Prepared by R.R. Donnelley Financial -- Amendment No. 1 to Form S-4 Proxy/Prospectus
As Filed With the Securities and Exchange Commission on May 23, 2002
Registration No. 333-87292
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CENDANT CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE |
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8699 |
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06-0918165 |
(State or Other Jurisdiction of Incorporation or Organization) |
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(Primary Standard Industrial Classification Code Number) |
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(I.R.S. Employer Identification
No.) |
9 West 57th Street
New York, New York 10019
(212) 413-1800
(Address, including zip code, and telephone number, including area code, of registrants principal executive offices)
James E. Buckman, Esq.
Cendant Corporation
9 West 57th Street
New York, New York 10019
(212) 413-1800
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
Copies to:
David Fox, Esq. Skadden, Arps,
Slate, Meagher & Flom LLP Four Times Square New York, New
York 10036 (212) 735-3000 |
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Eric J. Bock, Esq. Cendant
Corporation 9 West 57th Street New York, New York
10019 (212) 413-1800 |
Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement becomes effective and upon the effective time of the merger of
Tornado Acquisition Corporation, a wholly owned subsidiary of registrant, with and into Trendwest Resorts, Inc., which is expected to occur as soon as practicable, upon satisfaction of certain conditions, following the effectiveness of this
registration statement.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and
there is compliance with General Instruction G, check the following box. ¨
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same offering. ¨
THE REGISTRANT HEREBY AMENDS THIS
REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
FORM OF NOTICE OF MERGER TO BE
DELIVERED BY TORNADO ACQUISITION CORPORATION
TO SHAREHOLDERS OF TRENDWEST RESORTS, INC.
PURSUANT TO SECTION 60.491 OF THE OREGON REVISED STATUTES
May 1, 2002
To the Holders of
Common Stock of
Trendwest Resorts, Inc.
NOTICE IS HEREBY GIVEN pursuant to Section 60.491 of the Oregon Revised Statutes (the ORS) of the merger (the Merger) of Tornado Acquisition Corporation (Merger Sub), a newly formed subsidiary of
Cendant Corporation (Cendant), with and into Trendwest Resorts, Inc. (Trendwest), with Trendwest surviving the Merger as a subsidiary of Cendant. The Merger is to be effective, subject to the terms and conditions set forth in
the Agreement and Plan of Merger and Reorganization (the Merger Agreement) dated as of March 30, 2002, by and among Cendant, Merger Sub, JELD-WEN, inc. and Trendwest, no earlier than thirty days following the date of this notice (and
following the effectiveness of the registration statement on Form S-4 filed by Cendant with the Securities and Exchange Commission), upon the filing by Merger Sub of articles of merger with the office of the Secretary of State of the State of Oregon
or at such other time as Cendant and Trendwest shall have agreed and specified in the articles of merger (the Effective Time). Unless indicated otherwise, as used in this notice, we, us and our refer
to Cendant and/or Merger Sub.
Pursuant to a stock purchase agreement dated as of March 30, 2002 by and among
Cendant, Merger Sub, JELD-WEN, inc., owner of approximately 81% of Trendwests common stock, and certain other shareholders of Trendwest, entered into at the same time as the Merger Agreement, Merger Sub has acquired approximately 90% of the
outstanding shares of common stock (Shares), par value $0.01 per share, of Trendwest (the Stock Purchase). As a result of Merger Subs ownership of such Shares, pursuant to the Merger Agreement and Section 60.491 of the
ORS, Merger Sub may consummate the Merger thirty (30) days after mailing this notice to Trendwest shareholders without any vote of Trendwests shareholders. The boards of directors of Cendant and Merger Sub have each voted to effect the
Merger for the purpose of acquiring the minority interest in Trendwest not owned by Merger Sub after the Stock Purchase. A summary of the Merger Agreement setting forth the requirements of a plan of merger under Section 60.491(3) is attached as
Exhibit A to this notice (the Summary Plan of Merger).
Because the Shares are quoted on the National
Association of Securities Dealers, Inc. Automated Quotation System (Nasdaq) as a National Market System issue on the date of this notice, dissenters rights are not available in connection with the Merger.
At the Effective Time, subject to the terms and conditions set forth in the Merger Agreement, your shares of Trendwest common stock will
be converted into shares of common stock, par value $0.01 per share, of Cendant designated as CD common stock (CD Common Stock); for each of your shares of Trendwest common stock you will receive the merger consideration described in the
Merger Agreement and in the Summary Plan of Merger. The CD Common Stock trades on the New York Stock Exchange under the symbol: CD. Merger Sub is not publicly traded.
WE ARE NOT ASKING YOU FOR A PROXY TO VOTE YOUR SHARES, AND YOU ARE REQUESTED NOT TO SEND US A PROXY TO VOTE YOUR SHARES. THIS NOTICE CONSTITUTES NOTICE UNDER SECTION 60.491(3)(C) OF THE OREGON
BUSINESS CORPORATION ACT THAT CENDANT AND MERGER SUB WILL CAUSE THE SHORT-FORM MERGER TO BECOME EFFECTIVE WITHOUT ANY FURTHER NOTICE TO SHAREHOLDERS OF TRENDWEST.
Cendant has filed with the Securities and Exchange Commission a Registration Statement on Form S-4 covering the shares of CD Common Stock to be issued to you pursuant to
the Merger. The Registration Statement on Form S-4 has not yet been declared effective. You can view a copy of Cendants Registration Statement on Form S-4 (as well as any of the documents incorporated by reference therein) by accessing the
Securities and Exchange Commissions website maintained at http://www.sec.gov. As soon as practicable after completion of the Merger, you will be provided with appropriate documentation for exchanging your shares of Trendwest common
stock for shares of CD Common Stock.
PLEASE DO NOT SEND ANY CERTIFICATES REPRESENTING SHARES OF TRENDWEST
COMMON STOCK AT THIS TIME. The Exchange Agent, Mellon Investor Services LLC, on behalf of Cendant and Merger Sub, will be mailing letters of transmittal and instructions for the surrender and cancellation of your shares of Trendwest common stock
following the Effective Time.
Tornado Acquisition Corporation
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SHARES OF CD COMMON STOCK TO BE ISSUED
IN THE MERGER OR DETERMINED THAT THIS REGISTRATION STATEMENT ON FORM S-4 FILED BY CENDANT WITH THE SECURITIES AND EXCHANGE COMMISSION IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
You should read the Risk Factors section beginning on page 13 for a description of some of the risks you should consider in
evaluating the proposed merger.
The date of this prospectus
is , 2002, and is first being mailed to shareholders on or about , 2002.
REFERENCES TO ADDITIONAL INFORMATION
This prospectus incorporates important business and financial information about Trendwest and Cendant from other documents that are not
included in or delivered with this prospectus. This information is available to you without charge upon your written or oral request. You can obtain the documents incorporated by reference into this prospectus by accessing the Securities and
Exchange Commissions website maintained at http://www.sec.gov or by requesting copies in writing or by telephone from the appropriate company at the following addresses:
Cendant Corporation 9 West 57th
Street New York, New York 10019 (212) 413-1800 |
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Trendwest Resorts, Inc. 9805 Willows
Road Redmond, WA (425) 498-2500 |
The information contained in this registration statement
(including any information incorporated by reference herein) concerning JELD-WEN and Trendwest (including information concerning any financial advisors) has been furnished to Cendant by JELD-WEN and Trendwest. Cendant assumes no responsibility for
the accuracy or completeness of such information. We will mail the documents you request by first class mail, or another equally prompt means, by the next business day after we receive your request.
See Where You Can Find More Information.
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ANNEX A |
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ANNEX B |
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ANNEX C |
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ANNEX D |
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ANNEX E |
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ANNEX F |
iii
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: What is the transaction?
A: Cendant has agreed to acquire all of Trendwest in a series of two transactions:
a purchase of shares from a small group of Trendwest shareholders, followed by the merger of Trendwest with a Cendant subsidiary. To effect this acquisition, Cendant entered into two agreements on March 30, 2002. Cendant, Tornado Acquisition
Corporation (also called Merger Sub), JELD-WEN, inc., a privately held Oregon corporation and Trendwests principal shareholder, and certain directors and executive officers of Trendwest and JELD-WEN entered into a stock purchase
agreement providing for the purchase from these Trendwest shareholders of the shares of Trendwest common stock owned by them. On April 30, 2002, Merger Sub consummated the stock purchase pursuant to which it purchased approximately 90.1% of the then
outstanding shares of Trendwest. Cendant, Merger Sub, JELD-WEN and Trendwest also entered into a merger agreement which provides that, following the stock purchase, the remaining, publicly-held shares of Trendwest common stock will be acquired by
means of a merger.
Q: Did the Trendwest Board of Directors approve the merger?
A: The Trendwest Board of Directors unanimously approved the merger agreement and determined that the
merger consideration is fair to Trendwests shareholders. In addition, a special committee of the Trendwest board of directors, composed of Trendwests independent directors, unanimously determined that the proposed transaction was in the
best interest of Trendwest and its shareholders other than JELD-WEN and its affiliates and unanimously recommended to the Trendwest board of directors that it approve the transactions, including the merger agreement and the stock option agreement
(described below).
Q: What will happen in the proposed merger?
A: In the proposed merger, Trendwest will merge with Merger Sub, a newly formed subsidiary of Cendant formed
for the purpose of acquiring Trendwest. After the merger, Trendwest will no longer be a public company and will become a wholly owned subsidiary of Cendant. See The Merger on pages 21 through 49.
Q: When will the merger occur?
A: The merger will occur when Merger Sub files articles of merger with the office of the Secretary of State of the State of Oregon (or at such other time as Cendant and Trendwest
agree and specify in those articles of merger), subject to the terms and conditions set forth in the merger agreement, including the prior effectiveness of the registration statement on Form S-4 filed by Cendant covering the shares of Cendant common
stock, designated CD Common Stock, to be issued in the merger.
Q: What is Cendant Corporation?
A: Cendant is one of the foremost providers of travel and real estate services in
the world. Cendant operates in five business segmentsReal Estate Services, Hospitality, Travel Distribution, Vehicle Services and Financial Services. Cendants businesses provide a wide range of consumer and business services and are
intended to complement one another and create cross-marketing opportunities within each segment. Cendants Real Estate Services segment franchises real estate brokerage businesses, provides home buyers with mortgages and assists in employee
relocations. Cendants Hospitality segment operates lodging franchise systems, facilitates the sale and exchange of vacation ownership interests and markets vacation rental properties. Cendants Travel Distribution segment provides global
distribution and computer reservation services, travel services, reservation processing, connectivity and information management services. Its Vehicle Services segment operates and franchises car rental businesses and provides fleet management and
fuel services to corporate clients and government agencies. Cendants Financial Services segment provides enhancement packages to financial institutions, insurance-based products to consumers, loyalty solutions to businesses, operates and
franchises tax preparation service and provides a variety of membership programs offering discounted products and services to consumers.
1
Q: What will I receive in the merger?
A: Following the consummation of the merger, you will have the right to receive 1.3074 shares of CD Common
Stock in exchange for each share of Trendwest common stock. The number of shares that you will have the right to receive as merger consideration was determined by an exchange ratio that fluctuated with the market price of CD Common Stock and was
subject to a version of a mechanism commonly referred to as a collar that reduces exposure to losses and gains from market price fluctuations within specified market price ranges. The merger consideration of 1.3074 is based on the
greater of the JELD-WEN exchange ratio of 1.2973, which was determined for purposes of the stock purchase agreement based on the ten-day average Cendant trading price prior to the date of the stock purchase, and the merger exchange ratio of 1.3074,
determined as follows:
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the merger exchange ratio was determined by dividing $24.00 by $18.357, which is the average of the closing sales prices of CD Common Stock for the ten
consecutive NYSE trading days ending on (and including) the second trading day immediately prior to (and excluding) the date that the registration statement relating to this prospectus became effective, May 21, 2002; |
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in the event that this ten-day trailing average Cendant merger trading price had been greater than $18.50, then the merger exchange ratio would have
been equal to 1.2973; |
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because the average Cendant merger trading price is between $16.15 and $18.50, the merger exchange ratio is equal to the quotient of $24.00 divided by the
average Cendant merger trading price and is between 1.2973 and 1.4861; |
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in the event that the average Cendant merger trading price had been less than $16.15 but greater than or equal to $13.50, then the merger exchange ratio would
have been equal to 1.4861; and |
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in the event that the average Cendant merger trading price had been less than $13.50, then the exchange ratio would not be capped at 1.4861, but would have been
equal to the quotient of $20.062 divided by the average Cendant merger trading price. |
The JELD-WEN exchange ratio was determined in precisely the same manner as the merger exchange ratio, to the extent described above, except that it was determined based on the ten-day trailing average Cendant trading price prior to
the date of the stock purchase instead of prior to the effectiveness of the registration statement. See The Merger AgreementMerger Consideration on pages 50 through 51 for a more detailed description of the average Cendant merger
trading price.
The following table summarizes the foregoing description:
If the Average Cendant Merger Trading Price had been:
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Then the Merger Exchange Ratio would have been: |
Equal to or greater than $18.50 |
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1.2973 |
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$16.15 or less, but greater than or equal to $13.50 |
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1.4861 |
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$13.49 or less |
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$20.062 divided by the average Cendant merger trading price |
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However, since the Average Cendant Merger Trading Price was: |
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The Merger Exchange Ratio is: |
Between $16.16 and $18.49 |
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$24.00 divided by the average Cendant merger trading price (rounded to the nearest thousandth) |
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If the exchange ratio determined as above had been: |
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Then the Merger Exchange Ratio would have been: |
Less than the JELD-WEN exchange ratio |
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the JELD-WEN exchange ratio |
Cendant will not issue fractional shares in the
merger. Cendant will round the total number of shares of CD Common Stock you receive down to the nearest whole number of shares, and you will receive a cash payment based on the average Cendant merger trading price for any remaining fraction instead
of a fractional share of CD Common Stock.
2
Q: Why is there no shareholder vote?
A: On April 30, 2002, Merger Sub acquired, pursuant to the stock purchase agreement, all of the shares of
Trendwest common stock owned by JELD-WEN and the other selling shareholders who sold their shares in the stock purchase. As a result of this stock purchase, Merger Sub owns at least 90% of the outstanding Trendwest common stock. In addition, Merger
Sub is entitled to exercise an option granted to it by Trendwest to ensure that it continues to own at least 90% of the outstanding Trendwest common stock. On May 1, 2002, Merger Sub purchased 100,000 shares of Trendwests common stock pursuant
to this option. Under applicable provisions of the Oregon Revised Statutes relating to short form mergers, if a parent corporation owns at least 90% of the shares of each class of shares of subsidiary corporation, the parent can merge
with the subsidiary without any vote or other action of the subsidiarys shareholders. Because Merger Sub will own at least 90% of the Trendwest common stock outstanding at the effective time of the merger, Trendwest is not required to solicit
and will not be soliciting your vote to adopt the merger agreement. See Stock Purchase Agreement on pages 62 through 65.
Q: Do I have appraisal rights?
A: No.
Under Oregon law, in the case of a short form merger, shareholders that otherwise would be entitled to exercise dissenters appraisal rights do not have these rights if the stock affected is registered on a national securities exchange or is
quoted on the National Association of Securities Dealers, Inc. Automated Quotation System (Nasdaq) as a National Market System issue at the time that a summary plan of merger is mailed to shareholders pursuant to Section 60.491 of the
Oregon Revised Statutes. Since the Trendwest common stock is quoted on Nasdaq as a National Market System issue, dissenters appraisal rights will not be available in connection with the merger. See The MergerDissenters or
Appraisal Rights on page 46.
Q: What did JELD-WEN and the other shareholders receive when
Merger Sub purchased their shares of Trendwest common stock under the stock purchase agreement?
A: JELD-WEN and the other Trendwest shareholders who sold shares pursuant to the stock purchase agreement received for each share of Trendwest common stock purchased by Merger Sub 1.2973 shares of CD Common
Stock, which was determined by dividing $24.00 by the average of the closing sales prices of CD Common Stock for the ten consecutive NYSE trading days ending on (and including) the second trading day immediately prior to (and excluding) the date on
which the stock purchase was made (the JELD-WEN exchange ratio), subject to a maximum of 1.4861 and a minimum of 1.2973, based on a collar mechanism with a range established between $16.15 and $18.50. The stock purchase
agreement provides that if the merger exchange ratio is greater than the JELD-WEN exchange ratio, then these selling shareholders, other than JELD-WEN, will receive at the time of the merger under the stock purchase agreement additional shares so
that they end up receiving for their shares of Trendwest common stock the same exchange ratio as is received by other Trendwest shareholders in the merger.
The following table summarizes the foregoing description:
If the Average Cendant Trading Price had been: |
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Then the JELD-WEN Exchange Ratio would have been: |
Between $16.16 and $18.49 |
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$24.00 divided by the average trading price described in the above paragraph (rounded to the nearest
thousandth) |
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$16.15 or less, but greater than or equal to $13.50 |
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1.4861 |
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However, since the Average Cendant Trading Price was: |
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The JELD-WEN Exchange is: |
Equal to or greater than $18.50 |
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1.2973 |
On April 26, 2002, the second trading day immediately prior to (and excluding)
the date of the stock purchase, the average trading price of CD Common Stock for the ten-trading day period ending on that date was $18.64 and the
3
JELD-WEN exchange ratio was determined in accordance with the description above to be 1.2973. Since the merger exchange ratio, 1.3074, is greater than 1.2973, the selling shareholders other than
JELD-WEN will receive at the merger closing additional shares so that they end up receiving for their shares of Trendwest common stock the same exchange ratio as is received by the Trendwest shareholders in the merger.
Q: When do you expect the merger to be completed?
A: We expect to complete the merger as soon as practicable following the effectiveness of this registration statement, but in no event earlier than
thirty days from the mailing of notice of the merger.
Q: Should I send in my stock certificates now?
A: No. After the merger, Cendant will send you written instructions for sending in
your Trendwest stock certificates.
Q: How will the merger be treated for accounting purposes?
A: The merger will be accounted for using the purchase method of accounting as such
term is used under accounting principles generally accepted in the United States of America. The purchase method accounts for a merger as an acquisition of one company by another.
Q: Who can help answer my questions?
A: If you have any questions about the merger or if you need additional copies of this prospectus you should contact:
Investor Relations
Cendant Corporation
9 West 57th Street
New York, NY 10019
Telephone: (212) 413-1800
Q: Where can I find more information
about the companies?
A: You can find more information about Trendwest and Cendant
from various sources described under Where You Can Find More Information on pages 77 through 78.
4
This summary highlights selected information from this document and may
not contain all the information that is important to you. For a more complete understanding of the merger and for a more complete description of the legal terms of the merger, you should read this entire document carefully, as well as the additional
documents to which we refer you, including the stock purchase agreement and the merger agreement. See Where You Can Find More Information (pages 77 through 78). References in this document to Cendant and Trendwest
include their respective subsidiaries unless otherwise indicated. The stock purchase provided for in the stock purchase agreement is referred to in this prospectus as the stock purchase and the merger provided for in the merger agreement
is referred to in this prospectus as the merger. Together, the stock purchase and the merger constitute (together referred to in this prospectus as the transactions) the transactions by means of which Cendant, through its
subsidiary Merger Sub, is acquiring Trendwest.
Cendant Corporation 9 West 57th
Street New York, New York 10019 (212) 413-1800 |
|
Trendwest Resorts, Inc. 9805 Willows
Road Redmond, WA (425) 498-2500 |
Cendant is one of the foremost providers of travel and real estate services
in the world. Cendants businesses provide a wide range of consumer and business services and are intended to complement one another and create cross-marketing opportunities both within and among its following five business segments:
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Cendants Real Estate Services segment franchises the real estate brokerage businesses of the CENTURY 21®, Coldwell Banker®, Coldwell Banker Commercial® and ERA® brands; provides home buyers with mortgages through Cendant Mortgage Corporation; and assists in employee relocations through Cendant
Mobility Services Corporation. |
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Cendants Hospitality segment operates the Days Inn®, Ramada® (in the United States), Super 8
Motel®, Howard Johnson®, Wingate Inn®, Knights Inn®, Travelodge® (in North America), Villager Lodge® /Village Premier®/Hearthside by Villager
and AmeriHost Inn® lodging franchise systems; facilitates the sale and exchange of vacation ownership
intervals through Resort Condominiums International, LLC, Fairfield Resorts, Inc. and Equivest Finance, Inc. and markets vacation rental properties in Europe through Holiday Cottages and Cuendet. |
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Cendants Travel Distribution segment provides global distribution and computer reservation services to airlines, hotels, car rental companies and other
travel suppliers and provides our travel agent customers the ability to electronically access airline schedule and fare information, book reservations, and issue tickets through Galileo International; provides travel services through its Cendant
Travel and Cheap Tickets travel agency businesses; and provides reservations processing, connectivity and information management services through WizCom. |
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Cendants Vehicle Services segment operates and franchises its Avis® car rental business and provides fleet management and fuel card services to corporate clients and government agencies through PHH Arval and
Wright Express. On May 21, 2002, Cendant announced the sale of its National Car Parks subsidiary, an operator of parking facilities in the United Kingdom, for approximately $1.2 billion in cash. |
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Cendants Financial Services segment provides enhancement packages to financial institutions through FISI*Madison LLC; provides insurance-based products to
consumers through Benefit Consultants, Inc.
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5
and Long Term Preferred Care, Inc.; provides loyalty solutions to businesses through Cims Ltd.; operates and franchises tax preparation services through Jackson Hewitt Inc.; and provides a
variety of membership programs offering discounted products and services to consumers through its relationship with Trilegiant Corporation.
Trendwest markets, sells, and finances timeshare vacation ownership
interests in the form of vacation credits and fractional ownership interests. Trendwest also acquires and develops resorts. Trendwests resorts (except fractional interests) are owned and operated through WorldMark, The Club (referred to as
WorldMark), and WorldMark South Pacific Club (referred to as WorldMark South Pacific), together referred to as the Clubs. WorldMark is a California non-profit mutual benefit corporation organized in 1989 to provide an innovative, flexible vacation
ownership system. WorldMark South Pacific is a registered managed investment scheme regulated by the Australian Securities and Investments Commission. Trendwest presently sells vacation ownership interests in 48 resorts located in the United States,
British Columbia, Mexico, Fiji, and Australia and operates a network of 45 sales offices in eight western states, Alaska, Kansas, Missouri, Australia, and Fiji. At December 31, 2001, the Clubs had over 149,000 vacation credit owners. Trendwest sells
two types of timeshare vacation ownership interests: vacation credits and fractional ownership interests in vacation properties. Its vacation credit system is a points-based system that allows owners to reserve units at any of the Clubs
resorts, at any time of the year and in increments as short as one day. The use of vacation credits is not tied to any particular resort unit or time period. Trendwests combination of multiple Club resorts and vacation credit system provides
owners with an attractive range of vacation planning choices and values. Its vacation credit system facilitates the sale of vacation credits at off-site sales offices located in major metropolitan areas and reduces dependence on on-site sales
centers located at more remote resort locations.
The Merger Agreement (Pages 50 Through 61)
The merger agreement is attached as Annex
A to this prospectus. We encourage you to read the merger agreement as it is the principal document governing the merger.
The Merger Consideration (Pages 50 Through 51)
At the effective time of the
merger, Trendwest common stock (other than Trendwest common stock held by Cendant or any wholly owned subsidiary of Cendant) will be converted, without any action on the part of the holder, in accordance with the exchange procedures below, into the
right to receive, for each share of Trendwest common stock, the merger consideration. The merger consideration will be based on an exchange ratio of 1.3074 shares of CD Common Stock for each share of Trendwest common stock, which is the greater
of the JELD-WEN exchange ratio of 1.2973, determined as described in the section entitled The Stock Purchase AgreementConsideration, and the merger exchange ratio of 1.3074, determined as follows:
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the merger exchange ratio was determined by dividing $24.00 by the average Cendant merger trading price, so that if the average Cendant merger trading price was
anywhere between $16.15 and $18.50, then the merger exchange ratio would equal the quotient of $24.00 divided by the average Cendant merger trading price and would be between 1.2973 and 1.4861; |
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in the event that the average Cendant merger trading price had been less than $16.15 but greater than or equal to $13.50, then the merger exchange ratio would
have been equal to 1.4861; and |
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in the event that the average Cendant merger trading price had been less than $13.50, then the merger exchange ratio would have equaled the quotient of $20.062
divided by the average Cendant merger trading price. |
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The average Cendant merger trading price is $18.357, which was calculated
based on the arithmetic average of the 4:00 p.m. eastern time closing sales prices of CD Common Stock reported on the New York Stock Exchange Composite Tape for the ten consecutive NYSE trading days ending on (and including) the second trading day
immediately prior to, and excluding May 23, 2002, the date that the registration statement in which this prospectus is included became effective.
At the effective time of the merger, all shares of Trendwest common stock will no longer be outstanding and will be cancelled and retired and will cease to exist. Following the effective time of the
merger, each holder of Trendwest common stock (other than Trendwest, Cendant or any wholly owned subsidiary of Cendant) will cease to have any rights with respect to their shares of Trendwest common stock, except the right to receive, without
interest, the merger consideration.
Conditions to the Completion of the Merger (Page 61)
The completion of the
merger depends upon meeting a number of conditions including the following:
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the registration statement in which this prospectus is included having become effective under the Securities Act of 1933, as amended, and no stop order or
proceedings seeking a stop order having been entered by or pending before the Securities Exchange Commission; |
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the shares of CD Common Stock having been approved for listing on the NYSE; |
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no judgment, order, decree, statute, law, ordinance, rule or regulation, entered, enacted, promulgated, enforced or issued by any court or other governmental
authority of competent jurisdiction or other legal restraint or prohibition being in effect restraining or prohibiting the consummation of the merger; and |
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at least a majority of the then outstanding shares of Trendwest common stock having been purchased by Merger Sub pursuant to the stock purchase agreement.
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Cendant intends to effect the merger without a meeting of shareholders of Trendwest in
accordance with the provisions of Section 60.491 of the Oregon Revised Statutes, which allow an entity which owns at least 90% of the outstanding shares of another entity (as would be the case with Merger Sub in respect of Trendwest) to merge with
that entity no sooner than 30 days following the delivery to all shareholders of a notice of its intent to effect such a merger (accompanied by a summary plan of merger) simply by filing articles of merger with the office of the Secretary of State
of the State of Oregon. This notice was mailed to all Trendwests shareholders of record on May 1, 2002.
Conditions to the Completion of the Stock Purchase (Pages 63 Through 65)
As
described above, the completion of the merger depends, among other things, upon completion of the stock purchase, and completion of the stock purchase in turn depended upon meeting a number of conditions, including the following:
The obligations of Cendant, Merger Sub and the selling shareholders to complete the stock purchase were subject to, among
other things:
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absence of any legal prohibition to the merger; and |
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absence of any change in law after the date of the stock purchase agreement that would prevent the stock purchase and the merger from qualifying as an
integrated transaction that qualifies as a tax-fee reorganization under Section 368(a) of the Internal Revenue Code of 1986 as amended (referred to in this prospectus as the Code). |
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Termination of the Merger Agreement (Page 61)
The merger agreement may not be
terminated.
Trendwests Reasons for the Merger (Pages 26 Through 28)
Some of
Trendwests reasons for the merger include:
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Consideration of the existing assets, financial condition, operations, management and historical earnings of Trendwest, and the board of directors
judgment as to the nature and future prospects of Trendwests business and the future value of Trendwest; |
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Trendwests limitations as a public company, including limited trading volume, lack of institutional sponsorship, limited public float and lack of research
attention by market analysts; |
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The opportunity for Trendwests shareholders to participate in a larger more diversified company with greater depth of management; and
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The solicitation process conducted by Banc of America Securities LLC, referred to in this prospectus as Banc of America Securities since 1999, and
the board of directors belief that Trendwest was unlikely to receive a higher offer from another party. |
Cendants Reasons for Acquisition of Trendwest by Means of the Stock Purchase and the Merger (Pages 28 Through 29)
Some of Cendants reasons for the acquisition of Trendwest by means of the stock purchase and the merger include:
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the acquisition will provide Cendant with a unique opportunity to expand the scope of its involvement in the vacation ownership and travel industries;
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the acquisition will provide Cendant with an opportunity to substantially broaden the range of Cendants vacation ownership offerings in one of the fastest
growing segments of the travel industry; |
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the acquisition will provide Cendant with an opportunity to substantially broaden the geographic scope of its timeshare businesses and will complement the
timeshare businesses being operated by existing subsidiaries of Cendant; and |
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Trendwests experienced senior managers have more than 30 years experience in the vacation ownership industry and have developed strong sales and
marketing teams. |
Opinions of Trendwest Financial Advisors (Pages 29 Through 42)
In deciding to approve
the merger agreement, the merger and the other transactions contemplated by the merger agreement, the Trendwest board of directors considered the opinion, dated March 28, 2002, of its financial advisor, Banc of America Securities, that, as of March
28, 2002, and based upon and subject to the various assumptions described in the written opinion, the exchange ratio formula set forth in the merger agreement used to determine the number of shares of CD Common Stock to be issued in the merger was
fair, from a financial point of view, to the shareholders of Trendwest, other than JELD-WEN and the other shareholders selling under the stock purchase agreement. In addition, in deciding to approve the merger agreement, the merger and the other
transactions contemplated by the merger agreement, the Trendwest board of directors considered the recommendation of the special committee of the Trendwest board of directors established in connection with the transactions. The special committee, in
deciding to recommend approval of the merger agreement, the merger and the other transactions contemplated by the merger agreement, considered the opinion which its financial advisor, Houlihan Lokey delivered on and dated March 28, 2002, that, based
on the
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assumptions made, matters considered and limitations on the review described in the opinion, the consideration per share to be received in connection with the transactions by the holders of
Trendwest common stock, other than JELD-WEN and the JELD-WEN affiliates, is fair from a financial point of view and not less than the financial consideration per share to be received by JELD-WEN or its affiliates in connection with the transactions.
In this prospectus, Houlihan Lokey Howard & Zukin Financial Advisors, Inc. is referred to as Houlihan Lokey. The written opinions of Banc of America Securities and of Houlihan Lokey are attached as Annexes E and F, respectively, to
this prospectus. We encourage you to read these opinions carefully and in their entirety as they set forth the assumptions, conditions and limitations on which such opinions are based.
No Shareholder Approval Required (Page 21)
We are not asking you to vote on
the merger. Under the Oregon Revised Statutes, referred to in this prospectus as the ORS, if a parent corporation owns at least 90% of the shares of each class of shares of subsidiary corporation, the parent can merge with the subsidiary in a short
form merger without a vote of shareholders. Cendant and Merger Sub have consummated pursuant to a stock purchase agreement the purchase of the shares of Trendwest common stock beneficially owned by JELD-WEN and certain directors and executive
officers of Trendwest and JELD-WEN who, as of April 30, 2002, collectively owned approximately 90.1% of the outstanding shares of Trendwest common stock. See Stock Purchase Agreement, pages 62 through 65. As Merger Sub has acquired 90%
or more of the shares of Trendwest, Merger Sub can effect the merger pursuant to the short form merger provisions of the Oregon Revised Statutes without the action of any other shareholder of Trendwest. Further, if for any reason after the stock
purchase Merger Sub does not own at least 90% of the outstanding Trendwest shares, Merger Sub can purchase additional shares of Trendwest common stock under the stock option granted to it by Trendwest. Accordingly, because Merger Sub will own at
least 90% of the outstanding Trendwest common stock at the time of the merger, Trendwest is not required to solicit and will not be soliciting your vote to adopt the merger agreement.
The Stock Purchase Agreement (Pages 62 Through 65)
In connection with the merger
agreement, JELD-WEN and certain other shareholders of Trendwest entered into the stock purchase agreement. At April 30, 2002, JELD-WEN and such other shareholders owned 34,625,361 outstanding shares of Trendwest common stock, of which JELD-WEN owned
30,883,096 shares. These shares represented approximately 90.1% of the outstanding shares of Trendwest common stock at April 30, 2002. On the stock purchase closing date each seller under the stock purchase agreement sold to Merger Sub all of
his, her or its shares of Trendwest common stock. On April 30, 2002, immediately prior to the stock purchase, approximately 1.8 million of JELD-WENs Trendwest shares of common stock were redeemed in connection with the acquisition of
MountainStar by JELD-WEN. See Merger AgreementMountainStarMountainStar Redemption, page 59. The stock purchase agreement is attached hereto as Annex B. We encourage you to read the stock purchase agreement carefully and in
its entirety.
