parent, PHH or Merger Sub to the Company for inclusion or incorporation by
reference in the Proxy Statement. The Proxy Statement shall comply as to form in
all material respects with the requirements of the Exchange Act and the rules
and regulations promulgated thereunder.
III.12 Litigation. Except as specifically disclosed in the Company SEC
Reports or set forth in Section 3.12 of the Company Disclosure Letter, there is
no action, suit, proceeding, inquiry or investigation pending or, to the
knowledge of the Company, threatened against or involving the Company or any of
its Subsidiaries, at law or in equity, by or before any Governmental Entity
which (i), as of the date hereof, questions or challenges the validity of this
Agreement or which (ii), if adversely determined, would result in a Material
Adverse Effect or would materially impair or delay the ability of the Company to
consummate the Transactions to be consummated by it.
III.13 Taxes. Except as set forth in Section 3.13 of the Company Disclosure
Letter:
(a) Each of the Company and its Subsidiaries has (i) duly and timely filed
(or there has been filed on their behalf) with the appropriate Governmental
Entities all material Tax Returns (as defined below) required to be filed by it
and all such material Tax Returns are true, correct and complete; (ii) duly paid
in full (or there has been duly paid on its behalf) all Taxes (as defined below)
shown on such Tax Returns that are due and payable; and (iii) made adequate
provision, in accordance with GAAP (or adequate provision has been made on its
behalf), for the payment of all current Taxes not yet due.
(b) Each of the Company and its Subsidiaries has complied in all material
respects with all applicable laws, rules and regulations relating to the payment
and withholding of Taxes and has, within the time and the manner prescribed by
law, withheld and paid over the proper Governmental Entities all material
amounts required to be so withheld and paid over.
(c) Neither the Company nor any of its Subsidiaries has requested an
extension of time within which to file any material Tax Return in respect of a
taxable year which has not since been filed and no outstanding waivers or
comparable consents regarding the application of the statute of limitations with
respect to material Taxes or material Tax Returns has been given by or on behalf
of the Company or any of its Subsidiaries.
(d) No material federal, state, local or foreign audits, examinations or
other administrative court proceedings have been commenced or, to the Company's
knowledge, are threatened with regard to any material Taxes or material Tax
Returns of the Company or any of its Subsidiaries. No written notification has
been received by the Company or any of its Subsidiaries that such issuance.an audit,
examination or other proceeding is pending or threatened with respect to any
material Taxes due from or with respect to or attributable to the Company or any
of its Subsidiaries or any material Tax Return filed by or with respect to the
Company or any of its Subsidiaries.
(e) Neither the Company nor any of its Subsidiaries is a party to any
agreement, plan, contract or arrangement that could result, separately or in the
aggregate, in a payment of (i) any "excess parachute payments" within the
meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code"), or (ii) any amount that would not be deductible under Section 162(m) of
the Code.
(f) Neither the Company nor any of its Subsidiaries is a party to any
material tax sharing, tax indemnity or other agreement or arrangement.
(g) There are no material liens for Taxes upon the assets of the Company or
any of its Subsidiaries except liens for Taxes not yet due and payable.
(h) For purposes of this clause (3)(A), (i) "Cendant
Affiliate"Agreement, "Taxes" shall mean Cendantany and all taxes,
charges, fees, levies or other assessments, including income, gross receipts,
excise, real or personal property, sales, withholding, social security,
occupation, use, service, service use, value added, license, net worth, payroll,
franchise, transfer and recording taxes, fees and charges, imposed by the United
States Internal Revenue Service (the "IRS") or any taxing authority (whether
domestic or foreign including any state, local or foreign government or any
subdivision or taxing agency thereof (including a United States possession)),
whether computed on a separate, consolidated, unitary, combined or any other
basis; and such term shall include any interest, penalties or additional amounts
attributable to, or imposed upon, or with respect to, any such taxes, charges,
fees, levies or other assessments. For purposes of this Agreement, "Tax Return"
shall mean any report, return, document, declaration or other information or
filing required to be supplied to any taxing authority or jurisdiction (foreign
or domestic) with respect to Taxes.
III.14 Employee Benefit Plans.
(a) Each material employee benefit plan, program, arrangement or agreement,
including each "employee benefit plan," within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), in
each case, maintained by the Company or any of its Subsidiaries, or to which the
Company or any of its Subsidiaries contributes or is required to contribute
(each, a "Plan"; collectively, "Plans") is listed in Section 3.14(a) of the
Company Disclosure Letter. None of the Company or any of its Subsidiaries has
any commitment or formal plan to create any additional employee benefit plan or
modify or change any existing Plan (except as required to maintain the
tax-qualified status of any Plan intended to qualify under Section 401(a) of the
Code).
(b) Except as disclosed in the Company SEC Reports or Section 3.14(b) of
the Company Disclosure Letter or to the extent that any breach of the
representations set forth in this sentence would not have a Material Adverse
Effect: (i) each Plan (other than any Plan that is a "multiemployer plan,"
within the meaning of Section 4001(a)(3) of ERISA (a "Multiemployer Plan")) is
in compliance with applicable law and has been administered and operated in all
respects in accordance with its terms; (ii) each Plan (other than any
Multiemployer Plan) which is intended to be "qualified" within the meaning of
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
has received a favorable determination letter regarding its tax-qualified status
from the IRS and the Company is not aware of any circumstances that could
reasonably be expected to result in the revocation of such letter; (iii) the
actuarial present value of the accumulated plan benefits (whether or not vested)
under each Plan covered by Title IV of ERISA (other than any Multiemployer Plan)
as of the close of its most recent plan year did not exceed the fair value of
the assets allocable thereto; (iv) no Plan covered by Title IV of ERISA (other
than any Multiemployer Plan) has been terminated and no proceedings have been
instituted to terminate or appoint a trustee to administer any such plan; (v) no
"reportable event" (as defined in Section 4043 of ERISA) has occurred with
respect to any Plan covered by Title IV of ERISA (other than any Multiemployer
Plan); (vi) no Plan (other than any Multiemployer Plan) subject to Section 412
of the Code or Section 302 of ERISA nor any such employee benefit plan sponsored
or maintained by any entity that, together with the Company, would be deemed a
"single employer" within the meaning of Section 4001(b) of ERISA (an "ERISA
Affiliate") has incurred any accumulated funding deficiency within the meaning
of Section 412 of the Code or Section 302 of ERISA, or obtained a waiver of any
minimum funding standard or an extension of any amortization period under
Section 412 of the Code or Section 303 or 304 of ERISA; (vii) the Company and
each Subsidiary of the Company have made all contributions to each Plan required
by the terms of each such Plan or any collectively bargained agreement; (viii)
neither the Company nor any Subsidiary of the Company has incurred any
unsatisfied withdrawal liability under Part 1 of Subtitle E of Title IV of ERISA
to any Multiemployer Plan; (ix) no Plan provides medical, surgical,
hospitalization, death or similar benefits (whether or not insured) for
employees or former employees of the Company or any of its Subsidiaries for
periods extending beyond their retirement or other termination of service, other
than (1) coverage mandated by applicable law, (2) death benefits under any
"pension plan," or (3) benefits the full cost of which is borne by the current
or former employee (or his or her beneficiary); (x) neither the Company nor any
of its Subsidiaries nor, to the knowledge of the Company, any other
"disqualified person" or "party in interest" (as defined in Section 4975(e)(2)
of the Code and Section 3(14) of ERISA, respectively) has engaged in any
transactions in connection with any Plan that would result in the imposition of
a penalty pursuant to Section 502(i) of ERISA or a tax pursuant to Section 4975
of the Code; (xi) there has been no failure of a Plan that is a group health
plan (as defined in Section 5000(b)(1) of the Code) to meet the requirements of
Section 4980B(f) of the Code with respect to a qualified beneficiary (as defined
in Section 4980B(g) of the Code); (xii) there are not pending or, to the
Company's knowledge, threatened, claims by or on behalf of any Plan, by any
employee or beneficiary covered under any such Plan or otherwise involving any
such Plan (other than routine claims for benefits payable in the ordinary
course, and appeals of denied claims); and (xiii) no liability under Title IV or
Section 302 of ERISA has been incurred by the Company or any ERISA Affiliate
that has not been satisfied in full, and no condition exists that could
reasonably be expected to present a material risk to the Company or any ERISA
Affiliate of incurring any such liability, other than liability for premiums due
the Pension Benefit Guaranty Corporation (which premiums have been paid when
due).
(c) The Company has heretofore delivered or made available to Parent true
and complete copies of each Plan and any amendments thereto, any related trust
or other funding vehicle, any summaries required under ERISA or the Code, the
most recent annual reports filed with the IRS, and the most recent determination
letter received from the IRS with respect to each Plan intended to qualify under
Section 401(a) of the Code.
(d) Except as set forth in Section 3.14(d) of the Company Disclosure
Letter, the consummation of the Transactions shall not, either alone or in
combination with another event, (i) entitle any current or former employee or
officer of the Company or any of its Subsidiaries to severance pay, unemployment
compensation or any other payment or benefit, except as expressly provided in
this Agreement, or (ii) accelerate the time of payment or vesting, or increase
the amount of compensation due any such employee or officer.
III.15 Compliance with Applicable Laws. Except as set forth in Section 3.15
of the Company Disclosure Letter, each of the Company and its Subsidiaries, and
their respective properties, assets and operations, are in compliance in all
material respects with all applicable statutes, laws, rules, regulations,
judgments, decrees, orders, arbitration awards, franchises, permits or licenses
or other governmental authorizations or approvals which are material to the
business and operations of the Company or its Subsidiaries. Except as set forth
in Section 3.15 of the Company Disclosure Letter, the Company and its
Subsidiaries hold all licenses, franchises, ordinances, authorizations, permits,
certificates, variances, exemptions, concessions, leases, rights of way,
easements, instruments, orders and approvals, domestic or foreign ("Permits"),
required for the ownership of the assets and operation of the businesses of the
Company and its Subsidiaries where the failure of which to hold would,
individually or in the aggregate, result in a Material Adverse Effect. Except as
set forth in Section 3.15 of the Company Disclosure Letter, all Permits of the
Company and its Subsidiaries required under any statute, law, rule or regulation
of any Governmental Entity are in full force and effect where the failure to be
in full force and effect would have a Material Adverse Effect.
III.16 Material Contracts.
(a) Except as set forth in Section 3.16(a) of the Company Disclosure
Letter, neither the Company nor any Subsidiary of the Company is a party to, or
bound by, any Contract which is material to the Company and its Subsidiaries,
taken as a whole (a "Company Material Contract"). Notwithstanding the foregoing,
each of the following Contracts shall be a Company Material Contract and shall
be set forth in Section 3.16 of the Disclosure Schedule:
(i) any contracts or agreements under which the Company or any
Subsidiary of the Company has any outstanding indebtedness, obligation or
liability for borrowed money or the deferred purchase price of property or
has the right or obligation to incur any such indebtedness, obligation or
liability in excess of $500,000;
(ii) any bonds or agreements of guarantee or indemnification in which
the Company or any Subsidiary of the Company acts as surety, guarantor or
indemnitor with respect to any obligation (fixed or contingent) in excess
of $500,000, other than any such guarantees of the obligations of the
Company or any Subsidiary of the Company;
(iii) any noncompete agreements to which the Company, any Subsidiary
of the Company or any Affiliate thereof is a party;
(iv) any partnership and joint venture agreements; and
(v) any Contract that provides for the payment of any amount or
entitles any Person to receive any other benefit or exercise any other
right as a result of the execution, delivery or performance of this
Agreement, or the consummation of the Transactions, including the Merger.
(b) Neither the Company nor any Subsidiary of the Company is in breach of
or default under the terms of any Company Material Contract where such breach or
default would have a Material Adverse Effect. To the knowledge of the Company,
no other party to any Company Material Contract is in breach of or default under
the terms of any Company Material Contract where such breach or default would
have a Material Adverse Effect. Each Company Material Contract is a valid and
binding obligation of the Company or the Subsidiary of the Company which is
party thereto and, to the knowledge of the Company, of each other party thereto,
and is in full force and effect, except that (i) such enforcement may be subject
to applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws, now or hereafter in effect, relating to creditors' rights
generally and (ii) equitable remedies of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
III.17 Environmental Laws.
(a) Except as set forth in Section 3.17(a) of the Company Disclosure
Letter, each of the Company and its Subsidiaries is (i) in compliance in all
material respects with all applicable Environmental Laws (as defined below),
which compliance includes the possession by the Company and its Subsidiaries of
all Permits and other governmental authorizations required under applicable
Environmental Laws, and (ii) in compliance with the terms and conditions of such
Permits where the failure to be in compliance would result in a liability or
obligation of the Company or any of its Subsidiaries of any nature, whether or
not accrued, contingent or otherwise, in an amount exceeding $500,000
individually, and $5,000,000 in the aggregate. Except as set forth in Section
3.17(a) of the Company Disclosure Letter, neither the Company nor any of its
Subsidiaries has received any communication or written notice, whether from a
Governmental Entity, citizens group, employee or otherwise, that alleges that
the Company or any of its Subsidiaries is not in compliance with applicable
Environmental Laws, where the failure to be in compliance would result in a
liability or obligation of the Company or any of its Subsidiaries of any nature,
whether or not accrued, contingent or otherwise, in an amount exceeding $500,000
individually, and $5,000,000 in the aggregate and, to the best knowledge of the
Company and its Subsidiaries after due inquiry, there are no circumstances that
may prevent or interfere with such compliance in the future, where the failure
to be in compliance would result in a liability or obligation of the Company or
any of its Subsidiaries of any nature, whether or not accrued, contingent or
otherwise, in an amount exceeding $500,000 individually, and $5,000,000 in the
aggregate.
(b) Except as set forth in Section 3.17(b) of the Company Disclosure
Letter, there is no Environmental Claim (as defined below) which, if adversely
determined, would result in a liability or obligation of the Company or any of
its Subsidiaries, whether or not accrued, contingent or otherwise, in an amount
exceeding $500,000 individually, and $5,000,000 in the aggregate, pending or
threatened against the Company or any of its Subsidiaries or, to the best
knowledge of the Company and its Subsidiaries after due inquiry, against any
person or entity whose liability for any Environmental Claim the Company or any
of its Subsidiaries has or may have retained or assumed either contractually or
by operation of law which, if adversely determined, would result in a liability
or obligation of the Company or any of its Subsidiaries, whether or not accrued,
contingent or otherwise, in an amount exceeding $500,000 individually, and
$5,000,000 in the aggregate.
(c) Except as set forth in Section 3.17(c) of the Company Disclosure
Letter, there are no past or present actions, activities, circumstances,
conditions, events or incidents, including the Release (as defined below) of any
Hazardous Materials (as defined below), that could form the basis of any
material Environmental Claim (as defined below) against the Company or any of
its Subsidiaries or, to the best knowledge of the Company and its Subsidiaries
after due inquiry, against any Person or entity whose liability for any material
Environmental Claim the Company or any of its Subsidiaries has or may have
retained or assumed either contractually or by operation of law.
(d) Without in any way limiting the generality of the foregoing, except as
set forth in Section 3.17(d) of the Company Disclosure Letter, all underground
storage tanks owned, operated, or leased by the Company or any of its
Subsidiaries and which are subject to regulation under the federal Resource
Conservation and Recovery Act (or equivalent state or local law regulating
underground storage tanks) meet the technical standards prescribed at Title 40
Code of Federal Regulations Part 280 which became effective December 22, 1998
(or any applicable state or local law requirements which are more stringent than
such technical standards or which became effective before such date) where the
failure to meet such standards or requirements would result in a liability or
obligation of the Company or any Subsidiary, whether or not accrued, contingent
or otherwise, in an amount exceeding $500,000 individually, and $5,000,000 in
the aggregate.
(e) The Company has provided to Parent true and correct copies of all
material assessments, reports and investigations or audits in the possession of
the Company or its Subsidiaries regarding environmental matters pertaining to,
or the environmental condition of, any property currently or formerly owned,
operated or leased by the Company or its Subsidiaries, or the compliance (or
noncompliance) by the Company or any of its Subsidiaries with any Environmental
Laws.
(f) For purposes of this Agreement:
(i) "Environmental Claim" means any claim, action, cause of action,
investigation or notice (written or oral) by any person or entity alleging
potential liability (including potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resources damages,
property damages, personal injuries, or penalties) arising out of, based on
or resulting from (a) the presence, or Release into the environment, of any
Hazardous Materials at any location, whether or not owned or operated by
the Company or any of its Subsidiaries or (b) circumstances forming the
basis of any violation, or alleged violation, of any Environmental Law.
(ii) "Environmental Laws" means all federal, interstate, state, local
and foreign laws and regulations relating to pollution or protection of
human health, safety, or the environment (including ambient air, surface
water, ground water, land surface or subsurface strata), including laws and
regulations relating to emissions, discharges, releases or threatened
releases of Hazardous Materials, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials.
(iii) "Hazardous Materials" means chemicals, pollutants, contaminants,
wastes, toxic substances, hazardous substances, radioactive materials,
asbestos, petroleum and petroleum products.
(iv) "Release" shall mean releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, escaping, leaching, disposing or
dumping.
III.18 Intellectual Property. Except for the rights (the "Licensed Rights")
licensed to the Company pursuant to the Master License Agreement, dated as of
July 30, 1997, among Cendant Car Rental, Inc., Avis Rent A Car System, Inc. and
Wizard Co., Inc. (the "Avis License"), either the Company or a Subsidiary of the
Company owns, or is licensed or otherwise possesses legally enforceable rights
to use, all Intellectual Property (as defined below) used in their respective
businesses where the failure to own, license or otherwise possess such
Intellectual Property would result in a Material Adverse Effect and the
consummation of the Transactions shall not alter or impair such rights in any
material respect. Except as set forth in Section 3.18 of the Company Disclosure
Letter, there are no pending or, to the knowledge of the Company, threatened
claims by any Person challenging the use by the Company or its Subsidiaries of
any material trademarks, trade names, service marks, service names, mark
registrations, logos, assumed names, registered and unregistered copyrights,
patents or applications and registrations therefor (collectively, the
"Intellectual Property") in their respective operations as currently conducted
which, if adversely determined, would result in a Material Adverse Effect. The
conduct of the businesses of the Company and its Subsidiaries (other than the
use by the Company and its Subsidiaries of the Licensed Rights in accordance
with the terms of the Avis License) does not infringe, in any material respect,
upon any intellectual property rights or any other proprietary right of any
Person, and neither the Company nor any Subsidiary has received any written
notice from any other Person pertaining to or challenging the right of the
Company or any Subsidiary to use any of the Intellectual Property. Except as set
forth in Section 3.18 of the Company Disclosure Letter, neither the Company nor
any of its Subsidiaries has made any claim of a violation or infringement by
others of its rights to or in connection with the Intellectual Property used in
their respective businesses which violation or infringement would have a
Material Adverse Effect.
III.19 Labor Matters.
(a) Except as set forth in Section 3.19(a) of the Company Disclosure Letter
or specifically disclosed in the Company SEC Reports, there are no labor or
collective bargaining agreements to which the Company or any Subsidiary of the
Company is a party. To the knowledge of the Company, there is no union
organizing effort pending or threatened against the Company or any Subsidiary of
the Company. Except as set forth in Section 3.19(a) of the Company Disclosure
Letter, there is no labor strike, labor dispute, work slowdown, stoppage or
lockout pending or, to the knowledge of the Company, threatened against or
affecting the Company or any Subsidiary of the Company, which has had or would
result in a Material Adverse Effect. Except as set froth in Section 3.19(a) of
the Company Disclosure Letter, there is no unfair labor practice or labor
arbitration proceeding pending or, to the knowledge of the Company, threatened
against the Company or any Subsidiary of the Company, that has had or would
result in a Material Adverse Effect. The Company and its Subsidiaries are in
compliance in all material respects with all applicable laws respecting (i)
employment and employment practices, (ii) terms and conditions of employment and
wages and hours, and (iii) unfair labor practice. Except as set forth in Section
3.19(a) of the Company Disclosure Letter or specifically disclosed in the
Company SEC Reports, there is no action, suit, proceeding, inquiry or
investigation pending or, to the knowledge of the Company, threatened against or
involving the Company or any of its Subsidiaries, at law or in equity, alleging
a violation of applicable laws, rules or regulations respecting employment and
employment practices, terms and conditions of employment and wages and hours, or
unfair labor practice that has had or would result in a Material Adverse Effect.
(b) Except as set forth in Section 3.19(b) of the Company Disclosure
Letter, no grievance or any arbitration proceeding arising out of or under
collective bargaining agreements which would have a Material Adverse Effect is
pending and no claim therefor exists.
(c) Neither the Company nor any of its Subsidiaries has any liabilities
under the Worker Adjustment and Retraining Notification Act (the "WARN Act")
that has had or would result in a Material Adverse Effect.
III.20 Brokers or Finders. None of the Company or any of its Subsidiaries
or Affiliates has entered into any agreement or arrangement entitling any agent,
broker, investment banker, financial advisor or other firm or Person to any
brokers' or finders' fee or any other commission or similar fee in connection
with any of the Transactions, except Morgan Stanley and Bear, Stearns & Co. Inc.
