SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule
14a-12
CENDANT CORPORATION
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(Name of Registrant as Specified In Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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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):
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
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(1) Amount Previously Paid:
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(4) Date Filed:
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[LOGO]
March 29, 2002
Dear Fellow Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Cendant Corporation (the "Company"), which will be held at the Ramada Inn and
Conference Center, 130 Route 10 West, East Hanover, New Jersey 07936, on
May 21, 2002 at 10:00 a.m., New York time. We look forward to greeting as many
of our stockholders as possible.
This booklet includes the Notice of Annual Meeting and the Proxy Statement.
The Proxy Statement describes the business to be conducted at the Annual Meeting
and provides other information concerning the Company that you should be aware
of when you vote your shares.
Whether or not you attend the Annual Meeting, it is important that your
shares be represented and voted at the meeting. Stockholders of record can vote
their shares by telephone, electronically through the internet or by marking
your votes on the enclosed proxy card, signing, dating and mailing the proxy
card in the enclosed envelope. If you decide to attend the Annual Meeting and
vote in person, you may then withdraw your proxy.
Admission to the Annual Meeting will be by ticket only. If you are a
registered stockholder planning to attend the meeting, please check the
appropriate box on the proxy card and retain the bottom portion of the card as
your admission ticket. If your shares are held through an intermediary such as a
bank or broker, follow the instructions in the Proxy Statement to obtain a
ticket.
On behalf of the Board of Directors and the employees of Cendant
Corporation, I would like to express my appreciation for your continued interest
in the affairs of the Company.
Sincerely,
/s/ Henry R. Silverman
Henry R. Silverman
Chairman of the Board,
President and Chief Executive Officer
CENDANT CORPORATION
9 WEST 57TH STREET
NEW YORK, NEW YORK 10019
NOTICE OF 2002 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
MAY 21, 2002
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Cendant
Corporation (the "Company") will be held on May 21, 2002 at 10:00 a.m., New York
time, at the Ramada Inn and Conference Center, 130 Route 10 West, East Hanover,
New Jersey 07936 (the "Meeting"), to consider and vote upon the following
matters:
1. To elect five directors for a three-year term expiring in 2005 and until
their successors are duly elected and qualified (provided that, if
Proposal No. 3 is approved, the term will expire in 2003);
2. To ratify the appointment of Deloitte & Touche LLP as the auditors of
the Company's financial statements for fiscal year 2002;
3. To consider and approve our proposal to amend the Company's amended and
restated certificate of incorporation and by-laws to eliminate the
provisions for the classification of the Company's Board of Directors as
set forth in Annexes I and II to the accompanying Proxy Statement; and
4. To transact such other business as may properly come before the Meeting
or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on March 15, 2002 as
the record date for the Meeting. Only stockholders of record at that time are
entitled to notice of, and to vote at, the Meeting and any adjournment or
postponement thereof. A list of stockholders entitled to vote at the Meeting
will be available for examination by any stockholders, for any purpose germane
to the Meeting, for 10 days prior to the Meeting during ordinary business hours
at the site of the Meeting.
Attendance at the Meeting will be limited to stockholders as of the record
date, their authorized representatives and guests of the Company. Admission will
be by ticket only. For registered stockholders, the bottom portion of the proxy
card enclosed with the Proxy Statement is the Meeting ticket. Beneficial owners
with shares held through an intermediary, such as a bank or broker, should
request tickets in writing from Investor Relations, Cendant Corporation, 9 West
57th Street, New York, New York 10019, and include proof of ownership, such as a
bank or brokerage firm account statement or letter from the broker, trustee,
bank or nominee holding their stock, confirming beneficial ownership.
Stockholders who do not obtain tickets in advance may obtain them upon
verification of ownership at the Registration Desk on the day of the Meeting.
Admission to the Meeting will be facilitated if tickets are obtained in advance.
Tickets may be issued to others at the discretion of the Company.
The enclosed proxy is solicited by the Board of Directors of the Company.
Reference is made to the attached Proxy Statement for further information with
respect to the business to be transacted at the Meeting. The Board of Directors
urges you to date, sign and return the enclosed proxy promptly. This will ensure
the presence of a quorum at the Meeting. PROMPTLY SIGNING, DATING, AND RETURNING
THE PROXY WILL SAVE THE COMPANY THE EXPENSE AND EXTRA WORK OF ADDITIONAL
SOLICITATION. A reply envelope, for which no postage is required if mailed
within the United States, is enclosed for your convenience. Alternatively, in
lieu of returning signed proxy cards, the Company's stockholders of record can
vote their shares by telephone or electronically through the Internet at
www.eproxy.com/cd by following the instructions included on your proxy card. You
are cordially invited to attend the Meeting in person. The return of the
enclosed proxy will not affect your right to vote if you attend the Meeting in
person, as your proxy is revocable at your option.
Dated: March 29, 2002 By Order of the Board of Directors
/s/ Eric J. Bock
ERIC J. BOCK
Secretary
CENDANT CORPORATION
9 WEST 57TH STREET
NEW YORK, NEW YORK 10019
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS TO
BE HELD ON TUESDAY, MAY 21, 2002
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This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Cendant Corporation, a Delaware corporation
(the "Company"), to be voted at the 2002 Annual Meeting of Stockholders, 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 are first
being mailed to stockholders on or about March 31, 2002.
The Board of Directors does not intend to bring any matter before the
Meeting except as specifically indicated in the notice, nor does the Board of
Directors know of any matters which anyone else proposes to present for action
at the Meeting. However, if any other matters properly come before the Meeting,
the persons named in the enclosed proxy, or their duly constituted substitutes
acting at the Meeting, will be authorized to vote or otherwise act thereon in
accordance with their judgment on such matters.
Shares of the Company's CD common stock, par value $.01 per share (the
"Common Stock"), represented by proxies received by the Company (whether through
the return of the enclosed proxy card or by telephone), 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 specification(s) so made. If your proxy is properly executed
but does not contain voting instructions, or if you vote via telephone or the
Internet without indicating how you want to vote, your shares will be voted
"FOR" the election of all five 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 year ending December 31, 2002 and "FOR"
the proposal to declassify the Board of Directors.
Except as provided below, any proxy may be revoked at any time prior to its
exercise by notifying the Secretary in writing, by delivering a duly executed
proxy bearing a later date or by attending the Meeting and voting in person.
For participants in the Cendant Corporation Employee Savings Plan (the
"Savings Plan") and the Galileo International Savings and Investment Plan (the
"Galileo Plan") with shares of Common Stock credited to their accounts, voting
instructions for the trustees of the Savings Plan and the Galileo Plan are also
being solicited through this Proxy Statement. In accordance with the provisions
of the Savings Plan and the Galileo Plan, the respective trustees will vote
shares of Common Stock in accordance with instructions received from the
participants to whose accounts such shares are credited. To the extent such
instructions are not received prior to twelve o'clock noon, New York Time, on
May 15, 2002, (i) the trustee of the Savings Plan will vote the shares with
respect to which it has not received instructions proportionately in accordance
with the shares for which it has received instructions and (ii) the trustee of
the Galileo Plan will not vote the shares with respect to which it has not
received instructions. Instructions given with respect to shares in accounts of
the Savings Plan and the Galileo Plan may be changed or revoked only in writing,
and no such instructions may be revoked after twelve o'clock noon, New York
Time, on May 15, 2002. Participants in the Savings Plan and the Galileo Plan are
not entitled to vote in person at the Meeting.
If a participant in the Savings Plan or the Galileo Plan has shares of
Common Stock credited to his or her account and also owns other shares of Common
Stock, he or she should receive separate proxy cards for shares credited to his
or her account in the Savings Plan or the Galileo Plan and any other shares that
he or she owns. All such proxy cards should be completed, signed and returned to
the transfer agent to register voting instructions for all shares owned by him
or her or held for his or her benefit in the Savings Plan's Cendant Stock Fund
or the Galileo Plan's Cendant Stock Fund.
The accompanying form of proxy is being solicited on behalf of the Board of
Directors of the Company. The expenses of solicitation of proxies for the
Meeting will be paid by the Company. In addition to the mailing 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.
The Company has retained Mellon Investor Services to aid in the solicitation of
proxies. It is estimated that the fee for Mellon Investor Services will be
approximately $12,500.00 plus reasonable out-of-pocket costs and expenses. Such
fee will be paid by the Company.
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 at the Company's website at www.cendant.com or
upon written request to Cendant Corporation, 9 West 57th Street, New York, New
York 10019, Attention: Investor Relations.
TABLE OF CONTENTS
PAGE
--------
VOTING SECURITIES AND PRINCIPAL HOLDERS..................... 1
Outstanding Shares and Voting Rights...................... 1
Security Ownership of Certain Beneficial Owners and
Management.............................................. 2
ELECTION OF DIRECTORS [Proposal No. 1]...................... 3
General................................................... 3
Information Regarding the Nominees for the Term Expiring
in 2005................................................. 3
Information Regarding Directors Whose Terms Expire in
2003.................................................... 5
Information Regarding Directors Whose Terms Expire in
2004.................................................... 6
Committees and Meetings of the Board of Directors......... 7
EXECUTIVE OFFICERS.......................................... 10
EXECUTIVE COMPENSATION AND OTHER INFORMATION................ 13
Summary Compensation Table................................ 13
Option Grants in 2001..................................... 14
Aggregated Option Exercises in 2001 and Year-End Option
Values Table............................................ 15
Employment Contracts and Termination, Severance and Change
of Control Arrangements................................. 16
Compensation Committee Report on Executive Compensation... 19
Compensation Committee Interlocks and Insider
Participation........................................... 22
Performance Graph......................................... 23
Report of Audit Committee................................. 24
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 25
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT........... 25
RATIFICATION OF APPOINTMENT OF AUDITORS [Proposal No. 2].... 26
BOARD DECLASSIFICATION PROPOSAL [Proposal No. 3]............ 27
STOCKHOLDER PROPOSALS....................................... 29
ANNEX I BY-LAW AMENDMENT.................................. I-1
ANNEX II CERTIFICATE OF INCORPORATION AMENDMENT........... II-1
i
VOTING SECURITIES AND PRINCIPAL HOLDERS
OUTSTANDING SHARES AND VOTING RIGHTS
Only holders of record of the Common Stock at the close of business on
March 15, 2002 are entitled to notice of, and to vote at, the Meeting. On that
date, the Company had outstanding 982,020,341 shares of Common Stock, held of
record by 10,093 stockholders.
The presence, in person or by proxy, of the holders of not less than
one-third of the Common Stock entitled to vote at the Meeting will constitute a
quorum. On all matters voted upon at the Meeting and any adjournment or
postponement thereof, the holders of the Common Stock vote together as a single
class, with each record holder of Common Stock entitled to one vote per share.
Directors shall be elected by a plurality of the votes of the 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 such nominees have received the requisite number of affirmative votes,
abstentions and broker non-votes will have no effect on the outcome of the vote.
Approval of the proposal relating to the ratification of the appointment of
auditors of the Company's financial statements requires the affirmative vote of
a majority of the shares of Common Stock present or represented by proxy and
entitled to vote at the Meeting. 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.
Approval of the proposal relating to the declassification of the Board of
Directors requires the affirmative vote of at least 80% of the voting power of
all shares of the Company entitled to vote generally in the election of
directors. 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.
In order that your shares of Common Stock may be represented at the Meeting,
you are requested to:
- indicate your instructions on the proxy;
- date and sign the proxy;
- mail the proxy promptly in the enclosed envelope; and
- allow sufficient time for the proxy to be received before the date of the
Meeting.
Alternatively, in lieu of returning signed proxy cards, the Company's
stockholders of record can vote their shares by telephone. If you are a
registered shareholder (that is, if you hold your stock in certificate form),
you may vote by telephone, or electronically through the Internet, by following
the instructions included with your proxy card. If your shares are held in
"street name" such as in a stock brokerage account or by a bank or other
nominee, please check your proxy card or contact your broker or nominee to
determine whether you will be able to vote by telephone or electronically. The
deadline for voting by telephone or electronically is 4:00 p.m., New York time,
on the business day prior to the date of the Meeting. A proxy may be revoked at
any time prior to the voting at the Meeting by submitting a later dated proxy
(including a proxy by telephone or electronically through the Internet), by
giving timely written notice of such revocation to the Secretary of the Company
or by attending the Meeting and voting in person. However, if you hold shares in
"street name," you may not vote these shares in person at the Meeting unless you
bring with you a legal proxy from the stockholder of record.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT, AND, IF GIVEN
OR MADE, SUCH INFORMATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED AND
THE DELIVERY OF THIS PROXY STATEMENT SHALL, UNDER NO CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE OF THIS PROXY STATEMENT.
1
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth on the following table is furnished as of
March 15, 2002 as to those shares of the Company's equity securities
beneficially owned by each of its directors and certain of its executive
officers, and all of its executive officers and directors as a group.
There are currently no known beneficial owners of five percent (5%) or more
of any class of our voting securities.