The Stock Option Agreement (Page 66)
In connection with the merger agreement,
Trendwest entered into a stock option agreement with Cendant and Merger Sub. Under the stock option agreement, Trendwest granted to Merger Sub an irrevocable option to purchase newly issued shares of Trendwest common stock, at an exercise price of
$24.00 per share (subject to adjustment). The option may be exercised by Merger Sub, in whole or in part, at any time or from time to time after the date on which Merger Sub shall have purchased, pursuant to the stock purchase agreement, shares of
Trendwest common stock constituting at least 71% of the shares of Trendwest common stock issued and outstanding on the date of purchase. This option ensures that Merger Sub can continue as owner of at least 90% of Trendwests outstanding common
stock. On May 1, 2002 Cendant purchased 100,000 shares of Trendwest common stock pursuant to the stock option. The stock option agreement is attached hereto as Annex C. We encourage you to read the stock option agreement carefully and in its
entirety.
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The Registration Rights Agreement (Page 67)
In connection with the stock
purchase, the selling shareholders entered into a registration rights agreement with Cendant relating to the shares of CD Common Stock issued to the selling shareholders pursuant to the stock purchase agreement. Under the registration rights
agreement, Cendant filed with the SEC a registration statement on Form S-3 so as to permit the offer and subsequent resale by each selling shareholder of CD Common Stock following the effective date of this registration statement. The parties expect
the registration statement on Form S-3 to become effective at the same time as the registration statement on Form S-4 covering the shares being issued in the merger, so that shares of CD Common Stock issued to Trendwest shareholders in
connection with the merger and shares of CD Common Stock issued to the selling shareholders under the stock purchase agreement will be freely tradeable at approximately the same
time.
The MountainStar Redemption (Page 47)
Immediately prior to the stock purchase,
JELD-WEN acquired the assets comprising the MountainStar development project from Trendwest in accordance with the merger agreement. The purchase price for MountainStar was equal to the net book value of MountainStar, which was approximately
$44 million dollars, comprised of $76 million in net assets less approximately $32 million of debt related to MountainStar to be assumed by JELD-WEN as a consequence of the MountainStar redemption. Accordingly, Trendwest redeemed from JELD-WEN
approximately 1.8 million shares to pay for MountainStar.
Cendant initially indicated to Trendwest and
JELD-WEN that its interest in acquiring Trendwest did not extend to the MountainStar development property, a project beyond the scope of Trendwests core timeshare business. During Cendants negotiations with JELD-WEN and Trendwest,
Cendant repeatedly indicated that it would not acquire Trendwest unless JELD-WEN agreed that MountainStar would be disposed of so that Cendant could acquire Trendwest unencumbered by MountainStar. Cendant proposed that it should have the right,
though not the obligation, to put MountainStar to JELD-WEN following the acquisition of Trendwest at a price equal to the book value of MountainStar. JELD-WEN ultimately agreed to acquire MountainStar from Trendwest prior to
Cendants acquisition of Trendwest by redeeming Trendwest shares with a value equal to the book value of MountainStar, while leaving Cendant with the right to purchase MountainStar for a limited period after the acquisition of Trendwest.
In order to prevent the MountainStar redemption from causing the transaction to fail to qualify as a
reorganization under section 368(a) of the Code, the MountainStar redemption may be cancelled in the event that the price of CD Common Stock at the time of the merger is less than $10.00. Trendwest and Cendant have retained the right to repurchase
MountainStar at the net book value of MountainStar for a period of two months after the merger in exchange for shares of CD Common Stock valued at the JELD-WEN exchange ratio. In addition, JELD-WEN has granted Trendwest certain exclusive
development rights in respect of the MountainStar property.
Interests of Certain Persons in the Merger (Pages 47 Through 49)
In addition
to their interests as shareholders, the directors and executive officers of Trendwest and JELD-WEN, the principal and controlling shareholder of Trendwest, may have interests in the acquisition of Trendwest by means of the stock purchase and the
merger that are different from, or in addition to, your interests. Prior to the stock purchase, in accordance with the merger agreement, JELD-WEN acquired MountainStar in exchange for shares of Trendwest common stock. The employee stock options of
all of Trendwests executive officers became fully vested as a result of the stock purchase. Certain interests may exist as a result of rights under certain officers individual employment agreements. The executive officers and directors
of Trendwest are also entitled to indemnification in respect of events occurring at or prior to the effective time of the merger. The members of the Trendwest board of directors knew of these additional interests, and considered them when they
approved the merger and took other actions relating to the acquisition of Trendwest.
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Trendwest Board of Directors (Page 54)
Immediately following the stock
purchase, William F. Peare, Jeffrey P. Sites, Jerol E.Andres, Douglas P. Kintzinger and Roderick C. Wendt resigned as members of Trendwests board of directors. The remaining members of Trendwests board will remain on the board until the
merger is completed. Pursuant to the bylaws of Trendwest, Trendwests board of directors elected James E. Buckman, Stephen P. Holmes, Samuel L. Katz and Kevin M. Sheehan, each a designee of Cendant, to fill the vacancies on Trendwests
board of directors, each such director to hold office until the next annual meeting of shareholders.
Stock Exchange Listing (Page 42)
Cendant has begun preparation of a listing
application to list the shares of CD Common Stock to be issued to Trendwest shareholders in connection with the merger with the New York Stock Exchange.
Material United States Federal Income Tax Consequences of the Merger (Pages 42 Through 44)
It is intended that the stock purchase and the merger will, for U.S. federal income tax purposes, be treated as an integrated transaction that will qualify as a reorganization under Section 368(a) of the Code and Trendwest has
received an opinion from its counsel that, on the basis of the facts, representations, covenants, limitations and assumptions set forth or referred to in such opinion, the transaction will be treated for U.S. federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code. Assuming that the transaction so qualifies, a holder of Trendwest common stock will not recognize gain or loss upon the receipt of CD Common Stock in exchange for Trendwest common
stock in the merger, except with respect to cash received instead of a fractional share of CD Common Stock. See Material United States Federal Income Tax Consequences of the Merger on pages 42 through 44. HOLDERS OF TRENDWEST COMMON
STOCK ARE STRONGLY ENCOURAGED TO CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
Accounting Treatment (Page 44)
The merger will be accounted for using the purchase
method of accounting as such term is used under accounting principles generally accepted in the United States of America. The purchase method accounts for a merger as an acquisition of one company by another.
Appraisal Rights (Page 46)
Under Oregon law, in the case of a short form merger,
shareholders that otherwise would be entitled to exercise dissenters rights do not have these rights if the stock affected is registered on a national securities exchange or is quoted on the National Association of Securities Dealers, Inc.
Automated Quotation System as a National Market System issue at the time that a summary plan of merger is mailed to shareholders pursuant to Section 60.491 of the Oregon Revised Statutes. Since the Trendwest common stock will be quoted on Nasdaq as
a National Market System issue at the applicable time, dissenters appraisal rights are not be available in connection with the merger.
Regulatory Matters (Pages 44 Through 46)
Under the merger agreement, Cendant and
Trendwest have agreed to use their reasonable good faith efforts to obtain all necessary actions or no actions, waivers, consents and approvals from any governmental authority necessary to complete the merger.
Recent Developments
On May 21, 2002, Cendant announced the sale of its National Car Parks subsidiary, an operator of parking facilities in the United Kingdom, for approximately $1.2 billion in cash.
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In addition to the other information included in this prospectus
including the matters addressed in Special Note Regarding Forward-Looking Statements, you should carefully consider the matters described below in order to assess the risks associated with holding shares of CD Common Stock.
The Value of the Merger Consideration is Subject to Changes Based on Fluctuations in the Value of CD Common Stock to be Received in the Merger
You will have the right to receive 1.3074 shares of CD Common Stock in the merger for each share of
Trendwest common stock you own. Such calculation was based upon the average Cendant share price for the 10 trading days preceding the second trading day prior to (and including) the date the registration statement relating to this prospectus
became effective. Although the number of shares of CD Common Stock is fixed at 1.3074, the market price of CD Common Stock when the merger takes place may vary from the market price on the date of the effectiveness of this registration statement or
on the date of this prospectus. For example, during the 12-month period ended on May 22, 2002 (the most recent practicable date prior to the effectiveness of the registration statement relating to this prospectus), the price of CD Common Stock
varied from a low of $10.60 to a high of $20.90 and ended that period at $18.28. Variations like these may occur as a result of changes in the business, operations or prospects of Cendant or the combined company, market assessments of the likelihood
that the merger will be completed and the timing of the mergers completion, regulatory considerations, general market and economic conditions and other factors. Because the market price of CD Common Stock fluctuates, the overall value of the
merger consideration you will receive at the time of the merger may be adversely affected by changes in the market price of CD Common Stock.
CD Common Stock May be Subject to Disproportionate Market Risk
The market prices of CD
Common Stock and of securities of the publicly-held companies in the industries in which Cendant operates have shown volatility and sensitivity in response to many factors. These factors include overall economic conditions and consumer confidence,
general market trends, calamitous events such as the September 11 terrorist attacks, public communications regarding litigation and judicial decisions, legislative or regulatory actions, pricing trends, competition, earnings, membership reports of
particular industry participants and acquisition activity. Cendant cannot assure the level or stability of the price of its securities at any time or the impact of the foregoing or any other factors on such prices. We urge you to obtain current
market quotations for CD Common Stock.
The Price of CD Common Stock is Affected by Factors Different from the Factors Affecting the
Price of Trendwest Common Stock
Cendants business differs significantly from that of Trendwest and
Cendants results of operations, as well as the market price of CD Common Stock, are affected by factors that differ from those that affect Trendwests results of operations and the price of Trendwests common stock.
Failure to Complete the Stock Purchase and the Merger Could Have a Negative Impact on the Market Price and Future Business and Operations of
Trendwest
If the acquisition of Trendwest by means of the stock purchase and the merger is not completed, the
market price of Trendwest common stock may be negatively affected by the following:
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the price of Trendwest common stock may decline to the extent that the current market price reflects a market assumption that the merger will be completed;
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costs related to the merger, such as legal, accounting and other fees, as well as a portion of the financial advisory fees, must be paid even if the merger is
not completed; and |
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the diversion of managements attention from the day-to-day business operations of Trendwest and the unavoidable disruption to its employees and its
relationships with its customers and suppliers during the period before completion of the merger may make it difficult to regain financial and market position if the acquisition of Trendwest by means of the stock purchase and the merger does not
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The Merger May Adversely Affect Trendwests Ability to Attract and Retain Key Employees
Current and prospective Trendwest employees may experience uncertainty about their future roles after the
merger. In addition, current and prospective Trendwest employees may determine that they do not desire to work for Cendant for a variety of reasons. These factors may adversely affect Trendwests ability to attract and retain key management,
sales, marketing and other personnel.
Accounting Irregularities and Related Litigation and Government Investigations Could Adversely
Effect Cendants Financial Position or Liquidity
Cendant was created in December 1997, through the
merger of HFS Incorporated into CUC International, Inc. with CUC surviving and changing its name to Cendant Corporation. On April 15, 1998, Cendant announced that in the course of transferring responsibility for Cendants accounting functions
from Cendant personnel associated with CUC prior to the merger to Cendant personnel associated with HFS before the merger and preparing for the report of first quarter 1998 financial results, Cendant discovered accounting irregularities in some of
the CUC business units. As a result, Cendant, together with its counsel and assisted by auditors, immediately began an intensive investigation. As a result of the findings of the investigations, Cendant restated its previously reported financial
results for 1997, 1996 and 1995 and the six months ended June 30, 1998.
Following the April 15, 1998 announcement
of the discovery of accounting irregularities in the former business units of CUC, approximately 70 lawsuits claiming to be class actions, three lawsuits claiming to be brought derivatively on Cendants behalf and several individual lawsuits
and arbitration proceedings were commenced in various courts and other forums against Cendant and other defendants by or on behalf of persons claiming to be stockholders of Cendant and persons claiming to have purchased or otherwise acquired
securities or options issued by CUC or Cendant between May 1995 and August 1998.
The SEC and the United States
Attorney for the District of New Jersey have conducted investigations relating to the matters referenced above. As a result of the findings from Cendants internal investigations, Cendant made all adjustments it considered necessary, which are
reflected in its previously filed restated financial statements for the years ended December 31, 1997, 1996 and 1995 and for the six months ended June 30, 1998. On June 14, 2000, pursuant to an offer of settlement made by Cendant, the SEC
issued an Order Instituting Public Administrative Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings and Imposing a Cease and Desist Order. In such Order, the SEC found that Cendant had violated certain
financial reporting provisions of the Exchange Act and ordered Cendant to cease and desist from committing any future violations of such provisions. No financial penalties were imposed against Cendant.
On December 7, 1999, Cendant announced that it had reached a preliminary agreement to settle the principal securities class action pending
against Cendant in the U.S. District Court in Newark, New Jersey, brought on behalf of purchasers of all Cendant and CUC publicly traded securities, other than PRIDES, between May 1995 and August 1998. A portion of the PRIDES litigation had
previously been settled through the issuance of rights. Under the settlement agreement, Cendant would pay the class members approximately $2.85 billion in cash and 50% of any recovery Cendant may obtain in connection with claims it has asserted
against CUCs former public auditor. The definitive settlement document was approved by the U.S. District Court by order dated August 14, 2000. Certain parties in the class action appealed various aspects of the District Courts orders
approving the settlement. In August 2001, the U.S. Court of Appeals for the Third Circuit affirmed the judgment of the District Court approving the settlement (but remanded the case back to the District Court for further proceedings concerning an
award of fees to the class attorneys, a matter in which we have no interest). One party
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in the class action petitioned the U.S. Supreme Court to hear her challenge to the plan of allocation of the settlement funds among the class members. On March 18, 2002, the U.S. Supreme Court
declined to review the matter. The settlement agreement required Cendant to post collateral in the form of credit facilities and/or surety bonds by November 13, 2000, which Cendant has done. In light of the Supreme Courts action on March 18,
2002, the settlement is required to be fully funded by Cendant by July 16, 2002.
The settlement does not
encompass all litigations asserting claims against Cendant associated with the accounting irregularities. Cendant does not believe that it is feasible to predict or determine the final outcome or resolution of these unresolved proceedings. An
adverse outcome from such unresolved proceedings could be material with respect to earnings in any given reporting period. However, Cendant does not believe that the impact of such unresolved proceedings should result in a material liability to
Cendant in relation to its financial position or liquidity.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents
that are made a part of this prospectus by reference to other documents filed with the Securities and Exchange Commission include various forward-looking statements about Cendant and Trendwest that are subject to known and unknown risks,
uncertainties and other factors which may cause the actual results, performance or achievements of Cendant and Trendwest to be materially different from any future results, performance or achievements expressed or implied by such forward-looking
statements. These forward-looking statements were based on various factors and were derived utilizing numerous important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking
statements. Forward-looking statements include the information concerning future financial performance, business strategy, projected plans and objectives of Cendant and Trendwest set forth under:
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Questions and Answers About the Merger; |
Statements preceded by, followed by or that otherwise include the words believes, expects, anticipates, intends, project, estimates, plans,
may increase, may fluctuate and similar expressions or future or conditional verbs such as will, should, would, may and could are generally forward-looking in nature
and not historical facts. You should understand that the following important factors and assumptions could affect our future results and could cause actual results to differ materially from those expressed in such forward-looking statements:
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the impacts of the September 11, 2001 terrorist attacks on New York City and Washington D.C. on the travel industry in general, and Cendants travel
businesses in particular, are not fully known at this time, but are expected to include negative impacts on financial results due to reduced demand for travel in the near term; other attacks, acts of war, or measures taken by governments in response
thereto may negatively affect the travel industry, Cendants financial results and could also result in a disruption in Cendants business; |
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the effect of economic conditions and interest rate changes on the economy on a national, regional or international basis and the impact thereof on
Cendants businesses; |
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the effects of a decline in travel, due to political instability, adverse economic conditions or otherwise, on Cendants travel related business;
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the effects of changes in current interest rates, particularly on Cendants real estate franchise and mortgage businesses; |
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the resolution or outcome of Cendants unresolved pending litigation relating to the previously announced accounting irregularities and other related
litigation; |
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Cendants ability to develop and implement operational, technological and financial systems to manage growing operations and to achieve enhanced earnings
or effect cost savings; |
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competition in Cendants existing and potential future lines of business and the financial resources of, and products available to, competitors;
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failure to reduce quickly Cendants substantial technology costs in response to a reduction in revenue, particularly in Cendants computer
reservations and global distribution systems businesses; |
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Cendants failure to provide fully integrated disaster recovery technology solutions in the event of a disaster; |
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Cendants ability to integrate and operate successfully acquired and merged businesses and risks associated with such businesses, including the
acquisitions of Galileo International Inc. and Cheap
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Tickets, Inc., the compatibility of the operating systems of the combining companies, and the degree to which our existing administrative and back-office functions and costs and those of the
acquired companies are complementary or redundant;
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Cendants ability to obtain financing on acceptable terms to finance our growth strategy and to operate within the limitations imposed by financing
arrangements and to maintain its credit ratings; |
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competitive and pricing pressures in the vacation ownership and travel industries, including the car rental industry; |
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changes in the vehicle manufacturer repurchase arrangements in Cendants Avis car rental business in the event that used vehicle values decrease;
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and changes in laws and regulations, including changes in accounting standards and privacy policy regulation. |
We encourage you to read Cendants Annual Report on Form 10-K for the year ended December 31, 2001.
In addition, important factors and assumptions discussed in Trendwests Annual Report on Form 10-K for the year ended December 31,
2001, which is incorporated by reference into this prospectus, as well as Trendwests ability to implement Cendants managements business objectives, could affect the future results of Trendwest following the merger, and, therefore,
the results of the combined company, and could cause actual results to differ materially from those expressed in such forward-looking statements.
Other factors and assumptions not identified above were also involved in the derivation of these forward-looking statements, and the failure of such other assumptions to be realized as well as other
factors may also cause actual results to differ materially from those projected. Most of these factors are difficult to predict accurately and are generally beyond our control. These forward-looking statements involve risks and uncertainties in
addition to the risk factors described under Risk Factors.
You should consider the areas of risk
described above in connection with any forward-looking statements that may be made by Cendant or Trendwest and either of their businesses generally. Except for Trendwest and Cendants ongoing obligations to disclose material information under
the federal securities laws, neither Cendant nor Trendwest undertake any obligation to release publicly any revisions to forward-looking statements, to report events or to report the occurrence of unanticipated events unless required by law. You are
advised, however, to consult any additional disclosures Cendant or Trendwest make in their Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K to the Securities and Exchange Commission (the
Commission). See Where You Can Find More Information. Also note that we provide a cautionary discussion of risks and uncertainties under Risk Factors on page 13 of this prospectus. These are factors that we think
could cause our actual results to differ materially from expected results. Other factors besides those listed here could also adversely affect us.
16
Market Price Data
Trendwest common stock is quoted on Nasdaq under the symbol TWRI. CD Common Stock is traded on the New York Stock Exchange under the symbol CD. The
following table presents trading information for CD Common Stock and Trendwest common stock on March 28, 2002 and May 22, 2002. March 28, 2002 was the last trading day prior to the announcement of the execution of the stock purchase and merger
agreements. May 22, 2002 was the last trading day prior to the effectiveness of this prospectus.
|
|
CD Common Stock
|
|
Trendwest Common Stock
|
|
|
High
|
|
Low
|
|
Close
|
|
High
|
|
Low
|
|
Close
|
March 28, 2002 |
|
$ |
19.54 |
|
$ |
19.04 |
|
$ |
19.20 |
|
$ |
25.01 |
|
$ |
23.40 |
|
$ |
24.02 |
May 22, 2002 |
|
$ |
18.45 |
|
$ |
18.05 |
|
$ |
18.28 |
|
$ |
24.19 |
|
$ |
23.30 |
|
$ |
24.00 |
On March 13, 2002, there were approximately 65 holders of
record of shares of Trendwest common stock.
Historical Market Prices and Dividends
The following table sets forth, for the periods indicated, the high and low sales prices per share of CD Common Stock and Trendwest
common stock on the New York Stock Exchange and Nasdaq, respectively, based on published financial sources. All stock splits, including the three-for-two stock splits of Trendwest common stock in February 2001 and November 2001 have been reflected.
|
|
CD
|
|
Trendwest
|
|
|
Common
|
|
Stock
|
|
Common
|
|
Stock
|
Calendar Period
|
|
High
|
|
Low
|
|
High
|
|
Low
|
2000 |
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
$ |
24.313 |
|
$ |
16.188 |
|
$ |
11.167 |
|
$ |
9.000 |
Second Quarter |
|
|
18.750 |
|
|
12.156 |
|
|
11.500 |
|
|
7.167 |
Third Quarter |
|
|
14.875 |
|
|
10.626 |
|
|
9.222 |
|
|
7.361 |
Fourth Quarter |
|
|
12.563 |
|
|
8.500 |
|
|
12.444 |
|
|
7.000 |
|
2001 |
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
14.760 |
|
|
9.625 |
|
|
16.222 |
|
|
10.194 |
Second Quarter |
|
|
20.370 |
|
|
13.890 |
|
|
19.233 |
|
|
14.500 |
Third Quarter |
|
|
21.530 |
|
|
11.030 |
|
|
17.940 |
|
|
13.800 |
Fourth Quarter |
|
|
19.810 |
|
|
12.040 |
|
|
28.100 |
|
|
16.667 |
|
2002 |
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
19.990 |
|
|
15.350 |
|
|
27.600 |
|
|
21.800 |
Second Quarter (through May 22) |
|
|
19.35 |
|
|
17.30 |
|
|
26.28 |
|
|
23.15 |
Dividend Policy
Both Cendant and Trendwest have historically not paid dividends on their common stock and do not expect to pay any dividends in the foreseeable future. Following the
merger, the declaration of dividends will be at the discretion of the Cendant board of directors and will be determined after consideration of various factors, including, the earnings and financial condition of Cendant and its subsidiaries. Cendant
expects to retain its earnings for the development and expansion of its business, including acquisitions, and the repayment of indebtedness and does not anticipate paying dividends on CD Common Stock in the foreseeable future.
17
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical per
share data of Cendant and Trendwest and certain equivalent Trendwest per share data. The equivalent per share data is calculated based on Cendant historical data and assumes exchange ratios for each share of Trendwest common stock at the low, high
and mid-point of the range established by the collar mechanism used to determine the exchange ratio (after giving effect to a three-for-two stock split of Trendwest shares in February 2001 and a three-for-two stock split of Trendwest shares in
November 2001). The information set forth below should be read in conjunction with the selected historical financial data of Cendant and Trendwest included elsewhere in this prospectus and incorporated by reference into this prospectus (see
Where You Can Find More Information on pages 76 through 77).
|
|
Assumed Exchange Ratio |
|
Assumed Exchange Ratio |
|
Assumed Exchange Ratio |
|
|
1.4861(2)
|
|
1.3853(3)
|
|
1.2973(4)
|
Historical Cendant |
|
|
|
|
|
|
|
|
|
Diluted income per share from continuing operations: |
|
|
|
|
|
|
|
|
|
For the twelve months ended December 31, 2001 |
|
$ |
0.45 |
|
$ |
0.45 |
|
$ |
0.45 |
For the three months ended March 31, 2002 |
|
$ |
0.34 |
|
$ |
0.34 |
|
$ |
0.34 |
Cash dividends per share: |
|
|
|
|
|
|
|
|
|
For the twelve months ended December 31, 2001 |
|
$ |
|
|
$ |
|
|
$ |
|
For the three months ended March 31, 2002 |
|
$ |
|
|
$ |
|
|
$ |
|
Book value per share (1): |
|
|
|
|
|
|
|
|
|
As of December 31, 2001 |
|
$ |
7.23 |
|
$ |
7.23 |
|
$ |
7.23 |
As of March 31, 2002 |
|
$ |
7.69 |
|
$ |
7.69 |
|
$ |
7.69 |
|
Historical Trendwest |
|
|
|
|
|
|
|
|
|
Diluted net income per share from continuing operations: |
|
|
|
|
|
|
|
|
|
For the twelve months ended December 31, 2001 |
|
$ |
1.43 |
|
$ |
1.43 |
|
$ |
1.43 |
For the three months ended March 31, 2002 |
|
$ |
0.21 |
|
$ |
0.21 |
|
$ |
0.21 |
Cash dividends per share: |
|
|
|
|
|
|
|
|
|
For the twelve months ended December 31, 2001 |
|
$ |
|
|
$ |
|
|
$ |
|
For the three months ended March 31, 2002 |
|
$ |
|
|
$ |
|
|
$ |
|
Book value per share (1): |
|
|
|
|
|
|
|
|
|
As of December 31, 2001 |
|
$ |
6.97 |
|
$ |
6.97 |
|
$ |
6.97 |
As of March 31, 2002 |
|
$ |
7.20 |
|
$ |
7.20 |
|
$ |
7.20 |
|
Equivalent Trendwest |
|
|
|
|
|
|
|
|
|
Diluted income per share from continuing operations |
|
|
|
|
|
|
|
|
|
For the twelve months ended December 31, 2001 |
|
$ |
0.94 |
|
$ |
0.88 |
|
$ |
0.82 |
For the three months ended March 31, 2002 |
|
$ |
0.49 |
|
$ |
0.45 |
|
$ |
0.43 |
Cash dividends per share: |
|
|
|
|
|
|
|
|
|
For the twelve months ended December 31, 2001 |
|
$ |
|
|
$ |
|
|
$ |
|
For the three months ended March 31, 2002 |
|
$ |
|
|
$ |
|
|
$ |
|
Book value per share (1): |
|
|
|
|
|
|
|
|
|
As of December 31, 2001 |
|
$ |
11.44 |
|
$ |
10.70 |
|
$ |
10.05 |
As of March 31, 2002 |
|
$ |
12.08 |
|
$ |
11.30 |
|
$ |
10.62 |
(1) |
|
Historical book value per share for Cendant and Trendwest is computed by dividing total shareholders equity by the number of shares outstanding at the end
of each period. |
(2) |
|
Assumes an average Cendant trading price of $16.15 per share. |
(3) |
|
Assumes an average Cendant trading price of $17.325 per share. |
(4) |
|
Assumes an average Cendant trading price of $18.50 per share. |
18
SELECTED HISTORICAL FINANCIAL DATA OF CENDANT
The selected historical
consolidated statement of operations data for the three months ended March 31, 2002 and 2001 and the balance sheet data as of March 31, 2002 are derived from Cendants unaudited consolidated condensed financial statements and accompanying notes
filed on Form 10-Q on May 10, 2002. The selected historical consolidated statement of operations data for the three years ended December 31, 2001 and the balance sheet data as of December 31, 2001 and 2000 are derived from Cendants audited
consolidated financial statements and accompanying notes filed on Form 10-K on April 1, 2002. The selected historical consolidated statement of operations data for the year ended December 31, 1998 and the balance sheet data as of December 31,
1999 are derived from Cendants audited consolidated financial statements and accompany notes filed on Form 10-K/A on July 3, 2001, which were restated to reflect Cendants individual membership business as part of continuing operations.
The selected historical consolidated statement of operations data for the year ended December 31, 1997 and the balance sheet data as of December 31, 1998 and 1997 are derived from Cendants unaudited consolidated financial data included in Form
10-K filed on April 1, 2002. You should read this table in conjunction with such financial statements, which are incorporated by reference into this prospectus.
|
|
Three Months Ended March 31,
|
|
|
Year Ended December 31,
|
|
|
|
2002
|
|
2001
|
|
|
2001
|
|
|
2000
|
|
|
1999
|
|
|
1998
|
|
1997
|
|
|
|
(in millions except per share data) |
|
Results of Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
2,713 |
|
$ |
1,486 |
|
|
$ |
8,950 |
|
|
$ |
4,659 |
|
|
$ |
6,076 |
|
|
$ |
6,585 |
|
$ |
5,429 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
342 |
|
$ |
277 |
|
|
$ |
423 |
|
|
$ |
660 |
|
|
$ |
(229 |
) |
|
$ |
160 |
|
$ |
66 |
|
Income (loss) from discontinued operations, net of tax(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
174 |
|
|
|
380 |
|
|
(26 |
) |
Extraordinary gain (loss), net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
26 |
|
Cumulative effect of accounting change, net of tax |
|
|
|
|
|
(38 |
) |
|
|
(38 |
) |
|
|
(56 |
) |
|
|
|
|
|
|
|
|
|
(283 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
342 |
|
$ |
239 |
|
|
$ |
385 |
|
|
$ |
602 |
|
|
$ |
(55 |
) |
|
$ |
540 |
|
$ |
(217 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CD Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.35 |
|
$ |
0.32 |
|
|
$ |
0.47 |
|
|
$ |
0.92 |
|
|
$ |
(0.30 |
) |
|
$ |
0.19 |
|
$ |
0.08 |
|
Diluted |
|
|
0.34 |
|
|
0.30 |
|
|
|
0.45 |
|
|
|
0.89 |
|
|
|
(0.30 |
) |
|
|
0.18 |
|
|
0.08 |
|
Cumulative effect of accounting change: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
|
|
$ |
(0.04 |
) |
|
$ |
(0.05 |
) |
|
$ |
(0.08 |
) |
|
$ |
|
|
|
$ |
|
|
$ |
(0.35 |
) |
Diluted |
|
|
|
|
|
(0.04 |
) |
|
|
(0.04 |
) |
|
|
(0.08 |
) |
|
|
|
|
|
|
|
|
|
(0.35 |
) |
Net income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.35 |
|
$ |
0.28 |
|
|
$ |
0.42 |
|
|
$ |
0.84 |
|
|
$ |
(0.07 |
) |
|
$ |
0.64 |
|
$ |
(0.27 |
) |
Diluted |
|
|
0.34 |
|
|
0.26 |
|
|
|
0.41 |
|
|
|
0.81 |
|
|
|
(0.07 |
) |
|
|
0.61 |
|
|
(0.27 |
) |
|
|
|
March 31, 2002
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
2001
|
|
|
2000
|
|
|
1999
|
|
|
1998
|
|
1997
|
|
Financial Position |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
31,346 |
|
|
|
|
|
$ |
33,452 |
|
|
$ |
15,072 |
|
|
$ |
15,149 |
|
|
$ |
20,217 |
|
$ |
14,073 |
|
Long-term debt, excluding Upper DECS |
|
|
5,720 |
|
|
|
|
|
|
6,132 |
|
|
|
1,948 |
|
|
|
2,845 |
|
|
|
3,363 |
|
|
1,246 |
|
Upper DECS |
|
|
863 |
|
|
|
|
|
|
863 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets under management and mortgage programs |
|
|
11,704 |
|
|
|
|
|
|
11,950 |
|
|
|
2,861 |
|
|
|
2,726 |
|
|
|
7,512 |
|
|
6,444 |
|
Debt under management and mortgage programs |
|
|
9,666 |
|
|
|
|
|
|
9,844 |
|
|
|
2,040 |
|
|
|
2,314 |
|
|
|
6,897 |
|
|
5,603 |
|
Mandatorily redeemable preferred interest in a subsidiary |
|
|
375 |
|
|
|
|
|
|
375 |
|
|
|
375 |
|
|
|
|
|
|
|
|
|
|
|
|
Mandatorily redeemable preferred securities issued by subsidiary holding solely senior debentures issued by the
Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
1,683 |
|
|
|
1,478 |
|
|
|
1,472 |
|
|
|
|
Stockholders equity |
|
|
7,560 |
|
|
|
|
|
|
7,068 |
|
|
|
2,774 |
|
|
|
2,206 |
|
|
|
4,836 |
|
|
3,921 |
|
(1) |
|
Income (loss) from discontinued operations, net of tax includes the after tax results of discontinued operations and the gain on disposal of discontinued
operations. |
19
SELECTED HISTORICAL FINANCIAL DATA OF TRENDWEST
The selected historical consolidated
statement of operations data and balance sheet data as of and for each of the five years ended December 31, 2001 are derived from Trendwests audited consolidated financial statements. The selected historical consolidated statement of
operations data and balance sheet data as of March 31, 2002 and for the three months ended March 31, 2002 and 2001 are derived from Trendwests unaudited consolidated condensed financial statements. You should read this table in conjunction
with Trendwests consolidated and condensed financial statements, which are included in Trendwests December 31, 2001 Annual Report on Form 10-K and March 31, 2002 Quarterly Report on Form 10-Q, incorporated by reference into this
prospectus. Share data and earnings per share figures for all periods presented have been adjusted to reflect the 3 for 2 stock splits declared by Trendwests Board of Directors on February 21, 2001, and November 8, 2001.
