As filed with the Securities and Exchange Commission on July 24, 2001
Registration No. 333-64738
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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 8699 06-0918165
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
9 West 57th Street
New York, New York 10019
(212) 413-1800
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
--------------
James E. Buckman, Esq.
Cendant Corporation
9 West 57th Street
New York, New York 10019
(212) 413-1800
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
--------------
Copies to:
Elizabeth C. Kitslaar,
Patricia Moran, Esq. Eric J. Bock, Esq. Anthony C. Swanagan, Esq. Esq.
Skadden, Arps, Slate, Galileo International,
Meagher Cendant Corporation Inc. Jones, Day, Reavis & Pogue
9700 West Higgins Road,
& Flom LLP 9 West 57th Street Suite 400 77 West Wacker
One Rodney Square New York, New York 10019 Rosemont, Illinois 60018 Chicago, Illinois 60601
Wilmington, Delaware 19801 (212) 413-1800 (847) 518-4000 (312) 782-3939
(302) 651-3000
--------------
Approximate date of commencement of proposed sale to public: As soon as
practicable following the effective date 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 Section 8(a), may
determine.
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--------------------------------------------------------------------------------
[LOGO]
Galileo International, Inc.
9700 West Higgins Road, Suite 400
Rosemont, Illinois 60018
July 25, 2001
Dear Galileo Stockholder:
You are invited to attend a special meeting of stockholders of Galileo
International, Inc. The meeting will be held at 9:00 a.m., Central Time, on
Thursday, August 30, 2001, at The Westin O'Hare Hotel, 6100 North River Road,
Rosemont, Illinois, unless postponed or adjourned to a later date. At the
meeting, you will be asked to consider and vote upon a proposal to adopt a
merger agreement. If the merger contemplated by the merger agreement is
completed, Galileo will become a wholly owned subsidiary of Cendant
Corporation.
Upon successful completion of the merger, you will receive a combination of
cash and shares of Cendant common stock in exchange for your shares of Galileo
common stock. The value of the merger consideration is expected to be $33 per
share of Galileo common stock on the date of the special meeting, but may be
more or less as described in the accompanying proxy statement-prospectus. The
actual cash and number of shares of Cendant common stock to be issued in
exchange for each share of Galileo common stock will be determined as described
in the proxy statement-prospectus.
The Galileo board of directors has approved the merger agreement and has
determined that the merger agreement and the merger are advisable and in the
best interests of Galileo and its stockholders. Accordingly, the Galileo board
recommends that you vote FOR the adoption of the merger agreement at the
special meeting.
In light of the importance of the proposed merger, we urge you to attend the
special meeting in person or participate by proxy. Whether or not you plan to
attend, after carefully reading and considering the accompanying materials,
please vote your shares as soon as possible. Your voting materials contain
detailed information on how to vote.
Holders of outstanding shares of Galileo common stock at the close of
business on July 23, 2001 are entitled to vote at the special meeting. The
adoption of the merger agreement requires the approval of the holders of a
majority of the outstanding shares of Galileo common stock. If you do not vote
by proxy or in person at the special meeting, it will count as a vote against
the merger agreement. Regardless of the number of shares you own, your vote is
important.
Sincerely,
/s/ James E. Barlett
James E. Barlett
Chairman, President and Chief
Executive Officer
[LOGO]
Galileo International, Inc.
9700 West Higgins Road, Suite 400
Rosemont, Illinois 60018
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
----------------
A special meeting of stockholders of Galileo International, Inc. will be
held on Thursday, August 30, 2001, starting at 9:00 a.m. Central Time, at The
Westin O'Hare Hotel, 6100 North River Road, Rosemont, Illinois, unless
postponed or adjourned to a later date. The purposes of the special meeting are
for you to consider and vote upon:
. A proposal to adopt the Agreement and Plan of Merger, dated as of June
15, 2001, by and among Galileo, Cendant Corporation and Galaxy
Acquisition Corp., whereby Galaxy, a subsidiary of Cendant, will merge
into Galileo. Following the merger, Galileo will be a wholly owned
subsidiary of Cendant.
. Any adjournments or postponements of the special meeting, if necessary.
Only holders of record of shares of Galileo common stock at the close of
business on July 23, 2001 will be entitled to vote at the special meeting or
any adjournment or postponement of the special meeting. A list of Galileo
stockholders entitled to vote at the special meeting will be available during
normal business hours at our executive offices in Rosemont, Illinois, for at
least 10 days prior to the special meeting for examination by any stockholder
for any purpose related to the special meeting.
We cannot complete the merger unless the holders of a majority of the
outstanding shares of Galileo common stock vote to adopt the merger agreement.
For more information about the merger, please review the accompanying proxy
statement-prospectus and the merger agreement attached as Annex A.
The Galileo board has approved the merger agreement and has determined that
the merger agreement and the merger are advisable and in the best interests of
Galileo and its stockholders. Accordingly, the Galileo board recommends that
you vote FOR the adoption of the merger agreement at the special meeting.
Galileo stockholders who do not vote in favor of adoption of the merger
agreement and who otherwise comply with the requirements of Delaware law will
be entitled to appraisal rights. A summary of the applicable Delaware law
provision, including the requirements a Galileo stockholder must follow in
order to exercise his or her appraisal rights, is contained in the accompanying
proxy statement-prospectus. A copy of the applicable Delaware law provision is
attached as Annex E to the proxy statement-prospectus.
By Order of the Board of Directors,
/s/ Anthony C. Swanagan
Anthony C. Swanagan
Secretary
July 25, 2001
It is important that your shares be represented at the special meeting,
either in person or by proxy. To assure your representation at the special
meeting, please complete, sign and date the enclosed proxy card and return
it promptly in the accompanying postage prepaid envelope. You may also vote
your shares by calling the toll-free number or going to the Internet website
listed on your proxy card.
PROXY STATEMENT-PROSPECTUS
[Cendant Logo]
[Galileo Logo]
MERGER PROPOSED
Cendant Corporation The Merger:
. New York Stock Exchange Symbol: CD . Upon adoption of the merger
agreement and completion of the
merger, Cendant expects to issue
between 116 million and 141
million shares of Cendant common
stock.
Galileo International, Inc.
. New York Stock Exchange Symbol: GLC
Galaxy Acquisition Corp.
. Galileo stockholders will receive
a combination of Cendant common
stock and cash for each share of
Galileo common stock that they
own.
. A newly formed Delaware corporation
that is a wholly owned subsidiary of
Cendant and is not publicly traded.
. Galileo stockholders are expected
to receive total consideration of
$33 per share of Galileo common
stock, consisting of $6.435 in
cash and $26.565 in shares of
Cendant common stock. The actual
cash and number of shares of
Cendant common stock to be issued
in exchange for each share of
Galileo common stock will be
determined as described in the
proxy statement-prospectus.
You should read the "Risk Factors" section beginning on page 34 for a
description of some of the risks you should consider in evaluating the proposed
merger.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the shares of Cendant common stock
to be issued in the merger or determined that this proxy statement-
prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
The date of this proxy statement-prospectus is July 25, 2001,
and is first being mailed to stockholders on or about July 25, 2001.
REFERENCES TO ADDITIONAL INFORMATION
This proxy statement-prospectus incorporates important business and
financial information about Galileo and Cendant from other documents that are
not included in or delivered with this proxy statement-prospectus. This
information is available to you without charge upon your written or oral
request. You can obtain the documents incorporated by reference into this proxy
statement-prospectus by accessing the Securities and Exchange Commission's
website maintained at "http://www.sec.gov" or by requesting copies in writing
or by telephone from the appropriate company at the following addresses:
Galileo International, Inc. Cendant Corporation
9700 West Higgins Road, Suite 400 9 West 57th Street
Rosemont, Illinois 60018 New York, New York 10019
Attention: Investor Relations Attention: Investor Relations
(847) 518-4000 (212) 413-1845
If you would like to request documents, please do so by August 23, 2001 in
order to receive them before Galileo's special meeting. We will mail the
documents you request by first class mail, or another equally prompt means, by
the next business day after we receive your request.
See "Where You Can Find More Information" on pages 107 through 109.
TABLE OF CONTENTS
Page
----
QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING....................... 1
SUMMARY.............................................................................. 5
The Companies...................................................................... 5
Cendant.......................................................................... 5
Galileo.......................................................................... 7
The Merger Agreement............................................................... 7
Merger Consideration............................................................... 8
Conditions to the Completion of the Merger......................................... 11
Termination of the Merger Agreement................................................ 12
Termination Fee and Expenses....................................................... 12
Board of Directors Recommendation to Galileo Stockholders.......................... 13
Opinions of Galileo's Financial Advisor............................................ 13
The Galileo Special Meeting........................................................ 13
Vote Required to Adopt the Merger Agreement........................................ 13
The Voting Agreement............................................................... 14
Stock Option Agreement............................................................. 14
Interests of Certain Persons in the Merger......................................... 14
Stock Exchange Listing............................................................. 14
Material United States Federal Income Tax Consequences of the Merger............... 15
Accounting Treatment............................................................... 15
Appraisal Rights................................................................... 15
Recent Developments................................................................ 15
FINANCIAL SUMMARY.................................................................... 16
Market Price Data.................................................................. 16
Historical Market Prices and Dividends............................................. 16
Selected Historical Financial Data of Cendant...................................... 18
Unaudited Pro Forma Financial Data of Cendant...................................... 19
Selected Historical Financial Data of Galileo...................................... 30
Comparative Per Share Data......................................................... 32
RISK FACTORS......................................................................... 34
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS.................................... 38
THE MERGER........................................................................... 40
General............................................................................ 40
Background of the Merger........................................................... 40
Galileo's Rationale for the Merger; Recommendation of the Galileo Board............ 45
Cendant's Rationale for the Merger................................................. 47
Opinions of Galileo's Financial Advisor............................................ 48
Stock Exchange Listing............................................................. 54
Material United States Federal Income Tax Consequences of the Merger............... 54
Accounting Treatment............................................................... 57
Regulatory Approvals............................................................... 57
Appraisal Rights................................................................... 59
Interests of Certain Persons in the Merger......................................... 62
Redemption of Special Voting Preferred Stock from Certain Stockholders............. 66
Delisting and Deregistration of Galileo Common Stock............................... 67
Restrictions on Resales by Affiliates of Galileo................................... 67
i
Page
----
THE GALILEO SPECIAL MEETING............................................... 68
Purpose, Time and Place................................................. 68
Record Date; Voting Power............................................... 68
Vote Required to Adopt the Merger Agreement............................. 69
Share Ownership of Management and Certain Stockholders.................. 69
Voting of Proxies....................................................... 69
Revocability of Proxies................................................. 70
Solicitation of Proxies................................................. 70
THE MERGER AGREEMENT...................................................... 71
General................................................................. 71
Form of the Merger; Charter Documents of Galileo........................ 71
Timing of Closing....................................................... 71
Merger Consideration.................................................... 71
Conversion of Shares; Exchange Agent; Procedures for Exchange of
Certificates; Fractional Shares........................................ 74
Effect on Stock Based Awards; Employee Stock Purchase Plan.............. 75
Board of Directors and Officers of the Surviving Corporation............ 77
Board of Directors of Cendant........................................... 77
Representations and Warranties.......................................... 77
Covenants of Galileo.................................................... 78
No Solicitation......................................................... 81
Access to Information................................................... 83
Indemnification and Insurance........................................... 84
Tax Matters............................................................. 84
Benefit Plans........................................................... 85
Cendant Actions Prior to Completion of the Merger....................... 85
Conditions to the Completion of the Merger.............................. 85
Termination of the Merger Agreement..................................... 87
Termination Fee and Expenses............................................ 88
THE VOTING AGREEMENT...................................................... 90
Agreement to Vote and Proxy............................................. 90
Restrictions on Transfer................................................ 90
Standstill.............................................................. 90
Termination............................................................. 91
THE STOCK OPTION AGREEMENT................................................ 92
Exercise of the Option.................................................. 92
Conditions.............................................................. 92
Put Right............................................................... 92
Registration Rights..................................................... 93
Limitation on Profit.................................................... 93
Termination of the Option............................................... 94
Effect of the Stock Option Agreement and the Voting Agreement........... 94
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF GALILEO
COMMON STOCK............................................................. 95
Certain Beneficial Owners............................................... 95
Directors and Executive Officers........................................ 97
COMPARISON OF RIGHTS OF STOCKHOLDERS OF GALILEO AND CENDANT............... 98
Authorized Capital Stock................................................ 98
Board of Directors...................................................... 99
Committees of the Board of Directors.................................... 99
ii
Page
-------
Newly Created Directorships and Vacancies............................ 100
Removal of Directors................................................. 100
Officers............................................................. 100
Special Meetings of Stockholders..................................... 101
Quorum at Stockholder Meetings....................................... 101
Stockholder Action by Written Consent................................ 101
Advance Notice of Stockholder Proposals for Stockholder Meetings..... 101
Amendment of Governing Documents..................................... 103
Effect of Interested Stockholder Transactions and Fair Price
Provision........................................................... 104
Stockholders' Agreement.............................................. 105
Stockholder Rights Plan.............................................. 105
EXPERTS................................................................ 106
LEGAL MATTERS.......................................................... 106
SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS............................. 107
WHERE YOU CAN FIND MORE INFORMATION.................................... 107
GALILEO SEC FILINGS.................................................... 108
CENDANT SEC FILINGS.................................................... 108
MERGER AGREEMENT....................................................... Annex A
TRANSACTION SUPPORT AGREEMENT.......................................... Annex B
STOCK OPTION AGREEMENT................................................. Annex C
J.P.MORGAN SECURITIES INC. OPINION..................................... Annex D
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW.................... Annex E
iii
QUESTIONS AND ANSWERS ABOUT
THE MERGER AND THE SPECIAL MEETING
Q: What will happen in the proposed merger?
A: In the proposed merger, Galileo will merge with a newly formed subsidiary
of Cendant. After the merger, Galileo will no longer be a public company and
will become a wholly owned subsidiary of Cendant. See "The Merger" on pages 40
through 67.
Q: Why are Galileo and Cendant proposing the merger?
A: Galileo and Cendant believe that the merger will create attractive new
growth opportunities for stockholders of both companies because it will
substantially broaden the range of Cendant's service offerings and its
geographic reach. Galileo's fee-for-services business model, customer
relationships and customer base are believed to be highly complementary to
Cendant's. In addition, Galileo's major presence in air travel bookings and
substantial international reach are believed to be an excellent strategic fit
with Cendant and will facilitate Cendant's ability to capitalize on future
growth opportunities within the travel industry. See "The Merger--Galileo's
Rationale for the Merger; Recommendation of the Galileo Board" on pages 45
through 47 and "The Merger--Cendant's Rationale for the Merger" on pages 47
through 48.
Q: Are there risks associated with the merger?
A: Yes. We may not achieve the expected benefits of the merger because of
the risks and uncertainties discussed in the section entitled "Risk Factors" on
pages 34 through 37 and the section entitled "Special Note Regarding Forward-
Looking Statements" on pages 38 through 39.
Q: What will I receive in the merger?
A: If we complete the merger, you will receive a combination of Cendant
common stock, known as CD common stock, and cash with an expected value of
$33.00 per share of Galileo common stock, comprised of $6.435 in cash and
$26.565 in CD common stock, in exchange for each of your shares of Galileo
common stock. The actual amount of CD common stock you receive will be
determined during a measurement period that is expected to be the 20
consecutive trading days preceding the third trading day prior to the date of
the special meeting and the amount of cash will be determined on the closing
date. Assuming the special meeting is held on August 30, 2001, the measurement
period will be July 30, 2001 through August 24, 2001, inclusive. Under certain
circumstances, this measurement period will be changed. In addition, the number
of shares of CD common stock that you will receive for each share of Galileo
common stock you own, or the so-called exchange ratio, will float within a
range between approximately 1.56265 and 1.32825 if the average trading price of
CD common stock is between $17 and $20 per share and will be fixed if the
average trading price of CD common stock trades outside of this range. If the
average trading price of CD common stock during the measurement period is less
than or equal to $14 per share, Galileo may terminate the merger agreement. The
actual amount of cash you will receive will never exceed $6.435 per share, but
may be less in certain circumstances in order to preserve the tax-free nature
of the stock portion of the merger consideration.
For a more complete description of the consideration you will receive, see
"Merger Consideration" in the Summary on pages 8 through 11.
Q: When will I know the actual exchange ratio?
A: We will issue a press release prior to the special meeting that will
disclose the exchange ratio assuming that the closing of the merger is not
delayed by more than 30 days after the special meeting. We anticipate issuing
the press release on or about August 27, 2001.
1
Q: When do you expect the merger to be completed?
A: We plan to complete the merger as soon as possible after the special
meeting of Galileo stockholders called to adopt the merger agreement and the
satisfaction or waiver of other conditions to the merger, including the receipt
of any necessary regulatory approvals. We anticipate the merger will be
completed on or about August 31, 2001.
Q: On what am I being asked to vote?
A: You are being asked to vote on the adoption of the merger agreement.
Q: What other matters will be voted on at the Galileo special meeting?
A: No other matters will be voted on at the special meeting, except possibly
procedural business relating to an adjournment or postponement of the special
meeting.
Q: What does the Galileo board of directors recommend?
A: The Galileo board of directors has approved the merger agreement and has
determined that the merger agreement and the merger are advisable and in the
best interests of Galileo and its stockholders. Accordingly, the Galileo board
recommends that Galileo stockholders vote FOR the adoption of the merger
agreement at the special meeting.
Q: When and where is the Galileo special meeting?
A: The special meeting of Galileo stockholders to vote on the merger
agreement will be at The Westin O'Hare Hotel, 6100 North River Road, Rosemont,
Illinois on Thursday, August 30, 2001, at 9:00 a.m., Central Time, unless
postponed or adjourned to a later date.
Q: Who can vote on the merger?
A: Holders of record of Galileo common stock at the close of business on
July 23, 2001 can vote at the special meeting.
Q: What vote is required to approve the merger?
A: The merger must be approved by the holders of a majority of the total
number of outstanding shares of Galileo common stock on July 23, 2001. If you
do not vote, it will have the same effect as voting against the merger.
Q: What do I need to do now?
A: After carefully reading and considering the information contained in this
proxy statement-prospectus, please vote your shares as soon as possible. You
may vote your shares by signing and mailing the enclosed proxy card. You may
also vote your shares by calling the toll-free number listed on your proxy card
and following the recorded instructions or by going to the Internet website
listed on your proxy card and following the instructions.
Q: How will my proxy be voted?
A: If you complete your proxy it will be voted in accordance with your
instructions. If you sign and send in your proxy but do not indicate how you
want to vote, your proxy will be counted as a vote in favor of the merger
agreement, unless the Galileo board changes its recommendation concerning the
merger agreement
2
before you have signed and sent in your proxy, in which case your unspecified
proxy would be voted proportionately in accordance with the manner in which all
specified proxies have been voted. If you do not vote either in person or by
proxy, it will count as a vote against the merger agreement.
Q: If my shares are held in "street name" by my broker, will my broker vote
my shares for me?
A: Yes, but only if you provide your broker instructions on how to vote. You
should instruct your broker to vote your shares using the instructions provided
by your broker.
Q: Can I change my vote after I mail my proxy card?
A: Yes, you can change your vote at any time before your proxy is voted at
the special meeting. If you are a stockholder of record, you can do this by:
. delivering, prior to the special meeting, to Galileo's corporate
secretary at 9700 West Higgins Road, Suite 400, Rosemont, Illinois 60018,
a written notice of revocation bearing a later date or time than the
proxy;
. submitting a later-dated proxy that has been properly executed;
. submitting a later-dated proxy using the telephone voting procedures or
the Internet voting procedures; or
. attending the special meeting and voting in person. However, your
attendance alone will not revoke your proxy--you must also vote in
person.
If you instructed a broker to vote your shares, you must follow your
broker's directions for changing those instructions.
Q: Is my vote important?
A: Yes. Your vote is very important. Adoption of the merger agreement
requires the affirmative vote of the holders of a majority of the outstanding
shares of Galileo common stock. If you do not vote, it will have the same
effect as a vote against 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 Galileo stock certificates.
Q: Do I have appraisal rights?
A: Yes. If you do not vote in favor of the merger agreement and otherwise
comply with the requirements of Delaware law, you will be entitled to appraisal
rights to receive the statutorily determined "fair value" of your shares. See
"The Merger--Appraisal Rights" on pages 59 through 62.
Q: What are the material United States federal income tax consequences of
the merger to me?
A: In general, you will recognize gain (but not loss) equal to the lesser
of:
. the amount of cash you receive in the merger, and
. the amount equal to the excess, if any, of the sum of the amount of cash
and the fair market value of CD common stock you receive in the merger
over the adjusted tax basis of your Galileo common stock.
3
See "The Merger--Material United States Federal Income Tax Consequences of
the Merger" on pages 54 through 57. Galileo stockholders should consult their
tax advisors for a full understanding of the tax consequences to them of the
merger.
Q: How will the merger be treated for accounting purposes?
A: The merger will be accounted for under the purchase method of accounting
in accordance with accounting principles generally accepted in the United
States. Accordingly, the cost to acquire Galileo will be allocated to the
tangible assets acquired and liabilities assumed based on their fair values,
with any excess being treated as goodwill and other intangible assets.
Q: Who can help answer my questions?
A: If you have any questions about the merger or if you need additional
copies of this proxy statement-prospectus or the enclosed proxy card you should
contact:
Georgeson Shareholder
111 Commerce Road
Carlstadt, New Jersey 07072
(888)386-3975
Q: Where can I find more information about the companies?
A: You can find more information about Galileo and Cendant from various
sources described under "Where You Can Find More Information" on pages 107
through 109.
4
SUMMARY
This summary highlights selected information from this document and may not
contain all the information that is important to you. For a more complete
understanding of the merger and for a more complete description of the terms of
the merger, you should read this entire document carefully, as well as the
additional documents to which we refer you. See "Where You can Find More
Information" on pages 107 through 109. References in this document to "Cendant"
and "Galileo" include their respective subsidiaries unless otherwise indicated.
The Companies
Cendant Corporation Galileo International Inc.
9 West 57th Street 9700 West Higgins Road, Suite 400
New York, New York 10019 Rosemont, Illinois 60018
(212) 413-1800 (847) 518-4000
Cendant
Cendant is one of the foremost providers of travel and real estate services
in the world. Cendant operates in four business segments--Hospitality, Real
Estate Services, Vehicle Services and Financial Services. Cendant's businesses
provide a wide range of consumer and business services which are intended to
complement one another and create cross-marketing opportunities both within
each segment and between segments. Cendant's Hospitality segment franchises
hotel businesses and facilitates the sale and exchange of vacation ownership
interests. Cendant's Real Estate Services segment franchises real estate
brokerage businesses, provides home buyers with mortgages and assists in
employee relocations. Its Vehicle Services segment franchises and operates car
rental businesses, provides fleet management services to corporate clients and
government agencies and operates parking facilities in the United Kingdom.
Cendant's Financial Services segment provides marketing strategies primarily to
financial institutions by offering an array of financial and insurance-based
products to consumers, franchises tax preparation service businesses and
provides consumers with access to a variety of discounted products and
services.
As a franchiser of hotels, residential and commercial real estate brokerage
offices, car rental operations and tax preparation services, Cendant licenses
the owners and operators of independent businesses the right to use Cendant's
brand names. Cendant does not own or operate hotels, real estate brokerage
offices or tax preparation offices. Instead, Cendant provides its franchisees
with services designed to increase their revenue and profitability.
Hospitality Segment. Cendant's Hospitality segment contains its nine lodging
brands and its timeshare and travel agency businesses. In its lodging franchise
business, Cendant franchises hotels primarily in the mid-priced and economy
markets. Cendant is the world's largest hotel franchiser, operating the Days
Inn(R), Ramada(R) (in the United States), Super 8(R), Howard Johnson(R),
Wingate Inn(R), Knights Inn(R), Travelodge(R) (in North America), Villager(R)
and AmeriHost Inn(R) lodging franchise systems. In its timeshare business,
Cendant owns Resort Condominiums International, LLC, the world's leading
timeshare exchange company. On April 2, 2001, Cendant acquired Fairfield
Resorts, Inc. (formerly known as Fairfield Communities Inc.), one of the
largest vacation ownership companies in the United States.
Real Estate Services Segment. Cendant's Real Estate Services segment
consists of its three real estate brands and its mortgage and relocation
businesses. Cendant is the world's largest real estate brokerage franchiser. In
its real estate franchise business, Cendant franchises real estate brokerage
offices under the CENTURY 21(R), Coldwell Banker(R) and ERA(R) real estate
brokerage franchise systems. In its relocation business, Cendant Mobility
Services Corporation is one of the leading providers of corporate relocation
services in the world. Cendant Mobility offers relocation clients a variety of
services in connection with the transfer of a client's employees and offers
similar services to affinity groups and their members. In its mortgage
business, Cendant Mortgage Corporation is one of the largest retail providers
of residential mortgages in the
5
United States. Cendant Mortgage originates, sells and services residential
mortgage loans in the United States, marketing such services to consumers
through relationships with corporations, financial institutions, real estate
brokerage firms and mortgage banks.
Vehicle Services Segment. With the acquisition of Avis Group Holdings, Inc.
on March 1, 2001, Cendant's Vehicle Services segment now consists of the car
rental operations and fleet management services businesses of Avis Group, in
addition to the Avis car rental franchise system and its United Kingdom based
parking facility business. Cendant's Avis car rental business is the second
largest car rental system in the world (based on total revenues and volume of
rental transactions). Cendant's fleet management services business is a leader
in the industry. Cendant's National Car Parks Limited subsidiary is the largest
private parking facilities operator in the United Kingdom.
Financial Services Segment. Cendant's Financial Services segment consists of
its insurance/wholesale businesses, its tax preparation service system and its
individual membership business. Its insurance/wholesale business markets and
administers insurance products, primarily accidental death and dismemberment
insurance and term life insurance, and also provides marketing strategies
primarily to financial institutions through an offering of checking account
enhancement packages for the benefit of their customers. The
insurance/wholesale business is conducted through FISI*Madison LLC, Benefit
Consultants, Inc., Long Term Preferred Care, Inc. and Cims Ltd., which are all
wholly owned subsidiaries. Its Jackson Hewitt Inc. subsidiary operates the
second largest tax preparation service system in the United States with
locations in 48 states and franchises a system of approximately 3,300 offices
that specialize in computerized preparation of federal and state individual
income tax returns.
Cendant's individual membership business, with approximately 24.3 million
memberships, provides customers with access to a variety of discounted products
and services. On July 2, 2001, Cendant entered into outsourcing agreements with
Trilegiant Corporation, a newly formed corporation to be headquartered in
Norwalk, Connecticut, to outsource its individual membership business. The
former management of Cendant Membership Services, Inc. ("CMS") and Cendant
Incentives, Inc. own 100% of the common stock and Cendant owns a convertible
preferred stock investment in Trilegiant, which, if converted into common
stock, would initially represent approximately 20% of Trilegiant's common
stock. All employees of CMS and Cendant Incentives will become employees of
Trilegiant. Previously, Cendant had planned to spin off its individual
membership business, but a spin off is no longer being pursued.
Cendant will retain the economic benefits from existing members of Cendant's
individual membership business and Trilegiant will provide fulfillment services
to these members for a servicing fee. Trilegiant will also have the right to
use all assets necessary for the operation of the individual membership
business and, beginning in the third quarter of 2002, Cendant will receive a
license fee of 5% of Trilegiant's revenues, increasing to 22% over ten years.
The outsourcing agreement has a 40-year term.
Acquisitions. Cendant continually explores and conducts discussions with
regard to acquisitions and other strategic corporate transactions in its
industries and in other franchise, franchisable or service businesses in
addition to the transactions previously announced. As part of Cendant's regular
on-going evaluation of acquisition opportunities, Cendant currently is engaged
in a number of separate, unrelated preliminary discussions concerning possible
acquisitions. The purchase price for the possible acquisitions may be paid in
cash, through the issuance of CD common stock or other Cendant securities,
borrowings, or a combination thereof. Prior to consummating any such possible
acquisition, Cendant will need to, among other things, initiate and complete
satisfactory due diligence investigations; negotiate the financial and other
terms (including price) and conditions of such acquisitions; obtain appropriate
board of directors, regulatory and other necessary consents and approvals; and,
if necessary, secure financing. No assurance can be given with respect to the
timing, likelihood or business effect of any possible transaction. In the past,
Cendant has been involved in both relatively small acquisitions and
acquisitions which have been significant.
6
Recent Financial Results. On July 18, 2001, Cendant reported second quarter
2001 results and projected its outlook for the remainder of 2001. Cendant
announced that second quarter 2001 adjusted earnings per share (which excludes
non-recurring or unusual items and the effect of an equity ownership of
Homestore.com) of $0.30 exceeded prior second quarter 2001 projections of $0.27
and second quarter 2000 adjusted earnings per share of $0.26. Cendant also
announced that it has raised its projection for the second half of the year by
$0.01 and that Cendant now projects third quarter 2001 adjusted EPS to be
$0.32, fourth quarter 2001 adjusted EPS to be $0.24 and has increased its
projection for full year 2001 to $1.07. Cendant forecasted adjusted EPS for
full year 2002 of $1.35 to $1.40. Cendant announced reported earnings per share
of $0.27 compared to second quarter 2000 reported earnings per share of $0.24.
Cendant's second quarter 2001 includes $0.03 per share of interest expense not
included in second quarter 2000 as Cendant began to recognize interest expense
in third quarter 2000 as required by the settlement agreement for the principal
CD common stock class action litigation that is described under "Risk Factors"
on pages 34 through 37. Without this incremental interest expense, second
quarter 2001 adjusted EPS increased 27%. For a discussion of these results and
projections, you should review Cendant's current report on Form 8-K, filed with
the Securities and Exchange Commission on July 19, 2001 and available as
described under "Where You Can Find More Information" on pages 107 through 109.
Public Offering of Cendant Securities. On July 20, 2001, Cendant announced a
public offering of 15 million Upper DECSsm, each consisting of both a senior
note and a forward purchase contract, aggregating $750 million. The senior
notes will have a term of five years and will initially bear interest at an
annual rate of 6.75%. The forward purchase contracts will require the holder to
purchase a minimum of 1.7593 shares and a maximum of 2.3223 shares of CD common
stock, based upon the average closing price of CD common stock during a
stipulated period, in August 2004. The forward purchase contracts will require
distributions at an annual rate of 1.00% through August 2004 at which time the
rate will be reset based upon a remarketing. Cendant has also granted the
underwriters an option to purchase an additional 2.25 million of Upper DECSsm
aggregating $112.5 million to cover over-allotments, if any.
Galileo
Galileo is a diversified, global technology leader. Its core business is
providing electronic global distribution services to the travel industry
through its computerized reservation systems and innovative Internet-based
solutions. Galileo is a value-added distributor of travel inventory dedicated
to supporting its travel agency and corporate customers and, through them,
expanding traveler choice. Among Galileo's subsidiaries are TRIP.com, an award-
winning online travel service and technology provider, and Quantitude Inc.,
which delivers advanced telecommunications services and enterprise networking
solutions. Galileo also offers secure, flexible and cost-effective managed
hosting services. Headquartered in Rosemont, Illinois, Galileo has offices
worldwide and operates a state-of-the-art data center in Greenwood Village,
Colorado.
Recent Financial Results. On July 23, 2001, Galileo reported second quarter
2001 results. Galileo announced that second quarter economic earnings per share
grew 5.6% to $0.80 per diluted share, compared to economic earnings of $0.76
per diluted share, for the same quarter in 2000. Economic earnings are
calculated by adding back to reported earnings the after-tax amortization of
intangible assets arising from mergers and acquisitions. Reported earnings in
the second quarter were $44.0 million, or $0.50 per diluted share, compared to
$43.2 million, or $0.47 per diluted share, in 2000. Total revenue grew 5.2% to
$447.6 million for the quarter. Operating income declined 4.4% to $90.4
million, from $94.6 million for the same period in 2000, due to increased
investments to maintain and grow the business. For a discussion of these
results, you should review Galileo's current report on Form 8-K, filed with the
Securities and Exchange Commission on July 24, 2001 and available as described
under "Where You Can Find More Information" on pages 107 through 109.
The Merger Agreement (pages 71 through 89)
The merger agreement is attached as Annex A to this proxy statement-
prospectus. We encourage you to read the merger agreement carefully and in its
entirety. It is the principal document governing the merger.
7
Merger Consideration (pages 71 through 74)
You will receive in the merger a combination of cash and CD common stock
with a total expected value of $33 per share for each share of Galileo common
stock you own. In order to preserve the tax-free nature of the stock portion of
the merger consideration, Cendant will not pay more than 19.5% of the aggregate
merger consideration in cash and, as a result, must pay at least 80.5% of the
aggregate merger consideration in CD common stock. Thus, the expected value of
the total merger consideration of $33 per share is comprised of $26.565 per
share, or 80.5%, in CD common stock and $6.435 per share, or 19.5%, in cash,
which represents the maximum amount of cash per share that will be paid. The
effect of the 19.5% limitation is that the cash portion of the merger
consideration will be reduced if it exceeds 19.5% of the total value of the
merger consideration, determined as of the closing of the merger.
The Stock Consideration. The number of shares of CD common stock that you
will receive for each share of Galileo common stock you own is based upon the
so-called exchange ratio, which will be determined by dividing the $26.565
value of the stock consideration by the average of the closing sales prices for
CD common stock, referred to as the average trading price, during the
measurement period. Except as described below under "Effect of Certain Cendant
Acquisitions," the measurement period is the 20 consecutive trading days
preceding the third trading day prior to the date of the special meeting.
Assuming the special meeting is held on August 30, 2001, the measurement period
will be July 30, 2001 through August 24, 2001, inclusive. In other words:
Exchange Ratio = $26.565/Average Trading Price
The exchange ratio, which will not be rounded up or down, is subject to a
"collar" which means the exchange ratio will float when the average trading
price is between $17 and $20 per share of CD common stock and will be fixed
outside of this range. Thus, if the average trading price during the
measurement period is $17 or less per share, the exchange ratio will be
approximately 1.56265 ($26.565/$17); if the average trading price is $20 or
more per share, the exchange ratio will be 1.32825 ($26.565/$20); and if the
average trading price is between $17 and $20 per share, the exchange ratio will
adjust to keep the expected value of the stock portion of the merger
consideration at $26.565. The following table helps to illustrate:
Average Trading
Price Exchange Ratio
--------------- --------------
$20 or greater 1.32825
Between $17 and
$20 $26.565 divided by the average trading price
$17 or less Approximately 1.56265
The number of shares of CD common stock that you will receive for each share
of Galileo common stock you own will equal the exchange ratio rounded to the
nearest thousandth of a share. This number then will be multiplied by the
number of shares of Galileo common stock you own to determine the number of
shares of CD common stock you will receive. Cendant, however, will not issue
fractional shares of CD common stock in the merger. Rather, the number of
shares of CD common stock you will receive will be rounded down to the nearest
whole number of shares, and you will receive cash for the remaining fraction
based on the average trading price during the measurement period.
Because the exchange ratio is determined using the average trading price
during a specified period prior to the special meeting, the actual value of the
CD common stock you receive at closing may be more or less than $26.565 even if
the average trading price is between $17 and $20 per share. The actual value of
the stock you receive will be equal to the number of shares of CD common stock
that you will receive for each share of Galileo common stock that you own,
determined as described above, multiplied by the then current market price for
the CD common stock. For example, if the exchange ratio is 1.32825 and the
current market price for CD common stock is $25 at the time you receive your CD
common stock, the CD common stock you receive will be worth $33.20 (1.328 x
$25). Alternatively, if the exchange ratio is 1.32825 and the current market
price for CD common stock is $19, the CD common stock you receive will be worth
approximately $25.23 (1.328 x $19).
8
The Cash Consideration. The actual amount of the cash portion of the merger
consideration that you will receive will be determined on the closing date of
the merger. The amount of the cash portion of the merger consideration will
never exceed $6.435 per share of Galileo common stock, but may be less than
$6.435 per share in the circumstances described below.
In order to preserve the tax-free nature of the stock portion of the merger
consideration, Cendant will not pay more than 19.5% of the aggregate merger
consideration in cash, resulting in at least 80.5% of the aggregate merger
consideration being paid in CD common stock. Whether this requirement is
satisfied will be based upon the average of the high and low sales prices of CD
common stock on the closing date. It is important to note that this average is
calculated differently than the calculation of the average trading price used
to determine the exchange ratio, as described above under "The Stock
Consideration."
Once the value of CD common stock on the closing date is calculated, it will
be multiplied by the number of shares of CD common stock that you will receive
for each share of Galileo common stock you own to determine the value of the
stock portion of the merger consideration for tax purposes. After rounding the
exchange ratio to the nearest thousandth of a share, you can determine the cash
that you will receive by using the following formula:
Cash = (Exchange Ratio x Average Closing Price x .195)/.805
You will receive cash per share equal to the lower of the number resulting
from the above calculation and $6.435. Because satisfaction of the requirement
that the cash consideration not exceed 19.5% of the total merger consideration
will be measured at closing, it is not possible to determine prior to the
special meeting whether you will receive less than the maximum $6.435 per share
in cash. However, you will receive less than $6.435 per share in the following
circumstances:
. If the average trading price is $17 or less and the average closing price
is less than $17; or
. If the average closing price is less than the average trading price,
unless both averages are $20 or more.
Walk Away Right. If the average trading price during the measurement period
is less than or equal to $14 per share, Galileo may terminate the merger
agreement.
9
The following chart generally depicts the total value of the merger
consideration you will receive if the average trading price and the average
closing price are the same at various dollar amounts. The table that follows
sets forth the exchange ratio (rounded for illustration purposes), the value of
each of the stock and cash portions of the merger consideration, the total
value of the merger consideration and the value of each of the stock and cash
portions of the merger consideration as a percentage of the total value of the
merger consideration, again assuming the average trading price and the average
closing price are the same.
Expected value received per Galileo share
[GRAPH]
Galileo has right to walk-away at $14
$1.00 decrease in average trading price equals $1.94 decrease in expected value
per share of Galileo common stock
Expected value per share of Galileo common stock is fixed at $33.00
$1.00 increase in average trading price equals $1.33 increase in expected value
per share of Galileo common stock
Average trading price per Cendant share
Average
trading
price $12.00 $13.00 $14.00 $15.00 $16.00 $17.00 $18.00 $19.00
Exchange
ratio 1.56 1.56 1.56 1.56 1.56 1.56 1.48 1.40
Stock value
per share of
Galileo common
stock $18.75 $20.31 $21.88 $23.44 $25.00 $26.57 $26.57 $26.57
Cash per share
of Galileo
common stock $4.54 $4.92 $5.30 $5.68 $6.06 $6.44 $6.44 $6.44
Expected total
value per
share of
Galileo
common stock $23.29 $25.24 $27.18 $29.12 $31.06 $33.00 $33.00 $33.00
Percentage
of stock
consideration 80.5% 80.5% 80.5% 80.5% 80.5% 80.5% 80.5% 80.5%
Percentage of
cash
consideration 19.5% 19.5% 19.5% 19.5% 19.5% 19.5% 19.5% 19.5%
Average
trading
price $20.00 $21.00 $22.00 $23.00 $24.00 $25.00 $26.00 $27.00
Exchange
ratio 1.33 1.33 1.33 1.33 1.33 1.33 1.33 1.33
Stock value
per share of
Galileo common
stock $26.57 $27.89 $29.22 $30.55 $31.88 $33.21 $34.53 $35.86
Cash per share
of Galileo
common stock $6.44 $6.44 $6.44 $6.44 $6.44 $6.44 $6.44 $6.44
Expected total
value per
share of
Galileo
common stock $33.00 $34.33 $35.66 $36.98 $38.31 $39.64 $40.97 $42.30
Percentage
of stock
consideration 80.5% 81.3% 82.0% 82.6% 83.2% 83.8% 84.3% 84.8%
Percentage of
cash
consideration 19.5% 18.7% 18.0% 17.4% 16.8% 16.2% 15.7% 15.2%
Note: Exact numbers may change based on differences between 20-day average
trading price and average closing price and other factors described below.
Other Factors Affecting the Value or Composition of the Merger Consideration
Dissenting Shares. If any holders of shares of Galileo common stock dissent
from the merger and seek appraisal rights in compliance with Delaware law, an
estimated amount of cash necessary to pay cash to dissenting holders will be
deducted from the aggregate cash that can be paid to non-dissenting
stockholders. As a result, the amount of cash you will receive in the merger
will be reduced by the estimated amount of cash that would be paid
10
for dissenting shares divided by the total number of non-dissenting shares of
Galileo common stock. In this event, however, the stock portion of the merger
consideration will be increased proportionally for non-dissenting stockholders.
Capital Adjustments. If the outstanding shares of Galileo common stock or CD
common stock are changed into a different number of shares or a different class
as a result of a stock split, reverse stock split, stock dividend, subdivision,
reclassification, combination, exchange, recapitalization or other similar
transaction, the exchange ratio and the merger consideration will be adjusted
appropriately. If Cendant declares, sets aside or pays any dividend or makes
any other distribution or payment (whether in cash, stock, property or any
combination thereof), in each case with respect to its outstanding shares of CD
common stock, then the $17 to $20 per share collar described above and
Galileo's walk away right at $14 per share or less will be adjusted to take
into account the value of such dividend, distribution or payment.
Effect of Certain Cendant Acquisitions. If Cendant enters into an
acquisition agreement with a competitor of Galileo, and the closing of
Cendant's acquisition of Galileo is delayed due to regulatory delays primarily
as a result of that action, the value of the merger consideration may be
affected in two ways. First, if the closing is delayed by more than 30 days
after the special meeting, the measurement period will be changed to the 20
consecutive trading days ending immediately preceding the third trading day
prior to the date of receipt of the last regulatory approval, and the average
trading price will be recalculated. Second, if the closing does not occur until
after December 12, 2001, then Cendant will be required to pay additional merger
consideration, payable in CD common stock, equal to simple interest on $33
calculated using the 30 day London Interbank Offered Rate, or LIBOR, plus 100
basis points.
Cendant's Ownership of Galileo Common Stock. If Cendant or any of its
affiliates owns any Galileo common stock at the time of the merger, generally,
the percentage of the merger consideration that will consist of CD common stock
will be increased and the percentage of the merger consideration that will
consist of cash will be proportionately decreased. In general, the aggregate
value of the consideration that would be payable to Cendant for its shares of
Galileo common stock will be deducted from the aggregate cash that can be paid
to Galileo stockholders (other than Cendant). Currently, neither Cendant nor
any of its affiliates owns any Galileo common stock and, other than pursuant to
the stock option agreement (discussed below), Cendant and its affiliates are
prohibited by the merger agreement from acquiring Galileo common stock.