("Bear Stearns"), whose fees and expenses shall be paid by the Company in
accordance with the Company's agreement with such firm. True and correct copies
of engagement letters between the Company and each of Morgan Stanley and Bear
Stearns have been provided to Parent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT, PHH AND MERGER SUB
Each of Parent, PHH and Merger Sub jointly and severally represents and
warrants to the Company as follows:
IV.1 Organization. Each of Parent, PHH and Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted. Merger Sub has not engaged in any activities other
than in connection with or as contemplated by this Agreement and has no material
liabilities other than those incident to its formation and the Transactions.
IV.2 Authority Relative to this Agreement. Each of Parent, PHH and Merger
Sub has the requisite corporate power and authority to execute and deliver this
Agreement and to consummate the Transactions. The execution and delivery of this
Agreement by Parent, PHH and Merger Sub, and the consummation of the
Transactions, have been duly authorized by the respective board of directors of
each of Parent, PHH and Merger Sub, and by PHH as the sole stockholder of Merger
Sub, and no other corporate proceeding on the part of Parent, PHH or Merger Sub
is required to authorize this Agreement or to consummate the Transactions, other
than the filing and the recordation of the Certificate of Merger in accordance
with the DGCL. This Agreement has been duly executed and delivered by each of
Parent, PHH and Merger Sub and (assuming due and valid authorization, execution
and delivery hereof by the Company) constitutes a valid and binding agreement of
each of Parent, PHH and Merger Sub, enforceable against each of Parent, PHH and
Merger Sub in accordance with its terms, except that (i) such enforcement may be
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws, now or hereafter in effect, relating to creditor's rights
generally and (ii) equitable remedies of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
IV.3 No Conflict; Required Filings and Consents.
(a) Except (i) for applicable requirements of (A) the Exchange Act, (B) the
HSR Act and any similar foreign competition laws, and (C) any state securities
and blue sky filings applicable hereto, (ii) for the filing and recordation of
the Certificate of Merger, as required by the DGCL, and (iii) as set forth in
the disclosure letter delivered by Parent, PHH and Merger Sub prior to the
execution of this Agreement to the Company (the "Parent Disclosure Letter"),
neither the execution and delivery of this Agreement by Parent, PHH and Merger
Sub, nor the consummation by Parent, PHH and Merger Sub of the Transactions,
shall require, on the part of Parent, PHH or Merger Sub, any filing with, or
obtaining of, any permit, authorization, consent or approval of, any
Governmental Entity, except for such filings, permits, authorizations, consents
or approvals the failure of which to make or obtain would not materially impair
the ability of Parent, PHH or Merger Sub to consummate the Transactions.
(b) Except as set forth in Section 4.3(b) of the Parent Disclosure Letter,
neither the execution and delivery of this Agreement by Parent, PHH or Merger
Sub, nor the consummation by Parent, PHH or Merger Sub of the Transactions,
shall (i) conflict with or result in a breach of the certificate of
incorporation or by-laws of Parent, PHH or Merger Sub, (ii) result in a
violation or breach of or constitute (with or without due notice or lapse of
time, or both) a default under, or give rise to any right of termination,
cancellation, suspension, modification or acceleration under, or result in the
creation of a lien under, any of the terms, conditions or provisions of, or
otherwise require the consent or waiver of, or notice to, any other party under,
any material bond note, mortgage, indenture, other evidence of indebtedness,
guarantee, license, agreement or other contract or instrument to which Parent,
PHH or Merger Sub is a party or by which any of them or any of their respective
properties or assets is bound, or (iii) violate any law, statute, rule,
regulation, order, writ, injunction or decree applicable to Parent, PHH or
Merger Sub, or any of their respective properties or assets except, in the case
of clauses (ii) and (iii), for such violations, breaches, defaults or rights
which would not materially impair the ability of Parent, PHH or Merger Sub to
consummate the Transactions.
IV.4 Proxy Statement. None of the information supplied by Parent, PHH or
Merger Sub for inclusion or incorporation by reference in the Proxy Statement
shall, at the time it is filed with the SEC, at the time it is first mailed to
the Company's stockholders or at the time of the Stockholders Meeting, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
IV.5 Litigation. Except as set forth in Section 4.5 of the Parent
Disclosure Letter, there is no action, suit, proceeding, inquiry or
investigation pending or, to the knowledge of Parent, PHH or Merger Sub,
threatened involving Parent, PHH or Merger Sub, at law or in equity, by or
before any Governmental Entity which questions or challenges the validity of
this Agreement or which, if adversely determined, would materially impair or
delay the ability of Parent, PHH or Merger Sub to consummate the Transactions.
IV.6 Financing. Parent and PHH have or shall have sufficient cash on hand
and shall provide, or cause to be provided, at such time or times as such funds
are required, to Merger Sub or, as the case may be, the Company, such cash on
hand (i) to pay the Merger Consideration and to pay any other amounts required
to be paid in order to consummate the Transactions contemplated by this
Agreement, including pursuant to Section 2.4, (ii) to pay any fees and expenses
in connection with the Transactions and (iii) to satisfy the obligations to pay
any existing indebtedness of the Company or its Subsidiaries that is required to
be repaid as a result of the Transactions.
IV.7 Brokers or Finders. None of Parent, PHH, Merger Sub or any of their
respective Affiliates has entered into any agreement or arrangement entitling
any agent, broker, investment banker, financial advisor or other firm or Person
to any brokers' or finders' fee or any other commission or similar fee in
connection with any of the Transactions, except Lehman Brothers and Chase
Securities Inc., whose fees and expenses shall be paid by Parent in accordance
with Parent's agreement with each such firm.
ARTICLE V
COVENANTS
V.1 Conduct of Business by the Company Pending the Merger. The Company
covenants and agrees that, during the period from the date of this Agreement and
continuing until the earlier to occur of the termination of this Agreement or
the Effective Time, except as contemplated by this Agreement or required by
applicable law or rule of the New York Stock Exchange, unless Parent shall
otherwise agree in writing (such agreement not to be unreasonably withheld,
conditioned or delayed), and except as set forth in Section 5.1 of the Company
Disclosure Letter:
(a) the Company shall conduct its business and shall cause the businesses
of its Subsidiaries to be conducted, only in, and the Company and its
Subsidiaries shall not take any action except in, the ordinary course of
business, consistent with past practice; and the Company shall use its
reasonable best efforts to preserve intact the business organizations of the
Company and its Subsidiaries, and to maintain (i) the services of the present
officers, employees and consultants of the Company and its Subsidiaries and (ii)
its existing relations with suppliers, creditors, business associates and others
having business dealings with it; and
(b) without limiting the generality of the foregoing, the Company shall
not, and shall cause its Subsidiaries not to, take any of the following actions:
(i) amend its certificate of incorporation or by-laws;
(ii) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of
capital stock of any class or any other equity interest, or any options,
warrants, convertible securities or other rights of any kind to acquire any
shares of capital stock, or any other equity interest in the Company or any
of its Subsidiaries (except for the issuance of shares of Company Common
Stock pursuant to the exercise of Options outstanding on the date hereof);
(iii) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of any of its capital stock or any other equity
interest, including any constructive or deemed distributions, and any
distribution in connection with the adoption of a shareholders rights plan,
or make any other payments to stockholders in their capacity as such,
except that a wholly owned Subsidiary of the Company may declare and pay a
dividend to its parent;
(iv) split, combine or reclassify any of its capital stock or any
other equity interest or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for shares of
its capital stock or any other equity interest;
(v) redeem, purchase or otherwise acquire, directly or indirectly, any
of its capital stock or any other equity interests;
(vi) (A) purchase, acquire, sell, transfer, lease, license, mortgage,
encumber or dispose of any material assets, other than the purchase, sale,
rental and lease of vehicles in the ordinary course of business, consistent
with past practice; (B) acquire (by merger, consolidation or acquisition of
stock or assets or otherwise) any corporation, partnership or other
business organization or division thereof; (C) sell, transfer or dispose of
any Subsidiary of the Company (by merger, consolidation, sale of stock or
assets or otherwise); (D) incur or assume any indebtedness for borrowed
money or other liability, other than in connection with the financing of
vehicles in the ordinary course of business, consistent with past practice;
(E) modify, amend or terminate any confidentiality agreements, standstill
agreements or Company Material Contracts to which the Company or its
Subsidiaries is a party or by which it is bound, or waive, release or
assign any material rights or claims, other than in the ordinary course of
business, consistent with past practice; (F) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other Person, other than in the
ordinary course of business, consistent with past practice; (G) make any
material loans, advances or capital contributions to, or investments in,
any other Person (other than to its wholly owned Subsidiaries in the
ordinary course of business, consistent with past practice); (H)
repurchase, redeem, repay or take any other action with respect to the
issued and outstanding 11% Senior Subordinated Notes of the Company due May
2009 (the "Notes"), other than pursuant to Section 5.7; or (I) other than
in the ordinary course of business, consistent with past practice, enter
into any material commitment, transaction, contract or agreement, including
any of the following entered into outside the ordinary course of business
(i) any material capital expenditure, (ii) any material contract or
agreement outside the ordinary course of business, (iii) any contracts or
agreements that cannot be cancelled on notice of thirty (30) days or less
and (iv) any noncompete agreements or other agreements that limit the
ability of the Company to conduct any line of business;
(vii) increase the compensation, severance or other benefits payable
or to become payable to its directors, officers or employees, other than
increases in salary or wages of employees of the Company or its
Subsidiaries (who are not directors or executive officers of the Company)
in accordance with past practice or pursuant to binding commitments made
prior to the date hereof, or grant any severance or termination pay (except
payments required to be made under the Plans or other obligations existing
on the date hereof in accordance with the terms of such obligations) to, or
enter into any employment or severance agreement with, any employee of the
Company or any of its Subsidiaries, or establish, adopt, enter into or
amend any collective bargaining agreement, Plan, trust, fund, policy or
arrangement for the benefit of any current or former directors, officers or
employees or any of their beneficiaries, except, in each case, as may be
required by law or as would not result in a material increase in the cost
of maintaining such collective bargaining agreement, Plan, trust, fund,
policy or arrangement;
(viii) pay, repurchase, discharge or satisfy any of its material
claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business, consistent with past
practice, or pursuant to contractual requirements existing on the date
hereof, of claims, liabilities or obligations reflected or reserved
against, in, or contemplated by, the consolidated financial statements (or
the notes thereto) of the Company and its Subsidiaries;
(ix) take any action to change accounting policies or procedures or
any of its methods of reporting income, deductions or other items for
income tax purposes, except as required by a change in GAAP, SEC position
or applicable law occurring after the date hereof;
(x) approve or authorize any action to be submitted to the
stockholders of the Company for approval other than pursuant to this
Agreement;
(xi) make or change any material election with respect to Taxes, agree
or settle any material claim or assessment in respect of Taxes, or agree to
an extension or waiver of the limitation period to any material claim or
assessment in respect of Taxes;
(xii) voluntarily take, or commit to take, any action that would or is
reasonably likely to result in any of the conditions to the Merger set
forth in Article VI not being satisfied or make any representation or
warranty of the Company contained herein that is not qualified as to
materiality inaccurate in any material respect, or any representation or
warranty that is qualified as to materiality untrue in any respect at, or
as of any time prior to, the Effective Time, or that would materially
impair the ability of the Company, Parent, PHH or Merger Sub to consummate
the Transactions, including the Merger, in accordance with the terms hereof
or materially delay such consummation; or
(xiii) agree, authorize or announce to take any of the actions
described in subsections (i) through (xii) above.
V.2 No Solicitation.
(a) Except as set forth below, from and after the date hereof and prior to
the Effective Time, the Company shall not, directly or indirectly, through any
Subsidiary or Affiliate of the Company, or through any officer, director,
employee, investment banker, agent or other representative of the Company or any
Subsidiary or Affiliate of the Company, (i) encourage, invite, initiate or
solicit any inquiries relating to or the submission or making of a proposal by
any Person with respect to a Third-Party Acquisition (as defined below) or (ii)
participate in, or encourage, invite, initiate or solicit, negotiations or
discussions with, or furnish or cause to be furnished any information to, any
Person relating to a Third-Party Acquisition. Upon the execution of this
Agreement, the Company shall immediately (i) cease, or cause to be ceased, any
discussions or negotiations with any Person, entity or group in connection with
any proposed or potential Third-Party Acquisition and shall seek to have
returned to the Company any confidential information provided in any such
discussions or negotiations and (ii) take all actions necessary to rescind the
Company's stock repurchase program authorized by the Board on August 9, 2000.
Notwithstanding the foregoing, prior to the Stockholders Meeting, if the
Company, the Board or the Independent Committee, without being in violation of
the terms of this Section 5.2, receives an unsolicited bona fide written
proposal from any Person or group with respect to a Third-Party Acquisition
which could reasonably be expected to result in a Superior Proposal (as defined
below), then the Company may, directly or indirectly, furnish information and
access to such Person or group pursuant to an appropriate confidentiality
agreement, and may participate in discussions and negotiations with, such Person
or group; provided, however, that the terms of such confidentiality agreement
shall have terms that are not less restrictive than the terms set forth in the
confidentiality agreement between the Company and Parent, dated as of July 31,
2000 (the "Confidentiality Agreement").
(b) The Company shall within twenty-four (24) hours notify Parent in
writing upon receipt of any proposal, written or oral, relating to a Third-Party
Acquisition or any request for nonpublic information relating to the Company or
any of its Subsidiaries in connection with any pending, proposed or contemplated
Third-Party Acquisition or for access to the properties, books or records of the
Company or any Subsidiary by any Person that informs the Board or the
Independent Committee that it is considering making, or has made, a proposal
relating to a Third-Party Acquisition. Such notice shall identify the Person
submitting the proposal, attach a copy of any written correspondence or other
written materials relating to such proposal, summarize any significant terms of
such proposal not reflected in any such attached materials, state whether the
Company is providing or intends to provide the Person or group making such
proposal with access to information concerning the Company or any of its
Subsidiaries, as provided in this Section 5.2 and, if it proposes to provide
such access to information, state that such proposal could reasonably be
expected to result in a Superior Proposal and the basis for such conclusion. The
Company also shall promptly notify Parent of any significant development
relating to any inquiries, discussions, negotiations, proposals or requests for
information concerning any Third-Party Acquisition. The Company shall keep
Parent informed of the status of any such negotiations and shall further update,
to the extent of any significant developments, the information required to be
provided in each notice upon the request of Parent.
(c) Except as provided in subparagraph (d) below, neither the Board nor the
Independent Committee shall (i) withdraw or modify, or propose to withdraw or
modify, or refuse or fail at Parent's request to reaffirm, (A) the approval by
the Board of this Agreement or the Merger, (B) the favorable recommendation of
the Independent Committee and the Board with respect thereto, or (C) the Board's
recommendation to stockholders of the Company that they vote their shares of
Company Common Stock in favor of adoption of this Agreement, and the Board's
direction that this Agreement be submitted to stockholders for such adoption;
(ii) approve or recommend, or propose publicly to approve or recommend, any
Third-Party Acquisition; or (iii) cause the Company to enter into any agreement
in principle, letter of intent, contract, agreement (whether written or oral) or
memorandum of understanding (each, a "Company Acquisition Agreement") related to
any Third-Party Acquisition.
(d) Notwithstanding the foregoing, in the event that the Independent
Committee determines in good faith, after receipt of advice of its outside legal
counsel, that failure to take such action would constitute a breach of the
Board's fiduciary duties to the Company's stockholders under applicable law, the
Independent Committee (and the Board acting on the recommendation of the
Independent Committee) may (i) withdraw or modify its approval or recommendation
of this Agreement and the Merger and disclose such withdrawal or modification to
the Company's stockholders; and, (ii) solely in relation to a Third-Party
Acquisition that constitutes a Superior Proposal, provided the Board, the
Independent Committee and the Company have not violated the terms of this
Section 5.2, (A) recommend such Superior Proposal, and/or (B) following the
Stockholders Meeting, if the Company Stockholder Approval shall not have been
obtained, terminate this Agreement in accordance with Section 7.1(d)(iii) hereof
and, contemporaneously with such termination, cause the Company to enter into a
Company Acquisition Agreement with respect to such Superior Proposal, provided,
however, that (x) prior to taking any of the foregoing actions, the Company
shall have paid Parent by wire transfer the amount payable pursuant to Section
7.3 and (y) prior to taking the action described in clause (B) above, the
Independent Committee shall have (1) given Parent at least three Business Days'
prior written notice that the Company intends to terminate this Agreement and
provided Parent with a reasonable opportunity to respond to any such Superior
Proposal (which response could include a proposal to revise the terms of the
Transactions) and (2) fully considered any such response by Parent and concluded
that, notwithstanding such response, such proposal continues to be a Superior
Proposal in relation to the Transactions, as the terms of the Transactions may
be proposed to be revised by Parent's response. Notwithstanding the foregoing,
the obligation of the Company to duly call, give notice of, convene and hold the
Stockholders Meeting in accordance with Section 2.3 hereof shall not be affected
by the commencement, proposal, public disclosure or communication to the Company
of a Third-Party Acquisition or a Superior Proposal or by the taking of any
action by the Board or the Independent Committee in accordance with this Section
5.2. No action taken by the Board or the Independent Committee in accordance
with this Section 5.2 shall constitute a breach of any other section of this
Agreement.
(e) As used in this Agreement, the term "Third-Party Acquisition" shall
mean any of the following events: (i) the acquisition of the Company by merger,
purchase of stock or assets, joint venture or otherwise by, or a "merger of
equals" with, any Person (which includes a "person," as such term is defined in
Section 13(d)(3) of the Exchange Act) other than a member of the Acquisition
Group (a "Third Party"); (ii) the acquisition by a Third Party of any material
portion (which shall include twenty percent (20%) or more) of the assets of the
Company and its Subsidiaries, taken as a whole; (iii) the acquisition by a Third
Party of twenty percent (20%) or more of the outstanding shares of Company
Common Stock; (iv) the adoption by the Company of a plan of liquidation or the
declaration or payment of an extraordinary dividend; or (v) the repurchase by
the Company or any of its Subsidiaries of more than twenty percent (20%) of the
outstanding shares of Company Common Stock.
(f) For purposes of this Agreement, "Superior Proposal" means any bona fide
written proposal to acquire, directly or indirectly, for consideration
consisting of cash and/or securities, all of the shares of Company Common Stock
then outstanding or all or substantially all of the assets of the Company to be
followed by a pro rata distribution of the sale proceeds to stockholders of the
Company, that (i) is not subject to any financing conditions or contingencies,
(ii) provides holders of Company Common Stock with per share consideration that
the Independent Committee determines in good faith, after receipt of advice of
its financial advisor, is more favorable from a financial point of view than the
consideration to be received by holders of Company Common Stock in the Merger,
(iii) is determined by the Independent Committee in its good faith judgment,
after receipt of advice of its financial advisor and outside legal counsel, to
be likely of being completed (taking into account all legal, financial,
regulatory and other aspects of the proposal, the Person making the proposal and
the expected timing to complete the proposal), (iv) does not, in the definitive
Company Acquisition Agreement, contain any "due diligence" conditions, and (v)
has not been obtained by or on behalf of the Company in violation of this
Section 5.2.
V.3 Access to Information; Confidentiality.
(a) Until the Effective Date, the Company shall (and shall cause its
Subsidiaries to) afford to the officers, employees, accountants, counsel,
financing sources and other representatives of Parent, reasonable access during
normal business hours to its properties, books, contracts, commitments and
records; furnish to Parent all information concerning its business, properties,
and personnel as Parent may reasonably request or has reasonably requested; and
use reasonable best efforts to make available during normal business hours to
the officers, employees, accountants, counsel, financing sources and other
representatives of Parent the appropriate individuals (including management
personnel, attorneys, accountants and other professionals) for discussion of the
Company's business, properties, prospects and personnel as Parent may reasonably
request.
(b) Parent shall keep all information disclosed to the persons identified
in clause (a) above pursuant to this Agreement confidential in accordance with
the terms of the Confidentiality Agreement.
(c) As soon as practicable (but in no case later than 21 days) after the
execution of this Agreement, the Company shall permit Parent to electronically
link the Company's financial reporting system to Parent's financial reporting
consolidation system ("Hyperion"). The link to Hyperion will be completed by
Parent's financial reporting staff, with assistance from the Company's
accounting staff, at no incremental cost to the Company. Parent will provide the
necessary Hyperion and ancillary software to be installed on a computer in the
Company's accounting department.
V.4 Consents; Approvals.
(a) The Company, Parent and Merger Sub shall each use its reasonable best
efforts (which efforts, to the extent reasonably practicable, shall be made
prior to the consummation of the Merger), and cooperate with each other, to
obtain as promptly as practicable all consents, waivers, approvals,
authorizations or orders (including all rulings and approvals of all United
States and foreign Governmental Entities), and the Company, Parent, PHH and
Merger Sub shall make all filings (including all filings with United States and
foreign Governmental Entities) required in connection with the authorization,
execution and delivery of this Agreement by the Company, Parent, PHH and Merger
Sub and the consummation by them of the Transactions.
(b) Each party hereto shall make an appropriate filing of a notification
and report form pursuant to the HSR Act with respect to the Transactions within
fifteen Business Days after the date hereof, shall as promptly as practicable
supply any additional information and documentary material that may be requested
pursuant to the HSR Act, and shall use reasonable best efforts to obtain early
termination of the waiting period under the HSR Act. In addition, each party
hereto shall promptly make any other filing that may be required under any
antitrust law or by any antitrust authority and shall as promptly as practicable
supply and additional information and documentary material that may be required
in connection therewith.