|
|
Three Months Ended March 31,
|
|
Year Ended December 31,
|
|
|
2002
|
|
2001
|
|
2001
|
|
2000
|
|
1999
|
|
1998
|
|
1997
|
Statement of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vacation credit and fractional interest sales, net |
|
$ |
105,088 |
|
$ |
92,576 |
|
$ |
406,137 |
|
$ |
293,130 |
|
$ |
234,315 |
|
$ |
170,817 |
|
$ |
128,835 |
Finance income |
|
|
2,045 |
|
|
3,424 |
|
|
20,629 |
|
|
15,562 |
|
|
15,243 |
|
|
13,790 |
|
|
11,989 |
Gains on sales of notes receivable |
|
|
4,265 |
|
|
6,255 |
|
|
30,268 |
|
|
18,903 |
|
|
16,265 |
|
|
10,959 |
|
|
6,582 |
Resort management services |
|
|
2,024 |
|
|
980 |
|
|
4,607 |
|
|
4,763 |
|
|
3,710 |
|
|
2,328 |
|
|
2,032 |
Other |
|
|
2,246 |
|
|
1,742 |
|
|
7,527 |
|
|
5,280 |
|
|
4,593 |
|
|
3,063 |
|
|
2,149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
115,668 |
|
|
104,977 |
|
|
469,168 |
|
|
337,638 |
|
|
274,126 |
|
|
200,957 |
|
|
151,587 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vacation credit and fractional interest cost of sales |
|
|
27,969 |
|
|
26,048 |
|
|
112,288 |
|
|
74,714 |
|
|
68,611 |
|
|
48,059 |
|
|
34,569 |
Resort management services |
|
|
431 |
|
|
404 |
|
|
1,588 |
|
|
1,759 |
|
|
1,656 |
|
|
1,399 |
|
|
1,108 |
Sales and marketing |
|
|
51,500 |
|
|
43,231 |
|
|
193,531 |
|
|
137,752 |
|
|
104,952 |
|
|
83,347 |
|
|
59,448 |
General and administrative |
|
|
13,995 |
|
|
9,294 |
|
|
43,481 |
|
|
31,686 |
|
|
25,234 |
|
|
17,180 |
|
|
13,449 |
Provision for doubtful accounts |
|
|
8,407 |
|
|
6,751 |
|
|
30,276 |
|
|
21,148 |
|
|
16,100 |
|
|
11,865 |
|
|
9,077 |
Interest |
|
|
350 |
|
|
74 |
|
|
591 |
|
|
479 |
|
|
442 |
|
|
353 |
|
|
1,739 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and operating expenses |
|
|
102,652 |
|
|
85,802 |
|
|
381,755 |
|
|
267,538 |
|
|
216,995 |
|
|
162,203 |
|
|
119,390 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
13,016 |
|
|
19,175 |
|
|
87,413 |
|
|
70,100 |
|
|
57,131 |
|
|
38,754 |
|
|
32,197 |
Income tax expense |
|
|
4,954 |
|
|
7,394 |
|
|
32,211 |
|
|
27,241 |
|
|
22,258 |
|
|
14,723 |
|
|
11,588 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
8,062 |
|
$ |
11,781 |
|
$ |
55,202 |
|
$ |
42,859 |
|
$ |
34,873 |
|
$ |
24,031 |
|
$ |
20,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share of common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.21 |
|
$ |
0.47 |
|
$ |
1.46 |
|
$ |
1.13 |
|
$ |
0.90 |
|
$ |
0.61 |
|
$ |
0.59 |
Diluted |
|
$ |
0.21 |
|
$ |
0.46 |
|
$ |
1.43 |
|
$ |
1.12 |
|
$ |
0.90 |
|
$ |
0.61 |
|
$ |
0.59 |
Shares used in computing net income per share of common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
38,140,914 |
|
|
25,215,096 |
|
|
37,915,714 |
|
|
38,058,093 |
|
|
38,542,275 |
|
|
39,178,841 |
|
|
35,091,944 |
Diluted |
|
|
39,008,922 |
|
|
25,496,248 |
|
|
38,558,418 |
|
|
38,181,791 |
|
|
38,648,147 |
|
|
39,187,556 |
|
|
35,091,944 |
|
|
|
March 31, 2002
|
|
|
|
December 31,
|
|
|
|
|
2001
|
|
2000
|
|
1999
|
|
1998
|
|
1997
|
Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, including restricted cash |
|
$ |
10,892 |
|
|
|
|
$ |
9,659 |
|
$ |
7,605 |
|
$ |
4,747 |
|
$ |
2,360 |
|
$ |
1,289 |
Total assets |
|
|
446,849 |
|
|
|
|
|
427,029 |
|
|
320,159 |
|
|
192,752 |
|
|
187,248 |
|
|
142,993 |
Indebtedness to Parent and Affiliate |
|
|
24,373 |
|
|
|
|
|
24,951 |
|
|
18,150 |
|
|
|
|
|
5,688 |
|
|
1,947 |
Other indebtedness |
|
|
82,993 |
|
|
|
|
|
85,934 |
|
|
60,137 |
|
|
3,900 |
|
|
30,000 |
|
|
|
Shareholders equity |
|
|
275,115 |
|
|
|
|
|
265,511 |
|
|
207,443 |
|
|
173,715 |
|
|
141,262 |
|
|
122,125 |
20
The discussion in this prospectus of the merger and the principal terms of
the merger agreement is subject to, and qualified in its entirety by reference to, the merger agreement, a copy of which is attached to this prospectus as Annex A and is incorporated by reference into this prospectus.
We are sending you this prospectus to describe the merger between
Trendwest and Merger Sub, a newly formed subsidiary of Cendant. If we complete this merger, Merger Sub will be merged with and into Trendwest and your shares of Trendwest common stock will be converted into the right to receive shares of CD Common
Stock. For each share of Trendwest common stock you own you will have the right to receive 1.3074 shares of CD Common Stock. This exchange ratio was determined by dividing $24.00 by the average Cendant merger trading price which was determined to be
$18.357, subject to the following collar and other terms. In the event the ratio calculated had been greater than 1.4861, then the exchange ratio would have been 1.4861. In the event the ratio calculated had been less than 1.2973, then the exchange
ratio would have been 1.2973. In the event that the exchange ratio used to establish the consideration paid for shares of Trendwest common stock under the stock purchase agreement, as more fully described in the section entitled The Stock
Purchase AgreementStock Purchase Consideration, had been greater than the above exchange ratio, then the exchange ratio would have been the exchange ratio used to establish the consideration paid for shares of Trendwest common stock
under the stock purchase agreement. In the event that the average Cendant merger trading price had been less than $13.50, then the exchange ratio would have been the quotient of $20.062 and the average Cendant merger trading price. The average
Cendant merger trading price is equal to the arithmetic average of the 4:00 p.m. eastern time closing sales prices of CD Common Stock reported on the New York Stock Exchange Composite Tape for the ten consecutive NYSE trading days ending on (and
including) May 21, 2002, the second trading day immediately prior to, and excluding the date of effectiveness of the registration statement in which this prospectus is included. The exchange ratio in the merger will also be appropriately and
equitably adjusted if the number of outstanding shares of either CD Common Stock or Trendwest common stock changes as a result of any stock split, reverse stock split, stock dividend, reclassification or any similar transaction.
As of March 30, 2002, JELD-WEN owned and was entitled to vote 30,883,096 or approximately 81% of the outstanding shares of
Trendwest common stock and certain directors and executive officers of Trendwest and JELD-WEN as a group owned and were entitled to vote approximately an additional 10% of the outstanding shares of Trendwest common stock. On March 30, 2002, Cendant
and Merger Sub entered into a stock purchase agreement with JELD-WEN and these other shareholders of Trendwest and, upon completion by Merger Sub of the stock purchase contemplated by the stock purchase agreement on April 30, 2002, Merger Sub
beneficially owned approximately 90.1% of the outstanding shares of Trendwest common stock. See Stock Purchase Agreement, pages 62 through 65. By exercising the option to purchase shares of Trendwest common stock granted under a stock
option agreement that was entered into on March 30, 2002 by Trendwest, Cendant and Merger Sub, Merger Sub is assured of owning at least 90% of the outstanding shares of Trendwest common stock if for any reason the stock purchase does not result in
Merger Subs ownership at the applicable time of at least 90% of the outstanding shares of Trendwest common stock. On May 1, 2002 Cendant purchased 100,000 shares of Trendwest common stock pursuant to the option.
As a result of Merger Subs ownership of at least 90% of the outstanding shares of Trendwest common stock, pursuant to the Merger
Agreement and Section 60.491 of the ORS, Merger Sub may consummate the merger thirty days after mailing to Trendwest shareholders a notice of its intent to effect the merger, without any vote of Trendwests shareholders. The boards of directors
of each of Cendant and Merger Sub have each voted to effect the merger for the purpose of acquiring the minority interest in Trendwest not owned by Merger Sub after the stock purchase.
We are not asking you for a proxy to vote your shares, and you are requested not to send us a proxy to vote your shares.
21
The board of directors of Trendwest unanimously approved the transactions
contemplated by the merger agreement.
In June 1999, JELD-WEN, inc., which owned approximately 80%
of Trendwests outstanding shares, announced that it had retained Banc of America Securities to explore strategic and financial alternatives for its investment in Trendwest. JELD-WEN advised Trendwests Board of Directors at that time that
it would explore a variety of options, including a sale of all or a portion of its interest in Trendwest, the acquisition of the shares of Trendwest not owned by it or a merger with another company. Trendwests Board of Directors appointed a
Special Committee comprised of Linda Tubbs, Michael Hollern and Harry Demorest to review any transactions presented to Trendwest by JELD-WEN.
In June 1999, JELD-WEN, with the assistance of Banc of America Securities, prepared a confidential memorandum with detailed financial and operating information concerning Trendwest. In this period
through the end of 1999, Banc of America Securities contacted approximately 75 companies to assess their interest in the timeshare industry, and Trendwest in particular, and held preliminary discussions with a few of these parties. Banc of America
Securities and Trendwest negotiated nondisclosure agreements with several companies that were interested in pursuing a strategic alliance with Trendwest, which could include among other things the acquisition of Trendwest. No significant interest in
a transaction was generated during this period.
Banc of America Securities continued to contact potential
strategic and financial partners. In July 2000, Banc of America Securities contacted Cendant Corporation and a nondisclosure agreement was executed. Information concerning Trendwest was provided, but no substantive discussions followed. One
strategic buyer did express an interest in Trendwest during 2000 and conducted extensive due diligence. Acquisition discussions were ultimately terminated due to significant differences in valuation expectations.
In March 2001, JELD-WEN asked Banc of America Securities to renew its search for a possible acquiror for Trendwest. Banc of America
Securities contacted five strategic and financial parties, including Cendant, to determine if there was an interest in pursuing a transaction with Trendwest. In July 2001, senior management of JELD-WEN met with Mr. Steven Holmes, Vice Chairman and
CEO of Cendants Hospitality Services Division, Mr. William Hunscher, Executive Vice PresidentStrategic Development Group and other members of Cendant management to discuss a potential sale of Trendwest to Cendant. Cendant signed a
confidentiality agreement dated July 23, 2001. In addition, in July 2001, Trendwest engaged UBS Warburg as managing underwriter for a public offering of Trendwest common stock that would include shares owned by JELD-WEN. A registration statement
with respect to this offering was filed in July.
In August 2001, Cendant contacted Banc of America Securities and
expressed its interest in acquiring Trendwest and indicated a price range for an acquisition of $20.67 to $22.00 per Trendwest share. On August 16 members of Trendwest and JELD-WEN management met with Mr. Holmes, Mr. Hunscher and other members of
Cendant management in New York and discussed possible structures for a transaction and the valuation of Trendwest. Cendant indicated that it was not interested in acquiring Trendwest if it owned MountainStar. JELD-WEN and Trendwest agreed to permit
Cendant to perform detailed due diligence on Trendwest subject to the terms of the confidentiality agreement.
In
early September 2001, Mr. Hunscher and other representatives of Cendant, including its legal counsel and accountants, met in Seattle with Trendwest management and began an extensive due diligence review and analysis of Trendwests business.
When this review and analysis was substantially completed, a meeting was scheduled between senior management of Cendant and management of Trendwest and JELD-WEN to conclude Cendants due diligence and potentially initiate discussions regarding
the terms of an acquisition. Due to the events of September 11, 2001, this meeting was cancelled and Cendant then suspended further discussions regarding an acquisition of Trendwest. In addition, Trendwest suspended its planned equity offering due
to market conditions in the aftermath of September 11, 2001.
22
In November 2001, Cendant decided to engage UBS Warburg to act as its financial
advisor in connection with a possible transaction; Trendwest consented to the engagement. On December 7, 2001, Mr. Holmes and other members of Cendant management met in Phoenix with Mr. Douglas Kintzinger and Mr. Roderick Wendt, who are senior
executives of JELD-WEN and members of Trendwests Board of Directors, to express Cendants interest in proceeding with an acquisition of Trendwest. At this meeting, Cendant expressed the view that, due to the events of September 11 and
economic conditions following September 11, Cendants valuation of Trendwest was lower than indicated by Cendant in the summer of 2001 and suggested a price of $18.67 per Trendwest share. Later in December 2001, representatives of Banc of
America Securities met with JELD-WEN to discuss Cendants latest proposal and Trendwests outlook for its business. Following this meeting, JELD-WEN advised Cendant that the Trendwest valuation put forward by Cendant was unacceptable and
that no further negotiations would take place.
In early January, 2002, Cendant contacted Banc of America
Securities and requested additional information regarding Trendwests business and results after September 11, its budget for 2002 and longer-term projections. After a series of discussions, the parties agreed that representatives of Cendant,
including its financial advisers, would meet beginning on January 23 with Trendwest management and its financial advisers in Seattle for further discussions regarding Trendwests business model and to perform additional due diligence.
In late January and early February, Cendant emphasized in telephone conversations with Banc of America Securities
and Trendwest that it was unwilling to purchase Trendwest unless JELD-WEN could assure Cendant that MountainStar would be disposed of in connection with Cendants acquisition of Trendwest.
On February 5, 2002, members of Cendants due diligence team met with Mr. Henry Silverman, Chairman and Chief Executive Officer of Cendant, and other members of
Cendant senior management to provide an update on the potential transaction and the teams diligence findings to date.
In preparation for a meeting scheduled between Cendant and Trendwest for the following week, Mr. Hunscher and other Cendant representatives met on February 8 with Banc of America Securities, with Cendants legal counsel and
financial advisor participating by telephone, to discuss Cendants revised proposal for the acquisition of Trendwest. Cendant indicated that it was willing to proceed with an acquisition of Trendwest at a price of $21.01 per Trendwest share,
comprised of a combination of CD common stock, subject to an undefined collar mechanism, and warrants for shares of CD common stock. To ensure that MountainStar could be disposed of, Cendant proposed that it would have the right to put MountainStar
to JELD-WEN at book value, payable by JELD-WEN in cash or shares of CD common stock received by JELD-WEN in the acquisition. In addition, Cendant proposed that JELD-WEN would purchase a subordinated interest in Trendwests securitized
receivables for $43.6 million in cash or shares of CD common stock.
Thereafter, JELD-WEN and Trendwest management
met with Banc of America Securities and reviewed an analysis of Cendants proposal prepared by Banc of America Securities.
On February 13, Mr. Silverman, Mr. Holmes, other members of Cendant senior management and UBS Warburg met in New York with Mr. Wendt, Mr. Kintzinger, members of Trendwest management and Banc of America Securities to discuss
Cendants proposal. At this meeting, following discussions with Trendwest and JELD-WEN, Cendant agreed to increase its offer for Trendwest to $24.00 per share, comprised of $21.50 per share of Cendant common stock, subject to an undefined
collar mechanism, and $2.50 per share of Cendant warrants, subject to the negotiation of definitive documents and agreement on various ancillary matters, such as indemnification by JELD-WEN. Cendant also dropped the request that JELD-WEN purchase
the subordinated interest in Trendwests securitized receivables.
On February 20, the Trendwest board met to
discuss the tentative proposal from Cendant. At this meeting, the board authorized management to proceed with negotiation of a merger agreement and authorized and directed the special committee of the board, comprised of Linda Tubbs, Michael Hollern
and Harry Demorest, to review
23
the proposed transactions with Cendant and make a recommendation to the board and to review the potential transfer of MountainStar to JELD-WEN. In addition, the Trendwest board also approved the
engagement of Banc of America Securities as its financial advisor in the transaction. On February 26, the special committee met and decided to retain separate legal counsel and financial advisors. Legal counsel to the special committee briefed the
committee on its duties to the Trendwest shareholders.
On February 24, Cendants legal counsel provided a
draft merger agreement to JELD-WEN and Trendwest and a draft shareholders agreement to JELD-WEN.
During the week
of March 4, Mr. Kintzinger, Mr. Timothy ONeil, Chief Financial Officer of Trendwest and other representatives of Trendwest and JELD-WEN, including Trendwests financial advisors and legal counsel, met with Mr. Hunscher, Mr. Eric Bock,
Senior Vice President and Corporate Secretary of Cendant and other representatives of Cendant, including Cendants financial advisors and legal counsel, in New York to negotiate the terms and structure of a possible merger. During this period,
Trendwest, JELD-WEN and their advisors conducted due diligence on Cendants business and financial condition. By the end of this week, the parties agreed on many of the basic terms of the transaction, including a collar on the trading value of
CD common stock between $16.15 and $18.50 per share. The parties also discussed a variety of forms of consideration, including the use of warrants or cash for a portion of the purchase price. The parties also agreed that Trendwest would have
the right to terminate the agreement without penalty if Cendants share price fell below $13.50.
Through the
remainder of March, the parties continued to negotiate the merger agreement and other agreements, including the terms under which Cendant would be assured that MountainStar would be disposed of. During the week of March 11, the parties agreed to
alter the transaction structure to a two-step, all stock transaction in which Cendant would purchase directly the Trendwest shares owned by JELD-WEN and certain other shareholders, who in the aggregate owned in excess of 90% of the outstanding
shares of Trendwest, and then following the closing of that transaction, would complete the merger of Trendwest into a Cendant subsidiary, thereby acquiring the remainder of Trendwest. The parties believed that this structure would more quickly
enable Cendant to assume control of Trendwest, provide increased certainty of completion of the transaction and eliminate certain complexities associated with cash or warrants comprising a portion of the consideration. In order to protect Trendwest
shareholders from a decline in the price of CD common stock between the closing of the stock purchase and the closing of the merger, the revised structure provided that in the merger the shareholders of Trendwest other than JELD-WEN would receive
shares of CD common stock based on an exchange ratio that was the higher of the ratio applicable to JELD-WEN under the stock purchase agreement or the exchange ratio based on the average Cendant share price immediately preceding the effectiveness of
the registration statement covering the shares to be issued. In addition, the shareholders in the merger would receive an enhanced exchange ratio if the value of Cendant stock was below $13.50.
On March 14, the special committee held a telephonic meeting with representatives of Banc of America Securities, Houlihan Lokey (the special committees financial
advisor) and legal counsel to receive an update on the status of the negotiations and to discuss the financial advisors preliminary analysis of the economic terms of the transaction.
On March 19, during a meeting of Cendants Board of Directors, Mr. Silverman discussed the possible acquisition of Trendwest and apprised the Board that negotiations
were in advanced stages.
On March 20, Cendants legal counsel provided a draft stock purchase agreement to
JELD-WENs legal counsel. On March 20, Mr. Holmes and Mr. James Buckman, Cendants Vice Chairman and General Counsel met in Oregon with members of JELD-WENs board of directors to discuss Cendant and various matters relating to the
proposed transaction.
Negotiation of the stock purchase agreement, merger agreement and related documents
continued during the weeks of March 18 and March 25. With respect to MountainStar, in order to achieve a more tax efficient
24
structure, JELD-WEN proposed and Cendant agreed to convert Cendants post-closing put structure into a structure pursuant to which JELD-WEN would acquire MountainStar from Trendwest prior to
the closing of the transaction in exchange for shares of Trendwest common stock. In addition, the parties reached agreement on a number of ancillary matters, including the scope of post-closing indemnification by JELD-WEN, an obligation that would
not be shared by other Trendwest shareholders, the scope of JELD-WENs non-compete agreement, and the nature of Trendwests rights to develop timeshare units at MountainStar.
On March 25, the special committee met with its legal counsel and Houlihan Lokey to review the then current drafts of the transaction documents and to receive a preliminary
report from Houlihan Lokey. Legal counsel reported on the status of the negotiations and described the terms of the proposed stock purchase agreement, merger agreement and other documents. With regard to the transfer of MountainStar, counsel
explained that immediately prior to the stock purchase, Trendwest would transfer MountainStar to JELD-WEN in exchange for a portion of the shares of Trendwest held by JELD-WEN that would be cancelled. Houlihan Lokey then reviewed preliminarily with
the special committee several valuation methodologies and its analysis of the value of the consideration to be received by the public shareholders of Trendwest in the proposed transaction. The special committee also reviewed relevant legal standards
and potential factual considerations related to the proposed transaction.
On March 26, the Board of Directors of
Cendant met and, following presentations by members of Cendant senior management, unanimously approved the terms of the transaction.
On March 28, the special committee again met with its legal counsel and Houlihan Lokey to discuss in detail the proposed transaction with Cendant, including the transfer of MountainStar to JELD-WEN. Legal counsel discussed
the final draft of the merger agreement, including the provisions relating to the ongoing relationship between JELD-WEN and Trendwest with respect to MountainStar and the continued sale of Trendwest vacation credits by JELD-WEN affiliates. Houlihan
Lokey presented its financial analysis of the transaction and its opinion dated March 28, 2002 that, based upon the assumptions made, matters considered and limitations on the review described in their written opinion, the financial consideration
per share to be received in the transaction by the Trendwest shareholders other than JELD-WEN and the JELD-WEN affiliates (i) is fair to them from a financial point of view and (ii) is not less than the financial consideration per share to be
received by JELD-WEN or the JELD-WEN affiliates in connection with the transaction. The committee also reviewed a report by Economic Research Associates regarding the valuation of MountainStar. At this meeting, various factors, including those
described under Reasons for the Merger, were considered by the special committee. The special committee then determined that the consideration to be received by Trendwest shareholders (excluding JELD-WEN and the other shareholders
selling pursuant to the stock purchase agreement) in the merger was fair from a financial point of view and that the merger and the merger agreement were in the best interest of Trendwest and its shareholders, and recommended by a unanimous vote
that the Trendwest board approve the merger agreement and other related transactions. The special committee also approved the transfer of Trendwests MountainStar assets to JELD-WEN in partial redemption of JELD-WENs shares of Trendwest.
Immediately following the meeting of the special committee, the Trendwest board met with management, legal
counsel and representatives from Banc of America Securities. Management and legal counsel reviewed the terms of the transaction and the due diligence process undertaken with respect to Cendant. Banc of America Securities presented its financial
analysis of the transaction and its opinion that, as of March 28, 2002, and based upon and subject to the various assumptions described in the opinion, the exchange ratio formula set forth in the merger agreement used to determine the number of
shares of CD common stock to be issued per share of Trendwest stock in the merger was fair, from a financial point of view, to Trendwest shareholders other than JELD-WEN and the other shareholders selling pursuant to the stock purchase agreement.
The chairperson of the special committee reported to the board the recommendation of the special committee and a summary of the process the special committee had undertaken and the rationale for its recommendation. The board unanimously determined
that the consideration to be received by Trendwest shareholders (excluding JELD-WEN and the other shareholders selling pursuant to the stock purchase agreement) in the merger was fair from a financial point of
25
view and that the merger and the merger agreement were in the best interests of Trendwest and its shareholders. The Trendwest Board unanimously approved the merger agreement and the option
agreement and took appropriate steps to provide that Trendwest would not be subject to the Oregon Control Share statute and that the Oregon Business Combination Act would not apply to the transaction or to Cendant.
After finalizing certain minor ancillary details, the parties executed the agreements on March 30, 2002.
Cendant and Trendwest issued a joint press release announcing the execution of the stock purchase agreement and the merger agreement
providing for Cendants acquisition of Trendwest on Monday, April 1, prior to the opening of the New York Stock Exchange.
On April 30, 2002, Cendant and the other parties to the stock purchase agreement consummated the stock purchase, by which Merger Sub acquired approximately 90.1% of the outstanding shares of Trendwest common stock. On May 1,
2002, Merger Sub purchased 100,000 shares of Trendwests common stock pursuant to the option agreement.
The information contained in this registration statement (including any information incorporated by reference herein) concerning JELD-WEN and Trendwest (including information concerning any financial advisors) has been furnished to
Cendant by JELD-WEN and Trendwest; Cendant assumes no responsibility for the accuracy or completeness of such information.
Trendwests Reasons for the Merger
The special committee of the Trendwest board
of directors and the Trendwest board of directors believe that the merger and related transactions with Cendant are fair to and in the best interests of Trendwest shareholders (excluding JELD-WEN and the other shareholders selling pursuant to the
stock purchase agreement). The special committee reached this determination after consulting with its financial advisor, Houlihan Lokey, and considering advice from its legal counsel with respect to various matters relevant to its consideration of
the proposed transaction. Set forth below are the material factors that the special committee considered in reaching its determinations:
|
|
|
consideration of the existing assets, financial condition, operations, management and historical earnings of Trendwest, and the special committees
judgment as to the nature and future prospects of Trendwests business and the future value of Trendwest; |
|
|
|
Trendwests limitations as a public company, including limited trading volume, lack of institutional sponsorship, limited public float and lack of research
attention by market analysts; |
|
|
|
the opportunity for Trendwests shareholders to participate in a larger and more diversified company with greater depth of management;
|
|
|
|
the committees familiarity with the solicitation process conducted by Banc of America Securities since 1999, and the committees belief that
Trendwest was unlikely to receive a higher offer from another party; |
|
|
|
extensive arms length negotiations between Trendwest and Cendant that resulted in Cendant increasing its per share offer price over its earlier proposals;
|
|
|
|
the presentation of Houlihan Lokey to the special committee on March 28, 2002 and their opinion dated March 28, 2002 that based on the assumptions made, matters
considered and limitations on the review described in their written opinion, the consideration to be received in the transaction (i) is fair from a financial point of view to the shareholders (other than JELD-WEN and the other shareholders selling
pursuant to the stock purchase agreement) and (ii) is not less than the financial consideration to be received by JELD-WEN or the JELD-WEN affiliates in connection with the transaction; |
26
|
|
|
the fact that the consideration to be received by the shareholders will not be less than the consideration received by JELD-WEN and that under certain
circumstances the consideration to be received by the shareholders will be more than the consideration received by JELD-WEN; |
|
|
|
the review of various information with respect to the fairness from a financial point of view of Trendwests proposed sale of MountainStar to JELD-WEN in
partial redemption of JELD-WENs shares of Trendwest, including an evaluation by Economic Research Associates and analyses supporting a price equal to the book value of MountainStar by the special committees financial advisor. The special
committee also recognized that the transfer of MountainStar to JELD-WEN was an integral part of the transaction with Cendant and that Cendant had clearly stated throughout the negotiations that the transfer of MountainStar was a condition to the
transaction; |
|
|
|
consideration of the terms and conditions of the transaction documents; |
|
|
|
the tax-free nature of the transaction to Trendwest shareholders; and |
|
|
|
the anticipated continued employment of most Trendwest employees. |
The special committee also considered the following countervailing factors in making its determinations:
|
|
|
the fact that following the merger, Trendwests shareholders will no longer be able to participate in the potential growth of Trendwest except as part of
Cendant; |
|
|
|
the fact that the merger agreement prohibits Trendwest from soliciting or entering into a transaction with a third party to acquire Trendwest, except in limited
circumstances, and that, even in such circumstances, Trendwest may not terminate the merger agreement; |
|
|
|
the consideration to be received by Trendwest shareholders represented a potential discount to the price of Trendwest common stock prior to the announcement of
the transaction depending upon the value of CD common stock measured as of the date of completion of the merger; and |
|
|
|
certain risks associated with Cendant and the merger, including those described under Risk Factors. |
After assessing the various factors, the special committee determined that the advantages of the transaction outweighed the possible
disadvantages.
In light of the Trendwest board of directors knowledge of the business and operations of
Trendwest and its business judgment, the Trendwest board of directors considered and evaluated each of the factors listed above during the course of its deliberations prior to approving the merger agreement. In addition, the Trendwest board of
directors took into account the following additional factors:
|
|
|
the recommendation of the special committee of the Trendwest board of directors to approve the acquisition by Cendant of the shares held by the public
shareholders of Trendwest on the terms provided in the merger agreement, having evaluated the transactions contemplated by the stock purchase agreement, the merger agreement and the stock option agreement; |
|
|
|
the presentation by Banc of America Securities and its opinion dated as of March 28, 2002, that, as of such date and based upon and subject to the various
assumptions described in its written opinion, the exchange ratio formula set forth in the merger agreement used to determine the number of shares of CD Common Stock to be issued per share of Trendwest common stock in the merger was fair, from a
financial point of view, to Trendwest shareholders other than JELD-WEN and the other shareholders selling pursuant to the stock purchase agreement; |
|
|
|
the due diligence review of Cendant performed by Trendwest management and its advisors; and |
|
|
|
the boards consideration of other strategic alternatives available to Trendwest. |
27
The Trendwest board of directors believes that the merger and related
transactions with Cendant are fair to and in the best interests of Trendwest shareholders (excluding JELD-WEN and the other shareholders selling pursuant to the stock purchase agreement). The board of directors reached this determination after
receiving the recommendation of the special committee described above and after consulting with its financial advisor, Banc of America Securities, and considering advice from its legal counsel with respect to various matters relevant to its
consideration of the proposed transaction.
In view of the wide variety of factors considered in connection with
its evaluation of the merger, neither the special committee nor the Trendwest board of directors found it practicable to and did not, quantify or otherwise attempt to assign relative weights to the specific factors considered in making their
determinations.
Cendants Reasons for the Merger
On March 26, 2002 the Cendant board of
directors determined by a unanimous vote that the acquisition of Trendwest by means of the stock purchase and the merger is advisable and in the best interests of Cendant and Cendants stockholders. The Cendant board of directors approved the
stock purchase agreement, merger agreement, the stock purchase, the merger and the other transactions contemplated by the stock purchase agreement and the merger agreement.
In connection with its approval of the acquisition of Trendwest by means of the stock purchase and the merger, and its determination that the merger is advisable and in the
best interest of Cendants stockholders, the board of directors of Cendant consulted with its legal counsel and financial advisors, as well as with members of management. The Cendant board of directors also considered the following material
information and factors in reaching its determination to approve the stock purchase agreement, the merger agreement, the stock purchase, the merger and the other transactions contemplated by the stock purchase agreement and the merger agreement:
|
|
|
that Trendwest is one of the largest independent timeshare and fractional interest ownership operators in the United States, having sold timeshare interests to
more than 150,000 customers; |
|
|
|
Trendwests financial performance and position and Cendants managements view as to the financial condition, results of operations and business
of Trendwest before and after giving effect to the merger; |
|
|
|
that Cendant expects the acquisition of Trendwest to be accretive to Cendant earnings; |
|
|
|
that the acquisition will provide Cendant with an opportunity to substantially broaden the range of Cendants vacation ownership offerings;
|
|
|
|
that the acquisition will provide Cendant with an opportunity to substantially broaden the geographic scope of its timeshare businesses, and provide an
excellent opportunity to expand in the South Pacific market; |
|
|
|
that the acquisition will continue Cendants growth in one of the fastest growing segments of the travel industry; |
|
|
|
that the acquisition will complement the geographic reach and the sales and marketing functions of the timeshare businesses being operated by existing
subsidiaries of Cendant; |
|
|
|
that WorldMark, together with WorldMark South Pacific Club is one of the largest points-based clubs in the vacation ownership industry and will complement the
existing points-based programs being operated by various Cendant subsidiaries; |
|
|
|
that Trendwest has experienced senior managers who average more than 30 years experience each in the vacation ownership industry and have developed strong
sales and marketing teams; |
|
|
|
the fact that the consideration being paid pursuant to the stock purchase and the merger is being paid in CD Common Stock; |
28
|
|
|
the terms and conditions of each of the stock purchase agreement and the merger agreement, including the fact that the stock purchase agreement enables Cendant
to assume control of Trendwest in an expeditious manner; |
|
|
|
in light of Cendants unwillingness to acquire Trendwest while it owns or has any obligations to develop the currently undeveloped property known as
MountainStar, JELD-WENs agreement to acquire MountainStar from Trendwest at net book value pursuant to the MountainStar Redemption, and JELD-WENs additional agreement to allow Trendwest or Cendant during a limited period following the
merger to re-acquire MountainStar at book value in the event that Cendant determines that it would be beneficial to do so; |
|
|
|
JELD-WENs agreement not to compete in the timeshare business with Cendant for five years; and |
|
|
|
JELD-WENs agreement to indemnify Cendant against damages in respect of a number of potential liabilities and matters relating to the acquisition of
Trendwest. |
In reaching its decision to approve the stock purchase agreement, merger agreement,
the stock purchase, the merger and the other transactions contemplated by the stock purchase agreement and the merger agreement, the Cendant board of directors did not quantify or assign any relative weights to the factors considered, and individual
directors may have given different weights to different factors. The Cendant board of directors considered these factors as a whole, and overall considered them to be favorable to, and to support, its determination.