Conditions to the Completion of the Merger (pages 85 through 87)
The completion of the merger depends upon satisfying a number of conditions,
including the following:
. adoption of the merger agreement by the Galileo stockholders;
. absence of any legal prohibition to complete the merger;
. listing of shares of CD common stock issuable to Galileo stockholders on
the New York Stock Exchange; and
. receipt of various consents and approvals (including United States and
foreign regulatory approvals) required to complete the merger.
In addition, Cendant's obligation to complete the merger is subject to,
among other things:
. the accuracy of the representations and warranties made by Galileo in the
merger agreement;
. the performance by Galileo of its obligations under the merger agreement;
. the absence of events, changes, developments or circumstances that would
reasonably be expected to have a material adverse effect on Galileo;
11
. the receipt from Cendant's counsel of an opinion that the merger will
qualify as a tax-free reorganization; and
. the absence of any change in the Galileo board's recommendation that
Galileo stockholders adopt the merger agreement.
In addition, Galileo's obligation to complete the merger is subject to,
among other things:
. the accuracy of the representations and warranties made by Cendant in the
merger agreement;
. the performance by Cendant of its obligations under the merger agreement;
and
. the receipt from Galileo's counsel of an opinion that the merger will
qualify as a tax-free reorganization.
Termination of the Merger Agreement (pages 87 through 88)
The merger agreement may be terminated at any time prior to the completion
of the merger:
. by the mutual consent of Cendant and Galileo;
. by either Cendant or Galileo, if:
. the merger is not completed by July 1, 2002. However, neither party
may terminate for this reason if its failure to fulfill any obligation
is the reason the merger has not been completed;
. there exists a legal prohibition to complete the merger that is final
and not able to be appealed; or
. the merger agreement is not adopted by Galileo's stockholders at the
special meeting.
. by Galileo, if:
. Cendant materially breaches any of its representations, warranties,
agreements or covenants and the breach cannot be cured within a
specified time period; or
. the average trading price of a share of CD common stock during the
measurement period is less than or equal to $14.00.
. by Cendant, if:
. Galileo materially breaches any of its representations, warranties,
agreements or covenants and the breach cannot be cured within a
specified time period; or
. the Galileo board changes its recommendation that Galileo stockholders
adopt the merger agreement.
Termination Fee and Expenses (pages 88 through 89)
Galileo must pay to Cendant a termination fee of $100 million plus up to $10
million in Cendant's expenses incurred in connection with the transaction, if
any of the following occurs:
. Galileo becomes aware that another proposal to acquire Galileo has been
made or that such a proposal is intended to be made and:
. Galileo or Cendant terminates the merger agreement because the merger
was not completed by July 1, 2002, and, within 12 months of the
termination, Galileo executes a definitive agreement, or consummates a
transaction, with a third party to acquire Galileo;
. Cendant terminates the merger agreement because Galileo is in material
breach of any of its covenants or agreements, and, within 12 months of
the termination, Galileo executes a definitive agreement, or
consummates a transaction, with a third party to acquire Galileo; or
12
. Cendant terminates the merger agreement because Galileo breaches any
representation or warranty in the merger agreement in any material
respect, and, within 12 months of the termination, Galileo executes a
definitive agreement, or consummates a transaction, with a third party
to acquire Galileo; or
. Cendant terminates the merger agreement after the Galileo board
withdraws or changes its recommendation that Galileo stockholders adopt
the merger agreement; or
. either Galileo or Cendant terminates the merger agreement because the
Galileo stockholders did not adopt the merger agreement at the special
meeting, and either:
. the Galileo board had withdrawn or changed its recommendation that
Galileo stockholders adopt the merger agreement; or
. a proposal by a third party to acquire Galileo becomes publicly known
at or prior to the special meeting and within 12 months following the
termination of the merger agreement, Galileo executes a definitive
agreement, or consummates a transaction, with a third party to
acquire Galileo.
In addition, if the merger agreement is terminated because Galileo's
stockholders do not adopt the merger agreement at the special meeting, Galileo
has agreed to pay to Cendant the amount of its expenses incurred in connection
with the transaction up to a maximum amount of $10 million.
Board of Directors Recommendation to Galileo Stockholders (pages 45 through 47)
The Galileo board has approved the merger agreement and has determined that
the merger agreement and the merger are advisable and in the best interests of
Galileo and its stockholders. The Galileo board recommends that you vote FOR
the adoption of the merger agreement at the special meeting.
Opinions of Galileo's Financial Advisor (pages 48 through 54)
Among other factors that the Galileo board considered in deciding to approve
the merger, the Galileo board received an opinion from its financial advisor,
JPMorgan Securities Inc., as to the fairness, from a financial point of view,
of the merger consideration to the holders of Galileo common stock. The full
text of JPMorgan's written opinion, dated June 15, 2001, is attached to this
proxy statement-prospectus as Annex D. You should read this opinion completely
to understand the assumptions made, matters considered and limitations on the
review undertaken by JPMorgan in providing its opinion. JPMorgan's opinion is
addressed to the Galileo board and does not constitute a recommendation to any
stockholder with respect to any matter relating to the proposed merger.
The Galileo Special Meeting (pages 68 through 70)
The special meeting of Galileo stockholders to vote on the merger agreement
will be at The Westin O'Hare Hotel, 6100 North River Road, Rosemont, Illinois
on Thursday, August 30, 2001, at 9:00 a.m., Central Time, unless postponed or
adjourned to a later date.
Vote Required to Adopt the Merger Agreement (page 69)
Galileo stockholders will vote on a proposal to adopt the merger agreement.
Approval of this proposal requires the affirmative vote of the holders of at
least a majority of all shares of Galileo common stock that are outstanding and
entitled to vote at the special meeting.
At June 30, 2001, Galileo directors and executive officers as a group owned
and were entitled to vote less than one percent of the outstanding shares of
Galileo common stock. Each of the directors and executive officers of Galileo
that is entitled to vote at the Galileo special meeting has indicated that they
intend to vote their shares in favor of adoption of the merger agreement.
13
The Voting Agreement (pages 90 through 91)
In connection with the merger, Cendant entered into a transaction support
agreement, referred to in this proxy statement-prospectus as the voting
agreement, with United Air Lines, Inc. and its wholly owned subsidiary, Covia
LLC. As of June 30, 2001, based on information filed with the SEC, United,
through its affiliation with Covia, is deemed to be the beneficial owner of
18.2% of the outstanding shares of Galileo common stock held of record by Covia
and is entitled to vote these shares at the special meeting. Under the voting
agreement, Covia agreed to vote, and gave Cendant a proxy to vote, these shares
and any additional shares it acquires in favor of the adoption of the merger
agreement and against any third party proposal to acquire Galileo or any other
proposals presented for a vote that would prevent or materially delay
completion of the merger. United may terminate the voting agreement if the
Galileo board withdraws its recommendation to Galileo stockholders in favor of
the merger agreement as a result of a third party making a proposal that the
Galileo board determines is superior to the merger for Galileo's stockholders
or if the merger agreement is amended and United determines that the amendment
is adverse to it in a material respect. The voting agreement is attached hereto
as Annex B. We encourage you to read the voting agreement carefully and in its
entirety.
Stock Option Agreement (pages 92 through 94)
In connection with the merger agreement, Galileo entered into a stock option
agreement with Cendant. Under the stock option agreement, Galileo granted to
Cendant an option to purchase up to 17,041,071 shares of Galileo common stock
(subject to certain adjustments). The exercise price per share under the option
is $33.00 per share. Cendant may exercise its option in whole or in part if:
. under the terms of the merger agreement, Cendant would be able to
terminate the merger agreement under circumstances which could entitle
Cendant to the termination fee (regardless of whether the merger
agreement is actually terminated); and
. the voting agreement with United has been terminated in accordance with
its terms.
If Cendant proposes to exercise its option following the record date of the
special meeting, Galileo has agreed, subject to the exercise by Galileo's board
of its fiduciary duties, to fix a new record date and to hold the special
meeting at a time that provides Cendant the opportunity to vote its Galileo
common stock at that meeting. As of the date of this proxy statement-
prospectus, the option is not exercisable. The option agreement provides that
in no event will the number of shares of Galileo common stock subject to the
option exceed 19.5% of the number of shares of Galileo common stock issued and
outstanding. The stock option agreement is attached hereto as Annex C. We
encourage you to read the stock option agreement carefully and in its entirety.
Interests of Certain Persons in the Merger (pages 62 through 66)
In addition to their interests as stockholders, the directors and executive
officers of Galileo may have interests in the merger that are different from,
or in addition to, your interests. These interests exist because of rights they
may have under individual employment agreements, compensation arrangements, or
benefit and bonus plans, including a bonus plan for executive officers of
Galileo triggered upon completion of the sale of Galileo. Cendant will also
indemnify the executive officers and directors of Galileo for events occurring
prior to, at, or after the effective time of the merger. The members of the
Galileo board knew of these additional interests and considered them when they
approved the merger.
Stock Exchange Listing (page 54)
Cendant expects to receive authorization, subject to notice of issuance,
from the New York Stock Exchange for the listing of the shares of CD common
stock to be issued to Galileo stockholders in connection with the merger.
14
Material United States Federal Income Tax Consequences of the Merger (pages 54
through 57)
The obligations of Galileo and Cendant to consummate the merger are subject
to the receipt by Galileo and Cendant of the opinions of their respective
counsel that, on the basis of the facts, representations and assumptions set
forth or referred to therein, for U.S. federal income tax purposes, the merger
will qualify as a reorganization under Section 368(a) of the Internal Revenue
Code. If the merger so qualifies then, in general, Galileo stockholders will
recognize gain (but not loss) equal to the lesser of:
. the amount of cash they receive in the merger; and
. the amount equal to the excess, if any, of the sum of the amount of cash
and the fair market value of Cendant common stock they receive in the
merger over the adjusted tax basis of their Galileo common stock.
Tax matters are very complicated and the tax consequences of the merger to
each Galileo stockholder will depend on the stockholder's particular facts and
circumstances. Galileo stockholders are urged to consult their own tax advisors
to understand fully the tax consequences to them of the merger.
Accounting Treatment (page 57)
The merger will be accounted for using the purchase method of accounting as
such term is used under generally accepted accounting principles in the United
States. The purchase method accounts for a merger as an acquisition of one
company by another.
Appraisal Rights (pages 59 through 62)
Galileo stockholders who comply with the applicable requirements of Delaware
law will have the right to receive an appraisal of the value of their shares of
Galileo common stock in connection with the merger rather than receive the
merger consideration. A copy of Section 262 of the Delaware General Corporation
Law is included as Annex E to this proxy statement-prospectus.
Recent Developments
On June 18, 2001, two virtually identical complaints were filed in the Court
of Chancery in Delaware by alleged Galileo stockholders against Galileo and the
members of the Galileo board. The suits were filed on behalf of plaintiffs,
Lucian D. Cox and Jason Craner, respectively, and as purported class actions on
behalf of all public stockholders of Galileo except the defendants and their
affiliates. The complaints allege that the defendants have failed to act in
good faith toward the plaintiffs and have breached their fiduciary duties to
the plaintiffs in connection with defendants' pursuit and structure of the
merger by failing to shop Galileo to other companies or rival bidders and
denying plaintiffs their rights to share appropriately in the true value of
Galileo. The complaints seek, among other things, class certification, a
judgment declaring that the proposed transaction is unfair, unjust and
inequitable to plaintiffs and the other members of the class, to enjoin,
preliminarily and permanently, the merger, and compensation for all losses and
damages suffered and to be suffered, together with prejudgment and post-
judgment interest and costs and disbursements incurred in connection with the
action, including reasonable attorneys' fees. The defendants believe that the
allegations contained in the complaints are without merit and intend to contest
them vigorously.
15
FINANCIAL SUMMARY
Market Price Data
Galileo common stock is traded on the New York Stock Exchange under the
symbol "GLC." 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 Galileo common stock on the New York Stock Exchange on October 19,
2000, June 15, 2001, and July 23, 2001. October 19, 2000 was the last full
trading day prior to Galileo's announcement that it was exploring strategic
alternatives for the company. June 15, 2001 was the last full trading day prior
to the public announcement of the execution of the merger agreement. July 23,
2001 was the last full trading day prior to the printing of this proxy
statement-prospectus.
CD Galileo
Common Stock Common Stock
-------------------- --------------------
High Low Close High Low Close
------ ------ ------ ------ ------ ------
(Dollars per Share)
October 19, 2000...................... $ 9.88 $ 8.94 $ 9.75 $17.19 $16.19 $16.25
June 15, 2001......................... 18.60 18.29 18.45 30.10 28.42 29.80
July 23, 2001......................... 21.18 20.67 20.74 34.46 33.95 34.07
On July 23, 2001, there were approximately 98 holders of record of shares of
Galileo common stock.
Historical Market Prices and Dividends
The following table sets forth, for the periods indicated, the high and low
sale prices per share of CD common stock and Galileo common stock on the New
York Stock Exchange, based on published financial sources.
CD Galileo
Common Stock Common Stock
------------- -------------
Calendar Period High Low High Low
--------------- ------ ------ ------ ------
(Dollars per Share)
1999
First Quarter.................................... $22.56 $14.88 $51.88 $41.44
Second Quarter................................... 21.06 15.38 59.31 44.50
Third Quarter.................................... 22.63 17.00 58.69 36.00
Fourth Quarter................................... 26.94 13.63 39.50 25.31
2000
First Quarter.................................... 26.31 15.63 29.94 16.50
Second Quarter................................... 19.25 11.84 26.88 18.06
Third Quarter.................................... 14.88 10.50 23.00 14.81
Fourth Quarter................................... 12.75 8.13 21.25 13.44
2001
First Quarter.................................... 15.14 9.63 24.65 19.31
Second Quarter................................... 20.38 13.75 32.50 19.90
Third Quarter
(through July 23, 2001).......................... 21.53 19.81 34.95 32.25
16
Dividend Policy
Prior to the public announcement of the merger, Galileo historically paid
dividends on its common stock. Upon execution of the merger agreement, Galileo
suspended payment of regular quarterly dividends. Cendant historically has not
paid dividends on CD common stock. 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
Selected Historical Financial Data of Cendant
The selected historical consolidated statement of operations data for the
three years ended December 31, 2000 and the balance sheet data as of December
31, 2000 and 1999 are derived from Cendant's audited consolidated financial
statements and accompanying notes filed on Form 10-K/A on July 3, 2001, which
were restated to reflect Cendant's individual membership business as part of
continuing operations. The selected historical consolidated statement of
operations data for the years ended December 31, 1997 and 1996 and the balance
sheet data as of December 31, 1998, 1997 and 1996 are derived from Cendant's
unaudited consolidated financial data included in Form 10-K/A filed on July 3,
2001. The selected historical consolidated financial data as of and for the
three months ended March 31, 2001 and 2000 are derived from Cendant's unaudited
consolidated condensed financial statements filed on Form 10-Q/A on July 3,
2001, which were also restated to reflect Cendant's individual membership
business as part of continuing operations. You should read this table in
conjunction with such financial statements, which are incorporated by reference
into this proxy statement-prospectus.
Three Months
Ended Year Ended
March 31, December 31,
---------------- ------------------------------------------
2001 2000 2000 1999 1998 1997 1996
------- ------- ------- ------- ------- ------- -------
(In millions, except per share data)
Results of Operations
Net revenues............ $ 1,486 $ 1,128 $ 4,659 $ 6,076 $ 6,585 $ 5,429 $ 4,370
======= ======= ======= ======= ======= ======= =======
Income (loss) from
continuing operations.. $ 277 $ 127 $ 660 $ (229) $ 160 $ 66 $ 314
Income (loss) from
discontinued
operations, net of
tax(a)................. -- -- -- 174 380 (26) 16
Extraordinary gain
(loss), net of tax..... -- (2) (2) -- -- 26 --
Cumulative effect of
accounting change, net
of tax................. (38) (56) (56) -- -- (283) --
------- ------- ------- ------- ------- ------- -------
Net income (loss)....... $ 239 $ 69 $ 602 $ (55) $ 540 $ (217) $ 330
======= ======= ======= ======= ======= ======= =======
Per Share Data
CD Common Stock
Income (loss) from
continuing
operations:
Basic................ $ 0.32 $ 0.18 $ 0.92 $ (0.30) $ 0.19 $ 0.08 $ 0.41
Diluted.............. 0.30 0.17 0.89 (0.30) 0.18 0.08 0.39
Cumulative effect of
accounting change:
Basic................ $ (0.04) $ (0.08) $ (0.08) $ -- $ -- $ (0.35) $ --
Diluted.............. (0.04) (0.08) (0.08) -- -- (0.35) --
Net income (loss):
Basic................ $ 0.28 $ 0.10 $ 0.84 $ (0.07) $ 0.64 $ (0.27) $ 0.44
Diluted.............. 0.26 0.09 0.81 (0.07) 0.61 (0.27) 0.41
Move.com Common Stock
Income (loss) from
continuing
operations:
Basic................ $ 10.41 $ (1.76)
Diluted.............. 10.13 (1.76)
Cumulative effect of
accounting change:
Basic................ $ (0.07) $ --
Diluted.............. (0.06) --
Net income (loss):
Basic................ $ 10.34 $ (1.76)
Diluted.............. 10.07 (1.76)
Financial Position
Total assets............ $27,594 $15,042 $15,072 $15,149 $20,217 $14,073 $12,763
Long-term debt.......... 3,903 2,071 1,948 2,445 3,363 1,246 780
Assets under management
and mortgage programs.. 10,660 2,944 2,861 2,726 7,512 6,444 5,279
Debt under management
and mortgage programs.. 10,619 2,653 2,040 2,314 6,897 5,603 5,090
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............ -- 1,479 1,683 1,478 1,472 -- --
Stockholders' equity.... 5,343 2,583 2,774 2,206 4,836 3,921 3,956
--------
(a) Income (loss) from discontinued operations, net of tax, includes the after
tax results of discontinued operations and the gain on disposal of
discontinued operations.
18
Unaudited Pro Forma Financial Data of Cendant
The following Unaudited Pro Forma Condensed Combined Balance Sheet of
Cendant as of March 31, 2001 gives effect to the proposed acquisition of
Galileo. The following Unaudited Pro Forma Condensed Combined Statements of
Operations of Cendant for the three months ended March 31, 2001 and for the
year ended December 31, 2000 give effect to the proposed acquisition of Galileo
and Cendant's March 1, 2001 acquisition of Avis. Both transactions will be
accounted for under the purchase method of accounting.
Since the acquisition of Avis occurred prior to March 31, 2001, the
financial position of Avis has been included in the historical Cendant balance
sheet as of March 31, 2001. The Unaudited Pro Forma Condensed Combined Balance
Sheet assumes the acquisition of Galileo occurred on March 31, 2001. The
Unaudited Pro Forma Condensed Combined Statements of Operations assume the
acquisitions of Avis and Galileo occurred on January 1, 2000. The unaudited pro
forma financial data is based on the historical consolidated financial
statements of Cendant, Avis and Galileo under the assumptions and adjustments
set forth in the accompanying explanatory notes.
The following Unaudited Pro Forma Condensed Combined Statement of Operations
for the year ended December 31, 2000 also gives effect to various significant
finance-related activities that occurred during the first quarter of 2001
("Financing Activities"). The Financing Activities include an issuance of debt
securities (net of debt retirements) and equity securities, the conversion of
the PRIDES to CD common stock and an issuance of zero-coupon senior convertible
notes. The Unaudited Pro Forma Condensed Combined Statement of Operations for
the year ended December 31, 2000 assumes the Financing Activities occurred on
January 1, 2000. In addition, the Unaudited Pro Forma Condensed Combined
Balance Sheet also gives effect to Cendant's May 2001 issuance of zero-coupon
zero-yield senior convertible notes, which are assumed to be issued on March
31, 2001.
Since Avis and Cendant were consolidated as of March 1, 2001, the results of
operations of Avis between January 1, 2001 and February 28, 2001 were combined
with Cendant's results of operations to report the combined pro forma results
of operations for the three month period ended March 31, 2001. The pro forma
results of the combined company were then added to Galileo's results of
operations for the three month period ended March 31, 2001 and year ended
December 31, 2000, subject to certain pro forma adjustments, to provide the
Unaudited Pro Forma Condensed Combined Statements of Operations for the three
months ended March 31, 2001 and the year ended December 31, 2000. All
intercompany transactions have been eliminated on a pro forma basis.
Historically, Avis paid Cendant for services Cendant provided related to call
centers and information technology and for the use of Cendant trademarks and
Avis paid Galileo for services Galileo provided related to reservations for
vehicle rentals.
In August 2000, Avis contributed its European vehicle management and leasing
business (PHH Europe) to a newly formed joint venture in exchange for cash,
settlement of intercompany debt and a 20% interest in the venture (the "PHH
Europe Transaction"). The accompanying Avis Supplemental Unaudited Pro Forma
Condensed Combined Statement of Operations for the year ended December 31, 2000
has been adjusted to reflect the PHH Europe Transaction.
The pro forma adjustments relating to the acquisition of Avis reflect the
disbursement of $33 in cash for each share of Avis common stock outstanding to
Avis stockholders. Cendant made payments totaling approximately $994 million,
including payments to Avis stockholders ($937 million), direct expenses related
to the transaction ($40 million) and the net cash obligation related to Avis
stock options settled prior to consummation ($17 million). The purchase price
also includes the fair value of CD common stock options exchanged with certain
fully vested Avis stock options. The Unaudited Pro Forma Condensed Combined
Balance Sheet as of March 31, 2001 reflects the purchase price being funded by
the issuance of $600 million in debt with the remaining amount provided by
cash.
19
The pro forma adjustments relating to the acquisition of Galileo assume a
combination of a disbursement of CD common stock and cash with an expected
value of $33 for each share of Galileo common stock outstanding and the
conversion of Galileo stock options to CD common stock options. Cendant will
pay aggregate consideration and expenses totaling $3,052 million, including
payments of cash and stock to Galileo stockholders ($2,895 million), expenses
related to the conversion of Galileo stock options to CD common stock options
($48 million) and estimated transaction expenses directly related to the
acquisition of Galileo ($109 million). Approximately $2,330 million of the
merger consideration is expected to be funded through the issuance of CD common
stock, with the remainder being financed by debt issuances. The Unaudited Pro
Forma Condensed Combined Statements of Operations reflect incremental interest
expense based upon an assumed interest rate of 7.5% for these new borrowings.
In addition, Cendant's assumption of Galileo's debt of approximately $620
million is reflected in the Unaudited Pro Forma Condensed Combined Balance
Sheet.
The unaudited pro forma financial data has been prepared assuming that the
price of CD common stock is $19 on the date of acquisition as that reflects the
market value of CD common stock on the date the planned acquisition of Galileo
was announced. The purchase price may change based on fluctuations in the price
of CD common stock, but is subject to a collar described above under "Merger
Consideration."
For purposes of developing the Unaudited Pro Forma Condensed Combined
Balance Sheet as of March 31, 2001, Galileo's assets and liabilities have been
recorded at their estimated fair market values and the excess purchase price
has been assigned to goodwill and other identifiable intangibles. These fair
market values are based on preliminary estimates which are subject to revision
upon consummation of the acquisition of Galileo.
In connection with Cendant's various acquisitions, Cendant intends to review
acquired operations, which may result in a plan to realign or reorganize
certain of those operations. The costs of implementing such a plan, if it were
to occur, have not been reflected in the accompanying pro forma financial
statements. The impact of a potential realignment could increase or decrease
the amount of goodwill and intangible assets and related amortization in the
accompanying pro forma financial statements. The Unaudited Pro Forma Condensed
Combined Statements of Operations exclude any benefits that may result from the
acquisition due to synergies that may be derived or from the elimination of
duplicate efforts.
Cendant's management believes that the assumptions used provide a reasonable
basis on which to present the unaudited pro forma financial data. Cendant has
completed other acquisitions and dispositions which are not significant and,
accordingly, have not been included in the accompanying unaudited pro forma
financial data. The unaudited pro forma financial data may not be indicative of
the financial position or results that would have occurred if the acquisitions
of Avis, the planned acquisition of Galileo and the Financing Activities had
been in effect on the dates indicated or which may be obtained in the future.
The unaudited pro forma financial data should be read in conjunction with
the historical consolidated financial statements and accompanying notes thereto
for Cendant, Avis and Galileo, which have been incorporated by reference
herein. Certain reclassifications have been made to the historical amounts of
Galileo to conform with Cendant's classifications.
20
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of March 31, 2001
--------------------------------------------
Purchase
Historical Historical and Other Combined
Cendant Galileo Adjustments Pro Forma
---------- ---------- ----------- ---------
(in millions)
Assets
Current assets
Cash and cash equivalents....... $ 2,092 $ 11 $ 986(a) $ 3,089
Receivables, net................ 1,380 271 -- 1,651
Other current assets............ 1,030 52 -- 1,082
------- ------ ------ -------
Total current assets............ 4,502 334 986 5,822
Property and equipment, net...... 1,508 373 22(c) 1,903
Stockholder litigation settlement
trust........................... 600 -- -- 600
Deferred income taxes............ 1,358 -- -- 1,358
Franchise agreements, net........ 1,514 -- -- 1,514
Goodwill, net.................... 4,950 300 2,313(c) 7,563
Other intangibles, net........... 764 455 308(c) 1,527
Other assets..................... 1,738 81 14(b) 1,833
------- ------ ------ -------
Total assets exclusive of assets
under programs................. 16,934 1,543 3,643 22,120
------- ------ ------ -------
Assets under management and
mortgage programs
Relocation receivables.......... 329 -- -- 329
Mortgage loans held for sale.... 917 -- -- 917
Mortgage servicing rights....... 1,667 -- -- 1,667
Vehicle-related, net............ 7,747 -- -- 7,747
------- ------ ------ -------
10,660 -- -- 10,660
------- ------ ------ -------
Total assets.................... $27,594 $1,543 $3,643 $32,780
======= ====== ====== =======
Liabilities and stockholders'
equity
Current liabilities
Accounts payable and other
current liabilities............ $ 2,258 $ 287 $ -- $ 2,545
Current portion of long-term
debt........................... 267 188 1,000(a) 1,455
Deferred income................. 1,046 -- -- 1,046
Deferred income taxes........... 227 -- 82(c) 309
------- ------ ------ -------
Total current liabilities....... 3,798 475 1,082 5,355
Long-term debt................... 3,903 434 674(d) 5,011
Stockholder litigation
settlement...................... 2,850 -- -- 2,850
Other liabilities................ 706 143 -- 849
------- ------ ------ -------
Total liabilities exclusive of
liabilities under programs..... 11,257 1,052 1,756 14,065
------- ------ ------ -------
Liabilities under management and
mortgage programs
Debt............................ 9,589 -- -- 9,589
Deferred income taxes........... 1,030 -- -- 1,030
------- ------ ------ -------
10,619 -- -- 10,619
------- ------ ------ -------
Mandatorily redeemable preferred
interest in a subsidiary........ 375 -- -- 375
------- ------ ------ -------
Stockholders' equity............. 5,343 491 1,887(e) 7,721
------- ------ ------ -------
Total liabilites and
stockholders' equity........... $27,594 $1,543 $3,643 $32,780
======= ====== ====== =======
See accompanying Notes to Unaudited Pro Forma Condensed Combined Balance Sheet.
21
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED BALANCE SHEET
As of March 31, 2001
($ in millions)
The accompanying Unaudited Pro Forma Condensed Combined Balance Sheet was
prepared to reflect the proposed acquisition of Galileo, which will be
accounted for under the purchase method of accounting, and the issuance of
zero-coupon zero-yield senior convertible notes. The purchase price of $3,052
(including estimated expenses directly attributable to the acquisition of
Galileo of $109 and the estimated fair value of CD common stock options issued
in exchange for Galileo stock options of $48) was based on acquiring 100% of
the Galileo common stock outstanding for $33 per share.
(a) Represents the debt associated with the May 2001 issuance of the
zero-coupon zero-yield senior convertible notes for gross proceeds of
$1,000 (net proceeds of $986).
(b) Represents deferred financing costs of $14 associated with the May
2001 issuance of the zero-coupon zero-yield senior convertible notes.
(c) Estimated adjustments to goodwill representing the excess of the
cost over the preliminary estimate of the fair value of the identifiable
net assets acquired.
Calculation of acquisition goodwill--
Cash consideration............................................... $ 674
Issuance of CD common stock...................................... 2,330
Preliminary estimate of fair value of CD common stock options
issued in exchange for Galileo stock options.................... 48
------
Total purchase price........................................... $3,052
------
Preliminary estimate of fair value of identifiable net assets
acquired--
Book value of Galileo.......................................... 491
Elimination of Galileo goodwill................................ (300)
Preliminary estimate of adjustments to fair value of
identifiable intangible assets................................ 308
Preliminary estimate of adjustment to fair value of computer
software...................................................... 22
Net deferred tax liability on fair value adjustments and
transaction costs............................................. (82)
------
Preliminary estimate of fair value of identifiable net assets
acquired........................................................ 439
------
Acquisition goodwill............................................. $2,613
======
Calculation of goodwill acquisition adjustment--
Acquisition goodwill............................................. $2,613
Historical Galileo goodwill...................................... (300)
------
Goodwill acquisition adjustment.................................. $2,313
======
(d) Represents the issuance of debt to finance a portion of the
acquisition ($565) and to pay fees directly associated with the acquisition
of Galileo ($109).
(e) Represents the elimination of Galileo equity balances ($491) net of
the issuance of CD common stock ($2,330) in exchange for outstanding shares
of Galileo common stock and the issuance of CD common stock options in
exchange for Galileo stock options ($48).
22
UNAUDITED PRO FORMA
CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Three Months Ended
March 31, 2001
----------------------------------------------------------------------------------
Historical Avis Avis Galileo
Historical Jan. 1-Feb. 28, Purchase Adjusted Historical Purchase Combined
Cendant 2001 Adjustments Cendant Galileo Adjustments Pro Forma
---------- --------------- ----------- -------- ---------- ----------- ---------
(in millions, except per share amounts)
Revenues
Membership and services
fees, net.............. $1,076 $ 27 $(34)(a) $1,069 $-- $-- $1,069
Vehicle-related......... 398 594 -- 992 -- -- 992
Global distribution
services............... -- -- -- -- 443 (3)(f) 440
Other................... 12 20 -- (b) 32 23 -- 55
------ ---- ---- ------ ---- ---- ------
Net revenues............ 1,486 641 (34) 2,093 466 (3) 2,556
Expenses
Operating............... 451 174 (34)(a) 591 104 (3)(f) 692
Vehicle depreciation,
lease charges and
interest, net.......... 181 284 -- 465 -- -- 465
Selling, general and
administrative......... 411 115 -- 526 191 -- 717
Non-vehicle depreciation
and amortization....... 101 23 2(d) 126 67 (4)(g) 189
Other charges, net...... 204 -- -- 204 -- -- 204
Non-vehicle interest,
net.................... 60 78 1(c) 139 10 13(h) 162
Other, net.............. -- -- -- -- 4 -- 4
------ ---- ---- ------ ---- ---- ------
Total expenses.......... 1,408 674 (31) 2,051 376 6 2,433
------ ---- ---- ------ ---- ---- ------
Net gain on dispositions
of businesses.......... 435 -- -- 435 -- -- 435
------ ---- ---- ------ ---- ---- ------
Income (loss) before
income taxes, minority
interest and equity in
Homestore.com.......... 513 (33) (3) 477 90 (9) 558
Provision (benefit) for
income taxes........... 205 (10) (2)(e) 193 40 (3)(i) 230
Minority interest, net
of tax................. 13 -- -- 13 -- -- 13
Losses related to equity
in Homestore.com, net
of tax................. 18 -- -- 18 -- -- 18
------ ---- ---- ------ ---- ---- ------
Income (loss) before
cumulative effect of
accounting change...... $ 277 $(23) $ (1) $ 253 $ 50 $ (6) $ 297
====== ==== ==== ====== ==== ==== ======
CD common stock income
per share
Income before
cumulative effect of
accounting change:
Basic................ $ 0.32 $ 0.29 $ 0.30(k)
Diluted.............. 0.30 0.28 $ 0.29(k)
Weighted average
shares outstanding
Basic................ 790 790 123(j) 913
Diluted.............. 830 830 123(j) 953
Move.com common stock
income per share
Income before
cumulative effect of
accounting change:
Basic................ $10.41 $10.41 $10.41
Diluted.............. 10.13 10.13 $10.13
Weighted average
shares outstanding
Basic................ 2 2 2
Diluted.............. 3 3 3
--------
See accompanying Notes to Unaudited Pro Forma Condensed Combined Statement of
Operations.
23
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2001
($ in millions, except per share)
The following pro forma adjustments relate to the acquisition of Avis and
the Financing Activities.
(a) Elimination of amounts paid by Avis to Cendant for services provided
related to call centers and information technology and for the use of
trademarks.
(b) Elimination of Cendant's earnings attributable to its investment in
Avis, for which the combined effect is zero.
(c) Represents interest expense on debt issued to finance the
acquisition of Avis ($7), net of amortization of the fair value adjustment
on acquired debt ($4) and reversal of Avis' amortization of debt related
costs ($2).
(d) Amortization of goodwill generated on the excess of fair value over
the net assets acquired on a straight line basis over 40 years, net of
reversal of Avis' amortization of pre-acquisition goodwill and amortization
of other identifiable intangibles resulting from the allocation of purchase
price on a straight-line basis over 20 years.
(e) Represents the income tax effect of the purchase adjustments and
other pro forma adjustments at an estimated statutory rate of 38.5% (not
including adjustments for non-deductible goodwill).
The following pro forma adjustments relate to the acquisition of Galileo.
(f) Elimination of amounts paid by Avis to Galileo for services provided
related to reservations for vehicle rentals.
(g) Amortization of goodwill generated on the estimated excess of fair
value over the net assets acquired on a straight line basis over 40 years
($16) and the amortization of the estimated identifiable intangibles on a
straight-line basis with lives ranging from 5 to 20 years ($11) net of the
reversal of Galileo's amortization of pre-acquisition goodwill and
amortization of other identifiable intangibles ($31).
(h) Represents the increase in interest expense relating to the assumed
issuance of debt used to fund a portion of the acquisition of Galileo. The
interest rate relating to this debt is assumed to be 7.5%. Assuming
interest rates changed by .125%, the related interest expense and pre-tax
impact on earnings would be $0.2.
(i) Represents the income tax effect of the purchase adjustments and
other pro forma adjustments at an estimated statutory rate of 38.5% (not
including adjustments for non-deductible goodwill).
(j) Represents the issuance of 123 million shares of CD common stock
used to finance a portion of the acquisition of Galileo.
(k) The purchase price is subject to a collar for fluctuations in the
price of CD common stock between $17 and $20. The total purchase price is
fixed for price changes between $17 and $20, but the number of shares of CD
common stock to be issued will change to equal $2,330 in value. The impact
on earnings per share is approximately $.002 for each dollar movement
between $17 and $20. The impact for increases and decreases outside of the
collar would result only from changes in the annual goodwill amortization
because the number of shares of CD common stock issued is fixed outside of
the collar. The related impact on earnings per share would be less than
$.002 for each dollar change in price of CD common stock outside the
collar. The earnings per share reflected herein is based on an estimated
price of CD common stock of $19, which reflects the market value of CD
common stock on the date the planned acquisition of Galileo was announced.
24
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2000
------------------------------------------------------------------------------------------
Avis Other Pro Galileo
Historical Adjusted Purchase Forma Adjusted Historical Purchase Combined
Cendant Avis(A) Adjustments Adjustments Cendant Galileo Adjustments Pro Forma
---------- -------- ----------- ----------- -------- ---------- ----------- ---------
(in millions, except per share amounts)
Revenues
Membership and services
fees, net.............. $4,512 $ 155 $(173)(a) $-- $4,494 $ -- $-- $ 4,494
Vehicle-related......... -- 3,783 -- -- 3,783 -- -- 3,783
Global distribution
services............... -- -- -- -- -- 1,561 (12)(k) 1,549
Other................... 147 151 (39)(b) -- 259 82 -- 341
------ ------ ----- ---- ------ ------ ---- -------
Net revenues............ 4,659 4,089 (212) -- 8,536 1,643 (12) 10,167
Expenses
Operating............... 1,426 966 (173)(a) -- 2,219 368 (12)(k) 2,575
Vehicle depreciation,
lease charges and
interest, net.......... -- 1,671 -- -- 1,671 -- -- 1,671
Selling, general and
administrative......... 1,508 637 -- -- 2,145 678 -- 2,823
Non-vehicle depreciation
and amortization....... 352 74 16 (c) -- 442 241 2 (l) 685
Other charges, net...... 111 -- -- -- 111 28 -- 139
Non-vehicle interest,
net.................... 148 482 6 (d) 54 (g,i) 690 45 51 (m) 786
Other, net.............. -- -- -- -- -- 17 -- 17
------ ------ ----- ---- ------ ------ ---- -------
Total expenses.......... 3,545 3,830 (151) 54 7,278 1,377 41 8,696
------ ------ ----- ---- ------ ------ ---- -------
Net loss on dispositions
of businesses.......... (8) -- (35)(e) -- (43) -- -- (43)
------ ------ ----- ---- ------ ------ ---- -------
Income before income
taxes, minority
interest and equity in
Homestore.com.......... 1,106 259 (96) (54) 1,215 266 (53) 1,428
Provision for income
taxes.................. 362 117 (30)(f) (20)(f) 429 117 (13)(n) 533
Minority interest, net
of tax................. 84 7 -- (66)(h) 25 -- -- 25
------ ------ ----- ---- ------ ------ ---- -------
Income before
extraordinary loss and
cumulative effect of
accounting change...... $ 660 $ 135 $ (66) $ 32 $ 761 $ 149 $(40) $ 870
====== ====== ===== ==== ====== ====== ==== =======
CD Common Stock Income
Per Share
Income before
extraordinary loss
and cumulative effect
of accounting change:
Basic................ $ 0.92 $ 0.92 $ 0.92 (p)
Diluted.............. 0.89 0.90 $ 0.89 (p)
Weighted average
shares outstanding
Basic................ 724 107 (j) 831 123 (o) 954
Diluted.............. 762 107 (j) 869 123 (o) 992
Move.com Common Stock
Income Per Share
Income before
extraordinary loss
and cumulative effect
of accounting change:
Basic................ $(1.76) $(1.76) $ (1.76)
Diluted.............. (1.76) (1.76) $ (1.76)
Weighted average
shares outstanding
Basic................ 3 3 3
Diluted.............. 3 3 3
-------
(A) See Supplemental Unaudited Condensed Combined Statement of Operations and
Notes included herein.
See accompanying Notes to Unaudited Pro Forma Condensed Combined Statement of
Operations.
25
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2000
($ in millions, except per share)
The following pro forma adjustments relate to the acquisition of Avis and
the Financing Activities.
(a) Elimination of amounts paid by Avis to Cendant for services provided
related to call centers and information technology and for the use of
trademarks.
(b) Elimination of Cendant's earnings attributable to its investment in
Avis.
(c) Amortization of goodwill generated on the excess of fair value over
the net assets acquired on a straight-line basis over 40 years, net of
reversal of Avis' amortization of pre-acquisition goodwill and amortization
of other identifiable intangibles resulting from the allocation of purchase
price on a straight-line basis over 20 years.
(d) Represents interest expense on debt issued to finance the
acquisition of Avis ($44), net of amortization of fair value adjustment on
acquired debt ($25) and reversal of Avis' amortization of debt related
costs ($13).
(e) Reversal of a $35 gain recorded by Cendant, which represents the
recognition of a portion of its previously recorded deferred gain from the
1999 sale of its fleet business due to the disposition of PHH Europe by
Avis in August 2000.
(f) Represents the income tax effect of the purchase adjustments and
other pro forma adjustments at an estimated statutory rate of 37.5% (not
including adjustments for non-deductible goodwill), except item (e), where
the tax effect was approximately 2% (the rate at which taxes were provided
on the related gain).
(g) Represents net increase in interest expense relating to the issuance
of zero-coupon senior convertible notes, medium-term notes, borrowings
under a $650 million term loan agreement and the repayment of an existing
term loan, net of interest expense allocated to the acquisition of Avis
(See Note (d) above).
(h) Represents reduction in preferred stock dividends resulting from
conversion of PRIDES to CD common stock.
(i) No adjustment has been made to reduce interest expense for interest
income on the incremental cash raised through the Financing Activities of
$1,587. Assuming the incremental cash was invested at 5%, Cendant's current
rate for cash investments, interest expense would have been reduced by $79.
Additionally, income before extraordinary loss and cumulative effect of
accounting change and income per share before extraordinary loss and
cumulative effect of accounting change would have improved by $49 and
$0.06, respectively.
(j) Represents the issuance of CD common stock of 61 million shares and
46 million shares relating to the conversion of PRIDES to equity and the
issuance of equity securities, respectively.
The following pro forma adjustments relate to the acquisition of Galileo.
(k) Elimination of amounts paid by Avis to Galileo for services
provided related to reservations for vehicle rentals.
(l) Amortization of goodwill generated on the excess of fair value over
the net assets acquired on a straight line basis over 40 years ($65) and
the amortization of the estimated identifiable intangibles on a straight-
line basis with lives ranging from 5 to 20 years ($46) net of the reversal
of Galileo's amortization of pre-acquisition goodwill and amortization of
other identifiable intangibles ($109).
(m) Represents the increase in interest expense relating to the assumed
issuance of debt used to fund the acquisition of Galileo. The interest rate
relating to this debt is assumed to be 7.5%. Assuming interest rates
changed by .125%, the related interest expense and pre-tax impact on
earnings would be $0.8.
26
(n) Represents the income tax effect of the purchase adjustments and
other pro forma adjustments at an estimated statutory rate of 37.5% (not
including adjustments for non-deductible goodwill).
(o) Represents the issuance of 123 million shares of CD common stock
used to fund a portion of the acquisition of Galileo.
(p) The purchase price is subject to a collar for fluctuations in the
price of CD common stock between $17 and $20. The total purchase price is
fixed for price changes between $17 and $20, but the number of shares of CD
common stock to be issued will change to equal $2,330 in value. The impact
on earnings per share is approximately $.006 for each dollar movement
between $17 and $20. The impact for increases and decreases outside of the
collar would result only from changes in the annual goodwill amortization
because the number of shares of CD common stock issued is fixed outside of
the collar. The related impact on earnings per share would be less than
$.007 for each dollar change in price of CD common stock outside the
collar. The earnings per share reflected herein is based on an estimated
price of CD common stock of $19, which reflects the market value of CD
common stock on the date the planned acquisition of Galileo was announced.