V.5 Indemnification and Insurance.
(a) From and after the Effective Date, Parent and the Surviving Corporation
and their respective successors shall indemnify, defend and hold harmless each
Person who is now, or has been at any time prior to the date hereof or who
becomes prior to the Effective Time, an officer or director of the Company or
any of the Subsidiaries (the "Covered Parties") against all losses, claims,
damages, costs, expenses (including reasonable attorneys' fees and expenses),
liabilities or judgments or amounts that are paid in settlement with the
approval of the indemnifying party (which approval shall not be unreasonably
withheld or delayed) incurred in connection with any threatened or actual
action, suit or proceeding based in whole or in part on or arising in whole or
in part out of the fact that such person is or was a director or officer of the
Company ("Indemnified Liabilities"), including all Indemnified Liabilities based
in whole or in part on, or arising in whole or in part out of, this Agreement or
the transactions contemplated hereby, in each case to the fullest extent that a
corporation is permitted by law to indemnify its own directors or officers, as
the case may be. In the event any such claim, action, suit, proceeding or
investigation is brought against any Covered Party, the indemnifying parties
shall assume and direct all aspects of the defense thereof, including
settlement, and the Covered Party shall cooperate in the defense of any such
matter. The Covered Party shall have a right to participate in (but not control)
the defense of any such matter with its own counsel and at its own expense.
Notwithstanding the right of the indemnifying parties to assume and control the
defense of such litigation, claim or proceeding, such Covered Party shall have
the right to employ separate counsel and to participate in the defense of such
litigation, claim or proceeding, and the indemnifying parties shall bear the
fees, costs and expenses of such separate counsel and shall pay such fees, costs
and expenses promptly after receipt of an invoice from such Covered Party if (i)
the use of counsel chosen by the indemnifying parties to represent such Covered
Party would present such counsel with a conflict of interest, (ii) the
defendants in, or targets of, any such litigation, claim or proceeding shall
have been advised by counsel that there may be legal defenses available to it or
to other Covered Parties which are different from or in addition to those
available to the indemnifying parties or (iii) the indemnifying parties shall
not have employed counsel satisfactory to such Covered Party, in the exercise of
the Covered Party's reasonable judgment, to represent such Covered Party within
a reasonable time after notice of the institution of such litigation, claim or
proceeding. The Covered Parties as a group shall be represented by a single law
firm (plus no more than one local counsel in any jurisdiction) with respect to
each such matter unless there is, under applicable standards of professional
conduct, a conflict on any significant issue between the positions of any two or
more Covered Parties. The indemnifying parties shall not settle any such matter
unless (i) the Covered Party gives prior written consent, which shall not be
unreasonably withheld or delayed, or (ii) the terms of the settlement provide
that the Covered Party shall have no responsibility for the discharge of any
settlement amount and impose no other obligations or duties on the Covered
Party, and the settlement discharges all rights against the Covered Party with
respect to such matter. Any Covered Party wishing to claim indemnification under
this Section 5.5, upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify Parent and the Surviving Corporation (but
the failure so to notify shall not relieve the indemnifying party from any
liability which it may have under this Section 5.5, except to the extent such
failure materially prejudices the indemnifying parties). Each Covered Party
shall be entitled to the advancement of expenses to the full extent permitted by
law in connection with any such action (subject to tendering any undertaking to
repay such expenses, to the extent required by applicable law). Notwithstanding
the foregoing, in the event that there is any conflict between this Section
5.5(a) and the terms of the Amended and Restated Certificate of Incorporation or
Amended and Restated By-Laws of the Company, the Amended and Restated
Certificate of Incorporation and/or Amended and Restated By-laws, as the case
may be, shall prevail.
(b) All rights to indemnification, all limitations on liability and all
rights to advancement of expenses existing in favor of a Covered Party as
provided herein, in the Company's Amended and Restated Certificate of
Incorporation, Amended and Restated By-Laws or other indemnification agreements
as in effect as of the date hereof shall survive the Merger and shall continue
in full force and effect, without any amendment thereto, for a period of six
years from the Effective Time to the extent such rights are consistent with
applicable law; provided that in the event any claim or claims are asserted or
made within such six-year period, all rights to indemnification in respect of
any such claim or claims shall continue until disposition of any and all such
claims; provided further, that any determination required to be made with
respect to whether a Covered Party's conduct complies with the standards set
forth under applicable law, the Company's Amended Restated Certificate of
Incorporation, Amended and Restated By-Laws or such agreements, as the case may
be, shall be made by independent legal counsel selected by the Covered Party and
reasonably acceptable to the Surviving Corporation.
(c) In the event that Cendant or the Surviving Corporation or any subsidiary of their
respective successors or assigns (i) consolidates with or merges into any other
Person and shall not be the Corporation);surviving corporation or entity of such
consolidation or merger or (ii) "Cendant" shall mean
Cendant Corporation and any successor thereto by merger, consolidation,
transfer oftransfers or conveys all or substantially all of
its properties and assets to any Person, then, and in each such case, to the
extent necessary to effectuate the purposes of this Section 5.5, proper
provision shall be made so that such successors, assigns and transferees, as the
case may be, assume the obligations set forth in this Section 5.5, and none of
the actions described in the foregoing clauses (i) or otherwise;
(iii) "Affiliate"(ii) shall mean,be taken until
such provision is made.
(d) For a period of six years after the Effective Time, Cendant shall cause
the Surviving Corporation and its successors to maintain in effect, without any
lapses in coverage, policies of directors' and officers' liability insurance (or
a "tail" policy) for the benefit of those Persons who are covered by the
Company's directors' and officers' liability insurance policies as of the date
hereof, providing coverage with respect to matters occurring prior to the
Effective Time that is at least equal to the coverage provided under the
Company's current directors' and officers' liability insurance policies to the
extent that such liability insurance can be maintained at an annual cost to the
Surviving Corporation of not greater than 200 percent of the premium for the
current Company directors' and officers' liability insurance; provided that if
such insurance (or "tail" policy) cannot be so maintained at such cost, the
Surviving Corporation shall maintain as much of such insurance as can be so
maintained at a cost equal to 200 percent (200%) of the current annual premiums
of the Company for such insurance.
V.6 Employee Benefits.
(a) During the period commencing at the Effective Time and ending on
December 31, 2001, Parent shall cause all current and former employees and
officers of the Company and its Subsidiaries who are entitled to receive
compensation and benefits as of the Effective Time, other than employees covered
by collective bargaining agreements, to receive (i) the salary or wage level and
bonus opportunity, to the extent applicable, not materially less favorable in
the aggregate than that in effect on the date hereof and (ii) benefits,
perquisites and other terms and conditions of employment that are not materially
less favorable in the aggregate than the benefits, perquisites and other terms
and conditions that they were entitled to receive on the date hereof.
(b) Subject to Section 5.6(a) hereof, from and after the Effective Time,
Parent shall honor, pay, perform and satisfy any person, company,
corporationand all liabilities,
obligations and responsibilities to, or in respect of, each employee and officer
of the Company and its Subsidiaries, and each former employee and officer of the
Company and its Subsidiaries, as of the Effective Time arising under the terms
of, or in connection with, any employee benefit, fringe benefit, deferred
compensation or incentive compensation plan or arrangement or any employment,
consulting, retention, severance, change-of-control or similar agreement, in
each case, to the extent listed in Section 3.14(a) or 3.16(a) of the Company
Disclosure Letter and in accordance with the terms thereof in effect on the date
hereof. Without limiting the generality of the foregoing, until December 31,
2001, Parent shall keep in effect all severance and retention plans, practices
and policies that are applicable to employees and officers of the Company and
its Subsidiaries as of the date hereof.
(c) Parent shall, or shall cause the Surviving Corporation and its
Subsidiaries to, give Continuing Employees full credit for purposes of
eligibility and vesting under any employee benefit plans or arrangements
maintained by Parent, the Surviving Corporation or any Subsidiary of Parent or
the Surviving Corporation for such Continuing Employees' service with the
Company, any Subsidiary of the Company or any of their respective predecessors
to the same extent recognized by the Company, any Subsidiary of the Company or
any such predecessor for similar purposes immediately prior to the Effective
Time. In addition, Parent shall, or shall cause the Surviving Corporation and
its Subsidiaries to, give Continuing Employees full credit for purposes of the
determination of benefits under any employee benefit plans or arrangements in
effect as of the date hereof maintained by Parent for such Continuing Employees'
service with the Company, any Subsidiary of the Company or any of their
respective predecessors to the same extent recognized by the Company, any
Subsidiary of the Company or any such predecessor for similar purposes
immediately prior to the Effective Time. Parent shall, or shall cause the
Surviving Corporation and its Subsidiaries to, (i) waive all limitations as to
preexisting conditions, exclusions and waiting periods with respect to
participation and coverage requirements applicable to the Continuing Employees
under any welfare plan that such employees may be eligible to participate in
after the Effective Time, other than limitations or waiting periods that are
already in effect with respect to such employees and that have not been
satisfied as of the Effective Time under any welfare plan maintained for the
Continuing Employees immediately prior to the Effective Time, and (ii) provide
each Continuing Employee with credit for any co-payments and deductibles paid
prior to the Effective Time in satisfying any applicable co-payment, deductible
or out-of-pocket requirements in respect of the year during which the Effective
Time occurs under any welfare plans that such employees are eligible to
participate in after the Effective Time to the same extent as if those
deductibles or co-payments had been paid under the welfare plans for which such
employees are eligible after the Effective Time.
(d) Nothing contained herein shall constitute assurance of continued
employment of any officer or employee of the Company or any of its Subsidiaries
following the Effective Time.
V.7 Note Tender Offer. Parent may, in its sole and absolute discretion,
commence a tender offer and consent solicitation to repurchase any and all of
the outstanding Notes (the "Note Tender Offer") on terms and conditions
determined solely by Parent. The Note Tender Offer shall be effected in
compliance with applicable laws and SEC rules and regulations. The Company shall
cooperate with Parent, PHH and Merger Sub in connection with the preparation of
all documents and the making of all filings required in connection with the Note
Tender Offer and shall use its commercially reasonable efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all other things
necessary, proper or advisable to consummate the Note Tender Offer; provided,
however, that it is understood and agreed by the parties hereto that (i) such
Note Tender Offer shall be consummated no earlier than the Closing Date, (ii)
the Company shall have no obligation to provide any funds to consummate the Note
Tender Offer, and (iii) Parent or PHH shall provide the funds required to
consummate the Note Tender Offer on or after the Effective Time, together with
all related fees and expenses.
V.8 Notification of Certain Matters. The Company shall give prompt notice
to Parent, and Parent (on behalf of itself, PHH and Merger Sub) shall give
prompt notice to the Company, of (i) the occurrence or non-occurrence of any
event known to it, the occurrence or non-occurrence of which is reasonably
likely to cause any representation or warranty of such party contained in this
Agreement to be materially untrue or inaccurate, (ii) any failure of the Company
or Parent, PHH or Merger Sub, as the case may be, to comply with or satisfy, or
the occurrence or non-occurrence of any event known to it, the occurrence or
non-occurrence of which is reasonably likely to cause the failure by such party
materially to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; (iii) the occurrence of any other
event known to it which would be reasonably likely (A) to have a Material
Adverse Effect or (B) to cause any condition set forth in Article VI to be
unsatisfied in any material respect at any time prior to the Effective Time; or
(iv) any action, suit, proceeding, inquiry or investigation pending or, to the
knowledge of the Company, threatened which questions or challenges the validity
of this Agreement; provided, however, that the delivery of any notice pursuant
to this Section 5.8 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
V.9 Further Action. Upon the terms and subject to the conditions hereof
each of the parties hereto shall use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all other things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement, to obtain in a
timely manner all necessary waivers, consents and approvals and to effect all
necessary registrations and filings, and otherwise to satisfy or cause to be
satisfied all conditions precedent to its obligations under this Agreement.
V.10 Public Announcements. Parent, PHH, Merger Sub and the Company shall
consult with each other before issuing any press release or making any public
statement with respect to this Agreement, the Merger or the other Transactions
and shall not issue any such press release or make any such public statement
without the prior consent of the other parties, which shall not be unreasonably
withheld; provided, however, that any party may, without the prior consent of
the others, issue such press release or make such public statement as may, upon
the advice of counsel, be required by law or the rules and regulations of The
New York Stock Exchange, in advance of obtaining such prior consent, in which
case, the parties shall cooperate to reach mutual agreement as to the language
of any such report, statement or press release. Immediately following the
execution and delivery of this Agreement, Parent, PHH, Merger Sub and the
Company are each issuing press releases to be mutually agreed upon with respect
to this Agreement, the Merger and the other Transactions.
V.11 Transfer Taxes. Parent shall pay any real property or other similar
transfer Taxes incurred in connection with the consummation of the Offer and the
Merger.
V.12 Financial Statements. Upon request by Parent or PHH, the Company shall
use commercially reasonable efforts to cooperate with Parent and PHH in
connection with preparing such financial statements as are required by
applicable law and by SEC rules and regulations to be filed by PHH with the SEC
in connection with the prospectus for the medium term notes to be issued by PHH;
such cooperation shall include, without limitation, providing all information
reasonably requested by Parent or PHH.
V.13 Section 16 Matters. The Company shall take all such steps as may be
required to cause any dispositions of Company Common Stock (including derivative
securities with respect to the Company Common Stock) resulting from the
Transactions contemplated by this Agreement by each officer or director who is
subject to the reporting requirements of Section 16(a) of the Exchange Act with
respect to the Company to be exempt under Rule 16b-3 promulgated under the
Exchange Act, such steps to be taken in accordance with the No-Action Letter,
dated January 12, 1999, issued by the Commission to Skadden, Arps, Slate,
Meagher & Flom LLP.
ARTICLE VI
CONDITIONS TO THE MERGER
VI.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment or waiver (to the extent permitted by applicable law) at or
prior to the Effective Time of the following conditions:
(a) Stockholder Approval. The Company Stockholder Approval shall have been
obtained at or prior to the Effective Time in accordance with the DGCL.
(b) No Injunction or Statute. No statute, rule, regulation, order, decree,
judgment, injunction or ruling shall have been enacted, entered, promulgated or
enforced by any court or other Governmental Entity of competent jurisdiction
which, in any such case, (i) prohibits or restricts the ownership or operation
by Parent (or any of its Affiliates or Subsidiaries) of a material portion of
the Company's and its Subsidiaries' businesses or assets, or compels Parent (or
any of its Affiliates or Subsidiaries) to dispose of or hold separate any
material portion of the Company's and its Subsidiaries' businesses or assets, or
(ii) restrains in any material respect or prohibits the consummation of the
Merger, which has not been vacated, dismissed or withdrawn prior to the
Effective Time. The Company and Parent shall use their respective best efforts
to have any of the foregoing vacated, dismissed or withdrawn by the Effective
Time.
(c) No Action. No action, suit or proceeding shall have been instituted, or
shall be pending or threatened by a Governmental Entity (i) seeking to restrain
in any material respect or prohibit the consummation of the Merger or the
performance of any of the other Transactions contemplated by this Agreement,
(ii) seeking to obtain from the Company, Parent, PHH or Merger Sub any damages
that would result in a Material Adverse Effect or (iii) seeking to impose the
restrictions, prohibitions or limitations referred to in subsection (b) above.
(d) HSR Act. Any waiting period applicable to the Merger under the HSR Act
and any applicable foreign competition or antitrust laws shall have been
terminated or expired.
VI.2 Conditions to Obligations of the Company to Effect the Merger. The
obligation of the Company to effect the Merger shall be subject to the
fulfillment or waiver (to the extent permitted by applicable law) at or prior to
the Effective Time of the following conditions:
(a) The representations and warranties of Parent, PHH and Merger Sub set
forth in this Agreement shall be true and correct in all respects as of the
Effective Time as though made on or as of such time (ignoring for purposes of
this determination any materiality or Material Adverse Effect qualifiers
contained within individual representations and warranties), except for (i)
those representations and warranties that address matters only as of a
particular date or only with respect to a specific period of time which need
only be true and correct as of such date or with respect to such period and (ii)
such failures to be true and correct as would not, individually or in the
aggregate, reasonably be expected to materially impair the ability of Parent,
PHH or Merger Sub to consummate the Merger.
(b) Parent, PHH and Merger Sub shall have performed and complied in all
material respects with all obligations, agreements and covenants required by
this Agreement to be performed and complied with by it prior to the Effective
Time.
(c) The Company shall have received a certificate signed by the chief
financial officer of Parent, dated as of the Closing Date, to the effect that,
to the best of such officer's knowledge, the conditions set forth in Section
6.2(a) and Section 6.2(b) have been satisfied.
VI.3 Conditions to Obligations of Parent and Merger Sub to Effect the
Merger. The obligation of Parent, PHH and Merger Sub to effect the Merger shall
be subject to the fulfillment or waiver (to the extent permitted by applicable
law) at or prior to the Effective Time of the following conditions:
(a) The representations and warranties of the Company set forth in this
Agreement shall be true and correct in all respects as of the Effective Time as
though made on or as of such time (ignoring for purposes of this determination
any materiality or Material Adverse Effect qualifiers contained within
individual representations and warranties), except for (i) those representations
and warranties that address matters only as of a particular date or only with
respect to a specific period of time which need only be true and correct as of
such date or with respect to such period and (ii) such failures to be true and
correct as would not, individually or in the aggregate, reasonably be expected
to result in a Material Adverse Effect.
(b) The Company shall have performed and complied in all material respects
with all obligations, agreements and covenants required by this Agreement to be
performed or complied with by it prior to the Effective Time, except for such
failures to perform or comply as would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
(c) Parent shall have received a certificate signed by the chief financial
officer of the Company, dated as of the Closing Date, to the effect that, to the
best of such officer's knowledge, the conditions set forth in Section 6.3(a) and
Section 6.3(b) have been satisfied.
(d) Neither the Board nor the Independent Committee (i) shall have
withdrawn, modified or changed its approval or recommendation of this Agreement,
the Merger or the other Transactions in any manner which Parent reasonably
determines to be adverse to Parent, (ii) shall have recommended the approval or
acceptance of a Superior Proposal or Third-Party Acquisition from a Person or
entity (herein,other than a "Person"member of the Acquisition Group, or (iii) shall have
executed any Company Acquisition Agreement.
(e) No event, change, development or circumstance shall have occurred or
shall exist which is reasonably expected to result in a Material Adverse Effect.
(f) The Company shall have obtained the consents, approvals and waivers set
forth in Section 6.3(f) of the Company Disclosure Schedule.
ARTICLE VII
TERMINATION
VII.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, notwithstanding adoption of this Agreement by the
stockholders of the Company:
(a) by mutual written consent duly authorized by the Board of Directors of
each of the Company (provided such termination has been approved by the
Independent Committee) and Parent; or
(b) by either the Company (provided such termination has been approved by
the Independent Committee) or Parent as follows:
(i) if the Effective Time shall not have occurred on or prior to June
30, 2001; provided, however, that the right to terminate this Agreement
under this Section 7.1(b)(i) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Merger to be consummated on or prior
to such date; or
(ii) if a Governmental Entity shall have issued a nonappealable final
order, decree or ruling or taken any other nonappealable final action
having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger (which order, decree, ruling or other action the
parties hereto shall have used their best efforts to lift); or
(iii) if the Company Stockholder Approval shall not have been obtained
at the Stockholders Meeting; or
(c) by Parent, on behalf of itself, PHH and Merger Sub, as follows:
(i) upon a material breach of any covenant or agreement set forth in
this Agreement (a "Terminating Breach") on the part of the Company;
provided that, if such Terminating Breach is curable on or prior to the
earlier of (A) 60 days following notice of such Terminating Breach and (B)
June 30, 2001 by the Company through the exercise of its reasonable best
efforts and for so long as the Company continues to exercise such
reasonable best efforts, Parent may not terminate this Agreement under this
Section 7.1(c)(i) until the earlier of (A) 60 days following notice of such
Terminating Breach and (B) June 30, 2001; or
(ii) (x) the Independent Committee or the Board shall (A) withdraw,
modify or change its approval or recommendation of this Agreement, the
Merger or the other Transactions in any manner which Parent reasonably
determines to be adverse to Parent; (B) approve or recommend to the
stockholders of the Company a Third-Party Acquisition or a Superior
Proposal; (C) violate any of the provisions of Section 5.2 hereof; (D) take
any public position or make any disclosures to the Company's stockholders
which has the effect of any of the foregoing; or (E) resolve to enter into
a Company Acquisition Agreement relating to a Third-Party Acquisition or a
Superior Proposal; or (y) the Company shall (A) execute a Company
Acquisition Agreement relating to a Third-Party Acquisition or a Superior
Proposal (B) violate any of the provisions of Section 5.2 hereof; or
(iii) if any representation or warranty of the Company set forth in
this Agreement shall have become untrue or shall have been untrue when
made, if such failure to be true and correct, individually or in the
aggregate, would result in a Material Adverse Effect; provided that, if
such failure is curable on or prior to the earlier of (A) 60 days following
notice of such Terminating Breach and (B) June 30, 2001 by the Company
through the exercise of its reasonable best efforts and for so long as the
Company continues to exercise such reasonable best efforts, Parent may not
terminate this Agreement under this Section 7.1(c)(iii) until the earlier
of (A) 60 days following notice of such Terminating Breach and (B) June 30,
2001; or
(d) by the Company (provided such termination has been approved by the
Independent Committee) as follows:
(i) upon a Terminating Breach on the part of Parent, PHH or Merger
Sub; provided that, if such Terminating Breach is curable on or prior to
the earlier of (A) 60 days following notice of such Terminating Breach and
(B) June 30, 2001 by Parent, PHH or Merger Sub through the exercise of its
reasonable best efforts and for so long as Parent, PHH and Merger Sub
continue to exercise such reasonable best efforts, the Company may not
terminate this Agreement under this Section 7.1(d)(i) until the earlier of
(A) 60 days following notice of such Terminating Breach and (B) June 30,
2001; or
(ii) if any representation or warranty of Parent, PHH or Merger Sub,
respectively, set forth in this Agreement shall have been untrue in any
material respect or shall have been untrue in any material respect when
made; provided that, if such failure is curable prior to the earlier of (A)
60 days following notice of such Terminating Breach and (B) June 30, 2001
by Parent, PHH or Merger Sub, as the case may be, through the exercise of
its reasonable best efforts and for so long as Parent, PHH or Merger Sub,
as the case may be, continues to exercise such reasonable best efforts, the
Company may not terminate this Agreement under this Section 7.1(d)(ii)
until the earlier of (A) 60 days following notice of such Terminating
Breach and (B) June 30, 2001; or
(iii) if, following the Stockholders Meeting, (A) the Company
Stockholder Approval shall not have been obtained, (B) the Company
concurrently executes and delivers a definitive agreement with respect to a
Superior Proposal and (C) the Independent Committee determines in good
faith, after receipt of advice of its outside legal counsel, that a failure
to terminate this Agreement in order to enter into a definitive agreement
with regard to such Superior Proposal would constitute a breach of its
fiduciary duties to the Company's stockholders under applicable law;
provided that, prior to such termination, (x) the Company has given Parent
three (3) Business Days' advance notice of the Company's intention to
accept such Superior Proposal and shall have complied in all respects with
the provisions of Section 2.6 and Section 5.2; and (y) the Company shall
have paid by wire transfer the Fee and the Parent Expenses pursuant to
Section 7.3(b).