Opinions of Trendwests Financial Advisors
Opinion of Banc of America
Securities LLC
On March 1, 2002, Trendwest retained Banc of America Securities to act as its financial
advisor in connection with the proposed sale of the company to Cendant. Banc of America Securities is an internationally recognized investment banking firm and is regularly engaged in the valuation of businesses and securities in connection with
merger and acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. Trendwest selected Banc of America Securities to act as its financial
advisor on the basis of Banc of America Securities experience in transactions similar to the merger and its familiarity with Trendwest and its business.
On March 28, 2002, at a meeting of the Trendwest board of directors held to evaluate the merger, Banc of America Securities delivered to the Trendwest board of directors its oral opinion, which was
subsequently confirmed in writing, that, as of March 28, 2002 and based upon and subject to the various assumptions described in the written opinion, the exchange ratio formula set forth in the merger agreement used to determine the number of shares
of CD common stock to be issued per share of Trendwest common stock in the merger was fair, from a financial point of view, to the Trendwest shareholders, other than JELD-WEN and the other shareholders selling pursuant to the stock purchase
agreement.
The full text of Banc of America Securities written opinion to Trendwests board of
directors which sets forth, among other things, the procedures followed, assumptions made, matters considered and limitations on the review undertaken, is attached as Annex E to this prospectus, and is incorporated into this prospectus by reference.
Holders of Trendwest common stock are encouraged to, and should, read the opinion carefully and in its entirety. The following summary of Banc of America Securities opinion is qualified in its entirety by reference to the full text of the
opinion.
Banc of America Securities opinion is addressed only to Trendwests board of directors and
relates only to the fairness of the exchange ratio formula set forth in the merger agreement used to determine the number of shares of CD common stock to be issued per share of Trendwest common stock in the merger, from a financial point of view, to
the Trendwest shareholders, other than JELD-WEN and the other shareholders
29
selling shares pursuant to the stock purchase agreement. Banc of America Securities opinion does not address any other aspect of the merger or any related transaction and does not
constitute a recommendation to Trendwest shareholders on how to vote at any meeting held in connection with the merger. Banc of America Securities opinion also does not in any manner address the prices at which Cendants common stock will
trade following consummation of the merger. In furnishing its opinion, Banc of America Securities does not admit that it is an expert within the meaning of the term expert as used in the Securities Act, nor does Banc of America
Securities admit that its opinion constitutes a report or valuation within the meaning of the Securities Act. Statements to this effect are included in Banc of America Securities opinion.
Banc of America Securities did not perform any analyses with respect to the arrangements between Trendwest and JELD-WEN
relating to MountainStar, including the proposed transfer of MountainStar from Trendwest to JELD-WEN and the potential repurchase of MountainStar by Trendwest. Banc of America Securities opinion does not address the impact of such arrangements
upon the fairness, from a financial point of view, of the exchange ratio formula in the merger agreement to Trendwest shareholders.
In arriving at its opinion, Banc of America Securities:
|
|
|
reviewed certain publicly available financial statements and other business and financial information of Trendwest and Cendant, respectively;
|
|
|
|
reviewed certain internal financial statements and other financial and operating data concerning Trendwest and Cendant, respectively;
|
|
|
|
analyzed certain financial forecasts prepared by the management of Trendwest and certain publicly available financial forecasts of Cendant;
|
|
|
|
discussed the past and current operations, financial condition and prospects of Trendwest with senior executives of Trendwest and discussed the past and current
operations, financial condition and prospects of Cendant with senior executives of Cendant; |
|
|
|
reviewed and discussed with senior executives of Trendwest information relating to certain strategic, financial and operational benefits anticipated from the
merger; |
|
|
|
reviewed the pro forma impact of the merger on Cendants earnings per share; |
|
|
|
reviewed and considered information relating to the relative contributions of Trendwest and Cendant to the combined company; |
|
|
|
reviewed the reported prices and trading activity for Trendwests common stock and Cendants common stock; |
|
|
|
reviewed the financial performance of Trendwest and Cendant and the prices and trading activity of Trendwests common stock and Cendants common stock
and, with respect to Trendwest and Trendwests common stock, compared such information with that of certain other publicly traded companies Banc of America Securities deemed relevant; |
|
|
|
compared certain financial terms to financial terms, to the extent publicly available, of certain other business combination transactions Banc of America
Securities deemed relevant; |
|
|
|
participated in discussions and negotiations among representatives of Trendwest and Cendant and their financial and legal advisors;
|
|
|
|
reviewed the March 27, 2002 draft of the merger agreement and certain related documents, including the March 27, 2002 draft of the stock purchase agreement;
|
|
|
|
reviewed the valuation report, dated as of March 26, 2002, prepared by Economic Research Associates relating to MountainStar, a development project of
Trendwest; and |
|
|
|
performed such other analyses and considered such other factors as Banc of America Securities deemed appropriate. |
30
Banc of America Securities did not assume any responsibility for independently
verifying the accuracy or completeness of any of the financial or other information (including the information listed above) that it reviewed for purposes of its opinion. Instead, Banc of America Securities relied on the assumption that such
information was accurate and complete. Banc of America Securities also made the following assumptions without independent verification or investigation:
|
|
|
with respect to the financial forecasts of Trendwest prepared by the management of Trendwest, that they had been reasonably prepared on bases reflecting the
best currently available estimates and good faith judgments of the future financial performance of Trendwest; |
|
|
|
with respect to the publicly available financial forecasts of Cendant that the management of Cendant reviewed, and as advised by Cendant, that such forecasts
represent reasonable estimates and judgments as to the future financial performance of Cendant; |
|
|
|
as informed by Trendwest, that the merger will be treated as a tax-free reorganization for federal income tax purposes; |
|
|
|
that the terms and conditions of the merger and the related transactions set forth in the final forms of the merger agreement and the stock purchase agreement
would not differ in any material respects from the terms set forth in the drafts of the merger agreement and stock purchase agreement reviewed by Banc of America Securities; and |
|
|
|
that the merger will be consummated as provided in the merger agreement, with full satisfaction of all covenants and conditions and without waiver of such
covenants and conditions. |
In addition, Banc of America Securities was not requested by
Trendwest to make, and did not make, any independent valuation or appraisal of the assets or liabilities of Trendwest and, other than the MountainStar valuation report, Banc of America Securities was not furnished with any such appraisals.
Banc of America Securities based its opinion on financial, economic, market and other conditions as in effect on,
and the information made available to Banc of America Securities as of, March 28, 2002. Although subsequent developments may affect the Banc of America Securities opinion, Banc of America Securities does not have any obligation to update, revise or
reaffirm its opinion.
The following description is merely a summary of the analyses and examinations that Banc of
America Securities considered to be material to its opinion. It is not a comprehensive description of all analyses and examinations actually conducted by Banc of America Securities. The preparation of a fairness opinion is a complex process
involving the application of subjective business judgment in various determinations as to the most appropriate and relevant methods of financial analyses and the application of those methods to the particular circumstances. Therefore, the
preparation of a fairness opinion is not readily susceptible to partial analysis or summary description. In arriving at its opinion, Banc of America Securities made qualitative judgments as to the significance and relevance of each analysis and
factor that it considered. Accordingly, Banc of America Securities believes that selecting portions of its analyses and factors considered or focusing on information presented in tabular format, without considering all analyses and factors or the
narrative description of such analyses, would create an incomplete view of the process underlying its analyses and opinion. Banc of America Securities did not assign any specific weight to any of the analyses described below. The fact that any
specific analysis has been referred to in the summary below is not meant to indicate that such analysis was given greater weight than any other analysis. Accordingly, the ranges of valuations resulting from any particular analysis described below
should not be interpreted as Banc of America Securities view of the actual value of Trendwest.
In
performing its analyses, Banc of America Securities considered and made assumptions about industry performance, regulatory matters, general business, economic, market and financial conditions and other matters, many of which are beyond the control
of Trendwest and Cendant. The estimates contained in Banc of America Securities analyses and the ranges of valuations resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less
31
favorable than those suggested by the analyses. The analyses were prepared solely as part of Banc of America Securities analysis of the financial fairness of the exchange ratio formula in
the merger agreement and were provided to the Trendwest board in connection with the delivery of Banc of America Securities opinion. The analyses relating to the value of companies, businesses or securities do not purport to be appraisals or
to reflect the prices at which companies or businesses might actually be sold or the prices at which any securities may trade at any time in the future. Accordingly, the analyses and estimates used by Banc of America Securities in arriving at its
opinion are inherently subject to substantial uncertainty.
Transaction
Values. Banc of America Securities calculated several values implied by the exchange ratio formula, including the implied price per Trendwest share and the implied premium to Trendwests closing share price as of
certain dates. The implied values were based on Trendwests closing share price on March 27, 2002. The following table summarizes the results of this analysis:
Implied Values
|
|
|
|
Implied Price Per Trendwest Share |
|
$24.79 |
|
Implied Premium to Trendwest Closing Share Price as of:
|
|
|
|
March 27, 2002 |
|
4.1% |
|
December 11, 2001 (52-Week High) |
|
(11.8% |
) |
March 29, 2001 (52-Week Low) |
|
85.9% |
|
Historical Stock Price Performance of
Trendwest. Banc of America Securities reviewed the price history of Trendwest common stock over the period from August 15, 1997 (the first day of trading after the initial public offering of
Trendwest common stock) through March 27, 2002. Banc of America Securities then compared the historical price performance of Trendwest with the performance of the Russell 2000 composite index and the price performance of certain companies in the
timeshare industry over the same period. Banc of America Securities noted that Trendwests common stock had outperformed the Russell 2000 composite index and the price performance of other selected companies in the timeshare industry over such
period.
Precedent Vacation Ownership Transactions
Analysis. Banc of America Securities analyzed publicly available financial information relating to the following 10 precedent transactions involving companies in the vacation ownership industry:
Target
|
|
Acquiror
|
Equivest Finance, Inc. |
|
Cendant Corporation |
Fairfield Communities, Inc. |
|
Cendant Corporation |
Peppertree Resorts, Ltd. |
|
Equivest Finance, Inc. |
Vistana, Inc. |
|
Starwood Hotel & Resorts Worldwide, Inc. |
Eastern Resorts Company, LLC |
|
Equivest Finance, Inc. |
Success Development Group, Inc. |
|
Vistana, Inc. |
Vacation Break USA, Inc. |
|
Fairfield Communitites Inc. |
LSI Group |
|
Signature Inns, Inc. |
Plantation Res. |
|
Signature Inns, Inc. |
AVCOM |
|
Signature Inns, Inc. |
Banc of America Securities calculated several values implied by the
precedent transactions, including the implied fully diluted equity value of each target company as a multiple of net income and the implied fully diluted aggregate value of each target company as a multiple of net income plus interest, taxes,
depreciation and amortization (EBITDA) for the last twelve months.
Banc of America Securities then applied a
range of selected implied multiples derived from its analysis to corresponding financial information for Trendwest to calculate a range of implied per share equity values for Trendwest. The implied per share equity value for Trendwest was adjusted
to account for a MountainStar implied per share value range of $1.50$2.25. The financial information of Trendwest used in the analysis included fiscal
32
year 2001 EBITDA, projected EBITDA for the twelve months ended June 30, 2002, and fiscal year 2002 estimated net income based on internal forecasts and forecasts released by Trendwest on December
19, 2001, each as prepared by Trendwest management. This analysis indicated an implied per share equity value reference range for Trendwest of $17.00$23.00.
Precedent Lodging Transactions Analysis. Banc of America Securities analyzed publicly available financial
information relating to the following 15 precedent transactions involving companies in the lodging industry:
Target
|
|
Acquiror
|
Suburban Lodges of America, Inc. |
|
Intown Suites Management Inc. |
Red Lion Hotels, Inc. |
|
WestCoast Hospitality Corporation |
Homestead Village Incorporated |
|
Blackstone Group LP |
Sunburst Hospitality Corporation |
|
Private Investor Group |
Homestead Village Incorporated |
|
Security Capital Group Incorporated |
Red Roof Inns, Inc. |
|
Accor PLC |
Promus Hotel Corporation |
|
Hilton Hotels Corporation |
Supertel Hospitality, Inc. |
|
Humphrey Hospitality Trust, Inc. |
Sunstone Hotel Investors, Inc. |
|
Westbrook Partners/SHP Acquistion LLC |
Signature Inns, Inc. |
|
Jameson Inns, Inc. |
ShoLodge, Inc. (16 Shoney Inns) |
|
Capital Lodging Mgmt. Corp. |
IMPAC Group, Inc. |
|
Servico, Inc. |
Bristol Hotel Company |
|
Felcor Lodging Trust Incorporated |
America General Hopitality Corp. |
|
CapStar Hotel Company |
La Quinta Inns, Inc. |
|
Meditrust |
Banc of America Securities calculated several values implied by the
precedent transactions, including the implied fully diluted equity value of each target company as a multiple of net income and the implied fully diluted aggregate value of each target company as a multiple of EBITDA for the last twelve months.
Banc of America Securities then applied a range of selected implied multiples derived from its analysis to
corresponding financial information for Trendwest to calculate a range of implied per share equity values for Trendwest, including the implied adjusted per share equity value for Trendwest. The implied per share equity value for Trendwest was
adjusted to account for a MountainStar implied per share value range of $1.50$2.25. The financial information of Trendwest used in the analysis included fiscal year 2001 EBITDA and projected EBITDA for the twelve months ended June 30, 2002.
This analysis indicated an implied adjusted per share equity value reference range for Trendwest of $18.00$24.00.
Public Company Trading Analysis. Banc of America Securities reviewed publicly available financial information of certain publicly traded companies in the travel, leisure and consumer finance
industry, including:
Bluegreen Corporation
Silverleaf Resorts, Inc.
Sunterra Corporation
|
|
|
Leisure Oriented Lodging |
Choice Hotels International, Inc.
Fairmont Hotels and Resorts Incorporated
Hilton Hotels Corporation
Marriott
International, Inc.
Orient-Express Hotels Ltd.
Prime Hospitality Corp.
Starwood Hotels & Resorts Worldwide, Inc.
33
Ambassadors
International, Inc.
Ambassadors Group, Inc.
Navigant International, Inc.
ResortQuest International, Inc.
|
|
|
Cruise Lines/Ski Resort Owners/Operators |
Carnival Corporation
Intrawest Corporation
Royal Caribbean Cruises Ltd.
Vail Resorts, Inc.
Americredit Corp.
Countrywide Credit Industries, Inc.
NewCentury Financial Corporation
WFS
Financial, Inc.
Banc of America Securities calculated several financial metrics for each company, including the
price per company share on March 27, 2002 as a multiple of fiscal year 2001 earnings per share and fiscal year 2002 estimated earnings per share, and the implied fully diluted aggregate value as a multiple of EBITDA for the last twelve months and
projected EBITDA for fiscal year 2002. Banc of America Securities then calculated the average of such implied values for the companies in each industry sector. The multiples were calculated using publicly available information and publicly available
forecasts of securities research analysts. The following table summarizes the results of this analysis:
|
|
Average Multiples Price Per Share/ Earnings Per Share
|
|
Fully-Diluted Aggregate Value/LTM EBITDA
|
|
Fully-Diluted Aggregate Value/2002E EBITDA
|
|
|
2001A
|
|
2002E
|
|
|
|
|
Vacation Ownership |
|
12.8x |
|
12.8x |
|
7.8x |
|
NA |
Leisure Oriented Lodging |
|
26.6x |
|
27.2x |
|
11.3x |
|
11.7x |
Travel |
|
18.7x |
|
16.2x |
|
9.9x |
|
7.3x |
Cruise Lines/Ski Resort Owners/Operators |
|
22.1x |
|
21.4x |
|
13.7x |
|
11.0x |
Consumer Finance |
|
11.9x |
|
8.7x |
|
11.3x |
|
NA |
Banc of America Securities selected a range of implied multiples
derived from its analyses and applied such multiples to certain financial information of Trendwest to calculate a range of implied prices per Trendwest share. The financial information of Trendwest used in such analysis included fiscal year 2001
EBITDA and the projected EBITDA and earnings per Trendwest share for fiscal year 2002. The projected EBITDA and earnings per Trendwest share for fiscal year 2002 were based on internal forecasts and forecasts released by Trendwest on December 19,
2001, each as prepared by Trendwest management. This analysis indicated an implied price per Trendwest share reference range of $20.00$27.00.
No company, transaction or business used in the Precedent Vacation Ownership Transactions Analysis, the Precedent Lodging Transactions Analysis or the Public Company Trading Analysis is identical to
Trendwest or the merger. Accordingly, an evaluation of the results of those analyses is not entirely mathematical. Rather, the analyses involve complex considerations and judgments concerning differences in financial and operating characteristics
and other factors that could affect the acquisition, public trading or other values of the companies, business segments or transactions to which Trendwest and the merger were compared.
Discounted Cash Flow Analysis. Banc of America Securities conducted a discounted cash flow analysis to determine the implied fully
diluted equity value per Trendwest share based on Trendwests projected free cash
34
flows. In conducting the analysis, Banc of America Securities calculated the debt-free free cash flows that Trendwest was expected to generate during fiscal years 2002 through 2006 based upon
internal forecasts and operating assumptions provided by Trendwest management. Banc of America Securities also calculated terminal values for Trendwest at the conclusion of a five-year period ended 2006. In calculating this range of terminal values,
Banc of America Securities applied a multiple of 2006 EBITDA ranging from 6.5x to 8.5x for Trendwest during the final year of the five-year period. Banc of America Securities then discounted these debt-free cash flows, assuming no debt obligations
and such range of terminal values, to present values using a range of discount rates from 13.0% to 17.0%. These values were adjusted by Banc of America Securities to account for net debt of Trendwest as of December 31, 2001 of $110.1 million. This
analysis indicated an implied fully diluted equity value per Trendwest share of $25.00$35.00.
Premiums Paid Analysis. Banc of America Securities reviewed the premiums paid in 50 transactions valued between $800 million and $1,200 million (excluding technology
transactions) that were announced between January 1, 1999 and March 26, 2002. Banc of America Securities calculated the premium implied by the merger consideration in each transaction relative to the closing stock price for the target company in
such transaction over various periods prior to public announcement of the transaction. Banc of America Securities then applied the median of such premiums to the closing price of Trendwest common stock over the same periods, to calculate the price
per Trendwest share implied by such premiums. The following table summarizes the results of this analysis:
|
|
Period Prior to Announcement
of Transaction
|
|
|
One Day
|
|
One Week
|
|
One Month
|
Median Premium in Precedent Transactions |
|
26.2% |
|
35.9% |
|
37.3% |
Implied Price Per Trendwest Share Based on Precedent Median Premium |
|
$30.06 |
|
$34.04 |
|
$33.97 |
MountainStar Book Value
Analysis. Banc of America Securities calculated the book value of MountainStar as of certain dates prior to January 1, 2002. The book values for MountainStar were based on publicly available financial statements
for Trendwest, other than the book value for MountainStar on December 31, 2001, which was based on internal financial statements provided by Trendwest management. Banc of America Securities then divided such book values by the number of fully
diluted Trendwest shares outstanding on March 28, 2000 to calculate the implied book values per share. The following table summarizes the results of this analysis:
|
|
Date of Valuation
|
|
|
6/30/00
|
|
9/31/00
|
|
12/31/00
|
|
3/31/01
|
|
6/30/0
|
|
9/30/01
|
|
12/31/01
|
MountainStar Book Value |
|
$ |
44,300,000 |
|
$ |
49,073,000 |
|
$ |
56,536,000 |
|
$ |
60,361,000 |
|
$ |
63,724,000 |
|
$ |
66,397,000 |
|
$ |
70,382,271 |
Implied Book Value Per Share |
|
$ |
1.14 |
|
$ |
1.26 |
|
$ |
1.45 |
|
$ |
1.55 |
|
$ |
1.63 |
|
$ |
1.70 |
|
$ |
1.81 |
MountainStar Discounted Cash Flow and Sensitivity
Analysis. Banc of America Securities conducted a discounted cash flow analysis to determine the implied per share value of MountainStar based on MountainStars projected free cash flows. In conducting the
analysis, Banc of America Securities calculated the debt-free free cash flows that MountainStar was expected to generate during fiscal years 2002 through 2010 based upon internal forecasts and operating assumptions provided by Trendwest management.
Banc of America Securities also calculated terminal values for MountainStar at the conclusion of an nine-year period ended 2010. In calculating this range of terminal values, Banc of America Securities applied a multiple of 2010 operating income
ranging from 7.0x to 9.0x for MountainStar during the final year of the nine-year period. Banc of America Securities then discounted these debt-free cash flows, assuming no debt obligations and the range of such terminal values, to present values
using a range of discount rates from 18.0% to 22.0%. Banc of America
35
Securities also conducted a sensitivity analysis to determine the impact on the implied per share value of MountainStar assuming (i) a delay in the launch date for MountainStar and (ii) a
discount to the projected sales value of MountainStar. These analyses indicated an implied MountainStar per share value range of $1.50$2.25.
The type of consideration payable in the merger and the exchange ratio formula were determined through negotiations between Trendwest and Cendant and were approved by the Trendwest board of directors.
The decision to enter into the merger agreement was solely that of Trendwests board of directors. Banc of America Securities opinion and the financial analyses described above were only one of a number of factors considered by
Trendwests board of directors in its evaluation of the merger and should not be viewed as determinative of the views of the Trendwest board of directors or its management with respect to the merger or the exchange ratio formula.
Pursuant to the engagement letter between Banc of America Securities and Trendwest, Trendwest has agreed to pay certain
customary fees to Banc of America Securities for financial advisory services provided to Trendwest in connection with the merger, including a fee which was contingent upon Banc of America Securities rendering its opinion and an additional fee which
is contingent upon the consummation of the transactions contemplated by the merger agreement and the stock purchase agreement. The Trendwest board of directors was aware of the contingent nature of this fee structure and took it into account in
considering Banc of America Securities fairness opinion and in approving the merger. Trendwest has also agreed to reimburse Banc of America Securities for its reasonable out-of-pocket expenses, including reasonable fees and expenses of Banc of
America Securities legal counsel, and to indemnify Banc of America Securities, its affiliates, and their respective directors, officers, employees, agents and representatives against liabilities, including liabilities under the federal
securities laws, arising out of Banc of America Securities engagement.
In the past, Banc of America
Securities or its affiliates have provided financial advisory and financing services to Trendwest and Cendant and have received fees for the rendering of these services. In the past, Banc of America Securities or its affiliates have also provided
certain financial advisory and financing services to JELD-WEN including financial services relating to a sale of JELD-WENs interest in Trendwest. Bank of America, N.A., an affiliate of Banc of America Securities, is an agent and lender under
credit facilities with Trendwest and JELD-WEN. In the ordinary course of its business, Banc of America Securities and its affiliates may actively trade the debt and equity securities of Trendwest and Cendant for their own account and for the
accounts of their customers, and accordingly, may at any time hold a long or short position in such securities.
Opinion of Houlihan
Lokey Howard & Zukin Financial Advisors, Inc.
The special committee retained Houlihan Lokey to render an
opinion that the consideration per share to be received in connection with the transactions by the holders of Trendwest common stock, other than JELD-WEN and the JELD-WEN affiliates, is fair, from a financial point of view, and not less than the
financial consideration per share to be received by JELD-WEN or the JELD-WEN affiliates in connection with the transactions.
The special committee retained Houlihan Lokey based upon Houlihan Lokeys experience in the valuation of businesses and their securities in connection with recapitalizations and similar transactions, especially with respect to
timeshare and real estate services companies. Houlihan Lokey is a nationally recognized investment banking firm that is continually engaged in providing financial advisory services and rendering fairness opinions in connection with mergers and
acquisitions, leveraged buyouts, business and securities valuations for a variety of regulatory and planning purposes, recapitalizations, financial restructurings and private placements of debt and equity securities.
As compensation to Houlihan Lokey for its services in connection with the transactions, Trendwest agreed to pay Houlihan Lokey an
aggregate fee of $350,000 in addition to Houlihan Lokeys expenses in connection therewith. No portion of Houlihan Lokeys fee is contingent upon the successful completion of the transactions, any other related transaction, or the
conclusions reached in the Houlihan Lokey opinion. Trendwest also agreed
36
to indemnify Houlihan Lokey and related persons against certain liabilities, including liabilities under federal securities laws that arise out of the engagement of Houlihan Lokey.
The full text of Houlihan Lokeys opinion, which describes, among other things, the assumptions made, general procedures
followed, matters considered and limitations on the review undertaken by Houlihan Lokey in rendering its opinion is attached hereto and is incorporated herein by reference. The summary of the Houlihan Lokey opinion in this prospectus is qualified in
its entirety by reference to the full text of the Houlihan Lokey opinion. You are urged to read Houlihan Lokeys opinion in its entirety. Houlihan Lokeys opinion was provided for the information of the special committee and does not
constitute a recommendation to any stockholder with respect to any matter relating to such transactions.
In
arriving at its fairness opinion, among other things, Houlihan Lokey did the following:
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met with certain members of the senior management of Trendwest to discuss the operations, financial condition, future prospects, projected operations and
performance of Trendwest, MountainStar, and the pending transactions; |
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held discussions with Banc of America Securities, Trendwests financial advisors, to discuss the process and evolution, as well as the structure and
consideration, of the transactions; |
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reviewed Trendwests Form 10-K for the fiscal year ended December 31, 2000, Form 10-Q for the three quarters ended September 30, 2001, and a draft of
Trendwests Form 10-K for the year ended December 31, 2001, which Trendwests management has identified as containing the most current Company financial statements available; |
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reviewed various projections of Trendwests financial performance for the fiscal years ended December 31, 2002 through 2006 prepared by
Trendwests management; |
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reviewed various projections of MountainStars financial performance for the fiscal years ended December 31, 2002 through 2015 prepared by Trendwests
management which are referred to in this prospectus as the MountainStar projections; |
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reviewed various memoranda regarding managements exit strategies for MountainStar; |
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reviewed the historical market prices and trading volume for Trendwests publicly traded securities and other publicly available information regarding
Trendwest; |
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reviewed certain publicly available financial data for certain companies that we deemed comparable to Trendwest; |
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reviewed drafts of certain documents relating to the transactions, including the Merger Agreement dated March 27, 2002, the Stock Purchase Agreement dated March
27, 2002, and other related agreements; and |
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conducted such other studies, analyses and inquiries as Houlihan Lokey deemed appropriate. |
Analyses
Houlihan
Lokey used several methodologies to assess the fairness of the consideration per share to be received in connection with the transactions by the holders of Trendwest common stock, other than JELD-WEN and the JELD-WEN affiliates. The following is a
summary of the material financial analyses used by Houlihan Lokey in connection with providing its opinion. This summary is qualified in its entirety by reference to the full text of such opinion, which is attached as Annex F to this prospectus. You
are urged to read the full text of the Houlihan Lokey opinion carefully and in its entirety.
Houlihan
Lokeys analyses of the transactions included the calculation and comparison of the following: (i) an analysis of Trendwests stock price as determined by the public market; (ii) an analysis of Trendwests stock price as
determined by Houlihan Lokey; and (iii) and analysis of the MountainStar property.
37
Trendwest Analyses
Houlihan Lokey performed the following analyses in order to determine the current price per share of Trendwest:
Public Market Pricing. Houlihan Lokey reviewed the historical market prices and trading volume for
Trendwests publicly held common stock and reviewed publicly-available analyst reports, news articles, and press releases relating to Trendwest. Houlihan Lokey analyzed Trendwests closing stock price as of March 21, 2002. In addition,
Houlihan Lokey reviewed Trendwests closing stock price on a five-day average, 30-day average, 60-day average and one year average basis as of March 21, 2002. The resulting per share indications, as reviewed by Houlihan Lokey, ranged from
$16.56 to $25.23.
Market Multiple Methodology. Houlihan Lokey reviewed certain
financial information of publicly traded comparable timeshare companies selected solely by Houlihan Lokey. The comparable timeshare companies included: Bluegreen Corp., Ilx Resorts, Inc., Mego Financial Corp. and Resortquest International, Inc.
Houlihan Lokey calculated certain financial ratios of the comparable timeshare companies based on the most recent publicly available information. Houlihan Lokey calculated certain financial ratios, including, the multiples of: (i) enterprise
value (EV) to latest twelve months (LTM) revenues, (ii) EV to LTM earnings before interest, taxes, depreciation and amortization (EBITDA), (iii) EV to earnings before interest and taxes (EBIT), and
(iv) EV to projected next fiscal year (NFY) EBITDA of the comparable timeshare companies based on the most recent publicly available information.
The analysis showed that the multiples exhibited by the comparable timeshare companies was as follows: (i) EV to LTM revenues ranged from a low of 0.9x to a high of 1.55x with mean and median
multiples of 1.24x and 1.26x, respectively; (ii) EV to LTM EBITDA ranged from a low of 7.5x to a high of 10.5x with mean and median multiples of 9.1x and 9.3x, respectively; (iii) EV to LTM EBIT ranged from a low of 10.1x to a high of 23.8x with
mean and median multiples of 13.9x and 10.9x, respectively; and (iv) EV to NFY EBITDA ranged from a low of 5.5x to a high of 7.1x with mean and median multiples of 6.3x, respectively.
Houlihan Lokey derived indications of the enterprise value of Trendwest by applying selected revenue, EBITDA and EBIT multiples to certain adjusted operating results for
the latest twelve months ended December 31, 2001 and projected EBITDA for the fiscal year ending December 31, 2002. Based on the above, the resulting indications of the enterprise value of the operations of Trendwest ranged from approximately
$750.0 million to $870.0 million.
After determining the enterprise value of the operations of Trendwest,
Houlihan Lokey made certain adjustments to determine equity value including adjustments to reflect (i) Trendwests current holdings of cash and cash equivalents, (ii) certain debt obligations of the Trendwest, (iii) the book value of
MountainStar, (iv) an adjustment to reflect control of Trendwest, and (v) the dilutive effect of certain stock options outstanding. After consideration of such adjustments, Houlihan Lokey estimated the equity value of Trendwest using the market
multiple methodology to be in the range of $847.0 million to $991.0 million, or $21.73 per share to $25.42 per share, respectively.
Comparable Transaction Methodology. Houlihan Lokey reviewed the consideration paid in certain change of control acquisitions of selected publicly traded timeshare companies that Houlihan Lokey
deemed relevant. The selected comparison group included five transactions:
Target
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Acquiror
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EV (in millions)
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Date
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Equivest Finance, Inc. |
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Cendant |
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$ |
156.3 |
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2/11/02 |
Fairfield Communities, Inc. |
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Cendant |
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$ |
719.7 |
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4/2/01 |
Peppertree Resorts, Inc. |
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Equivest Finance, Inc. |
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$ |
109.5 |
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11/17/99 |
Vistana, Inc. |
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Starwood Hotel & Resorts Worldwide |
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$ |
630.0 |
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10/1/99 |
Vacation Break USA, Inc. |
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Fairfield Communities, Inc. |
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$ |
216.4 |
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12/22/97 |
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The analysis showed that the multiples exhibited in the change of control
transactions were as follows: (i) EV to LTM revenues ranged from a low of 1.22x to a high of 2.31x with mean and median multiples of 1.72x and 1.68x, respectively; (ii) EV to LTM EBITDA ranged from a low of 3.8x to a high of 13.0x with mean and
median multiples of 7.5x and 6.2x, respectively; and (iii) EV to LTM EBIT ranged from a low of 4.3x to a high of 14.6x with mean and median multiples of 9.1x and 8.7x, respectively.
In performing its analysis, Houlihan Lokey considered that the merger and acquisition transaction environment varies over time because of, among other things, interest rate
and equity market fluctuations and industry results and growth expectations. No company or transaction used in the analysis described above was directly comparable to Trendwest. Accordingly, Houlihan Lokey reviewed the foregoing transactions to
understand the range of multiples of revenue, EBITDA and EBIT paid for companies in the timeshare industry.
Houlihan Lokey derived enterprise value indications of Trendwest by applying selected revenue, EBITDA and EBIT multiples to certain adjusted operating results for the latest twelve months ended December 31, 2001. Based on the above,
the resulting indications of the enterprise value of the operations of Trendwest ranged from approximately $850.0 million to $950.0 million.