27
SUPPLEMENTAL UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
The unaudited pro forma financial data presented below for the year ended
December 31, 2000 was prepared to reflect the historical consolidated financial
statements of Avis, excluding the PHH Europe Transaction, as set forth in the
accompanying Supplemental Unaudited Pro Forma Condensed Combined Statement of
Operations for the year ended December 31, 2000. Avis will receive an annual
license fee in connection with the PHH Europe Transaction from the joint
venture for the license of the PHH fleet management technology, PHH
interactive. Avis utilized the proceeds of the PHH Europe Transaction to reduce
Avis' indebtedness and pay transaction costs.
For the Year Ended December 31, 2000
-----------------------------------------------
Historical Sale of Pro Forma Adjusted
Avis PHH Europe (a) Adjustments Avis
---------- -------------- ----------- --------
(in millions)
Revenues
Service fees, net $ 241 $ (86) $-- $ 155
Vehicle rental 2,467 -- -- 2,467
Vehicle leasing and other fees 1,389 (73) -- 1,316
Other 146 -- 5 (b) 151
------ ----- ---- ------
Net revenues 4,243 (159) 5 4,089
Expenses
Operating 966 -- -- 966
Vehicle depreciation and lease
charges 1,695 (24) -- 1,671
Selling, general and
administrative 693 (56) -- 637
Interest, net 577 (37) (58)(c) 482
Depreciation and amortization 89 (12) (3)(d) 74
------ ----- ---- ------
Total expenses 4,020 (129) (61) 3,830
Income (loss) before income
taxes and minority interest 223 (30) 66 259
Provision (benefit) for income
taxes 95 (3) 25 (e) 117
Minority interest 7 -- -- 7
------ ----- ---- ------
Income (loss) before
extraordinary loss and
cumulative effect of
accounting change $ 121 $ (27) $ 41 $ 135
====== ===== ==== ======
See accompanying Notes to Supplemental Unaudited Pro Forma Condensed Combined
Statement of Operations.
28
NOTES TO SUPPLEMENTAL UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF
OPERATIONS
For the year ended December 31, 2000
($ in millions)
(a) Represents the adjustment to pro forma the results of operations of PHH
Europe for the year ended December 31, 2000. This adjustment assumes that
the PHH Europe Transaction occurred on January 1, 2000.
(b) Represents fleet management technology fee income and the equity in the
earnings of the joint venture, formed pursuant to the PHH Europe
Transaction for the year ended December 31, 2000, net of amortization of
the excess of cost over the assets acquired.
(c) Interest reduction as a result of the retirement of acquisition debt and
revolving credit facilities related to the application of proceeds of
$1,053 from the PHH Europe Transaction.
(d) Decrease in amortization expense relating to goodwill generated from the
PHH Europe Transaction, net of reversal of PHH Europe goodwill.
(e) Represents the income tax effect of the pro forma adjustments at an
estimated statutory rate of 39% (not including adjustments for non-
deductible goodwill).
29
SELECTED HISTORICAL FINANCIAL DATA OF GALILEO
The selected historical consolidated financial data of Galileo presented
below as of and for the year ended December 31 for each of the fiscal years in
the five-year period ended December 31, 2000, are derived from Galileo's
audited consolidated financial statements and accompanying notes. The selected
historical consolidated financial data as of and for the three months ended
March 31, 2001, and 2000 are derived from Galileo's unaudited consolidated
condensed financial statements. You should read this table in conjunction with
Galileo's consolidated financial statements at December 31, 2000, and 1999, and
for each of the three years in the period ended December 31, 2000, and
Galileo's unaudited consolidated condensed financial statements at March 31,
2001, and for the three months ended March 31, 2001, and 2000, which are
incorporated by reference into this proxy statement-prospectus. See "Where You
Can Find More Information" on pages 107 through 109.
Three months
ended March 31, Year Ended December 31,
----------------- --------------------------------------------
2001 2000(1) 2000(2) 1999(3) 1998(4) 1997(5) 1996
-------- -------- -------- -------- -------- -------- --------
(unaudited)
(dollars in millions, except per share data)
Selected Income
Statement Data
Revenues................ $ 465.9 $ 440.7 $1,643.3 $1,526.1 $1,480.8 $1,256.1 $1,088.3
Operating income........ 104.2 99.3 327.6 312.9 331.6 211.5 175.4
Income before income
taxes.................. 90.3 87.6 265.9 361.3 325.5 205.6 167.1
Income taxes............ 39.7 40.2 117.0 143.1 129.9 44.0 1.9
Net income.............. 50.6 47.4 148.9 218.2 195.6 161.6 165.2
Pro forma net
income(6).............. -- -- -- -- -- 123.4 100.3
Net income per share:
Basic................. 0.57 0.52 1.65 2.22 1.87 -- --
Pro forma basic(6).... -- -- -- -- -- 1.30 1.14
Diluted............... 0.57 0.52 1.65 2.21 1.86 -- --
Pro forma diluted(6).. -- -- -- -- -- 1.30 1.14
Selected Balance Sheet
Data
Current assets.......... 333.6 348.5 244.7 230.5 243.5 224.3 240.8
Total assets............ 1,543.0 1,554.9 1,479.2 1,255.2 1,291.1 1,268.5 599.9
Current liabilities..... 474.6 281.7 436.9 319.2 231.8 201.4 199.6
Long-term debt.......... 434.4 691.0 434.4 434.4 69.5 250.0 70.0
Other long-term
obligations............ 142.9 97.3 142.7 108.0 147.2 133.4 74.9
Partners' capital....... -- -- -- -- -- -- 255.4
Stockholders' equity.... 491.1 484.9 465.2 393.6 842.6 683.7 --
--------
(1) For the three months ended March 31, 2000, operating expenses include a
$19.7 million ($11.0 million after tax) special charge related to the
extinguishment of a portion of Galileo's liability arising from a services
agreement with US Airways and a $7.0 million (non-tax deductible) special
charge to write off in-process research and development costs related to
Galileo's acquisition of Trip.com.
(2) For the year ended December 31, 2000, operating expenses include a $19.7
million ($11.0 million after tax) special charge related to the
extinguishment of a portion of Galileo's liability arising from a services
agreement with US Airways, a $7.0 million (non-tax deductible) special
charge to write off in-process research and development costs related to
the Trip.com acquisition, and a $1.7 million ($1.0 million after tax)
special charge related to the integration of Galileo UK.
(3) For the year ended December 31, 1999, operating expenses include an $83.2
million ($50.2 million after tax) special charge related to the
extinguishment of a portion of Galileo's liability arising from a services
30
agreement with United and an $11.3 million ($6.8 million after tax)
recovery of expenses previously reserved for the realignment of Galileo's
United Kingdom operations. Net income includes net gains of $64.0 million
($38.6 million after tax) from Galileo's investments in technology
companies.
(4) For the year ended December 31, 1998, operating expenses include $26.4
million ($15.9 million after tax) of special charges related to the
realignment of Galileo's operations in the United Kingdom and $13.4
million ($8.1 million after tax) in gains related to settlements of
contractual disputes from prior years.
(5) Effective July 30, 1997, Galileo International Partnership merged into a
wholly owned limited liability company subsidiary of Galileo
International, Inc., Galileo effected an initial public offering of its
common stock, and it incurred debt related to the purchase of three
national distribution companies ("NDCs"). For the year ended December 31,
1997, the results of the acquired NDCs have been consolidated with those
of Galileo from the date of each acquisition. Operating expenses for the
year ended December 31, 1997 include $20.1 million ($12.1 million after
tax) of special charges related to the integration of the acquired NDCs
and a $15.3 million nonrecurring charge to reflect the establishment of
initial deferred tax assets and liabilities. No provision for U.S. federal
and state income taxes was recorded prior to July 30, 1997 as such
liability was the responsibility of the partners of Galileo International
Partnership, rather than of Galileo.
(6) As a result of the merger and the offering specified in footnote (5)
above, pro forma net income and pro forma basic and diluted earnings per
share data are calculated as though: (i) partners' capital was converted
into 88,000,000 shares of Galileo common stock for all periods presented
and the 16,799,700 shares issued to the public were outstanding from July
30, 1997, and (ii) Galileo had operated in a corporate form for all
periods presented and accordingly was subject to federal and state income
taxes.
31
Comparative Per Share Data
The following table sets forth certain historical and pro forma per share
data of Cendant and certain historical and equivalent pro forma per share data
of Galileo. The pro forma per share data is based on Cendant exchanging 19.5%
of the issued and outstanding shares of Galileo common stock for cash and 80.5%
of the issued and outstanding shares of Galileo common stock for CD common
stock. The pro forma per share data presented below for Cendant gives effect to
both the completed acquisition of Avis as well as the planned acquisition of
Galileo as if the acquisitions were consummated on January 1, 2000. The
information set forth below should be read in conjuction with the selected
historical financial data of Cendant and Galileo included elsewhere in this
proxy statement-prospectus and the pro forma information of Cendant, which
gives effect to the acquisition of Avis, filed in Cendant's Current Report on
Form 8-K on July 3, 2001, which is incorporated by reference into this proxy
statement-prospectus. See "Where You Can Find More Information" on pages 107
through 109.
Galileo
Cendant Galileo Cendant Equivalent
Historical Historical Pro Forma Pro Forma(2)
---------- ---------- --------- ------------
(Assuming Average Trading Price
of CD Common Stock of $17)
Diluted earnings per share before
extraordinary loss and
cumulative effect of accounting
change:
For the year ended December 31,
2000........................... $0.89 $1.65 $0.88 $1.38
For the three months ended March
31, 2001....................... 0.30 0.57 0.28 0.44
Cash dividends per share:
For the year ended December 31,
2000........................... -- 0.36 -- --
For the three months ended March
31, 2001....................... -- 0.09 -- --
Book value per share(1):
As of December 31, 2000......... 3.77 5.27 5.90 9.22
As of March 31, 2001............ 6.31 5.60 7.85 12.26
(Assuming Average Trading Price
of CD Common Stock of $18)
Diluted earnings per share before
extraordinary loss and
cumulative effect of accounting
change:
For the year ended December 31,
2000........................... 0.89 1.65 0.89 1.31
For the three months ended March
31, 2001....................... 0.30 0.57 0.28 0.42
Cash dividends per share:
For the year ended December 31,
2000........................... -- 0.36 -- --
For the three months ended March
31, 2001....................... -- 0.09 -- --
Book value per share(1):
As of December 31, 2000......... 3.77 5.27 5.95 8.79
As of March 31, 2001............ 6.31 5.60 7.91 11.67
(Assuming Average Trading Price
of CD Common Stock of $19)
Diluted earnings per share before
extraordinary loss and
cumulative effect of accounting
change:
For the year ended December 31,
2000........................... 0.89 1.65 0.89 1.25
For the three months ended March
31, 2001....................... 0.30 0.57 0.29 0.40
Cash dividends per share:
For the year ended December 31,
2000........................... -- 0.36 -- --
For the three months ended March
31, 2001....................... -- 0.09 -- --
Book value per share(1):
As of December 31, 2000......... 3.77 5.27 6.00 8.39
As of March 31, 2001............ 6.31 5.60 7.96 11.14
32
Galileo
Cendant Galileo Cendant Equivalent
Historical Historical Pro Forma Pro Forma(2)
---------- ---------- --------- ------------
(Assuming Average Trading Price
of CD Common Stock of $20)(3)
Diluted earnings per share before
extraordinary loss and
cumulative effect of accounting
change:
For the year ended December 31,
2000........................... $0.89 $1.65 $0.90 $1.20
For the three months ended March
31, 2001....................... 0.30 0.57 0.29 0.38
Cash dividends per share:
For the year ended December 31,
2000........................... -- 0.36 -- --
For the three months ended March
31, 2001....................... -- 0.09 -- --
Book value per share(1):
As of December 31, 2000......... 3.77 5.27 6.05 8.03
As of March 31, 2001............ 6.31 5.60 8.02 10.65
--------
(1) Historical and pro forma book value per share for Cendant and the
historical book value per share for Galileo is computed by dividing total
stockholders' equity by the number of shares outstanding at the end of each
period.
(2) The Galileo equivalent pro forma per share data is calculated based on
Cendant pro forma per share data, and an exchange ratio of 1.563, 1.476,
1.398 and 1.328 of shares of CD common stock for each share of Galileo
common stock outstanding assuming an average trading price of CD common
stock of $17.00, $18.00, $19.00 and $20.00, respectively.
(3) At an average price of $20.29, Cendant's zero-coupon convertible debentures
may be converted into approximately 49 million shares and therefore would
be included in Cendant's calculation of diluted earnings per share
prospectively.
33
RISK FACTORS
In addition to the other information included in this proxy statement-
prospectus (including the matters addressed in "Special Note Regarding Forward-
Looking Statements"), you should carefully consider the matters described below
in determining whether to vote in favor of adopting the merger agreement.
Galileo Stockholders May Receive Less than $33.00 Per Share of Galileo Common
Stock in Certain Circumstances
Upon completion of the merger, each share of Galileo common stock will be
converted into the right to receive CD common stock and cash. If the average
trading price during the measurement period is $17.00 or less, the exchange
ratio will be fixed at approximately 1.56265. Consequently, the expected value
of the stock portion of the merger consideration will decrease if the average
trading price is less than $17.00. In addition, in order to preserve the tax-
free nature of the stock portion of the merger consideration, the value of the
cash portion of the merger consideration is subject to reduction to keep it at
no more than 19.5% of the total value of the merger consideration determined as
of the closing date. This reduction in the cash portion of the merger
consideration will occur if the average closing price for CD common stock is
less than $17.00 per share or if the average closing price is less than the
average trading price for CD common stock, unless both averages are $20.00 or
more. See "Summary--Merger Consideration." Thus, a decrease in the price per
share of CD common stock could result in your receiving less than $33.00 per
share of Galileo common stock.
If the closing is delayed by more than 30 days after the special meeting due
to certain regulatory delays, the measurement period for determining the
exchange ratio will be changed. This change may adversely affect the value of
the merger consideration you will receive because the exchange ratio will be
recalculated based upon a measurement period closely preceding the closing
date, and the value of the CD common stock could change significantly prior to
the new measurement period.
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
Except as otherwise described below, you will receive up to $6.435 in cash
and between 1.328 and 1.563 shares of CD common stock in the merger for each
share of Galileo common stock you own. Although the number of shares of CD
common stock to be issued is fixed within this range, the market price of CD
common stock when the merger takes place may vary from the market price at the
date of this proxy statement-prospectus and at the date of the special meeting.
For example, during the 12-month period ending on July 23, 2001 (the most
recent practicable date prior to the printing of this proxy statement-
prospectus), the sale price of CD common stock varied from a low of $8.125 to a
high of $21.53 and ended that period at $20.74. Variations like these may occur
as a result of changes in the business, operations or prospects of Cendant or
the combined company, market assessments of the likelihood that the merger will
be completed and the timing of the merger's completion, regulatory
considerations, general market and economic conditions and other factors.
Because the market price of CD common stock fluctuates, the overall value of
the merger consideration, including the value of the cash portion 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 industry 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, 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.
34
Failure to Complete the Merger Could Have a Negative Impact on the Market Price
and Future Business and Operations of Galileo
If the merger is not completed, the market price of Galileo common stock may
be affected negatively by the following:
. the price of Galileo common stock may decline to the extent that the
current market price reflects a market assumption that the merger will be
completed;
. Galileo may be required to pay Cendant a termination fee of $100 million
plus up to $10 million in expenses;
. the option granted to Cendant by Galileo pursuant to the stock option
agreement may be exercised, resulting in a substantial increase in the
number of shares of Galileo common stock outstanding, which could depress
Galileo's market price and make another business combination involving
Galileo more difficult;
. costs related to the merger, such as legal, accounting and financial
printing fees, as well as a portion of the financial advisory fees, must
be paid even if the merger is not completed; and
. the diversion of management's attention from the day-to-day business
operations of Galileo and the unavoidable disruption to its employees and
its relationships with its customers and suppliers during the period
before completion of the merger may make it difficult to regain financial
and market position if the merger does not occur.
Obtaining Required Approvals and Satisfying Closing Conditions May Delay or
Prevent Completion of the Merger
Completion of the merger is conditioned upon receipt of certain governmental
consents and approvals, including consents and approvals required under the
United States and certain foreign antitrust laws. Failure to obtain these
consents and approvals in a timely manner, or at all, may delay or prevent
consummation of the merger. Governmental authorities may also impose conditions
in connection with the merger that may adversely affect Cendant's operations
after the merger. Galileo and Cendant are vigorously pursuing all required
approvals.
In addition, Cendant routinely considers and pursues strategic acquisitions
and divestitures. If Cendant enters into an acquisition agreement with a
competitor of Galileo, and the closing of Cendant's acquisition of Galileo is
delayed due to regulatory delays primarily as a result of that action,
including the failure to obtain the regulatory approvals discussed above, the
merger may be delayed or may not be completed.
Cendant's Failure to Successfully Integrate Galileo on a Timely Basis into
Cendant's Operations Could Reduce Cendant's Profitability
Cendant expects that the acquisition of Galileo will result in certain
synergies, business opportunities and growth prospects. Cendant, however, may
never realize these expected synergies, business opportunities and growth
prospects. Cendant may experience increased competition that limits its ability
to expand its business, assumptions underlying estimates of expected cost
savings may be inaccurate, or general industry and business conditions may
deteriorate. In addition, integrating operations will require significant
efforts from both Cendant and Galileo. Personnel may leave or be terminated
because of the merger. Cendant's management may have its attention diverted
while trying to integrate Galileo and other acquisitions. If these factors
limit Cendant's ability to integrate the operations of Galileo successfully or
on a timely basis, Cendant's expectations of future results of operations,
including certain cost savings and synergies expected to result from the
merger, may not be met. In addition, Cendant's growth and operating strategies
for Galileo's business may be different from the strategies that Galileo
currently is pursuing. If Cendant's strategies are not the proper strategies
for Galileo, it could have a material adverse effect on the business, financial
condition and results of operations of Galileo. See "Special Note Regarding
Forward-Looking Statements."
35
Failure to Maintain Galileo's Existing Relationships with Customers and
Suppliers After the Merger Could Prevent Benefits Expected to Result from the
Merger
Galileo generates most of its revenues from the provision of electronic
global distribution services to the travel industry. For the fiscal year ended
December 31, 2000, Galileo generated approximately 95% of its total revenues
from these services. Fees generated through bookings made by Galileo's travel
agency customers are the primary source of this revenue. If, as a result of the
merger, Galileo were to lose and not replace the bookings generated by
Galileo's current travel agency customers as a result of Cendant's current
involvement in the travel industry or otherwise, its business, financial
condition and results of operations could be materially adversely affected. In
addition, Galileo's travel vendors, which include airlines, hotels and car
rental agencies, participate in Galileo's computer reservation systems for the
distribution of their travel services. United is the largest single travel
vendor utilizing Galileo's systems, as measured by booking fee revenue,
generating booking fees that accounted for approximately 11% of Galileo's
booking fee revenue in 2000. Although Cendant believes that airlines, hotels
and car rental agencies will continue to distribute travel services through
Galileo's systems, the loss of booking fees from United or other key airlines,
hotels and car rental agencies could have a material adverse effect on the
business, financial condition and results of operations of Galileo.
The Merger May Adversely Affect Galileo's Ability to Attract and Retain Key
Employees
Current and prospective Galileo employees may experience uncertainty about
their future roles after the merger. In addition, current and prospective
Galileo employees may determine that they do not desire to work for Cendant for
a variety of reasons. These factors may adversely affect Galileo's ability to
attract and retain key management, sales, marketing and other personnel.
Discovery of Accounting Irregularities and Related Litigation and Government
Investigations
Cendant was created in December 1997, through the merger of HFS Incorporated
into CUC International with CUC surviving and changing its name to Cendant
Corporation. On April 15, 1998, Cendant announced that in the course of
transferring responsibility for Cendant's accounting functions from Cendant
personnel associated with CUC prior to the merger to Cendant personnel
associated with HFS before the merger and preparing for the reporting of first
quarter 1998 financial results, Cendant discovered accounting irregularities in
some of the CUC business units. As a result, Cendant, together with its counsel
and assisted by auditors, immediately began an intensive investigation.
As a result of the findings of the investigations, Cendant restated its
previously reported financial results for 1997, 1996 and 1995 and the six
months ended June 30, 1998.
Since the April 15, 1998 announcement of the discovery of accounting
irregularities in the former business units of CUC, approximately 70 lawsuits
claiming to be class actions, three lawsuits claiming to be brought
derivatively on Cendant's behalf and several individual lawsuits and
arbitration proceedings 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 Cendant's internal investigations, Cendant made all
adjustments considered necessary by Cendant, which are reflected in its
previously filed restated financial statements for the years ended December 31,
1997, 1996 and 1995 and for the six months ended June 30, 1998. On June 14,
2000, pursuant to an offer of settlement made by Cendant, the SEC issued an
Order Instituting Public Administrative Proceedings Pursuant to Section 21C of
the Securities Exchange Act of 1934, Making Findings and Imposing a Cease and
Desist Order. In such Order, the SEC found that Cendant had violated certain
financial reporting provisions of the Exchange Act and ordered Cendant to cease
and desist from committing any future violations of such provisions. No
financial penalties were imposed against Cendant.
36
On December 7, 1999, Cendant announced that it reached a preliminary
agreement to settle the principal securities class action pending against
Cendant in the U.S. District Court in Newark, New Jersey, brought on behalf of
purchasers of all Cendant and CUC publicly traded securities, other than
PRIDES, between May 1995 and August 1998. Under the settlement agreement,
Cendant would pay the class members approximately $2.85 billion in cash and 50%
of any recovery it may obtain in connection with claims it has asserted against
CUC's former public auditor. The definitive settlement document was approved by
the U.S. District Court by order dated August 14, 2000. Certain persons in the
class action have appealed various aspects of the District Court's orders
approving the settlement. The U.S. Court of Appeals for the Third Circuit heard
oral arguments for all appeals on May 22, 2001; the Court reserved its
decision. Cendant does not believe that any of the appeals will result in a
change to the settlement amount. The settlement agreement required Cendant to
post collateral in the form of credit facilities and/or surety bonds by
November 13, 2000, which it has done.
The settlement does not encompass all 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.
37
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement-prospectus and the documents that are made a part of
this proxy statement-prospectus by reference to other documents filed with the
Securities and Exchange Commission include various forward-looking statements
about Cendant and Galileo that are subject to known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of Cendant and Galileo 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 Galileo set forth
under:
. "Questions and Answers About the Merger and the Special Meeting;"
. "Summary;"
. "Financial Summary;" and
. "The Merger."
Statements preceded by, followed by or that otherwise include the words
"believes," "expects," "anticipates," "intends," "estimates," "plans," "may
increase," "may fluctuate" and similar expressions or future or conditional
verbs such as "will," "should," "would" and "could" are generally forward-
looking in nature and not historical facts.
You should understand that the following important factors and assumptions
could affect the future results of Cendant following the merger and could cause
actual results to differ materially from those expressed in such forward-
looking statements:
. the effect of economic conditions and interest rate changes on the
economy on a national, regional or international basis and the impact
thereof on Cendant's businesses;
. the effects of changes in current interest rates, particularly on
Cendant's real estate franchise and mortgage businesses;
. the resolution or outcome of Cendant's unresolved pending litigation
relating to the previously announced accounting irregularities and other
related litigation;
. Cendant's ability to develop and implement operational and financial
systems to manage growing operations and to achieve enhanced earnings or
effect cost savings;
. competition in Cendant's existing and potential future lines of business
and the financial resources of, and products available to, competitors;
. Cendant's ability to integrate and operate successfully acquired and
merged businesses and risks associated with such businesses, including
the acquisitions of Avis and Fairfield Resorts and the pending
acquisition of Galileo, the compatibility of the operating systems of the
combining companies, and the degree to which its existing administrative
and back-office functions and costs and those of the acquired companies
are complementary or redundant;
. Cendant's ability to obtain financing on acceptable terms to finance its
growth strategy and to operate within the limitations imposed by
financing arrangements and rating agencies;
. competitive and pricing pressures in the vacation ownership and travel
industries, including the car rental industry;
. changes in the vehicle manufacturer repurchase arrangements between
vehicle manufacturers and Avis in the event that used vehicle values
decrease;
38
. changes in laws and regulations, including changes in accounting
standards and privacy policy regulation; and
. the effects of overall consumer confidence and discretionary spending
and their impact on Cendant's business.
The following important factors and assumptions, in addition to those
discussed in Galileo's Annual Report on Form 10-K for the year ended December
31, 2000 and Galileo's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2001, which are incorporated by reference into this proxy statement-
prospectus, could affect the future results of Galileo 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:
. competition in Galileo's industry;
. competition to attract and retain travel agency subscribers, and the loss
of bookings, without replacement, generated by one or more of Galileo's
five largest travel agency customers;
. an increase in direct access to travel vendors;
. an increase in bookings on Internet travel sites, since Galileo's market
share of bookings through Internet web sites is currently lower than in
the traditional brick-and-mortar agency marketplace;
. failure to maintain technological competitiveness and to make
technological innovations;
. substantial technology costs that cannot be quickly reduced in response
to a reduction in revenue;
. damage to key data facilities;
. network and software vulnerability to security breaches and similar
threats that could result in Galileo's liability for damages and harm to
its reputation;
. changes in governmental regulations;
. a decline in air travel, whether due to political instability, adverse
economic conditions or other factors;
. vulnerability of its proprietary software and intellectual property to
third party use;
. the successful execution of or change in the business plan of its
enterprise networking services subsidiary; and
. the successful integration of Galileo into Cendant's operations and
implementation by Galileo of Cendant's management's business objectives.
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. These forward-looking
statements involve risks and uncertainties in addition to the risk factors
described under "Risk Factors."
Most of these factors are difficult to predict accurately and are generally
beyond the control of Cendant and Galileo.
You should consider the areas of risk described above in connection with any
forward-looking statements made by Cendant or Galileo or anyone acting for
either or both of them. Neither Cendant nor Galileo undertakes any obligation
to release publicly any revisions to or update any forward-looking statements,
to report events or circumstances after the date of this proxy statement-
prospectus or to report the occurrence of unanticipated events. For any
forward-looking statements contained in this proxy statement-prospectus,
Cendant and Galileo claim the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995.
39
THE MERGER
The discussion in this proxy statement-prospectus of the merger and the
principal terms of the merger agreement is subject to, and qualified in its
entirety by reference to, the merger agreement, a copy of which is attached to
this proxy statement-prospectus as Annex A and is incorporated by reference
into this proxy statement-prospectus.
General
Galileo is furnishing this proxy statement-prospectus to you in connection
with the solicitation of proxies by the Galileo board for use at the special
meeting of Galileo stockholders to be held on Thursday, August 30, 2001, and at
any adjournments or postponements of the special meeting. Cendant is furnishing
this proxy statement-prospectus to you in connection with its offer to issue
shares of CD common stock in exchange for your shares of Galileo common stock.
At the special meeting, you will be asked to vote upon a proposal to adopt
the Agreement and Plan of Merger, dated as of June 15, 2001, by and among
Galileo, Cendant and Galaxy Acquisition Corp., a subsidiary of Cendant.
Background of the Merger
The Galileo board, as part of its ongoing oversight and planning functions,
has from time to time considered various financial and other alternatives that
might be available to increase the value of Galileo to all of its stockholders.
In connection with these ongoing reviews, the Galileo board met during the fall
of 2000 to assess the then current trading price of the Galileo common stock,
their view that the Galileo common stock was then undervalued by the financial
markets and the advisability of various possible strategic alternatives
available to Galileo to increase stockholder value, including a business
combination with a competitor of Galileo or other third party, a
recapitalization, a leveraged buyout or the continued operation of Galileo as a
stand alone entity under its then current business plan. At the conclusion of
the meeting, the Galileo board determined that a more extensive review of these
possible strategic alternatives would be appropriate.
At a meeting of the Galileo board held on October 5, 2000, the board
authorized preliminary discussions with financial advisors to advise the board
on its strategic alternatives. On October 19, 2000, the Galileo board decided
to proceed with the selection of an investment banker and authorized the public
announcement that it had commenced a review of strategic alternatives.
On October 20, 2000, Galileo issued a press release stating, among other
things, the following:
"Galileo International, Inc. announced today that its board of directors
has authorized management to explore strategic alternatives for the company
designed to maximize shareholder value. Such alternatives include, but are
not limited to, a leveraged buyout or sale to a strategic buyer. The
company said that there is no assurance that any transaction will be
completed. The Galileo board has begun the search for a financial advisor
to explore and evaluate possible alternatives, and anticipates naming one
shortly."
On October 25, 2000, the Galileo board engaged Morris Nichols Arsht &
Tunnell as special counsel to the board to advise the board as to its fiduciary
responsibilities in conducting the strategic review process.
On November 2, 2000, the Galileo board approved the engagement of JPMorgan
Securities Inc. as Galileo's financial advisor to evaluate possible strategic
alternatives for Galileo, and publicly announced the engagement of JPMorgan on
November 3, 2000.
At a meeting of the Galileo board held on December 21, 2000, JPMorgan
reviewed its preliminary analysis of strategic alternatives available to
Galileo. JPMorgan discussed with the Galileo board its preliminary views on an
appropriate valuation of Galileo and its analysis of other related matters.
Following these discussions, the Galileo board directed JPMorgan to undertake a
more detailed valuation analysis.
40
On January 18, 2001, JPMorgan provided updated valuation and market analyses
to the Galileo board concerning possible strategic alternatives for Galileo and
recommended to the board that likely strategic and financial buyers be
approached to gauge their interest in a possible business combination. While no
decision had been made at that time by the Galileo board as to whether to
pursue a sale or merger of Galileo or to pursue other strategic alternatives,
the board determined that, because a sale or other disposition was an
attractive alternative, the interest of potential bidders should be explored.
At the conclusion of the meeting, the Galileo board authorized JPMorgan to
proceed to contact potential buyers and directed JPMorgan, along with Galileo
management, to prepare materials and presentations to be provided to persons
that might be interested in making proposals to acquire Galileo.
Beginning on January 29, 2001, JPMorgan approached 16 potential buyers,
including Cendant. The companies contacted were chosen based on a variety of
factors, including perceived interest in the businesses in which Galileo
operated, familiarity with the computer reservation system industry, financial
position and ability to consummate an acquisition of Galileo. Those entities
expressing an interest in pursuing a possible transaction were asked to sign
confidentiality agreements to protect the confidential nature of the material
prepared by Galileo management to be provided to these parties. Galileo
management offered to provide the materials it had previously prepared and to
make presentations to those parties that executed confidentiality agreements.
Nine companies ultimately signed confidentiality agreements. On March 9, 2001,
Cendant and Galileo executed a confidentiality agreement.
In February 2001, Cendant engaged Salomon Smith Barney as its financial
advisor in connection with the potential acquisition of Galileo.
On February 5, 2001, representatives of Cendant and its financial advisor
met with representatives of JPMorgan to discuss a possible acquisition of
Galileo. At the meeting, the parties discussed Galileo's business and
operations and JPMorgan discussed the process that was being undertaken on
behalf of Galileo.
Beginning on February 28, 2001, Galileo management provided the potential
buyers access to due diligence materials related to Galileo's business that
could be reviewed by these potential bidders. One potential bidder that had
signed a confidentiality agreement withdrew from the process before viewing
management presentations or due diligence materials. Six of the potential
bidders received management presentations and eight of the potential bidders
conducted due diligence. Cendant and its advisors began their extensive
financial, business and legal due diligence of Galileo in March 2001. Galileo's
management made its initial presentation to Cendant on April 3, 2001. Cendant's
due diligence efforts included retaining outside consultants with expertise in
the global distribution services industry, conducting meetings with Galileo
management, touring Galileo's facilities and reviewing financial and legal
documents provided by Galileo.
On April 2, 2001, JPMorgan sent letters to the potential bidders that
outlined the procedures to be followed regarding submission of offers. The
letter stated that offers were to be delivered by April 24, 2001, and were to
specify the price-per-share for Galileo common stock, both including and
excluding Galileo's Quantitude business. In addition, potential bidders were
required, among other things, to disclose the source of financing for the
transaction, a timetable for completion, and regulatory approvals that would be
required to complete the transaction. Potential bidders also received a
proposed acquisition agreement and were instructed to highlight any material
departures from the agreement's terms in their bids.
On April 24, 2001, Cendant's executive committee received a memorandum from
its financial advisor outlining financial and business opportunities in
connection with pursuing an acquisition of Galileo. The executive committee
also received due diligence reports, including reports from its outside
consultants and legal and financial advisors. The executive committee held a
meeting to discuss whether to submit a bid to acquire Galileo. At the meeting,
Cendant's executive committee reviewed the principal terms of the proposed bid
for Galileo and discussed the reports presented by Cendant's outside
consultants and legal and financial advisors. After a full discussion of the
matters considered by the executive committee at the meeting, the executive
committee determined to submit a bid to acquire Galileo.
41
Three bidders, including Cendant, submitted written proposals on April 24,
2001. One additional bidder made an oral proposal which in other respects
substantially complied with the instructions provided by JPMorgan. Cendant's
proposal consisted of a tax-free exchange of $25 worth of CD common stock for
each share of Galileo common stock and a trust arrangement for Quantitude. The
trust arrangement would have placed Galileo's equity interest in Quantitude in
a trust in which the trustee would attempt to sell Quantitude to a qualified
third party and deliver the after-tax proceeds of that sale to Galileo
stockholders. In addition, Cendant's bid identified various proposed changes to
the draft agreement for the acquisition of Galileo and was conditioned upon
receiving voting agreements from Galileo's largest stockholders and an option
to purchase 19.9% of Galileo's common stock. Cendant also conditioned its bid
upon the satisfactory completion of its comprehensive due diligence
investigation.
The other three bidders all submitted cash offers. Two of the bidders
submitted offers for the whole company and the third bidder submitted an offer
for only the global distribution services business (Galileo excluding
Quantitude).
The Galileo board considered the proposals at meetings on April 27, 2001 and
April 28, 2001. At the April 28 meeting, the Galileo board instructed JPMorgan
to solicit an increased offer from each bidder. Two parties, including Cendant,
subsequently increased their bids.
On April 30, 2001, Cendant presented a new proposal that retained the trust
arrangement for Quantitude and increased the offer for Galileo's core
distribution system business to $30 of CD common stock for each share of
Galileo common stock. Cendant conditioned its higher offer on access to
extensive additional due diligence information and a requirement that Galileo
negotiate exclusively with Cendant until May 21, 2001. Cendant advised Galileo
that, at the conclusion of this period, it would be prepared to make a firm
offer which would not be subject to a due diligence condition. On May 3, 2001,
Galileo agreed to negotiate exclusively with Cendant until May 21, 2001, after
considering the advice of JPMorgan that Cendant's demand for additional due
diligence was reasonable, that agreeing to the exclusive negotiating period was
necessary to keep Cendant in the process at the increased price of $30 and that
the exclusivity request was not detrimental to Galileo, in part because of
Galileo's ability to receive and respond to any other inquiries during the
period and to negotiate with any other interested parties after May 21, 2001.
From May 3, 2001 through May 15, 2001, legal and financial representatives
of Galileo and Cendant met on numerous occasions to discuss and negotiate
aspects of the proposed merger, the Quantitude trust structure, Cendant's
proposed changes to the acquisition agreement and the proposed terms of the
stock option agreement. At the same time, Cendant and its advisors provided
expanded due diligence requests to Galileo and continued to conduct extensive
due diligence on Galileo's operations. On May 15, 2001, Cendant and its
advisors provided Cendant's management due diligence reports on their findings
at a meeting at Cendant's offices in New York, New York. At the conclusion of
the meeting, Cendant's management requested that its advisors continue to
conduct additional due diligence on Galileo.
On May 14, 2001, representatives of Cendant, along with representatives of
its outside legal counsel, Skadden, Arps, Slate, Meagher & Flom LLP, and its
financial advisor, Salomon Smith Barney, met in New York City with senior
members of Galileo's management, representatives of Galileo's financial
advisor, JPMorgan, and Galileo's outside counsel, Jones, Day, Reavis & Pogue,
to further discuss the terms of the transaction, structural matters and the
possible timing of executing the acquisition agreement. Cendant's remaining due
diligence was also discussed.
On May 15, 2001, Galileo's Chairman, President and Chief Executive Officer,
Mr. James E. Barlett, had a telephone conversation with Cendant's Chairman,
President and Chief Executive Officer, Mr. Henry R. Silverman, during which the
two discussed, among other things, the strategic rationale for the proposed
transaction and the potential benefits of the proposed transaction for the
stockholders of each company.
At a meeting held on May 17, 2001, the Galileo board discussed the status of
Cendant's revised offer and the other three proposals that had been made.
JPMorgan reviewed with the board that the four bidders had been
42
asked to raise their bids and that only Cendant and one other bidder had done
so. In addition, the Galileo board discussed the nature of the Quantitude trust
structure proposed by Cendant, and instructed JPMorgan to request from Cendant
a single proposal for all of Galileo, including Quantitude. JPMorgan advised
the Galileo board that Cendant likely would request an extension of its
exclusive negotiating period in order to confirm its Quantitude valuation.
JPMorgan also expressed its view that an extension by Galileo of an exclusive
negotiating period with Cendant would not hinder the continuation of the review
process or Galileo's assessment of alternatives. Accordingly, the Galileo board
agreed that an extension of the exclusivity period would be appropriate.
On May 18, 2001, JPMorgan advised representatives of Cendant that the
Galileo board had requested a single proposal for all of Galileo, including
Quantitude. In response, Cendant requested an extension of the exclusive
negotiating period from May 21, 2001 to June 1, 2001. Galileo's representatives
responded that Galileo sought $35 per share of Galileo common stock and that,
given the exclusivity already granted to Cendant and the extensive due
diligence that Cendant had already conducted, a one week exclusivity extension
would be appropriate. Representatives of Cendant informed representatives of
Galileo that Cendant could not commit to any increased purchase price prior to
completing its due diligence investigation and that Cendant's due diligence
process was ongoing. Shortly thereafter, the parties agreed to an extension of
the exclusive negotiating period from May 21, 2001 to May 29, 2001, on the same
terms as the initial exclusivity agreement.
During the period from May 18, 2001 to May 29, 2001, numerous discussions
between the financial and legal representatives of Cendant and Galileo
continued in an attempt to finalize the structure of the potential transaction
and resolve outstanding issues regarding due diligence and the terms of the
transaction documents. During this period, Galileo commenced its due diligence
investigation of Cendant.
During the period that Galileo was soliciting proposals for an acquisition
of Galileo, Galileo continued to analyze the potential benefits of pursuing an
acquisition of a third party and submitted a preliminary indication of interest
with regard to such a potential acquisition. However, in light of the progress
of Galileo's strategic review process, no further action was taken with regard
to such potential acquisition.
On May 29, 2001, Cendant submitted a revised offer for all of Galileo. The
offer contained a fixed exchange ratio of 1.271 shares of CD common stock plus
an additional amount of cash, totaling 19.5% of the total merger consideration
up to a maximum of $5.85 per share, in exchange for each share of Galileo
common stock. In its bid letter, Cendant noted that, based upon a CD common
stock value of at least $19, Galileo stockholders would receive in excess of
$30 per share of Galileo common stock. Cendant also proposed converting its
travel agency segments to Galileo's system from a competing system and to
integrate Cendant's travel portal with Trip.com. Cendant's bid remained
conditioned on finalizing the merger agreement and the stock option agreement
and completion of select outstanding due diligence items. In addition,
Cendant's bid stressed the importance of having the support of Galileo's
largest stockholders.
During a conference call on the evening of May 29, 2001 between Mr. Barlett
and Mr. Silverman and various representatives of each company, Mr. Barlett and
Mr. Silverman discussed Cendant's revised offer. In addition, Mr. Silverman
advised Mr. Barlett of Cendant's view of the positive effects of the proposed
transaction for the stockholders of each company. Mr. Barlett informed Mr.
Silverman that the Galileo board would take the revised offer under advisement
at a meeting of the Galileo board the following day.
On May 30, 2001, the Galileo board met to discuss Cendant's revised offer.
The Galileo board was advised that based on the then-current CD common stock
price, the revised offer would provide total consideration to Galileo
stockholders of approximately $29.60 per share. After considering the offer,
the Galileo board determined that it did not offer sufficient value to Galileo
stockholders to justify approval of a transaction. In addition, the Galileo
board noted that the revised offer had abandoned the fixed value consideration
to be received by Galileo stockholders in Cendant's earlier proposal in favor
of a fixed exchange
43
ratio. The Galileo board noted that, as a result, the value of the
consideration to be received by Galileo stockholders in the revised offer would
fluctuate with changes in the price of CD common stock. At the conclusion of
the meeting JPMorgan was authorized to communicate the view of the Galileo
board to representatives of Cendant. JPMorgan was also directed to contact the
other participants in the process and advise them to submit or revise, as
applicable, their proposals promptly if they had an interest in a transaction
with Galileo.
In response to the views of the Galileo board, Cendant revised its offer on
May 30, 2001. Its new offer still contained a mixture of stock and cash, but
the structure provided fixed value consideration to be received by Galileo
stockholders of $32 per share if the price of CD common stock traded within a
collar of $18 and $21. Total consideration to Galileo's stockholders would rise
or fall if the price of CD common stock rose or fell outside of the collar.
At a special meeting of the Galileo board held on May 31, 2001, the Galileo
board discussed the revised Cendant offer, and determined that the revised
offer presented insufficient value and an unacceptably narrow collar of fixed
consideration. At the conclusion of the meeting, JPMorgan was authorized to
communicate the view of the Galileo board to representatives of Cendant.
Thereafter, JPMorgan communicated the Galileo board's views to Cendant and said
that the Galileo board was unwilling to sell Galileo on that basis.
In response to the views of the Galileo board, Cendant modified its offer,
increasing the fixed value of the consideration to $32.50 per share of Galileo
common stock and widening the collar to $17.50 to $21.50 per share of CD common
stock. JPMorgan advised Cendant that the Galileo board would be unlikely to
approve a transaction where the expected consideration to be received by
Galileo stockholders was $32.50. In response, Cendant agreed to increase its
offer to provide expected consideration to Galileo stockholders of $33 per
Galileo share, but that such price was its final and best offer. Cendant also
proposed a collar of $17.50 to $20 per share of CD common stock. In addition,
Cendant proposed that both Cendant and Galileo have the right to terminate the
transaction if the price of CD common stock during the relevant period was $14
or less.