VII.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 7.1, written notice thereof shall forthwith be
given to the other party or parties specifying the provision hereof pursuant to
which such termination is made, and this Agreement shall forthwith become void
and there shall be no liability on the part of any party hereto or any of its
Affiliates, directors, officers, stockholders, representatives or agents except
for any obligation of the Company or Parent set forth in Article VII hereof, if
any. Notwithstanding the foregoing, or any other provision of this Agreement
(including Section 7.3), nothing herein shall relieve the Company, Parent, PHH
or Merger Sub from liability for any breach hereof.
VII.3 Fees and Expenses.
(a) Except as set forth in this Section 7.3, all fees and expenses incurred
in connection with this Agreement and the Transactions shall be paid by the
party incurring such expenses, whether or not the Merger is consummated.
(b) The Company shall pay, or cause to be paid, to Parent, the Parent
Expenses (as defined below) actually incurred and a fee of $28,000,000 (the
"Fee") upon the first to occur of any of the following events:
(i) the termination of this Agreement by Parent or the Company
pursuant to subsection (b)(i) of Section 7.1, or the termination of this
Agreement by Parent pursuant to Subsection (c)(i) or (c)(iii) of Section
7.1; provided, that prior to such termination, the Company becomes aware
that any Person has made or intends to make a proposal relating to a
Third-Party Acquisition and, within twelve months following the date of
such termination, a Third-Party Acquisition is consummated or a definitive
agreement with respect to a Third-Party Acquisition is executed by the
Company;
(ii) the termination of this Agreement by Parent pursuant to Section
7.1(c)(ii);
(iii) the termination of this Agreement by the Company pursuant to
Section 7.1(d)(iii); or
(iv) the termination of this Agreement by Parent pursuant to Section
7.1(b)(iii); provided, that a Third-Party Acquisition shall be publicly
announced or otherwise made known to the public at or prior to the
Stockholders Meeting and, within twelve months following the date of such
termination, a Third-Party Acquisition is consummated or a definitive
agreement with respect to a Third-Party Acquisition is executed by the
Company.
(c) "Parent Expenses" means all out-of-pocket expenses and fees (including
fees and expenses payable to all banks, investment banking agents and counsel
for arranging, committing to provide or providing any financing for the
Transactions contemplated hereby or structuring the Transactions contemplated
hereby and all fees of counsel, accountants, experts and consultants to Parent,
PHH and Merger Sub and all printing and advertising expenses) actually incurred
or accrued by either of them or on their behalf in connection with the
Transactions, including the financing thereof, and actually incurred or accrued
by banks, investment banking firms, other financial institutions and other
Persons and incurred by Parent, PHH and Merger Sub in connection with the
negotiation, preparation, execution and performance of this Agreement, the
structuring and financing of the Transactions and any financing commitments or
agreements relating thereto; provided, however, that in no event shall the
amount of Parent Expenses exceed $2,500,000.
(d) The Fee and Parent Expenses shall be paid by wire transfer of same day
funds to an account designated by Parent within two Business Days after a demand
for payment following the first to occur of any of the events described in
Section 7.3(b); provided that, in the event of a termination of this Agreement
under Section 7.1(d)(iii), the Fee and Parent Expenses shall be paid as therein
provided as a condition to the effectiveness of such termination.
(e) The agreements contained in this Section 7.3 are an integral part of
the Transactions and do not constitute a penalty. In the event of any dispute
between the Company and Parent as to whether the Fee and Parent Expenses under
this Section 7.3 are due and payable, the prevailing party shall be entitled to
receive from the other party the reasonable costs and expenses (including
reasonable legal fees and expenses) in connection with any action, including the
filing of any lawsuit or other legal action, relating to such dispute. Interest
shall be paid on the amount of any unpaid Fee or Parent Expenses at the publicly
announced prime rate of Citibank, N.A. from the date such Fee or Parent Expenses
was required to be paid.
ARTICLE VIII
GENERAL PROVISIONS
VIII.1 Nonsurvival of Representations, Warranties and Agreements. The
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall not survive the Effective
Time of the Merger; provided, that the agreements contained in Article I,
Article II, Sections 5.5 and 5.6 and this Article VIII shall survive the
Effective Time.
VIII.2 Notices. Any notice required to be given hereunder shall be
sufficient if in writing, and sent by facsimile transmission (provided that any
notice received by facsimile transmission or otherwise at the addressee's
location on any Business Day after 5:00 p.m. (addressee's local time) shall be
deemed to have been received at 9:00 a.m. (addressee's local time) on the next
Business Day), by reliable overnight delivery service (with proof of service),
hand delivery or certified or registered mail (return receipt requested and
first-class postage prepaid), addressed as follows:
If to Parent, PHH or Merger Sub:
Cendant Corporation
6 Sylvan Way
Parsippany, New Jersey 07054
Attention: General Counsel
Telecopier No.: 973-496-5335
with copies to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
Wilmington, Delaware 19801
Attention: Patricia Moran Chuff, Esq.
Telecopier No.: 302-651-3001
If to the Company:
Avis Group Holdings, Inc.
World Headquarters
900 Old Country Road
Garden City, New York 11530
Attention: General Counsel
Telecopier No.: 516-222-6922
with copies to:
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attention: John M. Reiss, Esq.
Telecopier No.: 212-354-8113
and to the Special Committee at:
JER Partners
1650 Tysons Blvd.
Suite 1600
McLean, VA 22102
Attention: Deborah Harmon
Telecopier: (703) 714-8124
with copies to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005-1702
Attention: Richard E. Farley, Esq.
Telecopier No.: 212-269-5420
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed. Any party to this Agreement
may notify any other party of any changes to the address or any of the other
details specified in this paragraph; provided that such notification shall only
be effective on the date specified in such notice or five (5) Business Days
after the notice is given, whichever is later. Rejection or other refusal to
accept or the inability to deliver because of changed address of which no notice
was given shall be deemed to be receipt of the notice as of the date of such
rejection, refusal or inability to deliver.
VIII.3 Assignment; Binding Effect. Neither this Agreement nor any of the
rights, interests or obligations hereunder may be assigned by any of the parties
(whether by operation of law or otherwise) without the prior written consent of
the other parties, except that Merger Sub may assign any of its rights and
obligations hereunder to a wholly owned Subsidiary of Parent which is a Delaware
corporation; provided, however, that no such assignment shall relieve Merger Sub
of its obligations hereunder. Subject to the preceding sentence, this Agreement
shall be binding upon and shall inure to the benefit of the parties and their
respective successors and permitted assigns. Notwithstanding anything contained
in this Agreement to the contrary, except for the provisions of Sections 5.5 and
5.6, nothing in this Agreement, expressed or implied, is intended to confer on
any Person other than the parties hereto or their respective heirs, successors,
executors, administrators and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
VIII.4 Entire Agreement. This Agreement, the Company Disclosure Letter, the
Parent Disclosure Letter and any documents delivered by the parties in
connection herewith constitute the entire agreement among the parties with
respect to the subject matter of this Agreement and supersede all prior
representations, warranties, agreements and understandings among the parties,
both written and oral, with respect thereto, except the Confidentiality
Agreement which shall continue in full force and effect; provided that if there
is any conflict between the Confidentiality Agreement and this Agreement, this
Agreement shall prevail.
VIII.5 Amendment. Subject to applicable law, this Agreement may be amended
by the parties hereto, by action taken by their respective boards of directors
and, with respect to the Company, by the Independent Committee, at any time
before or after the Company Stockholder Approval, but after any such Company
Stockholder Approval, no amendment shall be made which by law requires the
further approval of stockholders without obtaining such further approval. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties.
VIII.6 Governing Law; Consent to Jurisdiction.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to the principles of conflicts
of laws thereof.
(b) Each of the parties hereto (i) consents to submit itself to the
exclusive personal jurisdiction of any Delaware state court or any federal court
located in the State of Delaware in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement and (ii)
agrees that it shall not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court.
VIII.7 Counterparts. This Agreement may be executed by the parties in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies of this Agreement
each signed by less than all, but together signed by all of the parties hereto.
This Agreement shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
VIII.8 Headings. Headings of the Articles and Sections of this Agreement
are for the convenience of the parties only, and shall be given no substantive
or interpretive effect whatsoever.
VIII.9 Interpretation. When a reference is made in this Agreement to an
Article or Section, such reference shall be to an Article or Section of this
Agreement unless otherwise indicated. The table of contents to this Agreement is
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." The words "hereof," "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. All
terms defined in this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant thereto unless
otherwise defined therein. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a Person are also to its permitted successors and assigns. Each of
the parties has participated in the drafting and negotiation of this Agreement.
If an ambiguity or question of intent or interpretation arises, this Agreement
must be construed as if it is drafted by all the parties and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of
authorship of any of the provisions of this Agreement. The inclusion of any
matters in the Company Disclosure Letter or the Parent Disclosure Letter in
connection with any representation, warranty, covenant or agreement that is
qualified as to materiality or "Material Adverse Effect" shall not be an
admission by the Company that such matters is material or would have a Material
Adverse Effect.
VIII.10 Waivers. No action taken pursuant to this Agreement, including any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. Any term,
covenant or condition of this Agreement may be waived at any time by the party
which is entitled to the benefit thereof, but only by a written notice signed by
such party expressly waiving such term or condition. The waiver by any party
hereto of a breach of any provision hereunder shall not operate or be construed
as a waiver of any prior or subsequent breach of the same or any other provision
hereunder.
VIII.11 Incorporation of Annex and Disclosure Letters. The Company
Disclosure Letter and the Parent Disclosure Letter are hereby incorporated in
this Agreement and made a part of this Agreement for all purposes as if fully
set forth in this Agreement.
VIII.12 Severability. Any term 77or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent (and only to the extent) of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby are consummated as originally contemplated to the greatest extent
possible.
VIII.13 Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur if any of the provisions of this Agreement was not performed
in accordance with its specific terms or as otherwise breached and that money
damages would not be an adequate remedy for any breach of this Agreement. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court referred to in Section
8.6(b), this being in addition to any other remedy to which they are entitled at
law or in equity or pursuant to this Agreement. In any such action for specific
performance, each of the parties shall waive (i) the defense of adequacy of a
remedy at law and (ii) any requirement for the securing and posting of any bond.
VIII.14 Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT.
VIII.15 Execution. This Agreement may be executed by facsimile signatures
by any party and such signature shall be deemed binding for all purposes hereof,
without delivery of an original signature being thereafter required.
VIII.16 Date for any Action. In the event that any date on which any action
is required to be taken hereunder by any of the Parties hereto is not a Business
Day, such action shall be required to be taken on the next succeeding day which
is a Business Day.
VIII.17 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each Party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, other than Section 5.5 (which is intended to be for the benefit of
the Persons covered thereby and may be enforced by such Persons).
VIII.18 Certain Definitions. As used in this Agreement:
(a) The term "Affiliate," as applied to any Person, shall mean any other
Person directly or indirectly controlling, controlled by, or under common
control with, such
firstthat Person; and (iv) "Changefor purposes of Control" shall mean a transactionthis definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by,"
"under common control with"), as applied to any Person, means the possession,
directly or series of related transactions by which (a) any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d)indirectly, of the Securitiespower to direct or cause the direction of the
management and policies of that Person, whether through the ownership of voting
securities, by contract or otherwise.
(b) The term "Associate" has the meaning set forth in Rule 12b-2 under the
Exchange Act.
(c) A Person shall be deemed to "beneficially" own securities if such
Person would be the beneficial owner of such securities under Rule 13d-3 under
the Exchange Act, including securities which such Person has the right to
acquire (whether such right is exercisable immediately or only after the passage
of 1934, as amended (the "Exchange Act"))time).
(d) The term "Business Day" means any day on which commercial banks are
open for business in New York, New York other than a Cendant Affiliate,Saturday, a Sunday or a day
observed as a holiday in New York, New York under the laws of the State of New
York or the federal laws of the United States.
(e) The term "Person" shall include individuals, corporations,
partnerships, trusts, limited liability companies, associations, unincorporated
organizations, joint ventures, other entities, groups (which term shall include
a "group" as such term is or
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 underSection 13(d)(3) of the Exchange Act),
labor unions or Governmental Entity.
(f) The term "Subsidiary," when used with respect to any party, means any
corporation or other organization, whether incorporated or unincorporated, of
more than (1) 25%which such party directly or indirectly owns or controls at least a majority of
the totalsecurities or other interests having by their terms ordinary voting power of allto
elect a majority of the voting stockboard of directors or others performing similar
functions with respect to such corporation or other organization, or any
organization of which such party is a general partner.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first written
above.
CENDANT CORPORATION
By: /s/ Henry R. Silverman
----------------------------------------
Name: Henry R. Silverman
Title: Chairman, President and
Chief Executive Officer
PHH CORPORATION
By: /s/ James E. Buckman
----------------------------------------
Name: James E. Buckman
Title: Executive Vice President
and General Counsel
AVIS ACQUISITION CORP.
By: /s/ James E. Buckman
-----------------------------------------
Name: James E. Buckman
Title: Executive Vice President
and General Counsel
AVIS GROUP HOLDINGS, INC.
By: /s/ Kevin M. Sheehan
-----------------------------------------
Name: Kevin M. Sheehan
Title: President, Corporate and Business
Affairs, Chief Financial Officer
Defined Terms
Page
Acquisition.......................................................................................................1
Acquisition Group.................................................................................................1
Affiliate........................................................................................................56
Agreement.........................................................................................................1
Associate........................................................................................................56
Assumed Option....................................................................................................8
Assumed Option Plan...............................................................................................8
Assumed Option Plans..............................................................................................8
Avis Fleet.......................................................................................................14
Avis License.....................................................................................................25
Bear Stearns.....................................................................................................27
Beneficially.....................................................................................................56
Board.............................................................................................................1
Business Day.....................................................................................................56
Car Holdings......................................................................................................1
Cendant Common Stock..............................................................................................8
Certificate of Merger.............................................................................................2
Certificates......................................................................................................5
Class B Common Stock.............................................................................................13
Closing...........................................................................................................3
Closing Date......................................................................................................3
Code.............................................................................................................20
Code.............................................................................................................19
Company...........................................................................................................1
Company Acquisition Agreement....................................................................................34
Company Common Stock..............................................................................................1
Company Disclosure Letter........................................................................................14
Company SEC Reports..............................................................................................16
Company Stockholder Approval.....................................................................................10
Confidentiality Agreement........................................................................................33
Contract.........................................................................................................16
Control..........................................................................................................56
Covered Parties..................................................................................................37
DGCL..............................................................................................................1
Effective Date....................................................................................................3
Effective Time....................................................................................................3
Elected Portion...................................................................................................8
Environmental Claim..............................................................................................25
Environmental Laws...............................................................................................25
ERISA............................................................................................................19
ERISA Affiliate..................................................................................................20
Exchange Act.....................................................................................................15
Exchange Ratio....................................................................................................9
Fairness Opinion.................................................................................................13
Fee..............................................................................................................49
GAAP.............................................................................................................16
Governmental Entity..............................................................................................15
Hazardous Materials..............................................................................................25
HSR Act..........................................................................................................15
Hyperion.........................................................................................................37
Indemnified Liabilities..........................................................................................38
Independent Committee.............................................................................................1
Intellectual Property............................................................................................25
IRS..............................................................................................................19
Letter of Transmittal.............................................................................................5
Material Adverse Effect..........................................................................................12
Merger............................................................................................................1
Merger Consideration..............................................................................................4
Merger Sub........................................................................................................1
Merger Sub Common Stock...........................................................................................5
Morgan Stanley....................................................................................................1
Multiemployer Plan...............................................................................................20
Note Tender Offer................................................................................................41
Notes............................................................................................................31
Option............................................................................................................8
Parent Disclosure Letter.........................................................................................28
Parent Expenses..................................................................................................49
Payment Agent.....................................................................................................5
Payment Fund......................................................................................................5
Permits..........................................................................................................21
Person...........................................................................................................56
PHH...............................................................................................................1
Plan.............................................................................................................19
Plans............................................................................................................19
Preferred Stock..................................................................................................13
Proxy Statement..................................................................................................10
Release..........................................................................................................25
Retention Election................................................................................................8
SEC..............................................................................................................10
Securities Act...................................................................................................16
Shares............................................................................................................1
Stockholders Meeting.............................................................................................10
Subsidiary.......................................................................................................57
Superior Proposal................................................................................................36
Surviving Corporation.............................................................................................2
Tax Return.......................................................................................................19
Taxes............................................................................................................19
Terminating Breach...............................................................................................47
Third Party......................................................................................................35
Third-Party Acquisition..........................................................................................35
Transactions......................................................................................................2
WARN Act.........................................................................................................27
APPENDIX B
November 10, 2000
The Special Committee of the Corporation then outstanding at any time Cendant
controls 25% or moreBoard of such voting power and (2) 20%Directors
on behalf of the total voting
powerBoard of all voting stockDirectors
Avis Group Holdings, Inc.
900 Old Country Road
Garden City, NY 11530
Members of the Special Committee of the Board of Directors:
We understand that Avis Group Holdings, Inc. (the "Company"), Cendant
Corporation at any time Cendant controls
less than 25%(the "Parent"), PHH Corporation, an indirect wholly-owned subsidiary
of such voting powerParent ("PHH"), and Avis Acquisition Corp., an indirect wholly-owned
subsidiary of Parent (the "Relevant Percentage""Merger Sub"), propose to enter into an Agreement and
Plan of Merger, substantially in the form of the draft dated November 9, 2000
(the "Merger Agreement"), which will provide, among other things, for the merger
(the "Merger") except in
each caseof the Merger Sub with and into the Company. Pursuant to the
extent such person or group becomes such beneficial owner
solely as a result of transfers by Cendant Affiliates of shares of Common
Stock and/or Fleet Preferred; (b)(1) another corporation merges intoMerger, the Corporation or the Corporation consolidates with or merges into any other
corporation or (2) the Corporation conveys, transfers or leases all or
substantially all of its assets to any person or group, in one transaction
or a series of related transactions other than any conveyance, transfer or
lease between the Corporation andCompany will become a wholly-owned subsidiary of the Corporation, with the effect that a person or group, other than a person or
group which is the beneficial owner of more than the Relevant Percentage of
the total voting power of all voting stock of the Corporation immediately
prior to such transaction, becomes the beneficial owner of more than the
Relevant Percentage of the total voting power of all voting stock of the
surviving or transferee corporation of such transaction or series; or
(c) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (together with
any new directors whose election by the Board of Directors, or whose
nomination for election by the Corporation's shareholders, was approved by a
vote of a majority of the Directors of the Corporation then still in office
who were either Directors of the Corporation at the beginning of such period
or whose election or nomination for election was previously so approved)
cease for any reason to constitute a majority of the Directors of the
Corporation then in office.
(B) AUTOMATIC CONVERSION. Upon the transfer, sale or disposition for
value of the beneficial ownership of any shares of Class B Common Stock
to any person other than to a Cendant Affiliate,Parent, and
each such share of
Class B Common Stock shall be reclassified as and converted
automatically, without any action on the part of the holder thereof, into
one validly issued, fully paid and non-assessableoutstanding share of Class A common stock, par value $0.01 per share (the
"Class A Common Stock, without any actionStock"), other than shares held in treasury or held by the
holder thereof and shallParent or any of its subsidiaries or as to which dissenters' rights have been
perfected, will be converted without charge for any stampinto the right to receive $33.00 per share in cash.