OF THE TOTAL
NUMBER OF SHARES
BENEFICIALLY
TOTAL AMOUNT OWNED, SHARES
OF SHARES PERCENT OF WHICH MAY BE
BENEFICIALLY COMMON STOCK ACQUIRED WITHIN
NAME OWNED(1) OWNED(2) 60 DAYS(3)
---- ------------ ------------ ----------------
DIRECTORS AND EXECUTIVE OFFICERS(4):
Henry R. Silverman............................... 40,087,629 3.95% 32,087,629
Stephen P. Holmes(5)............................. 4,354,527 * 4,083,136
James E. Buckman................................. 3,411,446 * 3,364,149
Myra J. Biblowit(6).............................. 53,804 * 48,333
Leonard S. Coleman(7)............................ 309,227 * 302,488
The Honorable William S. Cohen................... 27,559 * 25,000
Martin L. Edelman(7)............................. 249,227 * 242,488
Dr. John C. Malone(8)............................ 1,053,743 * 48,333
Cheryl D. Mills.................................. 53,002 * 48,333
The Rt. Hon. Brian Mulroney, P.C., C.C.,
LL.D(7)........................................ 309,227 * 302,488
Robert E. Nederlander(7)......................... 309,227 * 302,488
Robert W. Pittman(7)............................. 789,847 * 783,108
Sheli Z. Rosenberg............................... 65,804 * 36,667
Robert F. Smith(7)(9)............................ 485,227 * 302,488
Samuel L. Katz(10)............................... 2,509,097 * 2,411,534
Richard A. Smith(11)............................. 3,253,383 * 3,211,514
Executive Officers and Directors as a Group
(21 persons):.................................... 65,029,128 6.27% 55,167,148
------------------------
* Amount represents less than 1% of the outstanding Common Stock.
(1) Shares beneficially owned includes direct and indirect ownership of shares
and stock options that are currently exercisable or exercisable within
60 days.
(2) Based on 982,020,341 shares of Common Stock outstanding on March 15, 2002.
(3) Includes stock options that are currently exercisable plus stock options
that are exercisable within 60 days ("Vested Options").
(4) Such Director's and/or Executive Officer's Vested Options are deemed
outstanding for purposes of computing the percentages of the class for such
Director and/or Executive Officer.
(5) Includes 12,171 shares of Common Stock held by Mr. Holmes' children.
(6) Includes 5,271 shares held in the 1999 Non-Employee Directors Deferred
Compensation Plan, 100 shares held in Ms. Biblowit's IRA account and 100
held in an IRA account for Ms. Biblowit's spouse.
(7) Includes 6,739 shares held in the 1999 Non-Employee Directors Deferred
Compensation Plan.
(8) Includes 1,000,000 shares held by the John C. Malone Charitable Remainder
Unitrust.
2
(9) Includes 150,000 shares of Common Stock held in Mr. Smith's IRA account and
26,000 shares of Common Stock held in the name of the Smith Family
Foundation, of which Mr. Smith is President and as to which Mr. Smith
disclaims beneficial ownership.
(10) Includes 1,000 shares held by Mr. Katz's children and 180 shares held by
his wife.
(11) Includes 517 shares held in a non-qualified deferred compensation plan.
ELECTION OF DIRECTORS
[PROPOSAL NO. 1]
GENERAL
The Board of Directors presently consists of fourteen members. The Board is
divided into three classes serving staggered three-year terms. Directors for
each class will be elected at the annual meeting of stockholders held in the
year in which the term for such class expires and will serve for three years;
provided that, if Proposal No. 3 is approved, Directors elected at the 2002
Annual Meeting and thereafter will serve one-year terms. The Board of Directors
has nominated five candidates to be elected at the Meeting to serve as directors
for a three-year term ending at the 2005 annual meeting of stockholders and when
their successors are duly elected and qualified; provided that, if Proposal
No. 3 is approved, such candidates will serve a one-year term ending at the 2003
annual meeting of stockholders. All nominees are currently directors of the
Company. The terms of the remaining directors expire at the Company's annual
meeting of stockholders to be held in 2003 and 2004.
Each nominee has consented to being named in this Proxy Statement and to
serve if elected. If, prior to the Meeting, any nominee should become
unavailable to serve, the shares of Common Stock represented by a properly
executed and returned proxy (whether through the return of the enclosed proxy
card, by telephone or electronically through the Internet) will be voted for
such additional person as shall be designated by the Board of Directors, unless
the Board of Directors 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 A DIRECTOR. UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED BY THE COMPANY
WILL BE VOTED "FOR" THE ELECTION OF THE FIVE NOMINEES LISTED BELOW.
Certain information regarding each nominee as of March 15, 2002, is set
forth below, including such individual's age and principal occupation, a brief
account of such individual's business experience during at least the last five
years and other directorships currently held.
INFORMATION REGARDING THE NOMINEES FOR THE TERM EXPIRING IN 2005 (OR, IF
PROPOSAL NO. 3 IS APPROVED, FOR THE TERM EXPIRING IN 2003)
Leonard S. Coleman
John C. Malone, Ph.D.
Cheryl D. Mills
Robert E. Nederlander
Robert F. Smith
MR. COLEMAN, age 53, has been a Director of the Company since
December 1997. Mr. Coleman was a Director of HFS from April 1997 until
December 1997. Mr. Coleman is presently Chairman of ARENACO a subsidiary of the
Yankees/Nets and Senior Advisor to Major League Baseball. Mr. Coleman was
President of The National League of Professional Baseball Clubs from 1994-1999,
having previously served since 1992 as Executive Director, Market Development of
Major League
3
Baseball. Mr. Coleman was a Director of Avis Group Holdings, Inc. from
September 1997 until March 1, 2000. Mr. Coleman is a Director of the following
corporations which file reports pursuant to the Exchange Act: Owens Corning, The
Omnicom Group, New Jersey Resources, H.J. Heinz Company, Radio Unica, Aramark,
Churchill Downs Inc. and Electronic Arts. Mr. Coleman is also Chairman of the
Jackie Robinson Foundation and a Trustee of the National Urban League and the
Children's Defense Fund.
DR. MALONE, age 61, has been a Director of the Company since March 2000.
Since 1999, Dr. Malone has been Chairman of Liberty Media Group. Prior to
serving as Chairman of Liberty Media Group, Dr. Malone was the Chairman
(1996-1999), Chief Executive Officer (1994-1999), and President (1994-1997) of
Tele-Communications, Inc., Chief Executive Officer (1992-1994) and President
(1973-1994) of TCI Communications Inc. Dr. Malone is a Director of Liberty Media
Group, The Bank of New York, the CATO Institute, Discovery
Communications, Inc., BET Holdings II, Inc., USANi, LLC and United Global
Communications, Inc.
MS. MILLS, age 37, has been a Director of the Company since June 2000. From
October 1999 until recently, Ms. Mills was Senior Vice President for Corporate
Policy and Public Programming of Oxygen Media, Inc. From 1997 to 1999,
Ms. Mills was Deputy Counsel to President Clinton. From 1993 to 1996, Ms. Mills
also served as Associate Counsel to the President, and as Deputy General Counsel
of the Clinton/Gore Transition Planning Foundation. From 1990 to 1992,
Ms. Mills was an associate at the Washington, D.C. law firm of Hogan and
Hartson. Ms. Mills currently serves on the Board of the National Partnership for
Women and Families, the Board of the Jackie Robinson Foundation, the Board of
the Robert F. Kennedy Memorial, the Stanford Law School Board of Visitors, and
the William J. Clinton Presidential Library Foundation Board of Trustees.
MR. NEDERLANDER, age 68, has been a Director of the Company since
December 1997. Mr. Nederlander was a Director of HFS from July 1995 to
December 1997. Mr. Nederlander has been President and/or Director since
November 1981 of the Nederlander Organization, Inc., owner and operator of
legitimate theaters in the City of New York. Since December 1998,
Mr. Nederlander has been a co-managing partner of the Nederlander Company, LLC,
operator of legitimate theaters outside the City of New York. Mr. Nederlander
has been Chairman of the Board of Riddell Sports Inc. (now known as Varsity
Brands) since April 1988 and was the Chief Executive Officer of such corporation
from 1988 through April 1, 1993. From February until June 1992, Mr. Nederlander
was also Riddell Sports Inc.'s interim President and Chief Operating Officer. He
served as the Managing General Partner of the New York Yankees from August 1990
until December 1991, and has been a limited partner and a Director since 1973.
Mr. Nederlander has been President since October 1985 of Nederlander Television
and Film Productions, Inc. and was Chairman of the Board and Chief Executive
Officer from January 1988 to January 2002 of Mego Financial Corp. ("Mego").
Mr. Nederlander was a Director of Mego Mortgage Corp. from September 1996 until
June 1998. Mr. Nederlander also served as Chairman of the Board of
Allis-Chalmers Corp. from May 1989 to 1993 and as Vice Chairman of
Allis-Chalmers Corp. from 1993 through October 1996. He is currently a Director
of Allis-Chalmers Corp. In October 1996, Mr. Nederlander became a Director of
New Communications, Inc., a publisher of community oriented free circulation
newspapers. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
MR. SMITH, age 69, has been a Director of the Company since December 1997.
Mr. Smith was a Director of HFS from February 1993 until December 1997. From
November 1994 until August 1996, Mr. Smith also served as a Director of
Chartwell Leisure Inc. ("Chartwell"). Mr. Smith is the retired Chairman and
Chief Executive Officer of American Express Bank, Ltd. ("AEBL"). He joined
AEBL's parent company, the American Express Company, in 1981 as Corporate
Treasurer before moving to AEBL and serving as Vice Chairman and Co-Chief
Operating Officer and then President prior to becoming Chief Executive Officer.
Mr. Smith is currently an equity owner and Senior Managing
4
Director of Car Component Technologies, Inc., an automobile parts
remanufacturer, located in Bedford, New Hampshire.
INFORMATION REGARDING DIRECTORS WHOSE TERMS EXPIRE IN 2003
Henry R. Silverman
James E. Buckman
The Honorable William S. Cohen
Martin L. Edelman
Stephen P. Holmes
MR. SILVERMAN, age 61, has been President and Chief Executive Officer and
Director of the Company since December 1997 and Chairman of the Board of
Directors and Chairman of the Executive Committee of the Board of Directors
since July 28, 1998. Mr. Silverman was Chairman of the Board, Chairman of the
Executive Committee and Chief Executive Officer of HFS from May 1990 until
December 1997. From November 1994 until February 1996, Mr. Silverman also served
as Chairman of the Board and Chief Executive Officer of Chartwell.
MR. BUCKMAN, age 57, has been a Vice Chairman since November 1998 and
General Counsel and a Director of the Company since December 1997. Mr. Buckman
was a Senior Executive Vice President of the Company from December 1997 until
November 1998. Mr. Buckman was the Senior Executive Vice President and General
Counsel and Assistant Secretary of HFS from May 1997 to December 1997, a
Director of HFS since June 1994 and was Executive Vice President, General
Counsel and Assistant Secretary of HFS from February 1992 to May 1997.
Mr. Buckman also serves as a Director and officer of several subsidiaries of the
Company. From November 1994 to February 1996, Mr. Buckman served as the
Executive Vice President, General Counsel and Secretary of Chartwell and until
August 1996 he served as a Director of Chartwell. Mr. Buckman also serves as a
Director of PHH Corporation, a wholly owned subsidiary of the Company, which
files reports pursuant to the Exchange Act and FFD Development Company LLC.
Mr. Buckman also serves on the Board of Trustees of Fordham University and the
Gregorian University Foundation.
THE HONORABLE WILLIAM S. COHEN, age 61, has been a Director of the Company
since January 2001. Since January 2001, Secretary Cohen has been the Chairman
and Chief Executive Officer of The Cohen Group, a consulting company. From
January 1997 until January 2001, Secretary Cohen served as U.S. Secretary of
Defense. From 1979 until January 1997, Secretary Cohen served as the U.S.
Senator for the State of Maine. From 1973 until 1979, Secretary Cohen served as
a member of the House of Representatives from Maine's Second Congressional
District. Secretary Cohen also serves as a Director of Velocity Express
Corporation, Nasdaq, Global Crossing, IDT Corporation and Head NV, which file
reports pursuant to the Exchange Act.
MR. EDELMAN, age 60, has been a Director of the Company since
December 1997. Mr. Edelman was a Director of HFS from November 1993 until
December 1997. Mr. Edelman has been Of Counsel to Paul, Hastings, Janofsky &
Walker, a New York City law firm, since June 2000. Mr. Edelman was a partner
with Battle Fowler, which merged with Paul Hastings, Janofsky & Walker, from
1972 through 1993 and from January 1, 1994 until June 2000 was Of Counsel to
Battle Fowler. 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:
Capital Trust and Arcadia Realty Trust. Mr. Edelman was Chairman of the Board of
Directors of Avis Rent A Car, Inc. from December 1998 until November 1999.
Mr. Edelman was a Director of Avis Group Holdings, Inc. from September 1997
until March 1, 2001. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
5
MR. HOLMES, age 45, has been a Vice Chairman and Director of the Company and
Chairman and Chief Executive Officer of the Hospitality Services Division of the
Company since December 1997. Mr. Holmes was Vice Chairman of HFS from
September 1996 until December 1997 and was a Director of HFS from June 1994
until December 1997. 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 and officer of several subsidiaries of the
Company and as a Director of FFD Development Company LLC. Mr. Holmes is a
Director of PHH Corporation, a wholly owned subsidiary of the Company, which
files reports pursuant to the Exchange Act. Mr. Holmes is also a Director of
Avis Europe PLC. Mr. Holmes was a Director of Avis Group Holdings, Inc. from
September 1997 until March 1, 2001. Mr. Holmes also serves on the Board of
Trustees of Chilton Memorial Hospital in Pompton Plains, New Jersey and on the
Board of Directors of the Boys and Girls Club of Morris County, New Jersey.