After determining the enterprise value of the operations of Trendwest, Houlihan Lokey made certain adjustments to determine equity value, including adjustments to reflect (i) Trendwests current
holdings of cash and cash equivalents, (ii) certain debt obligations of Trendwest, (iii) the book value of MountainStar, and (iv) the dilutive effect of certain stock options outstanding. After consideration of such adjustments, Houlihan Lokey
estimated the equity value of Trendwest using the market multiple methodology to be in the range of $819.2 million to $919.2 million, or $21.01 per share to $23.58 per share, respectively.
Discounted Cash Flow MethodologyExit Multiple. Houlihan Lokey utilized certain financial projections prepared by Trendwests
management with respect to fiscal years 2002 through 2006. To determine Trendwests EV, Houlihan Lokey used the projected pro forma operating income of Trendwest and applied risk-adjusted discount rates ranging from 10.0% to 14.0% and exit
EBITDA multiples of 5.0x to 7.0x. Based on the financial projections and this analysis, Houlihan Lokey calculated indications of the range of EV between $1,027.0 million and $1,249.8 million.
After determining the EV of the operations of Trendwest, Houlihan Lokey made certain adjustments to determine equity value including adjustments to reflect (i)
Trendwests current holdings of cash and cash equivalents, (ii) certain debt obligations of the Trendwest, (iii) the book value of MountainStar, and (iv) the dilutive effect of certain stock options outstanding. After consideration of such
adjustments, Houlihan Lokey estimated the equity value of Trendwest using the market multiple methodology to be in the range of $996.1 million to $1,218.9 million, or $25.55 per share to $31.27 per share, respectively.
Discounted Cash Flow MethodologyGordon Growth. Houlihan Lokey utilized certain financial projections
prepared by Trendwests management with respect to fiscal years 2002 through 2006. To determine Trendwests enterprise value, Houlihan Lokey used the projected pro forma operating income of Trendwest and applied risk-adjusted discount
rates ranging from 10.0% to 14.0% and long-term growth rates ranging from 1.0% to 5.0%. Based on the financial projections and this analysis, Houlihan Lokey calculated indications of the range of enterprise value between $825.0 million and $1,204.8
million.
After determining the EV of the operations of Trendwest, Houlihan Lokey made certain adjustments to
determine equity value, including adjustments to reflect (i) Trendwests current holdings of cash and cash equivalents, (ii) certain debt obligations of the Trendwest, (iii) the book value of MountainStar, and (iv) the dilutive effect of
certain stock options outstanding. After consideration of such adjustments, Houlihan Lokey estimated the equity value of Trendwest using the market multiple methodology to be in the range of $794.2 million to $1,174.0 million, or $20.37 per
share to $30.12 per share, respectively.
39
MountainStar Analyses
MountainStar, a development asset, is not yet income producing. Therefore the capitalization methodologies (based on market multiples or
comparable transactions) were not used by Houlihan Lokey. Further, Houlihan Lokey was unable to identify any comparable transactions of similar asset size or in a similar region to provide guidance on a price per acre or other similar measure.
Accordingly, the only available valuation methodology is the discounted cash flow approach. Houlihan Lokey relied on and performed three different discounted cash flow analyses in order to determine the range of value for MountainStar:
Entitlement Case. Although MountainStar is currently unentitled, Houlihan Lokey utilized certain
MountainStar projections prepared by Trendwests management for fiscal years 2002 through 2015. Such projections assume that MountainStar receives all necessary entitlements to continue the development process. To determine the value of
MountainStar, Houlihan Lokey considered various scenarios regarding the timing of receiving entitlements and the resulting cash flows. Houlihan Lokey then applied risk-adjusted discount rates ranging from 22.5% to 30.0%. Based on the financial
projections and this analysis, Houlihan Lokey calculated indications of the value of MountainStar to be in the range of $62.9 million to $78.3 million.
Tax Lot Scenario. Houlihan Lokey utilized certain MountainStar projections prepared by Trendwests management which assume a prompt sale of MountainStar. These
financial projections, for fiscal years 2002 through 2010, assume 300 lots will be created with certain minimum price points and acreage requirements to satisfy certain county requirements. To determine the value of MountainStar under this scenario,
Houlihan Lokey used the projected pro forma operating cash flow of MountainStar and applied risk-adjusted discount rates ranging from 15.0% to 20.0%. Based on the financial projections and this analysis, Houlihan Lokey calculated indications of the
value of MountainStar to be in the range of $41.8 million to $51.1 million.
Short Plat
Scenario. Houlihan Lokey utilized certain MountainStar projections prepared by Trendwests management which assume a prompt sale of MountainStar. These financial projections, for fiscal years 2002 through 2015, assume
500 large lots will be created. To determine the value of MountainStar under this scenario, Houlihan Lokey used the projected pro forma operating cash flow of MountainStar and applied risk-adjusted discount rates ranging from 15.0% to 20.0%. Based
on the financial projections and this analysis, Houlihan Lokey calculated indications of the value of MountainStar to be in the range of $35.8 million to $47.4 million.
Reconciliation of Discounted Cash Flow Conclusions with MountainStar book value. Houlihan Lokey understands that the purchase price for
MountainStar is equal to the net book value of MountainStar, which is estimated to be approximately $48 million, reflecting an enterprise value of MountainStar of approximately $78.0 million less approximately $30.0 million of debt associated with
MountainStar to be assumed by JELD-WEN as a consequence of the MountainStar redemption. The above-described Entitlement Case, Tax Lot Scenario, and Short Plat Scenario provided Houlihan Lokey with indications of enterprise value of MountainStar in
the range of $35.8 to $78.3 million. Houlihan Lokey noted that the implied enterprise value of MountainStar is within the range of valuation indications for MountainStar.
Trendwest and MountainStar Conclusions
The above-described Trendwest analyses provided Houlihan Lokey with indications of the market value of Trendwest which ranged from $22.20 to $27.60 per share. The above-described MountainStar analyses support a sale price equal to
the book value of MountainStar.
Conclusion
On March 28, 2002 Houlihan Lokey delivered to the special committee its written opinion, dated March 28, 2002, that based upon the assumptions made, matters considered and
limitations on the review described in the written opinion, the consideration per share to be received by the shareholders of Trendwest other than JELD-
40
WEN and the JELD-WEN affiliates in connection with the transactions (i) is fair to them from a financial point of view and (ii) is not less than the financial consideration per share to be
received by JELD-WEN or the JELD-WEN affiliates in connection with the transactions.
As a matter of course,
Trendwest does not publicly disclose forward-looking financial information. Nevertheless, in connection with its review, Houlihan Lokey considered financial projections. These financial projections were prepared by the management of Trendwest. The
financial projections were prepared under market conditions as they existed as of approximately December 31, 2001 and management does not intend to provide Houlihan Lokey with any updated or revised financial projections in connection with the
transactions. The financial projections do not take into account any circumstances or events occurring after the date they were prepared. In addition, factors such as industry performance, general business, economic, regulatory, market and financial
conditions, as well as changes to the business, financial condition or results of operation of Trendwest, may cause the financial projections or the underlying assumptions to be inaccurate. As a result, the financial projections should not be relied
upon as necessarily indicative of future results, and readers of this prospectus are cautioned not to place undue reliance on such financial projections.
In arriving at its fairness opinion, Houlihan Lokey reviewed key economic and market indicators, including, but not limited to, growth in the U.S. Gross Domestic Product, inflation rates, interest
rates, consumer spending levels, manufacturing productivity levels, unemployment rates and general stock market performance. Houlihan Lokeys opinion is based on the business, economic, market and other conditions as they existed as of March
28, 2002 and on the Trendwest and MountainStar financial projections provided to Houlihan Lokey as of December 31, 2001. In rendering its opinion, Houlihan Lokey relied upon and assumed, without independent verification, that the accuracy and
completeness of the financial and other information provided to Houlihan Lokey by the management of Trendwest, including the financial projections, was reasonably prepared and reflects the best currently available estimates of the financial results
and condition of Trendwest; and that no material changes have occurred in the information reviewed between the date the information was provided and the date of the Houlihan Lokey opinion. Houlihan Lokey did not independently verify the accuracy or
completeness of the information supplied to it with respect to Trendwest and does not assume responsibility for it. Houlihan Lokey did not make any independent appraisal of the specific properties or assets of Trendwest other than MountainStar.
Houlihan Lokey was not asked to opine and does not express any opinion as to: (i) the tax or legal consequences
of the transactions; (ii) the realizable value of Cendants common stock or the prices at which Cendants common stock may trade in the future following the transactions; and (iii) the fairness of any aspect of the transactions not
expressly addressed in its fairness opinion.
The Houlihan Lokey opinion does not address the underlying business
decision to effect the transactions; nor does it constitute a recommendation to any shareholder as to how they should vote at the special meeting. Houlihan Lokey has no obligation to update the Houlihan Lokey opinion. Houlihan Lokey did not, and was
not requested by Trendwest or any other person to, solicit third party indications of interest in acquiring all or any part of Trendwest or to make any recommendations as to the form or amount of consideration in connection with the transactions.
Furthermore, at the request of the special committee, Houlihan Lokey has not negotiated any portion of the transactions or advised the special committee with respect to alternatives to them.
The summary set forth above describes the material points of more detailed analyses performed by Houlihan Lokey in arriving at its fairness opinion. The preparation of a
fairness opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and application of those methods to the particular circumstances and is therefore not readily
susceptible to summary description. In arriving at its opinion, Houlihan Lokey made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, Houlihan Lokey believes that its analyses and summary set forth
herein must be considered as a whole and that selecting portions of its analyses, without considering all analyses and factors, or portions of this summary, could create an incomplete and/or inaccurate view of the
41
processes underlying the analyses set forth in Houlihan Lokeys fairness opinion. In its analysis, Houlihan Lokey made numerous assumptions with respect to Trendwest, MountainStar, the
transactions, industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of the respective entities. The estimates contained in such analyses are not necessarily
indicative of actual values or predictive of future results or values, which may be more or less favorable than suggested by such analyses. Additionally, analyses relating to the value of businesses or securities of Trendwest are not appraisals.
Accordingly, such analyses and estimates are inherently subject to substantial uncertainty.
Cendant expects to receive authorization, subject to notice of
issuance, from the NYSE for the listing of common stock issuable pursuant to the merger in exchange for Trendwest common stock. The trading symbol for CD Common Stock is CD. Following the merger, Trendwest shareholders will no longer be
able to trade shares of Trendwest common stock on the Nasdaq or any other exchange because the existing Trendwest common stock will have ceased to exist and therefore will no longer be listed on any exchange or quoted on any quotation system.
Material United States Federal Income Tax Consequences of the Merger
The following is
a general summary of the material United States federal income tax consequences of the merger to holders of Trendwest common stock who exchange their shares of Trendwest common stock for CD Common Stock in the merger. It does not address the
tax consequences to holders of Trendwest common stock who exchange their shares of Trendwest common stock for CD Common Stock pursuant to the stock purchase agreement. This summary does not address all aspects of United States federal income
taxation that may be applicable to Trendwest shareholders who exchange their shares of Trendwest common stock for CD Common Stock in the merger in light of their particular circumstances or who are subject to special treatment under United States
federal income tax law, such as:
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certain U.S. expatriates; |
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Trendwest shareholders who hold Trendwest common stock as part of a straddle, appreciated financial position, hedge, conversion transaction or other integrated
investment; |
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Trendwest shareholders whose functional currency is not the United States dollar; |
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Trendwest shareholders who acquired Trendwest common stock through the exercise of employee stock options or otherwise as compensation or through a
tax-qualified retirement plan; |
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foreign persons and entities; |
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financial institutions; |
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dealers in securities; and |
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traders in securities that mark-to-market. |
In addition, this summary does not discuss the consequences of the merger under state, local, or foreign tax law, and does not address the tax treatment to Trendwest shareholders who hold their shares
of Trendwest common stock through a partnership or other pass-through entity. This discussion assumes that Trendwest shareholders hold their shares of Trendwest common stock as capital assets within the meaning of Section 1221 of the
Code (generally, as property held for investment).
This summary is based on provisions of the Code, Treasury
regulations promulgated under the Code, and administrative and judicial interpretation of the Code, all as in effect as of the date of this prospectus. There can
42
be no assurance that future legislative, administrative or judicial changes or interpretations, which changes or interpretations could apply retroactively, will not affect the accuracy of the
statements or conclusions set forth in this tax summary.
General
It is intended that the stock purchase and the merger will, for U.S. federal income tax purposes, be treated as an integrated
transaction that will qualify as a reorganization under Section 368(a) of the Code, and Trendwest has received an opinion from its counsel, Heller Ehrman White & McAuliffe LLP, that, on the basis of the facts, representations, covenants,
limitations and assumptions set forth or referred to in such opinion, the transaction will be treated for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code. However, no ruling has been or will
be sought from the IRS, as to the U.S. federal income tax consequences of the transaction. Accordingly, there can be no certainty that the IRS will not challenge the treatment of the transaction as a reorganization under Section 368(a) of the Code
or that a court would not sustain such a challenge. If the transaction were to fail to qualify as a reorganization under Section 368(a) of the Code, then for U.S. federal income tax purposes, the merger would be a fully taxable transaction to the
holders of Trendwest common stock and might also be a fully taxable transaction for state, local and foreign tax purposes. See United States Federal Income Tax Consequences of the Merger to Trendwest Shareholders if the Transaction Does Not
Qualify as a Reorganization under Section 368(a) of the Code.
United States Federal
Income Tax Consequences of the Merger to Trendwest Shareholders if the Transaction Qualifies as a Reorganization under Section 368(a) of the Code
Assuming that the transaction is treated as an integrated transaction that qualifies as a reorganization under Section 368(a) of the Code, for U.S. federal income tax purposes:
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a holder of Trendwest common stock will not recognize gain or loss upon the receipt of CD Common Stock in exchange for Trendwest common stock in the merger,
except with respect to cash received instead of a fractional share of CD Common Stock; |
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the aggregate tax basis of the shares of CD Common Stock received by a Trendwest shareholder in exchange for Trendwest common stock pursuant to the merger will
be the same as the aggregate tax basis of such shareholders Trendwest common stock surrendered in exchange for such CD Common Stock (reduced by the amount of basis allocable to any fractional share of CD Common Stock for which cash is
received); |
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the holding period of the shares of CD Common Stock received by a Trendwest shareholder in the merger will include the holding period of the Trendwest
shareholders Trendwest common stock surrendered in the merger; and |
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a cash payment received by a Trendwest shareholder for a fractional share of CD Common Stock will be treated as if such fractional share had been issued in
connection with the merger and then redeemed by Cendant for such cash payment; a Trendwest shareholder generally will recognize capital gain or loss with respect to such cash payment based on the difference between the amount of the cash received
instead of such fractional share and such shareholders tax basis in such fractional share. |
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United States Federal Income Tax Consequences of the Merger to Trendwest
Shareholders if the Transaction Does Not Qualify as a Reorganization under Section 368(a) of the Code
If
the transaction does not qualify as a reorganization under Section 368(a) of the Code, the material U.S. federal income tax consequences to holders of Trendwest common stock who exchange Trendwest common stock for shares of CD Common Stock in the
merger would differ materially from the consequences summarized above, and would be as follows:
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a holder of Trendwest common stock who exchanged Trendwest common stock for CD Common Stock in the merger would recognize aggregate capital gain or loss in an
amount equal to the difference between (1) the fair market value of the CD Common Stock received in the merger (including any cash received instead of a fractional share of CD Common Stock) and (2) the holders aggregate tax basis in such
shares of Trendwest common stock; |
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the capital gain or loss recognized by a holder of Trendwest common stock would be long-term capital gain or loss if the holder had held the shares of Trendwest
common stock for more than one year on the effective date of the merger; |
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a holder of Trendwest common stock would have an aggregate tax basis in the CD Common Stock received pursuant to the merger equal to the fair market value of
such CD Common Stock; and |
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the holding period for CD Common Stock received by a holder of Trendwest common stock would commence on the day following the effective time of the merger.
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HOLDERS OF TRENDWEST COMMON STOCK ARE STRONGLY ENCOURAGED TO CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC TAX
CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS (INCLUDING LAWS RELATING TO REPORTING REQUIREMENTS).
Anticipated Accounting Treatment
The merger will be accounted for as a purchase for
financial accounting purposes in accordance with accounting principles generally accepted in the United States. For purposes of preparing Cendants consolidated financial statements, Cendant will establish a new accounting basis for
Trendwests assets and liabilities based upon their fair values, the merger consideration and the costs of the merger. Any excess of cost over the fair value of the net assets of Trendwest will be recorded by Cendant as goodwill. A final
determination of the intangible asset values and required purchase accounting adjustments, including the allocation of the purchase price to the assets acquired and liabilities assumed based on their respective fair values, has not yet been made.
Cendant will determine the fair value of Trendwests assets and liabilities and will make appropriate purchase accounting adjustments, including adjustments to the amortization period of the intangible assets, upon completion of that
determination.
Under the merger agreement, Cendant and Trendwest have agreed to
use their reasonable good faith efforts to obtain all necessary actions or nonactions, waivers, consents and approvals from any governmental authority necessary to complete the merger. The required regulatory approvals include approvals of various
state timeshare agencies, as described below. All other applications and notices have been filed, or are in the process of being filed.
Timeshare Regulatory Approvals
In connection with the acquisition of
Trendwest by Cendant, Trendwest may be required to file amendments to certain registration statements and is required to obtain consents, approvals or exemptions in respect of the
44
acquisition of Trendwest under state timeshare registration laws or, in states that do not have specific timeshare laws, related real estate or securities registration laws in states where
Trendwest develops real estate properties, holds vacation ownership interests and/or offers, markets or sells vacation ownership interests.
If the approval of the acquisition of Trendwest by any of the authorities mentioned above is subject to compliance with certain conditions, there can be no assurance that the parties or their
subsidiaries will be able to comply with such conditions or that compliance or non-compliance will not have adverse consequences for the combined company after consummation of the merger.
While Trendwest and Cendant believe that they will receive the requisite regulatory approvals for the merger, there can be no assurance regarding the timing of the
approvals or the ability of the companies to obtain the approvals on satisfactory terms or the absence of litigation challenging such approvals or otherwise. The stock purchase was conditioned upon all required registrations and amendments having
been made and written consents, approvals or exemptions having been obtained from the appropriate regulatory authorities under the timeshare laws (or, in the case of Australia, securities registration laws) in the following jurisdictions: Arizona,
California, Colorado, Idaho, Missouri, Nevada, Oregon, Utah, Washington and Australia. See The Stock Purchase Agreement on page 62.
Foreign Regulatory Filings
Cendant has obtained the
approval of the Australia Foreign Investment Review Board (FIRB) for the acquisition of Trendwest under the provisions of the Australia Foreign Acquisitions and Takeovers Act 1975.
Cendant and Trendwest are not aware of any other foreign governmental approvals or actions that may be required for consummation of the merger. Nonetheless, in connection
with the merger, the laws of other foreign countries and jurisdictions in which Trendwest conducts its business may require the filing of information with, or the obtaining of the approval or consent of, governmental authorities in those countries
and jurisdictions. The governments in those countries and jurisdictions might attempt to impose additional conditions on Trendwests operations conducted in those countries and jurisdictions as a result of the merger. If such approvals or
consents are found to be required, the parties intend to make the appropriate filings and applications. In the event that a filing or application is made for the requisite foreign approvals or consents, there can be no assurance that those approvals
or consents will be granted and, if those approvals or consents are received, there can be no assurance as to the date of those approvals or consents.
State Takeover Laws
Sections 60.825-60.845 of
the Oregon Revised Statutes (ORS) prevent an interested stockholder, generally a person who owns or has the right to acquire 15% or more of a corporations outstanding voting stock, or an affiliate or associate thereof, from
engaging in a business combination (defined to include mergers and certain other transactions) with an Oregon corporation for a period of three years following the date such person became an interested stockholder unless, among other
things, prior to such date the board of directors of the corporation approved either the business combination or the transaction in which the interested stockholder became an interested stockholder. On March 28, 2002, prior to the execution of the
stock purchase agreement, the merger agreement or the stock option agreement, the board of directors of Trendwest, approved each of these agreements, the stock purchase, the merger and the transactions contemplated by such agreements under and for
purposes of the provisions Sections 60.825-60.845 of the ORS. Trendwest has taken all appropriate action so that neither Cendant nor Merger Sub is an interested stockholder pursuant to Sections 60.825-60.845 of the ORS and, accordingly,
Sections 60.825-60.845 of the ORS are inapplicable to the merger.
Trendwest was subject to Sections 60.801
et seq. of the ORS, also known as the Oregon Control Share Act, which generally provides that a person who acquires voting stock of an Oregon corporation in a transaction (other than a transaction in which voting shares are acquired from the issuing
public corporation) that results in
45
the acquirer holding more than 20%, 33 1/3% or 50% of the total voting power of a corporation cannot vote the shares it acquires in the control share acquisition except in certain circumstances.
On March 28, 2002, prior to the execution of the stock purchase agreement, the merger agreement or the stock option agreement, the board of directors of Trendwest amended the bylaws of Trendwest to provide that Sections 60.801 et seq. of the ORS
relating to control share acquisitions, are not applicable to Cendant, Merger Sub or Trendwest.
A number of
states have adopted takeover laws and regulations which purport to varying degrees to be applicable to attempts to acquire securities of corporations which are incorporated in such states or which have or whose business operations have substantial
economic effects in such states, or which have substantial assets, security holders, principal executive offices or principal places of business therein. In 1982, the Supreme Court of the United States, in Edgar v. Mite Corp., invalidated on
constitutional grounds the Illinois Business Takeovers Act, which as a matter of state securities law made takeovers of corporations meeting certain requirements more difficult, and the reasoning in such decision is likely to apply to certain other
state takeover statutes. However, in 1987, in CTS Corp. v. Dynamics Corp. of America, the Supreme Court of the United States held that the State of Indiana could, as a matter of corporate law and in particular those aspects of corporate law
concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without the prior approval of the remaining stockholders, provided that such laws were applicable only under certain
conditions. Subsequently, in TLX Acquisition Corp. v. Telex Corp., a federal district court in Oklahoma ruled that the Oklahoma statutes were unconstitutional insofar as they applied to corporations incorporated outside Oklahoma in that they would
subject such corporations to inconsistent regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a federal district court in Tennessee ruled that four Tennessee takeover statutes were unconstitutional as applied to corporations incorporated
outside Tennessee. This decision was affirmed by the United States Court of Appeals for the Sixth Circuit.
Except
as described above, Cendant has not attempted to comply with any state takeover statutes in connection with the merger. Cendant reserves the right to challenge the validity or applicability of any state law allegedly applicable to the merger and
nothing in this prospectus nor any action taken in connection herewith is intended as a waiver of that right.
Third-party Approvals
Trendwest is a party to a number of credit agreements,
lease agreements, and other agreements which contain provisions granting the other party certain rights in the event of a change in control of Trendwest. The closing of the stock purchase was conditioned upon the receipt of certain consents in
connection with such agreements. Pursuant to the merger agreement, each of Trendwest and JELD-WEN has agreed to use its reasonable actions necessary to obtain any consent, authorization, order or approval of, or any exemption by, any governmental
authority or other public or private third party required to be obtained or made in connection with the various transactions contemplated by the merger agreement, the stock purchase agreement and the stock option agreement.
Dissenters or Appraisal Rights
Under Oregon law, shareholders that otherwise
would be entitled to exercise dissenters rights do not have these rights if the stock affected is registered on a national securities exchange or is quoted on the National Association of Securities Dealers, Inc. Automated Quotation System as a
National Market System issue. If Trendwest common stock is quoted on Nasdaq as a National Market System issue on the date on which Merger Sub delivers notice under Section 60.491 of the ORS of its intent to effect a short-form merger,
dissenters rights will not be available in connection with the merger. Cendant does not intend to de-list the Trendwest common stock from Nasdaq, and has agreed in the merger agreement to use its reasonable efforts to maintain the listing of
the Trendwest common stock on Nasdaq, until after completion of the merger.
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Interests of Certain Persons in the Acquisition of Trendwest by Means of the Stock Purchase and the Merger
Some of the executive officers and directors of Trendwest, as well as JELD-WEN, Trendwests principal and controlling shareholder, have interests in the acquisition of Trendwest in accordance with
the terms of the stock purchase agreement and the merger agreement that are different from, or in addition to, the interests of Trendwest shareholders generally. These additional interests relate to, among other things:
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the requirement under the merger agreement that JELD-WEN and Trendwest effect the MountainStar redemption, pursuant to which the MountainStar development
project was transferred, prior to the closing of the stock purchase, to JELD-WEN in exchange for shares of Trendwest common stock; |
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the effect of the merger on employment agreements for certain executive officers, including the availability of termination payments;
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the accelerated vesting of all stock options held by all Trendwest employees, including officers; and |
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the indemnification of, and provision of director and officer liability insurance for the directors and officers of Trendwest. |
These interests, to the extent they are material, are described below. The Trendwest board of directors was aware of these
interests and considered them, among other things, prior to approving the merger agreement and taking other actions relating to the acquisition of Trendwest.
MountainStar Redemption
JELD-WEN agreed to
acquire the MountainStar development project from Trendwest immediately prior to the stock purchase in exchange for a number of its shares of Trendwest common stock. The purchase price was equal the net book value of MountainStar and the number of
shares to be redeemed in payment of the purchase price will equal the purchase price divided by $24.00. The net book value of MountainStar represents Trendwests investment to date in MountainStar, comprised of the price it paid for
MountainStar in 2000 plus amounts subsequently spent in the development process less certain accrued liabilities, estimated at approximately $76 million as of March 31, 2002, net of approximately $32 million of debt that was transferred with
MountainStar. JELD-WEN has granted Trendwest the exclusive right to develop, market and sell timeshare interests at MountainStar, subject to certain conditions.
Employment Agreements
Trendwest has entered into employment agreements with two of its named executive officers, William Peare, President and Chief Executive Officer, and Jeffery Sites, Executive Vice President and Chief Operating Officer.
The severance provisions contained in these two employment agreements do not contain any provisions that provide
an acceleration of or increase in benefits in the event of a change in control. The agreements do provide that either Mr. Peare or Mr. Sites will be entitled to 12 months compensation including the prior years bonus if their employment is
terminated without cause.
Effects of the Merger on Grants Pursuant to Trendwest Stock Option Plan
Stock options were granted by Trendwest under its 1997 Employee Stock Option Plan, as amended. As a
result of the stock purchase, the unvested portion of stock options granted under the stock option plan became fully vested in accordance with the provisions of the stock option plan. Under the terms of the merger agreement, Cendant has agreed to
assume each outstanding stock option granted under the stock option plan. Each stock option outstanding at the effective time of the merger will automatically be converted into the right to
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receive a number of shares of CD Common Stock equal to the number of shares of Trendwest common stock for which the stock option was then exercisable multiplied by the exchange ratio used to
determine the merger consideration payable under the merger agreement to Trendwests public shareholders. The exercise price for each stock option will be equal to the exercise price subject to the stock option immediately prior to the
effective time of the merger divided by the exchange ratio used to determine the merger consideration payable under the merger agreement to Trendwests public shareholders. All other terms and conditions of the converted options will remain the
same.
The following chart sets forth, as of March 30, 2002, the total number of Trendwest stock options granted
to Trendwests directors and executive officers under Trendwests stock option plan, the total number of stock options that vest immediately upon a change of control of Trendwest and the weighted average exercise price of the vested stock
options which vest as a result of a change of control.
Name
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Total Number of Stock Option Grants
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Number of Stock Options Vested as a Result of Change of Control
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Weighted Average Exercise Price of Vested Stock Options That Vest as a Result of Change of
Control
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Gene Hensley |
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84,000 |
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37,200 |
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$15.04 |
Tim ONeil |
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48,000 |
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33,600 |
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$15.13 |
William Peare |
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84,000 |
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37,200 |
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$15.04 |
Alan Schriber |
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84,000 |
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37,200 |
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$15.04 |
Jeffery Sites |
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84,000 |
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37,200 |
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$15.04 |
Effect of the Merger on Trendwest Employee Stock Purchase
Plan
At or prior to the effective time of the merger, in connection with the merger, Trendwest will take
all actions necessary to terminate the Trendwest 1999 Employee Stock Purchase Plan and will take all necessary steps to refund, without interest, to each participant in the employee stock purchase plan any amounts withheld from such
participants compensation pursuant to an enrollment agreement under the employee stock purchase plan to the extent such amount has not be used to purchase shares of Trendwest common stock prior to the termination of the employee stock purchase
plan.
Directors and Officers
Promptly following the stock purchase, Cendant was entitled to designate a number of directors of the Trendwest board of directors multiplied by Cendants percentage
share ownership. Trendwest agreed to use its best efforts either to increase the size of the Board or to secure the resignations of the appropriate number of its incumbent directorsother than directors on Trendwests designated special
committeeto enable Cendants designees to be nominated and elected. Immediately following the stock purchase, William F. Peare, Jeffrey P. Sites, Jerol E. Andres, Douglas P. Kintzinger and Roderick C. Wendt resigned as members of
Trendwests board of directors, and Trendwests remaining directors elected James E. Buckman, Stephen P. Holmes, Samuel L. Katz, and Kevin M. Sheehan, each a designee of Cendant, to fill the resulting vacancies on Trendwests board of
directors. Cendant agreed in the merger agreement that, until the merger, it would not remove any of the special committee directors. In connection with the merger, the directors of Merger Sub shall, on and after the completion of the merger, become
the directors of the surviving company. The officers of Trendwest shall, on and after the completion of the merger, become the officers of the surviving company.
Indemnification and Insurance
Trendwests current directors and executive officers have executed indemnification agreements whereby Trendwest has agreed to indemnify each of them for acts or omissions in their capacities as directors or officers of
Trendwest. Under the terms of the merger agreement, the surviving company has agreed, for a period of six
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years after the effective time of the merger, to indemnify the directors and officers of Trendwest and its subsidiaries for any acts or omissions occurring on or prior to the
effective time of the merger, to the fullest extent permissible under applicable provisions of the Oregon Business Corporation Act, Trendwests articles of incorporation or bylaws, or under any such agreements.
The surviving company will also maintain Trendwests current directors and officers liability insurance policy for a
period of three years following the effective time of the merger. Directors and officers liability insurance policies on terms and in amounts no less favorable than those in effect prior to the effective time of the merger may however be
substituted. If the existing directors and officers liability insurance policy expires or is terminated or cancelled during such period, then reasonable best efforts will be used to obtain a substantially similar directors and
officers liability insurance policy. In no event will Cendant or the surviving company be required to pay aggregate premiums for insurance in excess of 200% of the premium which was paid by Trendwest in 2001 or prior to March 30, 2002,
whichever is greater, If Cendant or the surviving company is unable to obtain the amount of insurance required by merger agreement, Cendant or the surviving company will obtain as much insurance as can be obtained for an annual premium not in excess
of 200% of the aforementioned premium.
Business Relationships Between Cendant and JELD-WEN and JELD-WEN
Affiliates
JELD-WEN has agreed not to compete with Trendwest following the stock purchase for a period of
five years, with certain limited exceptions relating to operations at MountainStar and at its Eagle Crest and Running Y resorts.
JELD-WEN has agreed that following the merger, until December 31, 2002, it will continue to provide to Trendwests employees a number of the employee benefits currently being provided by JELD-WEN, with JELD-WEN to
charge Trendwest its actual direct costs for the provision of such benefits plus administrative fees of $22.50 per month per employee.
Trendwest participated in the vacation interval exchange networks operated by Resort Condominiums International, LLC, a subsidiary of Cendant, pursuant to agreements that terminated in 2001. The net amount paid by Trendwest
to Cendant in 2001 in conjunction with its participation under these agreements was approximately $1.9 million.
Delisting and Deregistration of Trendwest Common Stock
If the merger is completed,
the shares of Trendwest common stock will be delisted from Nasdaq and deregistered under the Securities Exchange Act of 1934. Consequently, following completion of the merger, Trendwest shareholders will no longer be able to trade shares of
Trendwest common stock on any stock exchange.
Restrictions on Resales by Affiliates of Trendwest
We are registering the shares of
CD Common Stock to be issued to Trendwest shareholders in the merger under the Securities Act of 1933 and are also registering for resale the shares of CD Common Stock issued and to be issued to Trendwest shareholders under the stock purchase
agreement under the Securities Act of 1933. These shares may be traded freely and without restriction by those stockholders not deemed to be affiliates of Trendwest as that term is defined under the Securities Act. An affiliate of a
corporation, as defined by the rules promulgated under the Securities Act, is a person who directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with that corporation. Any subsequent
transfer by an affiliate of Trendwest must be one permitted by the resale provisions of Rule 145 promulgated under the Securities Act or as otherwise permitted under the Securities Act. These restrictions are expected to apply to the directors and
executive officers of Trendwest as well as to certain other related individuals or entities, including JELD-WEN.