We further understand that the Parent beneficially owns, directly or other similar tax in respectindirectly,
approximately 17.8% of such
conversion.
(4) RESERVATION. The Corporation shall at all times reserve and keep
available out of its authorized but unissuedthe Class A Common Stock, solelyStock. The terms and conditions of the
Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the purpose of effecting conversions of Class B Common Stock into shares
of Class A Common Stock pursuantconsideration to clause (b)(3) of this Article Fourth,
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be received by
the full numberholders of shares of Class A Common Stock (other than Parent and its
affiliates) pursuant to the Merger Agreement is fair from timea financial point of
view to time issuable
uponsuch holders.
For purposes of the conversionopinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of all sharesthe Company;
(ii) reviewed certain internal financial statements and other financial and
operating data concerning the Company prepared by or on behalf of the
management of the Company;
(iii) reviewed certain financial projections prepared by the management of
the Company;
(iv) discussed the past and current operations and financial condition and
the prospects of the Company with senior executives of the Company;
(v) reviewed the reported prices and trading activity for the Class BA
Common Stock;
(vi) compared the financial performance of the Company and the prices and
trading activity of the Class A Common Stock then outstandingwith that of certain
other comparable publicly traded companies and shall take alltheir securities;
(vii) reviewed the financial terms, to the extent publicly available, of
certain transactions that we deemed comparable to the proposed
transaction;
(viii) participated in discussions and negotiations among representatives
of the Company and Parent and their respective financial and legal
advisors;
(ix) reviewed the draft Merger Agreement and certain related documents; and
(x) performed such actionother analyses and obtain allconsidered such permitsother factors as we
have deemed appropriate.
We have assumed and relied upon without independent verification the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the financial projections, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of the Company. In
addition, we have assumed that the Merger will be consummated substantially in
accordance with the terms set forth in the Merger Agreement. We have not made
any independent valuation or orders as may
be necessary to enableappraisal of the Corporation lawfully to issue such shares uponassets or liabilities of the
Company, nor have we been furnished with any such conversion.
(5) DIVIDENDS; STOCK SPLITS. Subjectappraisals. Our opinion is
necessarily based on financial, economic, market and other conditions as in
effect on, and the information made available to the rightsus as of, the holders of
Preferred Stock, and subject to any other provisions of this Amended and
Restated Certificate of Incorporation, as it may be amended from time to
time, holders of shares of Common Stock shall be entitled to receive such
dividends and other distributions in cash, stock or property of the
Corporation when, as and if declared thereon by the Board of Directors from
time to time out of assets or funds of the Corporation legally available
therefor.
(6) LIQUIDATION, DISSOLUTION, ETC.date hereof.
In the event of any liquidation,
dissolution or winding up (either voluntary or involuntary) of the
Corporation, the holders of shares of Common Stock shall be entitled to
receive the assets and funds of the Corporation available for distribution
after payments to creditors and to the holders of any Preferred Stock of the
Corporation that mayarriving at the time be outstanding, in proportion to the number
of shares held by them, respectively, without regard to class.
(7) MERGER, ETC. In the event of a merger or consolidation of the
Corporationour opinion, with or into another entity (whether or not the Corporation is
the surviving entity), the holders of each share of Common Stock shall be
entitled to receive the same per share consideration on a per share basis.
(8) NO PREEMPTIVE OR SUBSCRIPTION RIGHTS. No holder of shares of Common
Stock shall be entitled to preemptive or subscription rights.
(9) POWER TO SELL AND PURCHASE SHARES. Subject to the requirements of
applicable law and the terms of this Amended and Restated Certificate of
Incorporation, the Corporation shall have the power to issue and sell all or
any part of any shares of any class of stock herein or hereafter authorized
(other than shares of Class B Common Stock) to such persons, and for such
consideration, as the Board of Directors shall from time to time, in its
discretion, determine, whether or not greater consideration could be
received upon the issue or sale of the same number of shares of another
class, and as otherwise permitted by law. Subject to the requirements of
applicable law, the Corporation shall have the power to purchase any shares
of any class of stock herein or hereafter authorized from such persons, and
for such consideration, as the Board of Directors shall from time to time,
in its discretion, determine, whether or not less consideration could be
paid upon the purchase of the same number of shares of another class, and as
otherwise permitted by law.
(10) AMENDMENTS TO CLASS OF COMMON STOCK. The consent of a majority of
the holders of either Class A or Class B Common Stock, as the case may be
(the "Affected Stock"), at the time outstanding, in the case of any
amendment, alteration or repeal of any of the provisions of these Articles
of Incorporation, as amended, so as to affect adversely any right,
preference, privilege or power of such Affected Stock given in person or by
proxy, either in writing or at a special meeting called for the purpose of
approving such amendment, alteration or repeal, at which the Affected Stock
shall vote separately as a class (unless the consent of the holders of a
larger amount of such Affected Stock is then required by law) shall be
necessary to effect or validateSpecial Committee, we did
not solicit interest from any such adverse amendment, alteration or
repeal.
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APPENDIX B
AVIS GROUP HOLDINGS, INC.
2000 INCENTIVE COMPENSATION PLAN
CONTENTS
Article 1. Establishment, Purposes, and Duration....................... 1
Article 2. Definitions................................................. 1
Article 3. Administration.............................................. 5
Article 4. Shares Subject to the Plan and Maximum Awards............... 7
Article 5. Eligibility and Participation............................... 9
Article 6. Stock Options............................................... 9
Article 7. Stock Appreciation Rights................................... 12
Article 8. Restricted Stock............................................ 14
Performance Units, Performance Shares, and Cash-Based
Article 9. Awards...................................................... 16
Article 10. Performance Criteria........................................ 18
Article 11. Beneficiary Designation..................................... 19
Article 12. Deferrals................................................... 20
Article 13. No Implied Rights of Employees and Consultants.............. 20
Article 14. Change-of-Control Transactions.............................. 20
Article 15. Amendment, Modification, and Termination.................... 23
Article 16. Tax Withholding............................................. 24
Article 17. Limits of Liability; Indemnification........................ 25
Article 18. Successors.................................................. 26
Article 19. Miscellaneous............................................... 26
i
AVIS GROUP HOLDINGS, INC.
2000 INCENTIVE COMPENSATION PLAN
ARTICLE 1. ESTABLISHMENT, PURPOSES, AND DURATION
1.1. ESTABLISHMENT OF THE PLAN. Avis Group Holdings, Inc., a Delaware
corporation (hereinafter referred to as the "Company"), hereby establishes this
incentive compensation plan to be known as the "Avis Group Holdings, Inc. 2000
Incentive Compensation Plan" (hereinafter referred to as the "Plan"), as set
forth in this document. The Plan permits the grant of Nonqualified Stock
Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock,
Performance Shares, Performance Units, and Cash-Based Awards. Following adoption
of the Plan by the Board of Directors, the Plan shall become effective as of the
date (the "Effective Date") on which it is approved by the holders of a majority
of the Company's outstanding Shares which is present and voted at a meeting held
within the period ending twelve (12) months after the date the Plan is adopted
by the Board. The Plan shall remain in effect as provided in Section 1.3.
1.2. PURPOSES OF THE PLAN. The purposes of the Plan are to provide
additional incentives to those officers, key employees and independent
contractors of the Company and its eligible subsidiaries and affiliates whose
substantial contributions are essentialparty with respect to the continued growth and successacquisition of
the business of the Company and such subsidiaries and affiliates in order to
strengthen their commitment to the Company and such subsidiaries and affiliates,
and to attract and retain competent and dedicated individuals whose efforts will
result in the long-term growth and profitability of the Company and to further
align the interests of such officers, key employees and independent contractors
with the interests of the stockholders of the Company. To accomplish such
purposes, the Plan provides that the Company may grant Nonqualified Stock
Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock,
Performance Shares, Performance Units, and Cash-Based Awards.
1.3. DURATION OF THE PLAN. The Plan shall commence on the Effective Date,
as described in Section 1.1, and shall remain in effect, subject to the right of
the Board of Directors to amend or terminate the Plan at any time pursuant to
Article 15, until all Shares subject to it shall have been purchased or acquired
according to the Plan's provisions. However, in no event may an Award be granted
under the Plan on or after ten years from the Effective Date.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:
2.1. "AFFILIATE" means, other than the Company, (i) any corporation or
limited liability company in an unbroken chain of corporations or limited
liability companies ending with the Company if each corporation or limited
liability company owns stock or membership interests (as applicable)
possessing more than fifty percent (50%) of the total combined voting power
of all classes of stock in one of the other corporations or limited
liability companies in such chain; (ii) any corporation, trade or business
(including, without limitation, a partnership or limited liability company)
which is more than fifty percent (50%) controlled (whether by ownership of
stock, assets or an equivalent ownership interest or voting interest) by the
Company or one of its Affiliates; or (iii) any other entity, approved by the
Committee as an Affiliate under the Plan, in which the
Company or any of its Affiliates has a material equity interest.
2.2. "AWARD" means, individually or collectively, a grant under this
Planassets.
We have acted as financial advisor to the Special Committee on behalf of Nonqualified Stock Options, Incentive Stock Options, Stock
Appreciation Rights, Restricted Stock, Performance Shares, Performance
Units, or Cash-Based Awards.
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2.3. "AWARD AGREEMENT" means an agreement entered into by the Company
and a Participant setting forth the terms and provisions applicable to
Awards granted to such Participant under the Plan.
2.4. "BOARD" or "BOARD OF DIRECTORS" means the
Board of Directors of the Company.
2.5. "CASH-BASED AWARD" means an Award granted to a Participant, as
described in Article 9.
2.6. "CHANGE-OF-CONTROL TRANSACTION" means any transaction or series of
transactions pursuant to or as a result of which (i) during any period of
not more than 24 months, individuals who at the beginning of such period
constitute the Board, and any new director (other than a director designated
by a third party who has entered into an agreement to effect a transaction
described in clause (ii), (iii) or (iv) of this Section 2.6) whose election
by the Board or nomination for election by the Company's stockholders was
approved by a vote of at least a majority of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved (other than
approval givenCompany in connection with an actual or threatened proxy or election
contest), ceasethis transaction and will
receive a fee for any reason to constitute at least a majorityour services.
It is understood that this letter is for the information of the members of the Board; (ii) beneficial ownership of 50% or more of the Shares
(or other securities having generally the right to vote for election of the
Board) of the Company shall be sold, assigned or otherwise transferred,
directly or indirectly, other than pursuant to a public offering, to a third
party, whether by sale or issuance of Shares or other securities or
otherwise; (iii) the Company or any Subsidiary shall sell, assign or
otherwise transfer, directly or indirectly, assets (including stock or other
securities of Subsidiaries) having a fair market or book value or earning
power of 50% or more of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any third party, other than the Company
or a wholly-owned Subsidiary thereof; or (iv) control of 50% or more of the
business of the Company shall be sold, assigned or otherwise transferred
directly or indirectly to any third party.
2.7. "CODE" means the Internal Revenue Code of 1986, as it may be
amended from time to time, including regulations and rules promulgated
thereunder and successor provisions and regulations and rules thereto.
2.8. "COMMITTEE" means the CompensationSpecial
Committee of the Board of Directors or such other committee appointed byand the Board to administer the
Plan and to perform the functions set forth herein.
2.9. "CONSULTANT" means an independent contractor who performs services
for the Company or a Subsidiary or Affiliate in a capacity other than as an
Employee or director.
2.10. "COVERED EMPLOYEE" means a Participant who, as of the date of
vesting, exercise and/or payment of an Award, as applicable, is one of the
group of "covered employees," as defined in Code Section 162(m), or any
successor statute, and the regulations promulgated thereunder.
2.11. "DISABILITY" means the inability, due to illness or injury, to
engage in any gainful occupation to which the individual is suited by
education, training or experience, which condition continues for at least
six (6) months; PROVIDED, HOWEVER, that, for purposes of ISOs, "Disability"
shall mean "permanent and total disability" as set forth in
Section 22(e)(3) of the Code.
2.12. "EFFECTIVE DATE" shall have the meaning ascribed to such term in
Section 1.1.
2.13. "EMPLOYEE" means any officer or other employee of the Company, a
Subsidiary and/or an Affiliate. Directors of the Company,
who are employeddoes not constitute a recommendation as to how any holder of such shares should
vote with respect to the Merger, and may not be used for any other purpose
without our prior written consent; provided however, that the Company may
include the opinion in its entirety as an exhibit to any report, statement, or
schedule filed by the Company or a Subsidiary or Affiliate shall be considered Employeeswith the Securities and Exchange Commission under
the Plan.
B-2
2.14. "EXCHANGE ACT" means
the Securities Exchange Act of 1934 as it
mayin connection with the Merger.
Based on and subject to the foregoing, we are of the opinion on the date hereof
that the consideration to be amendedreceived by the holders of shares of Class A Common
Stock (other than Parent and its affiliates) pursuant to the Merger Agreement is
fair from timea financial point of view to time, includingsuch holders.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By:
------------------------------------
Jeffrey W. Smith
Managing Director
APPENDIX C
SECTION 262 OF THE DELAWARE
GENERAL CORPORATION LAW
APPRAISAL RIGHTS.--(a) Any stockholder of a corporation of this State who
holds shares of stock on the regulationsdate of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and rules
promulgated thereunder and successor provisions and regulations and rules
thereto.
2.15. "FAIR MARKET VALUE" meanswho has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to Section 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair market value of the Shares as
determined bystockholder's shares of stock under
the Boardcircumstances described in its sole discretion by such reasonable valuation
method assubsections (b) and (c) of this section. As used
in this section, the Committee shall,word "stockholder" means a holder of record of stock in its discretion, selecta
stock corporation and apply in good
faith asalso a member of record of a given date; PROVIDED, HOWEVER, that for purposesnonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of Section 6.3a member of a nonstock
corporation; and 6.11(c), such fair market valuethe words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more shares
or fractions thereof, solely of stock of a corporation, which stock is deposited
with the depository.
(b) Appraisal rights shall be determined subjectavailable for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 422(c)(7)251 (other than a merger effected pursuant to
Section 251 (g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the Code; PROVIDED FURTHER, HOWEVER, that (A) ifshares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the Shares are admittedrecord date fixed
to tradingdetermine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange Fair
Market Valueor
designated as a national market system security on any date shall be the last sale price reported for the
Shares on such exchange on such date or on the last date preceding such date
on which a sale was reported, (B) if the Shares are admitted toan interdealer quotation
onsystem by the National Association of Securities Dealers, Automated Quotation System
("NASDAQ")Inc. or other comparable quotation system(ii) held
of record by more than 2,000 holders; and have been designated as
a National Market System ("NMS") security, Fair Market Value on any datefurther provided that no
appraisal rights shall be the last sale price reportedavailable for the Shares on such system on such
date or on the last day preceding such date on which a sale was reported, or
(C) if the Shares are admitted to quotation on NASDAQ and have not been
designated as a NMS security, Fair Market Value on any date shall be the
average of the highest bid and lowest asked prices of the Shares on such
system on such date.
2.16. "FISCAL YEAR" means the calendar year, or such other consecutive
twelve-month period as the Board may select.
2.17. "FREESTANDING SAR" means an SAR that is granted independently of
any Options, as described in Article 7.
2.18. "INCENTIVE STOCK OPTION" or "ISO" means a right to purchase
Shares under the Plan in accordance with the terms and conditions set forth
in Article 6 and which is designated as an Incentive Stock Option and which
is intended to meet the requirements of Code Section 422.
2.19. "NONQUALIFIED STOCK OPTION" or "NQSO" means a right to purchase
Shares under the Plan in accordance with the terms and conditions set forth
in Article 6 and which is not intended to meet the requirements of Code
Section 422.
2.20. "OPTION" or "STOCK OPTION" means an Incentive Stock Option or a
Nonqualified Stock Option, as described in Article 6.
2.21. "OPTION PRICE" means the price at which a Share may be purchased
by a Participant pursuant to an Option.
2.22. "PARTICIPANT" means any Employee or Consultant who has received
an Award that is outstanding and has not expired, terminated or been
exercised, as applicable.
2.23. "PERFORMANCE-BASED EXCEPTION" means the exception for qualified
performance-based compensation from the tax deductibility limitations of
Section 162(m) of the Code, or any successor statute, and the regulations
promulgated thereunder.
2.24. "PERFORMANCE PERIOD" has the meaning given such term in
Section 9.2.
2.25. "PERFORMANCE SHARE" means an Award of a performance share granted
to a Participant, as described in Article 9.
2.26. "PERFORMANCE UNIT" means an Award of a performance unit granted
to a Participant, as described in Article 9.
2.27. "PERIOD OF RESTRICTION" means the period during which the
transfer of Shares of Restricted Stock is limited in some way, and such
Shares are subject to a substantial risk of forfeiture, as provided in
Article 8.
B-3
2.28. "RESTRICTED STOCK" means an Award granted to a Participant
pursuant to Article 8.
2.29. "RETIREMENT" means either (a) retirement in accordance with any
employee benefit plan maintained by the Company that is intended to satisfy
the requirements of Code Section 401(a) entitling a participant in such plan
to a full pension or (b) retirement with the consent of the Board.
2.30. "SECURITIES ACT" means the Securities Act of 1933, as it may be
amended from time to time, including the regulations and rules promulgated
thereunder and successor provisions and regulations and rules thereto.
2.31. "SHARES" means the common stock, par value $.01 per share, of the
Company (including any new, additional or different stock or securities
resulting from any change in corporate capitalization as listed in
Section 4.3).
2.32. "STOCK APPRECIATION RIGHT" or "SAR" means an Award, granted alone
(a Freestanding SAR) or in connection with a related Option (a Tandem SAR),
designated as an SAR, pursuant to the terms of Article 7.
2.33. "SUBSIDIARY" means any present or future corporation which is or
would be a "subsidiary corporation" of the Company as the term is defined in
Section 424(f) of the Code.
2.34. "TANDEM SAR" means a SAR that is granted in connection with a
related Option pursuant to Article 7.
ARTICLE 3. ADMINISTRATION
3.1. GENERAL. The Committee shall have exclusive authority to operate,
manage and administer the Plan in accordance with its terms and conditions.
Notwithstanding the foregoing, in its absolute discretion, the Board may at any
time and from time to time exercise any and all rights, duties and
responsibilities of the Committee under the Plan, including, but not limited to,
establishing procedures to be followed by the Committee, but excluding matters
which under any applicable law, regulation or rule, including, without
limitation, any exemptive rule under Section 16 of the Exchange Act (including
Rule 16b-3, or any successor rule, as the same may be amended from time to time)
or Section 162(m) of the Code, are required to be determined in the sole
discretion of the Committee. If and to the extent that no Committee exists which
has the authority to administer the Plan, the functions of the Committee shall
be exercised by the Board.
3.2. COMMITTEE. The members of the Committee shall be appointed from time
to time by, and shall serve at the discretion of, the Board of Directors. The
Committee shall consist of not less than two members of the Board. Appointment
of Committee members shall be effective upon their acceptance of such
appointment. Committee members may be removed by the Board at any time either
with or without cause, and such members may resign at any time by delivering
notice thereof to the Board. Any vacancy on the Committee, whether due to action
of the Board or any other reason, shall be filled by the Board. The Committee
shall keep minutes of its meetings. A majority of the Committee shall constitute
a quorum and a majority of a quorum may authorize any action. Any decision
reduced to writing and signed by a majority of the members of the Committee
shall be fully effective as if it has been made at a meeting duly held.
3.3. AUTHORITY OF THE COMMITTEE. Except as limited by law or by the
Certificate of Incorporation or By-Laws of the Company, and subject to the
provisions herein, the Committee shall have full power, in accordance with the
other terms and provisions of the Plan, to: select Employees and Consultants who
may receive Awards under the Plan and become Participants; determine eligibility
for participation in the Plan; determine the sizes and types of Awards;
determine the terms and conditions of Awards, including, without limitation, the
Option Prices of Options and the grant prices of SARs; construe and interpret
the Plan and any agreement or instrument entered into under the Plan, including,
without limitation, any Award Agreement; make all determinations concerning
termination of any Participant's employment or service
B-4
with the Company or a Subsidiary or Affiliate, including, without limitation,
whether such termination occurs by reason of Disability or Retirement or in
connection with a Change-of-Control Transaction; establish and administer any
terms, conditions, performance criteria, performance goals, restrictions,
limitations, forfeiture, vesting or exercise schedule, and other provisions of
or relating to any Award; construe any ambiguous provision of the Plan and/or
the Award Agreements; correct any errors, supply any omissions or reconcile any
inconsistencies in the Plan and/or any Award Agreement or any other instrument
relating to any Awards; establish, amend or waive rules, regulations or
procedures for the Plan's operation or administration; grant waivers of terms,
conditions, restrictions and limitations under the Plan or applicable to any
Award, or accelerate the vesting or exercisability of any Award; (subject to the
provisions of Article 15) amend the terms and conditions of any outstanding
Award; offer to buy out an Award previously granted, based on such terms and
conditions as the Committee shall establish with and communicate to the
Participant at the time such offer is made; and permit the transfer of an Option
or SAR or the exercise of an Option or SAR by one other than the Participant who
received the grant of such Option or SAR (other than any such a transfer or
exercise which would cause any ISO to fail to qualify as an "incentive stock
option" under Section 422 of the Code). Further, the Committee shall exercise
all such powers, perform all such acts and make all other determinations that
may be necessary or advisable for the administration of the Plan.