INFORMATION REGARDING DIRECTORS WHOSE TERMS EXPIRE IN 2004
Myra J. Biblowit
The Rt. Hon. Brian Mulroney, P.C., C.C., LL.D.
Robert W. Pittman
Sheli Z. Rosenberg
MS. BIBLOWIT, age 53, has been a Director of the Company since April 2000.
Since April 2001, Ms. Biblowit has been President of The Breast Cancer Research
Foundation. From July 1997 until March 2001, she served as Vice Dean for
External Affairs for the New York University School of Medicine and Senior Vice
President of the Mount Sinai-NYU Health System. From June 1991 to June 1997,
Ms. Biblowit was Senior Vice President, and Executive Director of the Capital
Campaign for the American Museum of Natural History and prior to that, served as
Executive Vice President of the Central Park Conservancy from 1986 to 1991.
Ms. Biblowit serves on the Board of Directors of the Women's Forum and the
Women's Executive Circle of UJA Federation. She is Vice Chairman of the Board of
the Historic House Trust of New York City and a Trustee of the Columbia Land
Conservancy. Ms. Biblowit is a former Director of Art Spaces and a founding
Director of the City Parks Foundation.
MR. MULRONEY, age 63, has been a Director of the Company since
December 1997. Mr. Mulroney was a Director of HFS from April 1997 until
December 1997. Mr. Mulroney was Prime Minister of Canada from 1984 to 1993 and
is currently Senior Partner in the Montreal-based law firm, Ogilvy Renault. He
is a Director of the following corporations which file reports pursuant to the
Exchange Act: America Online Latin America, Inc., Archer Daniels Midland
Company Inc., Barrick Gold Corporation, TrizecHahn Corporation Ltd.,
Quebecor, Inc. and Quebecor World Inc.
MR. PITTMAN, age 48, has been a Director of the Company since
December 1997. Mr. Pittman was a Director of HFS from July 1994 until
December 1997. Since January 2001, Mr. Pittman has been President and Co-Chief
Operating Officer of AOL Time Warner, Inc. From February 1998 until
January 2001, Mr. Pittman was President and Chief Operating Officer of America
Online, Inc., a provider of internet online services. From October 1996 to
February 1998, Mr. Pittman was President and Chief Executive Officer of AOL
Networks, a unit of America Online, Inc. From September 1995 through
October 1996, Mr. Pittman served as the Chief Executive Officer and Managing
Partner of the Company's subsidiary, Century 21 Real Estate Corporation. From
1990 until September 1995, Mr. Pittman served as President and Chief Executive
Officer of Time Warner Enterprises, a business development unit of Time
Warner Inc. and, from 1991 to September 1995, additionally, as Chairman and
Chief Executive Officer of Six Flags Entertainment Corporation, the parent of
Six Flags Theme Parks Inc. Mr. Pittman serves as a Director of AOL Time
Warner, Inc., which files reports pursuant to the Exchange Act.
6
MS. ROSENBERG, age 60, has been a Director of the Company since April 2000.
Since January 1, 2000, Ms. Rosenberg has been Vice Chairwoman of Equity Group
Investments, Inc., a privately held investment company. From October 1994 to
December 1999, Ms. Rosenberg was President and Chief Executive Officer of Equity
Group Investments, Inc. Ms. Rosenberg serves as a Director of the following
companies which file reports pursuant to the Exchange Act: CVS Corporation,
Capital Trust, Dynegy Inc., Manufactured Home Communities, Inc., Equity
Residential Properties Trust, Equity Office Property Trust and Ventas.
Ms. Rosenberg also currently sits on the Boards of The Chicago Network, National
Partnership of Women & Families, Women's Issue Network Foundation and
Rush-Presbyterian-St. Luke's Medical Center.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
BOARD OF DIRECTORS
The Board of Directors held seven meetings during 2001. In 2001, except as
set forth in the next sentence, all incumbent directors attended at least 75% of
the aggregate number of meetings of the Board and committees of the Board on
which they served that were held after their appointment. Messrs. Pittman and
Mulroney were absent from two and three meetings of the Board, respectively.
EXECUTIVE COMMITTEE
The Executive Committee is composed of Messrs. Silverman (Chairman),
Buckman, Holmes and Edelman (the "Executive Committee"). The Executive Committee
has and may exercise all of the powers of the Board of Directors when the Board
is not in session, including the power to authorize the issuance of stock,
except that the Executive Committee has no power to (a) alter, amend or repeal
the By-Laws or any resolution or resolutions of the Board of Directors,
(b) declare any dividend or make any other distribution to the stockholders of
the Company, (c) appoint any member of the Executive Committee, or (d) take any
other action which legally may be taken only by the full Board of Directors. The
Chairman of the Board will serve as Chairman of the Executive Committee. The
Executive Committee held two meetings in 2001.
NOMINATING COMMITTEE
The Nominating Committee is composed of Messrs. Mulroney (Chairman), Coleman
and Smith and Ms. Mills (the "Nominating Committee"), each of whom is an
independent Director. Any shareholder wishing to propose a nominee should submit
a recommendation in writing to the Company's Secretary, indicating the nominee's
qualifications and other relevant biographical information and providing
confirmation of the nominee's consent to serve as a director. Such proposals for
nominees will be given due consideration by the Committee for recommendations to
the Board based on the nominee's qualifications. While the Nominating Committee
held no meetings in 2001, the Committee did act by written consent to nominate
members of the Board of Directors to stand for election at the 2001 Annual
Meeting. In February 2002, the Board of Directors met to nominate members of the
Board of Directors to stand for election for the 2002 Annual Meeting.
AUDIT COMMITTEE
The Audit Committee is composed of Messrs. Smith (Chairman), Mulroney and
Coleman and Ms. Rosenberg (the "Audit Committee"). The functions of the Audit
Committee and its activities during fiscal 2001 are described below under the
heading Report of the Audit Committee. During the year, the Board reviewed the
composition of the Audit Committee in light of the New York Stock Exchange rules
governing audit committees. Based upon this examination, the Board confirmed
that all members of the Audit Committee are "independent" within the meaning of
the New York Stock Exchange's rules. The Board of Directors has a written
charter for the Audit Committee, a copy of
7
which was attached to the Company's Proxy Statement furnished in connection with
the Company's 2001 Annual Meeting. The Audit Committee held nine meetings in
2001.
COMPENSATION COMMITTEE
The Compensation Committee is composed of Messrs. Coleman (Chairman) and
Smith and Ms. Biblowit (the "Compensation Committee"). The Compensation
Committee has the following powers and authority: (i) determining and fixing the
compensation for all executive officers of the Company and those of its
subsidiaries that the Compensation Committee shall from time to time consider
appropriate, as well as all employees of the Company and its subsidiaries
compensated at a rate in excess of such amount per annum as may be fixed or
determined from time to time by the Board; (ii) performing the duties of the
committees of the Board provided for in any present or future stock option,
incentive compensation or employee benefit plan of the Company or, if the
Compensation Committee shall so determine, any such plan of any subsidiary; and
(iii) reviewing the operations of and policies pertaining to any present or
future stock option, incentive compensation or employee benefit plan of the
Company or subsidiary that the Compensation Committee shall from time to time
consider appropriate. Each resolution of the Compensation Committee requires the
majority of the members of such committee. The Compensation Committee held eight
meetings in 2001.
SPECIAL LITIGATION COMMITTEE
The Special Litigation Committee is composed of Mses. Rosenberg (Chairwoman)
and Mills (the "Special Litigation Committee"). The Special Litigation Committee
serves to investigate and evaluate the allegations and issues raised in the
derivative litigation actions (the "Derivative Actions") pending against certain
former and current officers and directors of the Company and to prepare such
reports, arrive at such decisions and take such other actions in connection with
the Derivative Actions as the Special Litigation Committee deems appropriate and
in the best interests of the Company and its stockholders, in accordance with
Delaware law. The Special Litigation Committee held nine meetings in 2001.
CORPORATE POLICY COMMITTEE
The Corporate Policy Committee is composed of Messrs. Coleman (Chairman) and
Edelman and Ms. Biblowit (the "Corporate Policy Committee"). The Corporate
Policy Committee serves as a resource for management with respect to issues
relating to diversity in the workplace, opportunities to promote the Company's
businesses within all areas of the socio-economic spectrum, and the creation of
opportunities for the Company to provide economically viable investments within
diverse segments of society. The Corporate Policy Committee held five meetings
in 2001.
DIRECTOR COMPENSATION
Non-Employee Directors of the Company receive an annual retainer of $40,000,
plus $5,000 for chairing a committee and $3,000 for serving as a member of a
committee other than as Chairman. One hundred percent of the $40,000 annual
stipend is paid to each Director ratably in Common Stock on a quarterly basis.
The calculations of stock paid to Non-Employee Directors is made based on the
average of the closing price of Common Stock on the New York Stock Exchange on
the last five trading days of the calendar quarter to which such stock payment
relates. The Company has implemented a program providing its Non-Employee
Directors the opportunity to defer the receipt of their annual stipend until
their separation of service from the Board. Non-Employee Directors also are paid
$1,000 for each Board of Directors meeting attended and $500 ($1,000 for
committee chair) for each Board committee meeting if held on the same day as a
Board of Directors meeting and $1,000 ($2,000 for committee chair) for each
Board committee meeting attended on a day on which there is no Board meeting.
Members of the Special Litigation Committee receive a fee of $350 per hour for
8
their services due to the substantial time commitment required of the committee
members. Members of the Board and each committee will also receive a fee of $500
for each proposed unanimous written action in lieu of a meeting. Non-Employee
Directors are reimbursed for expenses incurred in attending meetings of the
Board of Directors and committees.
The Company provides $100,000 of term life insurance coverage for each
Non-Employee Director to the beneficiary designated by such Non-Employee
Director. In addition, the Company has purchased joint life insurance contracts
in the amount of $1 million for each Director. Upon the death of such Director
while still in office, the Company will donate an aggregate of $1 million to one
or more charitable organizations designated by such Director from the proceeds
of such insurance policy. With the exception of such joint life insurance
contracts, members of the Board of Directors who are officers or employees of
the Company or any of its subsidiaries do not receive compensation or
reimbursement of expenses for serving in such capacity (other than travel
related expenses for meetings held outside of the Company's headquarters).
Non-Employee Directors have also received grants of stock options under one
or more of the following plans: 1990 Directors Stock Option Plan, 1992 Directors
Stock Option Plan, 1994 Director Stock Option Plan, the 1997 Stock Incentive
Plan, the 1997 Stock Option Plan and the HFS Incorporated 1993 Stock Option
Plan. In 2001, each of the Non-Employee Directors received a grant of 50,000
Common Stock options. Also, in 2001, in connection with the Company's sale of
its Move.com and related businesses, each of the Non-Employee Directors
consented to the cancellation of outstanding options to purchase Move.com
tracking stock held by such Non-Employee Director in exchange for a cash
payment. See "EXECUTIVE COMPENSATION AND OTHER INFORMATION--Compensation
Committee Report on Executive Compensation."
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-votes will have no effect on the outcome of the
vote.
9
EXECUTIVE OFFICERS
The executive officers of the Company as of the date 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
officer is appointed by the Board to hold office until his or her successor is
duly appointed and qualified:
NAME OFFICE OR POSITIONS HELD
---- ------------------------
Henry R. Silverman Chairman of the Board, President and Chief Executive Officer
James E. Buckman Vice Chairman and General Counsel
Stephen P. Holmes Vice Chairman, Chairman and Chief Executive Officer,
Hospitality Services Division
John W. Chidsey Senior Executive Vice President, Chairman and Chief
Executive Officer, Financial Services Division and Vehicle
Services Division
Thomas D. Christopoul Senior Executive Vice President and Chief Administrative
Officer
Scott E. Forbes Senior Executive Vice President and Group Managing Director
of Cendant Europe, Middle East and Africa
Samuel L. Katz Senior Executive Vice President and Chief Strategic Officer,
Chairman and Chief Executive Officer Travel Distribution
Division
Kevin M. Sheehan Senior Executive Vice President and Chief Financial Officer
Richard A. Smith Senior Executive Vice President, Chairman and Chief
Executive Officer, Real Estate Division
Tobia Ippolito Executive Vice President and Chief Accounting Officer
Other than as set forth below, for biographical information concerning the
Executive Officers of the Company, see "Election of Directors."