At a special meeting held on June 1, 2001, the Galileo board reviewed the
revised offer and was advised by JPMorgan that none of the other bids had been
increased and no new bids had been made. The Galileo board authorized JPMorgan
to communicate to representatives of Cendant that a transaction would be
considered financially acceptable if the collar's lower end were extended down
to $17 and if Galileo was the only party that had the right to terminate the
transaction if the price of CD common stock during the relevant period was $14
or less. On a conference call on June 1, 2001 between Galileo and its financial
and legal representatives and Cendant and its financial and legal
representatives, Cendant agreed in principle to those financial terms, subject
to completion of due diligence, finalization of mutually acceptable transaction
documents and receipt of a voting agreement from United Air Lines, Inc. and the
stock option agreement from Galileo. On the June 1, 2001 conference call,
Cendant and Galileo discussed the steps necessary to complete their respective
due diligence and finalize the terms of the transaction agreements.
On June 4, 2001, as part of Galileo's due diligence investigation of
Cendant, Cendant conducted a detailed management presentation to Galileo and
its advisors at Cendant's office in Parsippany, New Jersey.
From June 1 to June 14, 2001, legal and financial representatives of Galileo
and Cedant held discussions on numerous occasions to negotiate and finalize
terms of the proposed acquisition agreement between the two companies. During
this period, the parties continued their respective due diligence
investigations. In addition, from June 2 to June 14, 2001, Cendant, United and
its wholly owned subsidiary, Covia LLC and their respective legal and financial
representatives held discussions on numerous occasions to negotiate the terms
of the proposed voting agreement pursuant to which United would, among other
things, agree to vote, and give Cendant a proxy to vote, its shares and any
additional shares it acquires in favor of the adoption of the merger agreement
and against any third party proposal to complete an acquisition of Galileo or
any other proposals presented for a vote that would prevent or materially delay
completion of the merger.
44
On June 5, 2001, Cendant's board received a memorandum from its financial
advisor outlining financial and business opportunities in connection with
pursuing an acquisition of Galileo. The Cendant board also received due
diligence reports from its advisors. Later on June 5, 2001, the Cendant board
had a meeting at which the acquisition of Galileo was discussed. At the
meeting, Cendant's board reviewed the reports presented by Cendant's advisors
and the principal terms of the proposed acquisition of Galileo, including the
terms of the merger agreement, the voting agreement and the stock option
agreement. After a full discussion of the matters considered by the Cendant
board at the meeting, the Cendant board approved, among other things, the
merger agreement, the voting agreement and the stock option agreement in the
form presented to the Cendant board and authorized Cendant's management to
finalize the terms of those agreements and, once finalized, to execute and
deliver those agreements to Galileo and United. The board of directors of
Galaxy Acquisition Corp. subsequently approved the merger with Galileo, the
merger agreement and the other transactions contemplated in connection with the
merger agreement.
On June 15, 2001, at a special meeting of the Galileo board, the Galileo
board reviewed the terms of the proposed transaction with Cendant. All of the
directors were present in person or by conference telephone throughout the
meeting, except Mr. Schorderet, who was unable to participate, and Mr. Dik, who
was only able to participate in a portion of the meeting and left the call
before the board voted on the transaction. Galileo's financial advisor,
JPMorgan, reviewed with the Galileo board the bids that had been received in
the strategic review process and the course of negotiations with Cendant.
JPMorgan then reviewed a financial analysis of the consideration payable in the
proposed transaction, as well as alternatives to the proposed transaction,
including the continued operation of Galileo as an independent company.
Galileo's legal counsel reviewed the legal aspects of the proposed transaction,
including the board's legal duties, the terms of the transaction documents and
changes negotiated to the definitive merger agreement and stock option
agreement. Galileo's litigation and due diligence counsel, Chapman and Cutler,
reviewed with the board the results of its due diligence investigation and made
a presentation regarding certain class action litigation against Cendant as
described in "Risk Factors." The Galileo board was also advised that United and
Covia had indicated that they would agree to enter into a voting agreement with
Cendant if the Galileo board approved the merger agreement. Also at this
meeting, JPMorgan rendered to the Galileo board its oral opinion (subsequently
confirmed by delivery of a written opinion dated June 15, 2001) to the effect
that, as of the date and on the basis of and subject to the matters described
in the opinion, the consideration to be paid to Galileo's stockholders in the
proposed merger was fair, from a financial point of view. After a full
discussion of the matters considered by the Galileo board at the meeting, the
Galileo board, by the unanimous vote of the directors then present at the
meeting, approved the merger agreement and the stock option agreement in the
form presented to the Galileo board and determined to recommend to Galileo's
stockholders that they vote to adopt the merger agreement.
In the evening of June 15, 2001, Cendant and Galileo executed the merger
agreement and the stock option agreement. In addition, Cendant, United and
Covia executed the voting agreement on the same day. On June 18, 2001, prior to
the opening of trading on the New York Stock Exchange, Cendant and Galileo
issued press releases relating to the proposed merger.
Galileo's Rationale for the Merger; Recommendation of the Galileo Board
The Galileo board has approved the merger agreement and has determined that
the merger agreement and the merger are advisable and in the best interest of
Galileo and its stockholders. Accordingly, the Galileo board recommends that
Galileo stockholders vote FOR the adoption of the merger agreement at the
special meeting.
In reaching its recommendation described above, the Galileo board consulted
with Galileo's management, its financial advisors and legal counsel. Set forth
below are the material factors that the Galileo board considered in reaching
its determination:
. Its review and analysis of the financial performance, cash flow
generation and growth prospects of Galileo and its determination that
the public market failed to appropriately value the company.
45
. Its review of possible alternatives to the sale of Galileo, including
the prospects of continuing to operate Galileo as an independent
company, the value to stockholders of those alternatives and the timing
and likelihood of actually achieving additional value from those
alternatives, including the possibility that Galileo's future
performance might not lead to a stock price having a higher present
value than the merger consideration to be received in the proposed
merger with Cendant.
. The fact that the merger and the merger agreement were agreed to by the
Galileo board only after issuance by Galileo of a press release
regarding its review of strategic alternatives, publicity concerning the
review by Galileo of its strategic alternatives and the possibility of
Galileo being sold, the passage of a significant period of time between
issuance of the press release and the approval of the merger agreement,
and contact with, and the opportunity to receive and consider proposals
by, a large number of potential bidders during an "auction" process.
. The structure of the transaction as a generally tax-free reorganization,
to the extent of CD common stock received by Galileo stockholders, for
United States federal income tax purposes.
. The historical market price of, and the recent trading activity in,
Galileo common stock, and particularly the fact that the expected value
of the $33.00 per share price to be received by Galileo stockholders
represents a premium of approximately 103% over the closing price of
Galileo common stock on October 20, 2000 (one day prior to Galileo's
announcement that it was considering strategic alternatives) and a
premium of approximately 11% over the closing price of Galileo common
stock on June 15, 2001 (one business day prior to Galileo's announcement
that it had entered into the merger agreement with Cendant).
. The possibility that if the merger or some other significant transaction
were not consummated, the price of the Galileo common stock could
decline significantly below the current trading price.
. The presentation to the Galileo board of JPMorgan as to the transaction
and its opinion as to fairness, from a financial point of view, of the
consideration to be received in the merger by Galileo stockholders. The
full text of the written opinion of JPMorgan, dated June 15, 2001, which
sets forth the assumptions made, matters considered and limitations on
the review undertaken, is attached to this proxy statement-prospectus as
Annex D and is incorporated herein by reference. The opinion of JPMorgan
is addressed to the Galileo board, is directed only to the consideration
to be received by Galileo stockholders in the proposed merger and does
not constitute a recommendation to any stockholder as to how to vote
with respect to the proposed merger or at what price CD common stock
will trade at any future time. You are urged to read JPMorgan's opinion
carefully and in its entirety.
. The anticipated timing of consummation of the transactions contemplated
by the merger agreement.
. The fact that Cendant has not conditioned its obligations under the
merger agreement on its ability to obtain financing.
. The fact that United and Covia, the owner of 18.2% of the outstanding
shares of Galileo common stock, were willing to enter into the voting
agreement pursuant to which Covia agreed to vote, and grant Cendant a
proxy to vote, all of its shares in favor of adoption of the merger
agreement.
. The business, operations, financial position, personnel and prospects of
Cendant.
. The current and historical market prices and trading information with
respect to CD common stock.
In light of the Galileo board's knowledge of the business and operations of
Galileo and its business judgment, the Galileo board considered and evaluated
each of the factors listed above during the course of its
46
deliberations prior to approving the merger agreement. In view of the wide
variety of factors considered in connection with its evaluation of the merger,
the Galileo board found it impracticable to and did not, quantify or otherwise
attempt to assign relative weights to the specific factors considered in making
its determinations.
The Galileo board also considered the following countervailing factors in
making its determinations:
. The fact that following the merger, Galileo's stockholders will no
longer be able to participate in the potential growth of Galileo except
as part of Cendant.
. The terms of the merger agreement that set forth conditions to closing
and the significant fees and expenses that would become payable in the
event of a termination of the merger agreement under certain
circumstances.
. The fact that the merger agreement prohibits Galileo from soliciting or
entering into a transaction with a third party to acquire Galileo.
. The grant of the stock option to Cendant, which provides Cendant the
ability to acquire up to 19.5% of Galileo common stock under certain
circumstances. In this regard, the Galileo board recognized that the
provisions of the stock option agreement and the granting of the option
to Cendant were insisted upon by Cendant as a condition to entering into
the merger agreement.
. Certain risks associated with Cendant and the merger described under
"Risk Factors," including the potential negative effect on Cendant's
financial condition and other potential risks that may result if the
settlement terms of the class action lawsuit involving accounting
irregularities are modified or voided upon appeal and the potential
negative effect on Cendant's financial condition that may result from
other litigation that is not the subject of the existing settlement.
The Galileo board determined that the foregoing factors were outweighed by
the potential benefits of the merger described above.
Cendant's Rationale for the Merger
On June 5, 2001, the Cendant board determined by a unanimous vote that the
merger is advisable and in the best interests of Cendant and Cendant's
stockholders. The Cendant board approved the merger agreement, the merger and
the other transactions contemplated by the merger agreement.
In connection with its approval of the merger, and its determination that
the merger is advisable and in the best interest of Cendant's stockholders, the
Cendant board consulted with outside consultants and its legal 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 merger agreement, the merger and the other
transactions contemplated by the merger agreement:
. That Galileo is one of the foremost providers of electronic global
distribution services to the travel industry through its computerized
reservation systems and Internet-based solutions.
. That the merger will provide Cendant with an opportunity to
substantially broaden the range of Cendant's service offerings and its
geographic reach.
. That the merger significantly expands Cendant's presence in the travel
sector and provides Cendant a comprehensive travel platform, generating
transaction fees on all major components of travel spending.
. That Galileo's fee-for-services business model, customer relationships
and customer base are believed to be highly complementary to Cendant's
business model.
. That the merger will be accretive to Cendant's earnings.
47
. The terms and conditions of the merger agreement, including the fact
that in the event of certain terminations of the merger agreement,
Galileo must pay to Cendant a $100 million termination fee plus up to
$10 million in Cendant's expenses incurred in connection with the
merger.
. That United and Covia have agreed to vote, and give Cendant a proxy to
vote, 18.2% of the total number of shares of Galileo common stock issued
and outstanding pursuant to a voting agreement.
. The fact that in the event the voting agreement with United and Covia is
terminated and Cendant becomes entitled to the termination fee set forth
in the merger agreement, Cendant may exercise its option to purchase up
to 19.5% of the outstanding Galileo common stock as of the date of the
stock option agreement.
Opinions of Galileo's Financial Advisor
Pursuant to an engagement letter dated November 1, 2000, the Galileo board
retained JPMorgan to act as its exclusive financial advisor in connection with
the merger. At the Galileo board meeting on June 15, 2001, JPMorgan gave its
oral opinion, subsequently confirmed in writing, to the Galileo board that, as
of that date and on the basis of and subject to the matters described in the
opinion, the consideration to be paid to Galileo stockholders in the proposed
merger is fair, from a financial point of view, to such stockholders.
The full text of the written opinion of JPMorgan dated June 15, 2001, which
sets forth the assumptions made, matters considered and limits on the review
undertaken, is attached as Annex D to this proxy statement-prospectus.
JPMorgan's opinion is incorporated into this proxy statement-prospectus by
reference and Galileo urges its stockholders to read the opinion carefully and
in its entirety.
JPMorgan's opinion is addressed to the Galileo board, is directed only to
the consideration to be received by Galileo stockholders in the proposed merger
and does not constitute a recommendation to any stockholder as to how to vote
with respect to the proposed merger or the price at which the CD common stock
will trade at any future time.
In arriving at its opinion, JPMorgan, among other things:
. reviewed a draft dated June 10, 2001 of the merger agreement;
. reviewed certain publicly available business and financial information
concerning the business of Galileo and Cendant and the industries in
which they operate;
. compared the financial and operating performance of Galileo and Cendant
with publicly available information concerning certain other companies
JPMorgan deemed relevant and reviewed the current and historical market
prices of Galileo common stock and CD common stock and certain publicly
traded securities of such companies;
. reviewed certain internal financial analyses and forecasts prepared by
the management of Galileo relating to its business; and
. performed such other financial studies and analyses and considered such
other information as JPMorgan deemed appropriate for purposes of its
opinion.
JPMorgan noted that it did not compare the financial terms of the merger
with the terms of other transactions because there were no transactions
involving companies that JPMorgan deemed relevant and for which financial terms
were publicly available.
In addition, JPMorgan has held discussions with certain members of the
management of Galileo and Cendant with respect to certain aspects of the
merger, including their past and current business operations, their financial
condition and future prospects and operations, the effects of the merger on the
financial condition and future prospects of both Galileo and Cendant, and
certain other matters JPMorgan believed necessary or appropriate to its
inquiry.
48
In giving its opinion, JPMorgan relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was
publicly available or was furnished to it by Galileo or Cendant or otherwise
reviewed by JPMorgan, and has not assumed any responsibility or liability
therefor. JPMorgan did not conduct any valuation or appraisal of any assets or
liabilities, nor were any such valuations or appraisals provided to JPMorgan.
In relying on financial analyses and forecasts provided to it, JPMorgan assumed
that they were reasonably prepared based on assumptions reflecting the best
currently available estimates and judgments by the managements of Galileo and
Cendant as to the expected future results of operations and financial condition
of Galileo and Cendant to which such analyses or forecasts relate. JPMorgan
also assumed that the merger will qualify as a tax-free reorganization for
United States federal income tax purposes, and that the other transactions
contemplated by the merger agreement will be consummated as described therein.
JPMorgan relied, as to all legal matters relevant to rendering its opinion,
upon the advice of counsel. JPMorgan also assumed that the definitive merger
agreement would not differ in any material respects from the draft furnished to
JPMorgan. JPMorgan further assumed that all material governmental, regulatory
or other consents and approvals necessary for the consummation of the merger
would be obtained without any adverse effect on Galileo or Cendant or on the
contemplated benefits of the merger.
As is customary in the rendering of fairness opinions, JPMorgan based its
opinion on economic, market and other conditions as in effect on, and the
information made available to JPMorgan, as of June 15, 2001, the date of the
opinion. Subsequent developments may affect JPMorgan's opinion and JPMorgan
does not have any obligation to update, revise, or reaffirm its opinion.
In accordance with customary investment banking practice, JPMorgan employed
generally accepted valuation methods in reaching its opinion. The following is
a summary of the material financial analyses performed by JPMorgan in
connection with its opinion. Presented are some of the summaries of the
financial analyses in tabular format. In order to understand the financial
analyses used by JPMorgan more fully, you should read the tables together with
the text of each summary. The tables alone do not constitute a complete
description of JPMorgan's financial analyses and this summary is not a complete
description of the analyses underlying JPMorgan's opinion.
Discounted Cash Flow Analysis. JPMorgan conducted a discounted cash flow
analysis for the purpose of determining the fully diluted equity value per
share for Galileo common stock. JPMorgan analyzed a projection scenario
including Galileo management's projections for fiscal 2001 through 2005.
For the projection scenario, JPMorgan calculated the unlevered free cash
flows that Galileo is expected to generate during fiscal years 2001 through
2005. These unlevered free cash flows were divided into two segments: Galileo's
global distribution services ("GDS") business and its telecommunications
services business, Quantitude. The unlevered cash flows relating to the GDS
business were discounted at a rate of 9.0% to 11.0%, which is JPMorgan's
estimate of Galileo's weighted average cost of capital for the GDS business. A
range of terminal values for the GDS business was calculated by multiplying
projected 2005 EBITDA (earnings before interest, taxes, depreciation and
amortization) by a range of 3.5x to 4.5x. The unlevered cash flows relating to
the Quantitude business were discounted at a rate of 20.0% to 25.0%, which is
JPMorgan's estimate of Galileo's weighted average cost of capital for the
Quantitude business. A range of terminal values for the Quantitude business was
calculated by multiplying projected 2005 revenue by a range of 0.75x to 1.25x.
The present value of the combined unlevered free cash flows and the combined
range of terminal asset values were then adjusted for Galileo's March 31, 2001
excess cash, option exercise proceeds and total debt. Based on this analysis,
the discounted cash flow analysis indicated a range of equity values of between
$26.00 and $35.50 per share of Galileo common stock on a stand-alone basis
without synergies.
Public Trading Multiples. Using publicly available information, JPMorgan
compared selected financial data, ratios and multiples of Galileo with similar
data, ratios and multiples for selected publicly traded companies engaged in
the computer reservation systems, transaction processor, and information
technology, or IT, services sectors. JPMorgan noted that it did not deem these
companies fully comparable to Galileo and thus evaluated this information for
reference only.
49
The companies selected by JPMorgan were:
Computer Reservation Systems
Sabre Holdings Corporation
Amadeus Global Travel Distribution, S.A.
Transaction Processors
Automatic Data Processing, Inc.
First Data Corporation
Concord EFS Inc.
Equifax Inc.
IT Services
Electronic Data Systems Corporation
Computer Sciences Corporation
Fiserv Inc.
For each of these companies, publicly available financial performance
through the twelve months ended December 31, 2000 was measured. In addition,
JPMorgan derived estimates of sales, EBITDA, and net earnings for calendar
years 2001 and 2002 from public equity analyst estimates. JPMorgan conducted a
trading multiples analysis for the purpose of determining a fully diluted
equity value per share for Galileo's common stock. The analysis applied the
pre-announcement (defined as the time period immediately prior to Galileo's
announcement that it was exploring strategic alternatives) price to earnings
ratio ("P/E") of 9.0x 2000 estimated earnings to Galileo's 2001 analyst
estimated GAAP earnings per share of $1.89. In addition, JPMorgan selected the
trading performance of Sabre Holdings Corporation common stock, deemed to be
the most relevant of the companies listed above, and applied Sabre's current
2001 P/E ratio, defined as 2001 P/E divided by its current estimated long-term
growth rate, of 1.29 to Galileo's current analyst estimated long term growth
rate of 11.5%, resulting in an implied P/E ratio of 14.8x. This 14.8x was then
applied to Galileo's 2001 analyst estimated GAAP earnings per share of $1.89.
Based upon this range of multiples, JPMorgan derived an implied equity value
range of $17.00 to $28.00 per share of Galileo common stock.
Selected Transaction Analysis. As the number of relevant transactions
containing businesses significantly analogous to Galileo's business is limited,
JPMorgan conducted an initial survey of transactions, using publicly available
information, from a broad range of businesses in multiple industries. Upon
further review, JPMorgan believes the specific economic, market and other
conditions related to the travel industry reduces the relevancy of these
surveyed transactions to the proposed merger. Therefore, a detailed transaction
analysis was not relied upon by JPMorgan in rendering its opinion.
Historical Common Stock Performance. JPMorgan conducted a historical
analysis of the closing price of Galileo common stock based on closing prices
on the New York Stock Exchange relative to the share price performance of
selected publicly traded companies engaged in businesses which JPMorgan deemed
relevant to Galileo, the Standard & Poor's 500 index and the Nasdaq composite
index over the time periods from July 28, 1997 to June 13, 2001 and June 13,
2000 to June 13, 2001.
The companies selected by JPMorgan were:
Computer Reservation Systems
Sabre Holdings Corporation
Amadeus Global Travel Distribution, S.A.
Transaction Processors
Automatic Data Processing, Inc.
First Data Corporation
Concord EFS Inc.
Equifax Inc.
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IT Services
Electronic Data Systems Corporation
Computer Sciences Corporation
Fiserv Inc.
Broadband Services
Covad Communications Group, Inc.
Global Crossing Ltd.
Infonet Services Corporation
Level 3 Communications, Inc.
Rhythms NetConnections Inc.
Williams Communications Group, Inc.
JPMorgan noted that over the period from July 28, 1997 to June 13, 2001
Galileo common stock has under-performed indices consisting of companies from
the Computer Reservation Systems, Transaction Processors, and IT Services
industries. JPMorgan also found that over the time period from June 13, 2000 to
October 19, 2000 Galileo common stock has under-performed Sabre common stock,
Amadeus Global Travel Distribution, S.A. common stock, an index consisting of
companies from the Broadband Services industry, the Standard & Poor's 500 index
and the Nasdaq composite index. After the announcement of the review of
strategic alternatives, over the period October 20, 2000 to June 13, 2001,
Galileo common stock has under-performed Sabre common stock, but out-performed
Amadeus Global Travel Distribution, S.A. common stock, an index consisting of
companies from the Broadband Services industry, the Standard & Poor's 500 index
and the Nasdaq composite index.
Analysis of Premium. JPMorgan calculated the premium implied by $33 per
share relative to certain base prices. All prices used in this analysis
represent closing prices.
The table below sets forth JPMorgan's premium analysis:
Base Premium
Description of base price price implied by $33
------------------------- ------ --------------
Price one day prior to announcement of review of
strategic alternatives on October 20, 2000............. $16.25 103%
Average price one week (five trading days) prior to
announcement of review of strategic alternatives....... 16.26 103%
Average price one month (twenty trading days) prior to
announcement of review of strategic alternatives....... 15.07 119%
52 week low (period prior to announcement of review of
strategic alternatives)................................ 13.63 142%
52 week high (period prior to announcement of review of
strategic alternatives)................................ 32.31 2%
All-time low............................................ 13.63 142%
All-time high........................................... 59.00 (44%)
IPO Price............................................... 24.50 35%
JPMorgan noted that the premium analysis does not constitute a valuation
technique as such, but serves as a comparison of the proposed transaction price
to various base prices.
51
Historical Exchange Ratio Analysis. JPMorgan reviewed the per share daily
closing market price movements of Galileo common stock and CD common stock for
the three-year period ended June 13, 2001 and calculated the historical
exchange ratios during this period implied by dividing the daily closing prices
per share of Galileo common stock by those of CD common stock and the average
of those historical trading ratios for the calendar periods of 1-month, 3-
month, 6-month, 1-year, 2-year and 3-year periods ended June 13, 2001. The
analysis resulted in the following average historical trading ratios for the
periods indicated (rounded to the nearest hundredth):
Calendar
Period Mean
-------- -----
1-month.......................................... 1.50x
3-month.......................................... 1.48x
6-month.......................................... 1.61x
1-year........................................... 1.62x
2-year........................................... 1.69x
3-year........................................... 2.00x
The highest historical exchange ratio on any single day during the 3-year
period was approximately 3.91x, and the lowest historical exchange ratio on any
single day during this period was approximately 0.95x. The proposed exchange
ratio of 1.56x to 1.33x (dependent on the average closing stock price of
Cendant during the pricing period as defined in the merger agreement) is for
the stock portion only, which is no less than 80.5% of the total value of the
merger consideration. On a comparable basis this translates into an exchange
ratio of 1.94x to 1.65x for the total consideration.
Pro forma combination analysis. JPMorgan analyzed the pro forma impact of
the merger on Cendant's earnings per share, consolidated capitalization and
financial ratios using Galileo's management projections and projections
developed by JPMorgan based on analyst earnings estimates for Cendant.
Incorporating assumptions with respect to various structural considerations,
transaction and financing costs and Cendant's estimated synergies, the
combination would be accretive to Cendant's earnings per share in 2002.
JPMorgan also conducted a valuation analysis of the CD common stock using
generally accepted valuation methods. The following is a summary of the
material financial analyses performed by JPMorgan in connection with its
opinion.
Discounted Cash Flow Analysis. JPMorgan conducted a discounted cash flow
analysis for the purpose of determining the fully diluted equity value per
share of the CD common stock. JPMorgan analyzed a projection scenario based on
analyst estimates (JPMorgan equity research report dated May 22, 2001) of
financial performance for fiscal 2001 through 2006.
For the projection scenario, JPMorgan calculated the unlevered free cash
flows that Cendant is expected to generate during fiscal years 2001 through
2006 under two scenarios--base case and acquisitions case. The base case
assumed only organic growth of the current Cendant businesses. In the base
case, the unlevered free cash flows were discounted at a rate of 9.0% to 11.0%,
which is JPMorgan's estimate of Cendant's weighted average cost of capital for
the current Cendant businesses. A range of terminal values for Cendant was
calculated by multiplying projected 2005 EBITDA by a range of 7.0x to 8.0x.
The acquisition case assumed acquisitions of $750 million per year, funded
with internal cash. The acquisition was assumed to be at a value of 5.5x
acquired company EBITDA and the acquired company was assumed to have an EBITDA
margin of 20-22%. The unlevered cash flows relating to the acquisitive case
were discounted at a rate of 10.0% to 12.0%, which includes a 100 basis point
premium over the base case discount rate to account for incremental risk due to
an acquisitive strategy. A range of terminal values for the acquisitive case
was calculated by multiplying projected 2005 EBITDA by a range of 8.0x to
10.0x.
52
The present value of the combined unlevered free cash flows and the combined
range of terminal asset values were then adjusted for Cendant's March 31, 2001
excess cash, option exercise proceeds and total debt. Based on this analysis,
the discounted cash flow analysis indicated a range of equity values of between
$18.50 and $22.50 per share of CD common stock in the base case, and values
between $24.50 and $32.00 per share of CD common stock in the acquisitive case.
Public Trading Multiples. Using publicly available information, JPMorgan
compared selected financial data, ratios and multiples of Cendant with similar
data, ratios and multiples for selected publicly traded companies engaged in
the diversified industries and services sector.
The companies selected by JPMorgan were:
General Electric Company (excluding GE Capital)
Tyco International LTD.
PepsiCo, Inc.
Minnesota Mining and Manufacturing Company
United Technologies Corporation
Emerson Electric Co.
Raytheon Company
The Interpublic Group of Companies, Inc.
For each of these companies, publicly available financial performance
through the twelve months ended December 31, 2000 was measured. In addition,
JPMorgan derived estimates of sales, EBITDA, and net earnings for calendar
years 2001 and 2002 from public equity analyst estimates. JPMorgan conducted a
trading multiples analysis for the purpose of determining a fully diluted
equity value per share for CD common stock. The analysis applied the P/E ratio
of 22.4x 2001 estimated earnings to Cendant's 2001 analyst estimated GAAP
earnings per share of $1.01 and the firm value to 2002 EBITDA multiple of 10.7x
to 2002 analyst estimated EBITDA of Cendant. Based upon this range of
multiples, JPMorgan derived an implied equity value range of $22.50 to $25.00
per share of CD common stock.
Historical Common Stock Performance. JPMorgan conducted a historical
analysis of the closing price of CD common stock based on closing prices on the
New York Stock Exchange over the time periods from June 13, 1998 to June 13,
2001 and June 13, 2000 to June 13, 2001. JPMorgan noted that CD common stock
traded at a 3-year low of $7.50 per share, a 3-year high of $26.56 per share, a
52-week low of $8.50 per share and a 52-week high of $19.22 per share.
The summary set forth above is not a complete description of the analyses or
data presented by JPMorgan. The preparation of a fairness opinion is a complex
process and is not necessarily susceptible to partial analysis or summary
description. JPMorgan believes that Galileo's common stockholders must consider
its opinion, the summary and its analyses as a whole. Selecting portions of
this summary and these analyses, without considering the analyses as a whole,
would create an incomplete view of the processes underlying the analyses and
opinion. In arriving at its opinion, JPMorgan considered the results of all of
the analyses as a whole. No single factor or analysis was determinative of
JPMorgan's fairness determination. Rather, the totality of the factors
considered and analyses performed operated collectively to support its
determination. JPMorgan based its analysis on assumptions that it deemed
reasonable, including assumptions concerning general business and economic
conditions and industry specific factors. This summary sets forth under the
description of each analysis the other principal assumptions upon which
JPMorgan based that analysis. Analyses based upon forecasts of future results
are inherently uncertain, as they are subject to numerous factors or events
beyond the control of the parties and their advisors. Accordingly, these
forecasts and analyses are not necessarily indicative of actual future results,
which may be significantly more or less favorable than suggested by those
analyses. Therefore, neither Galileo nor JPMorgan nor any other person assumes
responsibility if future results are materially different from those
forecasted.
53
The projections furnished to JPMorgan for Galileo were prepared by Galileo's
management. Galileo does not publicly disclose internal management projections
of the type provided to JPMorgan in connection with JPMorgan's analysis of the
proposed merger, and such projections were not prepared with a view toward
public disclosure. These projections were based on numerous variables and
assumptions that are inherently uncertain and may be beyond the control of
management, including factors related to general economic and competitive
conditions and prevailing interest rates. Accordingly, actual results could
vary significantly from those set forth in such projections.
As a part of its investment banking business, JPMorgan and its affiliates
are continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, investments for passive and control
purposes, negotiated underwritings, secondary distribution of listed and
unlisted securities, private placements, and valuations for estate, corporate
and other purposes. Galileo selected JPMorgan to deliver an opinion to the
Galileo board of directors with respect to the proposed merger on the basis of
such experience and its familiarity with Galileo.
JPMorgan acted as financial advisor to Galileo and the board of directors of
Galileo with respect to the proposed merger and will receive a fee from Galileo
for its services rendered to date. JPMorgan will also receive an additional fee
if the proposed merger is consummated. From time to time, JPMorgan and its
affiliates have provided investment banking services to Cendant and Galileo for
which they have received customary compensation. In the ordinary course of
their businesses, JPMorgan and its affiliates may actively trade the debt and
equity securities of Galileo and/or affiliates thereof, as applicable, for its
own account or for the accounts of customers and, accordingly, JPMorgan may at
any time hold long or short positions in such securities.
Stock Exchange Listing
Cendant expects to receive authorization, subject to notice of issuance,
from the NYSE for the listing of CD common stock issuable pursuant to the
merger in exchange for Galileo common stock. The trading symbol for CD common
stock is "CD." Following the merger, Galileo stockholders will no longer be
able to trade shares of Galileo common stock on the NYSE or any other exchange
because the existing Galileo common stock will have ceased to exist and
therefore will no longer be listed on any exchange.
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 Galileo stockholders upon their
exchange of Galileo common stock for CD common stock and cash pursuant to the
merger. This summary is based on provisions of the Internal Revenue Code of
1986, as amended, Treasury regulations promulgated under the Internal Revenue
Code, and administrative and judicial interpretations of the Internal Revenue
Code, all as in effect as of the date of this proxy statement-prospectus. There
can 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. This summary is limited to Galileo stockholders that hold their
shares as capital assets and does not address the tax treatment to stockholders
that hold their shares through a partnership or other pass-through entity. This
summary does not address all aspects of United States federal income taxation
that may be applicable to Galileo stockholders in light of their particular
circumstances or to Galileo stockholders subject to special treatment under
United States federal income tax law, such as:
. certain U.S. expatriates;
. stockholders that hold Galileo common stock as part of a straddle,
appreciated financial position, hedge, conversion transaction or other
integrated investment;
. Galileo stockholders whose functional currency is not the United States
dollar;
. Galileo stockholders who acquired Galileo common stock through the
exercise of employee stock options or otherwise as compensation or
through a tax-qualified retirement plan;
54
. foreign persons and entities;
. financial institutions;
. insurance companies;
. tax-exempt entities;
. dealers in securities; and
. traders in securities that mark-to-market.
Furthermore, this summary does not address any aspect of state, local or
foreign taxation.
General United States Federal Income Tax Consequences of the Merger to Galileo
Stockholders
Jones, Day, Reavis & Pogue and Skadden, Arps, Slate, Meagher & Flom LLP have
provided opinions to their respective clients, dated as of the effective date
of the registration statement of which this proxy statement-prospectus forms a
part, to the effect that, for United States federal income tax purposes, the
merger will qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code. In addition, Cendant's obligation to consummate the
merger is conditioned on the receipt by Cendant of an opinion of Skadden Arps
dated as of the effective date of the merger to the effect that, for United
States federal income tax purposes, the merger will qualify as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code. Galileo's
obligation to consummate the merger is conditioned on the receipt by Galileo of
an opinion of Jones Day dated as of the effective date of the merger to the
effect that, for United States federal income tax purposes, the merger will
qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code. The opinions of Skadden Arps and of Jones Day will rely
on certain assumptions, including assumptions regarding the absence of changes
in existing facts and the completion of the merger strictly in accordance with
this proxy statement-prospectus and the merger agreement. The opinions will
also rely on representations and covenants, including those contained in
officers' certificates of Cendant and Galileo. If any of those assumptions or
representations are inaccurate, incomplete or untrue or any of the covenants
are breached, the conclusions contained in those opinions could be affected.
Neither these opinions nor the tax summary below will be binding on the IRS or
the courts, and no rulings will be sought from the IRS with regard to the tax
treatment of the merger and related transactions. Accordingly, there can be no
certainty that the IRS will not challenge the conclusions reflected in the
opinions or that a court would not sustain such a challenge.
Assuming that the merger is treated in accordance with the opinions of
counsel described above, the material United States federal income tax
consequences to a Galileo stockholder of the exchange of Galileo common stock
for CD common stock and cash pursuant to the merger will be as follows:
. A Galileo stockholder will recognize gain, but not loss, equal to the
lesser of (1) the amount of cash received in the merger and (2) the
amount equal to the excess, if any, of the sum of the amount of cash and
the fair market value of the CD common stock received in the merger over
that stockholder's adjusted tax basis in the Galileo common stock
exchanged by the stockholder in the merger. For this purpose, a Galileo
stockholder must calculate gain or loss separately for each identifiable
block of Galileo common stock exchanged by the stockholder in the merger,
and the Galileo stockholder cannot utilize a loss realized on one block
of its Galileo common stock to offset a gain realized on another block of
its Galileo common stock.
. A Galileo stockholder will not recognize any loss in the merger (except,
possibly, in connection with cash received instead of a fractional share,
as discussed below).
. The gain recognized by a Galileo stockholder in the merger generally will
constitute capital gain, unless, as discussed below, the receipt of cash
has the effect of a distribution of a dividend for United States federal
income tax purposes, in which case that gain will be treated as ordinary
dividend income to the extent of the stockholder's ratable share of
Galileo's earnings and profits.
55
. Any gain recognized by a Galileo stockholder in the merger that is
treated as a capital gain will constitute long-term capital gain if the
stockholder's holding period for the Galileo common stock exchanged in
the merger is more than one year as of the date of the merger, and
otherwise will constitute short-term capital gain.
. The aggregate tax basis of the shares of CD common stock received by a
Galileo stockholder (before reduction for the basis in any fractional
share of CD common stock for which cash is received) in exchange for
Galileo common stock pursuant to the merger will be the same as the
aggregate tax basis of the stockholder's Galileo common stock, decreased
by the amount of cash received by the stockholder in the merger
(excluding any cash received instead of a fractional share) and increased
by the amount of gain recognized by the stockholder in the merger
(including any portion of the gain that is treated as a dividend but
excluding any gain recognized as a result of cash received instead of a
fractional share).
. The holding period of the shares of CD common stock received by a Galileo
stockholder in the merger will include the holding period of the
stockholder's Galileo common stock.
Possible Treatment Of Cash As A Dividend
In general, the determination of whether the gain recognized by a Galileo
stockholder will be treated as capital gain or a dividend will depend upon
whether, and to what extent, the merger reduces the Galileo stockholder's
deemed percentage stock ownership interest in Cendant, and upon such
stockholder's particular circumstances. For purposes of this determination, a
Galileo stockholder will be treated as if the stockholder first exchanged all
of its Galileo common stock solely for CD common stock (instead of the
combination of CD common stock and cash actually received) and then Cendant
immediately redeemed a portion of that CD common stock in exchange for the cash
that the stockholder actually received in the merger. The gain recognized in
the exchange followed by the deemed redemption will be treated as capital gain
if, with respect to the Galileo stockholder, the deemed redemption is
"substantially disproportionate" or "not essentially equivalent to a dividend."
In general, the deemed redemption will be "substantially disproportionate"
with respect to a Galileo stockholder if the percentage described in (2) below
is less than 80% of the percentage described in (1) below. Whether the deemed
redemption is "not essentially equivalent to a dividend" with respect to a
Galileo stockholder will depend on the stockholder's particular circumstances.
In order for the deemed redemption to be "not essentially equivalent to a
dividend," the deemed redemption must result in a "meaningful reduction" in the
Galileo stockholder's deemed percentage stock ownership of CD common stock. In
general, that determination requires a comparison of (1) the percentage of the
outstanding voting stock of Cendant that the Galileo stockholder is deemed
actually and constructively to have owned immediately before the deemed
redemption by Cendant and (2) the percentage of the outstanding voting stock of
Cendant actually and constructively owned by the stockholder immediately after
the deemed redemption by Cendant. The IRS has indicated that a minority
stockholder in a publicly traded corporation whose relative stock interest is
minimal and who exercises no control with respect to corporate affairs will
experience a "meaningful reduction" if that stockholder has any reduction in
its percentage stock ownership under the foregoing analysis. In applying the
foregoing tests, a stockholder may, under the constructive ownership rules, be
deemed to own stock that is owned by other persons or otherwise in addition to
the stock actually owned by that stockholder. Because the constructive
ownership rules are complex, each Galileo stockholder should consult its own
tax advisor as to the applicability of these rules.
Cash Received Instead of a Fractional Share
A Galileo stockholder who receives cash instead of a fractional share of CD
common stock will generally recognize capital gain or loss based on the
difference between the amount of the cash received instead of a fractional
share and the stockholder's tax basis in such fractional share.
56
Reporting Requirements
Galileo stockholders receiving CD common stock in the merger should file a
statement with their United States federal income tax returns setting forth
their tax basis in the Galileo common stock exchanged in the merger and the
fair market value of the CD common stock and the amount of any cash received in
the merger. In addition, Galileo stockholders will be required to retain
permanent records of these facts relating to the merger.
Backup Withholding
Backup withholding at the applicable federal rate may apply with respect to
certain payments, including cash received in the merger, unless a Galileo
stockholder (1) is a corporation or comes within certain other exempt
categories and, when required, demonstrates this fact or (2) provides a correct
taxpayer identification number, certifies as to no loss of exemption from
backup withholding and that such stockholder is a U.S. person (including a U.S.
resident alien) and otherwise complies with applicable requirements of the
backup withholding rules. A Galileo stockholder who does not provide Cendant
(or the exchange agent) with its correct taxpayer identification number may be
subject to penalties imposed by the IRS. Any amounts withheld under the backup
withholding rules may be allowed as a refund or a credit against the
stockholder's federal income tax liability, provided that the stockholder
furnishes certain required information to the IRS.
The summary of material United States federal income tax consequences set
forth above is intended to provide a general summary only and is not intended
to be a complete analysis or description of all potential United States federal
income tax consequences of the merger. In addition, the summary does not
address tax consequences that may vary with, or are contingent on, individual
circumstances. Moreover, the summary does not address any non-income tax or any
foreign, state, local or other tax consequences of the merger. The summary does
not address the tax consequences of any transaction other than the merger.
Accordingly, each Galileo stockholder is strongly urged to consult with a tax
advisor to determine the particular federal, state, local or foreign income,
reporting or other tax consequences of the merger to that stockholder.
Accounting Treatment
The merger will be accounted for as a purchase for financial accounting
purposes in accordance with accounting principles generally accepted in the
United States. For purposes of preparing Cendant's consolidated financial
statements, Cendant will establish a new accounting basis for Galileo's assets
and liabilities based upon their fair values, the merger consideration and the
costs of the merger. Cendant believes that any excess of cost over the fair
value of the net assets of Galileo will be recorded as goodwill and other
intangible assets. 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 Galileo's assets and liabilities and will make appropriate purchase
accounting adjustments, including adjustments to the amortization period of the
intangible assets, upon completion of that determination. However, for purposes
of disclosing pro forma information in this proxy statement-prospectus, Cendant
has made a preliminary determination of the purchase price allocation, based
upon current estimates and assumptions, which is subject to revision upon
consummation of the merger.
Regulatory Approvals
The merger agreement provides that Cendant and Galileo will use reasonable
best efforts to cooperate with one another in determining which filings with
governmental entities are required to be made prior to the effective time of
the merger and to timely make such filings. If any administrative or judicial
action is instituted challenging any transaction contemplated by the merger
agreement as violative of any regulatory law, Cendant and Galileo have agreed
to cooperate in all respects with each other and use its respective reasonable
best efforts to have lifted or overturned any judgment or other order that
prohibits or restricts consummation of the merger. However, nothing in the
merger agreement requires either Cendant or Galileo to sell, hold separate or
otherwise dispose of their assets or conduct their businesses differently,
whether as a condition to obtaining approval from a governmental entity or any
other person for any other reason.
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The merger agreement also provides that if Cendant enters into an
acquisition agreement with a competitor of Galileo, and the closing of
Cendant's acquisition of Galileo is delayed due to delays in the receipt of
regulatory approvals primarily as a result of that action, the value of the
merger consideration may be affected in two ways. First, if the closing is
delayed by more than 30 days after the special meeting, the measurement period
will be changed to the 20 consecutive trading days ending immediately preceding
the third trading day prior to the date of receipt of the last regulatory
approval, and the average trading price will be recalculated. Second, if the
closing does not occur until after December 12, 2001, then Cendant will be
required to pay additional merger consideration, payable in CD common stock,
equal to simple interest on $33 calculated using the 30 day London Interbank
Offered Rate, or LIBOR, plus 100 basis points. In addition, if the closing of
Cendant's acquisition of Galileo is delayed due to delays in the receipt of
regulatory approvals primarily as a result of that action until March 31, 2002,
Cendant will promptly terminate the acquisition agreement with such competitor
of Galileo.
The regulatory approvals required to complete the merger are discussed
below.