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The following is a description of the material terms of the
merger agreement, but does not purport to describe all the terms of the merger agreement. The provisions of the merger agreement are complicated and not easily summarized. The full text of the merger agreement is attached as Annex A to this
prospectus and is incorporated herein by reference.
SHAREHOLDERS OF TRENDWEST ARE URGED TO READ THE MERGER AGREEMENT IN ITS ENTIRETY
FOR A MORE COMPLETE DESCRIPTION OF THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT BECAUSE IT IS THE LEGAL DOCUMENT THAT GOVERNS THE MERGER. IN THE EVENT OF ANY DISCREPANCY BETWEEN THE TERMS OF THE MERGER AGREEMENT AND THE
FOLLOWING SUMMARY, THE MERGER AGREEMENT WILL CONTROL.
Introduction: Transactions
The Stock Purchase
Under the terms of the stock purchase agreement, on April 30, 2002, approximately 90.1% of the outstanding Trendwest common
stock was purchased by Merger Sub from JELD-WEN and certain other shareholders of Trendwest. A more thorough description of the terms of the stock purchase agreement can be found below under The Stock Purchase Agreement pages 62 through
65.
The Stock Option
Under the terms of the stock option agreement, Merger Sub has the right to purchase newly issued stock from Trendwest at a price of $24.00 per share so as to assure us that
we beneficially own at least 90% of the Trendwest common stock then outstanding. This option assures us that the merger will be effected via a short-form merger under Section 60.491 of the Oregon Revised Statues. A more thorough
description of the terms of the stock option agreement can be found below under The Stock Option Agreement.
Form of the Merger; Charter Documents of Trendwest
Under the terms of the
merger agreement, Merger Sub will be merged with and into Trendwest. Trendwest will be the surviving company in the merger and will continue its corporate existence under Oregon law as a wholly owned subsidiary of Cendant. Merger Sub will cease to
be an entity as a result of the merger. The articles of incorporation and bylaws of Merger Sub in effect immediately prior to the effective time of the merger will become the articles of incorporation and bylaws of Trendwest following the merger.
The name of the surviving company will be Trendwest Resorts, Inc.
Timing of Closing
We will complete the merger when all of the conditions to completion of the merger contained in the
merger agreement described in the section entitled Conditions to the Merger beginning on page 60 of this prospectus are satisfied or waived. The merger will become effective upon the filing of articles of merger with the Secretary of
State of the State of Oregon.
At the effective time of the merger, Trendwest common stock
(other than Trendwest common stock held by Cendant or any wholly owned subsidiary of Cendant) will be converted, without any action on the part of the holder, in accordance with the exchange procedures below, into the right to receive, for each
share of Trendwest common stock, the merger consideration. The merger consideration will be 1.3074 shares of CD Common
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Stock (rounded to the nearest thousandth of a share), which is the greater of the JELD-WEN exchange ratio of 1.2973, determined as described in the section entitled The Stock Purchase
Agreement Consideration, and the merger exchange ratio of 1.3074, determined as follows:
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the merger exchange ratio was determined by dividing $24.00 by the average Cendant merger trading price, so that if the average Cendant merger trading price was
in between $16.15 and $18.50, then the exchange ratio would be between 1.2973 and 1.4861; |
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in the event that the average Cendant merger trading price had been less than $16.15 but greater than or equal to $13.50, then the merger exchange ratio would
have been equal to 1.4861; and |
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in the event that the average Cendant merger trading price had been less than $13.50, then the exchange ratio would have equaled the quotient of $20.062 divided
by the average Cendant merger trading price. |
The average Cendant merger trading price
is $18.357, which is the arithmetic average of the 4:00 p.m. eastern time closing sales prices of CD Common Stock reported on the New York Stock Exchange Composite Tape for the ten consecutive NYSE trading days ending on (and including) May 21,
2002, the second trading day immediately prior to, and excluding the date that the registration statement in which this prospectus is included became effective.
The exchange ratio in the merger will also be appropriately and equitably adjusted if the number of outstanding shares of either CD Common Stock or Trendwest common stock
changes as a result of any stock split, reverse stock split, stock dividend, reclassification or any similar transaction.
At the effective time of the merger, all shares of Trendwest common stock will no longer be outstanding and will be cancelled and retired and will cease to exist. Following the effective time of the merger, each holder of Trendwest
common stock (other than Trendwest, Cendant or any wholly owned subsidiary of Cendant) will cease to have any rights with respect to their shares of Trendwest common stock, except the right to receive, without interest, the merger consideration.
Conversion of Shares; Exchange Agent; Procedures for Exchange of Certificates; Fractional Shares
At the effective time of the merger, Trendwest common stock will automatically convert into the right to receive the merger consideration. At that time or promptly thereafter, Cendant will deposit with the exchange agent all of the
merger consideration.
Cendant has appointed Mellon Investor Services to act as exchange agent for the
merger. The exchange agent will receive the merger consideration from Cendant and distribute it to Trendwest shareholders who properly surrender their Trendwest stock certificates in accordance with the exchange agents instructions. A
transmittal letter with instructions for the surrender of stock certificates will be mailed to you as soon as reasonably practicable after completion of the merger.
After the effective time of the merger, each certificate that previously represented shares of Trendwest common stock will represent only the right to receive the merger
consideration. The merger consideration will also include cash payable in lieu of fractional shares of CD Common Stock and dividends or other distributions on CD Common Stock with record dates after the effective time of the merger. However, no
dividends or other distributions with respect to CD Common Stock with a record date after the effective time of the merger shall be paid to you and no cash payment in lieu of fractional shares of CD Common Stock shall be paid to you until the holder
of record of your certificate(s) surrenders the certificate in accordance with the exchange agents instructions. No interest will be paid or will accrue on the cash payable upon surrender of your certificate(s).
If there is a transfer of ownership of Trendwest common stock that is not registered in the transfer records of Trendwest, exchange and
payment may be made to the transferee if the certificate representing those shares of
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Trendwest common stock is presented to the exchange agent, accompanied by all documents required to evidence and effect the transfer and to evidence that any applicable stock transfer taxes have
been paid.
Cendant will not issue fractional shares of CD Common Stock to you upon surrender of your
certificates. In addition, no dividend or distribution of Cendant will relate to fractional share interests and the fractional share interest will not entitle you to vote or to any rights of a stockholder of Cendant. In lieu of the issuance of
fractional shares, you will receive cash in an amount, less the amount of any required withholding taxes, equal to the product of the fractional part of a share that you are entitled to receive and the average Cendant merger trading price.
Effect on Stock Based Awards; Employee Stock Purchase Plan
Each outstanding stock
option or other right to acquire shares of Trendwest common stock granted under the Trendwest 1997 Employee Stock Option Plan, whether or not then exercisable or vested, which is outstanding and unexercised immediately prior to the merger, will
become vested immediately prior to the effective time of the merger and cease to represent a right to acquire shares of Trendwest common stock and will be assumed by Cendant and will be converted into options to purchase shares of CD Common Stock.
The number of shares of CD Common Stock to be subject to each converted option will be equal to the product of
the number of shares of Trendwest common stock subject to the original option and the exchange ratio which is used to determine the merger consideration, rounded down to the nearest whole share.
The exercise price per share of CD Common Stock under each converted option will be equal to the exercise price per share of Trendwest common stock under the original
option divided by the same exchange ratio which is used to determine the merger consideration, but that exercise price will be rounded up to the nearest cent. Except as set forth above, the other provisions of the converted option will remain
unchanged.
Effective at or prior to the effective time of the merger, Trendwest will take all actions necessary
to terminate the 1999 Employee Stock Purchase Plan and will take all steps to refund, without interest, to you, if you are a participant, any amounts it withheld from your compensation under an enrollment agreement under the 1999 Employee Stock
Purchase Plan to the extent that it has not been used to purchase shares of Trendwest Common stock on an ending date (as defined in the plan).
Board of Directors and Officers of the Surviving Company
After the closing of the
stock purchase, Trendwest agreed to use its best efforts to have a number of designees that Cendant designates to be elected or appointed to the Trendwest board of directors equal to the product of the percentage of shares of Trendwest common stock
that we own and the number of directors (after giving effect of adding our designees). Immediately following the stock purchase, William F. Peare, Jeffrey P. Sites, Jerol E. Andres, Douglas P. Kintzinger and Roderick C. Wendt resigned as members of
Trendwests board of directors, and Trendwests remaining directors elected James E. Buckman, Stephen P. Holmes, Samuel L. Katz, and Kevin M. Sheehan, each a designee of Cendant, to fill the resulting vacancies on Trendwests board of
directors.
After the merger, the directors of Merger Sub will be the directors of Trendwest. After the
merger, the officers of Trendwest will continue to serve in their respective offices until their successors are elected or appointed or until their resignations or removal.
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Representations and Warranties
Representations and Warranties by Trendwest
The merger agreement, including schedules thereto, contains a number of representations and warranties by
Trendwest. Some of the most significant of these include:
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that the board of directors of Trendwest: |
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determined that the merger agreement, the stock option agreement, the merger and the other transactions contemplated by those agreements, are advisable and fair
to and in the best interests of the shareholders of Trendwest, |
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duly and validly approved and took all corporate action required to be taken to authorize the merger agreement, the stock option agreement and the consummation
of the merger and the other transactions contemplated by those agreements, |
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unanimously resolved to recommend that the shareholders of Trendwest approve the merger agreement, the stock option agreement, the merger and the other
transactions contemplated by those agreements if a meeting of the Trendwest shareholders is required to be held in accordance with applicable law in order to approve the merger, and |
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duly and validly amended Trendwests bylaws to provide that Trendwest, Cendant, Merger Sub, the merger agreement, the stock option agreement, the stock
purchase agreement and the transactions contemplated by those agreements are not subject to the State of Oregons control share statute, Sections 60.801 through 60.810 of the Oregon Revised Statutes and approved the foregoing for
purposes of the State of Oregons business combination statute, Section 60.825 through 60.845; |
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the receipt by Trendwest of the written opinion of its financial advisor, Banc of America Securities, that the exchange ratio formula set forth in the merger
agreement used to determine the number of shares to be received in the merger by the holders of Trendwest common stock in the merger, other than JELD-WEN and the other shareholders selling their common stock under the stock purchase agreement, is
fair to such holders of Trendwest common stock from a financial point of view; |
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the receipt by the special committee of the board of directors of the written opinion of its financial advisor, Houlihan Lokey Howard & Zukin, dated March
28, 2002, that the consideration to be received by the holders of Trendwest common stock in the merger, other than JELD-WEN and certain JELD-WEN affiliates, is fair to such holders of Trendwest common stock from a financial point of view;
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the absence of conflicts, violations, breaches, defaults, creation of liens or consents of, or on, organizational documents, properties, loans, leases,
contracts or other agreements of Trendwest; |
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Trendwests capital structure; |
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the compliance of documents filed with the SEC and the Australian Securities Investment Commission since December 31, 1998 and the accuracy of financial
statements included in those documents; |
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the compliance with generally accepted accounting principles for Trendwest, its subsidiaries (including unconsolidated subsidiaries) and the Clubs;
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Trendwests, its subsidiaries and the Clubs compliance with or its absence of liability under certain tax, labor, employee benefit and
environmental laws and matters; |
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the absence of any material adverse effect with respect to Trendwest and its subsidiaries or the Clubs since December 31, 2001;
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the conduct of Trendwests and its subsidiaries business in all material respects only in the ordinary course of business since December 31, 2001;
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the existence of any undisclosed liabilities of Trendwest, its subsidiaries and the Clubs; |
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the absence of pending or threatened litigation against or involving Trendwest, its subsidiaries or the Clubs; |
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Trendwests, its subsidiaries and the Clubs title to owned real property and rights in leased real property; |
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the validity and binding nature of any material contract and the absence of any default under those contracts; |
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industry specific representations and warranties with respect to vacation ownership interests and the laws regulating them, timeshare registrations, debt
instruments, resorts, homeowner and condominium associations, vacation credits and the Clubs; |
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Trendwests disclosure of any affiliated transactions; and |
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the clubs operation in accordance with its governing documents. |
Representations and Warranties by JELD-WEN
The merger agreement contains certain customary representations and warranties by JELD-WEN in its capacity as a party to the merger agreement.
Representations and Warranties by Cendant and Merger Sub
The merger agreement contains certain customary representations and warranties by Cendant and Merger Sub in their capacities as parties to the merger agreement.
Definition of Material Adverse Effect
Under the terms of the merger agreement, a
material adverse effect on Trendwest is defined to mean any change, event, development or circumstance which, individually or taken together, would be reasonably expected:
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to have a materially adverse effect, either in the short term or in the long term, on the business, results of operations, assets, liabilities or condition
(financial or otherwise) of Trendwest and its subsidiaries (including for such purposes the clubs), taken as a whole; |
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to impair in any material respect the ability of Trendwest to perform its obligations under the merger agreement or the stock option agreement; or
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to have a materially adverse effect on or prevent or materially delay the consummation of any of the transactions contemplated by the merger agreement, the
stock purchase agreement and the stock option agreement. |
However, with respect to the first
above bullet, any adverse effect resulting primarily from the following is to be disregarded in determining whether there has been a material adverse effect on Trendwest:
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changes in the United States economy generally which do not disproportionately affect Trendwest in any material respect; or |
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changes in the timeshare industry generally which do not disproportionately affect Trendwest in any material respect. |
However, under the terms of the merger agreement, with respect to the two bullets directly above, changes resulting from the
commencement or material worsening of a war or armed hostilities or other national or international calamity directly or indirectly involving the United States or Australia or from any terrorist activities, and changes in any of certain laws
applicable to the timeshare business shall not be disregarded.
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Conduct of Business Pending Completion of the Stock Purchase
Subject to
certain exceptions, including the written consent of Cendant, prior to the completion of the stock purchase, Trendwest agreed to, and to cause its subsidiaries to, do the following:
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conduct its operations in the ordinary course of business consistent with past practice; and |
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use its reasonable best efforts to preserve its present business organization intact and maintain satisfactory relations with customers, employees, contractors,
regulators and others having business dealings with it. |
Trendwest also agreed to certain
customary restrictions on its and its subsidiaries operations pending completion of the stock purchase. Some of the most significant of these included:
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except for borrowing under certain material contracts and additional borrowings less than $15 million from a recognized financial institution not involving the
financing of its sale of vacation credits, assume, not to guarantee, endorse or otherwise become liable or responsible for the obligations of any other person, or make any loans, advances or capital contributions to, or investments in, any other
person; |
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not to issue, sell, grant pursuant to any employee benefit plan, pledge, encumber, subject to certain liens or dispose of, split, combine or reclassify or
redeem, purchase or otherwise acquire any shares in Trendwest or any of its subsidiaries or effect any change in the issued and outstanding capitalization of Trendwest or any of its subsidiaries, except for shares of Trendwest common stock issued
prior to the closing of the merger upon the exercise of employee options outstanding on the date of the merger agreement or in the ordinary course of business pursuant to rights granted under the employee stock purchase plan;
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not declare, set aside or pay any dividend or make any distribution of any assets to any of its shareholders, or discharge or cancel any indebtedness, other
than the MountainStar redemption as described below; |
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not sell, lease, encumber or otherwise dispose of any of its assets, except for sales to consumers of vacation credits in the ordinary course of business
consistent with past practice, dispositions of tangible personal property in the ordinary course of business consistent with past practice and the disposition of MountainStar; |
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not enter into any contract for the purchase or lease of any assets or make any capital expenditures or commitments involving the expenditure of more than
$500,000, merge or consolidate with, purchase all or any substantial part of the assets of, or otherwise acquire any other entity, or enter into any contract obligating Trendwest to spend more than $100,000, on a one time or annual basis, that is
not terminable without cost upon sixty days notice other than certain marketing contracts; |
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not make any change in the compensation or benefits payable or to become payable to any of its officers, directors, employees, agents or consultants, other than
increases in wages to employees who are not directors, officers or affiliates, in the ordinary course of business consistent with past practice, not exceeding $10,000 each year for any individual employee, agent or consultant and $250,000 each year
in the aggregate, or to persons providing management services; |
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not permit any insurance policy obtained for the purpose of protecting and insuring against any material loss or exposure and naming it or one of its
subsidiaries as a beneficiary or a loss payee to be cancelled or terminated without notice to Cendant; |
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take any action to change accounting policies procedures or practices, except as required by a change in GAAP, SEC position or applicable law;
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not settle or compromise any tax liability, agree to any adjustment of any tax attribute, make or change any election with respect to taxes, surrender any right
to claim a refund of taxes, consent to any extension or waiver of the statute of limitation period applicable to any taxes, tax returns or tax claims, file any amended tax return, or enter into any closing agreement; |
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not pay, discharge or satisfy any claims or liabilities, whether absolute, accrued or unaccrued, contingent, determined, determinable or otherwise, other than
in the ordinary course of business consistent with past practice or in an amount not exceeding any reserve established in respect of such claim in the balance sheet of Trendwest; |
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not enter into any agreement containing any provision or covenant limiting in any respect its ability to engage in its business or compete anywhere in the
world; |
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except in accordance with previous construction contracts and applicable laws or in the ordinary course of business consistent with past practice, not take any
actions with respect to the development of the real property which Trendwest or any of its subsidiaries owns; and |
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not approve or request changes to those previous construction contracts that result in a change which violates a governmental requirement or lease, would
reasonably be expected to reduce the overall scope, quality, character or amenities of the parcel of real property, increases construction costs for such project by more than one per cent of the project cost, reduces the number of units or vacation
credits to be allocated to such parcel of real property after conveyance to either of the clubs or extends the completion date for any parcel more than thirty days beyond the date indicated on the applicable construction schedule.
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The merger agreement provides that, except as set forth below in this
section, from and after the date of the merger agreement and prior to the completion of the stock purchase, neither Trendwest and its subsidiaries and their respective officers, directors, employees, investment bankers, attorneys, accountants or
other agents shall, directly or indirectly:
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initiate, solicit or encourage or take any action to facilitate the making of, any offer or proposal which constitutes or is reasonably likely to lead to an
acquisition proposal; |
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enter into any agreement regarding an acquisition proposal; |
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participate in negotiations or discussions with, or provide any information or data to, any person, other than Cendant, Merger Sub or any of their respective
affiliates or representatives, regarding any acquisition proposal; or |
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make or authorize any statement, recommendation or solicitation in support of any acquisition proposal, or otherwise encourage any effort or attempt by any
person to do or seek any of the foregoing. |
The merger agreement also provides that upon the
execution of the merger agreement, Trendwest was required to immediately cease and cause to be terminated all existing discussions, negotiations and communications with any persons with respect to any acquisition proposal.
Trendwest also agreed to promptly, and in any event within twenty-four hours following receipt by Trendwest or any of its
representatives of a superior proposal or any inquiry or expression of interest relating to an acquisition proposal or acquisition proposal interest and prior to providing any party from whom a superior proposal has been received with any material
non-public information, notify Cendant and JELD-WEN of the receipt of the same. Trendwest also agreed to promptly provide to Cendant any material non-public information regarding Trendwest provided to any other party which was not previously
provided to Cendant, such additional information to be provided no later than the date of provision of such information to the other party.
In addition, the merger agreement provides that, except as otherwise provided in the merger agreement, the Trendwest board of directors will not:
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withdraw or modify, or propose to withdraw or modify, in a manner adverse to Cendant or to Merger Sub, the approval or recommendation by the Trendwest board of
directors or any such committee of the merger agreement, the merger or take any action or make any statement inconsistent with such approval; |
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approve or recommend, or propose to approve or recommend, any acquisition proposal; or |
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enter into any letter of intent, agreement in principle or agreement with respect to any acquisition proposal. |
Notwithstanding the above, prior to the stock purchase closing, Trendwests board of directors, to the extent that it may have
determined in good faith, after consultation with independent outside counsel, that the failure to do so would be inconsistent with the boards fiduciary duties to the Trendwests shareholders under applicable law, could have taken any of
the actions in the first two bullets above. Trendwest could have done so at a time that was after the third business day following Trendwests delivery to Cendant of written notice advising Cendant that Trendwests board of directors had
determined that it had received a superior proposal, specifying the material terms and conditions of that superior proposal, identifying the person making that superior proposal and indicating that it intended to take such action and if, during that
three business day period, Trendwest and its advisors had negotiated in good faith with Cendant to make adjustments in the terms and conditions of the merger agreement so that that acquisition proposal no longer constituted a superior proposal. The
taking of that action would not have changed the approval of Trendwests board of directors for purposes of causing any state takeover statute or other state law to be inapplicable to the transactions contemplated by the merger agreement, the
stock option agreement and the stock purchase agreement.
Notwithstanding anything in the merger
agreement to the contrary nothing prohibits:
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Trendwest or Trendwests board of directors from taking and disclosing to Trendwests shareholders a position contemplated by Rule 14e-2 promulgated
under the Securities Exchange Act of 1934, as amended; or |
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any disclosure if, in the good faith judgment of the Trendwest board of directors, after consultation with outside counsel, failure to do so would be
inconsistent with the boards fiduciary duties to Trendwests shareholders under applicable law. |
The term superior proposal means any acquisition proposal that is not conditioned upon the ability to obtain financing:
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which is for all, but not less than all, of the issued and outstanding shares of Trendwest common stock or one hundred percent of the consolidated assets of
Trendwest and |
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which the Trendwest board of directors determines in good faith, after consultation with a nationally recognized investment banking firm, is:
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superior to Trendwests shareholders from a financial point of view and, taking into account relevant legal, financial and regulatory aspects of the
proposal, the identity of the third party making such proposal, and the conditions for completion of such proposal, a more favorable transaction than the merger; and |
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reasonably likely to be completed. |
Trendwest agreed to promptly notify Cendant, Merger Sub and JELD-WEN if any proposals are received by, any information is requested from, or any negotiations or discussions are sought to be initiated
or continued with Trendwest or any of its subsidiaries or any of their respective representatives, in each case in connection with any acquisition proposal or the possibility or consideration of making an acquisition proposal indicating, in
connection with such notice, the name of the person indicating such acquisition proposal interest and the material terms and conditions of any proposals or offers. Trendwest agreed that it shall keep Cendant, Merger Sub and JELD-WEN informed, on a
current basis, of the status and terms of any acquisition proposal interest.
The term acquisition
proposal means:
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any tender or exchange offer involving Trendwest or any of its subsidiaries; |
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any proposal for a merger, consolidation or other business combination involving Trendwest or any of its subsidiaries; |
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any proposal or offer to acquire in any manner an interest in excess of fifteen percent of the outstanding equity securities, or a substantial portion of the
business or assets of, Trendwest or any of its subsidiaries, other than assets or inventory in the ordinary course of business or assets held for sale; |
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any proposal or offer with respect to any recapitalization or restructuring with respect to Trendwest or any of its subsidiaries; or
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any proposal or offer with respect to any other transaction similar to any of the foregoing with respect to Trendwest or any of its subsidiaries other than
pursuant to the transactions contemplated by the merger agreement and the stock purchase agreement. |
Access to Information
Trendwest agreed to electronically link its financial reporting system to Cendants financial reporting system. Cendant agreed that
the information retrieved from Trendwests financial reporting system will not be made available to persons who are directly involved in pricing or any other competitive activity at Cendant or any subsidiary of Cendant. Cendant agreed that it
will not use such information other than for purposes of assessing the financial condition of Trendwest for purposes of the transactions contemplated by the merger agreement, the stock option agreement and the stock purchase agreement, and will not
share, provide or sell the information to any third party or use the information in any manner that could reasonably be considered a restraint on competition or result in a violation of any applicable laws.
Indemnification and Insurance
Under the merger agreement, Cendant has agreed to cause the surviving company to maintain in effect for six years after the closing of the merger, indemnify, defend and hold harmless the officers and
directors of Trendwest and its subsidiaries against all losses, claims, damages, liabilities, costs, fees and expenses (including reasonable fees and disbursements of counsel and judgments, fines, losses, claims, liabilities and amounts paid in
certain settlements) arising out of actions or omissions solely in those capacities occurring at or prior to the closing of the merger to the fullest extent permissible under applicable provisions of the Oregon Business Corporation Act, the terms of
Trendwests articles of incorporation or bylaws, or under any agreements as in effect at March 30, 2002. Also, any claims made within that six year period, all rights to indemnification will continue until the disposition of those claims.
The merger agreement also provides that Cendant or Merger Sub shall maintain Trendwests existing
officers and directors liability insurance for a period of not less than three years after the closing of the merger. However, Trendwest agreed that Cendant may substitute in place of the earlier policies, policies of substantially
equivalent coverage and amounts containing terms, taken as a whole, no less favorable to those directors or officers. Cendant also agreed that if the existing directors and officers insurance expires or is terminated or cancelled during
the period, then Cendant or Merger Sub will use reasonable best efforts to obtain substantially similar insurance. But Trendwest agreed that in no event will Cendant be required to pay aggregate premiums for insurance in excess of two hundred
percent of the premium which was paid by Trendwest in 2001 or in 2002, before March 30, 2002, whichever is greater, for such purpose. Finally, Trendwest agreed that if Cendant or Merger Sub is unable to obtain the amount of insurance required by
these terms, they only need obtain as much insurance as can be obtained for an annual premium not in excess of that sum.
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Certain Other Matters
The merger agreement contains Trendwests agreements to file all tax returns, with certain exceptions, and pay all taxes payable in
accordance with such returns. The merger agreement also contains Trendwests agreement to obtain from a credit bureau credit scores for the notes receivables it owns.
The merger agreement also contains Trendwests agreement to have filed prior to the completion of the stock purchase its Form 10-Q for the period ended March 31, 2002,
with Cendant being reasonably satisfied that the financial information in the Form 10-Q is presented in accordance with accounting principles generally accepted in the United States of America.
Benefit Plans
The
merger agreement generally provides that following the closing of the merger, Cendant will continue to provide eligible employees of Trendwest employee benefits on terms no less favorable overall to those provided by Trendwest. With respect to those
Cendant employee benefit plans in which Cendant, in its sole discretion, determines that Trendwest employees may participate after the stock purchase, Cendant and the surviving company have agreed to credit prior service with Trendwest or any of its
subsidiaries, as applicable, for purposes of eligibility and vesting under those plans to the extent that such service was recognized under the analogous Trendwest plans, but Cendant did not agree to necessarily credit that service to the extent it
would result in a duplication of benefits. The surviving company agreed to honor certain Trendwest employee benefit plans, but it did not agree to honor those plans for which Trendwest employees and directors are not the sole participants or those
plans which are not solely sponsored by Trendwest.
JELD-WEN agreed to continue until December 31, 2002 to provide
(or cause to be provided) to Trendwests employees a number of the employee benefits currently being provided by JELD-WEN, with JELD-WEN to charge Trendwest its actual direct costs for the provision of such benefits plus administrative fees of
$22.50 per month per employee.
Non-solicitation and No-hire
JELD-WEN agreed that until the fourth anniversary of the stock purchase, it will not solicit any Trendwest employees or hire any person
who was an employee of Trendwest at any time within four months of JELD-WENs hiring. JELD-WEN also agreed that until the second anniversary of the stock purchase it will not hire was an employee of Trendwest on the date of the merger
agreement. Cendant agreed to the same terms with regard to employees of the MountainStar development project.
MountainStar Redemption
JELD-WEN agreed to acquire from Trendwest, immediately prior to the stock purchase (but only if the stock purchase occurred), the
MountainStar development project, in exchange for a number of its shares of Trendwest common stock. JELD-WEN and Trendwest entered into a conditional stock redemption agreement to formalize JELD-WENs agreement to effect the MountainStar
redemption set forth in the Merger Agreement. The purchase price was to equal the net book value of MountainStar, calculated as the sum of:
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the amount reflected as total assets on a particular MountainStar balance sheet as of the date of the redemption; |
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plus the amount of any transfer taxes that may be payable in connection with the transfer; |
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minus the amount of certain outstanding debt and certain liabilities as of the date of the redemption. |
The approximately 1.8 million shares redeemed in payment of the purchase price equaled the purchase price divided by $24.00.
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Cancellation of MountainStar Redemption
The MountainStar redemption is subject to cancellation in the event that the closing price of CD Common Stock on the merger closing date
is less than ten dollars ($10.00) and JELD-WEN and Trendwest shall be returned to their respective positions immediately before the MountainStar redemption as if such MountainStar redemption had never occurred, and the redeemed shares shall be
purchased by Merger Sub prior to the merger in accordance with the stock purchase agreement, as described more fully under Stock Purchase Agreement.
Timeshare Development Rights
JELD-WEN agreed
that after the MountainStar redemption, Trendwest will have the exclusive right to develop, market and sell timeshare interests. JELD-WEN also agreed that Trendwest will have a right of first offer with respect to being the developer, marketer and
seller of fractional timeshare interests priced below $60,000 to be developed, marketed or sold at MountainStar. For these purposes, timeshare interests are defined in terms of vacation ownership interests of less than four weeks duration, and
fractional interests are defined in terms of vacation ownership interests of four weeks or less duration and $60,000 or less in price. In order not to forfeit its exclusive right to develop timeshare interests at MountainStar, Trendwest must,
subject to certain conditions, commit to purchasing 200 timeshare pads, meaning land sufficient to build 200 units, at MountainStar, and further to completing construction of 200 units in accordance with a schedule, again, subject to
certain conditions.
JELD-WEN Non-competition Provision
The merger agreement contains the agreements
of Richard Wendt, Roderick Wendt and JELD-WEN that for a period of five years, except as expressly permitted at MountainStar, Eagle Crest and Running Y, none of them will, directly or indirectly, engage or invest in, own, manage, operate, finance or
control, anywhere in the United States, western Canada or Australia, in any business whose activities or products compete with the timeshare business of Trendwest. For these purposes, the timeshare business is comprised of the development,
construction, marketing and/or sales of any product entitling the possessor thereof to less than four weeks of ownership rights in respect of any real estate and any product priced at less than $60,000 entitling the possessor thereof to four weeks
or less of ownership rights in respect of any real estate.
JELD-WEN Indemnification Provision
JELD-WEN agreed to indemnify, defend and
hold harmless Cendant, Merger Sub, Trendwest and their respective representatives, shareholders or stockholders, controlling persons, and affiliates and any of their successors or assigns for, and to pay to those entities the amount of, any loss,
liability, claim, damage, judgment, settlement and expense, including interest and penalties recovered by a third party, and reasonable attorneys, consultants and accountants fees and expenses incurred in the investigation and
defense or in asserting, preserving or enforcing any of the rights under these indemnification provisions or certain tax matters, whether or not involving a third-party claim, directly or indirectly resulting from, arising out of or incurred in
connection with:
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certain tax-related matters; |
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any breach by JELD-WEN of any of its covenants or obligations contained in the merger agreement; |
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until March 30, 2004, any and all damages incurred by Cendant or the surviving company or any of their respective subsidiaries arising under or relating to:
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any employee benefit plan sponsored or maintained by JELD-WEN or any of its subsidiaries other than Trendwest and its subsidiaries other than damages arising
under certain employee benefit plans that are extended to employees of Trendwest by JELD-WEN; or |
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the participation of any employee, officer or director of Trendwest or any of its subsidiaries, including for these purposes the clubs, prior to the stock
purchase in any of those employee benefit plans; |
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until March 30, 2005, certain environmental matters; |
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under certain circumstances, claims relating to the MountainStar development; and |
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certain litigation matters. |
The parties agreed that the remedies described here are not exclusive of or limit any other remedies that may be available to Cendant or the other indemnified parties.
JELD-WEN agreed to irrevocably waive any and all right of recourse against Trendwest, its subsidiaries and WorldMark with respect to any representation, warranty,
indemnity or other agreement or action made in the merger agreement. It also agreed that it will not be entitled to any contribution from, subrogation to or recovery against Trendwest, any of its subsidiaries or WorldMark with respect to the
liability of JELD-WEN that may arise under the merger agreement.
There is no limitation on the amount of
indemnifiable damages for which JELD-WEN may be responsible under its indemnification obligations, except that JELD-WENs obligations with respect to certain of the tax matters for which it is responsible are subject to a $1,000,000 deductible.
The completion of the merger depends upon meeting a number
of conditions including the following:
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if required by applicable law, approval of the merger by the shareholders of Trendwest; |
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the registration statement under this prospectus having become effective under the Securities Act and no stop order or proceedings seeking a stop order having
been entered by or pending before the SEC; |
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the shares of CD Common Stock having been approved for listing on the NYSE; |
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no judgment, order, decree, statute, law, ordinance, rule or regulation, entered, enacted, promulgated, enforced or issued by any court or other governmental
authority of competent jurisdiction or other legal restraint or prohibition being in effect restraining or prohibiting the consummation of the merger; and |
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at least a majority of the then outstanding shares of Trendwest common stock having been purchased by Merger Sub pursuant to the stock purchase agreement.