NAME OFFICE OR POSITIONS HELD
---- ------------------------
John W. Chidsey Mr. Chidsey, age 39, has been Chairman and Chief Executive
Officer of the Financial Services Division and Vehicle
Services Division since August 2001. From March 2000 to
August 2001, Mr. Chidsey was Chief Executive Officer of the
Diversified Services Division, including the Individual
Membership Segment. Mr. Chidsey was Chief Executive Officer
of the Diversified Services Division, excluding the
Individual Membership Segment, from January 2000 until March
2000. Mr. Chidsey was Chairman and Chief Executive Officer
of the Insurance/Wholesale Division of the Company from
November 1998 until January 2000. From May 1998 to November
1998, Mr. Chidsey was President and Chief Operating Officer
of the Alliance Marketing Division of the Company. From
December 1997 to May 1998, Mr. Chidsey was Executive Vice
President, Business Development of the Company. From 1995 to
December 1997, Mr. Chidsey was Senior Vice President,
Preferred Alliance Services for HFS. Prior to joining HFS,
Mr. Chidsey was the Chief Financial Officer at two divisions
of PepsiCo, Inc. with responsibilities for international
operations. Mr. Chidsey is a Director of Trilegiant
Corporation.
10
NAME OFFICE OR POSITIONS HELD
---- ------------------------
Thomas D. Christopoul Mr. Christopoul, age 37, has been Senior Executive Vice
President and Chief Administrative Officer since April 2000.
From January 2000 to April 2000, Mr. Christopoul was
President, Cendant Membership Services. From October 1999 to
January 2000, Mr. Christopoul was Executive Vice President,
Corporate Services. From April 1998 to October 1999, Mr.
Christopoul was Executive Vice President, Human Resources,
and from December 1997 until April 1998, Mr. Christopoul was
Senior Vice President, Human Resources. Mr. Christopoul was
Senior Vice President, Human Resources of HFS from October
1996 until December 1997 and Vice President Human Resources
of HFS from October 1995 until October 1996. He also is
Chairman of Advance Ross Corporation, a subsidiary of the
Company.
Scott E. Forbes Mr. Forbes, age 44, has been Senior Executive Vice President
and Group Managing Director of Cendant Europe, Middle East
and Africa since December 2000 and Executive Vice President
and Group Managing Director of Cendant Europe from November
1998. Mr. Forbes was Executive Vice President, Finance of
Cendant and Chief Accounting Officer from April 1998 to
November 1998. From December 1997 until April 1998 and from
August 1993 until April December 1997, Mr. Forbes was Senior
Vice President Finance of Cendant and HFS.
Samuel L. Katz Mr. Katz, age 36, has been Senior Executive Vice President,
Chief Strategic Officer and Chairman and Chief Executive
Officer Travel Distribution Division since July 2001. From
January 2001 to July 2001, Mr. Katz was Senior Executive
Vice President--Strategic and Business Development and from
January 2000 to January 2001, Mr. Katz was Senior Executive
Vice President and Chief Executive Officer of the Cendant
Internet Group. Mr. Katz was Senior Executive Vice
President, Strategic Development of the Company from July
1999 to January 2000, Executive Vice President, Strategic
Development from April 1998 until January 2000, and Senior
Vice President, Acquisitions from December 1997 to March
1998. Mr. Katz was Senior Vice President, Acquisitions of
HFS from January 1996 to December 1997. From June 1993 to
December 1995, Mr. Katz was Vice President of Dickstein
Partners Inc., a private investment firm. Mr. Katz is a
Director of NRT Incorporated, Go2 Systems Inc., Netgrocer
and Trilegiant Corporation.
11
NAME OFFICE OR POSITIONS HELD
---- ------------------------
Kevin M. Sheehan Mr. Sheehan, age 47, has been Senior Executive Vice
President and Chief Financial Officer since March 1, 2001.
From August 1999 to February 2001, Mr. Sheehan was
President--Corporate and Business Affairs and Chief
Financial Officer of Avis Group Holdings, Inc. and a
Director of that company since June 1999. From December 1996
to August 1999, Mr. Sheehan was Executive Vice President and
Chief Financial Officer of Avis Group Holdings, Inc. He
served as Executive Vice President and Chief Financial
Officer of Avis Car Rental Services, Inc. from December 1996
until March 1, 2001 and of PHH from June 1999 until March 1,
2001. From September 1996 to September 1997, Mr. Sheehan was
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.
Richard A. Smith Mr. Smith, age 48, has been Chairman and Chief Executive
Officer of the Real Estate Division of the Company since
December 1997. Mr. Smith was President of the Real Estate
Division of HFS from October 1996 to December 1997 and
Executive Vice President of Operations for HFS from February
1992 to October 1996. Mr. Smith is a Director of NRT
Incorporated. Mr. Smith also serves on the Easter Seals
National Board, the Harvard Joint Center for Housing and is
a member of Columbus State University's Board of Trustees.
Tobia Ippolito Mr. Ippolito, age 37, has been Executive Vice President and
Chief Accounting Officer since April 2001. Prior to that,
Mr. Ippolito was Executive Vice President--Finance and
Administration of Cendant Internet Group from April 2000 to
April 2001, Senior Vice President, Special Projects and
Strategic Initiatives from September 1999 to April 2000 and
from April 1998 to September 1999, he was Senior Vice
President, Finance and Corporate Controller. From December
1997 to April 1998, Mr. Ippolito was Vice President and
Corporate Controller of the Company. From January 1995 to
December 1997, Mr. Ippolito was Vice President and Corporate
Controller of HFS and from January 1993 to January 1995, Mr.
Ippolito was Corporate Controller of HFS. Mr. Ippolito is a
Director of Trilegiant Corporation.
12
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth the 1999, 2000 and 2001 cash and non-cash
compensation awarded to or earned by each person who served as Chief Executive
Officer of the Company during 2001 and the four other most highly compensated
executive officers of the Company (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
------------------------------
SECURITIES
UNDERLYING
OPTIONS
ANNUAL COMPENSATION RESTRICTED COMMON STOCK/ ALL OTHER
NAME AND ------------------------ STOCK MOVE.COM COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) AWARDS($)(2) COMMON STOCK(#) ($)(4)
------------------ -------- ---------- ----------- ------------ --------------- ------------
Henry R. Silverman(6) ................... 2001 3,141,510 4,715,250 0 6,000,000 4,120,013
Chairman of the Board, 2000 3,037,308 4,555,962 0 3,000,000/0(3) 707,224
President and Chief 1999 2,900,000 4,320,254 0 3,000,000 266,149
Executive Officer
Stephen P. Holmes ....................... 2001 750,000 1,400,000 0 1,000,000 204,193
Vice Chairman and 2000 678,655 644,722 500,000 503,750/43,750(3) 85,416
Chairman and CEO, 1999 661,050 660,880 0 600,000 84,902
Hospitality Services Division
James E. Buckman ........................ 2001 750,000 1,400,000 0 1,000,000 247,542
Vice Chairman and General 2000 678,655 644,722 500,000 503,750/43,750(3) 6,014
Counsel 1999 661,050 660,880 0 600,000 79,049
Richard A. Smith ........................ 2001 750,000 2,671,500 0 1,000,000 110,601
Chairman and CEO, 2000 673,153 639,495 500,000 270,000/150,000(3) 19,487
Real Estate Division 1999 650,000 650,000 0 600,000 19,077
Samuel L. Katz .......................... 2001 750,000 2,788,853 0 1,400,000 158,661
Chief Strategic Officer, 2000 536,038 509,237 500,000 335,000/75,000(3) 69,125
Chairman and CEO, Travel 1999 500,000 609,234 0 500,000 40,043
Distribution Division
------------------------------
(1) For 2001, bonus amounts include fiscal year 2001 profit-sharing bonuses paid
in February 2002. For each Named Executive Officer (other than
Mr. Silverman), 2001 bonus amounts include regular annual bonus targeted to
equal to 100% of base salary (subject to the Company's attainment of
performance goals). Mr. Silverman's 2001 profit-sharing bonus was calculated
pursuant to his employment agreement. See "EXECUTIVE COMPENSATION AND OTHER
INFORMATION--Employment Contracts and Termination, Severance and Change of
Control Arrangements." Each Named Executive Officer (other than
Mr. Silverman) also received a special discretionary incentive bonus equal
to $650,000 ($500,000 for Mr. Katz) approved by the Compensation Committee
and paid in February 2001. Mr. Katz also received a special market
adjustment award equal to $278,103. Regular annual profit-sharing bonus was
paid at 100% of target for each Named Executive Officer. For Messrs. Smith
and Katz, bonus amounts also include a special discretionary bonus equal to
$1,271,500 and $1,260,750 respectively, approved by the Compensation
Committee, in consideration of their extraordinary efforts in completing
strategic and other initiatives relating to their respective business units
("Strategic Initiative Bonus").
(2) On October 1, 2000, each Named Executive Officer (other than Mr. Silverman)
was granted 47,058 restricted shares of Common Stock (the "Retention
Program"). For each such Named Executive Officer, the value of the shares as
of the date of grant equaled $500,000, and the value as of December 29, 2000
equaled $452,933 (based upon December 29, 2000 closing price of $9.625).
Each of the restricted shares was scheduled to become vested, and the
restrictions relating to transferability on such shares were set to lapse,
on March 31, 2002, subject to the Named Executive Officer remaining
continuously employed with the Company through such date. The restricted
shares were granted pursuant to the Company's 1997 Stock Incentive Plan. By
action of the Compensation Committee the restricted shares were accelerated
and became vested on January 2, 2002. No grants of restricted shares were
made to any Named Executive Officer in 1999 or 2001.
(3) For 2000, shows separately options for Common Stock and Move.com tracking
stock. No grants of Move.com tracking stock options were made in 1999 or any
prior year. No grants of Move.com common stock options were made to
Mr. Silverman in
13
any year. In 2001, in connection with the Company's sale of its Move.com and
related businesses, employees of the Company including applicable Named
Executive Officers were given the opportunity to consent to the cancellation
of their Move.com tracking stock options in exchange for a cash payment
equal to $8.19 per option share. See "EXECUTIVE COMPENSATION AND OTHER
INFORMATION--Compensation Committee Report on Executive Compensation."
(4) Payments included in these amounts for fiscal year 2001 consist of
(i) Company matching contributions to a non-qualified deferred compensation
plan maintained by the Company ("Defined Contribution Match"),
(ii) insurance premiums paid by the Company for life insurance coverage and
which will be repaid to the Company upon the Named Executive Officer's death
or upon certain other events, and (iii) executive medical benefits. Defined
Contribution Match includes matching contributions relating to deferred
bonuses in respect of fiscal year 2001 and paid in February 2002.
The foregoing amounts were as follows:
DEFINED LIFE EXECUTIVE
CONTRIBUTION INSURANCE MEDICAL
YEAR MATCH($) PREMIUM($)(5) BENEFITS($)
-------- ------------ ------------- -----------
Mr. Silverman............................................... 2001 461,848 3,653,365 4,800
Mr. Holmes.................................................. 2001 122,683 76,710 4,800
Mr. Buckman................................................. 2001 83,836 158,906 4,800
Mr. Smith................................................... 2001 15,000 90,801 4,800
Mr. Katz.................................................... 2001 105,554 48,307 4,800
(5) Amounts represent split-dollar life insurance premiums paid by the Company
for the period beginning January 1, 2001 and ending December 31, 2001.
Pursuant to split dollar agreements entered into by each Named Executive
Officer, the Company will be repaid all amounts it expends for such
premiums, either from the cash surrender value or the death benefit of the
insurance policies.
(6) Mr. Silverman did not participate in the Retention Program, did not receive
any Move.com tracking stock options and did not receive a Strategic
Initiative Bonus or any other discretionary bonuses.
OPTION GRANTS IN 2001
The following table summarizes option grants during the last fiscal year
made to the Named Executive Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
% OF TOTAL
NUMBER OF COMMON
SECURITIES STOCK OPTIONS
UNDERLYING GRANTED EXERCISE GRANT DATE
OPTIONS/SARS TO EMPLOYEES IN PRICE EXPIRATION PRESENT
GRANTED(1) FISCAL YEAR PER SHARE DATE VALUE ($)
------------ --------------- --------- ---------- ----------
Mr. Silverman(3)............... 6,000,000 10.1% $ 9.41 1/3/2011 28,080,000(2)
Mr. Holmes..................... 1,000,000 1.68% $ 9.41 1/3/2011 4,680,000(2)
Mr. Buckman.................... 1,000,000 1.68% $ 9.41 1/3/2011 4,680,000(2)
Mr. Smith...................... 1,000,000 1.68% $ 9.41 1/3/2011 4,680,000(2)
Mr. Katz....................... 1,000,000 1.68% $ 9.41 1/3/2011 4,680,000(2)
400,000 0.67% $12.18 10/2/2011 2,424,000(2)
------------------------
(1) The vesting of options accelerates under certain circumstances (including a
change of control of the Company). See "EXECUTIVE COMPENSATION AND OTHER
INFORMATION--Employment Contracts and Termination, Severance and Change of
Control Arrangements."
(2) The values assigned to each reported option on this table are computed using
the Black-Scholes option pricing model. The calculations assume a risk-free
rate of return of 4.65%, which represents the yield of United States
Treasury Notes having a maturity on the option grant date approximating the
expected life of the option. The calculations for all option grant dates
assume a 49.4% volatility; however, there can be no assurance as to the
actual volatility of the Company's common stock in the future. The
calculations for all grant dates also assume no dividend payout
14
and a 5.27 year expected life. In assessing these option values, it should
be kept in mind that no matter what theoretical value is placed on a stock
option on the date of grant to a Named Executive Officer, its ultimate value
will depend on the market value of the Company's common stock at a future
date.