HSR Act
Under the Hart-Scott-Rodino Act, Cendant and Galileo were required to give
notification and furnish information to the Federal Trade Commission and the
Antitrust Division of the Department of Justice and to wait the specified
waiting period before they can complete the merger. Each of Galileo and Cendant
filed the required notification and report forms with the Federal Trade
Commission and the Antitrust Division on June 26, 2001. Cendant and Galileo
received early termination of the statutory waiting period under the HSR Act
from the Federal Trade Commission on July 9, 2001.
Foreign Regulatory Filings
Under Regulation (EEC) No. 4064/89 of the Council of the European Union, the
merger may not be consummated until the Commission of the European Communities
(the "European Commission") has granted its approval of the transaction. The
requisite notification was filed with respect to the merger with the European
Commission on July 5, 2001. The European Commission has until August 6, 2001 to
review the transaction. This initial review period may be extended for up to an
additional four months if the European Commission decides to conduct a full
investigation of the merger.
Completion of the merger requires the approval and consent of the Treasurer
of the Commonwealth of Australia under the Foreign Acquisition and Takeovers
Act 1975(th). The requisite notification was filed with respect to the merger
with the Foreign Investment Review Board (FIRB) on July 6, 2001. The FIRB has
30 days after receiving the notice to make any order in relation to the
proposed transaction and 10 additional days in which to notify the parties once
a decision has been made. After this 40-day period expires, which is scheduled
to occur on August 16, 2001, the FIRB loses the ability either to block the
transaction or impose conditions on its approval. The FIRB may, however, extend
its examination period for a further 90 days.
The Competition Act of Canada and accompanying regulations require
notification to Canada's Commissioner of Competition of mergers involving the
acquisition of the assets or shares of an operating business in Canada where
the acquisition exceeds prescribed financial thresholds and in the case of
share acquisitions, prescribed voting interest thresholds. Notification to the
Commissioner and the expiration or earlier termination or waiver of the
applicable waiting period are required before the merger can be completed.
Galileo and Cendant filed formal notifications with the Competition Commission
on July 18, 2001 and on July 16, 2001 requested an advance ruling certificate
from the Competition Commission to the effect that the Commissioner does not
have sufficient grounds upon which to challenge the merger before the Canadian
Competition Tribunal in due course. The time period in which the Commissioner
has to consider the merger is initially 14 days for a short-form filing, unless
the Commissioner requires a long-form filing in which case the time period is
42 days.
Completion of the merger requires the approval and consent of the
Competition Commission of South Africa under the Competition Act No. 89 of
1998. The requisite notification was filed with respect to the
58
merger on July 12, 2001. The time period in which the Competition Commission
has to consider the merger is initially 30 business days. The Commission may
extend this period for a further 60 business days. If upon expiration of the
initial 30 business days, the Commission has not issued a certificate extending
the time period for a further 60 business days, the merger is deemed to have
been approved. In addition, if upon the expiration of the 60 business days, the
Commission has not issued a certificate approving the merger, the merger will
be deemed to have been approved.
Cendant and Galileo 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 a number of foreign
countries and jurisdictions in which Galileo 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 Galileo's 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. Galileo and Cendant are vigorously pursuing all required approvals.
Federal Communications Commission
Galileo holds authorizations issued by the U.S. Federal Communications
Commission to provide, among other things, global facilities-based and resale
services. Galileo and Cendant must obtain prior FCC approval in order to
transfer control of the FCC authorizations from Galileo to Cendant. Galileo and
Cendant have filed the appropriate transfer of control applications with the
FCC and expect to obtain approval to transfer control of the FCC authorizations
prior to completion of the merger.
Third-party Approvals
Galileo is a party to a number of loan agreements, lease agreements and
other agreements. Pursuant to the merger agreement, Galileo has agreed to use
its reasonable best efforts to obtain all consents, approvals and waivers from
third parties.
Appraisal Rights
Under Delaware law, if the merger is consummated, any Galileo stockholder of
record who objects to the merger in accordance with the statutory requirement
of Section 262 of the Delaware General Corporation Law may elect to have his or
her shares of Galileo common stock appraised under the procedures of Delaware
law and to be paid the fair value of his or her shares. Under Section 262, only
holders of record of Galileo common stock are entitled to appraisal rights, and
any such holders electing to exercise appraisal rights must comply with the
provisions of Section 262 in order to perfect their rights. A copy of Section
262 is attached to this proxy statement-prospectus as Annex E.
The following is intended as a brief summary of the material provisions of
the Delaware statutory procedures required to be followed by a Galileo
stockholder in order to dissent from the merger and perfect his or her
appraisal rights. This summary, however, is not a complete statement of all
applicable requirements and is qualified in its entirety by reference to
Section 262 of the Delaware General Corporation Law.
Under Section 262, Galileo is required to notify stockholders not less than
20 days before the special meeting to vote on the merger that appraisal rights
will be available. A copy of Section 262 must be included with that notice.
This proxy statement-prospectus constitutes Galileo's notice to its
stockholders of the availability of appraisal rights in connection with the
merger in compliance with the requirements of Section 262. If you wish to
consider exercising your appraisal rights, you should carefully review the text
of
59
Section 262 contained in Annex E. If you fail to timely and properly comply
with the requirements of Section 262, your appraisal rights under Delaware law
may be lost.
If you elect to demand appraisal of your shares of Galileo common stock, you
must satisfy each of the following conditions:
. You must deliver to Galileo a written demand for appraisal of your
shares before the vote is taken on the merger agreement at the special
meeting. This written demand for appraisal must be in addition to and
separate from any proxy or vote abstaining from or voting against the
merger. Voting against or failing to vote for the merger by itself does
not constitute a demand for appraisal under Section 262.
. You must not vote in favor of the merger. A vote in favor of the merger,
by proxy or in person, will constitute a waiver of your appraisal rights
and will nullify any previously filed written demands for appraisal.
. You must continuously hold your Galileo common stock through the
effective time of the merger.
If you fail to comply with any of these conditions and the merger is
completed, you will lose your appraisal rights with respect to your shares of
Galileo common stock. All demands for appraisal should be addressed to:
Galileo International, Inc.
9700 West Higgins Road, Suite 400
Rosemont, Illinois 60018
Attention: Corporate Secretary
The written demand must identify the Galileo stockholder and state that the
stockholder intends to demand appraisal of his or her shares of Galileo common
stock. A person having a beneficial interest in shares of Galileo common stock
that are held of record in the name of another person, such as a broker,
fiduciary, depositary or other nominee, must act promptly to cause the record
holder to follow the steps summarized herein properly and in a timely manner to
perfect appraisal rights. An authorized agent may execute the demand for
appraisal for a stockholder of record; however, the agent must identify the
record owner and expressly disclose the fact that, in exercising the demand,
such person is acting as agent for the record owner. If a stockholder holds
shares through a broker who in turn holds the shares through a central
securities depositary nominee such as Cede & Co., a demand for appraisal of
such shares must be made by or on behalf of the depository nominee and must
identify the depository nominee as record holder.
Within 10 days after the effective time of the merger, Galileo must give
written notice that the merger has become effective to each Galileo stockholder
who has properly sent a written demand for appraisal and who did not vote in
favor of the merger. Within 120 days after the effective time of the merger,
either Galileo or any stockholder who has complied with the requirements of
Section 262 may file a petition in the Delaware Chancery Court demanding a
determination of the value of the shares held by all stockholders entitled to
appraisal. Galileo has no obligation to file such a petition in the event there
are dissenting stockholders. Accordingly, any stockholders who desire to have
their shares appraised should initiate any petition necessary for the
perfection of their appraisal rights within the time periods and in the manner
prescribed by Section 262. If a petition is not filed within the 120-day
period, all appraisal rights relating to Galileo common stock will terminate
and all stockholders will be entitled to the merger consideration.
At any time within 60 days after the effective time of the merger, any
dissenting stockholder may withdraw in writing the demand for appraisal. If a
Galileo stockholder withdraws his or her demand, the stockholder will only be
entitled to receive the merger consideration specified by the merger agreement
for his or her shares of Galileo common stock. Any attempt to withdraw an
appraisal demand more than 60 days after the effective time of the merger will
require the written approval of the surviving corporation and no appraisal
proceeding in the Delaware Court of Chancery will be dismissed as to any
stockholder without the approval of the court, which approval may be
conditioned on such terms as the court deems just. Within 120 days after the
60
effective time of the merger, any stockholder who has complied with Section 262
will be entitled, upon written request, to receive a statement setting forth
the aggregate number of shares of Galileo common stock not voted in favor of
the merger with respect to which demands for appraisal have been received and
the aggregate number of holders of such shares. If a petition for appraisal is
duly filed by a dissenting stockholder and a copy of the petition is delivered
to Galileo, within 20 days after receiving such service, Galileo must file with
the Delaware Chancery Court a duly verified list containing the names and
addresses of all stockholders who have demanded an appraisal of their shares.
After notice to dissenting stockholders, the Delaware Chancery Court is
empowered to conduct a hearing upon the petition to determine those
stockholders who have complied with Section 262 and who are entitled to
appraisal rights. The Delaware Chancery Court may require the stockholders who
have demanded appraisal to submit their stock certificates to the Register in
Chancery for notation thereon of the pendency of the appraisal proceedings. If
any stockholder fails to comply with such direction, the Delaware Chancery
Court may dismiss the proceedings as to such stockholder.
After determination of the stockholders entitled to appraisal rights, the
Delaware Chancery Court will appraise the shares of Galileo common stock owned
by such stockholders, determining the fair value of such shares exclusive of
any element of value arising from the accomplishment or expectation of the
merger, together with a fair rate of interest, if any, to be paid upon the
amount determined to be the fair value.
Although Galileo believes that the merger consideration to be received by
Galileo stockholders pursuant to the merger agreement is fair, no
representation is made as to the outcome of the appraisal of fair value as
determined by the Delaware Court of Chancery and stockholders should recognize
that such an appraisal could result in a determination of a value higher or
lower than, or the same as, the merger consideration. Galileo does not
anticipate offering more than the merger consideration to any stockholder
exercising appraisal rights and reserves the right to assert, in any appraisal
proceeding, that, for purposes of Section 262, the "fair value" of a share of
Galileo common stock is less than the merger consideration. In determining
"fair value," the court is required to take into account all relevant factors.
In Weinberger v. UOP, Inc., the Delaware Supreme Court stated that "proof of
value by any techniques or methods which are generally considered acceptable in
the financial community and otherwise admissible in court" should be considered
and that "[f]air price obviously requires consideration of all relevant factors
involving the value of a company." The Delaware Supreme Court has stated that
in making this determination of fair value the court must consider market
value, asset value, dividends, earnings prospects, the nature of the enterprise
and any other facts which could be ascertained as of the date of the merger
which throw any light on future prospects of the merged corporation. Section
262 provides that fair value is to be "exclusive of any element of value
arising from the accomplishment or expectation of the merger." In Cede & Co. v.
Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a
"narrow exclusion [that] does not encompass known elements of value," but which
rather applies only to the speculative elements of value arising from such
accomplishment or expectation. In Weinberger, the Delaware Supreme Court
construed Section 262 to mean that "elements of future value, including the
nature of the enterprise, which are known or susceptible of proof as of the
date of the merger and not the product of speculation, may be considered."
The cost of the appraisal proceeding may be determined by the Delaware Court
of Chancery and taxed against the parties as the court deems equitable in the
circumstances. However, costs do not include attorneys' and expert witness
fees. Each dissenting stockholder is responsible for his or her attorneys' and
expert witness expenses, although, upon application of a dissenting
stockholder, the court may order that all or a portion of the expenses incurred
by any dissenting stockholder in connection with the appraisal proceeding,
including reasonable attorneys' fees and the fees and expenses of experts, be
charged pro rata against the value of all shares of stock entitled to
appraisal.
Any stockholder who has demanded appraisal rights will not, after the
effective time of the merger, be entitled to vote his or her shares for any
purpose or to receive payments of dividends or any other distribution with
respect to such shares (other than with respect to payment as of a record date
prior to the effective time of the merger).
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In view of the complexity of Section 262, Galileo stockholders who may wish
to dissent from the merger and pursue appraisal rights should consult their
legal advisors.
Failure to take any required step in connection with exercising appraisal
rights may result in the termination or waiver of such rights.
Interests of Certain Persons in the Merger
In considering the recommendation of the Galileo board with respect to the
merger agreement, stockholders of Galileo should be aware that certain
directors and executive officers of Galileo have interests in the merger that
are in addition to their interests as stockholders of Galileo generally. The
Galileo board was aware of these interests and considered them, among other
matters, in approving the merger.
Cendant Director
The merger agreement provides that, at the effective time of the merger,
Cendant will expand its board of directors by one seat and will nominate and
appoint an individual that has been designated by the Galileo board and is
reasonably satisfactory to Cendant to serve on the Cendant board in the class
of directors whose term expires in 2004. Under the terms of the merger
agreement, the individual designated by Galileo must have no relationship to
Cendant that may interfere with the exercise of his or her independence from
Cendant and its management. At this time, the Galileo board has not yet
designated such director.
Acceleration of Vesting of Stock Options
Galileo has issued stock options to certain directors, officers and
employees under Galileo's stock option and equity incentive plans. Under the
terms of the merger agreement, all options to acquire shares of Galileo common
stock outstanding immediately prior to the effective time of the merger,
whether or not then exercisable, will be converted into options of Cendant in
amounts and at exercise prices as determined in the merger agreement. The terms
of each option will otherwise remain subject to the terms of the applicable
option plan and agreements as in effect immediately prior to the effective time
of the merger. Accordingly, the stock options granted to Galileo's executive
officers will become immediately vested and exercisable at the effective time
of the merger. Furthermore, subsequent to the merger, stock options and stock
appreciation rights previously granted to other employees who are not executive
officers will, by their terms, become immediately vested and exercisable in the
event that the employee's employment with Galileo is terminated other than for
cause within two years of the merger.
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As a result of the foregoing, Galileo stock options held by its directors
and executive officers will immediately vest upon the effectiveness of the
merger as follows:
In-The-Money Options(1) Total Options
----------------------------------- -----------------------------------
Number of Weighted Average Number of Weighted Average
Unvested Shares to Exercise Price Unvested Shares to Exercise Price
Name Vest Upon Merger Per Share(2) Vest Upon Merger Per Share(2)
---- ------------------ ---------------- ------------------ ----------------
Directors
Graham W. Atkinson.... -- -- -- --
Cheryl Ballenger...... 20,600 $24.53 22,267 $26.29
James E. Barlett...... 203,200 25.30 339,267 32.23
Wim Dik............... 10,000 27.41 10,000 27.41
Mina Gouran........... 1,000 27.41 1,000 27.41
Matthew F.C. Miau..... 1,000 27.41 1,000 27.41
Andrew P. Studdert.... -- -- -- --
Anthony C. Swanagan... 22,467 24.53 23,800 25.85
Kenneth Whipple....... 1,000 27.41 1,000 27.41
Other Executive Officers
Lyn Bulman............ 37,067 25.27 43,733 28.74
Babetta R. Gray....... 63,800 25.03 72,466 27.78
James E. Lubinski..... 77,067 25.09 89,067 28.19
David A. Near......... 43,667 25.22 53,333 29.36
Ron Thornhill......... 12,000 24.53 16,667 29.33
--------
(1) In-The-Money Options represent options with exercise prices of less than
$33.00 per share.
(2) Upon conversion of Galileo stock options into Cendant stock options, the
exercise price per share of CD common stock under each converted stock
option will equal the exercise price per share under the Galileo stock
option divided by the option exchange ratio. The option exchange ratio is
the quotient derived by dividing $33.00 by Cendant's average trading
price, subject to a collar of 1.65000 and approximately 1.94118.
In addition, under the terms of the Galileo non-employee director stock plan
and the stockholders' agreement, Galileo pays to each holder of special voting
preferred stock the cash equivalent of the options that their director
designees would otherwise receive as non-employee directors under the plan.
Payments under the plan to United in the aggregate amount of $127,224 will
become vested upon the effectiveness of the merger.
Strategic Alternatives Bonus Payment
The compensation committee of Galileo's board approved a strategic
alternatives bonus plan that provides for a bonus pool to be funded to pay the
chief executive officer of Galileo and certain other senior executives,
including Ms. Ballenger and Mr. Swanagan, a strategic alternatives bonus
payment upon consummation of a business combination such as the proposed
merger. The bonus pool is equal to 0.50% (one-half of one percent) of the
transaction value of the merger, which is defined as the equity purchase price,
plus assumed debt, minus available cash at the time the merger transaction
closes. The equity purchase price refers to the total price paid to acquire the
outstanding securities of Galileo. If the equity purchase price per share is
less than $27.00, no strategic alternatives bonus payments will be paid. For
illustrative purposes, based upon (1) an assumed equity purchase price of $33
per share of Galileo common stock; and (2) the shares of Galileo common stock
outstanding, debt and available cash at June 30, 2001, the strategic
alternatives bonus pool would be approximately $17,700,000.
The amount of each executive's award will be determined by the compensation
committee upon recommendation of the chief executive officer. Such amounts will
be payable at the effective time of the merger. In the event that the
employment of a designated executive is terminated prior to the effective time
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other than for cause, that executive will remain eligible to receive the
strategic alternatives bonus payment. If the designated executive's employment
with Galileo is voluntarily terminated by the executive prior to the effective
time, no strategic alternative bonus payment will be payable to that executive.
The individual payments to the chief executive officer and senior executives
have not yet been determined.
Restricted Stock
Galileo granted to Mr. Barlett restricted stock awards of 48,950 shares each
on June 18, 1998 and June 18, 1999, of which 44,055 shares are currently
subject to forfeiture under the terms of the award agreements. At the effective
time of the merger, the restrictions on these shares will lapse, the shares
will become immediately vested and Mr. Barlett will receive the merger
consideration for these shares.
Employment Agreements
Galileo has in place employment agreements with its chief executive officer
and each of its other executive officers, which contain change in control
provisions.
Chief Executive Officer. James E. Barlett is a party to an employment
agreement with Galileo, dated April 27, 2001. The term of his employment
agreement continues for three years, but is automatically renewed every April
27 for an additional year, such that there is always three years remaining in
the term of the agreement on April 27 of each year. The agreement provides for
a salary of $703,500 per annum, reviewed by the Compensation Committee of the
Galileo board and increased upon approval of the Galileo board. The agreement
also provides for Mr. Barlett's participation in Galileo's incentive and
benefit plans as well as an airfare and car allowance. The agreement may be
terminated immediately by Galileo for "Cause" or by Mr. Barlett with "Good
Reason" (as these terms are defined in the employment agreement).
If Mr. Barlett's employment agreement is terminated by Galileo without Cause
or by Mr. Barlett for Good Reason, within 30 days after termination, Galileo
must pay Mr. Barlett (1) a lump sum equal to the sum of Mr. Barlett's annual
salary at the rate in effect at the time of termination through the termination
date, to the extent not theretofore paid, plus an amount equal to the annual
incentive compensation Mr. Barlett would have received under the Management
Incentive Plan ("MIP") attributable to the year in which termination occurred,
assuming 100% target achievement; multiplied by a fraction, the numerator of
which is the number of days in such year through the termination date and the
denominator of which is 365; and (2) a lump sum equal to Mr. Barlett's annual
salary at its rate in effect at the termination date, for a period of 12 months
or the remaining term of the agreement, whichever is less, plus an amount equal
to the annual incentive compensation Mr. Barlett would have received under the
MIP attributable to the year in which termination occurred, assuming 100%
target achievement. In addition, commencing 12 months after the date of
termination, and for a period of 24 months or the remaining term of the
agreement following the date that is 12 months after the termination date,
whichever is less, Galileo would be required to pay Mr. Barlett an additional
amount equal to Mr. Barlett's annual salary, payable on a monthly basis, plus a
monthly amount equal to one-twelfth of the amount Mr. Barlett would have earned
under the MIP for that year, assuming a 100% target achievement. The monthly
payments will be decreased to reflect income generated by Mr. Barlett from any
other employment or business activities, other than income from personal
investments. Galileo also will provide group insurance benefits to Mr. Barlett
for a 24-month period following a termination without Cause or a resignation
for Good Reason, or until Mr. Barlett becomes entitled to receive benefits from
another employer.
If Mr. Barlett's employment agreement is terminated by Galileo without Cause
prior to a "Change in Control" (as such term is defined in the agreement) as a
condition of the agreement to which the Change in Control occurs, or if Galileo
terminates the agreement without Cause within two years following a Change in
Control, or if Mr. Barlett terminates the agreement with Good Reason within two
years following a Change in Control, within 30 days after termination, Galileo
must pay Mr. Barlett (1) a lump sum equal to the sum of Mr. Barlett's annual
salary at the rate in effect at the time of termination through the termination
date, to the extent not theretofore paid, plus an amount equal to the annual
incentive compensation Mr. Barlett would have
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received under the MIP attributable to the year in which termination occurred,
assuming 100% target achievement, multiplied by a fraction, the numerator of
which is the number of days in such year through the termination date and the
denominator of which is 365, and (2) a lump sum equal to the sum of Mr.
Barlett's annual salary at the rate in effect at the time of termination, plus
an amount equal to the annual incentive compensation Mr. Barlett would have
received under the MIP attributable to the 12-month period following the date
of termination, assuming a performance target achievement rate calculated as
the average of the rates used to calculate MIP payments, or any payment made to
Mr. Barlett instead of MIP payments, in the three years immediately prior to
the termination date for which these payments have been calculated and made,
multiplied by the number three. Galileo also will provide group insurance
benefits to Mr. Barlett for three years following a termination without Cause
or a resignation for Good Reason within the applicable Change in Control time
periods or until Mr. Barlett becomes entitled to receive benefits from another
employer.
Other Executive Officers. Cheryl Ballenger, Lyn Bulman, Babetta R. Gray,
James E. Lubinski, David A. Near, Anthony Swanagan and Ron Thornhill are each
party to an employment agreement with Galileo. Each of these agreements is
dated April 11, 2001, except for the agreement with Ms. Ballenger, which is
dated May 17, 2001, and the agreement with Mr. Thornhill, which is dated May
18, 2000, as amended May 4, 2001. The agreements provide for a base salary per
annum of $330,000, $197,500, $306,000, $397,500, $250,000, $176,000 and
$216,300, respectively, reviewed by the Compensation Committee of the Galileo
board and increased at its discretion. The agreements provide for participation
in Galileo's incentive and benefit plans as well as a car allowance. The term
of each of these agreements continues indefinitely until terminated by Galileo
or the executive. Each of the agreements may be terminated immediately by
Galileo with "Cause" or by the executive with "Good Reason" (as these terms are
defined in the agreement).
If any of the agreements is terminated by Galileo without Cause or by the
executive for Good Reason, within 30 days after termination, Galileo must pay
the executive (i) a lump sum equal to the sum of the executive's annual salary
at the rate in effect at the time of termination through the termination date,
to the extent not theretofore paid, plus an amount equal to the annual
incentive compensation the executive would have received under the MIP
attributable to the year in which termination occurred, assuming 100% target
achievement, multiplied by a fraction, the numerator of which is the number of
days in such year through the termination date and the denominator of which is
365, and (ii) a lump sum equal to the executive's annual salary at its rate in
effect at the termination date plus an amount equal to the amount of annual
incentive compensation the executive would have received under the MIP for that
12 month period assuming a 100% target achievement. In addition, commencing 12
months after the date of termination and for 12 months thereafter, Galileo must
pay the executive an additional amount equal to the executive's annual salary
at the rate in effect at the time of termination on a monthly basis, plus a
monthly amount equal to one-twelfth of the amount the executive would have
earned under the MIP for that year, assuming a 100% target achievement. Such
monthly payments are decreased to reflect income generated by the executive
from any other employment or business activities, other than income from
personal investments. Galileo also will provide group insurance benefits to the
executive for the lesser of a 24-month period or until the executive becomes
entitled to receive benefits from another employer.
If any of the agreements is terminated by Galileo without Cause prior to a
"Change in Control" (as such term is defined in the agreements) as a condition
of the agreement to which the Change in Control occurs, or if Galileo
terminates any of the agreements without Cause within two years following a
Change in Control, or if the executive terminates his or her respective
agreement with Good Reason within two years following a Change in Control,
within 30 days after termination, Galileo must pay the executive (1) a lump sum
equal to the sum of the executive's annual salary at the rate in effect at the
time of termination through the termination date, to the extent not theretofore
paid, plus an amount equal to the annual incentive compensation the executive
would have received under the MIP attributable to the year in which termination
occurred, assuming 100% target achievement, multiplied by a fraction, the
numerator of which is the number of days in such year through the termination
date and the denominator of which is 365, and (2) a lump sum equal to three
times (two times in the case of Mr. Thornhill) the executive's salary, at its
rate in effect at the termination date, plus
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an amount equal to three times (two times in the case of Mr. Thornhill) the
annual incentive compensation the executive would have received under the MIP,
assuming 100% of target achievement for Mr. Thornhill and, with respect to the
other executive officers, assuming a performance target achievement rate
calculated as the average of the rates used to calculate MIP payments, or any
payment made to the executive instead of MIP payments, in the three years
immediately prior to the termination date for which these payments have been
calculated and paid. Galileo also will provide group insurance benefits to the
executive for a period of 36 months (24 months in the case of Mr. Thornhill),
or until the executive becomes entitled to receive benefits from another
employer.
Payments Resulting from the Merger. Approval of the merger agreement by
Galileo's stockholders will constitute a "change in control" as defined in
those agreements. It is presently estimated, based upon certain assumptions and
data available as of a recent date, that if these executives' employment is
terminated within the time period specified in the employment agreements under
circumstances entitling those persons to severance benefits under their
employment agreements, those persons will be entitled to severance benefits
approximately in the following amounts:
Severance
Name Benefit
---- ----------
James E Barlett................................................... $4,770,716
James E. Lubinski................................................. 2,328,474
Cheryl M. Ballenger............................................... 1,935,620
Babetta R. Gray................................................... 1,795,938
David A. Near..................................................... 1,470,015
Lyn Bulman........................................................ 1,164,462
Anthony C. Swanagan............................................... 1,039,331
Ron Thornhill..................................................... 729,076
The severance benefit amounts shown in the table include the cash severance
payment, management incentive bonus component, and an estimated value of
continued welfare benefits as set forth in the executive's employment
agreement. Such amounts do not take into account (1) the strategic alternatives
bonus payments described above; (2) the value of acceleration of stock option
and restricted stock awards; or (3) the excise tax gross-up payment that is
required under Mr. Barlett's employment agreement. Under Mr. Barlett's
employment agreement (but not the employment agreements of Galileo's other
executive officers) Galileo is obligated to pay Mr. Barlett (1) an additional
amount to cover any liability on his part for excise taxes on any "excess
parachute payments" under Section 4999 of the Internal Revenue Code paid to him
as a result of the completion of the merger, plus (2) a further amount to cover
any liability on his part for all taxes (including income taxes) arising as a
result of the payment to him of such additional amount. These payments are
collectively known as an excise tax gross-up payment. The estimated excise tax
gross-up payment to Mr. Barlett is $2,154,257, plus 54.9% of any strategic
alternatives bonus payment that he receives.
Indemnification and Insurance.
Under the merger agreement, Cendant agreed to provide certain continuing
indemnification and insurance benefits for officers, directors and employees of
Galileo. See "The Merger Agreement--Indemnification and Insurance."
Redemption of Special Voting Preferred Stock from Certain Stockholders
In addition to Galileo common stock, Galileo has issued and outstanding
special voting preferred stock. This outstanding special voting preferred stock
is divided into three series, each series consisting of one share and entitling
the holder to elect one director so long as certain Galileo common stock
ownership thresholds are maintained. Based upon the number of shares of special
voting preferred stock outstanding and related Galileo common stock ownership,
the special voting preferred stock holders are entitled to elect a total of
three
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members to the Galileo board. The respective holders of the special voting
preferred stock are entitled to elect their director designee, voting as a
separate class. See "Comparison of Rights of Stockholders of Galileo and
Cendant." On July 17, 2001, SAirGroup's designee on the Galileo board resigned
his position. SAirGroup has advised Galileo that it does not intend to appoint
a successor.
The outstanding special voting preferred stock currently is held by two
entities that are respectively controlled by United and SAirGroup. As of June
30, 2001, United and SAirGroup held in the aggregate 18.2% and 8.0%,
respectively, of Galileo common stock. See "Security Ownership of Certain
Beneficial Owners And Management of Galileo Common Stock."
Under the terms of Galileo's certificate of incorporation and the merger
agreement, all shares of special voting preferred stock outstanding at the
effective time of the merger will automatically and immediately be redeemed by
Galileo for an amount equal to $100 per share (the preferred redemption price)
and any directors elected to the Galileo board by holders of special voting
preferred stock will, at the effective time of the merger, be deemed to have
resigned from the Galileo board. All funds necessary to pay the preferred
redemption price and any expenses relating to the redemption of the special
voting preferred stock will come solely from Galileo. See "The Merger
Agreement."
Delisting and Deregistration of Galileo Common Stock
If the merger is completed, the shares of Galileo common stock will be
delisted from the NYSE and deregistered under the Securities Exchange Act of
1934. Consequently, following completion of the merger, Galileo stockholders
will no longer be able to trade shares of Galileo common stock on any stock
exchange.
Restrictions on Resales by Affiliates of Galileo
The shares of CD common stock to be issued to Galileo stockholders in the
merger have been registered under the Securities Act of 1933. These shares may
be traded freely and without restriction by those stockholders not deemed to be
"affiliates" of Galileo 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 Galileo 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
Galileo (as well as to certain other related individuals or entities, including
United and SAirGroup).
67
THE GALILEO SPECIAL MEETING
Purpose, Time and Place
The special meeting will be held at The Westin O'Hare Hotel, 6100 North
River Road, Rosemont, Illinois on Thursday, August 30, 2001, at 9:00 a.m.,
Central Time, unless postponed or adjourned to a later date. The purpose of the
special meeting is for the Galileo stockholders to consider and vote upon a
proposal to adopt the merger agreement and possibly any adjournments or
postponements of the special meeting. It is currently contemplated that no
other matters will be considered at the special meeting.
The Galileo board has approved the merger agreement and has determined that
the merger agreement and the merger are advisable and in the best interest of
Galileo and its stockholders. Accordingly, the Galileo board recommends that
Galileo stockholders vote FOR the adoption of the merger agreement at the
special meeting.
Record Date; Voting Power
The Galileo board of directors has fixed the close of business (5:00 p.m.,
Eastern Time) on July 23, 2001 as the record date for determining the holders
of Galileo common stock entitled to notice of, and to vote at, the special
meeting. Only holders of record of Galileo common stock at the close of
business on the record date will be entitled to notice of, and to vote at, the
special meeting. Holders of Galileo special voting preferred stock do not have
the right to vote at the special meeting.
On the record date, approximately 87,611,000 shares of Galileo common stock
were issued and outstanding and entitled to vote at the special meeting.
Holders of record of Galileo common stock are entitled to one vote per share on
any matter which may properly come before the special meeting. If you are a
record holder of Galileo common stock on the record date, you may vote your
shares of Galileo common stock in person at the special meeting or by proxy as
described below under "Voting of Proxies."
The record stockholder number does not include the number of persons whose
Galileo common stock is in nominee or "street name" accounts through brokers.
If you hold your shares of Galileo common stock in this manner, you must follow
the instructions provided by your broker regarding how to instruct your broker
to vote your shares. Most banks and brokers have provisions for telephone and
Internet voting. Check the material sent to you by them, or call your account
representative for more information.
A quorum is present at the special meeting if a majority of the outstanding
shares of Galileo common stock is represented in person or by proxy. A quorum
is necessary to hold the special meeting. Any shares of Galileo common stock
held in treasury by Galileo or any of its subsidiaries are not considered to be
outstanding for purposes of determining a quorum. Once a share of Galileo
common stock is represented at the special meeting, it will be counted for the
purpose of determining a quorum at the special meeting and any adjournment of
the special meeting unless the holder is present solely to object to the
special meeting. If a quorum is not present at the special meeting, it is
expected that the special meeting will be adjourned or postponed to solicit
additional proxies. However, if a new record date is set for the adjourned
meeting, then a new quorum will have to be established. Abstentions and broker
non-votes (which are shares held by brokers in street name that are not
entitled to vote at the special meeting due to the absence of specific
instructions from the beneficial owners of those shares) will be treated as
present at the special meeting for purposes of determining the presence or
absence of a quorum for the transaction of business.
In connection with the merger agreement, Galileo entered into a stock option
agreement with Cendant, whereby Galileo granted to Cendant an option to
purchase up to 17,041,071 shares of Galileo common stock at an exercise price
of $33.00 per share, which is exercisable by Cendant upon the occurrence of
certain conditions specified in the stock option agreement. If Cendant proposes
to exercise its option following the
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record date of the special meeting, Galileo has agreed, at Cendant's request
given no later than five days prior to the Galileo special meeting, subject to
the fiduciary duties of the Galileo board, to fix a new record date and to hold
the special meeting at a time that provides Cendant the opportunity to vote its
Galileo common stock at that meeting. As of the date of this proxy statement-
prospectus, the option is not exercisable.
Vote Required to Adopt the Merger Agreement
The affirmative vote of holders of a majority of the shares of Galileo
common stock outstanding on the record date is required to adopt the merger
agreement. No vote of the holders of Galileo special voting preferred stock is
needed. Under Delaware law, a Galileo stockholder who abstains from voting or
who does not vote will have the same effect as if the stockholder had voted
against the adoption of the merger agreement. Brokers who hold shares of
Galileo common stock as nominees will not have discretionary authority to vote
such shares in the absence of instructions from the beneficial owners of those
shares. Any shares that are not voted because the nominee-broker lacks such
discretionary authority will be counted and have the same effect as a vote
against the adoption of the merger agreement.
Share Ownership of Management and Certain Stockholders
As of the record date, Galileo directors and executive officers as a group
owned and were entitled to vote less than one percent of the outstanding shares
of Galileo common stock. Each of the directors and executive officers of
Galileo that is entitled to vote at the Galileo special meeting has indicated
that they intend to vote their shares in favor of adoption of the merger
agreement.
At June 30, 2001, United, as the parent of Covia, owned and was entitled to
vote 15,940,000 or approximately 18.2% of the outstanding shares of Galileo
common stock. United and Covia have agreed to vote in favor of adoption of the
merger agreement pursuant to the terms of the voting agreement. See "The Voting
Agreement."
Under the stock option agreement, Cendant has an option to purchase up to
17,041,071 shares of Galileo common stock. If Cendant proposes to exercise its
option following the record date of the special meeting, Galileo has agreed,
subject to the fiduciary duties of the Galileo board, to fix a new record date
and to hold the special meeting at a time that provides Cendant the opportunity
to vote its Galileo common stock at that meeting. Cendant may not acquire
shares pursuant to the stock option agreement unless the voting agreement with
United has been terminated and certain other conditions have been satisfied. As
of the date of this proxy statement-prospectus, the option is not exercisable.
See "The Stock Option Agreement."
Voting of Proxies
If you vote your shares of Galileo common stock by signing a proxy and
returning it in time for the special meeting, your shares will be voted at the
special meeting in the manner specified in your proxy card. If your proxy is
properly executed but does not contain voting instructions, your proxy will be
voted FOR adoption of the merger agreement, unless the Galileo board changes it
recommendation concerning the merger before you have signed and dated your
proxy, in which case executed proxies without voting instructions will be voted
in proportion to all specified proxies that have been voted. If other matters
are properly presented before the special meeting, the persons named in your
proxy will have authority to vote in accordance with their judgment on any
other such matter, including, any proposal to adjourn or postpone the meeting
or otherwise concerning the conduct of the meeting. However, a proxy that has
been designated to vote against the adoption of the merger agreement will not
be voted, either directly or through a separate proposal, to adjourn the
meeting to solicit additional votes. It is not expected that any matter other
than as described in this proxy statement-prospectus will be brought before the
special meeting.
You may also submit your proxy by telephone or over the Internet. The
telephone and Internet voting procedures are designed to authenticate votes
cast by use of a personal identification number. These procedures
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allow stockholders to appoint a proxy to vote their shares and to confirm that
their instructions have been properly recorded. Instructions for voting by
telephone and over the Internet are printed on the proxy cards. Please be
advised that if you vote your proxy by calling the toll-free number or by using
the Internet, the deadline for submitting or revoking your proxy by telephone
or over the Internet is 11:59 p.m., Central time, on August 28, 2001.
If you hold your shares in nominee or "street name" (which is the name of a
broker, bank or other record holder) you must either direct the record holder
of your shares on how to vote your shares or obtain a proxy from the record
holder to vote at the meeting.
Revocability of Proxies
If you complete and mail the enclosed proxy card, it will not preclude you
from voting in person at the special meeting. If you are a record holder of
Galileo common stock, you may revoke a proxy at any time prior to your proxy
being voted at the special meeting by:
. delivering, prior to the special meeting, to Corporate Secretary,
Galileo International, Inc., 9700 West Higgins Road, Suite 400,
Rosemont, Illinois 60018, a written notice of revocation bearing a later
date or time than your proxy;
. submitting a later-dated proxy that is properly executed;
. submitting a later-dated proxy using the telephone voting procedures or
the Internet voting procedures. The deadline for revoking your proxy by
telephone or over the Internet is 11:59 p.m., Central time, on August
28, 2001; or
. attending the special meeting and voting in person.
Simply attending the special meeting will not revoke your proxy. If you
instructed a broker to vote your shares, you must follow your broker's
directions for changing those instructions. If an adjournment occurs and no new
record date is set, it will have no effect on the ability of stockholders of
record as of the record date to exercise their voting rights or to revoke any
previously delivered proxies.
Solicitation of Proxies
This proxy statement-prospectus is being furnished to you in connection with
the solicitation of proxies by the Galileo board from the holders of Galileo
common stock for use at the Galileo special meeting. Galileo generally will
bear the cost of solicitation of proxies. In addition to solicitation by mail,
certain directors, officers and employees of Galileo and its subsidiaries may
solicit proxies from stockholders in person by telephone, or by other
electronic means. These persons will not be paid for soliciting proxies.
Galileo may also have brokerage houses and other custodians, nominees and
fiduciaries forward solicitation materials to the beneficial owners of Galileo
common stock held of record. Galileo will reimburse these persons for their
reasonable out-of-pocket expenses in connection with soliciting proxies.
In addition, Galileo has retained Georgeson Shareholder to assist Galileo in
the solicitation of proxies from stockholders in connection with the special
meeting. Georgeson Shareholder will receive a fee that Galileo expects will be
approximately $10,000 as compensation for its services and reimbursement of its
out-of-pocket expenses. Galileo has agreed to indemnify Georgeson Shareholder
against certain liabilities arising out of or in connection with its
engagement.
Stockholders Should Not Send Stock Certificates With Their Proxy Cards.
70
THE MERGER AGREEMENT
General
The Cendant board has unanimously approved and adopted the merger agreement,
the merger and the other transactions contemplated by the merger agreement. The
Galileo board has approved and adopted the merger agreement, the merger and the
other transactions contemplated by the merger agreement. This section of the
proxy statement-prospectus describes material provisions of the merger
agreement. This description is not a complete description of the terms and
conditions of the merger agreement and is qualified in its entirety by
reference to the full text of the merger agreement, a copy of which is attached
as Annex A to this proxy statement-prospectus and is incorporated by reference
into this proxy statement-prospectus. We urge you to read the merger agreement
carefully and in its entirety.
Form of the Merger; Charter Documents of Galileo
Under the terms of the merger agreement, Galaxy Acquisition Corp. will be
merged with Galileo. Galileo will be the surviving corporation in the merger
and will continue its corporate existence under Delaware law as a wholly owned
subsidiary of Cendant. Galaxy Acquisition Corp. will cease to be an entity as a
result of the merger. The certificate of incorporation of Galileo will be
amended and restated by virtue of the merger to read in its entirety as set
forth as Exhibit A to the merger agreement. The bylaws of Galaxy Acquisition
Corp. in effect immediately prior to the effective time of the merger will
become the bylaws of Galileo following the merger. The name of the surviving
corporation will be Galileo International, Inc.
Timing of Closing
The merger is scheduled to be completed as soon as practicable following the
satisfaction (or waiver, if permissible) of the conditions set forth below in
this summary under the heading entitled "Conditions to the Completion of the
Merger."
Merger Consideration
Galileo Common Stock
At the effective time of the merger, holders of Galileo common stock (other
than Galileo which holds shares of Galileo common stock in its treasury,
dissenting stockholders and Cendant or any subsidiary of Cendant) will receive
a combination of CD common stock and cash in exchange for their shares of
Galileo common stock. Each share of Galileo common stock held by those
stockholders will be converted into the right to receive the following:
. CD common stock:
A number of shares of CD common stock (rounded to the nearest
thousandth of a share) equal to the exchange ratio. The exchange ratio
is determined by dividing the per share stock amount by the average
trading price. In the event that the exchange ratio is less than the
low-end ratio, then the exchange ratio will be the low-end ratio. In
the event that the exchange ratio is greater than the high-end ratio,
then the exchange ratio will be the high-end ratio. Subject to
adjustment, the low-end ratio will be equal to the number determined by
dividing the per share stock amount by 20. Subject to adjustment, the
high-end ratio will be equal to the number determined by dividing the
per share stock amount by 17.
. The per share stock amount will equal the product of $33.00 and the
control requirement percentage. The control requirement percentage
is the fraction (expressed as a decimal, without rounding): (1) the
numerator of which equals the product of 0.8050 and the total number
of issued and outstanding shares of Galileo common stock immediately
prior to the effective time of the merger and (2) the denominator of
which equals the excess of the total number of issued and
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outstanding shares of Galileo common stock immediately prior to the
effective time of the merger over the number of shares of Galileo
common stock, if any, owned by Cendant (or any subsidiary of Cendant)
at the effective time of the merger.
. The average trading price will equal the average of the per share
4:00 p.m. Eastern time closing sales price of CD common stock on the
New York Stock Exchange during the measurement period. The
measurement period is the 20 consecutive trading days immediately
preceding the third consecutive trading day prior to the date of the
Galileo stockholders meeting. The measurement period will change if,
primarily as a result of the execution by Cendant or any of its
subsidiaries of certain restricted acquisition agreements, the
consents, approvals, permits or authorizations are not obtained by
the date that is 30 days after the date on which the Galileo special
meeting occurs. In this situation, the measurement period will be the
20 consecutive trading days immediately preceding the third
consecutive trading day prior to the date on which the last of the
approvals described above have been obtained and satisfied.