3.4. AWARD AGREEMENTS. Each Award shall be evidenced by an Award
Agreement, which shall be executed by the Company and the Participant to whom
such Award has been granted, unless the Award Agreement provides otherwise; two
or more Awards granted to a single Participant may, however, be combined in a
single Award Agreement. An Award Agreement shall not be a precondition to the
granting of an Award; no person shall have any rights under any Award, however,
unless and until the Participant to whom the Award shall have been granted
(i) shall have executed and delivered to the Company an Award Agreement or other
instrument evidencing the Award, unless such Award Agreement provides otherwise,
and (ii) has otherwise complied with the applicable terms and conditions of the
Award. The Committee shall prescribe the form of all Award Agreements, and,
subject to the terms and conditions of the Plan, shall determine the content of
all Award Agreements. Any Award Agreement may be supplemented or amended in
writing from time to time as approved by the Committee; PROVIDED that the terms
and conditions of any such Award Agreement as supplemented or amended are not
inconsistent with the provisions of the Plan.
3.5. DECISIONS BINDING. All determinations, decisions and actions made by
the Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Committee shall be final, conclusive and binding on all
persons, including the Company and its stockholders, any Subsidiary or
Affiliate, and all Employees, Consultants and Participants, and their estates
and beneficiaries.
3.6. DELEGATION OF ADMINISTRATION. Except to the extent prohibited by
applicable law, including, without limitation, the requirements applicable under
Section 162(m) of the Code to any Award intended to qualify for the
Performance-Based Exception or the requirements for any Award granted to an
officer or director to be covered by any exemptive rule under Section 16 of the
Exchange Act (including Rule 16b-3, or any successor rule, as the same may be
amended from time to time), or the applicable rules of a stock exchange, the
Committee may, in its discretion, allocate all or any portion of its
responsibilities and powers under this Article 3 to any one or more of its
members and/or delegate all or any part of its responsibilities and powers under
this Article 3 to any person or persons selected by it; PROVIDED, HOWEVER, that
the Committee may not delegate its authority to correct errors, omissions or
inconsistencies in the Plan. Any such authority delegated or allocated by the
Committee under this Section 3.6 shall be exercised in accordance with the terms
and conditions of the Plan and any rules, regulations or administrative
guidelines that may from time to time be established by the Committee, and any
such allocation or delegation may be revoked by the Committee at any time.
3.7. SUBSTITUTE AWARDS. In the event that a transaction described in
Section 424(a) of the Code involving the Company or an Affiliate is consummated,
such as the acquisition of property or stock from an
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unrelated corporation, or a merger or consolidation, individuals who become
eligible to participate in the Plan in connection with such transaction, as
determined by the Committee, may be granted Awards in substitution for stock
options or stock or stock-based awards granted by another corporation that is a
party to such transaction. The Committee shall determine, in its discretion and
consistent with Section 424(a) of the Code, if applicable, and the terms of the
Plan, though notwithstanding Section 6.3, the Option Price, if applicable, and
other terms and conditions of such substitute Awards.
3.8. FOREIGN PARTICIPANTS. The Committee shall have the authority to adopt
such procedures and subplans and grant Options or other Awards on such terms and
conditions as the Committee determines necessary or appropriate to permit
participation in the Plan by individuals otherwise eligible to so participate
who are foreign nationals or employed outside of the United States, or otherwise
to conform to applicable requirements or practices of jurisdictions outside of
the United States.
ARTICLE 4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
4.1. NUMBER OF SHARES AVAILABLE FOR GRANTS. The shares of stock subject to
Awards granted underof the
Plan shall be Shares. Such Shares subject to the Plan
may be either authorized and unissued shares (which will not be subject to
preemptive rights) or previously issued shares acquired by the Company or any
Subsidiary. Subject to adjustment as provided in Section 4.3, the number of
Shares hereby reserved for issuance to Participants under the Plan shall be one
million five hundred thousand (1,500,000) Shares, no more than three hundred
thousand (300,000) Shares of which may be granted in the form of Restricted
Stock Awards. The Committee shall determine the appropriate methodology for
calculating the number of Shares issued pursuant to the Plan; PROVIDED, HOWEVER,
that (a) any Shares subject to an Option which for any reason expires or is
terminated or canceled without having been fully exercised, and any Shares that
are subject to any Restricted Stock Award or other Award granted under the Plan
which are forfeited prior to the payment of any dividends thereon, may again be
granted pursuant to an Award, subject to the limitations of this Article 4;
(b)constituent corporation surviving a merger if the Option Pricemerger did not require
for its approval the vote of an Option granted under the Plan is paid by tendering
to the Company Shares already owned by the holder of such Option, only the
number of Shares issued net of the Shares so tendered shall be deemed issued for
purposes of determining the total number of Shares that may be issued under the
Plan; and (c) any Shares delivered under the Plan in assumption or substitution
of outstanding, or obligations to grant future, stock options, stock or
stock-based awards under plans or arrangements of an entity other than the
Company or an Affiliate in connection with the Company or an Affiliate acquiring
such other entity, or an interest in such an entity, or a transaction otherwise
described in Section 3.7, shall not reduce the maximum number of Shares
available for delivery under the Plan; PROVIDED FURTHER, HOWEVER, that the total
number of Shares that may be issued pursuant to Incentive Stock Options shall be
1,500,000 Shares without application of clause (b) of this sentence.
4.2. MAXIMUM AWARDS. The following rules shall apply to grants of all
Awards under the Plan:
(a) OPTIONS: The maximum aggregate number of Shares that may be
subject to Options, pursuant to any Awards granted in any one Fiscal Year to
any one Participant shall be two hundred fifty thousand (250,000) Shares.
(b) SARS: The maximum aggregate number of Shares that may be subject
to Stock Appreciation Rights, pursuant to any Awards granted in any one
Fiscal Year to any one Participant shall be one hundred fifty thousand
(150,000) Shares. Any Shares covered by Options which include Tandem SARs
granted to one Participant in any Fiscal Year shall reduce this limit on the
number of Shares subject to SARs that can be granted to such Participant in
such Fiscal Year.
(c) RESTRICTED STOCK: The maximum aggregate number of Shares that may
be subject to Awards of Restricted Stock granted in any one Fiscal Year to
any one Participant shall be one hundred thousand (100,000) Shares.
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(d) PERFORMANCE SHARES, PERFORMANCE UNITS AND CASH-BASED AWARDS: The
maximum aggregate payment with respect to Cash-Based Awards or Awards of
Performance Shares or Performance Units granted in any one Fiscal Year to
any one Participant shall be equal to the value of one hundred fifty
thousand (150,000) Shares (determined using the equivalent Fair Market Value
as of the beginning of the applicable Performance Period of the Shares
covered by such Award).
To the extent required by Section 162(m) of the Code, Shares subject to Options
or SARs which are canceled shall continue to be counted against the limits set
forth in paragraphs (a) and (b) immediately preceding, and if, after the grant
of an Option or SAR, the price of Shares subject to such Option or SAR is
reduced and the transaction is treated as a cancellation of the Option or SAR
and a grant of a new Option or SAR, both the Option or SAR, as the case may be,
deemed to be canceled and the Option or SAR deemed to be granted shall be
counted against such limits set forth in paragraphs (a) and (b) immediately
preceding.
4.3. ADJUSTMENTS IN AUTHORIZED SHARES. Upon any changes in the outstanding
Shares by reason of a change in corporate capitalization, such as an increase,
reduction, or change or exchange of Shares for a different number or kind of
shares or other securities of the Company by reason of a reclassification,
recapitalization, merger, consolidation, reorganization (whether or not such
reorganization comes within the definition of such term in Code Section 368),
issuance of warrants or rights, dividend or other distribution (whether in the
form of cash, stock or other property), stock split or reverse stock split,
spin-off, combination or exchange of shares, repurchase of shares, change in
corporate structure or any partial or complete liquidation of the Company, such
adjustment shall be made in the number, class and type of shares of stock which
may be delivered under Section 4.1, in the number, class and type, and/or price
(such as the Option Price of Options or the grant price of SARs) of shares
subject to outstanding Awards granted under the Plan, and in the Award limits
set forth in Section 4.2, as may be determined to be appropriate and equitable
by the Committee, in its sole discretion, to prevent dilution or enlargement of
rights intended to be made available under the Plan or any Award, or as
otherwise necessary to reflect any such change; PROVIDED, HOWEVER, that the
number of Shares subject to any Award shall always be a whole number.
4.4. NO LIMITATION ON CORPORATE ACTIONS. The existence of the Plan and any
Awards granted hereunder shall not affect in any way the right or power of the
Board or the stockholders of the Company to makesurviving corporation
as provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or authorize any adjustment,
recapitalization, reorganization or other change inseries
of stock of a constituent corporation if the Company's capital
structure or its business, anyholders thereof are required
by the terms of an agreement of merger or consolidation pursuant to Section
Section 251, 252, 254, 257, 258, 263 and 264 of the Company or an
Affiliate, any issue of debt, preferred or prior preference stock ahead of or
affecting Shares, the authorization or issuance of additional Shares, the
dissolution or liquidation of the Company or its Affiliates, any sale or
transfer of all or part of its assets or business or any other corporate act or
proceeding.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1. ELIGIBILITY. Employees and Consultants shall be eligiblethis title to become
Participants and receive Awards in accordance with the terms and conditions of
the Plan, subject to the limitations on granting of ISOs set forth in
Section 6.11(a). Directors of the Company or any Subsidiary or Affiliate who are
not also employees of the Company or any Subsidiary or Affiliate shall not be
eligible to participate in the Plan.
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5.2. ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee may, from time to time, select Participants from all eligible
Employees and Consultants and shall determine the nature and amount of each
Award.
ARTICLE 6. STOCK OPTIONS
6.1. GRANT OF OPTIONS. Subject to the terms and provisions of the Plan,
Options may be granted to Participants in such number, and upon such terms, and
at any time and from time to time as shall be determined by the Committee.
6.2. AWARD AGREEMENT. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as the
Committee shall determine. The Award Agreement also shall specify whether the
Option is intended to be an ISO or an NQSO. To the extent that any Option does
not qualify as an Incentive Stock Option (whether because of its provisions or
the time or manner of its exercise or otherwise), such Option, or the portion
thereof which does not so qualify, shall constitute a separate Nonqualified
Stock Option.
6.3. OPTION PRICE. The Option Price for each Option shall be determined by
the Committee and set forth in the Award Agreement, PROVIDED that, subject to
Sections 3.7 and 6.11(c), the Option Price of an Option shall be (a) not less
than one hundred percent (100%) of the Fair Market Value of a Share on the date
the Option is granted and (b) in any event, not less than the offering price of
a Share in the initial public offering of the Company's common stock.
6.4. DURATION OF OPTIONS. Each Option granted to a Participant shall expire
at such time as the Committee shall determine at the time of grant and set forth
in the Award Agreement; PROVIDED, HOWEVER, that no Option shall be exercisable
later than the tenth (10th) anniversary of its date of grant.
6.5. EXERCISE OF OPTIONS. Options shall be exercisable at such times and be
subject to such restrictions and conditions as the Committee shall in each
instance determine and set forth in the Award Agreement, which need not be the
same for each grant or for each Option or Participant.
6.6. PAYMENT. Options shall be exercised by the delivery of a written
notice of exercise to the Company, setting forth the number of Shares with
respect to which the Option is to be exercised, accompanied by full paymentaccept for
such Shares, which shall include applicable taxes, if any, in accordance with
Article 16. The Option Price upon exercise of any Option shall be payable to the
Company in full either:stock anything except:
(a) in cash or its equivalent; (b) subject to such
terms, conditions and limitations as the Committee may prescribe, by tendering
Shares previously acquired by the Participant exercising such Option having an
aggregate Fair Market Value at the time of exercise equal to the total Option
Price (PROVIDED that the Shares which are tendered must have been held by such
Participant for at least six (6) months prior to their tender to satisfy the
Option Price), or (c) by a combination of (a) and (b). The Committee also may
allow cashless exercise as permitted by applicable law, subject to applicable
securities law restrictions, or by any other means which the Committee
determines to be consistent with the Plan's purpose and applicable law, in all
cases, subject to such terms, conditions and limitations as the Committee may
prescribe. Subject to any governing rules or regulations, as soon as practicable
after receipt of a written notification of exercise and full payment, the
Company shall deliver to the Participant exercising an Option, in the
Participant's name, Share certificates in an appropriate amount based upon the
number of Shares purchased under the Option, subject to Section 19.8.
6.7. RIGHTS AS A SHAREHOLDER. No Participant or other person shall become
the beneficial owner of any Shares subject to an Option, nor have any rights to
dividends or other rights of a shareholder with respect to any such Shares,
until the Participant has exercised his or her Option in accordance with the
provisions of the Plan and the applicable Award Agreement.
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6.8. TERMINATION OF EMPLOYMENT OR SERVICE. Each Participant's Option Award
Agreement shall set forth the extent to which, if at all, a Participant shall
have the right to exercise his or her Option following termination of such
Participant's employment or service with the Company, a Subsidiary or an
Affiliate. Such provisions shall be determined in the sole discretion of the
Committee, need not be uniform among all Options granted, and may reflect
distinctions based on the reasons for, or circumstances of, such termination.
6.9. LIMITATIONS ON TRANSFERABILITY OF OPTIONS.
(a) INCENTIVE STOCK OPTIONS. Except as otherwise provided in Article 11, no
ISO may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution.
Further, all ISOs granted to a Participant under the Plan shall be exercisable
during his or her lifetime only by such Participant.
(b) NONQUALIFIED STOCK OPTIONS. Except as otherwise provided in a
Participant's Award Agreement or Article 11, no NQSO may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will or
by the laws of descent and distribution. Further, except as otherwise provided
in a Participant's Award Agreement, all NQSOs granted to a Participant under
this Article 6 shall be exercisable during his or her lifetime only by such
Participant.
(c) EXERCISE BY ONE OTHER THAN A PARTICIPANT. In the event any Option is
exercised by the executors, administrators, heirs or distributees of the estate
of a deceased Participant, or such a Participant's beneficiary, or the
transferee of an Option, in any such case pursuant to the terms and conditions
of the Plan and the applicable Award Agreement and in accordance with such terms
and conditions as may be specified from time to time by the Committee, the
Company shall be under no obligation to issue Shares thereunder unless and until
the Committee is satisfied that the person or persons exercising such Option is
the duly appointed legal representative of the deceased Participant's estate or
the proper legatee or distributee thereof or the named beneficiary of such
Participant, or the valid transferee of such Option, as applicable.
6.10. RENEWAL AND SUBSTITUTION OF OPTIONS. Subject to the terms and
conditions and within the limitations of the Plan, the Committee may modify,
extend or renew outstanding Options granted under the Plan, or accept the
surrender of outstanding Options (up to the extent not theretofore exercised)
and authorize the granting of new Options in substitution therefor (to the
extent not theretofore exercised).
6.11. LIMITATIONS ON INCENTIVE STOCK OPTIONS.
(a) GENERAL. No ISO shall be granted to any individual otherwise eligible to
participate in the Plan who is not an Employee of the Company or a Subsidiary on
the date of granting of such Option. Any ISO granted under the Plan shall
contain such terms and conditions, consistent with the Plan, as the Committee
may determine to be necessary to qualify such Option as an "incentive stock
option" under Section 422 of the Code. Any ISO granted under the Plan may be
modified by the Committee to disqualify such Option from treatment as an
"incentive stock option" under Section 422 of the Code.
(b) $100,000 PER YEAR LIMITATION. Notwithstanding any intent to grant ISOs,
an Option granted under the Plan will not be considered an ISO to the extent
that it, together with any other "incentive stock options" (within the meaning
of Section 422 of the Code, but without regard to subsection (d) of such
Section) under the Plan and any other "incentive stock option" plans of the
Company, any Subsidiary and any "parent corporation" of the Company within the
meaning of Section 424(e) of the Code, are exercisable for the first time by any
Participant during any calendar year with respect to Shares having an aggregate
Fair Market Value in excess of $100,000 (or such other limit as may be required
by the Code) as of the time the Option with respect to such Shares is granted.
The rule set forth in the preceding sentence shall be applied by taking Options
into account in the order in which they were granted.
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(c) OPTIONS GRANTED TO CERTAIN SHAREHOLDERS. No ISO shall be granted to an
individual otherwise eligible to participate in the Plan who owns (within the
meaning of Section 424(d) of the Code), at the time the Option is granted, more
than ten percent (10%) of the total combined voting power of all classes of stock of the Companycorporation surviving or a Subsidiary or any "parent corporation" of the Company
within the meaning of Section 424(e) of the Code. This restriction does not
apply if at the time such ISO is granted the Option Price of the ISO is at least
110% of the Fair Market Value of a Share on the date such ISO is granted, and
the ISO by its terms is not exercisable after the expiration of five yearsresulting
from such date of grant.
ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1. GRANT OF SARS. Subject to the terms and conditions of the Plan, SARs
may be granted to Participants at any time and from time to time as shall be
determined by the Committee. The Committee may grant a SAR (a)(i)merger or consolidation, or depository receipts in connection
and simultaneously with the grant of an Option or (ii) with respect
to a
previously-granted Nonqualified Stock Option (a Tandem SAR) orthereof;
(b) independent
of, and unrelated to, an Option (a Freestanding Option). The Committee shall
have complete discretion in determining the number of Shares granted in the form
of SARs to each Participant (subject to Article 4) and, consistent with the
provisions of the Plan, in determining the terms and conditions pertaining to
such SARs.
7.2. GRANT PRICE. The grant price for each SAR shall be determined by the
Committee and set forth in the Award Agreement, subject to the limitations of
this Section 7.2. The grant price of a Freestanding SAR shall be (a) not less
than one hundred percent (100%) of the Fair Market Value of a Share on the date
the SAR is granted and (b) in any event, not less than the offering price of a
Share in the initial public offering of the Shares. The grant price of a Tandem
SAR shall be equal to the Option Price of the related Option.
7.3. EXERCISE OF TANDEM SARS. Tandem SARs may be exercised for all or part
of the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR shall be
exercisable only when and to the extent the related Option is exercisable and
may be exercised only with respect to the Shares for which the related Option is
then exercisable. A Tandem SAR shall entitle a Participant to elect, in the
manner set forth in the Plan and the applicable Award Agreement, in lieu of
exercising his or her unexercised related Option for all or a portion of the
Shares for which such Option is then exercisable pursuant to its terms, to
surrender such Option to the Company with respect to any or all of such Shares
and to receive from the Company in exchange therefor a payment described in
Section 7.7. An Option with respect to which a Participant has elected to
exercise a Tandem SAR shall, to the extent of the Shares covered by such
exercise, be canceled automatically and surrendered to the Company. Such Option
shall thereafter remain exercisable according to its terms only with respect to
the number of Shares as to which it would otherwise be exercisable, less the
number of Shares with respect to which such Tandem SAR has been so exercised.
Notwithstanding any other provision of the Plan to the contrary, with respect to
a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR will expire
no later than the expiration of the related ISO; (ii) the value of the payment
with respect to the Tandem SAR may be for no more than one hundred percent
(100%) of the difference between the Option Price of the related ISO and the
Fair Market Value of the Shares subject to the related ISO at the time the
Tandem SAR is exercised; and (iii) the Tandem SAR may be exercised only when the
Fair Market Value of the Shares subject to the ISO exceeds the Option Price of
the ISO.
7.4. EXERCISE OF FREESTANDING SARS. Freestanding SARs may be exercised upon
whatever terms and conditions the Committee, in its sole discretion, in
accordance with the Plan, determines and sets forth in the Award Agreement.
7.5. SAR AGREEMENT. Each SAR grant shall be evidenced by an Award Agreement
that shall specify the grant price, the term of the SAR, and such other
provisions as the Committee shall determine in accordance with the Plan.
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7.6. TERM OF SARS. The term of a SAR granted under the Plan shall be
determined by the Committee, in its sole discretion; PROVIDED, HOWEVER, that the
term of any Tandem SAR shall be the same as the related Option and no SAR shall
be exercisable more than ten (10) years after it is granted.
7.7. PAYMENT OF SAR AMOUNT. Upon exercise of a SAR, a Participant shall be
entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The difference between the Fair Market Value of a Share on the date of
exercise over the grant price of the SAR; by
(b) The number of Shares with respect to which the SAR is exercised.
At the discretion of the Committee, such payment upon exercise of a SAR may be
in cash or its equivalent, in Shares of equivalent Fair Market Value, or in some
combination thereof.
7.8. TERMINATION OF EMPLOYMENT OR SERVICE. Each SAR Award Agreement shall
set forth the extent to which the Participant shall have the right to exercise
the SAR following termination of the Participant's employment or service with
the Company, the Subsidiary and/or the Affiliate. Such provisions shall be
determined in the sole discretion of the Committee, need not be uniform among
all SARs issued pursuant to the Plan, and may reflect distinctions based on the
reasons for termination.
7.9. NONTRANSFERABILITY OF SARS. Except as otherwise provided in a
Participant's Award Agreement, no SAR granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, except as
otherwise provided in a Participant's Award Agreement, all SARs granted to a
Participant under the Plan shall be exercisable during his or her lifetime only
by such Participant.