(3) Mr. Silverman will not receive an option grant in 2002; he has waived his
right to any option grant under his employment agreement.
AGGREGATE OPTION EXERCISES IN 2001 AND YEAR-END OPTION VALUES TABLE
The following table summarizes the exercise of Common Stock options by the
Named Executive Officers during the last fiscal year and the value of
unexercised options held by such executives as of the end of such fiscal year.
All shares acquired on exercise (and value realized) are pursuant to exercises
of Common Stock options and a voluntary cash-out of Move.com tracking stock
options. The number of securities underlying unexercised in-the-money options
(and the value of unexercised in-the-money options) reflect only the aggregate
value of Common Stock options.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS OPTIONS/SARS
ACQUIRED VALUE AT FY-END(#) AT FY-END($)(1)
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- ------------------- ------------------------- -------------------------
Mr. Silverman(2)............ 3,479,213 28,494,754 32,087,629/4,302,230 233,527,971/21,505,772
Mr. Holmes(3)............... 230,698/43,750(3) 2,258,533/358,313(3) 3,106,220/1,834,090 27,715,843/12,132,313
Mr. Buckman(3).............. 721,631/43,750(3) 5,760,635/358,313(3) 2,377,233/1,850,965 16,818,165/12,232,288
Mr. Smith(3)................ 306,395/150,000(3) 3,510,928/1,228,500(3) 2,425,064/1,372,900 21,274,601/12,088,927
Mr. Katz(3)................. 0/75,000(3) 0/614,250(3) 1,556,363/1,943,676 8,817,125/14,931,386
------------------------------
(1) Amounts are based upon the closing price on the New York Stock Exchange on
December 31, 2001.
(2) Mr. Silverman exercised 3,479,213 stock options on October 24, 2001.
Mr. Silverman retained for investment purposes 1,151,585 of the 3,479,213
shares acquired upon exercise of such stock options.
(3) Amounts reflect exercises of Common Stock options and voluntary cash-out of
Move.com tracking stock options in March 2001, in connection with the sale
of the Company's Move.com business to Homestore.com. All Move.com tracking
stock options held by Named Executive Officers were canceled in exchange for
a cash payment equal to $8.19 per share. Mr. Silverman was not granted any
Move.com tracking stock options. See "EXECUTIVE COMPENSATION AND OTHER
INFORMATION--Compensation Committee Report on Executive Compensation--Sale
of Move.com to Homestore.com" for explanation of reasons for initial grant
of Move.com tracking stock options and the cancellation thereof.
15
EMPLOYMENT CONTRACTS AND TERMINATION, SEVERANCE AND CHANGE OF CONTROL
ARRANGEMENTS
Each Named Executive Officer is employed by the Company pursuant to a
written agreement of employment. Each such employment agreement contains
covenants precluding the Named Executive Officer from competing, directly or
indirectly, against the Company and/or the business unit or units for which such
officer performs services, during a period of time set forth in each respective
employment agreement.
MR. SILVERMAN. Mr. Silverman is employed by the Company pursuant to an
employment agreement originally entered into as of September 30, 1991 between
Mr. Silverman and HFS Incorporated and amended and restated from time to time
(the "Silverman Employment Agreement"). Mr. Silverman serves the Company as its
President and Chief Executive Officer and as the Chairman of the Board and the
Chairman of the Executive Committee of the Board. The term of employment under
the Silverman Employment Agreement expires on August 1, 2010, subject to earlier
termination upon certain events.
Effective for 2002, the Compensation Committee approved a base salary for
Mr. Silverman equal to $3,196,000, an increase of 1.67% over 2001. The Silverman
Employment Agreement provides Mr. Silverman an annual bonus opportunity equal to
the lesser of (i) 0.75% of the Company's "EBITDA" (as defined in the Silverman
Employment Agreement) for the applicable fiscal year or (ii) 150% of his annual
base salary. The Silverman Employment Agreement requires the Company to provide
Mr. Silverman with term life insurance in the amount of $100 million during the
term of employment. The Silverman Employment Agreement also requires the Company
to provide Mr. Silverman with option grants and specified officer perquisites,
however, for 2002, Mr. Silverman has waived his right to an option grant.
The Silverman Employment Agreement provides that if Mr. Silverman resigns
his employment in connection with a breach by the Company of the Silverman
Employment Agreement, or if he is terminated by the Company without Cause (as
defined in the Silverman Employment Agreement), he will be entitled to receive a
lump sum cash payment equal to (i) the lesser of (a) 150% of his annual base
salary or (b) the sum of his annual base salary plus 0.75% of EBITDA for the
12 months preceding the date of termination, multiplied by (ii) the number of
years and partial years remaining in the term of employment under the Silverman
Employment Agreement. In addition, Mr. Silverman would be entitled to continued
health and welfare benefits during the remaining term of employment and the
vesting of any options and restricted stock. However, the Company may remove
Mr. Silverman from his position of President and/or Chief Executive Officer (but
not Chairman of the Board) without triggering such termination provisions. After
termination of Mr. Silverman's employment with the Company other than due to
death or for Cause (but including a resignation for good reason), (i) the
Company would provide Mr. Silverman, through August 31, 2009, term life
insurance in the amount of $100 million; and (ii) the Company would provide him
certain benefits for life, including office and clerical support, executive
transportation services (including use of aircraft), security services,
continued access to other general facilities and services and reimbursement of
any properly documented business expenses. During such period, Mr. Silverman
would be required to keep himself reasonably available to the Company to render
advice or to provide services for no more than 30 days per year, in return for
which he will be paid $30,000 per month.
The Silverman Employment Agreement further provides that Mr. Silverman will
be made whole on an after-tax basis with respect to certain excise taxes in
connection with a change of control of the Company which may, in certain cases,
be imposed upon payments thereunder and other compensation and benefit
arrangements.
MESSRS. HOLMES AND BUCKMAN. The Company entered into employment agreements
with Messrs. Holmes and Buckman dated as of September 12, 1997 (such agreements,
respectively, the "Holmes Employment Agreement" and the "Buckman Employment
Agreement," and collectively, the
16
"1997 Employment Agreements"). Each of the 1997 Employment Agreements originally
provided for a period of employment through December 17, 2002; however, such
agreements contain automatic extension periods which cause each respective
period of employment to be extended by one year on an annual basis (an extension
of the period of employment through December 17, 2006 has taken effect under
each of the 1997 Employment Agreements).
Each of the 1997 Employment Agreements specifies the compensation and
benefits provided to the executive during the period of employment. Effective
for 2002, the Compensation Committee approved base salaries for Messrs. Holmes
and Buckman equal to $762,500. For 2001, the Compensation Committee approved a
target incentive bonus payment of 100% of base salary, as well as an additional
discretionary bonus payment. Each of Messrs. Holmes and Buckman is eligible to
participate in all of the Company's other compensation and employee benefit
plans or programs and to receive officer perquisites.
Each of the 1997 Employment Agreements provides for certain payments in the
event of termination of the Executive's employment under various circumstances.
The Holmes Employment Agreement provides that if the Executive's employment is
terminated by the Company other than for Cause, or by the Executive for
Constructive Discharge or resignation, the Company will pay the Executive a lump
sum cash payment equal to 500% of the sum of (i) his annual base salary and
(ii) the highest annual bonus he has received for any of the three preceding
years (or $520,000, if higher). In such event, the Executive would also receive
any earned but unpaid base salary and incentive compensation, his benefits and
perquisites would continue for 36 months and any stock options (excluding the
option granted January of 2001 in the case of a resignation) and restricted
stock would vest (and such options would remain outstanding for the remainder of
their terms without regard to such termination).
The Buckman Employment Agreement provides that if Mr. Buckman's employment
is terminated by the Company other than for Cause or by Mr. Buckman for
Constructive Discharge, the Company will pay Mr. Buckman a lump sum cash payment
equal to 500% of the sum of (i) his annual base salary and (ii) the highest
annual bonus he has received for any of the three preceding years (or $500,000,
if higher) ("Buckman Salary plus Bonus"). Mr. Buckman may also resign at any
time and receive a lump sum cash payment equal to 200% of Buckman Salary plus
Bonus. In any of the foregoing situations, Mr. Buckman would also receive any
earned but unpaid base salary and incentive compensation, his benefits and
perquisites would continue for 36 months and any stock options (excluding the
option granted January of 2001 in the case of a resignation) and restricted
stock would vest (and such options would remain outstanding for the remainder of
their terms without regard to such termination).
Each 1997 Employment Agreement provides that the Executive will be made
whole on an after-tax basis with respect to certain excise taxes in connection
with a change of control of the Company which may, in certain cases, be imposed
upon payments thereunder and other compensation and benefit arrangements.
MR. SMITH. The Company entered into an amended and restated employment
agreement with Mr. Smith as of June 2, 2001 (the "Smith Employment Agreement").
The Smith Employment Agreement is set to expire on June 30, 2004, subject to
earlier termination or extension upon certain events.
The Smith Employment Agreement provides that during his term of employment,
Mr. Smith will be paid an annual base salary equal to $750,000 and will be
eligible for annual bonuses based on a target of 100% of annual base salary.
Effective for 2002, the Company increased Mr. Smith's base salary to $762,500.
Mr. Smith is eligible to participate in all of the Company's other compensation
and employee benefit plans or programs and to receive officer perquisites. The
Smith Employment Agreement provides that if Mr. Smith's employment is terminated
by the Company other than for
17
Cause or by Mr. Smith for Constructive Discharge, the Company will pay
Mr. Smith a lump sum cash payment equal to 300% of his base salary plus target
incentive bonus. In addition, each of Mr. Smith's outstanding options granted
after September 3, 1998 will become fully vested and remain exercisable until
the first to occur of the fifth anniversary of the date of such termination and
the original expiration date of such option. In addition, Mr. Smith and his
eligible dependents will remain covered under certain welfare benefit plans
sponsored by the Company until Mr. Smith reaches age 75.
MR. KATZ. The Company entered into an amended and restated employment
agreement with Mr. Katz as of June 5, 2000 (the "Katz Employment Agreement").
The Katz Employment Agreement is set to expire on December 31, 2003, subject to
earlier termination or extension upon certain events.
The Katz Employment Agreement provides that during his term of employment,
Mr. Katz will be paid an annual base salary equal to $500,000 and will be
eligible for annual bonuses based on a target of 100% of annual base salary.
Effective for 2002, the Company increased Mr. Katz' base salary to $762,500.
Mr. Katz is eligible to participate in all of the Company's other compensation
and employee benefit plans or programs and to receive officer perquisites. The
Katz Employment Agreement provides that if Mr. Katz' employment is terminated by
the Company other than for Cause or by Mr. Katz for Constructive Discharge, the
Company will pay Mr. Katz a lump sum cash payment equal to 300% of his base
salary plus target incentive bonus (or if higher, the base salary and target
incentive bonus of any other senior officer of the Company). In addition, each
of Mr. Katz' outstanding options granted after June 5, 2000 will become fully
vested and remain exercisable until the first to occur of the third anniversary
of his termination of employment and the original expiration date of such option
(the "Option Extension").
OTHER CHANGE OF CONTROL PROVISIONS. In connection with the merger of HFS
Incorporated and CUC International Inc., action was taken by the Company to
provide that any employee formerly with HFS Incorporated who incurs a golden
parachute excise tax under Section 4999 of the Internal Revenue Code, if and to
the extent applicable, incurred because of the vesting of options granted prior
to such merger, will be reimbursed by the Company for the economic costs
incurred by such employee, including a tax gross-up payment to account for any
additional golden parachute excise tax incurred by reason of such reimbursement
to the Named Executive Officers, if any. In addition, action was also taken by
the Company to provide for a similar reimbursement in the event a future
corporate event causes an excise tax liability.
STOCK OPTIONS AND RESTRICTED STOCK. Generally, all stock options granted to
each of the Named Executive Officers under any applicable stock option plan of
the Company will become fully and immediately vested and exercisable, and all
restrictions on shares of restricted stock will lapse, upon the occurrence of
any change of control transaction affecting the Company.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OR THE EXCHANGE ACT THAT MIGHT
INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART,
THE FOLLOWING COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION AND
PERFORMANCE GRAPH SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
18
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
administering the Company's executive compensation policies and programs. The
Compensation Committee also reviews and approves the salaries and bonuses of the
Company's executive officers as well as all grants of options to purchase shares
of Company common stock.
OFFICER COMPENSATION POLICY. The Compensation Committee administers the
Company's executive compensation policies. These policies include:
- aligning the interests of executive officers with the long-term interests
of the Company's stockholders;
- providing competitive levels of compensation which are, in large part,
conditioned on the Company's attainment of specified performance targets
and/or stock price appreciation; and
- attracting, motivating and retaining the best possible executive talent
for the benefit of the Company's stockholders.