If there are Galileo stockholders that have properly exercised their
dissenters rights, then the consideration to be received by Galileo
stockholders set forth above will be increased to that number of shares
of CD common stock (rounded to the nearest thousandth of a share) equal
to the number determined by dividing the actual aggregate shares of CD
common stock by the total number of shares of Galileo common stock (less
the number of dissenting shares of Galileo common stock, shares of
Galileo common stock owned by Cendant or any of its subsidiaries, and
shares held in Galileo's treasury). The actual aggregate Cendant shares
will equal the product of (i) the total outstanding shares of Galileo
common stock (excluding shares of Galileo common stock owned by Cendant
or its subsidiaries) and (ii) the stock consideration to be received by
Galileo stockholders set forth above, determined prior to any increase
set forth in this paragraph.
. Cash:
The lesser of the per share cash amount and the number determined by
dividing the actual aggregate cash consideration by the total number of
issued and outstanding shares of Galileo common stock immediately prior
to the effective time (excluding shares owned by Cendant or any of its
subsidiaries at the effective time).
. The per share cash amount will equal the product of $33.00 and the
cash limitation percentage. The cash limitation percentage is the
excess (expressed as a decimal, without rounding) of one over the
control requirement percentage.
. Actual aggregate cash consideration will be an amount equal to the
preliminary aggregate cash consideration, if the preliminary
aggregate cash consideration is less than or equal to the cash
limitation amount. Actual aggregate cash consideration will be an
amount equal to the cash limitation amount, if the preliminary
aggregate cash consideration exceeds the cash limitation amount. The
preliminary aggregate cash consideration is the product of the per
share cash amount and the total number of issued and outstanding
shares of Galileo common stock immediately prior to the effective
time (excluding shares owned by Cendant or any of its subsidiaries at
the effective time). The cash limitation amount is the number
determined by dividing (1) the product of the cash limitation
percentage and the total closing date stock consideration value by
(2) the control requirement percentage. The total closing date stock
consideration value is the product of (1) the actual aggregate
Cendant shares and (2) the closing date Cendant stock price (the
average of the high and low trading prices of CD common stock on the
NYSE Composite Tape on the effective date of the merger).
If cash is paid in lieu of fractional shares or there are Galileo
stockholders who have properly exercised their dissenters rights, or
both, then, two things will happen. First, the actual aggregate cash
consideration will be reduced to equal the adjusted actual aggregate
cash consideration. Second, the cash consideration to be received by
Galileo stockholders as set forth above will be reduced to equal
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the number determined by dividing the adjusted actual aggregate cash
consideration by the total number of shares of Galileo common stock
(less the number of dissenting shares of Galileo common stock, shares
of Galileo common stock owned by Cendant or any of its subsidiaries,
and shares held in Galileo's treasury). The adjusted actual aggregate
cash consideration equals the excess of the actual aggregate cash
consideration over the sum of the total cash in lieu and the total
dissenting cash. Total cash in lieu is the product of the total number
of registered holders of Galileo common stock immediately prior to the
effective time of the merger and the average closing price. Total
dissenting cash is the product of the number of shares of Galileo
common stock dissenting from the merger and the greater of (i) $33.00
and (ii) the sum of (A) the product of the stock consideration to be
received by Galileo stockholders (before any increase) and the average
closing price and (B) the cash consideration to be received by Galileo
stockholders (before any decrease).
. Additional Stock Consideration, if Any:
The number of shares of CD common stock (rounded to the nearest
thousandth of a share) determined by dividing the per share additional
consideration value by the average closing price of CD common stock.
The per share additional consideration value will be equal to simple
interest on $33.00 calculated at the 30 day London Interbank Offered
Rate plus 100 basis points, from the date that is 180 days from the
date of the merger agreement to the date, if later, on which the
effective time of the merger occurs. The per share additional
consideration value amount, if any, will be determined using a year of
360 days to calculate the interest-equivalent amount. Holders of
Galileo common stock will receive no additional stock consideration
unless the consents, approvals, permits or authorizations described in
certain covenants of the merger agreement cannot be obtained by the
date that is 180 days from the date of the merger agreement, primarily
as a result of the execution by Cendant or any of its subsidiaries of
certain restricted acquisition agreements.
The exchange ratio and merger consideration to be received by Galileo
stockholders, as set forth above, will be appropriately and equitably adjusted
if, prior to the effective time of the merger, the outstanding shares of
Galileo common stock or CD common stock are changed into a different number of
shares or a different class as a result of a stock split, reverse stock split,
stock dividend, subdivision, reclassification, combination, exchange,
recapitalization or other similar transaction.
In addition, if, prior to the effective time of the merger, there is an
adjustment transaction (i.e., Cendant declares, sets aside or pays any dividend
or makes any other distribution or payment (whether in cash, stock, property or
any combination of the three), with respect to the outstanding shares of CD
common stock, in connection with a spin-off, split off or spit up, the record
date for which is prior to the effective time of the merger), then the
following adjustments will be made to the low-end ratio, the high-end ratio and
the walk-away price:
. the high-end ratio will equal the number determined by dividing the per
share stock amount by the adjusted high-end price;
. the low-end ratio will equal the number determined by dividing the per
share stock amount by the adjusted low-end price; and
. the walk-away price will equal $14.00 minus the adjustment factor.
As used above, the adjusted high-end price means an amount equal to $17.00
minus the adjustment factor. The adjusted low-end price means an amount equal
to $20.00 minus the adjustment factor. The adjustment factor means the number
determined by dividing the distribution value by the aggregate number of shares
of CD common stock outstanding immediately prior to the effective time of the
merger. The distribution value means (1) for adjustment transactions not
involving a spin-off, the aggregate fair market value on the distribution date
of the assets, property, cash, securities, rights, warrants or options
distribution in respect of the CD common stock in the adjustment transaction,
as determined in good faith by the Cendant board, or (2) in respect of any
spin-off, the product of the arithmetic average of the per share 4:00 p.m.
Eastern time closing
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sales price of such securities for the 10 consecutive trading days commencing
on and including the first day of trading of such securities after the
effectiveness of the spin-off and the aggregate number of such securities
outstanding during such 10-day period.
In addition, Cendant has agreed not to effect any adjustment transaction or
cause CD common stock to trade ex-dividend with respect to any adjustment
transaction during the pricing period.
Cendant has also agreed to refrain from effecting or causing CD common stock
to trade ex-dividend with respect to any adjustment transaction, other than a
spin-off of Cendant's individual membership and loyalty business which was
previously announced by Cendant.
At the effective time of the merger, all shares of Galileo 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 Galileo
common stock (other than Galileo, Cendant or any subsidiary of Cendant and any
dissenting stockholder exercising appraisal rights under Delaware law) will
cease to have any rights with respect to their shares of Galileo common stock,
except the right to receive, without interest, the merger consideration.
Each share of Galileo common stock owned by Cendant or any subsidiary of
Cendant at the effective time of the merger or held in Galileo's treasury at
the effective time of the merger, by virtue of the merger and without any
action on the part of the holder of the shares, will cease to be outstanding
and will be cancelled and retired without payment of any consideration for
those shares.
Galileo Special Voting Preferred Stock
Holders of Galileo special voting preferred stock will receive cash in
exchange for their shares. At the effective time of the merger, any and all
shares of special voting preferred stock will be redeemed by Galileo for an
amount in cash equal to $100.00 per share. All funds necessary to pay the
preferred redemption price and any expenses relating to the redemption of the
special voting preferred stock will come solely from Galileo.
At the effective time of the merger, each share of Galileo special voting
preferred stock will no longer be outstanding and will cease to exist.
Following the merger, each holder of shares of Galileo special voting preferred
stock will cease to have any rights with respect to the shares, except the
right to receive from Galileo $100.00 per share. All shares of Galileo special
voting preferred stock that have been redeemed will be retired and will not be
reissued as part of any series of preferred stock of Galileo.
In addition, each share of Galileo special voting preferred stock issued and
held in Galileo's treasury at the effective time will, by virtue of the merger,
cease to be outstanding and will be cancelled and retired without payment of
any consideration for those shares.
Conversion of Shares; Exchange Agent; Procedures for Exchange of Certificates;
Fractional Shares
Galileo Common Stock
At the effective time of the merger, Galileo common stock will automatically
convert into the right to receive the merger consideration. At that time,
Cendant will deposit with the exchange agent all of the merger consideration.
Cendant has appointed First Union National Bank to act as exchange agent for
the merger. The exchange agent will receive the merger consideration from
Cendant and distribute it to Galileo stockholders. Galileo stockholders should
NOT return stock certificates with the enclosed proxy card. A transmittal
letter with instructions for the surrender of stock certificates will be mailed
to you as soon as practicable after completion of the merger.
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After the effective time of the merger, each certificate that previously
represented shares of Galileo 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.
Your certificates previously representing Galileo common stock may only be
paid whole shares of CD common stock, dividends or other distributions payable
on CD common stock and the cash consideration to be received in the merger
(including any cash in lieu of any fractional shares) after you surrender your
certificates to the exchange agent. 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 Galileo common stock that is not
registered in the transfer records of Galileo, exchange and payment may be made
to the transferee if the certificate representing those shares of Galileo
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 any fractional shares of CD common stock to any
Galileo stockholder upon surrender of their certificates. In addition, no
dividend or distribution of Cendant will relate to fractional share interests
and the fractional share interest will not entitle the owner to vote or to any
rights of a stockholder of Cendant. In lieu of the issuance of fractional
shares, Cendant will deliver to the exchange agent shares of CD common stock
and, the exchange agent will sell a number of whole shares of CD common stock
in the open market in order to pay each former holder of Galileo common stock
an amount in cash equal to the product obtained by multiplying the fractional
share interest to which the former holder (after taking into account all shares
of Galileo common stock held at the effective time of the merger by the holder)
would otherwise be entitled by the average Cendant trading price.
Galileo Special Voting Preferred Stock
At the effective time of the merger, Galileo will cause to be mailed to each
holder of special voting preferred stock a notice of redemption instructing
that holder to surrender its certificates(s) representing special voting
preferred stock in exchange for the preferred redemption price of $100 per
share. Upon surrender of the certificate(s), Galileo will deliver to the
holders of Galileo special voting preferred stock the preferred redemption
price and the certificate(s) representing those shares will be cancelled. All
funds necessary to pay the preferred redemption price for shares of Galileo
special voting preferred stock and the expenses relating to the redemption of
those shares will come solely from Galileo.
Effect on Stock Based Awards; Employee Stock Purchase Plan
Immediately prior to the effective time of the merger, all options to
acquire Galileo common stock under any Galileo stock option plan or other
equity incentive plan will be assumed by Cendant and will be converted into
options to purchase shares of CD common stock. All unvested options that have
an exercise price that is less than the average Galileo trading price (the
arithmetic average of the per share 4:00 p.m. Eastern time closing sales price
of Galileo common stock on the NYSE for the 20 consecutive trading days
immediately preceding the third trading day prior to the special meeting) will
become fully vested and exercisable.
The terms of each converted option will remain subject to the terms of the
applicable option plans and agreements in effect immediately prior to the
effective time of the merger. Cendant has agreed to assume Galileo's option
plans upon completion of the merger.
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 Galileo common
stock subject to the original option and the option exchange ratio. The option
exchange ratio is the quotient derived by dividing $33.00 by the average
Cendant trading price per share of CD common stock. However, if the foregoing
would result in an option exchange
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ratio less than 1.65000, the option exchange ratio will be deemed to be
1.65000, and if the foregoing would result in an option exchange ratio greater
than 1.94118, the option exchange ratio will be deemed to be 1.94118. The
option exchange ratio will be increased if Galileo stockholders are entitled to
additional stock consideration as described above under the heading entitled
"Merger Consideration--CD common stock--Additional stock consideration" to take
into account the amount of the additional stock consideration.
The exercise price per share of CD common stock under each converted option
will be equal to the exercise price per share of Galileo common stock under the
original option divided by the option exchange ratio, but that exercise price
will be rounded to the nearest whole cent.
Immediately prior to the effective time of the merger, Galileo will use its
reasonable best efforts to cause all stock appreciation rights related to
Galileo common stock outstanding immediately prior to the effective time of the
merger under any equity incentive plan of Galileo, whether or not then
exercisable, to be cancelled (subject to any required consent by the holder of
the stock appreciation right) and each holder of a stock appreciation right
will promptly after the effective time of the merger receive from the surviving
corporation, for each stock appreciation right that is cancelable (1) an amount
in cash equal to the difference of the merger consideration minus the per share
exercise price of that stock appreciation right, without interest, to the
extent the difference is a positive number or (2) to the extent the difference
is a negative number, such other consideration as described in the second
bullet below. All such stock appreciation rights will be terminated and will
thereafter represent only the right to receive the consideration set forth in
this paragraph. Notwithstanding the foregoing, with respect to any person
subject to Section 16(a) of the Exchange Act, any amount to be paid to that
individual will be paid as soon as practicable after the first date payment can
be made without liability to that person under Section 16(b) of the Exchange
Act.
. Notwithstanding anything stated immediately above, no consideration for
stock appreciation rights will be paid with respect to any stock
appreciation right unless, at or prior to the time of that payment the
stock appreciation right is cancelled and, to the extent necessary under
the terms of the stock appreciation right, the holder of the right has
executed and delivered a release of any and all rights the holder had or
may have had with respect to the right.
. Prior to the effective time of the merger, Galileo will use reasonable
best efforts to obtain all necessary consents or releases, if any, from
holders of stock appreciation rights under any Galileo equity incentive
plan and take all other lawful action as may be necessary to give effect
to the transactions contemplated by this section. In the event that any
stock appreciation right is not cancelled in accordance with the
foregoing, that right will be converted to a stock appreciation right
related to the price of CD common stock in accordance with the first
through fourth paragraphs under the heading entitled "Effect on Stock
Based Awards; Employee Stock Purchase Plan" in this summary. Galileo or
its subsidiaries may, but will not be required to, offer additional
consideration for the purpose of obtaining the consents or releases
referred to above. The additional consideration will be subject to the
advance approval of Cendant, which approval will not be unreasonably
withheld.
After the effective time of the merger, all options to acquire shares of
common stock of Quantitude and Trip.com, outstanding immediately prior to the
effective time of the merger under the Quantitude, Inc. 2001 Equity Incentive
Plan and the Trip.com, Inc. 2001 Equity Incentive Plan, whether or not
exercisable, will remain outstanding following the effective time and subject
to the terms of the applicable plans and the applicable option agreements
representing grants under those plans.
In addition, Galileo will take all actions necessary to cause the
termination of the Galileo International, Inc. Employee Stock Purchase Plan and
will take all necessary steps to refund, without interest, to each participant,
any amounts withheld from that participant's compensation pursuant to a
subscription agreement under the plan, to the extent that the amount has not
been used to purchase Galileo common stock on a purchase date (as defined in
the plan) occurring prior to the effective date of termination of the plan.
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Board of Directors and Officers of the Surviving Corporation
After the merger, the directors of Galaxy Acquisition Corp. will be the
directors of Galileo.
Any directors elected to Galileo's board by holders of Galileo special
voting preferred stock will, at the effective time of the merger, automatically
and without any further action by those directors or the holders of Galileo
special voting preferred stock be deemed to have resigned from the Galileo
board.
After the merger, the officers of Galileo will continue to serve in their
respective offices until their successors are elected or appointed or until
their resignation or removal. Upon the effective date of the merger, Mr.
Barlett's employment will terminate and he will resign as Chairman of the
Galileo board.
Board of Directors of Cendant
At the effective time of the merger, Cendant will take all actions
necessary, including, amending its bylaws, to cause its board to be expanded by
one seat so that a designee of the Galileo board who is reasonably satisfactory
to Cendant and who is an independent director is nominated and appointed to the
class of directors whose term will expire in 2004. A director is considered an
independent director if he or she has no relationship to Cendant that may
interfere with the exercise of his or her independence from Cendant and its
management. The Galileo board has not yet designated such director.
Representations and Warranties
The merger agreement contains certain customary mutual representations and
warranties by each of Galileo and Cendant. Some of the most significant of
these include:
. the existence and good standing of Galileo and Cendant under their
respective jurisdictions of incorporation and the corporate power and
authority to operate their respective businesses;
. the power and authority of Galileo and Cendant to execute and deliver and
to perform their obligations under the merger agreement and the other
agreements and documents contemplated by the merger agreement and their
compliance with laws and their respective organizational documents;
. the capital structure of each company;
. the absence of violations, conflicts, breaches, defaults, creation of
liens or consents of, or on, organizational documents, properties, loans,
leases, contracts or other agreements of Galileo and Cendant;
. the compliance of documents filed with the SEC by each of Galileo and
Cendant since December 31, 1998 and the accuracy of financial statements
included in those documents;
. the absence of litigation, undisclosed liabilities and changes in the
respective businesses of Galileo and Cendant since March 31, 2001;
. the absence of action taken, or failed to be taken, and the absence of
knowledge of any fact, agreement, plan or other circumstance that is
reasonably likely to prevent the merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended; and
. the accuracy of information supplied by each party for inclusion in this
proxy statement-prospectus and the registration statement.
In addition, Galileo made additional representations to Cendant. The most
significant of these additional representations include:
. that the Galileo board:
. declared the merger advisable and in the best interest of Galileo and
its stockholders and approved the merger agreement,
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. resolved to recommend the adoption of the merger agreement by Galileo
stockholders at the special meeting, and
. directed that the merger agreement be submitted to Galileo's
stockholders for approval;
. the organization, standing and existence of Galileo's subsidiaries and
Galileo's ownership interest in those subsidiaries;
. Galileo's compliance with or its absence of liability under certain tax,
labor and employee benefit matters;
. Galileo's disclosure of its ownership of and the absence of claims
related to intellectual property;
. the absence of environmental liabilities and Galileo's compliance with
environmental laws and regulations;
. the disclosure, full force and effect, and the legal, valid and binding
obligations and enforceability of Galileo's material contracts;
. Galileo's and its subsidiaries' title to property;
. the absence of any brokerage, finder's or other fees or commissions to be
paid in connection with the transactions contemplated by the merger
agreement other than fees paid or payable to JPMorgan;
. the receipt by Galileo of the written opinion of its financial advisor to
the effect that, as of the date of the merger agreement, the merger
consideration is fair, from a financial point of view, to the
stockholders of Galileo;
. the amendment of Galileo's rights agreement to render the agreement
inapplicable to the approval, execution and delivery of the merger
agreement and the agreements and transactions contemplated by the merger
agreement;
. the inapplicability of Section 203 of Delaware General Corporation Law to
the merger agreement and the transactions contemplated thereby; and
. the vote of the holders of Galileo common stock being the only vote of
holders of any class or series of Galileo capital stock required to
approve the merger and adopt the merger agreement and the other
agreements contemplated by the merger agreement.
In addition, Cendant made additional representations to Galileo. The most
significant of these additional representations include:
. that the Cendant board approved the merger, the merger agreement and the
other agreements and transactions contemplated by the merger agreement;
. the absence of state takeover statutes or similar statutes or regulations
applicable to the transactions contemplated by the merger agreement;
. the absence of restrictions or impairments under those statutes,
regulations or Cendant's organizational documents on the ability of
Cendant to consummate the transactions contemplated by the merger
agreement; and
. the absence of any required approval of the merger agreement and the
transactions contemplated by the merger agreement by Cendant's
stockholders.
Covenants of Galileo
Conduct of Business
Subject to certain exceptions, including the written consent of Cendant,
until the closing, Galileo has agreed to, and to cause its subsidiaries to, do
the following:
. conduct its operations only in, and not take any actions except in, the
ordinary course of business, consistent with past practice;
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. use its reasonable best efforts to preserve intact its business
organizations and goodwill, keep available the services of its officers
and employees, and maintain satisfactory relationships with those persons
having business relationships with them; and
. upon discovery, promptly notify Cendant of the existence of certain
breaches of representations or warranties contained in the merger
agreement or, subject to certain qualifications, the occurrence of any
event that would cause any representation or warranty contained in the
merger agreement no longer to be true and correct.
In addition, subject to certain exceptions, including the written consent of
Cendant or as expressly contemplated by the merger agreement, Galileo has
agreed to, and to cause its subsidiaries to, refrain from doing the following:
. amend their respective organizational documents;
. issue, sell, pledge, dispose of or encumber, or authorize the issuance,
sale, pledge, disposition or encumbrance of, any shares of its capital
stock or other ownership interest in Galileo or any of its subsidiaries
or any securities convertible into or exchangeable for any such shares or
ownership interest, or any rights, warrants or options to acquire or with
respect to any such shares of capital stock, ownership interest, or
convertible or exchangeable securities;
. split, combine or reclassify its capital stock, or otherwise change its
capitalization as it exists on the date of the merger agreement, or
propose the issuance of any other securities in respect of, in lieu of or
in substitution for, shares of its capital stock or any other equity
interest;
. grant, confer or award any option, warrant, convertible security or other
right to acquire any shares of its capital stock or take any action to
cause to be exercisable any otherwise unexercisable option under any
existing stock option plan;
. declare, set aside or pay any dividend or make any other distribution or
payment (whether in cash, stock or property or any combination of the
three) with respect to any shares of its capital stock or other ownership
interests, including any constructive or deemed distributions, or make
any other payments to stockholders in their capacity as such (other than
any such payments by any of Galileo's subsidiaries to Galileo);
. directly or indirectly redeem, purchase or otherwise acquire any shares
of its capital stock or capital stock of Galileo's subsidiaries
(including repurchases of Galileo common stock pursuant to its stock
repurchase program);
. transfer, license, mortgage, encumber, sell, lease or otherwise dispose
of any of its material assets (including capital stock of Galileo's
subsidiaries);
. acquire by merger, purchase or any other manner, any business entity or
division, or make any capital expenditures or otherwise acquire any
material property or assets, except for purchases of supplies or capital
equipment in the ordinary course of business, consistent with past
practice, or capital expenditures or purchases of property and assets in
accordance with Galileo's capital plan disclosed to Cendant in connection
with the merger agreement, other than capital expenditures with third
parties that are primarily for the purpose of supporting Quantitude's
third party telecommunications business or Galileo's web-hosting
business;
. incur, assume, guarantee or otherwise become liable for any indebtedness
for borrowed money except in the ordinary course of business, consistent
with past practices under Galileo's existing credit agreements or to
trade creditors of Galileo or its subsidiaries;
. make or forgive any loans, advances or capital contributions (which do
not include marketing incentive payments or up-front financial assistance
payments) to, or investments in, any other person in an amount in excess
of $3,000,000 individually, or $10,000,000 in the aggregate (other than
advances for
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business expenses and loans and advances for relocation arrangements, made
to officers or employees in the ordinary course of business, consistent
with past practice);
. subject to some exceptions, grant any stock-related or stock-based
awards;
. modify, amend, terminate or waive any rights under any confidentiality
agreement entered into in connection with any third party acquisition
proposal;
. enter into any material contract, other than in accordance with Galileo's
capital plan or material contracts not involving costs, individually or
in the aggregate, in excess of $3,000,000;
. modify, amend, terminate or waive any rights under any material contract
in any manner that would reasonably be expected to have a material
adverse effect or result in costs in excess of $3,000,000;
. subject to some exceptions, increase the compensation, severance or other
benefits payable or to become payable to its directors, officers or
employees, grant any severance or termination pay, to, or enter into any
employment, consulting, salary continuation or severance agreement with,
any officer or director of Galileo or any of its subsidiaries, or
establish, adopt, enter into, amend or modify in any material respect or
in any manner that would result in costs in excess of $3,000,000 any
collective bargaining agreement, employee benefit plan, trust, fund,
policy or arrangement for the benefit of any current or former directors,
officers or employees of any of their beneficiaries;
. take any action to change accounting policies, procedures or practices of
Galileo, except as required by a change in GAAP, SEC position or
applicable law;
. approve or authorize any action to be submitted to Galileo stockholders
for approval other than pursuant to the merger agreement, other than, if
the transactions contemplated by the merger agreement have not been
consummated by January 1, 2002, the election of directors and
ratification of auditors at an annual meeting of stockholders to be held
after June 1, 2002:
. materially change any method of reporting income, deductions or other
material items for income tax purposes, make or change any material
election with respect to taxes, agree to or settle any material claim or
assessment in respect of taxes, or agree to an extension or waiver of the
limitation period to any material claim or assessment in respect of
taxes, other than in the ordinary course of business consistent with past
practice or as required by GAAP, SEC position or applicable law;
. settle or compromise any pending or threatened suit, action or claim not
covered by insurance in an aggregate amount in excess of $3,000,000;
. amend in any material respect any of material contract so as to include
any "change of control" provision which would be triggered upon the
merger or any sale of Galileo or any of its subsidiaries;
. enter into, amend in any material respect or renew certain contracts with
specified customers or suppliers;
. enter into, amend or renew other specified contracts;
. amend, extend, renew or otherwise modify any material lease in any manner
that would reasonably be expected to have a material adverse effect on
Galileo or result in costs in excess of $3,000,000;
. enter into any contract to provide web-hosing services or third party
telecommunications services; or
. agree to take any of the foregoing actions.
As used in this proxy statement-prospectus, a material adverse effect on
Galileo means, individually or in the aggregate, a material adverse effect on
the assets, liabilities, business, results of operations, or financial
condition of Galileo and its subsidiaries, taken as a whole, except any such
effect resulting primarily from:
. the merger agreement, the transactions contemplated by the merger
agreement or the announcement of the merger agreement;
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. Cendant's announcement or other communication of its plans or intentions
with respect to the conduct of the business of Galileo or any of its
subsidiaries;
. changes or conditions (including changes in economic, financial market,
regulatory or political conditions) affecting generally the air travel
industry, the computer reservation system industry or the information
services industry in which Galileo or its subsidiaries participates; or
. Galileo's or its subsidiaries' failure to engage in actions and
activities in furtherance of Galileo's web-hosting business or
Quantitude's third party telecommunications business.
As used in this proxy statement-prospectus, a material adverse effect on
Cendant means, individually or in the aggregate, a material adverse effect on
the assets, liabilities, business, results of operations, or financial
condition of Cendant and its subsidiaries, taken as a whole, except any such
effect resulting primarily from:
. the merger agreement, the transactions contemplated by the merger
agreement or the announcement of the merger agreement;
. Cendant's announcement or other communication of its plans or intentions
with respect to the conduct of the business of Galileo or any of its
subsidiaries; or
. changes or conditions (including changes in economic, financial market,
regulatory or political conditions) affecting generally the industries in
which Cendant operates its business.
Amendments to Stockholder Rights Plan and Section 203 of the Delaware General
Corporation Law
Under the terms of the merger agreement, Galileo has agreed that it will not
amend, modify or waive any provision of its stockholder rights plan, take any
action to redeem the preferred stock purchase rights issued under the
stockholder rights plan, or render those preferred stock purchase rights
inapplicable to any third-party acquisition proposal.
In addition, Galileo has agreed that it will not take any action to render
Section 203 of the Delaware General Corporation Law or any other state takeover
statute or similar statute or regulation inapplicable to any person in respect
of any third-party acquisition proposal.
Affiliates
Under the merger agreement, Galileo has agreed that, as soon as practicable
after the date of the merger agreement, it will deliver to Cendant a letter
identifying all persons who may be deemed, at the time the merger agreement is
submitted for adoption by the stockholders of Galileo, "affiliates" of Galileo
for purposes of rule 145 under the Securities Act. Galileo has also agreed to
use its reasonable best efforts to cause each of those persons to deliver to
Cendant, at least 30 days prior to the closing of the merger, a written
agreement as specified in the merger agreement.
No Solicitation
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
effective time of the merger, neither Galileo nor any of its subsidiaries or
affiliates, nor any officer, director, employee, investment banker, agent or
other representative of it or its subsidiaries will, directly or indirectly:
. encourage, invite, initiate or solicit any inquiries relating to or the
submission or making of a proposal by any person with respect to a third-
party acquisition; or
. participate in or encourage, invite, initiate or solicit negotiations or
discussions with, or furnish or cause to be furnished any information to,
any person relating to a third-party acquisition.
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The merger agreement also provides that upon the execution of the merger
agreement, Galileo was required to immediately:
. cease or cause to be ceased any discussions or negotiations in connection
with any proposed or potential third-party acquisition and request the
prompt return to Galileo, or destruction of, any confidential information
provided in connection with any such discussions or negotiations; and
. terminate, effective as of the business day immediately following the
date of the merger agreement, Galileo's stock repurchase program
authorized by the Galileo board on April 21, 2000.
In addition, the merger agreement provides that, except as otherwise
provided in the merger agreement, the Galileo board will not change its
recommendation that Galileo stockholders adopt the merger agreement or cause
Galileo to enter into a third party acquisition.
The merger agreement provides that, prior to the special meeting, if
Galileo, without violating its no solicitation obligations, receives an
unsolicited bona fide written proposal from any person or group with respect to
a third-party acquisition which the Galileo board (after consideration of
advice it shall have obtained from its legal and financial advisors) reasonably
expects will result in a superior proposal, then Galileo may furnish
information and access to such person or group pursuant to an appropriate
confidentiality agreement and may participate in discussions and negotiations
with that person or group. The merger agreement provides that the terms of the
confidentiality agreement will not be less restrictive than the terms set forth
in the confidentiality agreement between Galileo and Cendant, dated as of March
9, 2001.
Galileo also agreed to notify Cendant in writing of the receipt of any
proposal, written or oral, as soon as possible, but, in any event, within 24
hours of the receipt of any proposal relating to a third-party acquisition or
any request for non-public information relating to Galileo or any of its
subsidiaries in connection with any pending, proposed or contemplated third-
party acquisition or for access to the properties, books or records of Galileo
or any of its subsidiaries by any person that, to Galileo's knowledge, is
considering making, or has made, a proposal relating to a third-party
acquisition. The notice will identify the person submitting the proposal,
attach a copy of any written correspondence or other written materials relating
to the proposal, and summarize any significant terms of the proposal not
reflected in any of the attached materials. In addition, the notice will, to
the extent then known by Galileo, state whether Galileo is providing or intends
to provide the person or group making the proposal with access to information
concerning Galileo or any of its subsidiaries, in accordance with the
provisions of this section. The notice will also include any expectation by the
Galileo board, if then known, that the third-party acquisition proposal will
result in a superior proposal. If the foregoing is not then known, then Galileo
will thereafter give prompt notice to Cendant of any subsequent determination
as to the provision to the person or group making the proposal of access to
such information, and any such expectation. Galileo will keep Cendant informed
of the status of any of the negotiations and will further update, to the extent
of any significant developments, the information required to be provided in
each notice upon the request of Cendant.
Notwithstanding anything in the merger agreement to the contrary:
. Galileo or the Galileo board will be permitted, to the extent applicable,
to comply with certain Exchange Act rules or to make any required
disclosure to Galileo stockholders if, in the good faith judgment of the
Galileo board (after consideration of advice it will have obtained from
its outside counsel) failure to so disclose would constitute a violation
of applicable law; and
. the Galileo board may change its recommendation that Galileo stockholders
adopt the merger agreement and disclose to Galileo stockholders the
position of the Galileo board with respect to the transactions
contemplated by the merger agreement or otherwise make disclosure to
them, with respect to the matters to be considered at the Galileo
stockholders meeting, in the event that the Galileo board determines in
good faith, after consideration of advice it will have obtained from its
outside counsel, that failure to take that action would create a
substantial probability of violating the Galileo board's fiduciary duties
to Galileo stockholders under applicable law.
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The obligation of Galileo to duly call, give notice of, convene and hold the
Galileo stockholders meeting will not be affected by the commencement,
proposal, public disclosure or communication to Galileo of a third-party
acquisition or a superior proposal or by the taking of any action by the
Galileo board that does not violate Galileo's no solicitation obligations.
The term "third-party acquisition" means any of the following events other
than, in each case, the transactions contemplated by the merger agreement:
. the merger, reorganization, share exchange, consolidation, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving Galileo, or any purchase or sale of the
consolidated assets (including without limitation stock of Galileo's
subsidiaries) of Galileo and its subsidiaries, taken as a whole having an
aggregate value of 20% or more of the equity securities of Galileo, or a
"merger of equals" with, any a third party. A third party includes any
officer or director of Galileo or any of its affiliates or any affiliate
of that officer or director other, than a subsidiary of Cendant;
. the acquisition by a third party of 20% or more of the outstanding shares
of Galileo common stock;
. the acquisition by a third party of Quantitude or Trip.com;
. the adoption by Galileo of a plan of liquidation or the declaration or
payment of an extraordinary dividend; or
. the repurchase by Galileo or any of its subsidiaries of more than twenty
percent (20%) of the outstanding shares of Galileo common stock.
The term "superior proposal" means any bona fide written proposal to
acquire, directly or indirectly, for consideration consisting of cash and/or
securities, all of the shares of Galileo common stock then outstanding or all
or substantially all of the assets of Galileo that:
. is not subject to any financing conditions or contingencies;
. provides holders of Galileo common stock with per share consideration
that the Galileo board determines in good faith (after consideration of
advice that it shall have obtained from its financial advisor) to be more
favorable to the stockholders of Galileo from a financial point of view
than the merger consideration (taking into account all the terms and
conditions of the proposal and the merger agreement including any changes
to the financial or other terms of the merger agreement proposed by
Cendant in response to that offer or otherwise);
. is determined by the Galileo board in its good faith judgment (after
consideration of advice that it will have obtained from its legal or
financial advisor) to be reasonably capable of being completed (taking
into account all legal, financial, regulatory and other aspects of the
proposal, the person making the proposal and the expected timing to
complete the proposal); and
. does not, in the definitive Galileo acquisition agreement, contain any
"due diligence" conditions. A Galileo acquisition agreement means any
memorandum of understanding, agreement in principle, letter of intent,
contract or agreement (whether written or oral).
Access to Information
Cendant and Galileo each agreed to give one another reasonable access at all
reasonable times during normal business hours to contracts, books, records,
analysis, projections, plans, systems, personnel, commitments, offices and
other facilities and properties and their accountants and accountants' work
papers. Cendant and Galileo also each agreed to furnish one another on a timely
basis with such financial and operating data and other information with respect
to their businesses and properties as they may from time to time reasonably
request and use reasonable best efforts to make available at all reasonable
times during normal business hours to their officers, employees, accountants,
counsel, financing sources and other representatives.
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Indemnification and Insurance
Under the merger agreement, Cendant has agreed to cause the surviving
corporation to maintain in effect for not less than six years, Galileo's
current directors' and officers' insurance policies, if that insurance is
obtainable (or policies equivalent in all material respects to those maintained
by or on behalf of Galileo and its subsidiaries on the date of the merger
agreement, and having at least the same coverage and containing terms and
conditions no less advantageous to the current and all former directors and
officer of Galileo) with respect to acts or failure to act prior to the
effective time of the merger. Cendant and the surviving corporation will not be
required to maintain or obtain policies providing the coverage except to the
extent the coverage can be provided at or below the insurance cap (an annual
cost of no greater than two times the most recent annual premium paid by
Galileo prior to the date of the merger agreement). If equivalent coverage
cannot be obtained or can be obtained only by paying an annual premium in
excess of the insurance cap, Cendant or the surviving corporation will be
required to only obtain as much coverage as can be obtained by paying an annual
premium equal to the insurance cap.
The merger agreement also provides that, from and after the effective time
of the merger, Cendant and the surviving corporation will indemnify and hold
harmless to the fullest extent permitted under applicable law, each person who
is, or has been at any time prior to the date of the merger agreement or who
becomes prior to the effective time of the merger, an officer or director of
Galileo or any of its subsidiaries against all losses, claims, damages,
liabilities, cost and expenses (including attorneys' fees), judgments, fines,
penalties and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation arising out of or pertaining to act or
omissions, or alleged acts or omissions, by them in their capacities as such,
which acts and omissions occurred prior to the effective time of the merger,
whether asserted or claimed prior to, at or after the effective time of the
merger.
In addition, Cendant has agreed to cause the surviving corporation to keep
in effect for a period of not less than six years from the effective date of
the merger (or in the case of matters occurring prior to the effective date of
the merger which have not been resolved prior to the sixth anniversary of the
effective date of the merger, until those matters are finally resolved) all
provisions in the surviving corporation's certificate of incorporation and
bylaws that provide for exculpation of director and officer liability and
indemnification (and related advancement of expenses) of the past and present
officers and directors of Galileo to the fullest extent permitted by the
Delaware General Corporation Law, and those provisions will not be amended
except as either required by applicable law or to make changes permitted by law
that would enhance the rights of past or present officers and directors to
indemnification or advancement of expenses.
The merger agreement also provides for the assumption of the obligations set
forth above by the successors and assigns of Cendant or the surviving
corporation.
Tax Matters
Under the terms of the merger agreement, from the date of the merger
agreement until the effective time of the merger, Galileo agreed to timely file
all tax returns it is required to file, to pay all taxes related to those
returns, to accrue a reserve in its books and records and financial statements,
in accordance with past practice, for all taxes payable by Galileo for which no
return is due prior to the effective time of the merger, and to promptly notify
Cendant of any federal or state income or franchise, or other material tax,
suit, claim, action, investigation, proceeding or audit pending against or with
respect to Galileo or its subsidiaries relating to any tax matters.
In addition, each of Galileo and Cendant agreed that they would not, nor
would their respective affiliates, directly or indirectly (without the consent
of the other) take any action or fail to take any action, that would reasonably
be expected to adversely affect the qualification of the merger as a
reorganization under Section 368(a) of the Internal Revenue Code.
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Benefit Plans
The merger agreement generally provides that for a period of one year
following the effective time of the merger, Cendant will continue to provide
eligible employees of Galileo employee benefits on terms substantially
identical to those provided by Galileo (other than equity-based incentive
plans). Eligible Galileo employees will participate or not participate in
Cendant equity-based incentive plans on the same basis as similarly situated
employees of Cendant. Cendant also generally agreed in the merger agreement to
maintain certain Galileo severance plans with respect to any eligible Galileo
employee who is employed at the effective time and whose employment is
terminated during the one-year period commencing at the effective time of the
merger for any reason other than cause as determined under such plan. Cendant
also agreed to credit Galileo employees with their years of service with
Galileo except to the extent necessary to avoid the duplication of benefits. In
addition, the merger agreement generally provides that Cendant will grant to
eligible Galileo employees options to purchase CD common stock, at fair market
value on the date of grant on such terms as apply as of the date of the merger
agreement, to similarly situated employees of Cendant.
Cendant Actions Prior to Completion of the Merger
Under the merger agreement, Galileo acknowledged that Cendant may take
actions involving (1) a merger, reorganization, share exchange, spin-off,
consolidation, recapitalization, liquidation, dissolution or similar
transaction, (2) any purchase or sale of the consolidated assets of a person or
any division or unit thereof, (3) any purchase or sale of, or tender or
exchange offer for, equity securities of any person, (4) the acquisition of 20%
or more of the outstanding equity securities of any person, or (5) any
financings. Galileo's acknowledgment, however, does not modify or diminish
Galileo's rights or Cendant's obligations under the merger agreement.
Conditions to the Completion of the Merger
The completion of the merger depends upon meeting a number of conditions,
including the following:
. the adoption of the merger agreement by the affirmative vote of the
holders of a majority of the outstanding shares of Galileo's common
stock;
. the absence of any restraints (temporary restraining order, preliminary
or permanent injunction or other judgment or order issued by any court of
competent jurisdiction or other statute, law, rule, legal restraint or
prohibition) that prevent the consummation of the merger;
. the absence of any action, suit or proceeding by a governmental entity
seeking to restrain in any material respect to prohibit the consummation
of the merger, seeking to obtain from Galileo, Cendant or Galaxy
Acquisition Corp. any damages that, individually or in the aggregate,
would be reasonably likely to result in a material adverse effect on
Galileo or Cendant, or seeking to impose any of the restraints referred
to in the immediately preceding bullet;
. the registration statement having become effective under the Securities
Act and not being the subject of any stop order or proceedings seeking a
stop order;
. the shares of CD common stock issuable to the holders of Galileo common
stock and issuable upon the exercise to holders of the Galileo options
and stock appreciation rights to be assumed by Cendant having been
approved for listing on the NYSE;
. any waiting period applicable to the merger under the Hart-Scott-Rodino
Act having been terminated or expired, the European Commission having
issued a decision under Article 6(1)(b) or 8(2) of Council Regulation No.
4064/89 of the European Community (or will be deemed to have done so
under Article 10(6) of the Council Regulation) declaring the merger
compatible with the EC Common Market, the governmental approval and
consent of the Treasurer of the Commonwealth of Australia under the
Foreign Acquisition and Takeovers Act 1975(th), and any applicable
waiting periods under Section 123 of the Canadian Competition Act having
expired or been earlier terminated or waived; and
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. all consents, approvals and actions of, and filing with and notices to
any governmental entity required of Galileo, Cendant, Galaxy Acquisition
Corp. or any of their respective subsidiaries under any regulatory law
(other than the filings set forth in the immediately preceding bullet) to
consummate the merger and the other transactions contemplated by the
merger agreement, the failure of which to be obtained or made would
impose a risk of criminal liability, criminal fines, imprisonment or
confinement, in each case, upon any officer, employee or director of
Galileo, Cendant or any of their respective subsidiaries, reasonably be
expected to have a material adverse effect on Galileo or Cendant, or
impose operating or other regulatory restrictions in jurisdictions from
which more than 10% of the consolidated revenues of Galileo and its
subsidiaries are generated, will have been obtained.
In addition, Cendant's obligation to complete the merger is subject to,
among other things:
. the representations and warranties of Galileo set forth in the merger
agreement (other than the representations and warranties of Galileo set
forth in bullets two, three and five (as it relates to Galileo's
financial statements) following the first full paragraph under the
heading "Representations and Warranties" in this summary) will be true
and correct both when made and as of the effective time of the merger
(except to the extent expressly made as of a specified date, in which
case as of that date), except where the failure of those representations
and warranties to be so true and correct (without giving effect to any
limitation as to "materiality" or a material adverse effect on Galileo
set forth in those representations and warranties) would not,
individually or in the aggregate, reasonably be expected to have a
material adverse effect on Galileo;
. the representations and warranties of Galileo set forth in bullets two,
three and five (as it relates to Galileo's financial statements)
following the first full paragraph under the heading "Representations and
Warranties" in this summary, will be true and correct in all material
respects both when made and as of the effective time of the merger
(except to the extent expressly made as of a specified date, in which
case as of that date);
. Galileo will have performed and complied in all material respects with
all obligations, agreements and covenants required by the merger
agreement to be performed or complied with by it prior to the effective
time of the merger;
. Cendant will have received a certificate signed by the chief financial
officer of Galileo, to the effect that, to the best of that officer's
knowledge, the conditions set forth in bullets one and two of this
section, have been satisfied;
. there has been no event, change, development or circumstance (regardless
of whether that event, change, development or circumstance arose before
or after the date of the merger agreement or was disclosed by Galileo to
Cendant pursuant to the terms of the merger agreement) that would
reasonably be expected to have a material adverse effect on Galileo after
the date of the merger agreement;
. Cendant will have received the opinion of Skadden, Arps, Slate, Meagher &
Flom LLP, in form and substance reasonable satisfactory to Cendant, to
the effect that the merger will qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code;
. a change of the recommendation of the Galileo board has not occurred; and
. Cendant will have received from each person named in the letter referred
to in this summary under the heading "Covenants of Galileo--Affiliates"
an executed copy of the affiliate letter referred to under that heading.