ARTICLE 8. RESTRICTED STOCK
8.1. AWARDS OF RESTRICTED STOCK. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to Participants in such amounts as the Committee shall
determine. Subject to the terms and conditions of this Article 8 and the Award
Agreement, upon delivery of Shares of Restricted Stock to a Participant, or
creation of a book entry evidencing a Participant's ownership of Shares of
Restricted Stock, pursuant to Section 8.5, the Participant shall have all of the
rights of a stockholder with respect to such Shares, subject to the terms and
restrictions set forth in this Article 8 or the applicable Award Agreement or
determined by the Committee.
8.2. RESTRICTED STOCK AWARD AGREEMENT. Each Restricted Stock Award shall be
evidenced by a Restricted Stock Award Agreement that shall specify the Period of
Restriction, the number of Shares of Restricted Stock granted, and such other
provisions as the Committee shall determine in accordance with the Plan. Any
Restricted Stock Award must be accepted by the Participant within a period of
sixty (60) days (or such shorter period as determined by the Committee at the
time of award) after the award date, by executing such Restricted Stock Award
Agreement and providing the Committee or its designee a copy of such executed
Award Agreement and payment of the applicable purchase price of such Shares of
Restricted Stock, if any, as determined by the Committee.
8.3. TRANSFERABILITY. Except as provided in this Article 8, Shares of
Restricted Stock may not be sold, transferred, pledged, assigned, encumbered,
alienated, hypothecated or otherwise disposed of until the end of the applicable
Period of Restriction established by the Committee and specified in the
Restricted Stock Award Agreement. All rights with respect to the Restricted
Stock granted to a Participant under the Plan shall be available during his or
her lifetime only to such Participant.
8.4. PERIOD OF RESTRICTION AND OTHER RESTRICTIONS. The Period of
Restriction shall lapse based on continuing employment (or other business
relationships) with the Company, a Subsidiary or an Affiliate, the achievement
of performance goals, or upon the occurrence of other events as determined by
the
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Committee, at its discretion, and stated in the Award Agreement. If the grant or
vesting of Shares of Restricted Stock awarded to a Covered Employee is intended
to qualify for the Performance-Based Exception, the lapse of the Period of
Restriction shall be based on the achievement of pre-established, objective
performance goals that are determined over a measurement period or periods
established by the Committee and relate to one or more performance criteria
listed in Article 10. The Committee shall determine the extent to which any such
pre-established performance goals are attained or not attained, in accordance
with Article 10. Subject to Article 11, the Committee may impose such other
conditions and/or restrictions on any Shares of Restricted Stock awarded
pursuant to the Plan as it may deem advisable including, without limitation, a
requirement that Participants pay a stipulated purchase price for each Share of
Restricted Stock. Except pursuant to Section 8.9, a Participant's rights in his
or her Shares of Restricted Stock shall lapse upon termination of his or her
employment or other service with the Company or any Subsidiary or Affiliate,
prior to termination of the Period of Restriction or lapsestock of any other restrictions set forth in the applicable Award Agreement,corporation, or upon any other
failure to satisfy any vesting conditions or restrictions set forth in the
applicable Award Agreement and such Shares shall be forfeited and revert to the
Company.
8.5. DELIVERY OF SHARES. Subject to Section 19.8, after the last day of the
applicable Period of Restriction or other expiration or termination of all
restrictions applicable to a Participant's Shares of Restricted Stock, pursuant
to his or her Award Agreement, such Shares of Restricted Stock shall become
freely transferable by such Participant, and the Company shall then deliver
certificates evidencing such Shares to such Participant, free of all
restrictions hereunder.
8.6. FORMS OF RESTRICTED STOCK AWARDS. Each Participant who receives an
Award of Shares of Restricted Stock shall be issued a stock certificate or
certificates evidencing the Shares covered by such Award registered in the name
of such Participant, which certificate or certificates may contain an
appropriate legend. The Committee may require a Participant who receives a
certificate or certificates evidencing a Restricted Stock Award to immediately
deposit such certificate or certificates, together with a stock power or other
appropriate instrument of transfer, endorsed in blank by the Participant, with
signatures guaranteed in accordance with the Exchange Act if required by the
Committee, with the Secretary of the Company or an escrow holder as provided in
the immediately following sentence. The Secretary of the Company or such escrow
holder as the Committee may appoint shall retain physical custody of each
certificate representing a Restricted Stock Award until the Period of
Restriction and any other restrictions imposed by the Committee or under the
Award Agreement with respect to the Shares evidenced by such certificate expire
or shall have been removed. The foregoing to the contrary notwithstanding, the
Committee may, in its discretion, provide that a Participant's ownership of
Shares of Restricted Stock prior to the lapse of the Period of Restriction or
any other applicable restrictions shall, in lieu of such certificates, be
evidenced by a "book entry" (I.E., a computerized or manual entry) in the
records of the Company or its designated agent in the name of the Participant
who has received such Award. Such records of the Company or such agent shall,
absent manifest error, be binding on all Participants who are granted Restricted
Stock Awards. The holding of Shares of Restricted Stock by the Company or such
an escrow holder, or the use of book entries to evidence the ownership of Shares
of Restricted Stock, in accordance with this Section 8.6, shall not affect the
rights of Participants as owners of the Shares of Restricted Stock awarded to
them, nor affect the restrictions applicable to such shares under the Award
Agreement or the Plan, including, without limitation, the Period of Restriction.
8.7. VOTING RIGHTS. Participants holding Shares of Restricted Stock may be
granted the right to exercise full voting rights with respect to those Shares
during the Period of Restriction.
8.8. DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of Restriction,
Participants holding Shares of Restricted Stock shall be credited with any cash
dividends paid with respect to such Shares while they are so held, unless
determined otherwise by the Committee and set forth in the Award Agreement. The
Committee may apply any restrictions to such dividends that the Committee deems
appropriate. Without
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limiting the generality of the preceding sentence, if the grant or vesting of
Shares of Restricted Stock awarded to a Covered Employee is designed to comply
with the requirements of the Performance-Based Exception, the Committee may
apply any restrictions it deems appropriate to the right to payment of dividends
declared with respect to such Restricted Stock, such that the dividends and/or
the Restricted Stock maintain eligibility for the Performance-Based Exception.
The Award Agreement may require or permit the immediate payment, waiver,
deferral or investment of dividends paid on the Restricted Stock.
8.9. TERMINATION OF EMPLOYMENT OR SERVICE. Each Restricted Stock Award
Agreement shall set forth the extent to which, if any, the Participant shall
have the right to receive Shares of Restricted Stock following termination of
the Participant's employment or period of other service with the Company or the
applicable Subsidiary or Affiliate even though the Period of Restriction has not
then ended. Such provisions shall be determined in the sole discretion of the
Committee, need not be uniform among all Shares of Restricted Stock, and may
reflect distinctions based on the reasons for, or circumstances of, such
termination of employment or service; PROVIDED, HOWEVER, that, except in cases
of termination of employment connected with a Change in Control or termination
of employment by reason of death or Disability (or similar involuntary
terminations of employment as determined by the Committee in its discretion),
the lapse of the Period of Restriction of Shares of Restricted Stock which are
intended to qualify for the Performance-Based Exception and which are held by
Covered Employees shall occur only to the extent otherwise provided in the Award
Agreement, but for such termination. In addition, except with respect to any
Restricted Stock Award intended to qualify for the Performance-Based Exception,
by action taken after a Restricted Stock Award is issued, the Committee may, in
its sole discretion, and on such terms and conditions as it may determine to be
appropriate, remove any or all of the restrictions, including, without
limitation, the Period of Restriction, imposed on such Restricted Stock Award.
8.10. MODIFICATION OR SUBSTITUTION. Subject to the terms of the Plan, the
Committee may modify outstanding Restricted Stock Awards or accept the surrender
of outstanding Shares of Restricted Stock (to the extent that the Period of
Restriction or other restrictions applicable to such Shares have not yet lapsed)
and grant new Awards in substitution for them.
8.11. SECTION 83(B) ELECTION. If a Participant makes an election under
Section 83(b) of the Code, or any successor section thereto, to be taxed with
respect to a Restricted Stock Award as of the date of transfer of the Restricted
Stock rather than as of the date or dates upon which such Participant would
otherwise be taxable under Section 83(a) of the Code, such Participant shall
deliver a copy of such election to the Company immediately after filing such
election with the Internal Revenue Service. None of the Company, a Subsidiary or
an Affiliate shall have any liability or responsibility relating to or arising
out of the filing or not filing of any such election or any defects in its
construction.
ARTICLE 9. PERFORMANCE UNITS, PERFORMANCE SHARES, AND CASH-BASED AWARDS
9.1. GRANT OF PERFORMANCE UNITS, PERFORMANCE SHARES AND CASH-BASED
AWARDS. Subject to the terms of the Plan, Performance Units, Performance
Shares, and/or Cash-Based Awards may be granted to Participants in such amounts
and upon such terms, and at any time and from time to time, as shall be
determined by the Committee, in accordance with the Plan. A Performance Unit,
Performance Share or Cash-Based Award entitles the Participant who receives such
Award to receive Shares or cash upon the attainment of performance goals and/or
satisfaction of other terms and conditions determined by the Committee when the
Award is granted and set forth in the Award Agreement. Such entitlements of a
Participant with respect to his or her outstanding Performance Unit, Performance
Share or Cash-Based Award shall be reflected by a bookkeeping entry in the
records of the Company, unless otherwise provided by the Award Agreement. The
terms and conditions of such Awards shall be consistent with the Plan and set
forth in the Award Agreement and need not be uniform among all such Awards or
all Participants receiving such Awards.
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9.2. VALUE OF PERFORMANCE UNITS, PERFORMANCE SHARES AND CASH-BASED
AWARDS. Each Performance Unit shall have an initial value that is established
by the Committee at the time of grant. Each Performance Share shall have an
initial value equal to the Fair Market Value of a Share on the date of grant.
Each Cash-Based Award shall have a value as shall be determined by the
Committee. The Committee shall set performance goals in its discretion which,
depending on the extent to which they are met, will determine the number and/or
value of Performance Units and Performance Shares and Cash-Based Awards that
will be paid out to the Participant. In the case of any Performance Units,
Performance Shares or Cashed-Based Awards granted to a Covered Employee that are
intended to qualify for the Performance-Based Exception, such objective
performance goals shall be established in advance by the Committee and based on
one or more performance criteria described in Article 10. For purposes of the
Plan, the period during which the achievement of performance goals is measured
shall be called a "Performance Period."
9.3. EARNING OF PERFORMANCE UNITS, PERFORMANCE SHARES AND CASH-BASED
AWARDS. Subject to the terms of the Plan, after the applicable Performance
Period has ended, the holder of Performance Units, Performance Shares or
Cash-Based Awards shall be entitled to receive payment on the number and value
of Performance Units, Performance Shares or Cash-Based Awards earned by the
Participant over the Performance Period, to be determined as a function of the
extent to which the corresponding performance goals and/or other terms and
conditions have been achieved or satisfied. The Committee shall determine the
extent to which any such pre-established performance goals and/or other terms
and conditions of a Performance Unit, Performance Share or Cash-Based Award are
attained or not attained following conclusion of the applicable Performance
Period, in accordance with Article 10. The Committee may, in its discretion,
waive any such performance goals and/or other terms and conditions relating to
any such Award not intended to qualify for the Performance-Based Exception.
9.4. FORM AND TIMING OF PAYMENT OF PERFORMANCE UNITS, PERFORMANCE SHARES AND
CASH-BASED AWARDS. Payment of earned Performance Units, Performance Shares and
Cash-Based Awards shall be made in a single lump-sum following the close of the
applicable Performance Period. Subject to the terms of the Plan, the Committee,
in its sole discretion, may pay earned Performance Units, Performance Shares and
Cash-Based Awards in the form of cash or in Shares (or in a combination thereof)
which have an aggregate Fair Market Value equal to the value of the earned
Performance Units, Performance Shares or Cash-Based Awards at the close of the
applicable Performance Period. Such Shares may be granted subject to any
restrictions imposed by the Committee, including, without limitation, pursuant
to Section 19.8. The determination of the Committee with respect to the form of
payment of such Awards shall be set forth in the Award Agreement pertaining to
the grant of the Award. At the discretion of the Committee, Participants may be
entitled to receive any dividends declared with respect to Shares which have
been earned in connection with grants of Performance Units and/or Performance
Shares which have been earned, but not yet distributed to Participants (such
dividends shall be subject to the same accrual, forfeiture, and payment
restrictions as apply to dividends earned with respect to Shares of Restricted
Stock, as set forth in Section 8.8). In addition, Participants may, at the
discretion of the Committee, be entitled to exercise their voting rights with
respect to such Shares.
9.5. RIGHTS AS A SHAREHOLDER. A Participant receiving a Performance Unit,
Performance Share or Cash-Based Award shall have the rights of a shareholder
only as to Shares, if any, actually received by the Participant upon
satisfaction or achievement of the terms and conditions of such Award and not
with respect to Shares subject to the Award but not actually issued to such
Participant.
9.6. TERMINATION OF EMPLOYMENT OR SERVICE DUE TO DEATH, DISABILITY, OR
RETIREMENT. Unless determined otherwise by the Committee and set forth in the
Participant's Award Agreement, in the event the employment or other service of a
Participant is terminated by reason of death, Disability, or Retirement during a
Performance Period, the Participant shall receive a payment of the Performance
Units, Performance Shares or Cash-Based Awards which is prorated based upon the
portion of the Performance Period completed, as specified by the Committee in
its discretion. Payment of earned Performance Units,
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Performance Shares or Cash-Based Awards shall be made at a time specified by the
Committee in its sole discretion and set forth in the Participant's Award
Agreement. Notwithstanding the foregoing, with respect to Covered Employees who
retire during a Performance Period, payments shall be made at the same time as
payments are made to Participants who did not terminate employment during the
applicable Performance Period.
9.7. TERMINATION OF EMPLOYMENT OR SERVICE FOR OTHER REASONS. In the event
that a Participant's employment or service terminates under any circumstances
other than those reasons set forth in Section 9.6, all Performance Units,
Performance Shares and Cash-Based Awards shall be forfeited by the Participant
to the Company, except to the extent otherwise provided in the Participant's
Award Agreement or as determined by the Committee.
9.8. NONTRANSFERABILITY. Performance Units, Performance Shares and
Cash-Based Awards may not be sold, transferred, pledged, assigned, encumbered or
otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution.
ARTICLE 10. PERFORMANCE CRITERIA
Unless and until the Board proposes for shareholder vote and shareholders
approve a change in the general performance criteria set forth in this
Article 10, the attainment of pre-established, objective performance goals based
on which determine the grant, payment and/or vesting with respect to Awards to
Covered Employees which are designed to qualify for the Performance-Based
Exception, the performance criteria to be used for purposes of such Awards shall
be selected by the Committee from among the following:
(a) Earnings per share;
(b) Net income (before or after taxes);
(c) Return measures (including, but not limited to, return on assets,
equity, or sales);
(d) Cash flow return on investments which equals net cash flows divided by
owners' equity;
(e) Earnings before or after taxes; and
(f) Share price (including, but not limited to, growth measures, total
shareholder return and return relative to market indices such as the
Russell 2000).
Performance goals of Awards may relate to the performance of the entire Company,
a Subsidiary or Affiliate, any of their respective divisions, units or offices,
an individual Participant or any combination of the foregoing. The Committee
shall have the discretion to adjust the determinations of the degree of
attainment of the pre-established performance goals based on the above-listed
performance criteria; PROVIDED, HOWEVER, that Awards which are designed to
qualify for the Performance-Based Exception, and which are held by a Covered
Employee, may not be adjusted upward (the Committee shall retain the discretion
to adjust such Awards downward). In the event that applicable tax and/or
securities laws change to permit Committee discretion to alter the governing
performance criteria without obtaining shareholder approval of such changes, the
Committee shall have sole discretion to make such changes without obtaining
shareholder approval. In addition, in the event that the Committee determines
that it is advisable to grant Awards which shall not qualify for the
Performance-Based Exception, the Committee may make such grants without
satisfying the requirements of Code Section 162(m).
Notwithstanding any other provisions of the Plan to the contrary, payment of
compensationdepository
receipts in respect thereof, which shares of any such Awards granted to a Covered Employee that
are intended to qualify for the Performance-Based Exception, including, without
limitation, the grant, vestingstock (or depository
receipts in respect thereof) or payment of any Restricted Stock Award,
Performance Shares, Performance Units or Cash-Based Awards, shall not be made
until the
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Committee certifies in writing that the applicable performance goals and any
other material terms of such Awards were in fact satisfied, except as otherwise
provided under Section 8.8 or 9.5 or Article 14.
ARTICLE 11. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any beneficiary
or beneficiaries who shall be permitted to exercise his or her Option or SAR or
to whom any amount due such Participant under the Plan is to be paid, in case of
his or her death before he or she fully exercises his or her Option or SAR or
receives any or all of such benefit. Each such designation shall revoke all
prior designations by the same Participant, shall be in a form prescribed by the
Company, and will be effective only when filed by the Participant in writing
with the Company during the Participant's lifetime. In the absence of any such
beneficiary designation, a Participant's unexercised Option or SAR, or amounts
due but remaining unpaid to such Participant,depository receipts at the Participant's death may be
exercised by, or paid as designated by the Participant by will or by the laws of
descent and distribution.
ARTICLE 12. DEFERRALS
The Committee may permit or require a Participant to defer such
Participant's receipt of the payment of cash or the delivery of Shares that
would otherwise be due to such Participant by virtue of the exercise of an
Option or SAR, the lapse or waiver of the Period of Restriction or other
restrictions with respect to Restricted Stock, or the satisfaction of any
requirements or goals with respect to Performance Units, Performance Shares or
Cash-Based Awards. If any such deferral election is required or permitted, the
Committee shall, in its sole discretion, establish rules and procedures for such
payment deferrals.
ARTICLE 13. NO IMPLIED RIGHTS OF EMPLOYEES AND CONSULTANTS
13.1. EMPLOYMENT. Nothing in the Plan shall interfere with or limit in any
way the right of the Company or any Subsidiary or Affiliate to terminate any
Participant's employment or other service at any time, nor confer upon any
Participant any right to continue in the employ or service of the Company or any
Subsidiary or Affiliate.
13.2. PARTICIPATION. No Employee or Consultant shall have the right to be
selected to receive an Award under the Plan, or, having been so selected, to be
selected to receive a future Award.
13.3. VESTING. Notwithstanding any other provision of the Plan or an Award
Agreement, a Participant's right or entitlement to exercise or otherwise vest in
any Award not vested or exercisable at the time of grant shall only result from
continued employment or other service with the Company or any Subsidiary or
Affiliate, or satisfaction of any other performance goals or other conditions or
restrictions applicable, by its terms, to such Award.
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ARTICLE 14. CHANGE-OF-CONTROL TRANSACTIONS
14.1. TREATMENT OF OUTSTANDING AWARDS. In the event of a Change-of-Control
Transaction, unless otherwise specifically prohibited under applicable laws, or
by the rules and regulations of any governing governmental agencies or national
securities exchanges:
(a) Immediately prior to the occurrence of such Change-of-Control
Transaction, any and all Options and SARs which are outstanding shall
immediately become fully exercisable as to all Shares covered thereby,
notwithstanding anything to the contrary in the Plan or the Award
Agreement.
(b) Immediately prior to the occurrence of such Change-of-Control
Transaction, any restrictions imposed by the Committee on Restricted
Stock previously awarded to Participants shall be immediately canceled,
the Period of Restriction applicable thereto shall immediately terminate,
and any applicable performance goals shall be deemed achieved,
notwithstanding anything to the contrary in the Plan or the Award
Agreement.
(c) Immediately prior to the occurrence of such Change-of-Control
Transaction, all Awards which are outstanding shall immediately become
fully vested.
(d) The target payment opportunities attainable under any outstanding Awards
of Performance Units, Performance Shares or Cash-Based Awards shall be
deemed to have been fully earned for the entire Performance Period(s) as
of the effective
date of the Change-of-Control Transaction. There shallmerger or consolidation will be paid out to each Participant holding sucheither listed on a
national securities exchange or designated as a national market system
security on an Award denominatedinterdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more than
2,000 holders;
(c) Cash in Shares, within thirty (30) days followinglieu of fractional shares or fractional depository
receipts described in the effective dateforegoing subparagraphs a. and b. of this
paragraph; or
(d) Any combination of the Change-of-Control Transaction,shares of stock, depository receipts
and cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a., b. and c. of
this paragraph.
(3) In the event all of the stock of a PRO RATA numbersubsidiary Delaware corporation
party to a merger effected under Section 253 of Shares (or the
equivalent Fair Market Value thereof, as determinedthis title is not owned by
the Committee, in
cash) based upon an assumed achievement of all relevant targeted
performance goals and upon the length of time within the Performance
Period which has elapsed prior to the Change-of-Control Transaction.
Awards denominated in cash shall be paid pro rata to participants in cash
within thirty (30) days following the effective date of the
Change-of-Control Transaction, with the PRO-RATION determined as a
function of the length of time within the Performance Period which has
elapsed prior to the Change-of-Control Transaction, and based on an
assumed achievement of all relevant targeted performance goals.
(e) The Committee may provide that any Award the payment of which was
deferred under Article 12 shall be paid or distributed as of or promptly
following such Change-of-Control Transaction.