EMPLOYMENT AGREEMENTS. Each of the Named Executive Officers is employed by
the Company pursuant to a written agreement of employment. A limited number of
other executive officers of the Company are also employed pursuant to employment
agreements. The Compensation Committee has considered the advisability of using
employment agreements and has determined that under certain circumstances it is
in the best interests of the Company insofar as it permits the Company to
achieve its desired goals of retaining the best possible executive talent. In
addition, each employment agreement contains restrictive covenants, including
noncompetition, nonsolicit and confidentiality covenants, for the benefit of the
businesses of the Company. The Compensation Committee has determined that the
use of employment agreements may be necessary in certain cases to ensure the
retention of key executive officers and to attract additional executive talent
to the Company, including in connection with acquisitions. Each such employment
agreement separately reflects the terms that the Compensation Committee felt
were appropriate and/or necessary to retain the services of the particular
executive officer, within the framework of the Company's compensation policies.
COMPONENTS OF EXECUTIVE COMPENSATION. The material elements of the
Company's executive compensation arrangements include base salary, annual
performance bonus and stock options. Each executive officer's total compensation
package is designed to condition a significant portion of the executive
officer's overall anticipated compensation on the Company's success in achieving
specified performance targets and/or stock price appreciation. During 2001, the
Compensation Committee acknowledged increasing competition for top executive
talent and the aggressive recruiting tactics of the Company's competitors, as
well as internet and technology companies, and considered such factors in its
decision-making.
BASE SALARIES. Salaries paid to executive officers, other than the Chief
Executive Officer, are reviewed annually by the Chief Executive Officer, the
Chief Administrative Officer and the Executive Vice President-Human Resources
based upon their assessment of the nature of the position and the contribution,
experience and tenure of the executive officer. The Compensation Committee is
responsible for determining the salary of the Chief Executive Officer. The
salary levels of the Named Executive Officers are subject to the provisions of
such employment agreements which are approved by the Compensation Committee (the
employment agreements with the Named Executive Officers are described more fully
under "Employment Contracts and Termination, Severance and Change of Control
Arrangements"). From time to time, the Company performs market research and/or
engages compensation consultants to advise on market rates of compensation for
executive officers similarly situated, and the Compensation Committee considers
such advice and surveys in connection with establishing salaries for executive
officers.
19
ANNUAL BONUS. The Named Executive Officers are entitled to annual
performance bonuses based upon the terms of their employment agreements (see
"Employment Contracts and Termination, Severance and Change of Control
Arrangements"). As described under "Employment Contracts and Termination,
Severance and Change in Control Arrangements," Mr. Silverman's employment
agreement provides for an annual incentive bonus equal to the lesser of
(i) 0.75% of the Company's EBITDA (as defined in such agreement) for the
applicable fiscal year or (ii) 150% of his annual base salary. Under the
Company's annual incentive bonus plan, certain employees are eligible to earn
bonuses equal to a percentage of base salary based upon the degree of
achievement of target levels of earnings before interest and taxes ("EBIT").
Such percentages of base salary range from 5% for the lowest level of employees
eligible for bonuses if the minimum level of earnings is achieved, to a maximum
of 100% for Senior Executive Vice Presidents and above, if the highest level of
earnings is achieved (payment of up to 125% is available in the event that the
highest level targets are greatly exceeded). In 2001, bonuses paid to executive
officers of certain business units were paid at less than the target level to
the extent such business units did not attain pre-established levels of EBIT (or
other relevant performance measurement). The bonuses paid to the Named Executive
Officers in respect of 2001 are set forth in the Summary Compensation Table.
In 2001, the Compensation Committee also considered and approved special
discretionary bonuses for the Named Executive Officers (other than the Chief
Executive Officer) and Messrs. Smith and Katz also received Strategic Initiative
Bonuses relating to their extraordinary efforts in completing strategic and
other initiatives within their respective business units. Mr. Silverman did not
receive any such bonuses. The bonuses paid to the Named Executive Officers are
set forth in the Summary Compensation Table.
STOCK OPTIONS. The Compensation Committee continues to believe that the
most effective way to align the interests of executives with those of the
Company's stockholders is to ensure that the executives hold material equity
stakes in the Company. Therefore, the Compensation Committee has determined that
the continued use of stock options is the best mechanism for long term incentive
compensation of executive officers. The Compensation Committee administers each
of the Company's stock option plans. Generally, option grants are approved by
the Compensation Committee upon the recommendation of the Chief Executive
Officer, the Chief Administrative Officer and the Executive Vice President-Human
Resources, who determine the number of shares subject to such grants and the
applicable terms and conditions of such grants. In general, to ensure that the
use of stock options meets the intended long-term goals of the Compensation
Committee, most stock option grants vest over a period of at least three years.
In addition, the Company does not grant options with exercise prices below the
fair market value of the Company common stock as of the date of grant. In 2001,
the Compensation Committee approved enhanced option grants for eligible officers
as an additional retention and incentive vehicle. The additional incentive was
in response to a competitive market for executive talent in conjunction with a
material drop in the market price of Company common stock which materially
reduced the incentive and retention value of the Company's option program.
Information with respect to option grants in 2001 to the Named Executive
Officers is set forth in the "Option Grants Table."
SALE OF MOVE.COM TO HOMESTORE.COM. In connection with the creation of
Move.com tracking stock, and the anticipated public offering thereof, the
Compensation Committee approved the initial grant of Move.com tracking stock
options to employees and directors of the Company and employees of Move.com to
avoid conflicts between Move.com and the Company, and to align the interests of
all employees towards creating value for Move.com and the Company as a whole.
The recipients of Move.com option grants who were not employed directly by
Move.com were primarily officers and employees of the Company's Real Estate
Division.
The Compensation Committee also viewed the Move.com option grant as a
necessary and appropriate retention device in the then current business climate
during which internet and technology
20
companies appeared to be thriving, especially in comparison to "old economy"
entities like the Company, and were successfully recruiting executive talent by
offering attractive equity participation and option grants. All employees of the
Company who were granted Move.com tracking stock options had their 2000 annual
Company option grant recommendation reduced by a factor of 2.2 Company options
for each Move.com tracking stock option granted. In 2001, the Company
consummated the sale of Move.com and certain related businesses to Homstore.com
in exchange for shares of Homestore.com common stock (the "Move.com
Transaction"). In connection with the Move.com Transaction, Homestore.com agreed
to assume Move.com tracking stock options held by Company employees who were
transferred to Homestore.com upon consummation of the Move.com Transaction.
Homestore.com would not agree to assume Move.com tracking stock options held by
the Company employees who remained employed with the Company following the
Move.com Transaction (this group of non-transferring employees included
executive officers of the Company and Non-Employee Directors). Although
Homestore.com would not assume the outstanding Move.com tracking stock options
held by the non-transferring employees, the Move.com Transaction was structured,
from the Company's perspective, so that the Company received shares of
Homestore.com common stock in exchange for (i) each outstanding Move.com
tracking stock option held by the non-transferring employees and (ii) each
outstanding share of Move.com tracking stock held by the Company. The shares of
Homestore.com common stock received by the Company for each outstanding share of
Move.com tracking stock and each outstanding Move.com tracking stock option had
a value of $24.47 upon consummation of the Move.com Transaction. In connection
with the consummation of the Move.com Transaction and pursuant to a fair market
value analysis conducted internally and by an independent third-party
compensation consultant, the Compensation Committee determined to provide the
non-transferring employees with the option of cancelling their outstanding
Move.com tracking stock options in exchange for a cash payment equal to $8.19
(the "Cancellation Payment"). In determining the Cancellation Payment, the
Compensation Committee considered the fact that the Cancellation Payment was
$16.28 less than the consideration paid to the Company by Homestore.com for each
outstanding Move.com tracking stock option at the time of the consummation of
the Move.com Transaction. The Compensation Committee also determined that
offering the option of the Cancellation Payment was appropriate in connection
with the Move.com Transaction based upon, among other things, (i) the valuation
of such businesses at the time of the consummation of the Move.com Transaction,
(ii) the exercise price of the Move.com tracking stock options held by the
non-transferring employees, (iii) the fact that the Company employees who were
transferred to Homestore.com received options in Homestore.com in connection
with the transaction and (iv) the non-transferring employees' legal rights with
respect to the outstanding Move.com tracking stock options. Mr. Silverman held
no Move.com tracking stock options; accordingly, Mr. Silverman did not receive a
Cancellation Payment or any other equity or compensation awards in connection
with the Move.com Transaction.
EXECUTIVE OFFICER RETENTION. In 2000, a number of factors gave rise to
material concerns regarding the retention of key executive officers as well as
other Company employees. The Compensation Committee recognized that because the
Company is engaged primarily in service-oriented businesses, executive officer
and employee retention is always a key concern. However, the concern was
heightened by a number of factors. One factor was aggressive and competitive
recruiting by internet and technology companies both in the New York
Metropolitan area and nationwide, including the use of large equity grants to
attract potential recruits away from established companies. In addition, a
number of the Company's competitors targeted their recruiting efforts directly
at the Company. In addition, the Compensation Committee recognized that the
retention value inherent in Company equity awards had decreased in connection
with certain economic events. In June of 2000, the Compensation Committee
approved a special retention program designed to grant restricted cash and
restricted Company common stock awards to approximately 200 officers and key
employees. Such awards were established to vest only if such officers remain
employed with the Company through either March 31, 2002 or
21
December 31, 2002, the dates by which senior management believed that retention
issues would be resolved. By action of the Compensation Committee, the awards
were accelerated and became vested on January 2, 2002. For the Named Executive
Officers (other than Mr. Silverman), the awards consisted solely of restricted
Company common stock. For other officers and key employees, the awards consisted
of restricted common stock and cash. Mr. Silverman did not receive any retention
award because the Compensation Committee did not consider it necessary or
appropriate. The restricted stock awards granted to the Named Executive Officers
are set forth in the Summary Compensation Table. Senior management and the
Compensation Committee believe that the special retention program was successful
in meeting its desired goals.
CHIEF EXECUTIVE OFFICER COMPENSATION. The compensation paid to
Mr. Silverman during 2001 is based upon the minimum levels of his existing
employment agreement, however Mr. Silverman has received increases in his base
salary. Such agreement, and certain amendments made thereto, are described under
"Employment Contracts and Termination, Severance and Change of Control
Arrangements". Effective for 2001, Mr. Silverman's annual base salary was
increased to $3,143,500. Effective for 2002, Mr. Silverman's annual base salary
was increased to $3,196,000 which represents an increase of 1.67%.
Mr. Silverman's annual bonus, which is disclosed in the Summary Compensation
Table, was determined based on a formula set forth in his employment agreement,
and is based directly on the Company's attainment of EBITDA (as defined in such
employment agreement).
Mr. Silverman will not receive a stock option grant in 2002. Further, Mr.
Silverman did not receive a Cancellation Payment, did not participate in the
Retention Program and did not receive any other discretionary bonus.
DEDUCTIBILITY OF COMPENSATION. In accordance with Section 162(m) of the
Code, the deductibility for federal corporate tax purposes of compensation paid
to certain individual executive officers of the Company in excess of $1 million
in any year may be restricted. The Compensation Committee believes that it is in
the best interests of the Company's stockholders to comply with such tax law,
while still maintaining the goals of the Company's executive compensation
program. Accordingly, where it is deemed necessary and in the best interests of
the Company to continue to attract and retain the best possible executive
talent, and to motivate such executives to achieve the goals inherent in the
Company's business strategy, the Compensation Committee will recommend, and the
Company is expected to pay, compensation to executive officers which may exceed
the limits of deductibility.
THE COMPENSATION COMMITTEE
LEONARD S. COLEMAN (CHAIR)
ROBERT F. SMITH
MYRA J. BIBLOWIT
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of Mr. Coleman (Chairman),
Mr. Smith and Ms. Biblowit. Messrs. Smith and Coleman and Ms. Biblowit were not
employees of the Company during 2001 or before.
22
PERFORMANCE GRAPH
The following graph assumes $100 invested on December 31, 1996, and compares
(a) the yearly percentage change in the Company's cumulative total shareholder
return on the Common Stock (as measured by dividing (i) the sum of (A) the
cumulative amount of dividends, assuming dividend reinvestment, during the five
years commencing on the last trading day before January 1, 1997, and ending on
December 31, 2001, and (B) the difference between the Company's share price at
the end and the beginning of the periods presented; by (ii) the share price at
the beginning of the periods presented) with (b) (i) the Standard & Poor's 500
Index (the "S&P 500 Index"), and (ii) the Standard & Poor's Services
(Commercial & Consumer) Index (the "S&P SVCS Index").
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
DEC-96 DEC-97 DEC-98 DEC-99 DEC-00 1-DEC
CENDANT CORPORATION 100 141.75 79.64 109.54 39.69 80.87
S & P 500 100 133.36 171.47 207.56 188.66 166.24
S & P SVCS (COMMERCIAL & CONSUMER) 100 137.21 138.25 121.24 81.28 111.12
23
REPORT OF AUDIT COMMITTEE
The Audit Committee reviews the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility for
the financial statements and the reporting process, including the system of
internal controls. The independent auditors are responsible for performing an
independent audit of the Company's consolidated financial statements in
accordance with generally accepted accounting principles and to issue a report
thereon. The Committee monitors these processes.
In this context, the Committee met and held discussions with management and
the independent auditors. Management represented to the Committee that the
Company's consolidated financial statements were prepared in accordance with
accounting principles generally accepted in the United States, and the Committee
reviewed and discussed the consolidated financial statements with management and
the independent auditors. The Committee also discussed with the independent
auditors the matters required to be discussed by Statement on Auditing Standards
No. 61 (Codification of Statements on Auditing Standards, AU 380), as amended.