In addition, Galileo's obligation to complete the merger is subject to,
among other things:
. the representations and warranties of Cendant and Galaxy Acquisition
Corp. set forth in the merger agreement (other than the representations
and warranties set forth in bullets two, three, five (as it relates to
Cendant's financial statements) and six (as it relates to the absence of
certain changes in Cendant's business and undisclosed liabilities)
following the first full paragraph under the heading "Representations and
Warranties" in this summary and Cendant's representation to Galileo
concerning
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Cendant's ownership of Galileo common stock) will be true and correct both
when made and as of the effective time of the merger (except to the extent
expressly made as of an earlier date, in which case as of that date)
except where the failure of that representation and warranties to be so
true and correct, without giving effect to any limitation as to
"materiality" or a material adverse effect on Cendant set forth in those
representations and warranties, would not, individually or in the
aggregate, be reasonably expected to have a material adverse effect on
Cendant;
. the representations and warranties of Cendant and Galaxy Acquisition
Corp. set forth in bullets two, three and five (as it relates to
Cendant's financial statements) following the first full paragraph under
the heading "Representations and Warranties" in this summary, will be
true and correct in all material respects both when made and at and as of
the effective time of the merger (except to the extent expressly made as
of an earlier date, in which case as of that date);
. the representations and warranties of Cendant and Galaxy Acquisition
Corp. set forth in the merger agreement with respect to Cendant's
ownership of Galileo common stock, will be true and correct in all
respects both when made and at and as of the effective time of the merger
(except to the extent expressly made as of an earlier date, in which case
as of that date);
. Cendant and Galaxy Acquisition Corp. will have performed and complied in
all material respects with all obligations, agreements and covenants
required by the merger agreement to be performed and complied with by it
prior to the effective time of the merger;
. Galileo will have received a certificate signed by the chief financial
officer of Cendant, to the effect that, to the best of that officer's
knowledge, the conditions set forth in bullets one through four above
have been satisfied; and
. Galileo will have received the opinion of Jones, Day, Reavis & Pogue, in
form and substance reasonably satisfactory to Galileo, to the effect that
the merger will qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code.
Termination of the Merger Agreement
The merger agreement may be terminated at any time prior to the completion
of the merger:
. by the mutual consent of Cendant and Galileo;
. if the effective time of the merger agreement has not occurred on or
prior to July 1, 2002. The right to terminate the merger agreement
pursuant to this provision is not available to any party whose failure to
fulfill any obligation under the merger agreement has been the cause of,
or resulted in, the failure of the merger to be consummated on or prior
to July 1, 2002;
. if a governmental entity has issued a nonappealable final order, decree
or ruling or taken any other nonappealable final action having the effect
of permanently restraining, enjoining or otherwise prohibiting the
merger; or
. if the special meeting of the Galileo stockholders has been held and
Galileo stockholders failed to adopt the merger agreement.
In addition, Galileo may terminate the merger agreement at any time prior
to the completion of the merger:
. upon a terminating breach (a material breach of any covenant or agreement
set forth in the merger agreement) on the part of Cendant or Galaxy
Acquisition Corp. Galileo may not terminate the merger agreement under
this provision until the earlier of 45 days following notice of the
terminating breach and July 1, 2002, if the terminating breach is curable
on or prior to the earlier of 45 days following notice of the terminating
breach and July 1, 2002 by Cendant or Galaxy Acquisition Corp. through
the exercise of its reasonable best efforts;
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. if Cendant or Galaxy Acquisition Corp. has breached any representation
and warranty set forth in the merger agreement in any material respect;
provided that:
. Galileo may not terminate the merger agreement under this provision
until the earlier of 45 days following notice of the breach and July
1, 2002, if the breach is curable prior to the earlier of 45 days
following notice of the breach and July 1, 2002, by Cendant or Galaxy
Acquisition Corp., as the case may be, through the exercise of its
reasonable best efforts; and
. the breach would give rise to the failure of a condition set forth in
bullets one through three above under the heading "Conditions to the
Completion of the Merger" in this summary, relating to Galileo's
obligation to complete the merger; or
. if the Cendant average trading price is less than or equal to $14.00.
In addition, Cendant may terminate the merger agreement at any time prior to
the completion of the merger:
. upon a terminating breach on the part of Galileo. However, Cendant may
not terminate the merger agreement under this provision until the earlier
of 45 days following notice of such terminating breach and July 1, 2002,
if the terminating breach is curable on or prior to the earlier of 45
days following notice of the terminating breach and July 1, 2002 by
Galileo through the exercise of its reasonable best efforts;
. if a change in the recommendation of the Galileo board has occurred; or
. if Galileo has breached any representation and warranty set forth in the
merger agreement in any material respect; provided, that:
. Cendant may not terminate the merger agreement under this provision
until the earlier of 45 days following notice of the breach and July
1, 2002, if the breach is curable on or prior to the earlier of 45
days following notice of the breach and July 1, 2002 by Galileo
through the exercise of its reasonable best efforts; and
. the breach would give rise to the failure of a condition set forth in
bullets one and two above under the heading "Conditions to the
Completion of the Merger" in this summary, relating to Cendant's
obligation to complete the merger.
Termination Fee and Expenses
Galileo must pay to Cendant a termination fee of $100 million and up to $10
million of Cendant's expenses actually incurred upon the first to occur of any
of the following events:
. the termination of the merger agreement by Cendant or Galileo pursuant to
the second bullet under the first full paragraph under the heading
"Termination of the Merger Agreement" in this summary, or the termination
of the merger agreement by Cendant pursuant to the first and third
bullets under the third full paragraph (relating to Cendant's ability to
terminate the merger agreement) under the heading "Termination of the
Merger Agreement" in this summary; provided, that, prior to the
termination, Galileo becomes aware that any person has made or intends to
make a proposal relating to a third-party acquisition and, within 12
months following the date of the termination, a third-party acquisition
is consummated or a definitive agreement with respect to a third-party
acquisition is executed by Galileo;
. the termination of the merger agreement by Cendant pursuant to the second
bullet under the third full paragraph (relating to Cendant's ability to
terminate the merger agreement) under the heading "Termination of the
Merger Agreement" in this summary; or
. the termination of the merger agreement by Cendant or Galileo pursuant to
the fourth bullet under the first full paragraph under the heading
"Termination of the Merger Agreement" in this summary; provided, that
Cendant had the right to terminate under the second bullet under the
third full paragraph
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(relating to Cendant's ability to terminate the merger agreement) under
the heading "Termination of the Merger Agreement" in this summary, or a
third-party acquisition is publicly announced or otherwise made known to
the public at or prior to the Galileo stockholders meeting and, within 12
months following the date of the termination, a third-party acquisition is
consummated or a definitive agreement with respect to a third-party
acquisition is executed by Galileo.
In the event of a termination of the merger agreement pursuant to the
fourth bullet under the first full paragraph under the heading "Termination of
the Merger Agreement" in this summary in circumstances where the third bullet
under the first full paragraph under the heading "Termination Fee and
Expenses" is not applicable, Galileo will pay, or cause to be paid, to
Cendant, Cendant's expenses actually incurred up to $10 million.
Notwithstanding anything under the first full paragraph under the heading
entitled "Termination Fee and Expenses" in this summary or the stock option
agreement, in no event will the sum of the termination fee to be paid to
Cendant under the merger agreement and the aggregate amounts actually paid to
or realized by Cendant pursuant to the stock option agreement, exceed $100
million.
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THE VOTING AGREEMENT
The following is a summary of the material terms of the transaction support
agreement, known as the voting agreement, and is qualified by reference to the
complete text of the agreement, which is incorporated by reference and attached
to this proxy statement-prospectus as Annex B. You should read the voting
agreement carefully and in its entirety.
Agreement to Vote and Proxy
In connection with the merger agreement, United and Covia entered into a
voting agreement with Cendant. At June 15, 2001, Covia beneficially owned
15,940,000 outstanding shares of Galileo common stock. These shares represented
18.2% of the total issued and outstanding shares of Galileo common stock at
June 30, 2001.
Under the terms of the voting agreement, Covia agreed that, until the voting
agreement is terminated, it would vote, or cause to be voted, and grant Cendant
a proxy to vote, all of its shares:
. in favor of the adoption of the merger agreement;
. against any third-party acquisition; and
. against any proposed action by Galileo, Galileo's stockholders or any
other person, the result of which action could prevent or materially
delay completion of the merger.
In addition, Covia granted to and appointed Cendant, and any designee of
Cendant, Covia's proxy and attorney-in-fact to vote Covia's shares in the
manner set forth above.
Each of United and Covia agreed not to enter into any agreement or
commitment with any person, the effect of which would be inconsistent with or
violative of the provisions and agreements set forth above.
Restrictions on Transfer
Each of United and Covia agreed with Cendant that, during the period
commencing on the date of the voting agreement and ending on the date that the
voting agreement is terminated, Covia will not transfer to any person its
shares. A transfer is deemed to include the sale, transfer, pledge,
hypothecation, encumbrance, assignment or disposition of such securities or the
beneficial ownership of such securities, the offer to make such a sale,
transfer or other disposition, and each option, agreement, arrangement or
understanding, whether or not in writing, to effect any of the foregoing.
Standstill
Each of United and Covia agreed with Cendant that, during the period
commencing on the date of the voting agreement and ending on the date the
voting agreement is terminated:
. United and Covia will not solicit or participate in any solicitation of
proxies with respect to any shares of Galileo common stock, nor will they
seek to advise or influence any person with respect to the voting of any
shares of Galileo common stock, other than to recommend that Galileo
stockholders vote in favor of the merger and the merger agreement and
otherwise as expressly provided for under the heading "Agreement to Vote
and Proxy" in this summary;
. United and Covia will not deposit any shares of Galileo common stock or
Galileo special voting preferred stock in a voting trust or subject any
shares of Galileo common stock or Galileo special voting preferred stock
to any arrangement or agreement with any person with respect to the
voting of those shares of Galileo common stock or Galileo special voting
preferred stock, except as provided for above under the heading
"Agreement to Vote and Proxy" in this summary;
. United and Covia will not seek control of the management, board of
directors or policies of Galileo, encourage, invite, initiate or solicit
any inquiries relating to or the submission or making of a proposal
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by any person with respect to a third-party acquisition, participate in or
encourage, invite, initiate or solicit negotiations or discussions with,
or furnish or cause to be furnished any information to, any person
relating to a third-party acquisition. However, if, prior to the special
meeting, United or Covia, without being in violation of the terms of the
provisions in this section under the heading entitled "Standstill" in this
summary, or Galileo, without being in violation of the no solicitation
obligations set forth in the merger agreement, receives an unsolicited
bona fide written proposal from any person or group with respect to a
third-party acquisition which United determines in good faith could
reasonably be expected to result in a superior proposal or there is a
superior proposal which has been made by any person, then United or Covia,
and their affiliates and representatives may, directly or indirectly,
furnish information and access to such person or group pursuant to an
appropriate confidentiality agreement and may participate in discussions
and negotiations with such person or group;
. United and Covia will not request a waiver of any of the terms or
provisions of the voting agreement in any manner that would require
public disclosure by Cendant, Galileo or United; and
. Cendant acknowledges that United's two designees on the Galileo board may
act in their capacities as directors of Galileo in accordance with their
fiduciary duties to Galileo and its stockholders.
Termination
The voting agreement will terminate upon the earlier of:
. the effective time of the merger;
. the termination of the merger agreement;
. a change in the Galileo board recommendation that Galileo stockholders
adopt the merger agreement, as a result of a superior proposal; or
. an amendment, modification or waiver of any provision of the merger
agreement that United reasonably determines in good faith is adverse in
a material respect to United.
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THE STOCK OPTION AGREEMENT
The following is a summary of the material terms of the stock option
agreement and is qualified by reference to the complete text of the agreement
which is attached as Annex C and incorporated by reference into this proxy
statement-prospectus. You should read the stock option agreement in its
entirety.
In connection with the merger agreement, Galileo entered into a stock option
agreement with Cendant. Under the stock option agreement, Galileo granted to
Cendant an irrevocable option to purchase up to 17,041,071 shares of Galileo
common stock, at an exercise price of $33.00 per share (subject to adjustment).
In no event will the number of Galileo shares for which the option is
exercisable exceed 19.5% of the issued and outstanding shares of Galileo common
stock.
Exercise of the Option
The option may be exercised by Cendant, in whole or in part, at any time or
from time to time after:
. the merger agreement becomes terminable by Cendant under circumstances
which could entitle Cendant to the termination fee under the terms of
the merger agreement (regardless of whether the merger agreement is
actually terminated); and
. the voting agreement has been terminated.
If Cendant proposes to exercise the option following the record date of the
Galileo special meeting, Galileo, at Cendant's request given no later than five
days prior to the Galileo special meeting, will take all actions necessary to
fix a new record date and to hold the Galileo special meeting at such time that
provides Cendant the opportunity to vote its Galileo common stock at the
Galileo special meeting. The Galileo board will not be required to take that
action in the event that the Galileo board determines, in good faith (with due
regard for the intention of the parties to the option agreement that, upon
exercise of the option, Cendant be able to vote its shares of Galileo common
stock at the Galileo stockholders meeting) and after consideration of advice it
shall have obtained from outside counsel, that taking such action would create
a substantial probability of violating the Galileo board's fiduciary duties to
the Galileo stockholders under applicable law.
Conditions
Galileo's obligation to issue Galileo common stock to Cendant under the
option agreement is subject to the conditions that:
. all waiting periods, if any, under the Hart-Scott-Rodino Act applicable
to the issuance of Galileo common stock under the stock option agreement
will have expired or will have been terminated and all required filings
will have been made and all required approvals will have been obtained
under foreign competition laws; and
. no statute, rule or regulation will be in effect, and no order, decree
or injunction entered by any court of competent jurisdiction or
governmental entity in the United States will be in effect, that
prohibits or restrains the exercise of the option pursuant to the terms
of the stock option agreement.
Put Right
At any time during which the option is exercisable, Cendant will have the
right to sell to Galileo (or any successor entity of Galileo):
. all or any portion of the option, at a price equal to the product
obtained by multiplying:
. the difference between the market offer price for shares of Galileo
common stock as of the notice date (the date of the notice of
exercise) is given to Galileo, and $33.00; by
. the number of shares of Galileo common stock purchasable pursuant to
the option; or
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. all or any portion of the Galileo common stock purchased by Cendant upon
exercise of the option, at a price equal to the product obtained by
multiplying:
. the higher of $33.00 and the market offer price; by
. the number of shares of Galileo common stock with respect to which
Cendant is exercising its rights.
As used in this summary "market offer price" will mean the higher of:
. the highest price per share offered as of the notice date in any tender
or exchange offer or any other third-party acquisition proposal; and
. the average of the closing sales prices of Galileo common stock reported
on the NYSE for the five consecutive trading days ending on (and
including) the trading day immediately preceding the notice date.
Registration Rights
At any time and from time to time within two years of the exercise of the
option, Cendant will have certain registration rights under the Securities Act
with respect to the shares of Galileo common stock issued pursuant to the
option. However, any demand registration request made by Cendant must equal at
least 20% of the total number of shares of Galileo common stock issuable under
the option. These registration rights terminate at the time Cendant is able to
sell its shares of Galileo common stock under rule 144(k) under the Securities
Act. In addition, Galileo has rights to purchase from Cendant all or any part
of the shares of Galileo common stock proposed to be sold for cash in a
registered offering.
In connection with its registration rights obligations, Galileo has agreed:
. to prepare and file registration statements under the Securities Act to
cover the registrable securities; and
. to use reasonable efforts to cause each registration statement to become
effective, to obtain all consents or waivers of other parties which are
required, and to keep each registration statement or prospectus
effective for a period not in excess of 120 calendar days.
The obligations of Galileo to file a registration statement or prospectus
and to maintain its effectiveness may be suspended for up to 90 calendar days
in the aggregate during any 12-month period if Galileo determines, in its
reasonable judgment and upon the advice of outside counsel, that the filing of
the registration statement or prospectus or the maintenance of its
effectiveness would require premature disclosure of nonpublic information that
would materially and adversely affect Galileo or otherwise interfere with or
adversely affect any pending or proposed offering of securities of Galileo or
any other material transaction involving Galileo, or Galileo would be required
under the Securities Act to include audited financial statements for any period
in the registration statement or prospectus and such financial statements were
not yet available for inclusion in the registration statement or prospectus.
Galileo also granted Cendant "piggyback rights" for the same period of time
as the above demand registration rights. These allow Cendant to participate in
offerings on terms reasonably satisfactory to the managing underwriters of such
offerings.
Limitation on Profit
In no event will the total payments received by Cendant and its affiliates
exceed $100 million and, if it otherwise would exceed that amount, Cendant, at
its sole election, will either:
. reduce the number of shares of Galileo common stock subject to the
option;
. deliver to Galileo for cancellation Galileo common stock previously
purchased by Cendant;
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. pay cash to Galileo; or
. any combination of the above.
The "total payments" is the sum (before taxes) of the following:
. any amount received by Cendant pursuant to Cendant's put right (as
described above);
. the net (1) cash amounts received or (2) the fair market value of
securities received by Cendant pursuant to the sale of Galileo common
stock to any unaffiliated party (including any conversion of such
Galileo common stock in connection with a third party acquisition)
within 12 months following exercise of the option, less the aggregate
exercise price for those shares;
. any amounts received by Cendant upon transfer of the option (or any
portion of the option) to an unaffiliated party; and
. the amount, if any, of the termination fee actually received by Cendant
pursuant to the terms of the merger agreement.
Termination of the Option
The option will terminate upon the earliest of:
. the effective time of the merger;
. the termination of the merger agreement pursuant to its terms (other
than a termination following the occurrence of the event described in
the first bullet under the heading "Exercise of the Option" in this
summary); and
. 5:00 p.m., New York City time, on the date that is the one-year
anniversary of the termination of the merger agreement following the
occurrence of the event described in the first bullet under the heading
"Exercise of the Option" in this summary, or if, at the expiration of
that one-year period, the option cannot be exercised by reason of any
applicable judgment, decree, order, law or regulation, ten business days
after such impediment to exercise has been removed or has become final
and not subject to appeal.
Effect of the Stock Option Agreement and the Voting Agreement
The stock option agreement and the voting agreement are intended to make it
more likely that the merger will be completed on the agreed terms. These
agreements may have the effect of making an acquisition or other business
combination involving Galileo by or with a third party more costly because of
the need, in any transaction, to acquire the shares of Galileo common stock and
voting rights held pursuant to these agreements.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT OF GALILEO COMMON STOCK
Certain Beneficial Owners
The following table sets forth certain information, as of June 30, 2001,
with respect to any person known by Galileo to be the beneficial owner of more
than five percent of the shares of Galileo voting stock:
Special Voting
Preferred
Common Shares Stock
------------------ --------------
Beneficial Owner(1) Number Percent Number Percent
------------------- ---------- ------- ------ -------
United Air Lines, Inc.(2)..................... 15,940,000 18.2% 2 66.7%
SAirGroup(3).................................. 7,000,400 8.0% 1 33.3%
Leon G. Cooperman(4).......................... 6,043,394 6.9% -- --
Barclays Global Investors, N.A.(5)............ 5,232,894 6.0% -- --
David J. Greene and Company, LLC(6)........... 4,782,420 5.5% -- --
--------
(1) As used in this table, the term "beneficial owner" has the meaning given
such term in Rule 13d-3 under the Exchange Act. Except as noted, each
person has sole voting and investment power over the shares reported.
(2) Shares are owned directly by Covia. The business address of Covia is 1200
East Algonquin Road, Elk Grove Township, Illinois 60007. Cendant has voting
power of 15,940,000 shares of Galileo common stock beneficially owned by
United pursuant to a proxy granted to Cendant under the voting agreement.
United may terminate the voting agreement and revoke its proxy upon the
occurrence of certain events specified in the voting agreement. See "The
Voting Agreement." Cendant is not entitled to any rights as a stockholder
of Galileo, holds no right to dispose of the Galileo common stock owned by
United, and expressly disclaims beneficial ownership of these shares.
(3) Shares are owned directly by Roscor, A.G., a wholly owned subsidiary of
SAirGroup. The business address of Roscor, A.G. is CH-8058, Zurich Airport,
Switzerland.
(4) Consists of Galileo common stock owned by Omega Capital Partners, L.P.
("Capital LP"), Omega Institutional Partners, L.P. ("Institutional LP"),
Omega Equity Investors, L.P. ("Equity LP"), Omega Capital Investors, L.P.
("Investors LP"), Omega Overseas Partners, Ltd. ("Overseas") and the
Managed Accounts (as defined below). Leon G. Cooperman is the ultimate
controlling person of Capital LP, Institutional LP, Equity LP, Investors
LP, the general partner of each of such partnerships and Omega Advisors,
Inc. ("Advisors"). Advisors serves as the investment manager to Overseas
and the owner of Advisors serves as a discretionary investment advisor to a
limited number of institutional clients (the "Managed Accounts"). Mr.
Cooperman has sole voting and dispositive power over 4,163,894 shares of
Galileo common stock and shared voting and dispositive power over 1,879,500
shares of Galileo common stock. The principal business address of Mr.
Cooperman is 88 Pine Street, Wall Street Plaza--31st Floor, New York, New
York 10005. The share holdings reported above are as of December 31, 2000,
as reported on the amendment to Schedule 13G filed on February 7, 2001 by
Mr. Cooperman.
(5) Consists of (A) 4,709,748 shares beneficially owned by Barclays Global
Investors, N.A. (4,436,104 of which such person holds sole voting power
over); (B) 328,336 shares beneficially owned by Barclays Global Fund
Advisors (320,904 of which such person holds sole voting power over); (C)
1,000 shares beneficially owned by Barclays Bank PLC; (D) 9,602 shares
beneficially owned by Barclays Funds Limited; (E) 151,622 shares
beneficially owned by Barclays Global Investors, LTD.; and (F) 32,586
shares beneficially owned directly by Barclays Trust and Banking Company
(Japan) Ltd. The business address of Barclays Global Investors, N.A. and
Barclays Global Fund Advisors is 45 Fremont Street, San Francisco,
California 94105. The business address of Barclays Bank PLC is 54 Lombard
Street, London, England EC3P 3AH. The business address of Barclays Funds
Limited is Gredley House, 11 The Broadway, Stratford, England E15 4BJ. The
business address of Barclays Global Investors, LTD. is Murray House, 1
Royal Mint Court, London, England EC3 NHH. The business address of Barclays
Trust and Banking
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Company (Japan) Ltd. is Ebisu Prime Square Tower, 8th Floor, 1-1-39 Hiroo,
Shibuya-Ku, Tokyo, Japan 150-8402. The share holdings reported above are as
of December 31, 2000, as reported on the Schedule 13G filed on February 14,
2001 by the above stockholders.
(6) David J. Greene and Company, LLC has sole voting and dispositive power
over 236,500 shares of Galileo common stock, shared voting power over
2,382,230 shares of Galileo common stock, and shared dispositive power
over 4,545,920 shares of Galileo common stock. The business address of
such stockholder is 599 Lexington Avenue, New York, New York 10022. The
share holdings reported above are as of December 31, 2000, as reported on
the amendment to Schedule 13G filed on February 14, 2001 by David J.
Greene and Company, LLC.
Cendant may acquire 17,041,071 shares of Galileo common stock upon exercise
of its option granted pursuant to the stock option agreement. This number of
shares represents approximately 19.5% of the total outstanding shares of
Galileo common stock as of June 15, 2001, excluding shares issuable upon
exercise of the option. See "The Stock Option Agreement." The option may be
exercised only if the merger agreement may be terminated by Cendant in
circumstances which could entitle Cendant to the termination fee set forth in
the merger agreement and the voting agreement is terminated, neither of which
has occurred as of the date of this proxy statement-prospectus. Accordingly,
at no time will Cendant beneficially own or have the power to vote both the
Galileo common stock owned by United and the shares issuable upon exercise
under the option agreement. Therefore, Cendant will never beneficially own or
have the power to vote more than 17,041,071 of the outstanding shares of
Galileo common stock, subject to certain adjustments.
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Directors and Executive Officers
The following table sets forth certain information, as of June 30, 2001,
with respect to the beneficial ownership of shares of Galileo common stock by
each of Galileo's directors (including those owned by James E. Barlett, Cheryl
Ballenger and Anthony C. Swanagan who also serve as executive officers of
Galileo), by Galileo's Chief Executive Officer and four most highly compensated
executive officers (other than Galileo's Chief Executive Officer), and by all
directors and executive officers as a group.
Beneficial Ownership
-------------------------------------------
Shares
Subject to
Name of Individual and No. of Persons Shares Exercisable Percent of
in Group Owned Options Total(1) Class(2)
------------------------------------- ------- ----------- --------- ----------
Directors
Graham W. Atkinson................. -- -- -- *
Cheryl Ballenger................... 100 25,983 26,083 *
James E. Barlett................... 105,900(3) 398,483 504,383 *
Wim Dik............................ -- 12,000 12,000 *
Mina Gouran........................ -- 15,000 15,000 *
Matthew F.C. Miau.................. -- 10,000 10,000 *
Georges P. Schorderet(4)........... 1,500 -- 1,500 *
Andrew P. Studdert................. -- -- -- *
Anthony C. Swanagan................ -- 18,250 18,250 *
Kenneth Whipple.................... 2,000 22,000 24,000 *
Named Executive Officers
Babetta R. Gray.................... 200 185,984 186,184 *
James E. Lubinski.................. 200 254,883 255,083 *
David A. Near...................... 1,500 193,217 194,717 *
All directors and executive
officers as a group (15 persons).. 112,400 1,286,650 1,399,050 1.6%
--------
(1) The directors and executive officers, and all directors and executive
officers as a group, have sole voting and sole investment power over the
Galileo common stock listed except for Ms. Ballenger, Ms. Gray and Ms.
Bulman, who each share voting and investment power with a third party.
(2) An asterisk indicates that the percentage of shares beneficially owned by
the named individual does not exceed one percent (1%) of the outstanding
Galileo common stock.
(3) Includes Mr. Barlett's restricted stock award of 97,900 shares which was
granted in two equal annual installments of 48,950 shares on June 18, 1998
and June 18, 1999.
(4) On July 17, 2001, Mr. Schorderet, who had been the director designee of
SAirGroup, resigned his position on the Galileo board. SAirGroup has
advised Galileo that it does not intend to appoint a successor.
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COMPARISON OF RIGHTS OF STOCKHOLDERS OF GALILEO AND CENDANT
Cendant and Galileo are both organized under the laws of the State of
Delaware. Any differences, therefore, in the rights of holders of CD common
stock and Galileo common stock will arise from differences in their
certificates of incorporation and bylaws and, in the case of Galileo, from the
existence of a stockholders' agreement and a rights plan. Under the terms of
the merger agreement, Galileo stockholders will receive cash and CD common
stock in the merger. At the effective time of the merger, the rights of Galileo
stockholders will be governed by Delaware law, Cendant's amended and restated
certificate of incorporation and Cendant's amended and restated bylaws. The
following is a summary of the material differences between the current rights
of Galileo stockholders and the rights of Cendant stockholders.
The following discussion is not intended to be complete and is qualified in
its entirety by reference to Galileo's restated certificate of incorporation,
Galileo's restated bylaws, Galileo's stockholders' agreement, Galileo's rights
plan, Cendant's amended and restated certificate of incorporation, Cendant's
amended and restated bylaws and applicable provisions of Delaware 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 law, as well as the full text of the
certificates of incorporation and bylaws of Cendant and Galileo and Galileo's
stockholders' agreement and rights plan. 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."
Authorized Capital Stock
Galileo. The authorized capital stock of Galileo consists of:
. 250,000,000 shares of Galileo common stock, par value $0.01 per share, of
which there were, on June 30, 2001, 87,462,281 shares issued and
outstanding and 18,077,776 shares held by Galileo in its treasury;
. Seven shares of special voting preferred stock, par value $0.01 per
share, of which one share has been designated series A special voting
preferred stock, one share has been designated series B special voting
preferred stock, one share has been designated series C special voting
preferred stock, one share has been designated series D special voting
preferred stock, one share has been designated series E special voting
preferred stock, one share has been designated series F special voting
preferred stock and one share has been designated series G special voting
preferred stock, of which one share of each of the series A, B and E
special voting preferred stock was issued and outstanding on June 30,
2001; and
. 25,000,000 shares of ordinary preferred stock, par value $0.01 per share,
of which 2,500,000 shares have been designated as series H junior
participating preferred stock and none of which were issued and
outstanding on June 30, 2001.
Cendant. The authorized capital stock of Cendant consists of:
. 2,500,000,000 shares of common stock, par value $0.01 per share, of which:
. 2,000,000,000 shares are designated as CD common stock, of which
there were, on June 30, 2001, 857,074,916 shares issued and
outstanding and 175,887,540 shares held by Cendant in its treasury;
and
. 500,000,000 shares are designated as Move.com common stock, of which
there were, on June 30, 2001, 1,861,995 shares issued and
outstanding; and
. 10,000,000 shares of preferred stock, par value $0.01 per share, of which
there were no shares issued and outstanding as of June 30, 2001.
Cendant's certificate of incorporation contains detailed mechanisms for
allocating dividend, distribution, redemption, liquidation and other rights
between CD common stock and Move.com common stock.
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Board of Directors
Galileo. The board of directors of Galileo has 10 directors (with one
vacancy as of the record date). Galileo's certificate of incorporation and
bylaws provide that, subject to the rights, if any, of holders of preferred
stock, the number of directors shall be fixed from time to time by the Galileo
board.
Galileo's certificate of incorporation and bylaws provide for three classes
of directors, with each class elected for a term of three years and consisting
as nearly as possible of one third of the total number of directors on the
Galileo 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. Classification of directors
has the effect of making it more difficult for stockholders to change the
composition of the Galileo board.
Galileo's certificate of incorporation and bylaws provide that, except for
directors elected by holders of special voting preferred stock, if any,
directors shall be elected by a plurality of the votes cast at a meeting of
stockholders. Galileo's certificate of incorporation provides that each share
of special voting preferred stock entitles its holder, voting the share as a
separate class, to elect one director so long as certain Galileo common stock
ownership thresholds are maintained. If a holder fails to maintain the
requisite Galileo common stock ownership levels, some or all of its shares of
special voting preferred stock will be automatically redeemed.
A quorum at any meeting of the Galileo board consists of a majority of the
total number of Galileo directors, and a majority of directors present at a
meeting at which a quorum is present is required to approve an action of the
Galileo board.
Cendant. The board of directors of Cendant has 14 directors. Cendant's
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.
Cendant's certificate of incorporation and bylaws provide for three classes
of directors, with each class elected for a term of three years and consisting
as nearly as possible of one third of the total number of directors on 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. Classification of directors
has the effect of making it more difficult for stockholders to change the
composition of the Cendant board.
Cendant's certificate of incorporation and bylaws are silent as to the
requisite vote of stockholders to elect directors. Under Delaware law,
directors are elected by a plurality of the votes present, in person or
represented by proxy, at a meeting of stockholders, by the holders of shares
entitled to vote in the election.
A quorum at any meeting of the Cendant board consists of a majority of the
total number of Cendant directors and the act of a majority of such quorum
shall be deemed the act of the Cendant board.
Committees of the Board of Directors
Galileo. Galileo's bylaws permit the Galileo board to designate an audit
committee, a compensation committee and a nominating committee, each of which
are to consist of two or more directors, and one or more special committees to
consist of one or more directors. The holders of special voting preferred stock
may have directors on each committee other than the audit committee, which must
be comprised of independent directors under the terms of the audit committee's
charter.
The Galileo board currently has an audit committee, a compensation committee
and a nominating committee.
Cendant. Cendant's bylaws require that the Cendant board have an executive
committee and a compensation committee, each of which must consist of three or
more directors, and an audit committee to
99
consist of four or more independent directors. Cendant's certificate of
incorporation also permits the Cendant board to designate other committees,
each committee to consist of one or more directors.
In addition to the foregoing committees, the Cendant board currently has a
nominating committee, a corporate policy committee and a special litigation
committee.
Newly Created Directorships and Vacancies
Galileo. Galileo's certificate of incorporation and bylaws provide that,
subject to the stockholders' agreement and subject to the rights of holders of
any series of preferred stock or any other class of capital stock (other than
Galileo common stock) then outstanding, any vacancy on the Galileo board
arising from death, resignation, removal, an increase in the number of
directors or any other cause may be filled by a majority vote of the remaining
directors, even if less than a quorum, or by the sole remaining director. If
Galileo redeems any share of special voting preferred stock, then the director
elected by the holder of that share will be deemed to have automatically and
immediately resigned, and the resulting vacancy will be filled with an
independent director chosen by a majority of the Galileo board. Directors
elected to fill a vacancy will hold office for a term to coincide with the term
of the class to which such director was elected.
Cendant. Cendant's certificate of incorporation and bylaws provide that
newly created directorships resulting from an increase in the number of
directors and any vacancies on the Cendant board resulting from death,
resignation, disqualification, removal or other cause will be filled solely by
the affirmative vote of a majority of the remaining directors then in office,
even though less than a quorum. Directors appointed to fill newly created
directorships and vacancies will hold office for the remainder of the full term
of the class of directors in which the new directorship was created or the
vacancy occurred and until such director's successor shall have been elected
and qualified.
Removal of Directors
Galileo. Galileo's certificate of incorporation provides that, subject to
the rights, if any, of holders shares of preferred stock, any or all directors
may be removed from office only for cause by the affirmative vote of the
holders of a majority of the outstanding shares of Galileo entitled to vote
generally in the election of directors, voting as a single class. A director
elected by the holder of a share of special voting preferred stock may be
removed and/or replaced at any time by that holder.
Cendant. Cendant's certificate of incorporation and bylaws provide that any
director may be removed from office, without cause, only by the affirmative
vote of the holders of 80% of the combined voting power of the then-outstanding
shares of stock entitled to vote generally in the election of directors voting
together as a single class.
Officers
Galileo. Galileo's bylaws provide that Galileo's officers will include a
chairman of the board, a president and chief executive officer, a chief
financial officer, a general counsel, a treasurer and a secretary, and may also
include a chief operating officer and one or more senior vice presidents,
executive vice presidents, vice presidents, assistant treasurers and assistant
secretaries. The Galileo board or the chief executive officer may also elect or
appoint other officers as they deem necessary. Any officer elected by the
Galileo board may be removed at any time by the Galileo board, and any officer
appointed by the chief executive officer may be removed at any time by the
Galileo board or the chief executive officer, in each case, with or without
cause.
Cendant. Pursuant to Cendant's bylaws, Cendant's officers consist of a
chairman of the board, a president and chief executive officer, one or more
vice chairmen of the board, a chief financial officer, a general counsel, one
or more vice presidents and a secretary, all as elected or appointed by the
Cendant board. In addition, the Cendant board may appoint such other officers,
agents and employees as it shall deem appropriate.
100
Cendant's bylaws provide that all officers may be removed at any time by the
Cendant board with or without cause. Until January 2002, the affirmative vote
of 80% of Cendant's board is required to remove the chief executive officer.
Special Meetings of Stockholders
Galileo. Galileo's certificate of incorporation and bylaws provide that
special meetings of the stockholders may be called only by a majority of the
Galileo board, the chairman of the board or the chief executive officer.
Cendant. Cendant's bylaws provide that special meetings of the stockholders
may be called only by the chairman of the board, the president or the Cendant
board pursuant to a resolution approved by a majority of the entire Cendant
board.
Quorum at Stockholder Meetings
Galileo. Galileo's bylaws provide that at any meeting of stockholders, the
holders of shares representing a majority of the votes entitled to be cast by
all holders of shares outstanding and entitled to vote at the meeting, present
in person or by proxy, will constitute a quorum.
If a quorum is not present at a meeting, the stockholders entitled to vote
at the meeting may adjourn the meeting from time to time until a quorum is
present.
Cendant. Cendant's bylaws provide that, except as otherwise required by law,
the certificate of incorporation or the bylaws, the holders of not less than
one third of the shares entitled to vote at any meeting of the stockholders,
present in person or by proxy, shall constitute a quorum, and the act of the
majority of such quorum shall be deemed the act of the stockholders.
If a quorum shall fail to attend any meeting, the chairman of the meeting
may adjourn the meeting to another place, date or time.
If a notice of any adjourned special meeting of stockholders is sent to all
stockholders entitled to vote thereat, stating that it will be held with those
present constituting a quorum, then, except as otherwise required by law, those
present at such adjourned meeting shall constitute a quorum, and all matters
shall be determined by a majority of votes cast at such meeting.
Stockholder Action by Written Consent
Galileo. Galileo's certificate of incorporation requires that any action
required or permitted to be taken by Galileo stockholders must be effected at a
duly called annual or special meeting and may not be effected by a written
consent of the stockholders.
Cendant. Cendant's 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.
Advance Notice of Stockholder Proposals for Stockholder Meetings
Galileo. Galileo's certificate of incorporation and bylaws provide for
advance notice procedures for the nomination of candidates for election as
directors as well as for other stockholder-proposed business to be considered
at stockholder meetings.
101
Galileo's bylaws provide that notice of stockholder-proposed business for
the annual meeting generally must be received in writing by Galileo not more
than 90 days and not less than 60 days prior to the anniversary date of the
previous annual meeting. The stockholder notice must contain:
. a brief description of, and the reasons for, the business desired to be
brought before the annual meeting;
. the name and record address of the stockholder proposing the business;
. the class and number of Galileo shares that are beneficially owned by
the stockholder and reasonable evidence of ownership;
. a description of all arrangements or understandings between the
stockholder and any person regarding the proposed business and any
material interest of the stockholder in the proposed business; and
. a representation that the stockholder intends to appear at the meeting
in person or by proxy.
With respect to stockholder nominations of candidates for election as
directors, Galileo's certificate of incorporation and bylaws provide different
deadlines for giving notice of nominations depending on whether the election is
taking place at an annual or a special meeting. In each case, the stockholder
notice must contain:
. the name, age, business and residential addresses and principal
employment of each nominee, the class and number of Galileo shares
beneficially owned by each nominee and any other information about each
nominee that would be required to be included in a proxy statement;
. the name and record address of the stockholder making the nomination;
. the class and number of Galileo shares that are beneficially owned by
the stockholder and reasonable evidence of ownership;
. a description of all arrangements or understandings between the
stockholder and each nominee and any other person pursuant to which the
nomination is to be made;
. a representation that the stockholder intends to appear at the meeting
in person or by proxy to nominate the nominees identified in the notice;
. any other information about the stockholder that would be required to be
included in a proxy statement; and
. the consent of each nominee to serve as a director if elected.
Cendant. Cendant's bylaws provide for advance notice procedures for the
nomination of candidates for election as directors as well as for other
stockholder-proposed business to be considered at stockholder meetings.
Generally, notice of stockholder-proposed business for the annual meeting
must be received in writing by the secretary of Cendant not more than 90 days
and not less than 60 days prior to the annual meeting. The stockholder notice
must contain:
. a brief description of the business desired to be brought before the
annual meeting;
. the name and address, as they appear on Cendant's books, of the
stockholder proposing the business;
. the class and number of Cendant shares that are beneficially owned by
the stockholder; and
. any material interest of the stockholder in the proposed business.
With respect to stockholder nominations of candidates for election as
directors, Cendant's bylaws provide different deadlines for giving notice of
nominations depending on whether the election is taking place at an annual or
special meeting. In each case, the stockholder notice must contain:
. the name and address of the stockholder intending to make the
nomination;
102
. a representation that the stockholder is entitled to vote at the meeting
and intends to appear at the meeting in person or by proxy to nominate
the nominees identified in the notice;
. a description of all arrangements or understandings between the
stockholder and each nominee and any other person pursuant to which the
nomination is to be made;
. any other information about each nominee that would be required to be
included in a proxy statement; and
. the consent of each nominee to serve as a director if elected.
Amendment of Governing Documents
Under Delaware law, an amendment to a corporation's certificate of
incorporation requires:
. a resolution of the corporation's board of directors recommending the
amendment;
. the approval of holders of a majority of all shares entitled to vote
thereon, voting together as a single class; and
. the approval of holders of a majority of the outstanding stock of each
class entitled to vote on the amendment,
unless a higher vote is required in the corporation's certificate of
incorporation.
Galileo. Galileo's certificate of incorporation requires the affirmative
vote of at least 66 2/3% of the outstanding Galileo shares entitled to vote,
voting as a single class, in order to amend, repeal or adopt any provision to
reclassify the Galileo board, permit stockholder action by written consent or
permit stockholders to call special meetings. In addition, the certificate of
incorporation also requires the affirmative vote of at least 80% of the total
voting power of all classes of outstanding Galileo common stock to alter, amend
or repeal in a manner adverse to the interests of certain of Galileo's past and
present airline stockholders, or adopt any provisions adverse to the interests
of those stockholders and inconsistent with, provisions of the certificate of
incorporation relating to corporate opportunities.
As to other provisions and matters, Galileo's certificate of incorporation
and bylaws are silent on the matter of amending the certificate of
incorporation of Galileo and, therefore, Delaware law applies.
Galileo's certificate of incorporation and bylaws require either a majority
of the Galileo board or the affirmative vote of the holders of at least 66 2/3%
of the outstanding Galileo shares entitled to vote, voting as a single class,
to alter, amend or repeal any bylaws or adopt new bylaws. Galileo's bylaws
provide further that the Galileo board cannot alter, amend or repeal the
provisions in the bylaws relating to telephonic meetings of the Galileo board
or its committees without the consent of all of the directors.
Cendant. Cendant's certificate of incorporation requires the affirmative
vote of the holders of at least 80% of the voting power of all the shares
entitled to vote generally in the election of directors, voting together as a
single class, in order to alter, amend or adopt any provision inconsistent with
the provisions in the certificate of incorporation relating to the election,
number and terms of directors, filling of newly created directorships and
vacancies, removal of directors, stockholder nomination of director candidates,
bylaws amendment and the vote required for certain business combinations.