Completion of the stock purchase is subject, in turn, to the satisfaction of other conditions described below under Stock Purchase Agreement. |
Termination of the Merger Agreement
The merger agreement may not be terminated.
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THE STOCK PURCHASE AGREEMENT
The following is a summary of the material terms of the
stock purchase agreement, and is qualified by reference to the complete text of the agreement, which is incorporated by reference and attached to this prospectus as Annex B. You should read the stock purchase agreement carefully and in its entirety.
In connection with the merger agreement, JELD-WEN and certain other shareholders of Trendwest entered in a
stock purchase agreement with Cendant and the Merger Sub. At March 30, 2002, JELD-WEN and such shareholders of Trendwest beneficially owned 34,625,361 outstanding shares of Trendwest common stock. These shares represented approximately 91% of the
total issued and outstanding shares of Trendwest common stock at March 30, 2002.
Under the terms of the
stock purchase agreement, on April 30, 2002, the stock purchase closing date, each seller under the stock purchase agreement, known as the selling shareholders, sold to Merger Sub all of such selling shareholders rights, title and interests in
and to all of the shares of Trendwest common stock beneficially owned by such selling shareholder on that date. JELD-WENs holdings were reduced by the approximately 1.8 million of shares redeemed in connection with the MountainStar
redemption. The shares of CD common stock were issued to the selling shareholders pursuant to an exemption from the registration requirements of US federal securities laws.
Stock Purchase Consideration
The purchase price to be paid by Merger Sub for each
share of Trendwest common stock was a number of shares of CD Common Stock (rounded to the nearest thousandth of a share) equal to the JELD-WEN exchange ratio (this ratio is different than the exchange ratio determined for purposes of establishing
the merger consideration described above). The JELD-WEN exchange ratio was determined by dividing $24.00 by the average Cendant stock purchase trading price, subject to the following collar and other terms.
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In the event the ratio calculated was greater than 1.4861, then the exchange ratio would be 1.4861. |
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In the event the ratio calculated was less than 1.2973, then the exchange ratio would be 1.2973. |
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In the event that the exchange ratio determined for purposes of establishing the merger consideration was not the JELD-WEN exchange ratio, then the sellers
under the stock purchase agreement, other than JELD-WEN, would receive, pursuant to the stock purchase agreement, at the time of the closing of the merger, an additional number of shares of CD Common Stock equal to the product of:
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the exchange ratio determined for purposes of establishing the merger consideration minus the majority shareholder exchange ratio, and
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the number of shares that that seller is selling. |
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In the event that the exchange ratio determined for purposes of establishing the merger consideration was the quotient of $20.062 divided by the average Cendant
merger trading price, then the sellers under the stock purchase agreement, other than JELD-WEN, would receive, pursuant to the stock purchase agreement, at the time of the closing of the merger, an additional number of shares of CD Common Stock
equal to the product of: |
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the exchange ratio determined for purposes of establishing the merger consideration minus the majority shareholder exchange ratio, and
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the number of shares that that seller is selling. |
The average Cendant stock purchase trading price equaled the arithmetic average of the 4:00 p.m. Eastern Time closing sales prices of CD Common Stock reported on the New York Stock Exchange Composite
Tape for the ten consecutive NYSE trading days ending on (and including) the second trading day immediately prior to, and
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excluding the date that the stock purchase occurred. The JELD-WEN exchange ratio on April 26, 2002, the second trading day immediately prior to and excluding the date of the stock purchase, was
determined to be 1.2973. Since the merger exchange ratio, 1.3074, is greater than 1.2973, the selling shareholders other than JELD-WEN will receive at the merger closing additional shares so that they end up receiving for their shares of Trendwest
common stock the same exchange ratio as is received by the Trendwest shareholders in the merger.
In
the event that the closing price of CD Common Stock on the NYSE on the merger closing date is less than ten dollars, then the MountainStar redemption shall be cancelled. In the event that such cancellation occurs, Cendant shall issue to JELD-WEN,
pursuant to the stock purchase agreement, immediately prior to the merger, a number of shares of CD Common Stock equal to the product of (i) the redeemed shares multiplied by (ii) the JELD-WEN exchange ratio. Redeemed shares shall mean the number of
shares of Trendwest common stock that would have been redeemed by Trendwest in connection with the MountainStar redemption.
Each selling shareholder agreed to notify Cendant if any proposals
are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued in connection with any acquisition proposal or the possibility or consideration of making an acquisition proposal. Each
selling shareholder agreed to cease discussions, negotiations and communications with any persons with respect to any acquisition proposal. Each selling shareholder also agreed to non-solicitation covenants substantially the same as those agreed to
by Trendwest in the merger agreement without the exceptions to these obligations provided to Trendwest in the case of superior proposals. See Merger AgreementNon-Solicitation.
JELD-WEN agreed that until the first anniversary of the
stock purchase closing date, JELD-WEN would not cause any transfer of any shares of CD Common Stock beneficially owned by JELD-WEN, provided, that, during the period from and after the stock purchase closing date and ending on the first anniversary
of the stock purchase closing date, JELD-WEN may transfer up to, but not more than, thirty percent of the number of shares of CD Common Stock that JELD-WEN acquired pursuant to the stock purchase agreement. During this period JELD-WEN may pledge the
other seventy percent of the number of shares of CD Common Stock that JELD-WEN acquired pursuant to the stock purchase agreement as collateral for a loan of money under certain circumstances.
Under the stock purchase agreement, JELD-WEN agreed that, until
the first anniversary of the stock purchase closing date, it would not, effect, directly or indirectly, any short sales (as defined in Rule 3b-3 of the Securities Exchange Act of 1934, as amended) of CD Common Stock or any securities
convertible, exercisable or exchangeable, directly or indirectly and with or without consideration, into any CD Common Stock or engage in any sale, exchange, transfer, distribution, redemption or other transactions or use any puts, calls, or other
derivatives directly involving any CD Common Stock or convertible securities to reduce in any way selling shareholders risk of ownership of CD Common Stock, subject to certain carve-outs.
Conditions to Closing of the Stock Purchase
The conditions to closing of each
party under the stock purchase agreement were subject to the satisfaction of the following conditions, unless waived by Merger Sub and JELD-WEN in writing:
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no judgment, order, decree, statute, law, ordinance, rule or regulation, entered, enacted, promulgated, enforced or issued by any court or other governmental
authority of competent jurisdiction or other legal restraint or prohibition will be in effect restraining or prohibiting the consummation of the any of the transactions under the merger agreement, stock purchase agreement or stock option agreement
or the effective operation of the business of Trendwest and its subsidiaries after the stock purchase closing date; |
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no change in laws after the execution of the stock purchase agreement that would prevent the stock purchase and merger from qualifying as an integrated
transaction that is a reorganization within the meaning of Section 368(a) of the Code. |
The
conditions to closing of Cendant under the stock purchase agreement were subject to the satisfaction of the following conditions, which conditions were either satisfied or waived in writing:
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each of Trendwest and JELD-WEN shall have performed and complied in all material respects with its obligations under the merger agreement required to be
performed by it at or prior to the stock purchase closing date; |
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the MountainStar redemption, see MountainStar Redemption, page 59, shall have occurred; |
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a number of individuals shall have resigned as directors of WorldMark, and shall have been replaced with our designees; |
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the representations and warranties of Trendwest and JELD-WEN set forth in the merger agreement shall be true and correct, subject to certain materiality
standards; |
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Cendant shall have received a certain certificate signed by the chief executive officer and chief financial officer; |
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there shall not have occurred any Trendwest material adverse effect or any similar material adverse effect with respect to the Clubs, see Merger Agreement
Definition Material Adverse Effect, page 54; |
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no action, suit, proceeding, investigation or inquiry shall have been instituted, or shall be pending or threatened, by a governmental authority seeking to
restrain in any material respect to prohibit the consummation of the transactions contemplated by the stock purchase agreement or any of the other transactions under the merger agreement or the stock option agreement, including the merger, seeking
to prohibit or materially limit the ownership or operation by the Trendwest, Cendant or any of Cendants subsidiaries of any material portion of any business or of any assets of the Trendwest or its subsidiaries or of Cendant or of any of
Cendants subsidiaries or which would be reasonably likely to materially adversely affect the aggregate economic benefits of the transactions under the stock purchase agreement, the merger agreement or the stock option agreement, taken as a
whole, to Cendant or the surviving company or any of the businesses they operate; |
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all consents, orders or approvals of, declarations or filings with any governmental authority or third party listed in the stock purchase agreement shall have
been obtained and in effect and no condition or requirement shall have been imposed by any governmental authority in connection with any approval, or exemption, required of them in connection with the transactions contemplated by the stock purchase
agreement, the stock option agreement or the merger agreement which, either alone or together with all such other conditions or requirements, requires Trendwest or its subsidiaries, including the Clubs, to be operated in a manner which is materially
different from industry standards in effect or which is different in any material respect from the manner in which Trendwest, including the clubs, conducts its operations on the date of the stock purchase agreement or would have a company material
adverse effect, as such term is defined in the stock purchase agreement; |
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approval of the Commonwealth of Australia under the Foreign Acquisition and Takeovers Act 1975(th) shall have been obtained; |
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Trendwest Resorts South Pacific Limited, referred to in this prospectus as TRSP, shall have demonstrated to the reasonable satisfaction of Cendant that its
current Dealers License No. 193164 issued by the Australia Securities and Investment Commission permits the selling activities currently undertaken by TRSP in Australia, TRSP shall have obtained changes in the conditions of such Dealers
License enabling it to provide investment advice or TRSP shall have obtained a license under the Australian Financial Services Reform Act to provide financial product advice; |
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Trendwest shall have received an owners policy of title insurance (or an equivalent in the jurisdiction in which any parcel of certain owned real property
is located) with respect to each parcel of such owned real property located in the United States by First American Title Company, which must meet certain conditions; |
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each of JELD-WEN and the other selling shareholders shall have performed and complied in all material respects with its obligations under the stock purchase
agreement; |
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the representations and warranties of each of JELD-WEN and the other selling shareholders shall be true and correct; |
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Merger Sub shall have received certificates signed by each of JELD-WEN and the other selling shareholders; |
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each selling shareholder shall have made certain deliveries required by the stock purchase agreement. |
The obligations of selling shareholders under the stock purchase agreement were subject to the satisfaction or waiver of the following
conditions, unless waived by JELD-WEN in writing:
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Cendant and Merger Sub shall have performed and complied in all material respects with their respective obligations under the merger agreement;
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the representations and warranties of Cendant and Merger Sub set forth in the merger agreement that are qualified as to materiality shall be true and correct,
subject to certain materiality conditions; |
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Trendwest and JELD-WEN shall have received a certificate signed by an executive officer of Cendant; |
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there shall not have occurred any Cendant material adverse effect. Cendant material adverse effect shall mean any change(s), event(s), development(s) or
circumstance(s) which, individually or in the aggregate, would be reasonably expected to have a materially adverse effect, either in the short term or in the long term, on the business, results of operations, assets, liabilities or condition
(financial or otherwise) of Cendant and its subsidiaries, taken as a whole, subject to certain exceptions; |
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Cendant and Merger Sub shall have performed and complied in all material respects with its obligations under the merger agreement required to be performed by
it; |
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the representations and warranties of Cendant and Merger Sub contained in the stock purchase agreement shall be true and correct in all material respects.
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Termination of the Stock Purchase Agreement
The stock purchase agreement could
have been terminated and the transactions contemplated thereby may be abandoned at any time prior to the stock purchase closing:
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by mutual written consent of Cendant and JELD-WEN; or |
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by either Cendant or JELD-WEN, |
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if a governmental authority had issued a non-appealable final order, decree or ruling or taken any other non-appealable final action having the effect of
permanently restraining, enjoining or otherwise prohibiting the stock purchase or the merger; or |
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if there had been a breach by Trendwest or JELD-WEN, on the one hand, or by Cendant, on the other hand, of any one or more representations or warranties or
covenants or agreements set forth in the merger agreement, which breach shall result in any condition not being satisfied; or |
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if the stock purchase had not been consummated on or prior to July 15, 2002; or |
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by Cendant, if there had been a breach by any of JELD-WEN and certain of the selling shareholders of their obligations under the stock purchase agreement;
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by JELD-WEN, if there shall have been a breach by Cendant or Merger Sub of any of the representations, warranties, covenants or agreements set forth in the
stock purchase agreement; |
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by JELD-WEN, if the stock purchase average trading price is less than $13.50 per share; |
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by Cendant, if a change in the Trendwest board of director recommendation of the merger shall have occurred; or |
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by Cendant, if Trendwest shall have violated or breached certain of is obligations in the merger agreement. |
THE STOCK OPTION AGREEMENT
The following is a summary of the material terms of the
stock option agreement and is qualified by reference to the complete text of the agreement which is attached as Annex C and incorporated by reference into this prospectus. You should read the stock option agreement in its entirety.
In connection with the merger agreement, Trendwest entered into a stock option agreement with Cendant and Merger Sub. Under the
stock option agreement, Trendwest granted to Merger Sub an irrevocable option to purchase newly issued shares of Trendwest common stock, at an exercise price of $24.00 per share, subject to adjustment. In no event will the number of Trendwest shares
for which the option is exercisable exceed the number of shares of Trendwest common stock necessary to make certain that Merger Sub will beneficially own not less than 90.5% of the shares of Trendwest common stock on the date of any exercise by
Merger Sub of the option. In addition, in no event will the number of Trendwest shares for which the option is exercisable exceed 19.9% of the issued and outstanding shares of Trendwest common stock.
The option may be exercised by Cendant, in whole or in
part, at any time or from time to time after April 30, 2002, the date on which Merger Sub purchased pursuant to the stock purchase agreement shares of Trendwest common stock constituting at least 71% of the shares of Trendwest common stock issued
and outstanding on the date of purchase.
Termination of the Option
The option will terminate upon the effective time of the
merger.
Effect of the Stock Option Agreement and the Stock Purchase Agreement
The stock
option agreement is intended to ensure that Merger Sub can own at least 90% of Trendwests common stock after completion of the stock purchase and effect the merger pursuant to the Oregon short-form merger statute without the
requirement of a shareholder meeting or vote to approve the merger agreement.
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REGISTRATION RIGHTS AGREEMENT
The following is a summary of the material terms of the
registration rights agreement, and is qualified by reference to the complete text of the agreement, which is incorporated by reference and attached to this prospectus as Annex D. You should read the registration rights agreement carefully and in its
entirety.
Cendant agreed in the stock purchase agreement to enter into a
registration rights agreement with the selling shareholders to provide for the registration of the shares of CD Common Stock issued to the selling shareholders pursuant to the stock purchase agreement. The registration rights agreement was entered
into on the stock purchase closing date.
Under the registration rights agreement, we filed with the SEC
a registration statement on Form S-3, so as to permit the offer and subsequent resale by each selling shareholder of CD Common Stock following the effective date of such registration statement. The parties expect this registration statement to be
effective at the same time as the registration statement covering shares to be issued in the merger. We will use our commercially reasonable efforts to cause this registration statement to remain effective until the earlier of such time as there are
no longer any registered shares outstanding or the second anniversary of the registration rights agreement.
Cendant will indemnify and hold harmless each selling shareholder,
such selling shareholders directors, officers and partners and each other person, if any, who controls such selling shareholder, subject to certain limitations, for:
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any untrue statement or alleged untrue statement of any material fact contained in the registration statement, any preliminary, final or summary prospectus
included in the registration statement, or any amendment or supplement to the registration statement; and |
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any omission or alleged omission to state in the registration statement a material fact required to be stated therein or necessary to make the statements in the
registration statement not misleading. |
Each selling shareholder will indemnify and hold
harmless Cendant, each of its directors and officers, and each person, if any, who controls Cendant, subject to certain limitations, for:
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any untrue statement or alleged untrue statement of any material fact contained in the registration statement, any preliminary, final or summary prospectus
included in the registration statement, or amendment or supplement to the registration statement; and |
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any omission or alleged omission to state therein a material fact required to be stated in the registration statement or necessary to make the statements in the
registration statement not misleading. |
The registration rights agreement shall terminate on the third
anniversary of the effective date of the registration rights agreement although the indemnification provisions will survive.
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COMPARATIVE RIGHTS OF STOCKHOLDERS
The total number of authorized shares of capital
stock of Cendant is 2,510,000,000 shares, consisting of 2,000,000,000 shares of CD Common Stock, 500,000,000 shares of Move.com common stock and 10,000,000 shares of preferred stock. The authorized capital of Trendwest is 100,000,000 shares,
consisting of 90,000,000 shares of common stock and 10,000,000 shares of preferred stock.
Cendant is incorporated
in the State of Delaware and Trendwest is incorporated in the State of Oregon. Because Trendwest shareholders will hold CD common stock rather than Trendwest common stock after the merger, the rights of the stockholders will be governed by Delaware
law and by the Cendant amended and restated certificate of incorporation and the Cendant amended and restated bylaws, rather than by the Trendwest second amended and restated articles of incorporation and the Trendwest amended and restated bylaws.
The following discussion is not intended to be complete and is qualified in its entirety by reference to
Trendwests restated second amended and restated articles of incorporation, Trendwests amended and restated bylaws, Cendants amended and restated certificate of incorporation, Cendants amended and restated bylaws and
applicable provisions of Delaware and Oregon law. In addition, the identification of some of the differences in the rights of these stockholders as material is not intended to indicate that other differences that are equally important do not exist.
We urge you to read carefully the relevant provisions of Delaware and Oregon law, as well as the full text of the articles and certificates of incorporation and bylaws of Cendant and Trendwest. Copies of these documents are incorporated by reference
into this document and will be sent to you upon request. See Where You Can Find More Information.
Power to Call Special Meeting of Stockholders
Under Delaware law, a special meeting
of stockholders may be called by the board of directors or any other person as may be provided in the certificate of incorporation or bylaws. The Cendant bylaws provide that special meetings of the stockholders may be called only by the Chairman of
the board, the President, or the board of directors pursuant to a resolution approved by a majority of the entire board of directors. Under Oregon law, a special meeting of stockholders may be called by the board of directors or by any other person
authorized to do so in the articles of incorporation or the bylaws or the holders of at least ten percent of all votes entitled to be cast at such meeting. The Trendwest bylaws provide that a special meeting of stockholders may be called by the
President, the board of directors or on demand in writing by shareholders of record holding shares with at least ten percent of the votes entitled to be cast on any matter proposed to be considered at the special meeting.
Stockholder Action Without a Meeting
Under Delaware law, unless otherwise provided in
the certificate of incorporation, any action which may be taken at a meeting of the stockholders may be taken without a meeting and without prior notice if a consent in writing is signed by the holders of outstanding shares having at least the
minimum number of votes that would be necessary to take such action at a meeting at which all shares entitled to vote thereon were present and voted. The Cendant certificate of incorporation and bylaws require that any action required or permitted
to be taken by Cendant stockholders must be effected at a duly called annual or special meeting and may not be effected by any consent in writing. Under Oregon law, any action required or permitted to be taken at a meeting of the stockholders may be
taken without a meeting if the action is taken by all stockholders entitled to vote on the action. The Trendwest bylaws allow any action required or permitted to be taken at a meeting of shareholders to be taken without a meeting if a written
consent, or consents, describing the action taken is signed by all of the shareholders entitled to vote on the action and is delivered to the corporation or included in the minutes and filing with the corporate records.
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Size of the Board of Directors
Under Delaware law, the number of directors is fixed
by the bylaws, unless the certificate of incorporation fixes the number of directors. The Cendant certificate of incorporation and bylaws provide that the number of directors shall be fixed from time to time by the Cendant board but shall not be
less than three. Under Oregon law, the number of directors may be fixed in either the articles of incorporation or bylaws. The board of directors or the stockholders of an Oregon corporation may change the authorized number of directors within the
minimum and maximum range if the articles of incorporation or bylaws establish a variable range for the size of the board of directors. If the articles of incorporation establish a fixed or variable range, then, after shares are issued, only the
stockholders may change the range for the size of the board or change from a fixed or variable-ranged size board by amendment to the corporations articles of incorporation. If the bylaws establish a fixed or variable range, then either the
board of directors or the stockholders may change the range for the size of the board or change from a fixed or variable range size board by amendment to the corporations bylaws in the manner provided in the bylaws unless the number of
directors is fixed in the corporations articles of incorporation, in which case a change in the number of directors may be made only by amendment to the articles of incorporation. The Trendwest bylaws provide that the board of directors will
consist of not less than six members and not more than eleven members.
Classification of Board of Directors
A classified board is one with respect to which
a certain number of directors, but not necessarily all, are elected on a rotating basis each year. Delaware law permits, but does not require, a classified board of directors, pursuant to which the directors can be divided into as many as three
classes with staggered terms of office, with only one class of directors standing for election each year. The Cendant certificate and bylaws provide for three classes of directors, with each class elected for a term of three years and consisting as
nearly as possible of one third of the total number of directors on the Cendant board. At each annual meeting of stockholders, one class of directors is elected for a three-year term, with the members of each class to hold office until their
successors are elected and qualified. However, Cendant has submitted to its stockholders at its 2002 meeting a proposal providing for the de-classification of its board.
If there are six or more directors, Oregon law permits, but does not require, an Oregon corporation to provide in its articles of incorporation or bylaws for a classified
board of directors, pursuant to which the directors can be divided into up to two or three classes of directors with staggered terms of office, with only one class of directors to stand for election each year. The Trendwest articles provide for the
board of directors to be divided into three classes as nearly equal in number as possible.
Special Meetings of the Board of Directors
Under the Cendant bylaws, meetings of
Cendants board of directors may be called by the Chairman of the Executive Committee, the Chairman of the Board, or the President, or by any officer of the corporation upon the request of a majority of the entire board. Oregon law provides
that unless the articles of incorporation or bylaws set forth a longer or shorter period, special meetings of a companys board of directors must be preceded by at least two days notice of the date, time and place of the meeting. The
Trendwest bylaws stipulate that special meetings of the board of directors may be called by the President, the Chief Executive Officer or any member of the board of directors. The Trendwest bylaws provide that notice of a special meeting must be
given to each director, either by oral or in written notification actually received not less than 24 hours prior to the meeting or by written notice mailed by deposit in the United States mail, first class postage prepaid, addressed to the director
at the directors address appearing on the records of the corporation not less than 72 hours prior to the meeting. Special meetings of the directors may also be held at any time when all members of the board are present and consent to a special
meeting.
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Under Delaware law, any director or the entire board of
directors of a corporation that does not have a classified board of directors or cumulative voting may be removed with or without cause with the approval of a majority of the outstanding shares entitled to vote at an election of directors. The
Cendant certificate and bylaws do provide for a classified board of directors. The Cendant certificate and bylaws provide that any director may be removed from office, without cause, only by an affirmative vote of the holders of eighty-percent 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. Under Oregon law, any director of an Oregon corporation may be removed with or without
cause by the stockholders unless the articles of incorporation provide that directors may only be removed for cause. If a director is elected by a voting group of stockholders, only the stockholders of that voting group may vote to remove the
director. If cumulative voting is authorized, a director may not be removed if the number of votes cast against such a removal would be sufficient to elect the director under cumulative voting. If cumulative voting is not authorized, a director may
be removed only if the number of votes cast to remove the director exceed the votes cast not to remove the director. Furthermore, a director may be removed by the stockholders only at a meeting called for the purpose of removing the director. The
Trendwest bylaws provide that the shareholders, at any meeting of the shareholders called expressly for that purpose, may remove any director from office, with or without cause.
Transactions Involving Officers or Directors
An Oregon corporation may loan money to,
or guarantee any obligation incurred by, its directors only if either:
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the loan or guarantee is approved by a majority of the votes represented by the outstanding voting shares of all classes, voting as a single group, excluding
the voting shares owned by or voted under the control of the benefited director; or |
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the board of directors and any affected officer determine such loan or guarantee benefits the corporation and the board of directors approves the loan or
guarantee or general plan authorizing the loans and guarantees. |
With respect to any other
contract or transaction between the corporation and one or more of its directors, such transactions are neither void nor voidable if either:
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the directors interest is made known to the board of directors, a committee of the board of directors or the stockholders of the corporation, who
thereafter approve the transaction; or |
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the contract or transaction is fair to the corporation. |
Oregon law does not specifically regulate loans to officers or employees.
Under Delaware law, any corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation, including any officer or employee who is
also a director of the corporation, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. Furthermore, under Delaware law, contracts or transactions between a corporation
and either any of its directors or a second corporation of which a director is also a director, are not void or voidable if either:
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the material facts as to the transaction and as to the directors interest are fully disclosed, and either the disinterested directors or a majority of the
disinterested stockholders approve or ratify the transaction in good faith; or |
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the person asserting the validity of the contract or transaction sustains the burden of proving that the contract or transaction was just and reasonable as to
the corporation at the time it was authorized, approved or ratified. |
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Limitation of Liability of Directors; Indemnification
Under Oregon law, a
corporations articles of incorporation may set forth a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for conduct as a director. However, such provisions may
not eliminate or limit a directors liability for:
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breaches of the directors duty of loyalty to the corporation or its stockholders; |
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acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law; |
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the payment of unlawful distributions; or |
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any transaction from which the director derived an improper personal benefit. |
Under Oregon law, a corporation may, subject to the limitations described below, indemnify a director against liability incurred if the conduct was in good faith, the
individual reasonably believed the individuals conduct was in the best interests of the corporation and, in the case of a criminal proceeding, the individual had no reasonable cause to believe the conduct was unlawful. Under Oregon law, a
director may not be indemnified in connection with a proceeding in which the director was found liable to the corporation or in connection with any other proceeding charging improper personal benefit to the director in which the director was found
liable on the basis that personal benefit was improperly received. The Trendwest articles contain provisions limiting a directors liability to the fullest extent permitted by Oregon law. Oregon law provides for mandatory indemnification of
officers and directors when the indemnified party is wholly successful on the merits or otherwise in the defense of any proceeding to which the director was a party because of being a director. Officers are entitled to the same mandatory
indemnification as are directors under the Oregon Business Corporation Act.
The Cendant certificate eliminates
the liability of directors to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director to the fullest extent permissible under Delaware law. Under Delaware law, such provision may not eliminate or limit
director monetary liability for:
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breaches of the directors duty of loyalty to the corporation or its stockholders; |
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acts or omissions not in good faith or involving intentional misconduct or knowing violations of law; |
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the payment of unlawful dividends or unlawful stock repurchases or redemptions; or |
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transactions in which the director received an improper personal benefit. |
Such limitation of liability provisions also may not limit a directors liability for violation of, or otherwise relieve the company or its directors from the
necessity of complying with federal or state securities laws, or affect the availability of nonmonetary remedies such as injunctive relief or rescission.
Delaware law generally permits indemnification of expenses, including attorneys fees, actually and reasonably incurred in the defense or settlement of a derivative or third-party action, provided
there is a determination by a majority vote of a disinterested quorum of the directors, by independent legal counsel or by a majority vote of a quorum of the stockholders that the person seeking indemnification acted in good faith and in a manner
reasonably believed to be in best interests of the corporation. Without court approval, however, no indemnification may be made in respect of any derivative action in which such person is adjudged liable for negligence or misconduct in the
performance of his or her duty to the corporation. Delaware law requires indemnification of expenses to the extent the individual being indemnified has successfully defended any action, claim, issue or matter therein, on the merits or otherwise.
Expenses incurred by an officer or director in defending any action may be paid in advance, under Delaware law,
if such director or officer undertakes to repay such amounts if it is ultimately determined that he or she is not entitled to indemnification. In addition, Delaware law authorizes a corporations purchase of indemnity insurance
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for the benefit of its officers, directors, employees and agents whether or not the corporation would have the power to indemnify against the liability covered by the policy.
Delaware law also permits a Delaware corporation to provide indemnification in excess of that provided by statute. Delaware law
does not require authorizing provisions in the certificate of incorporation. Limitations on indemnification may be imposed by a court based on principles of public policy.
Dividends and Repurchases of Shares
Oregon law permits a corporation, unless
otherwise restricted by its articles of incorporation, to make distributions to its stockholders if both of the following factors are satisfied:
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in the judgment of the directors, the corporation would be able to pay its debts as they come due in the usual course of business; and
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the corporations total assets would at least equal the sum of its total liabilities plus, unless the articles permit otherwise, the amount that would be
needed if the corporation were dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights are superior to those receiving the distribution.
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The Trendwest articles do not otherwise restrict the ability of its board of directors to make distributions
to its stockholders. In addition, Oregon law generally provides that a corporation may redeem or repurchase its shares.
Delaware law permits a corporation to declare and pay dividends out of surplus or, if there is no surplus, out of net profits for the fiscal year in which the dividend is declared and/or for the preceding fiscal year. However, if the
amount of capital of the corporation following the declaration and payment of the dividend is less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of
assets, the directors may not declare and pay out a dividend from the corporations net profits. In addition, Delaware law generally provides that a corporation may redeem or repurchase its shares only if the capital of the corporation is not
impaired and such redemption or repurchase would not impair the capital of the corporation.
Approval of Certain Corporate Transactions
Under both Oregon law and Delaware law,
with certain exceptions, any merger, consolidation or sale of all or substantially all the assets of a corporation must be approved by the corporations board of directors and a majority of the outstanding shares entitled to vote.
In addition, Cendants certificate contains an approval provisions concerning creditor compromises or arrangements. The
provision states that whenever a compromise or arrangement is proposed between this Cendant and its creditors or any class of them and/or between Cendant and its stockholders or any class of them, any court of equitable jurisdiction within the State
of Delaware may, on the application in a summary way of Cendant or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for Cendant under the provisions of Section 291 of Title 8 of the Delaware Code
or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement to any reorganization of this Corporation as consequence of such compromise or arrangement, the said compromise or arrangement
and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders of Cendant, as the case may be,
and also on Cendant.
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Class Voting in Certain Corporate Transactions
Under Delaware law, certain amendments
of a corporations certificate of incorporation must be approved by a majority of the outstanding shares of each class of stock (without regard to limitations on voting rights). With certain exceptions, any merger or sale of all or
substantially all of the assets of a corporation must be approved by the holders of a majority of the outstanding stock of the corporation. Oregon law does not generally require separate class votes of all voting classes in order to approve charter
amendments and sales of substantially all the corporate assets. Oregon law, however, provides that all classes of stock, even nonvoting classes of stock, vote on charter amendments, mergers and share exchanges that affect the rights of holders of
such class.
Business Combinations/Merger
Under Section 203 of the Delaware General Corporation
Law, a Delaware corporation is prohibited from engaging in a business combination with an interested stockholder, as defined below, for three years following the date that such person or entity becomes an interested stockholder. With certain
exceptions, an interested stockholder is a person or entity who or which owns, individually or with or through certain other persons or entities, 15% or more of the corporations outstanding voting stock, including any rights to acquire stock
pursuant to an option, warrant, agreement, arrangement or understanding, or upon the exercise of conversion or exchange rights, and stock with respect to which the person has voting rights only. The three-year moratorium imposed by Section 203 on
business combinations of Section 203 does not apply if one or more of the following applies:
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prior to the date on which such stockholder becomes an interested stockholder, the board of directors of the subject corporation approves either the business
combination or the transaction that resulted in the person or entity becoming an interested stockholder; |
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upon consummation of the transaction that made him or her an interested stockholder, the interested stockholder owns at least 85% of the corporations
voting stock outstanding at the time the transaction commenced, excluding from the 85% calculation shares owned by directors who are also officers of the subject corporation and shares held by employee stock plans that do not give employee
participants the right to decide confidentially whether to accept a tender or exchange offer; or |
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on or after the date such person or entity becomes an interested stockholder, the board of directors approves the business combination and it is also approved
at a stockholder meeting by 66 2/3% of the outstanding voting stock not owned by the interested stockholder. |
In addition to the approval requirements of business combinations under Delaware law, the Cendant certificate of incorporation includes what generally is referred to as a fair price provision.