In addition, the Committee discussed with the independent auditors the
auditors' independence from the Company and its management, and the independent
auditors provided to the Committee the written disclosures and letter required
by the Independence Standards Board Standard No. 1 (Independence Discussions
With Audit Committees).
The Committee discussed with the Company's internal and independent auditors
the overall scope and plans for their respective audits. The Committee met with
the internal and independent auditors, with and without management present, to
discuss the results of their examinations, the evaluations of the Company's
internal controls, and the overall quality of the Company's financial reporting.
Based on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors, and the Board has approved, that the
audited financial statements be included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2001, for filing with the Securities
and Exchange Commission. The Committee and the Board also have recommended,
subject to shareholder approval, the selection of the Company's independent
auditors for fiscal year 2002.
AUDIT COMMITTEE
ROBERT F. SMITH, CHAIRMAN
RT. HON. BRIAN MULRONEY, P.C., C.C., LL.D.
LEONARD S. COLEMAN
SHELI Z. ROSENBERG
24
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Edelman is of counsel to Paul, Hastings, Janofsky & Walker, LLP, a New
York City law firm (successor to Battle Fowler). Paul, Hastings represented the
Company in certain matters in 2001. It is expected that Paul, Hastings will
continue to represent the Company in connection with certain matters from time
to time in the future.
Mr. Edelman is also a partner in Chartwell Hotels Associates ("Chartwell
Hotels"), a general partnership affiliated with the Fisher Brothers and Gordon
Getty, and its affiliate Chequers Investment Associates, which have acquired
certain hotels and mortgages secured by hotels from the Resolution Trust
Corporation. Chartwell Hotels currently owns an interest in 12 hotel properties
franchised by the Company. During 2001, such hotel properties paid aggregate
royalties of approximately $1,947,451 to the Company.
In April 1995, the Company and Ramada Franchise Systems, Inc., a
wholly-owned subsidiary of the Company ("RFS"), entered into a license agreement
with Preferred Equities Corporation ("PEC"), the owner, developer and operator
of interval ownership resort facilities, pursuant to which PEC was licensed to
use certain RAMADA-Registered Trademark- servicemarks in connection with its
facilities in the United States. In April, 2000, the Company and PEC agreed to
extend the term of such agreement for a period of five years. Pursuant to such
agreement, as extended, PEC paid RFS $1 million in initial fees and will pay a
percentage of Gross Sales (as defined) of interval ownership interests during
the extended term of the agreement. During 2001, PEC paid $1,267,038 in
licensing fees to us. Until January 2002, Mr. Nederlander was the Chairman and a
significant shareholder of MEGO Financial Corp., of which PEC is a wholly-owned
subsidiary. Pursuant to an agreement with PEC entered into in 1996, Resort
Condominiums International, LLC ("RCI") provides timeshare exchange and related
travel and leisure services to PEC timeshare owners and members in exchange for
fees payable by PEC to RCI. In 2001, PEC paid $649,969 in fees to RCI under this
arrangement.
PEC and RFS are also parties to a License Agreement, dated August 14, 2001,
relating to PEC's use of the Ramada franchise system and use of the Ramada
trademark at a hotel owned by PEC. Pursuant to such agreement, PEC paid us an
additional $210,985 in franchise fees.
On September 26, 2001, RWP Associates, a corporation wholly-owned by Robert
W. Pittman, sold to Cendant Transportation Corp., a wholly-owned subsidiary of
the Company, a Dassault Bregnet Mystere Falcon 20-F5 aircraft for $6,500,000.
The price of the aircraft was determined by averaging the fair market values
determined by three airplane brokers/consultants, all of which are unrelated to
both the Company and Mr. Pittman.
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, except as set forth below, the Company believes that all its officers,
directors, and greater than ten percent beneficial owners complied with all
filing requirements applicable to them with respect to transactions during 2001.
On May 4, 2001, Tobia Ippolito filed an amended Form 3 excluding 1,254
shares of common stock inadvertently included in his original Form 3. On
February 12, 2002, Mr. Ippolito reported on Form 5 an outstanding option
inadvertently omitted from the Form 3 filed by him in May 2001.
25
RATIFICATION OF APPOINTMENT OF AUDITORS
[PROPOSAL NO. 2]
Deloitte & Touche LLP has been appointed by the Board of Directors as the
auditors for the Company's financial statements for 2002. 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 of stockholders.
The Audit Committee considered the non-audit services provided by
Deloitte & Touche, LLP and determined that the provision of such services was
compatible with maintaining Deloitte & Touche's independence. Deloitte & Touche
LLP, the members of Deloitte Touche Tohmatsu, and their respective affiliates,
billed the following:
AUDIT FEES. The aggregate fees for professional services rendered by
Deloitte & Touche in connection with their audit of our consolidated financial
statements and reviews of the consolidated financial statements included in our
Quarterly Reports on Form 10-Q for the 2001 fiscal year was approximately
$6.9 million.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. The aggregate
fees for professional services rendered by Deloitte & Touche in the 2001 fiscal
year relating to financial information systems design and implementation was
approximately $1.3 million.
ALL OTHER FEES. The aggregate fees for all other services rendered by
Deloitte & Touche in the 2001 fiscal year was approximately $24.2 million and
can be sub-categorized as follows:
AUDIT RELATED FEES. The aggregate fees for attestation services
rendered by Deloitte & Touche for matters such as comfort letters and
consents related to SEC and other registration statements, audits of
employee benefit plans, agreed-upon procedures, due diligence pertaining to
acquisitions and consultation on accounting standards or transactions was
approximately $15.3 million.
OTHER FEES. The aggregate fees for all other services, such as
consultation related to tax planning and compliance, improving business and
operational processes and regulatory matters, rendered by Deloitte & Touche
in the 2001 fiscal year was approximately $8.9 million.
The Audit Committee also approved a resolution restricting the utilization
of Deloitte & Touche for certain non-audit matters other than tax and merger and
acquisition related services. The Audit Committee also adopted a policy
prohibiting the Company from hiring Deloitte & Touche personnel at the manager
or partner level who have been directly involved in performing auditing
procedures or providing accounting advice to the Company.
Although stockholder action on this matter is not required, the appointment
of Deloitte & Touche LLP is being recommended to the stockholders for
ratification. 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 or represented by
proxy and entitled to vote at the Meeting. Abstentions and broker non-votes will
be counted and will have the same effect as a vote against this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
YOU VOTE "FOR" THIS PROPOSAL.
26
BOARD DECLASSIFICATION PROPOSAL
[PROPOSAL NO. 3]
GENERAL
On March 19, 2002, the Board of Directors approved a resolution to submit to
the stockholders for approval proposed amendments to Article III, Sections 1, 2
and 3 of the amended and restated by-laws of the Company and Article 9 (b), (d),
(e), (g) and (h) of the amended and restated certificate of incorporation of the
Company to eliminate classification of the Board and related matters effective
as of the Meeting. Currently, the by-laws and amended and restated certificate
of incorporation provide that the Board be divided into three classes with the
number of Directors in each class being as nearly equal as possible. Each
Director currently serves a three-year term and Directors for one of the three
classes are elected each year. Accordingly, if the proposed amendments are
approved, stockholders will elect the directors at this annual meeting and
hereafter for a term of one year. The proposed amendment, which can only be
approved with the affirmative vote of 80% of the votes which would be entitled
to be cast generally in an election of Directors, would also eliminate the 80%
voting requirement for any future amendments to Article 9 (b) of the amended and
restated certificate of incorporation and Article III, Sections 1, 2 and 3 of
the by-laws. The current terms of the Directors that do not expire in 2002 will
not be affected if the proposed amendments are approved.
DESCRIPTION OF PROPOSAL
In 1997, in connection with the merger of CUC International Inc. and HFS
Incorporated to form the Company, stockholders of the constituent corporations
voted to approve the Certificate of Incorporation providing for a classified
Board of Directors and to require the affirmative vote of 80% of the votes which
would be entitled to be cast generally in the election of directors to amend
such provision. This classified director provision is set forth in Article 9
(b) of the amended and restated certificate of incorporation and Article III,
Section 1 of the by-laws. Under that classified director provision,
approximately one-third of the Directors are elected annually and serve a
three-year term.
Supporters of classified boards of directors believe that they help maintain
continuity of experience and, as a result, may assist a company in long-term
strategic planning. Additionally, supporters argue that a classified board may
encourage a person seeking control of a company to initiate arm's-length
discussions with management and the board, who may be in a position to negotiate
a higher price or more favorable terms for stockholders or to seek to prevent a
takeover that the board believes is not in the best interests of stockholders.
Alternatively, a classified board of directors limits the ability of
stockholders to elect directors and exercise influence over a company, and may
discourage proxy contests in which stockholders have an opportunity to vote for
a competing slate of nominees. The election of directors is the primary avenue
for stockholders to influence corporate governance policies and to hold
management accountable for the implementation of those policies. A nonclassified
board of directors may enable stockholders to hold all directors accountable on
an annual basis, rather than over a three-year period.
Also, the existence of a classified board of directors may deter some tender
offers or substantial purchases of stock that might give stockholders the
opportunity to sell their shares at a price in excess of what they would
otherwise receive. Accordingly, approval of the proposed amendment to the
amended and restated certificate of incorporation might increase the likelihood
of such a tender offer or substantial stock purchases by a person seeking to
change the Company's Board of Directors.
At the 1999 annual meeting of stockholders of the Company, a majority of the
shares voted at the meeting (although less than 50% of the outstanding shares)
were voted in favor of a nonbinding stockholder proposal recommending the
declassification of the Board. At a special meeting of stockholders held on
March 21, 2000, the Board submitted a proposal to declassify the Board but such
27
proposal did not receive the requisite vote of stockholders at such meeting to
approve the amendment to the amended and restated certificate of incorporation
and by-laws to implement such proposal. The Board has again decided to
voluntarily submit a proposal to declassify the Board because of the support for
the proposal by the stockholders at the 1999 annual meeting and the 2000 special
meeting, as well as for the other factors discussed above.
Under Delaware law, directors of companies that have a classified board of
directors may only be removed for cause unless the certificate of incorporation
provides otherwise. However, under Delaware law, directors of companies that do
not have a classified board may be removed with or without cause by a majority
vote of the stockholders at any annual or special meeting of stockholders.
Accordingly, if the proposed amendment to the amended and restated certificate
of incorporation is approved, the Company's stockholders would be able to remove
any or all directors without cause at any stockholders meetings after the 2002
annual meeting of stockholders. Under the Company's by-laws, special meetings of
stockholders can be called only by the Chairman, the President or a majority of
the Company's Board.
Article 9 of the amended and restated certificate of incorporation also
currently provides that Article 9 (b) and Article III, Sections 1, 2 and 3 of
the by-laws can only be amended by the affirmative vote of 80% of the votes
which would be entitled to be cast generally in an election of directors. The
proposed amendment would delete this requirement with respect to any future
amendments of Article 9 (b) of the amended and restated certificate of
incorporation or Article III, Sections 1, 2 and 3 of the by-laws. Accordingly,
under Delaware law, any subsequent amendment to Article 9 (b) of the amended and
restated certificate of incorporation or Article III, Sections 1, 2 or 3 of the
by-laws would require approval of the Company's Board of Directors and the
affirmative vote of a majority of the outstanding shares entitled to vote
generally in the election of directors.
The proposed amendments to the by-laws and amended and restated certificate
of incorporation are set forth in Annexes I and II hereto, respectively, with
deletions indicated by strike-out and additions indicated by brackets.
------------------------
In accordance with the amended and restated certificate of incorporation,
Proposal 3 requires the affirmative vote of at least 80% of the voting power of
all shares of the Company entitled to vote generally in the election of
Directors. Under Delaware law, in determining whether such proposal has received
the requisite number of affirmative votes, abstentions and broker nonvotes will
be counted and will have the same effect as a vote against the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THIS
PROPOSAL.
28
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
for the Year 2003 Annual Meeting if they are received by the Company on or
before November 29, 2002. Any proposal should be directed to the attention of
the Eric J. Bock, Senior Vice President, Law and Corporate Secretary, Cendant
Corporation, 9 West 57th Street, New York, New York 10019. In order for a
shareholder proposal submitted outside of Rule 14a-8 to be considered "timely"
within the meaning of Rule 14a-4(c) such proposal must be received by the
Company on or prior to March 22, 2003 and in order for a proposal to be timely
under the Company's By-Laws it must be received on or prior to March 22, 2003,
but no earlier than February 20, 2003.
By Order of the Board of Directors
/s/ Eric J. Bock
ERIC J. BOCK
Secretary
Dated: March 29, 2002
29
ANNEX I
BY-LAW AMENDMENT
ARTICLE III.
DIRECTORS
SECTION 1. NUMBER, ELECTION AND TERMS.