(f) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee may provide, either by the terms of the Award
Agreement applicable to any Option or Freestanding SAR or by resolution
adopted prior to the occurrence of the Change-of-Control Transaction,
that any outstanding Option or Freestanding SAR shall be adjusted by
substituting for Shares subject to such Option or Freestanding SAR stock
or other securities of the survivingparent corporation or any successor
corporation to the Company, or a parent or subsidiary thereof, or that
may be issuable by another corporation that is a party to the transaction
resulting in the Change-of-Control Transaction, whether or not such stock
or other securities are publicly traded, in which event the aggregate
Option Price or grant price, as applicable, shall remain the same and the
amount of shares or other securities subject to the Option or
Freestanding SAR shall be the amount of shares or other securities which
could have been purchased on the closing date or expiration date of such
transaction with the proceeds which would have been received by the
Participant if the Option or Freestanding SAR had been exercised in full
(or with respect to a portion of such Award, as determined by the
Committee, in its discretion) for Shares prior to such transaction or
expiration date, and the Participant exchanged all of such Shares in the
transaction.
(g) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee may provide, either by the terms of the Award
Agreement applicable to any Option or SAR or by resolution adopted prior
to the occurrence of the Change-of-Control Transaction, that any
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outstanding Option or SAR shall be converted into a right to receive cash
on or following the closing date or expiration date of the transaction
resulting in the Change-of-Control Transaction in an amount equal to the
highest value of the consideration to be received in connection with such
transaction for one Share, or, if higher, the highest Fair Market Value
of a Share during the thirty (30) consecutive business days immediately prior to the closing date or expiration datemerger, appraisal rights
shall be available for the shares of such transaction, less
the per Share Option Price of such Option or grant price of such SAR,
multiplied by the number of Shares subject to such Option or SAR, or a
portion thereof.
(h) The Committeesubsidiary Delaware corporation.
(c) Any corporation may provide in its discretion, providecertificate of incorporation that
an Award cannotappraisal rights under this section shall be exercised after, or will otherwise terminate as of, such a
Change-of-Control Transaction, toavailable for the extent that such Award is or
becomes fully exercisable on or before such Change-of-Control Transaction
or is subject to any acceleration, adjustment, conversion or payment in
accordance with the foregoing paragraphs of this Section 14.1.
14.2. NO IMPLIED RIGHTS. No Participant shall have any right to prevent the
consummationshares of any
class or series of the acts described in Section 14.1 affecting the number
of Shares available to, or other entitlement of, such Participant under the Plan
or such Participant's Award. Any actions or determinations of the Committee
under this Article 14 need not be uniform as to all outstanding Awards, nor
treat all Participants identically. Notwithstanding the adjustments described in
Section 14.1, in no event may any Option or SAR be exercised after ten
(10) years from the date it was originally granted, and any changes to ISOs
pursuant to this Article 14 shall, unless the Committee determines otherwise,
only be effective to the extent such adjustments or changes do not cause a
"modification" (within the meaning of Section 424(h)(3) of the Code) of such
ISOs or adversely affect the tax status of such ISOs.
14.3. CERTAIN PAYMENTS RELATING TO ISOS. If,its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
Change-of-Control Transaction, an ISO fails to qualify as an "incentive stock
option," within the meaning of Section 422 of the Code, either because of the
failure of the Participant to meet the holding period requirements of Code
Section 422(a)(1) (a "Disqualifying Disposition")constituent corporation or the exercisability of such
Option is accelerated pursuant to Section 14.1(a), or any similar provision of
the applicable Award Agreement, in connection with such Change-of-Control
Transaction and such acceleration causes the aggregate Fair Market Value
(determined at the time the Option is granted) of the Shares with respect to
which such Option, together with any other "incentive stock options," as
provided in Section 6.11(b), are exercisable for the first time by such
Participant during the calendar year in which such accelerated exercisability
occurs to exceed the limitations described in Section 6.11(b) (a "Disqualified
Option"); or any other exercise, payment, acceleration, adjustment or conversion
of an Option in connection with a Change-of Control Transaction results in any
additional taxes imposed on a Participant, then the Company may, in the
discretion of the Committee or pursuant to an Award Agreement, make a cash
payment to or on behalf of the Participant who holds any such Option equal to
the amount that will, after taking into account all taxes imposed on the
Disqualifying Disposition or other exercise, payment, acceleration, adjustment
or conversion of the Option, as the case may be, and the receipt of such
payment, leave such Participant in the same after-tax position the Participant
would have been in had the Code Section 422(a)(1) holding period requirements
been met at the time of the Disqualifying Disposition or had the Disqualified
Option continued to qualify as an "incentive stock option," within the meaning
of Code Section 422 on the date of such exercise or otherwise equalize the
Participant for any such taxes; PROVIDED, HOWEVER, that the amount, timing and
recipients of any such payment or payments shall be subject to such terms,
conditions and limitations as the Committee shall, in its discretion, determine.
Without limiting the generality of the PROVISO contained in the immediately
preceding sentence, in determining the amount of any such payment or payments
referred to therein, the Committee may adopt such methods and assumptions as it
considers appropriate, and the Committee shall not be required to examine or
take into account the individual tax liability of any Participant.
14.4. TERMINATION, AMENDMENT, AND MODIFICATIONS OF CHANGE-OF-CONTROL
TRANSACTION PROVISIONS. Notwithstanding any other provision of the Plan (but
subject to the limitations of Section 15.3) or any Award Agreement provision,
the provisions of this Article 14 may not be terminated, amended, or modified on
or
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after the date of a Change-of-Control Transaction to affect materially adversely
any Participant's Award theretofore granted and then outstanding under the Plan
without the prior written consent of such Participant; PROVIDED, HOWEVER, the
Board may terminate, amend, or modify this Article 14 at any time and from time
to time prior to the date of a Change-of-Control Transaction.
14.5. POOLING OF INTERESTS ACCOUNTING. Notwithstanding any other provision
of the Plan or any Award Agreement to the contrary, in the event of a
Change-of-Control Transaction that is intended to be treated as a "pooling of
interests" under generally accepted accounting principles, the Board shall take
all actions necessary with regard to the Plan or any outstanding Award to
preserve such use of pooling of interests accounting.
ARTICLE 15. AMENDMENT, MODIFICATION, AND TERMINATION
15.1. AMENDMENT, MODIFICATION, AND TERMINATION. The Board may, at any time
and with or without prior notice, amend, alter, suspend or terminate the Plan,
retroactively or otherwise; PROVIDED, HOWEVER, unless otherwise required by law
or specifically provided herein, no such amendment, alteration, suspension or
termination shall be made which would materially impair the previously accrued
rights of any Participant who holds an Award theretofore granted without his or
her written consent, or which, without first obtaining approval of the
stockholders of the Company (where such approval is necessary to satisfy
(i) any applicable requirements under the Code relating to ISOs or for exemption
from Section 162(m) of the Code; (ii) the then-applicable requirements of
Rule 16b-3 promulgated under the Exchange Act, or any successor rule, as the
same may be amended from time to time; or (iii) any other applicable law,
regulation or rule), would:
(a) except as is provided in Section 4.3, increase the maximum number of
Shares which may be sold or awarded under the Plan or increase the
maximum limitations set forth in Section 4.2;
(b) except as is provided in Section 4.3, decrease the minimum Option Price
or grant price requirements of Section 6.3 and 7.2, respectively;
(c) change the class of persons eligible to receive Awards under the Plan;
or
(d) extend the duration of the Plan or the periods during which Options or
SARs may be exercised under Section 6.4 or 7.6, as applicable.
15.2. ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR
NONRECURRING EVENTS. The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in
Section 4.3) affecting the Company or the financial statements of the Company or
of changes in applicable laws, regulations, or accounting principles, whenever
the Committee determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan; PROVIDED that, unless the Committee
determines otherwise at the time such adjustment is considered, no such
adjustment shall be authorized to the extent that such authority would be
inconsistent with the Plan's meeting the requirements of Section 162(m) of the
Code, as from time to time amended.
15.3. AWARDS PREVIOUSLY GRANTED. The Committee may amend the terms of any
Award theretofore granted, including any Award Agreement, retroactively or
prospectively, but no such amendment shall materially impair the previously
accrued rights of any Participant without his or her written consent.
15.4. COMPLIANCE WITH CODE SECTION 162(M). At all times when Code
Section 162(m) is applicable, all Awards granted under the Plan shall comply
with the requirements of Code Section 162(m); PROVIDED, HOWEVER, that in the
event the Committee determines that such compliance is not desired with respect
to any Award or Awards available for grant under the Plan, then compliance with
Code Section 162(m) will not be required. In addition, in the event that changes
are made to Code Section 162(m) to permit greater
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flexibility with respect to any Award or Awards available under the Plan, the
Committee may, subject to this Article 15, make any adjustments it deems
appropriate to such Awards and/or the Plan.
ARTICLE 16. TAX WITHHOLDING
16.1. TAX WITHHOLDING. The Company and/or any Affiliate shall have the power
and the right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient, or take whatever other actions are necessary and
proper to satisfy, Federal, state, and local taxes, domestic or foreign,
required by law or regulation to be withheld or paid with respect to any taxable
event arising as a result of the Plan. Each Participant shall (and in no event
shall Shares be delivered to such Participant with respect to an Award until),
no later than the date as of which the value of the Award first becomes
includible in the gross income of the Participant for income tax purposes, pay
to the Company in cash, or make arrangements satisfactory to the Company, as
determined in the Committee's discretion, regarding payment to the Company of,
any taxes of any kind required by law to be withheld with respect to the Shares
or other property subject to such Award, and the Company and any Affiliate
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to such Participant.
16.2. SATISFACTION OF WITHHOLDING IN SHARES. With respect to withholding
required upon the exercise of Options or SARs, upon the lapse of restrictions on
Restricted Stock, or upon any other taxable event arising as a result of Awards
granted hereunder, the Committee may permit a Participant to elect, subject to
the approval of the Committee, to satisfy the withholding requirement, in whole
or in part, (a) by having the Company withhold Shares otherwise deliverable to
such Participant pursuant to such Award having a Fair Market Value, as
determined by the Committee, on the date the tax is to be determined equal to
the minimum statutory total tax which could be imposed on the transaction,
and/or (b) by tendering to the Company Shares owned by such Participant and
acquired more than six (6) months prior to such tender in full or partial
satisfaction of such tax obligations, based on the Fair Market Value of the
Shares, as determined by the Committee, on the date the tax is to be determined.
All such elections shall be irrevocable, made in writing, signed by the
Participant, and shall be subject to any restrictions or limitations that the
Committee, in its sole discretion, deems appropriate.
16.3. SPECIAL ISO OBLIGATIONS. The Committee may require a Participant to
give prompt written notice to the Company concerning any disposition of Shares
received upon the exercise of an ISO within: (i) two (2) years from the date of
granting such ISO to such Participant or (ii) one (1) year from the transfer of
such Shares to such Participant or (iii) such other period as the Committee may
from time to time determine. The Committee may direct that a Participant with
respect to an ISO undertake in the applicable Award Agreement to give such
written notice described in the preceding sentence, at such time and containing
such information as the Committee may prescribe, and/or that the certificates
evidencing Shares acquired by exercise of an ISO refer to such requirement to
give such notice.
ARTICLE 17. LIMITS OF LIABILITY; INDEMNIFICATION
17.1. LIMITS OF LIABILITY. (a) Any liability of the Company or an Affiliate
to any Participant with respect to any Award shall be based solely upon
contractual obligations created by the Plan and the Award Agreement.
(b) None of the Company, any Affiliate, any member of the Committee or
the Committee or any other person participating in any determination of any
question under the Plan, or in the interpretation, administration or
application of the Plan, shall have any liability, in the absence of bad
faith, to any party for any action taken or not taken in connection with the
Plan, except as may expressly be provided by statute.
17.2. INDEMNIFICATION. Each person who is or shall have been a member of the
Committee or of the Board, shall be indemnified and held harmless by the Company
against and from any loss, cost, liability, or expense that may be imposed upon
or reasonably incurred by him or her in connection with or resulting
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from any claim, action, suit, or proceeding to which he or she may be a party or
in which he or she may be involved by reason of any action taken or failure to
act under the Plan and against and from any and all amounts paid by him or her
in settlement thereof, with the Company's approval, or paid by him or her in
satisfaction of any judgment in any such action, suit, or proceeding against him
or her, PROVIDED he or she shall give the Company an opportunity, at its own
expense, to handle and defend the same before he or she undertakes to handle and
defend it on his or her own behalf. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such persons
may be entitled under the Company's Articles of Incorporation or By-Laws, as a
matter of law, or otherwise, or any power that the Company may have to indemnify
them or hold them harmless.
ARTICLE 18. SUCCESSORS
All obligations of the Company under the Plan with respect to Awards granted
hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise,sale of all or substantially all of the business
and/or assets of
the Company.
ARTICLE 19. MISCELLANEOUS
19.1. GENDER AND NUMBER; SECTION REFERENCES. Except where otherwise
indicatedcorporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of
such stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the context,surviving or resulting corporation to all such holders of any masculine term used hereinclass
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holders' shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall includesend a second notice before the
feminine;effective date of the pluralmerger or consolidation notifying each of the holders
of any class series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall includesend
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the singularsending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the singularnotice is given prior to the effective date, the
record date shall includebe the plural. The words "Article," "Section," and "paragraph" herein shall refer
to provisionsclose of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the Plan, unless expressly indicated otherwise.
19.2. SEVERABILITY. Inmerger or
consolidation, the eventsurviving or resulting corporation or any provisionstockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the Planvalue of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
held
illegalentitled to receive from the corporation surviving the merger or invalid for any reason,resulting from
the illegality or invalidity shallconsolidation a statement setting forth the aggregate number of shares not
affect
the remaining partsvoted in favor of the Plan,merger or consolidation and with respect to which demands
for appraisal have been received and the Planaggregate number of holders of such
shares. Such written statement shall be construedmailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and enforcedaddresses of all stockholders who have demanded payment for their
shares and with whom agreements as ifto the illegal or invalid provision hadvalue of their shares have not been
included.
19.3. TRANSFER, LEAVE OF ABSENCE. A transferreached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
Employeeappraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceeding as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the Companyaccomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an Affiliate (or, for purposesappraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) the Court shall direct the payment of the fair value of the shares,
together with interest, if any, ISO granted underby the Plan, a
Subsidiary),surviving or vice versa,resulting corporation to the
stockholders entitled thereto. Interest may be simple or from one Affiliatecompound, as the Court
may direct. Payment shall be so made to another (oreach such stockholder, in the case of
an ISO, from one Subsidiary to another),holders of uncertificated stock forthwith, and a leave of absence, duly authorized
in writing by the Company or a Subsidiary or Affiliate, shall not be deemed a
termination of employment of the employee for purposes of the Plan or with
respect to any Award (in the case of ISOs,holders of shares
represented by certificates upon the surrender to the extent permittedcorporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Code).
A changeCourt and taxed
upon the parties as the Court deems equitable in statusthe circumstances. Upon
application of a Participant from an Employee tostockholder, the Court may order all or a Consultant shall be
considered a termination of such Participant's employment with the Company or an
Affiliate for purposesportion of the
Plan and such Participant's Awards, except to the
extent that the Committee, in its discretion, determines otherwise with respect
toexpenses incurred by any Award that is not an ISO.
19.4. EXERCISE AND PAYMENT OF AWARDS. No Award shall be issuable or
exercisable except in whole Shares, and fractional Share interests shall be
disregarded. Not less than one hundred (100) Shares may be purchased or issued
at one time upon exercise of an Option or under any other Award, unless the
number of Shares so purchased or issued is the total number of Shares then
available under the Option or other Award. An Award shall be deemed exercised or
claimed when the Secretary or other official of the Company designated by the
Committee for such purpose receives appropriate written notice from a
Participant, in form acceptable to the Committee, together with payment of the
applicable Option Price or other purchase price, if any, and compliance with
Article 16, in accordance with the Plan and such Participant's Award Agreement.
19.5. LOANS. The Company may, in the discretion of the Committee, extend one
or more loans to Participantsstockholder in connection with the exerciseappraisal
proceeding, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts, to be charged pro rata against the value of all of
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or receiptconsolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
an
Award granted to any such Participant. The terms and conditions of any such loanthis section shall be established byentitled to vote such stock for any purpose or to receive
payment of dividends or together distributions on the Committee.
19.6. NO EFFECT ON OTHER PLANS. Neitherstock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the adoptioneffective date of the Plan nor
anything contained hereinmerger or consolidation); provided, however; that
if no petition for an appraisal shall affect any other compensationbe filed within the time provided in
subsection (e) of this section, or incentive plansif such stockholder shall deliver to the
surviving or arrangementsresulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the Companymerger or any Affiliate,consolidation, either
within 60 days after the effective date of the merger or B-21
preventconsolidation as
provided in subsection (e) of this section or limitthereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the Company orforegoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any Affiliate to establish any
other forms of incentives or compensation for their directors, employees or
consultants or grant or assume options or other rights otherwise than understockholder without the Plan.
19.7. INSIDERS. With respect to Insiders (as hereinafter defined),
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent
any provisionapproval of the
PlanCourt, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or action byresulting corporation to which the
Committee fails to so comply, it
shall be deemed null and void,shares of such objecting stockholders would have been converted had they
assented to the extent permitted by lawmerger or consolidation shall have the status of authorized and
deemed
advisable by the Committee. "Insider" shall mean an individual who is, on the
relevant date, an officer, director or ten percent (10%) beneficial owner of any
classunissued shares of the Company's equity securities that is registered pursuant to
Section 12 of the Exchange Act, all as defined under Section 16 of the Exchange
Act.
19.8. REQUIREMENTS OF LAW; LIMITATIONS ON AWARDS. (a) The granting of Awards
and the issuance of Shares under the Plan shall be subject to all applicable
laws, rules, and regulations, and to such approvalssurviving or resulting corporation. (last amended by any governmental agencies
or national securities exchanges as may be required.
(b) If at any time the Committee shall determine, in its discretion,
that the listing, registration and/or qualification of Shares upon any
securities exchange or under any state, Federal or foreign law, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the sale or purchase of
Shares hereunder, no Award may be granted, exercised or paid in whole or in
part unless and until such listing, registration, qualification, consent
and/or approval shall have been effected or obtained, or otherwise provided
for, free of any conditions not acceptable to the Committee.
(c) If at any time counsel to the Company shall be of the opinion that
any sale or delivery of Shares pursuant to an Award is or may be in the
circumstances unlawful or result in the imposition of excise taxes on the
Company or any Affiliate under the statutes, rules or regulations of any
applicable jurisdiction, the Company shall have no obligation to make such
sale or delivery, or to make any application or to effect or to maintain any
qualification or registration under the Securities Act, or otherwise with
respect to Shares or Awards and the right to exercise or payment of any
Option or Award shall be suspended until, in the opinion of such counsel,
such sale or delivery shall be lawful or will not result in the imposition
of excise taxes on the Company or any Affiliate.
(d) Upon termination of any period of suspension under this
Section 19.8, any Award affected by such suspension which shall not then
have expired or terminated shall be reinstated as to all Shares available
before such suspension and as to the Shares which would otherwise have
become available during the period of such suspension, but no suspension
shall extend the term of any Award.
(e) The Committee may require each person receiving Shares in connection
with any Award under the Plan to represent and agree with the Company in
writing that such person is acquiring such Shares for investment without a
view to the distribution thereof. The Committee, in its absolute discretion,
may impose such restrictions on the ownership and transferability of the
Shares purchasable or otherwise receivable by any person under any Award as
it deems appropriate. Any such restrictions shall be set forth in the
applicable Award Agreement, and the certificates evidencing such shares may
include any legend that the Committee deems appropriate to reflect any such
restrictions.
(f) An Award and any Shares received upon the exercise or payment of an
Award shall be subject to such other transfer and/or ownership restrictions
and/or legending requirements as the Committee may establish in its
discretion and may be referred to on the certificates evidencing such
Shares, including, without limitation, restrictions under applicable Federal
securities laws, under the requirements of any stock exchange or market upon
which such Shares are then listed and/or traded, and under any blue sky or
state securities laws applicable to such Shares.
B-22
19.9. PARTICIPANTS DEEMED TO ACCEPT PLAN. By accepting any benefit under the
Plan, each Participant and each person claiming under or through any such
Participant shall be conclusively deemed to have indicated their acceptance and
ratification of, and consent to, all of the terms and conditions of the Plan and
any action taken under the Plan by the Board, the Committee or the Company, in
any case in accordance with the terms and conditions of the Plan.
19.10. GOVERNING LAW. To the extent not preempted by Federal law, the Plan
and all Award Agreements and other agreements hereunder shall be construed in
accordance with and governed by the laws of the state of Delaware, without
giving effect to the choice of law principles thereof, except to the extent
superseded by applicable Federal law.
19.11. PLAN UNFUNDED. The Plan shall be unfunded. The Company shall not be
required to establish any special or separate fund or to make any other
segregation of assets to assure the issuance of Shares or the payment of cash
upon exercise or payment of any Award. Proceeds from the sale of Shares pursuant
to Options or other Awards granted under the Plan shall constitute general funds
of the Company.
19.12. ADMINISTRATION COSTS. The Company shall bear all costs and expenses
incurred in administering the Plan, including expenses of issuing Shares
pursuant to any Options or other Awards granted hereunder.
* * * *
B-23Ch.
339, L. '98. Eff. 7-1-98.)