In general, this provision of the Cendant certificate of incorporation provides that a business combination, which is defined to include
any of the following:
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any merger or consolidation of Cendant or any majority-owned subsidiary with (a) any interested stockholder or (b) any other corporation (whether or not itself
an interested stockholder) that is, or after such merger or consolidation would be, an affiliate of an interested stockholder; |
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any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any interested
stockholder of any assets of Cendant or any majority-owned subsidiary having an aggregate fair market value of $10 million or more; |
|
|
|
the issuance or transfer by Cendant or any majority-owned subsidiary (in one transaction or series of transactions) of any securities of Cendant or any
majority-owned subsidiary to any interested stockholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate fair market value of $10 million or more; |
73
|
|
|
the adoption of any plan or proposal for the liquidation or dissolution of Cendant proposed by or on behalf of any interested stockholder or any affiliate of
any interested stockholder; or |
|
|
|
any reclassification of securities (including any reverse stock split) or recapitalization of Cendant or any merger or consolidation of Cendant with any of its
majority-owned subsidiaries or any other transaction (whether or not with or into or otherwise involving an interested stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any
class of equity security of Cendant or any majority-owned subsidiary that is directly or indirectly owned by any interested stockholder or any affiliate of any interested stockholder; |
requires approval by the affirmative vote of at least 80% of the voting power of the then outstanding shares of capital stock of Cendant entitled to vote
generally in the election of directors, voting as a single class, unless:
|
|
|
the business combination is approved by a majority of the disinterested directors; or |
|
|
|
minimum price criteria and procedural requirements that are intended to assure an adequate and fair price under the circumstances are satisfied.
|
In general, under Cendants certificate of incorporation, an interested stockholder includes any person
who is the beneficial owner of 5% or more of the voting capital stock of Cendant or is an affiliate of Cendant and at any time within the two-year period immediately prior to the date in question was the beneficial owner of 5% or more of the voting
capital stock of Cendant.
In general, a disinterested director means a director that is not affiliated with the
interested stockholder and was a member of the board of directors prior to the time that the interested stockholder became an interested stockholder.
Oregon law contains a business combinations provision that is essentially the same as Section 203 of the Delaware law.
The Oregon Control Share Act generally provides that a person who
acquires control shares cannot vote the shares unless voting rights are approved by the corporations preexisting disinterested stockholders. Delaware law does not contain an equivalent to the Control Share Act.
Under Oregon law and Delaware law, a stockholder of a corporation
participating in certain major corporate transactions may, under varying circumstances, be entitled to dissenters rights or to appraisal rights pursuant to which such stockholder may receive cash in the amount of the fair market value of the
shares held by such stockholder (as determined by a court or by agreement of the corporation and the stockholder) in lieu of the consideration such stockholder would otherwise receive in the transaction.
The limitations on the availability of appraisal rights under Oregon law are different from those under Delaware law. Under Delaware law,
such fair market value is determined exclusive of any element of value arising from the accomplishment or expectation of the merger or consolidation, and such appraisal rights are not available in the following situations:
|
|
|
with respect to the sale, lease or exchange of all or substantially all of the assets of a corporation; |
|
|
|
with respect to a merger or consolidation by a corporation the shares of which are either listed on a national securities exchange or are held of record by more
than 2,000 holders if such stockholders receive only shares of the surviving company or shares of any other corporation that are either listed on a national securities exchange or held of record by more than 2,000 holders, plus cash in lieu of
fractional shares of such corporations; or |
74
|
|
|
to stockholders of a corporation surviving a merger if no vote of the stockholders of the surviving company is required to approve the merger under Delaware
law. |
Under Oregon law, appraisal rights are generally not available to holders of shares of
any class or series if the shares of the class or series were registered with respect to a merger on a national securities exchange or quoted on the Nasdaq National Market as a national market security on the record date for the meeting at which the
merger is to be approved or on which is mailed to shareholders a notice of a short-form merger.
Inspection of Stockholder List
Delaware law allows any stockholder to inspect the
stockholder list for a purpose reasonably related to such persons interest as a stockholder. Delaware law also provides for inspection rights as to a list of stockholders entitled to vote at a meeting within a ten day period preceding a
stockholders meeting for any purpose germane to the meeting. Oregon law allows any stockholder to inspect the stockholder list beginning two days after notice of a meeting is given for which the list was prepared and continuing through the
meeting.
Under Delaware law, the corporations bylaws may be adopted, amended or
repealed by the stockholders of the corporation. However, under Delaware law, a corporation may, in its certificate of incorporation, confer the power to adopt, amend, or repeal the bylaws upon the directors, subject to the stockholders right
to do the same. The Cendant certificate provides that the board of directors has the right to make, alter, or repeal the bylaws. Under Oregon law, a corporations bylaws may be adopted, amended or repealed either by the board of directors or
the stockholders of the corporation, unless the corporations articles provide that the stockholders solely have the power to amend or repeal the bylaws, or the stockholders, in amending or repealing a particular bylaw, provide expressly that
the board of directors may not amend or repeal that bylaw. The Trendwest bylaws state that the bylaws of Trendwest may be amended or repealed by the directors, subject to amendment or repeal by action of the shareholders, at any regular meeting or
at any special meeting called for that purpose, provided notice of the proposed change is given in the notice of the meeting or notice thereof is waived in writing.
Under Oregon law, a dissolution must be approved by written consent of
all stockholders or the dissolution must be initiated by the board of directors and, unless the articles of incorporation or the board requires a greater vote or a vote by voting groups, approved by a majority of the votes entitled to be cast on the
proposal for dissolution. The Trendwest articles do not contain any such supermajority or voting group requirement. Under Delaware law, unless the board of directors approves the proposal to dissolve, the dissolution must be unanimously approved by
all the stockholders entitled to vote thereon. Only if the dissolution is initially approved by the board of directors may the dissolution be approved by a simply majority of the outstanding shares of the corporations stock entitled to vote.
In the event of such a board-initiated dissolution, Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions. The Cendant certificate does not
contain a supermajority voting requirement.
75
The consolidated financial statements of Cendant and its subsidiaries as
of December 31, 2001 and 2000 and for each of the years in the three year period ended December 31, 2001, incorporated by reference into this prospectus from Cendants Annual Report on Form 10-K for the year ended December 31, 2001, have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their report (which expresses an unqualified opinion and includes an explanatory paragraph relating to the modification of the accounting for interest income and impairment of
beneficial interests in securitization transactions, the accounting for derivative instruments and hedging activities and the revision of certain revenue recognition policies, as discussed in Note 1), which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
With respect to the unaudited interim financial information for the periods ended March 31, 2002 and 2001 which is incorporated herein by reference, Deloitte & Touche LLP have applied limited
procedures in accordance with professional standards for a review of such information. However, as stated in their report included in the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 2002 and incorporated by reference
herein, they did not audit and they do not express an opinion on that interim financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures
applied. Deloitte & Touche LLP are not subject to the liability provisions of Section 11 of the Securities Act of 1933 for their report on the unaudited interim financial information because the report is not a report or a
part of the registration statement prepared or certified by an accountant within the meaning of Sections 7 and 11 of the Securities Act of 1933.
The consolidated financial statements of Trendwest as of December 31, 2001 and 2000, and for each of the years in the three-year period ended December 31, 2001, have been incorporated by reference
herein from Trendwests 2001 Annual Report on Form 10-K in reliance upon the report of KPMG LLP, independent auditors, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
The validity of the CD common stock offered hereby will be passed upon
for Cendant by Eric J. Bock, Executive Vice President and Corporate Secretary of Cendant Corporation at the effective time of the merger.
SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS
As a result of the merger, Trendwest does
not currently expect to hold a 2002 annual meeting of stockholders because Trendwest will have become a wholly owned subsidiary of Cendant in the merger. In the event that the merger is not consummated and the 2002 annual meeting is held, Trendwest
shareholders may propose matters to be presented at the 2002 annual meeting of stockholders and may also nominate persons to be directors of Trendwest.
Stockholder proposals intended for inclusion in the proxy materials for the 2002 annual meeting of stockholders must have been received by Trendwest no later than December 7, 2001.
Stockholder proposals not included in the proxy materials for the 2002 annual meeting as well as proposed stockholder
nominations for the election of directors at the 2002 annual meeting must each comply with advance notice procedures set forth in Trendwests bylaws in order to be brought properly before that meeting.
In addition to the timing requirements, the advance notice provisions of Trendwests bylaws contain informational content
requirements that also must be met. A copy of the bylaw provisions governing these timing procedures and content requirements may be obtained by writing to the Secretary of Trendwest.
Unless shareholder proposals meet the requirements set forth above, the persons named in the proxies solicited on behalf of the Trendwest board will have discretionary
authority to vote on and may vote against any such stockholder proposal.
76
WHERE YOU CAN FIND MORE INFORMATION
Trendwest and Cendant file annual, quarterly and
current reports, proxy and registration statements and other information with the SEC. You may read and copy any reports, statements or other information that the companies file at the SECs public reference rooms at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and in New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Trendwests and Cendants public filings are also available to the public
from commercial document retrieval services and at the Internet World Wide Web site maintained by the SEC at http://www.sec.gov. Reports, proxy statements and other information concerning Cendant also may be inspected at the offices of
the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
Cendant has filed a registration
statement on Form S-4 to register with the SEC the shares of CD common stock to be issued to Trendwest shareholders in the merger. This prospectus is a part of that registration statement and constitutes a prospectus of Cendant.
As allowed by SEC rules, this prospectus omits certain information contained in the registration statement or the exhibits to
the registration statement. Any statements contained in this prospectus concerning the provisions of any other document are not necessarily complete, and, in each instance, reference is made to the copy of such document filed as an exhibit to the
registration statement or otherwise filed with the SEC. Each statement is qualified in its entirety by such reference.
We are incorporating by reference the information we file with the SEC into this prospectus, which means that we are disclosing important business and financial information to you by referring you to another document
filed separately with the SEC. Cendant incorporates by reference into this prospectus the documents listed below and any future filings made with the SEC under sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended
(the Exchange Act), until the completion of the offering of the shares of CD Common Stock.
Cendants Filings with the SEC
|
|
Period
|
Annual Report on Form 10-K |
|
Fiscal year ended December 31, 2001 |
|
Quarterly Report on Form 10-Q |
|
Quarter ended March 31, 2002 |
|
Current Reports on Form 8-K |
|
Filed on: October 15, 2001 February 7,
2002 February 14, 2002 March 19, 2002 April 1, 2002 April 18,
2002 May 1, 2002 May 3, 2002 May 23, 2002 |
|
Proxy statement describing CD common stock, including any amendments or reports filed for the purpose of updating such
description |
|
Dated February 10, 2000 (filed on February 11, 2000) |
|
Trendwests Filings with the SEC
|
|
Period
|
Annual Report on Form 10-K |
|
Fiscal year ended December 31, 2001 |
|
Quarterly Report on Form 10-Q |
|
Quarter ended March 31, 2002 |
|
Current Reports on Form 8-K |
|
Filed on: April 1, 2002 May 2,
2002 |
77
Cendant incorporates by reference additional documents that either Cendant or
Trendwest may file with the SEC under Sections 13(a), 13(c), 14 or 15(d) between the date of this prospectus and the date of the consummation of the merger (other than any Form 8-K reporting solely an earnings release in respect of a quarterly
period which quarterly period is covered in a Form 10-Q subsequently filed and incorporated herein by reference). These include periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form
8-K, as well as registration statements and proxy statements.
Trendwest has supplied all information contained or
incorporated by reference into this prospectus relating to Trendwest, JELD-WEN has supplied all information contained or incorporated by reference into this prospectus relating to JELD-WEN and Cendant has supplied all such information relating to
Cendant. Cendant assumes no responsibility for the accuracy or completeness of any information contained or incorporated by reference into this prospectus (or the registration statement of which it is a part) relating to Trendwest or JELD-WEN.
You can obtain a copy of any Cendant document or any Trendwest document incorporated by reference except for the
exhibits to those documents from the appropriate company. You may also obtain these documents from the SEC or through the SECs Internet World Wide Web site described above. Documents incorporated by reference are available from the companies
without charge, excluding all exhibits unless specifically incorporated by reference as an exhibit into this prospectus. You may obtain documents incorporated by reference into this prospectus by requesting them in writing or by telephone from the
appropriate company at the following addresses:
For Cendant documents: |
|
For Trendwest documents: |
|
Cendant Company 9 West 57th Street New York, NY 10019 Attention: Investor Relations Department Telephone: (212) 413-1800 |
|
Trendwest Resorts, Inc. 9805 Willows Rd. Redmond, WA 98052 Attention: Investor Relations Department Telephone: (425) 498-2500 |
If you request any of these documents from us we will mail them to
you by first-class mail, or similar means.
You should rely only on the information contained or incorporated by
reference into this prospectus. Trendwest and Cendant have not authorized anyone to provide you with information that is different from what is contained in this prospectus. This prospectus is
dated , 2002. You should not assume that the information contained in the prospectus is accurate as of any other date, and neither the mailing of this prospectus to
Trendwests stockholders nor the issuance of Cendants securities in the merger will create any implication to the contrary.
78
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
by and among
CENDANT CORPORATION
TORNADO ACQUISITION CORPORATION
JELD-WEN, INC.
and
TRENDWEST RESORTS, INC.
dated
March 30, 2002
TABLE OF CONTENTS
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Page
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|
ARTICLE I THE MERGER |
|
2 |
|
Section 1.1 |
|
The Merger |
|
2 |
|
Section 1.2 |
|
Merger Closing |
|
2 |
|
Section 1.3 |
|
Effective Time |
|
2 |
|
Section 1.4 |
|
Effects of the Merger |
|
2 |
|
Section 1.5 |
|
Articles of Incorporation and Bylaws of the Surviving Corporation |
|
2 |
|
Section 1.6 |
|
Directors and Officers |
|
2 |
|
Section 1.7 |
|
Subsequent Actions |
|
4 |
|
ARTICLE II CONVERSION OF SECURITIES |
|
4 |
|
Section 2.1 |
|
Conversion of Capital Stock |
|
4 |
|
Section 2.2 |
|
Exchange of Certificates |
|
5 |
|
Section 2.3 |
|
Certain Adjustments |
|
8 |
|
Section 2.4 |
|
Option Plan; ESPP |
|
8 |
|
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY |
|
9 |
|
Section 3.1 |
|
Corporate Organization; Authority; No Violation |
|
9 |
|
Section 3.2 |
|
Capitalization; Subsidiaries |
|
11 |
|
Section 3.3 |
|
Company SEC Documents; Company Financial Statements; Other Financial Statements |
|
12 |
|
Section 3.4 |
|
Directors, Officers and Employees; Employee Benefit Plans; ERISA |
|
13 |
|
Section 3.5 |
|
Absence of Certain Changes or Events |
|
16 |
|
Section 3.6 |
|
Absence of Undisclosed Liabilities |
|
16 |
|
Section 3.7 |
|
Litigation |
|
16 |
|
Section 3.8 |
|
Real Property |
|
16 |
|
Section 3.9 |
|
Exempt Assets |
|
19 |
|
Section 3.10 |
|
Contracts |
|
19 |
|
Section 3.11 |
|
VOI Receivables |
|
20 |
|
Section 3.12 |
|
Licenses; Compliance with Laws |
|
21 |
|
Section 3.13 |
|
Environmental Matters |
|
22 |
|
Section 3.14 |
|
Tax Matters |
|
23 |
|
Section 3.15 |
|
Associations |
|
25 |
|
Section 3.16 |
|
Intellectual Property |
|
26 |
|
Section 3.17 |
|
Affiliated Transactions |
|
28 |
|
Section 3.18 |
|
Insurance |
|
28 |
|
Section 3.19 |
|
Assets |
|
28 |
|
Section 3.20 |
|
Resorts; VOIs |
|
29 |
|
Section 3.21 |
|
Club Corporate Organization; Authority; No Violation |
|
31 |
|
Section 3.22 |
|
Club Memberships; Subsidiaries |
|
32 |
|
Section 3.23 |
|
Club Directors, Officers and Employees; Employee Benefit Plans; ERISA |
|
32 |
A-i
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Page
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|
Section 3.24 |
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Business of the Clubs |
|
33 |
|
Section 3.25 |
|
Club Intellectual Property |
|
33 |
|
Section 3.26 |
|
Club Assets |
|
34 |
|
Section 3.27 |
|
Club Litigation |
|
34 |
|
Section 3.28 |
|
Club Real Property |
|
34 |
|
Section 3.29 |
|
Absence of Undisclosed Club Liabilities |
|
36 |
|
Section 3.30 |
|
Absence of Certain Club Changes or Events |
|
36 |
|
Section 3.31 |
|
Club Licenses; Compliance with Laws |
|
36 |
|
Section 3.32 |
|
Club Tax Matters |
|
37 |
|
Section 3.33 |
|
Club Insurance |
|
38 |
|
Section 3.34 |
|
Brokers and Finders |
|
38 |
|
Section 3.35 |
|
Information in the Proxy Statement |
|
38 |
|
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF MAJORITY SHAREHOLDER |
|
39 |
|
Section 4.1 |
|
Corporate Organization; Authority; No Violation |
|
39 |
|
Section 4.2 |
|
Brokers and Finders |
|
40 |
|
Section 4.3 |
|
Information in the Proxy Statement/Prospectus |
|
40 |
|
Section 4.4 |
|
Affiliated Transactions |
|
40 |
|
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB |
|
40 |
|
Section 5.1 |
|
Organization |
|
40 |
|
Section 5.2 |
|
Capitalization |
|
41 |
|
Section 5.3 |
|
Authorization; Validity of Agreement; Necessary Action |
|
42 |
|
Section 5.4 |
|
Consents and Approvals; No Violations |
|
42 |
|
Section 5.5 |
|
Parent Documents |
|
43 |
|
Section 5.6 |
|
Absence of Changes or Events |
|
43 |
|
Section 5.7 |
|
Information in the Proxy Statement/Prospectus |
|
43 |
|
Section 5.8 |
|
Tax Matters |
|
43 |
|
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER |
|
44 |
|
Section 6.1 |
|
Interim Operations |
|
44 |
|
Section 6.2 |
|
No Solicitation |
|
47 |
|
Section 6.3 |
|
Acquisition Proposals |
|
48 |
|
ARTICLE VII ADDITIONAL AGREEMENTS |
|
49 |
|
Section 7.1 |
|
Preparation of the Form S-4 |
|
49 |
|
Section 7.2 |
|
Preparation of the Proxy Statement; Company Shareholders Meeting; Nasdaq |
|
49 |
|
Section 7.3 |
|
Letters of the Companys Accountants |
|
51 |
|
Section 7.4 |
|
Notification of Certain Matters |
|
51 |
|
Section 7.5 |
|
Access; Confidentiality |
|
52 |
|
Section 7.6 |
|
Consents and Approvals |
|
53 |
|
Section 7.7 |
|
Publicity |
|
53 |
A-ii
|
|
|
|
Page
|
|
Section 7.8 |
|
Directors and Officers Insurance and Indemnification |
|
54 |
|
Section 7.9 |
|
Certain Tax and other Matters |
|
54 |
|
Section 7.10 |
|
State Takeover Laws |
|
55 |
|
Section 7.11 |
|
Employee Benefits |
|
55 |
|
Section 7.12 |
|
Resignations and Appointments |
|
57 |
|
Section 7.13 |
|
Affiliates |
|
57 |
|
Section 7.14 |
|
Non-solicitation and No-hire |
|
57 |
|
Section 7.15 |
|
Transfer of MountainStar Assets |
|
58 |
|
Section 7.16 |
|
Majority Shareholder Post-Redemption Covenants |
|
61 |
|
Section 7.17 |
|
Eagle Crest and Running Y |
|
63 |
|
Section 7.18 |
|
Non-competition |
|
65 |
|
ARTICLE VIII TAX MATTERS |
|
66 |
|
Section 8.1 |
|
Tax Indemnification |
|
66 |
|
Section 8.2 |
|
Tax Cooperation |
|
67 |
|
Section 8.3 |
|
Tax Audits |
|
68 |
|
Section 8.4 |
|
Transfer Taxes |
|
69 |
|
Section 8.5 |
|
Tax Sharing Agreements |
|
69 |
|
Section 8.6 |
|
Payments |
|
69 |
|
Section 8.7 |
|
Conflicts; Survival |
|
70 |
|
Section 8.8 |
|
Tax Treatment of Indemnification Payment |
|
70 |
|
ARTICLE IX INDEMNIFICATION; REMEDIES |
|
70 |
|
Section 9.1 |
|
Survival |
|
70 |
|
Section 9.2 |
|
Indemnification and Payment of Damages by Majority Shareholder |
|
70 |
|
Section 9.3 |
|
Time Limitations |
|
72 |
|
Section 9.4 |
|
Procedure for Indemnification Third Party Claims |
|
72 |
|
Section 9.5 |
|
Procedure for Indemnification Other Claims |
|
73 |
|
Section 9.6 |
|
Conflicts |
|
73 |
|
ARTICLE X CONDITIONS |
|
73 |
|
ARTICLE XI TERMINATION |
|
74 |
|
Section 11.1 |
|
Termination |
|
74 |
|
Section 11.2 |
|
Effect of Termination |
|
74 |
|
ARTICLE XII MISCELLANEOUS |
|
75 |
|
Section 12.1 |
|
Amendment; Modification and Waiver |
|
75 |
|
Section 12.2 |
|
Expenses |
|
75 |
|
Section 12.3 |
|
Notices |
|
75 |
|
Section 12.4 |
|
Interpretation |
|
76 |
|
Section 12.5 |
|
Counterparts |
|
77 |
|
Section 12.6 |
|
Entire Agreement; No Third-Party Beneficiaries |
|
77 |
A-iii
|
|
|
|
Page
|
|
Section 12.7 |
|
Severability |
|
77 |
|
Section 12.8 |
|
Governing Law |
|
77 |
|
Section 12.9 |
|
Assignment |
|
77 |
|
Section 12.10 |
|
Headings |
|
77 |
|
Section 12.11 |
|
Jurisdiction and Venue |
|
78 |
|
Section 12.12 |
|
Acknowledgements |
|
78 |
|
EXHIBITS |
|
|
|
|
|
Exhibit 7.5 |
|
|
|
|
|
Exhibit 7.11(b) |
|
|
|
|
|
Exhibit 7.14(a) |
|
|
|
|
|
Exhibit 7.16(c) |
|
|
|
|
|
Exhibit 9.2(c) |
|
|
|
|
A-iv
INDEX OF DEFINED TERMS
Acquisition Proposal |
|
67 |
Acquisition Proposal Interest |
|
67 |
Additional MountainStar Debt |
|
81 |
Action |
|
22 |
Affiliate |
|
78 |
Affiliate Agreement |
|
78 |
Agreement |
|
1 |
Amenities |
|
41 |
Appointment Time |
|
4 |
Articles of Merger |
|
3 |
ASIC |
|
17 |
ASIC Act |
|
17 |
Association |
|
34 |
Assumed Option |
|
11 |
Average Trading Price |
|
7 |
Balance Sheet |
|
21 |
Balance Sheet Date. |
|
21 |
California Mutual Benefit Nonprofit Corporation Law |
|
43 |
Call Notice |
|
80 |
Call Termination Date |
|
80 |
Cancellation. |
|
83 |
Cash Portion |
|
70 |
CBA |
|
18 |
Certificates. |
|
8 |
Change in the Companys Recommendation |
|
66 |
Change Orders |
|
64 |
Class A Memberships |
|
44 |
Club |
|
4 |
Club Balance Sheet |
|
49 |
Club Balance Sheet Date |
|
49 |
Club Financial Statements |
|
17 |
Club Governing Documents |
|
40 |
Club Improvements |
|
47 |
Club Lease |
|
46 |
Club Leased Real Property |
|
46 |
Club Material Adverse Effect |
|
42 |
Club Owned Real Property |
|
46 |
Club Permits |
|
50 |
Club Real Property |
|
46 |
Club Resorts |
|
39 |
Clubs |
|
12 |
Code |
|
2 |
Commitment |
|
86 |
Company |
|
1 |
Company Board of Directors |
|
1 |
Company Common Stock |
|
1 |
Company Employees |
|
76 |
Company Foreign Securities Filings |
|
16 |
Company Material Adverse Effect |
|
12 |
Company Note |
|
81 |
AI-1
Company Recommendation |
|
70 |
Company SEC Documents |
|
16 |
Company Shareholder Approval |
|
13 |
Company Unconsolidated Subsidiaries |
|
17 |
Completion Conditions |
|
79 |
Completion Date |
|
25 |
Confidentiality Agreement |
|
65 |
Construction Contract |
|
25 |
Construction Project |
|
24 |
Construction Schedule |
|
24 |
Contract |
|
16 |
Controlled Associations |
|
74 |
Custodian |
|
46 |
D&O Insurance |
|
74 |
Damages |
|
96 |
Declaration |
|
40 |
EC Marketing Agreement |
|
87 |
EC Resort |
|
87 |
ECI |
|
87 |
Effective Time |
|
3 |
Employees |
|
77 |
Environmental Claim |
|
30 |
Environmental Investigation |
|
70 |
Environmental Laws |
|
31 |
ERISA |
|
19 |
ERISA Affiliate |
|
19 |
ESPP |
|
11 |
Exchange Act |
|
15 |
Exchange Agent |
|
8 |
Exchange Fund |
|
8 |
Exclusivity Right |
|
83 |
Existing Parent Warrants |
|
56 |
FIRB |
|
15 |
FIRB Approval |
|
15 |
Form S-4 |
|
15 |
Fractional Interest |
|
41 |
GAAP |
|
17 |
Governing Documents |
|
41 |
Governmental Authority |
|
14 |
High-End Ratio |
|
7 |
Holiday Credit |
|
41 |
Hyperion |
|
72 |
Improvements |
|
23 |
Indemnified Persons |
|
96 |
Independent Directors |
|
5 |
Installment Sales Contract |
|
27 |
Intellectual Property |
|
35 |
IRS |
|
19 |
IRS Materials |
|
92 |
JW Affiliates |
|
70 |
Laws |
|
29 |
Lease |
|
22 |
AI-2
License Agreements |
|
36 |
Licensing Fee |
|
82 |
Liens |
|
16 |
Low-End Fractional Interests |
|
89 |
Low-End Fractional Notice |
|
83 |
Low-End Fractional Valuation Procedure |
|
84 |
Majority Shareholder |
|
1 |
Majority Shareholder Schedule |
|
53 |
Material Contracts |
|
26 |
Material Variation |
|
65 |
Materials of Environmental Concern |
|
31 |
Membership |
|
41 |
Merger |
|
3 |
Merger Closing |
|
3 |
Merger Closing Date |
|
3 |
Merger Consideration |
|
7 |
Merger Sub |
|
1 |
Merger Sub Common Stock |
|
6 |
Mortgage |
|
27 |
MountainStar |
|
80 |
MountainStar Assets |
|
80 |
MountainStar Employees |
|
79 |
MountainStar Redemption |
|
81 |
Move.com Common Stock |
|
56 |
Nasdaq |
|
15 |
New Club Directors |
|
4 |
New SoPac Directors |
|
4 |
NYSE |
|
7 |
OBCA |
|
1 |
Offer Conditions |
|
85 |
Option |
|
11 |
Option Exchange Ratio |
|
11 |
Option Plan |
|
11 |
Order |
|
15 |
Original Declaration |
|
40 |
ORS |
|
3 |
Owned Real Property |
|
22 |
Parcel(s) |
|
78 |
Parent |
|
1 |
Parent Authorized Preferred Stock |
|
56 |
Parent Common Stock |
|
7 |
Parent Employee Stock Options |
|
56 |
Parent Material Adverse Effect |
|
59 |
Parent Plans |
|
76 |
Parent Schedule |
|
55 |
Parent SEC Documents |
|
60 |
Parent Stock Plans |
|
54 |
Permits |
|
28 |
Permitted Liens |
|
39 |
Person |
|
95 |
Plan |
|
19 |
Premium |
|
74 |
AI-3
Proposed Price |
|
84 |
Proxy Statement |
|
15 |
Public Shareholder Exchange Ratio |
|
7 |
Purchase Conditions |
|
85 |
Recipient |
|
93 |
Real Property |
|
22 |
Recorded Documents |
|
50 |
Redeemed Shares |
|
81 |
Redemption Agreement |
|
82 |
Refund Recipient |
|
93 |
Representatives |
|
65 |
Reserves |
|
27 |
Resigning Club Director |
|
4 |
Resorts |
|
39 |
Resort Documents |
|
41 |
Responsible Entity |
|
4 |
Restraints |
|
00 |
Ruling Request |
|
92 |
Ruling Request Materials |
|
92 |
RYI |
|
87 |
RY Resort |
|
87 |
Schedule |
|
12 |
SEC |
|
15 |
Securities Act |
|
17 |
Selected Appraiser |
|
84 |
Shareholder |
|
1 |
Software |
|
35 |
SoPac Club |
|
12 |
SoPac Governing Documents |
|
41 |
Special Committee Directors |
|
5 |
Stock Option Agreement |
|
1 |
Stock Purchase |
|
1 |
Stock Purchase Closing Date |
|
4 |
Subsidiary |
|
13 |
Superior Proposal |
|
66 |
Surviving Corporation |
|
3 |
Tax |
|
33 |
Tax Accountant |
|
93 |
Tax Average Trading Price |
|
95 |
Tax Claim |
|
93 |
Tax Damages |
|
91 |
Tax Returns |
|
34 |
Tax Sharing Agreement |
|
33 |
Taxes |
|
33 |
TII |
|
81 |
TII Call |
|
80 |
TII Pad Cost |
|
84 |
TII Price |
|
81 |
Timeshare Interests |
|
89 |
Timeshare Notice |
|
84 |
Timeshare Pads |
|
84 |
Top-up Public Shareholder Exchange Ratio |
|
7 |
AI-4
Trade Secrets |
|
35 |
Trademarks |
|
35 |
Trading Day |
|
7 |
Transactions |
|
13 |
Transfer Agreement |
|
87 |
Transfer Taxes |
|
94 |
Treasury Regulations |
|
34 |
Unconsolidated Subsidiaries Statements |
|
17 |
Vacation Credit |
|
41 |
Vacation Credit Notes Receivables |
|
27 |
Vacation Program Agreement |
|
40 |
Valuation Period |
|
7 |
VOI |
|
41 |
VOI Consumer Documents |
|
28 |
VOI Laws |
|
42 |
VOI Receivables |
|
27 |
VOI Registrations |
|
39 |
WARN Act |
|
19 |
AI-5
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER (hereinafter referred to as this Agreement), dated March 30, 2002, by and among CENDANT
CORPORATION, a Delaware corporation (Parent), TORNADO ACQUISITION CORPORATION, an Oregon corporation and a direct wholly owned subsidiary of Parent (Merger Sub), JELD-WEN, INC., Inc. an Oregon corporation
(Majority Shareholder) and TRENDWEST RESORTS, INC., an Oregon corporation (the Company).
WHEREAS, the board of directors of each of Parent, Merger Sub and the Company has approved, and deems advisable and in the best interests of its respective stockholders or shareholders this Agreement and the Merger (as defined in
Section 1.1 hereof) upon the terms and subject to the conditions set forth herein and in accordance with the Oregon Business Corporation Act (the OBCA);
WHEREAS, the board of directors of the Company (the Company Board of Directors) has determined that the consideration to be paid for each issued and
outstanding share of common stock, no par value, of the Company (Company Common Stock) in the Merger is fair to the holders of the Company Common Stock (and has resolved, in the event that a Company Shareholders Meeting is
required in order to approve the Merger in accordance with applicable law, to recommend that the holders of the Company Common Stock approve this Agreement and the transactions contemplated hereby), upon the terms and subject to the conditions set
forth herein;
WHEREAS, Majority Shareholder and certain other shareholders of the Company (each a
Shareholder) beneficially owning approximately ninety percent (90%) of the outstanding shares of Company Common Stock have agreed to sell, pursuant to a Stock Purchase Agreement, dated the date hereof, such shares to Merger Sub
and Merger Sub has agreed to purchase such shares (the purchase of Company Common Stock under the Stock Purchase Agreement, the Stock Purchase), subject to the terms and conditions of the Stock Purchase Agreement, and,
concurrently with the execution of such Stock Purchase Agreement, Parent and Merger Sub have agreed to execute this Agreement pursuant to which all other shareholders of the Company, subject to the terms and conditions of this Agreement, shall
receive in the Merger consideration per share of Common Stock that is at least, and under certain circumstances, superior, to the consideration to be received by Majority Shareholder pursuant to the Stock Purchase Agreement;
WHEREAS, as a condition and inducement to Parent and Merger Sub to enter into this Agreement and incur the obligations set forth herein,
concurrently with the execution and delivery of this Agreement, Merger Sub and the Company are entering into a Stock Option Agreement in the form of Exhibit A hereto (the Stock Option Agreement), pursuant to which, among other
things, the Company has granted Parent an option to purchase certain newly-issued shares of Common Stock (as hereinafter defined), subject to certain conditions;
WHEREAS, for federal income tax purposes, it is intended that the purchases of Company Common Stock pursuant to the Stock Purchase Agreement and