The number of Directors shall be fixed from time to time by the Board of
Directors but shall not be less than three. [From and after the annual meeting
of stockholders to be held in 2002,] the Directors shall [Strike-out begins]be
classified, with respect to the time for which they severally hold office, into
three classes, as nearly equal in number as possible, as determined by the Board
of Directors, one class to [Strike-out ends]hold office [Strike-out
begins]initially [Strike-out ends]for a term expiring at the annual meeting of
stockholders to be held in [the year following their election][Strike-out
begins]1986, another class to hold office initially for a term expiring at the
annual meeting of stockholders to be held in 1987, and another class to hold
office initially for a term expiring at the annual meeting of stockholders to be
held in 1988[Strike-out ends], with [each] [Strike-out begins]the [Strike-out
ends]member [Strike-out begins]of each class [Strike-out ends]to hold office
until their successors are elected and qualified[; provided that the term of any
Director appointed prior to the annual meeting of stockholders to be held in
2002 shall be unaffected.] At each annual meeting of stockholders, the
successors of the [Strike-out begins]class of [Strike-out ends]Directors whose
term expires at that meeting shall be elected to hold office for a term expiring
at the annual meeting of stockholders held in the [Strike-out begins]third
[Strike-out ends]year following the year of their election.
The term "entire Board" as used in these By-Laws means the total number of
Directors which the Corporation would have if there were no vacancies.
Nominations for the election of Directors may be made by the Board of
Directors or a committee appointed by the Board of Directors or by any
stockholder entitled to vote in the election of Directors generally. However,
any stockholder entitled to vote in the election of Directors generally may
nominate one or more persons for election as Directors at a meeting only if
written notice of such stockholder's intent to make such nomination or
nominations has been given, either by personal delivery or by United States
mail, postage prepaid, to the Secretary of the Corporation not later than
(i) with respect to an election to be held at an annual meeting of stockholders,
ninety days prior to the anniversary date of the immediately preceding annual
meeting, and (ii) with respect to an election to be held at a special meeting of
stockholders for the election of Directors, the close of business on the tenth
day following the date on which notice of such meeting is first given to
stockholders. Each such notice shall set forth: (a) the name and address of the
stockholder who intends to make the nomination and of the person or persons to
be nominated; (b) a representation that the stockholder is a holder of record of
stock of the Corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons specified
in the notice; (c) a description of all arrangements or understandings between
the stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by the stockholder; (d) such other information regarding each nominee
proposed by such stockholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission; and (e) the consent of each nominee to serve as a Director of the
Corporation if so elected. The presiding officer of the meeting may refuse to
acknowledge the nomination of any person not made in compliance with the
foregoing procedure.
SECTION 2. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Newly created directorships resulting from any increase in the number of
Directors and any vacancies on the Board of Directors resulting from [the]
death, resignation, disqualification, [or] removal [Strike-out begins]or other
cause [Strike-out ends][of a director] shall be filled solely by the affirmative
vote of a majority of the
I-1
remaining Directors then in office, even though less than a quorum of the Board
of Directors. Any Directors elected [(a) to fill any vacancy resulting from the
death, resignation, disqualification or removal of a Director shall hold office
for the remainder of the full term of the Director whose death, resignation,
disqualification or removal created such vacancy and (b) to fill any vacancy
resulting from a newly created directorship shall hold office until the next
annual meeting of stockholders.] [Strike-out begins]in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
class of Directors in which the new directorship was created or the vacancy
occurred [Strike-out ends]and[, in each case,] until such Director's successor
shall have been elected and qualified. No decrease in the number of Directors
constituting the Board of Directors shall shorten the term of any incumbent
Director.
SECTION 3. REMOVAL
Any Director may be removed from office,[with or] without cause, only by the
affirmative vote of the holders of [Strike-out begins]80% [Strike-out ends]a
majority of the combined voting power of the then outstanding shares of stock
entitled to vote generally in the election of Directors, voting together as a
single class.
I-2
ANNEX II
CERTIFICATE OF INCORPORATION AMENDMENT
9. For the management of the business and for the conduct of the affairs of
the Corporation, and in further creation, definition, limitation and regulation
of the power of the Corporation and of its directors and of its stockholders, it
is further provided:
....
b. NUMBER, ELECTION AND TERMS OF DIRECTORS. The number of Directors
of the Corporation shall be fixed from time to time by or pursuant to the
By-laws. [From and after the annual meeting of stockholders to be held in
2002,] the Directors shall [Strike-out begins]be classified, with respect
to the time for which they severally[Strike-out ends] hold office
[Strike-out begins]into three classes, as nearly equal in number as
possible, as shall be provided in the manner specified in the By-laws,
one class to hold office initially[Strike-out ends] for a term expiring
at the annual meeting of stockholders to be held in [the year following
the year of their election] [Strike-out begins]1986, another class to
hold office initially for a term expiring at the annual meeting of
stockholders to be held in 1987, and another class to hold office
initially for a term expiring at the annual meeting of stockholders to be
held in 1988[Strike-out ends], with the members [Strike-out begins]of
each class[Strike-out ends] to hold office until their successors are
elected and qualified[; provided that the term of any Director appointed
prior to the annual meeting of stockholders held in 2002 shall be
unaffected.] At each annual meeting of the stockholders of the
Corporation, the [Strike-out begins]successors to the class of[Strike-out
ends] Directors whose term expires at that meeting shall be elected to
[Strike-out begins]the [Strike-out ends]office for a term expiring at the
annual meeting of stockholders held in the [Strike-out begins]third
[Strike-out ends]year following the year of their election.
....
d. NEWLY CREATED DIRECTORSHIP AND VACANCIES. Newly created
directorships resulting from any increase in the number of Directors and
any vacancies on the Board of Directors resulting from [the] death,
resignation, disqualification, [or] removal [of a director][Strike-out
begins]or other cause[Strike-out ends] shall be filled solely by the
affirmative vote of the majority of the remaining Directors then in
office, even though less than a quorum of the Board of Directors. Any
Director elected [(a) to fill any vacancy resulting from the death,
resignation, disqualification or removal of a Director shall hold office
for the remainder of the full term of the Director whose death,
resignation, disqualification or removal created such vacancy or (b) to
fill any vacancy resulting from a newly created directorship shall hold
office until the next annual meeting of stockholders] [Strike-out
begins]in accordance with the preceding sentence shall hold office for
the remainder of the full term of the class of Directors for which the
new directorship was created or the vacancy occurred [Strike-out ends]and
[, in each case,] until such Director's successors shall have become
elected and qualified. No decrease in the number of Directors
constituting the Board of Directors shall shorten the term of any
incumbent Director.
e. REMOVAL OF DIRECTORS. Any Director may be removed from office
[with or] without cause only by the affirmative vote of the holders of
[Strike-out begins]80% [Strike-out ends][a majority] of the combined
voting power of the then outstanding shares of stock entitled to vote
generally in the election of Directors voting together as a single class.
....
g. BY-LAW AMENDMENTS. The Board of Directors shall have power to
make, alter, amend and repeal the By-Laws (except so far as the By-Laws
adopted by the stockholders shall otherwise provide). Any By-Laws made by
the Directors under the powers conferred hereby
II-1
may be altered, amended or repealed by the Directors or by the
stockholders. Notwithstanding the foregoing and anything contained in
this Restated Certificate of Incorporation to the contrary, Sections 1, 2
and 3 of Article II [of the By-Laws] [Strike-out begins]and Sections 1, 2
and 3 of Article III of the By-Laws [Strike-out ends]shall not be
altered, amended or repealed and no provision inconsistent therewith
shall be adopted without the affirmative vote of the holders of at least
80% of the voting power of all the shares of the Corporation entitled to
vote generally in the election of Directors, voting together as a single
class [and Sections 1, 2 and 3 of Article III of the By-Laws shall not be
altered, amended or repealed and no provision inconsistent therewith
shall be adopted without the affirmative vote of the holders of at least
a majority of the voting power of all shares of the Corporation entitled
to vote generally in the election of Directors, voting together as a
single class.]
h. AMENDMENT, REPEAL. Notwithstanding anything contained in this
Restated Certificate of Incorporation to the contrary, the affirmative
vote of the holders of at least 80% of the voting power of all shares of
the Corporation entitled to vote generally in the election of Directors,
voting together as a single class, shall be required to alter, amend, or
adopt any provision inconsistent with, or repeal, Article 9 [a., c., d.,
f., g., or h.]
II-2
PLEASE MARK | X |
YOUR VOTES AS
INDICATED IN
THIS EXAMPLE
FOR all WITHHELD AUTHORITY
1. Election of Directors nominees for all nominees
Nominees:
01 Leonard S. Coleman, |_| |_|
02 John C. Malone Ph.D., 03 Cheryl D. Mills,
04 Robert E. Nederlander, 05 Robert F. Smith
For all nominees, except vote withheld from the following
--------------------------------------------------------------
I have noted an address change on the reverse |_|
side of the card
THE BOARD OF DIRECTORS OF CENDANT RECOMMENDS A VOTE FOR PROPOSAL 2.
2. To ratify and approve the appointment of Deloitte & Touche LLP as the
Company's Independent Auditors for the year ending December 31, 2002.
FOR AGAINST ABSTAIN
|_| |_| |_|
THE BOARD OF DIRECTORS OF CENDANT RECOMMENDS A VOTE FOR PROPOSAL 3.
3. To approve amendments to the Articles of Incorporation and By-laws of the
Company to eliminate classification of the Board of Directors of the Company.
FOR AGAINST ABSTAIN
|_| |_| |_|
I Plan to attend the Meeting |_|
By checking the box to the right, I consent to future delivery of annual |_|
reports, proxy statements, prospectuses and other materials and
shareholder communications electronically via the Internet at a webpage
which will be disclosed to me. I understand that the Company may no
longer distribute printed materials to me from any future shareholder
meeting until such consent is revoked. I understand that I may revoke my
consent at any time by contacting the Company's transfer agent, Mellon
Investor Services LLC, Ridgefield Park, NJ and that costs normally
associated with electronic delivery, such as usage and telephone charges
as well as any costs I may incur in printing documents, will be my
responsibility.
SIGNATURE ____________________ SIGNATURE ____________________ DATE______________
PLEASE SIGN EXACTLY AS NAME APPEARS. IF SIGNING FOR TRUSTS, ESTATES OR
CORPORATIONS, CAPACITY OR TITLE SHOULD BE STATED. IF SHARES ARE OWNED JOINTLY,
BOTH OWNERS MUST SIGN. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS.
--------------------------------------------------------------------------------
o FOLD AND DETACH HERE o
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 4PM EASTERN TIME
THE BUSINESS DAY PRIOR TO ANNUAL MEETING DAY.
YOUR INTERNET OR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
INTERNET
http://www.eproxy.com/cd
Use the Internet to vote your proxy. Have your proxy card in hand when you
access the web site. You will be prompted to enter your control number, located
in the box below, to create and submit an electronic ballot.
OR
TELEPHONE
1-800-435-6710
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call. You will be prompted to enter your control number, located in the
box below, and then follow the directions given.
OR
MAIL
Mark, sign and date your proxy card and return it in the enclosed postage-paid
envelope.
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE,
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
YOU CAN VIEW THE ANNUAL REPORT AND PROXY STATEMENT
ON THE INTERNET AT www.cendant.com
CENDANT CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD ON MAY 21, 2002
The undersigned stockholder of Cendant Corporation ("Cendant") hereby
appoints Henry R. Silverman, James E. Buckman and Eric J. Bock, and each of them
individually, with full power of substitution, attorneys and proxies for the
undersigned and authorizes them to represent and vote, as designated on the
reverse side, all of the shares of common stock of Cendant ("Cendant Common
Stock") which the undersigned may be entitled, in any capacity, to vote at the
Annual Meeting of Stockholders to be held at the Ramada Inn and Conference
Center, 130 Route 10 West, East Hanover, New Jersey 07936, May 21, 2002, at
10:00 a.m. New York Time and at any adjournments or postponements of such
meeting, for the following purposes, and with discretionary authority as to any
other matters that may properly come before the meeting, all in accordance with,
and as described in, the Notice and accompanying Proxy Statement. The
undersigned acknowledges receipt of the Notice of Annual Meeting of Shareholders
dated March 29, 2002, and the accompanying Proxy Statement. IF NO DIRECTION IS
GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS FOR THE NAMED
NOMINEES AND FOR PROPOSALS 2 and 3.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE PLEASE MARK, SIGN, DATE AND RETURN
THIS PROXY USING THE ENCLOSED ENVELOPE.)
SEE REVERSE SIDE
--------------------------------------------------------------------------------
o FOLD AND DETACH HERE o
CENDANT CORPORATION
THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT
Whether or not you plan to attend the Annual Meeting of Stockholders,
you can ensure your shares are represented at the Meeting by promptly
completing, signing and returning your proxy (attached above) to Mellon Investor
Services LLC in the enclosed postage-paid envelope. We urge you to return your
proxy as soon as possible. AS AN ALTERNATIVE TO COMPLETING THIS FORM, YOU MAY
ENTER YOUR VOTE INSTRUCTIONS BY TELEPHONE, (1-800-435-6710) or VIA THE INTERNET
AT WWW.EPROXY.COM/CD AND FOLLOW THE SIMPLE INSTRUCTIONS. Thank you for your
attention to this important matter.
ADMISSION TICKET
CENDANT CORPORATION
2002 ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, MAY 21, 2002
10:00 A.M.
RAMADA INN AND CONFERENCE CENTER
130 ROUTE 10 WEST
EAST HANOVER, NEW JERSEY 07936
NON-TRANSFERABLE NON-TRANSFERABLE