As to other provisions and matters, Cendant's certificate of incorporation
and bylaws are silent on the matter of amending the certificate of
incorporation of Cendant and, therefore, Delaware law applies.
Cendant's certificate of incorporation requires the affirmative vote of the
holders of at least 80% of the voting power of all the shares entitled to vote
generally in the election of directors, voting together as a single class, in
order to alter, amend or repeal the provisions in the bylaws relating to annual
meetings, special meetings, stockholder action, number, election and terms of
directors, newly created directorships and vacancies and removal of directors.
103
As to other provisions and matters, Cendant's bylaws provide that the bylaws
may be altered, amended or repealed at any regular meeting of the stockholders
(or at any special meeting duly called for that purpose) by the vote of a
majority of the shares outstanding and entitled to vote at such meeting,
provided, in the case of any special meeting, that in the notice of such
special meeting notice of such purpose shall be given. The Cendant board may by
a majority vote of those present at any meeting at which a quorum is present
amend the bylaws, or enact such other bylaws as in their judgment may be
advisable for the regulation of the conduct of the affairs of Cendant.
Effect of Interested Stockholder Transactions and Fair Price Provision
Galileo. Delaware law generally prohibits a business combination between a
corporation and an "interested stockholder" within three years of the time that
person became an interested stockholder. An interested stockholder generally
includes a person who beneficially owns 15% or more of the outstanding voting
stock of the corporation. This provision does not apply in some circumstances,
including if (1) the corporation's board of directors approved the interested
stockholder transaction prior to the date the interested stockholder acquired
his or her shares, (2) as a result of the interested stockholder transaction,
the interested stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced (excluding shares
owned by persons who are both directors and officers and by employee stock
plans), or (3) the interested stockholder transaction is approved by the board
of directors and the affirmative vote of 66 2/3% of the outstanding voting
stock of the disinterested stockholders at an annual or special meeting. These
restrictions also will not apply to a corporation if, among other reasons, the
corporation's certificate of incorporation or bylaws contains a provision
expressly electing not to be governed by this section of Delaware law.
Galileo's certificate of incorporation and bylaws do not contain a provision
electing not to be governed by this section of Delaware law.
Cendant. In addition to the approval requirements of business combinations
under Delaware law, the Cendant certificate of incorporation includes what
generally is referred to as a "fair price provision."
In general, this provision of the Cendant certificate of incorporation
provides that a business combination, which is defined to include any of the
following:
. any merger or consolidation of Cendant or any majority-owned subsidiary
with (a) any interested stockholder or (b) any other corporation
(whether or not itself an interested stockholder) that is, or after such
merger or consolidation would be, an affiliate of an interested
stockholder;
. any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with
any interested stockholder of any assets of Cendant or any majority-
owned subsidiary having an aggregate fair market value of $10 million or
more;
. the issuance or transfer by Cendant or any majority-owned subsidiary (in
one transaction or series of transactions) of any securities of Cendant
or any majority-owned subsidiary to any interested stockholder in
exchange for cash, securities or other property (or a combination
thereof) having an aggregate fair market value of $10 million or more;
. the adoption of any plan or proposal for the liquidation or dissolution
of Cendant proposed by or on behalf of any interested stockholder or any
affiliate of any interested stockholder; or
. any reclassification of securities (including any reverse stock split) or
recapitalization of Cendant or any merger or consolidation of Cendant with
any of its majority-owned subsidiaries or any other transaction (whether or
not with or into or otherwise involving an interested stockholder) which
has the effect, directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity security of Cendant
or any majority-owned subsidiary that is directly or indirectly owned by
any interested stockholder or any affiliate of any interested stockholder:
104
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 Cendant's certificate of incorporation, an interested
stockholder includes any person who is the beneficial owner of 5% or more of
the voting capital stock of Cendant or is an affiliate of Cendant and at any
time within the two-year period immediately prior to the date in question was
the beneficial owner of 5% or more of the voting capital stock of Cendant.
In general, a disinterested director means a director that is not affiliated
with the interested stockholder and was a member of the board of directors
prior to the time that the interested stockholder became an interested
stockholder.
Stockholders' Agreement
Galileo. Galileo is a party to a stockholders' agreement, dated as of July
30, 1997, as amended, with holders of special voting preferred stock who are
airline stockholders. Pursuant to the stockholders' agreement, these
stockholders have agreed to various terms, including terms relating to the
size, composition, classification and committees of the Galileo board, the
composition of the classes and certain committees of the Galileo board and the
compensation of directors. They have agreed, for example, to vote their Galileo
shares to elect three management and three independent directors to the Galileo
board and to cause the Galileo board to designate nominating, audit and
compensation committees. The stockholders' agreement provides that if a
stockholder no longer holds its special voting preferred stock, its director
must resign immediately and that directorship will be filled by an independent
director.
Cendant. Cendant does not have a stockholders' agreement.
Stockholder Rights Plan
Galileo. In February 2001, Galileo adopted a stockholder rights plan
pursuant to a rights agreement with LaSalle Bank National Association, as
rights agent. A summary of the material provisions of the rights plan is set
forth below. The summary does not include a complete description of all of the
terms of the rights plan. We urge you to read carefully the Galileo rights
plan, a copy of which will be sent to you upon request. See "Where You Can Find
More Information."
In connection with the Galileo rights plan, Galileo issued, as a dividend,
one preferred stock purchase right for each outstanding share of Galileo's
common stock. Under the Galileo rights plan, the Galileo rights generally will
not become exercisable until the earlier of:
. the close of business on the tenth calendar day after a public
announcement or disclosure that a person, entity or group, has acquired
beneficial ownership of 15% or more of the outstanding Galileo common
stock or, in the case of a person, entity or group that beneficially
owned 15% or more of the outstanding Galileo common stock as of the date
the rights plan was adopted, 20% or more of the outstanding Galileo
common stock (a person, entity or group that acquires beneficial
ownership in excess of the applicable threshold is called an acquiring
person); and
. the close of business on the tenth business day after a person, entity or
group begins a tender or exchange offer, which if completed would result
in that person, entity or group becoming an acquiring person.
105
In connection with the merger, the Galileo rights plan was amended to
provide that the rights would not become exercisable solely by reason of the
execution and delivery of the merger agreement or the consummation of the
transactions contemplated by the merger agreement, voting agreement or stock
option agreement and that the Galileo rights plan would expire immediately
prior to the effective time of the merger.
After the rights become exercisable, all holders of rights, except the
acquiring person, may exercise the rights upon payment of the purchase price,
which is currently $90.00 per right, to purchase shares of Galileo common stock
(or other securities or assets as determined by the Galileo board) with a
market value of two times the purchase price. Thereafter, if Galileo is
acquired in a merger or similar transaction, all holders of rights, except the
acquiring person, may exercise the rights upon payment of the purchase price,
to purchase shares of the acquiring corporation with a market value of two
times the purchase price.
At any time before a person, entity or group becomes an acquiring person,
the Galileo board may redeem the rights in whole, but not in part, at a price
of $0.01 per right. At any time after a person, entity or group becomes an
acquiring person, but before an acquiring person owns 50% or more of the
outstanding Galileo common stock, the Galileo board may exchange each right
(except for rights held by any acquiring person) for one share of Galileo
common stock or an equivalent security. The rights will expire on March 8, 2011
if they have not been previously exercised, exchanged or redeemed.
The rights plan is designed to protect the interests of Galileo and its
stockholders against coercive takeover tactics. The rights plan may have the
effect of deterring additional takeover proposals.
Cendant. Cendant has not adopted a stockholder rights plan.
EXPERTS
The consolidated financial statements of Cendant incorporated in this proxy
statement-prospectus by reference from Cendant's Annual Report on Form 10-K/A
for the year ended December 31, 2000 have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report (which expresses an
unqualified opinion and includes explanatory paragraphs relating to the change
in certain revenue recognition policies regarding the recognition of
non-refundable one-time fees and pro rata refundable subscription revenue and
the restatement of the financial statements to reflect the individual
membership business as part of continuing operations as described in Note 1),
which is incorporated herein by reference, and has been so incorporated in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
The consolidated financial statements of Galileo incorporated by reference
into its Annual Report on Form 10-K for the years ended December 31, 2000 and
1999, and for each of the years in the three-year period ended December 31,
2000, have been audited by KPMG LLP, independent auditors, as set forth in
their report thereon incorporated by reference therein and incorporated herein
by reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
LEGAL MATTERS
The validity of the CD common stock offered hereby is being passed upon for
Cendant by Eric J. Bock, Senior Vice President--Law and Corporate Secretary at
the effective time of the merger, as a condition to the merger. Certain legal
matters regarding the U.S. federal income tax consequences of the merger will
be passed upon for Galileo by Jones, Day, Reavis & Pogue, and for Cendant by
Skadden, Arps, Slate, Meagher & Flom LLP.
106
SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS
As a result of the merger, Galileo does not currently expect to hold a 2002
annual meeting of stockholders because Galileo will have become a wholly owned
subsidiary of Cendant in the merger. The merger agreement provides that if the
merger is not consummated by January 1, 2002, Galileo may hold its annual
meeting. If that meeting is held, Galileo stockholders may propose matters to
be presented at the 2002 annual meeting of stockholders and may also nominate
persons to be directors of Galileo. Any stockholder proposal intended for
inclusion in the proxy materials for the 2002 annual meeting of stockholders
must be received by Galileo no later than December 3, 2001, addressed to the
Secretary of Galileo at the address on the front cover of this proxy statement-
prospectus. Stockholders submitting proposals are urged to submit their
proposals by certified mail, return receipt requested.
Stockholder proposals not included in the proxy statement 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 Galileo's bylaws in order to be brought properly before
that meeting. See "Comparison of Rights of Stockholders of Galileo and
Cendant--Advance Notice of Stockholder Proposals for Stockholder Meetings." In
general, written notice of a stockholder proposal or a director nomination must
be delivered to the Secretary of Galileo not less than 60 days nor more than 90
days prior to the anniversary date of the preceding annual meeting of
stockholders. With regard to the 2002 annual meeting, the written notice must
be received between February 16, 2002 and no later than March 18, 2002, to be
considered for inclusion.
In addition to the timing requirements, the advance notice provisions of
Galileo's 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 Galileo.
Unless stockholder proposals meet the requirements set forth above, the
persons named in the proxies solicited on behalf of the Galileo board will have
discretionary authority to vote on and may vote against any such stockholder
proposal.
WHERE YOU CAN FIND MORE INFORMATION
Galileo 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 SEC's public reference room at 450 Fifth Street, N.W. Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference room. Galileo's and Cendant's 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 Galileo and Cendant
also may be inspected at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
Cendant has filed a registration statement on Form S-4 to register with the
SEC the shares of CD common stock to be issued to Galileo stockholders in the
merger. This proxy statement-prospectus is a part of that registration
statement and constitutes a prospectus of Cendant and a proxy statement of
Galileo for purposes of the Galileo special meeting.
As allowed by SEC rules, this proxy statement-prospectus omits certain
information contained in the registration statement or the exhibits to the
registration statement. Any statements contained in this proxy statement-
prospectus concerning the provisions of any other document are not necessarily
complete, and, in each instance, reference is made to the copy of such document
filed as an exhibit to the registration statement or otherwise filed with the
SEC. Each statement is qualified in its entirety by such reference.
107
The SEC allows Galileo and Cendant to incorporate by reference information
into this proxy statement-prospectus, which means that the companies can
disclose important information to you by referring you to another document
filed separately with the SEC. The information incorporated by reference is
deemed to be part of this proxy statement-prospectus, except for any
information superseded by information contained directly in the proxy
statement-prospectus. This proxy statement-prospectus incorporates by reference
the documents set forth below that Galileo and Cendant have previously filed
with the SEC. These documents contain important information about the
companies.
GALILEO SEC FILINGS
(File No. 1-13153) Period
------------------ ------
Annual Report on Form 10-K..... Year ended December 31, 2000 (filed on March
13, 2001)
Quarterly Report on Form 10-Q.. Quarter ended March 31, 2001 (filed on May 8,
2001)
Current Reports on Form 8-K.... Dated February 22, 2001; June 15, 2001; and
July 23, 2001 (filed on February 23, 2001;
June 18, 2001; and July 24, 2001, respectively)
CENDANT SEC FILINGS
(File No. 1-10308) Period
------------------ ------
Annual Report on Form 10-K/A... Year ended December 31, 2000 (filed on July 3,
2001)
Quarterly Report on Form 10-
Q/A........................... Quarter ended March 31, 2001 (filed on July 3,
2001)
Current Reports on Form 8-K and
Form 8-K/A.................... Dated January 9, 2001; January 18, 2001;
January 19, 2001; February 7, 2001; February
8, 2001; February 20, 2001; March 1, 2001;
March 12, 2001; March 21, 2001; April 2, 2001;
April 18, 2001; April 18, 2001; May 2, 2001;
May 4, 2001; May 10, 2001; May 24, 2001; June
13, 2001; June 15, 2001; July 2, 2001; July
10, 2001; July 18, 2001; July 19, 2001; July
23, 2001; and July 23, 2001 (filed on January
9, 2001; January 18, 2001; January 19, 2001;
February 8, 2001; February 8, 2001; February
20, 2001; March 9, 2001; March 12, 2001; March
21, 2001; April 3, 2001; April 19, 2001; April
19, 2001; May 2, 2001; May 4, 2001; May 11,
2001; May 25, 2001; June 15, 2001; June 18,
2001; July 3, 2001; July 10, 2001; July 19,
2001; July 19, 2001; July 23, 2001; and July
24, 2001, respectively)
Proxy Statement describing
Cendant common stock, including
any amendments or reports filed
for the purpose of updating
such description............... Dated February 10, 2000 (filed on February 11,
2000)
Galileo and Cendant incorporate by reference additional documents that
either company may file with the SEC under Sections 13(a), 13(c), 14 or 15(d)
between the date of this proxy statement-prospectus and the date of the special
meeting. These include periodic reports, such as Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as
registration statements and proxy statements.
Galileo has supplied all information contained or incorporated by reference
into this proxy statement-prospectus relating to Galileo, and Cendant has
supplied all such information relating to Cendant.
You can obtain a copy of any Cendant document or any Galileo document
incorporated by reference except for the exhibits to those documents from the
appropriate company. You may also obtain these documents from the SEC or
through the SEC's Internet World Wide Web site described above. Documents
108
incorporated by reference are available from the companies without charge,
excluding all exhibits unless specifically incorporated by reference as an
exhibit into this proxy statement-prospectus. You may obtain documents
incorporated by reference into this proxy statement-prospectus by requesting
them in writing or by telephone from the appropriate company at the following
addresses:
Galileo International, Inc. Cendant Corporation
9700 West Higgins Road, Suite 400 9 West 57th Street
Rosemont, Illinois 60018 New York, New York 10019
Attention: Investor Relations Attention: Investor Relations
(847) 518-4000 (212) 413-1845
If you would like to request documents from either company, please do so by
August 23, 2001 to receive them before the Galileo special meeting. 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 proxy statement-prospectus in voting your shares at the
Galileo special meeting. Galileo and Cendant have not authorized anyone to
provide you with information that is different from what is contained in this
proxy statement-prospectus. This proxy statement-prospectus is dated July 25,
2001. You should not assume that the information contained in the proxy
statement-prospectus is accurate as of any other date, and neither the mailing
of this proxy statement-prospectus to Galileo's stockholders nor the issuance
of Cendant's securities in the merger will create any implication to the
contrary.
109
Annex A
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
by and among
CENDANT CORPORATION,
GALAXY ACQUISITION CORP.
and
GALILEO INTERNATIONAL, INC.
Dated as of June 15, 2001
--------------------------------------------------------------------------------
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TABLE OF CONTENTS
Page
----
INDEX OF DEFINED TERMS.................................................... A-V
AGREEMENT AND PLAN OF MERGER.............................................. A-1
RECITALS................................................................. A-1
ARTICLE I THE MERGER...................................................... A-2
1.1The Merger........................................................... A-2
1.2The Closing.......................................................... A-2
1.3Effective Time....................................................... A-2
1.4Certificate of Incorporation, Bylaws, Directors and Officers of the
Surviving Corporation; Directors of Parent......................... A-2
1.5Directors of Parent.................................................. A-2
ARTICLE II EFFECT OF THE MERGER ON SECURITIES OF PURCHASER AND
THE COMPANY.............................................................. A-3
2.1Purchaser Securities................................................. A-3
2.2Company Securities................................................... A-3
2.3Exchange of Certificates Representing Company Common Stock........... A-8
2.4Adjustment of Merger Consideration................................... A-10
2.5Dissenting Company Stockholders...................................... A-11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY................. A-12
3.1Existence; Good Standing; Corporate Authority........................ A-12
3.2Authorization, Validity and Effect of Agreements..................... A-12
3.3Compliance with Laws................................................. A-13
3.4Capitalization....................................................... A-13
3.5Subsidiaries......................................................... A-14
3.6No Violation; Consents............................................... A-14
3.7Company Reports; Financial Statements................................ A-15
3.8Litigation........................................................... A-15
3.9Absence of Certain Changes........................................... A-16
3.10Taxes............................................................... A-16
3.11Employee Benefit Plans.............................................. A-16
3.12Labor and Employment Matters........................................ A-18
3.13Intellectual Property Rights........................................ A-19
3.14Permits............................................................. A-20
3.15Environmental Compliance............................................ A-20
3.16Material Contracts.................................................. A-21
3.17Title to Property................................................... A-22
3.18Brokers............................................................. A-22
3.19Opinion of Financial Advisor........................................ A-22
3.20Rights Agreement.................................................... A-23
3.21State Takeover Statutes............................................. A-23
3.22No Undisclosed Liabilities.......................................... A-23
3.23Vote Required....................................................... A-23
3.24Form S-4; Proxy Statement........................................... A-23
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER......... A-24
4.1Existence; Good Standing; Corporate Authority........................ A-24
4.2Authorization, Validity and Effect of Agreements..................... A-24
4.3Compliance with Laws................................................. A-24
A-i
Page
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4.4Capitalization....................................................... A-25
4.5No Violation; Consents............................................... A-25
4.6Parent Reports....................................................... A-26
4.7Litigation........................................................... A-26
4.8Absence of Certain Changes........................................... A-26
4.9Interim Operations of Purchaser...................................... A-27
4.10Form S-4; Proxy Statement........................................... A-27
4.11Tax Matters......................................................... A-27
4.12State Takeover Statutes............................................. A-27
4.13No Undisclosed Liabilities.......................................... A-27
4.14Parent Shareholder Approval......................................... A-27
4.15Parent Common Stock................................................. A-27
4.16Ownership of Company Common Stock................................... A-27
ARTICLE V COVENANTS....................................................... A-28
5.1Alternative Proposals................................................ A-28
5.2Interim Operations................................................... A-29
5.3Preparation of the Form S-4 and the Proxy Statement; Company
Stockholder Approval................................................... A-32
5.4Filings; Other Action................................................ A-34
5.5Access to Information................................................ A-36
5.6Publicity............................................................ A-36
5.7Further Action....................................................... A-37
5.8Insurance; Indemnity................................................. A-37
5.9Employee Benefit Plans............................................... A-38
5.10Conveyance Taxes.................................................... A-40
5.11Certain Tax Matters................................................. A-40
5.12Section 16 Matters.................................................. A-41
5.13Stock Options and SARs.............................................. A-41
5.14Stock Exchange Listing.............................................. A-41
5.15Amendments to the Rights Agreement; Section 203..................... A-41
5.16Affiliates.......................................................... A-41
ARTICLE VI CONDITIONS..................................................... A-42
6.1Conditions to Each Party's Obligation to Effect the Merger........... A-42
6.2Conditions to Obligation of Parent and Purchaser to Effect the
Merger................................................................. A-42
6.3Conditions to Obligations of the Company to Effect the Merger........ A-43
ARTICLE VII TERMINATION................................................... A-44
7.1Termination by Mutual Consent........................................ A-44
7.2Termination by Either Parent or Company.............................. A-44
7.3Termination by the Company........................................... A-44
7.4Termination by Parent................................................ A-44
7.5Effect of Termination and Abandonment; Termination Fee............... A-45
7.6Fees and Expenses.................................................... A-45
7.7Extension; Waiver.................................................... A-46
ARTICLE VIII GENERAL PROVISIONS........................................... A-46
8.1Nonsurvival of Representations and Warranties........................ A-46
8.2Notices.............................................................. A-46
8.3Assignment; Binding Effect; No Third-Party Beneficiaries............. A-47
8.4Entire Agreement..................................................... A-47
8.5Governing Law........................................................ A-48
8.6Fee and Expenses..................................................... A-48
A-ii
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8.7Certain Definitions................................................... A-48
8.8Headings.............................................................. A-48
8.9Interpretation........................................................ A-48
8.10Waivers.............................................................. A-49
8.11Severability......................................................... A-49
8.12Parent Actions....................................................... A-49
8.13Enforcement of Agreement............................................. A-49
8.14Amendment............................................................ A-49
8.15Waiver of Jury Trial................................................. A-50
8.16Execution............................................................ A-50
8.17Date for Any Action.................................................. A-50
8.18Counterparts......................................................... A-50
A-iii
EXHIBITS
Exhibit Description
------- -----------
A Certificate of Incorporation of the Surviving Corporation
B Form of Affiliate Letter
A-iv
INDEX OF DEFINED TERMS
Definition Page
---------- ----
2000 Annual Report......................................................... A-15
2001 Proxy Statement....................................................... A-14
2001 Quarterly Report...................................................... A-23
280G Persons............................................................... A-40
Action..................................................................... A-38
Actual Aggregate Cash Consideration........................................ A-4
Actual Aggregate Parent Shares............................................. A-4
Adjusted Actual Aggregate Cash Consideration............................... A-4
Adjusted High-End Price.................................................... A-11
Adjusted Low-End Price..................................................... A-11
Adjustment Factor.......................................................... A-11
affiliate.................................................................. A-48
Agreement.................................................................. A-1
Ancillary Documents........................................................ A-12
Assumed Options............................................................ A-6
Australian Approval........................................................ A-42
Average Company Trading Price.............................................. A-7
Average Parent Trading Price............................................... A-4
Board Recommendation....................................................... A-12
business day............................................................... A-48
Cap........................................................................ A-37
Capital Plan............................................................... A-30
Cash Limitation Amount..................................................... A-4
Cash Limitation Percentage................................................. A-4
Certificate of Merger...................................................... A-2
Certificates............................................................... A-8
Change in Control Contracts................................................ A-21
Change in the Company Recommendation....................................... A-33
Closing.................................................................... A-2
Closing Date Parent Stock Price............................................ A-4
Closing Date............................................................... A-2
Code....................................................................... A-1
Company.................................................................... A-1
Company Acquisition Agreement.............................................. A-28
Company Benefit Plans...................................................... A-17
Company Common Stock....................................................... A-1
Company Disclosure Letter.................................................. A-12
Company ESPP............................................................... A-7
Company Material Adverse Effect............................................ A-12
Company Permits............................................................ A-20
Company Recommendation..................................................... A-33
Company Reports............................................................ A-15
Company Stock Option Plans................................................. A-6
Company Stockholder Approval............................................... A-13
Confidentiality Agreement.................................................. A-28
Confidentiality Contracts.................................................. A-22
Contract................................................................... A-15
Contracts.................................................................. A-15
Control Requirement Percentage............................................. A-4
A-v
Definition Page
---------- ----
Controlling Company Shares................................................. A-4
Covia...................................................................... A-1
Delaware Courts............................................................ A-48
Designated Number.......................................................... A-40
DGCL....................................................................... A-2
Dissenting Common Stock.................................................... A-11
Distribution Value......................................................... A-11
DOJ........................................................................ A-34
EC Merger Regulation....................................................... A-35
Effective Time............................................................. A-2
Environmental Liability.................................................... A-20
Environmental Matters...................................................... A-20
ERISA...................................................................... A-48
ERISA Affiliate............................................................ A-18
Excess Costs............................................................... A-30
Exchange Act............................................................... A-6
Exchange Agent............................................................. A-8
Exchange Fund.............................................................. A-8
Exchange Ratio............................................................. A-3
Exclusivity Contracts...................................................... A-21
FCC Act.................................................................... A-15
Fee........................................................................ A-45
Fee Determination.......................................................... A-45
Financial Advisor.......................................................... A-22
Foreign Benefit Plan....................................................... A-18
Form S-4................................................................... A-23
FTC........................................................................ A-34
GAAP....................................................................... A-15
Governmental Entity........................................................ A-13
Guarantees................................................................. A-21
High-End Ratio............................................................. A-4
HSR Act.................................................................... A-15
Hyperion................................................................... A-36
incentive stock options.................................................... A-7
Indemnified Party.......................................................... A-37
Independent Director....................................................... A-2
Intellectual Property Rights............................................... A-19
Jones Day.................................................................. A-2
knowledge.................................................................. A-48
Laws....................................................................... A-13
Leases..................................................................... A-22
Liens...................................................................... A-14
Litigation................................................................. A-15
Loan Contracts............................................................. A-21
Low-End Ratio.............................................................. A-4
Material Contracts......................................................... A-21
Material Intellectual Property Rights...................................... A-19
Merger..................................................................... A-1
Merger Consideration....................................................... A-3
Miscellaneous Contracts.................................................... A-22
Move.com Common Stock...................................................... A-25
A-vi
Definition Page
---------- ----
Non-Competition Contracts.................................................. A-21
NYSE....................................................................... A-4
Option..................................................................... A-1
Option Agreement........................................................... A-1
Option Exchange Ratio...................................................... A-7
Options.................................................................... A-6
Ordinary Preferred Stock................................................... A-12
Parent..................................................................... A-1
Parent 2000 Annual Report.................................................. A-26
Parent Authorized Preferred Stock.......................................... A-25
Parent Common Stock........................................................ A-1
Parent Disclosure Letter................................................... A-25
Parent Employee Stock Options.............................................. A-25
Parent Expenses............................................................ A-46
Parent Material Adverse Effect............................................. A-24
Parent Reports............................................................. A-26
Parent Stock Plans......................................................... A-25
Parent Warrants............................................................ A-25
Participating Company Shares............................................... A-4
Partnership Contracts...................................................... A-21
Per Share Additional Stock Consideration................................... A-4
Per Share Cash Consideration............................................... A-3
Per Share Stock Amount..................................................... A-5
Per Share Stock Consideration.............................................. A-3
person..................................................................... A-48
Post Signing Returns....................................................... A-40
Preferred Redemption Price................................................. A-6
Preferred Stock............................................................ A-13
Preliminary Aggregate Cash Consideration................................... A-5
Pricing Period............................................................. A-5
Proxy Statement............................................................ A-23
Proxy Statement/Prospectus................................................. A-32
Purchaser.................................................................. A-1
Qualifying Amendment....................................................... A-32
Quantitude................................................................. A-7
Quantitude Common Stock.................................................... A-7
Quantitude Stock Option Plan............................................... A-8
Regulatory Challenge....................................................... A-35
Regulatory Law............................................................. A-35
Regulatory Restrictions.................................................... A-34
Reporting Requirements..................................................... A-31
Restraints................................................................. A-42
Rights..................................................................... A-1
Rights Agreement........................................................... A-1
SAirGroup.................................................................. A-21
SEC........................................................................ A-15
Section 2.4(b) Transaction................................................. A-10
Securities Act............................................................. A-7
Series A Special Voting Preferred Stock.................................... A-13
Series B Special Voting Preferred Stock.................................... A-13
Series C Special Voting Preferred Stock.................................... A-13
A-vii
Definition Page
---------- ----
Series D Special Voting Preferred Stock.................................... A-13
Series E Special Voting Preferred Stock.................................... A-13
Series F Special Voting Preferred Stock.................................... A-13
Series G Special Voting Preferred Stock.................................... A-13
Series H Preferred Stock................................................... A-13
Skadden Arps............................................................... A-41
Special Voting Preferred Stock............................................. A-6
Spin-Off................................................................... A-11
Stock Repurchase Program................................................... A-28
Stockholders Meeting....................................................... A-12
Subsidiaries............................................................... A-12
Subsidiary Plans........................................................... A-8
Superior Proposal.......................................................... A-29
Surviving Corporation...................................................... A-2
Tax........................................................................ A-16
Tax Return................................................................. A-16
Taxes...................................................................... A-16
Terminating Breach......................................................... A-44
Third Party................................................................ A-29
Third-Party Acquisition.................................................... A-29
Total Cash In Lieu......................................................... A-5
Total Closing Date Stock Consideration Value............................... A-5
Total Dissenting Cash...................................................... A-5
Total Outstanding Company Shares........................................... A-5
Total Parent Owned Company Shares.......................................... A-5
Transaction Support Agreement.............................................. A-1
Trip....................................................................... A-7
Trip Common Stock.......................................................... A-7
Trip Stock Option Plan..................................................... A-8
UAL........................................................................ A-1
United..................................................................... A-1
WARN Act................................................................... A-19
A-viii
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (this "Agreement"), dated as of June 15, 2001,
by and among Cendant Corporation, a Delaware corporation ("Parent"), Galaxy
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Parent ("Purchaser"), and Galileo International, Inc., a Delaware corporation
(the "Company").
RECITALS
Whereas, the respective Boards of Directors of Parent, Purchaser and the
Company each have approved and declared advisable this Agreement and the merger
of Purchaser with and into the Company (the "Merger"), upon the terms and
subject to the conditions set forth in this Agreement, whereby each issued and
outstanding share of common stock, par value $.01 per share, of the Company
(together with the associated Preferred Stock Purchase Rights (the "Rights")
issued pursuant to the Company's Rights Agreement, dated as of February 22,
2001, between the Company and LaSalle Bank National Association (the "Rights
Agreement," the "Company Common Stock"), other than shares of Company Common
Stock owned by Parent, Purchaser or the Company and other than Dissenting
Common Stock (as hereinafter defined), will be converted into the right to
receive common stock, par value $.01 per share, of Parent ("Parent Common
Stock") and cash as provided herein;
Whereas, simultaneously with the execution and delivery of this Agreement,
and as a condition to Parent's willingness to enter into this Agreement, Parent
and United Air Lines, Inc., a Delaware corporation ("UAL"), and Covia LLC, a
Delaware limited liability company ("Covia" and together with UAL, "United")
are entering into a transaction support agreement (the "Transaction Support
Agreement"), pursuant to which United has agreed, among other things, to grant
Parent a proxy to vote its shares of Company Common Stock in favor of the
Merger, upon the terms and subject to the conditions set forth therein;
Whereas, simultaneously with the execution and delivery of this Agreement,
Parent and the Company are entering into a stock option agreement (the "Option
Agreement"), pursuant to the which the Company will grant to Parent an option
(the "Option") to purchase shares of Company Common Stock, upon the terms and
subject to the conditions set forth therein;
Whereas, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and that this Agreement
constitutes a plan of reorganization; and
Whereas, Parent, Purchaser and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
Now, Therefore, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
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ARTICLE I
The Merger
1.1 The Merger. At the Effective Time (as hereinafter defined), upon the
terms and subject to the conditions of this Agreement and the applicable
provisions of the General Corporation Law of the State of Delaware (the
"DGCL"), Purchaser shall be merged with and into the Company and the separate
corporate existence of Purchaser shall thereupon cease. The Company shall be
the surviving corporation in the Merger (sometimes hereinafter referred to as
the "Surviving Corporation") and shall become a wholly owned subsidiary of
Parent. The Merger shall have the effects specified in the DGCL. Without
limiting the generality of the foregoing and subject thereto, at the Effective
Time, all of the property, rights, privileges, immunities, powers and
franchises of the Company and Purchaser shall vest in the Surviving
Corporation, and all debts, liabilities, and duties of the Company and
Purchaser shall become the debts, liabilities and duties of the Surviving
Corporation.
1.2 The Closing. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") shall take place at the offices of Jones,
Day, Reavis & Pogue, 77 W. Wacker, Chicago, Illinois ("Jones Day"), at 10:00
a.m., local time, as soon as practicable following the satisfaction (or waiver,
if permissible) of the conditions set forth in Article VI. The date on which
the Closing occurs is hereinafter referred to as the "Closing Date."
1.3 Effective Time. On or as soon as practicable after the Closing Date, the
parties hereto shall cause a Certificate of Merger meeting the requirements of
Section 251 of the DGCL (the "Certificate of Merger") to be properly executed
and filed with the Secretary of State of the State of Delaware in accordance
with the DGCL. The Merger shall become effective at the time of filing of the
Certificate of Merger with the Secretary of State of the State of Delaware in
accordance with the DGCL or at such later time which the parties hereto shall
have agreed upon and designated in such filing as the effective time of the
Merger (the "Effective Time").
1.4 Certificate of Incorporation, Bylaws, Directors and Officers of the
Surviving Corporation; Directors of Parent. Unless otherwise agreed by the
Company and Parent prior to the Closing, at the Effective Time, without any
further action on the part of Parent, Purchaser or the Company:
(a) The Certificate of Incorporation of the Company shall be amended and
restated by virtue of the Merger to read in its entirety in the form attached
hereto as Exhibit A (until further amended as provided by law and by such
Certificate of Incorporation) and, as so amended and restated, shall be the
Certificate of Incorporation of the Surviving Corporation;
(b) The Bylaws of Purchaser as in effect immediately prior to the Effective
Time shall be at and after the Effective Time (until amended as provided by
law, its Certificate of Incorporation and its Bylaws, as applicable) the Bylaws
of the Surviving Corporation;
(c) The officers of the Company immediately prior to the Effective Time
shall continue to serve in their respective offices of the Surviving
Corporation from and after the Effective Time, until their successors are
elected or appointed and qualified or until their resignation or removal; and
(d) The directors of Purchaser immediately prior to the Effective Time shall
be the directors of the Surviving Corporation from and after the Effective
Time, until their successors are elected or appointed and qualified or until
their resignation or removal.
1.5 Directors of Parent. At the Effective Time, Parent shall take all
actions necessary, including, amending its Bylaws, to cause its Board of
Directors to be expanded by one seat and to cause an individual designated by
the Board of Directors of the Company and reasonably satisfactory to Parent and
who is an Independent Director (as hereinafter defined) to be nominated and
appointed to the class of directors whose term shall expire in 2004. A director
shall be considered an "Independent Director" if he or she has no relationship
to Parent that may interfere with the exercise of his or her independence from
Parent and its
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management. Individuals with the following relationships to Parent are not
independent: employment by Parent or any of its affiliates during the then-
current year or any of the past five years; acceptance of compensation from
Parent or any of its affiliates other than compensation for Board service or
benefits under a tax-qualified retirement plan; an immediate family member of
an individual who is, or has been in any of the past five years, employed by
Parent or any of its affiliates as an executive officer; partnership with or
controlling shareholder or executive officer of any for-profit business
organization to which Parent made, or from which Parent received, payments that
are or have been significant to Parent or the business organization in any of
the past five years; and employment as an executive of another company where
any of Parent's executives serve on that company's compensation committee.
ARTICLE II
Effect of the Merger on Securities
of Purchaser and the Company
2.1 Purchaser Securities. At the Effective Time, each share of common stock,
par value $.01 per share, of Purchaser that is outstanding immediately prior to
the Effective Time shall, by virtue of the Merger and without any action on the
part of the holders thereof, be converted into and become one validly issued,
fully paid and non-assessable share of common stock, par value $.01 per share,
of the Surviving Corporation.
2.2 Company Securities.
(a) Company Common Stock.
(i) At the Effective Time, each Participating Company Share shall, by
virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive the following (the "Merger
Consideration") (capitalized terms used in this Section 2.2(a) not
otherwise defined in this Agreement have the meanings ascribed to such
terms in Section 2.2(a)(iv)):
(A) the number of duly authorized, validly issued, fully paid and
non-assessable shares of Parent Common Stock, rounded to the nearest
thousandth of a share, equal to the number (the "Exchange Ratio")
determined by dividing the Per Share Stock Amount by the Average Parent
Trading Price, provided, however, that (X) if the foregoing would
result in an Exchange Ratio less than the Low-End Ratio, then the
Exchange Ratio shall be the Low-End Ratio, and (Y) if the foregoing
would result in an Exchange Ratio greater than the High-End Ratio, then
the Exchange Ratio shall be the High-End Ratio (the "Per Share Stock
Consideration"), provided, however, that the Per Share Stock
Consideration is subject to increase as provided in Section
2.2(a)(iii);
(B) the lesser of (I) the Per Share Cash Amount and (II) the number
determined by dividing (X) the Actual Aggregate Cash Consideration by
(Y) the excess of (a) the Total Outstanding Company Shares over (b) the
Total Parent Owned Company Shares (such lesser amount, the "Per Share
Cash Consideration"), provided, however, that the Per Share Cash
Consideration is subject to decrease as provided in Section 2.2(a)(ii);
and
(C) the Per Share Additional Stock Consideration, if any.
(ii) If cash is paid in lieu of fractional shares or there are shares of
Dissenting Common Stock, or both, then, (I) the Actual Aggregate Cash
Consideration shall be reduced to equal the Adjusted Actual Aggregate Cash
Consideration and (II) the Per Share Cash Consideration that the holders of
Participating Company Shares are entitled to receive pursuant to Section
2.2(a)(i)(B) shall be reduced to equal the number determined by dividing
(X) the Adjusted Actual Aggregate Cash Consideration by (Y) the
Participating Company Shares.
(iii) If there are shares of Dissenting Common Stock, then the Per Share
Stock Consideration that the holders of Participating Company Shares are
entitled to receive pursuant to Section 2.2(a)(i)(A) shall be
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increased to that number of duly authorized, validly issued, fully paid and
non-assessable shares of Parent Common Stock, rounded to the nearest
thousandth of a share, equal to the number determined by dividing (I) the
Actual Aggregate Parent Shares by (II) the Participating Company Shares.
(iv) For purposes of this Agreement:
"Actual Aggregate Cash Consideration" shall mean (I) if the Preliminary
Aggregate Cash Consideration is less than or equal to the Cash Limitation
Amount, then, an amount equal to the Preliminary Aggregate Cash Consideration
and (II) if the Preliminary Aggregate Cash Consideration exceeds the Cash
Limitation Amount, then, an amount equal to the Cash Limitation Amount.
"Actual Aggregate Parent Shares" shall mean the product of (I) the excess of
(X) the Total Outstanding Company Shares over (Y) the Total Parent Owned
Company Shares, if any, and (II) the Per Share Stock Consideration (determined
prior to any increase pursuant to Section 2.2(a)(iii)).
"Adjusted Actual Aggregate Cash Consideration" shall mean the excess of (I)
the Actual Aggregate Cash Consideration over (II) the sum of (X) the Total Cash
In Lieu and (Y) the Total Dissenting Cash.
"Average Parent Trading Price" shall mean the arithmetic average of the per
share 4:00 p.m. Eastern time closing sales price of the Parent Common Stock on
the New York Stock Exchange (the "NYSE") (as reported on the NYSE Composite
Tape) during the Pricing Period.
"Cash Limitation Amount" shall mean the number determined by dividing (I)
the product of (X) the Cash Limitation Percentage and (Y) the Total Closing
Date Stock Consideration Value by (II) the Control Requirement Percentage.
"Cash Limitation Percentage" shall mean the excess (expressed as a decimal,
without rounding) of (I) one over (II) the Control Requirement Percentage. For
the avoidance of doubt, if the Total Parent Owned Company Shares shall equal
zero, the Cash Limitation Percentage shall equal 0.1950.
"Closing Date Parent Stock Price" shall mean the average of the high and low
trading prices of the Parent Common Stock on the NYSE Composite Tape on the
date on which the Effective Time occurs.
"Controlling Company Shares" shall mean the product of (I) 0.8050 and (II)
the Total Outstanding Company Shares.
"Control Requirement Percentage" shall mean the fraction (expressed as a
decimal, without rounding), (I) the numerator of which shall equal the
Controlling Company Shares and (II) the denominator of which shall equal the
excess of (X) the Total Outstanding Company Shares over (Y) the Total Parent
Owned Company Shares. For the avoidance of doubt, if the Total Parent Owned
Company Shares shall equal zero, the Control Requirement Percentage shall equal
0.8050.
"High-End Ratio" shall mean, subject to adjustment pursuant to Section 2.4,
the number determined by dividing (I) the Per Share Stock Amount by (II) 17.
"Low-End Ratio" shall mean, subject to adjustment pursuant to Section 2.4,
the number determined by dividing (I) the Per Share Stock Amount by (II) 20.
"Participating Company Shares" shall mean the excess of (I) the Total
Outstanding Company Shares over (II) the sum of (X) the number of shares of
Dissenting Common Stock, if any, and (Y) the number of shares of Company Common
Stock, if any, cancelled pursuant to Section 2.2(a)(vi).
"Per Share Additional Stock Consideration" shall mean the number of shares
of Parent Common Stock, rounded to the nearest thousandth of a share, equal to
the number determined by dividing (I) the Per Share Additional Consideration
Value by (II) the Closing Date Parent Stock Price. For purposes of this Section
2.2(a),
A-4
the Per Share Additional Consideration Value shall be equal to simple interest
on $33 calculated at the 30 day London Interbank Offered Rate plus 100 basis
points, from the date that is 180 days from the date hereof to the date, if
later, on which the Effective Time occurs, provided, however, that if the event
described in the first sentence of Section 5.4(f) does not occur, the Per Share
Additional Consideration Value (and therefore, the Per Share Additional Stock
Consideration) shall be zero. Such amount, if any, shall be determined using a
year of 360 days to calculate the interest-equivalent amount.
"Per Share Cash Amount" shall mean the product of (I) $33 and (II) the Cash
Limitation Percentage.
"Per Share Stock Amount" shall mean the product of (I) $33 and (II) the
Control Requirement Percentage.
"Preliminary Aggregate Cash Consideration" shall mean the product of (I) the
Per Share Cash Amount and (II) the excess of (X) the Total Outstanding Company
Shares over (Y) the Total Parent Owned Company Shares.
"Pricing Period" shall mean the 20 consecutive trading days immediately
preceding the third consecutive trading day prior to the date of the
Stockholders Meeting; provided, however, that if, primarily as a result of the
execution by Parent or any Subsidiary thereof of a Restricted Acquisition
Agreement (as hereinafter defined), the consents, approvals, permits or
authorizations described in Section 5.4 hereof are not obtained by the date
that is 30 days after the date on which the Stockholders Meeting occurs, the
Pricing Period shall be the 20 consecutive trading days immediately preceding
the third consecutive trading day prior to the date on which the last of the
approvals described in Section 5.4 shall have been obtained and satisfied.
"Total Cash In Lieu" shall mean the product of (I) the total number of
registered holders of Company Common Stock immediately prior to the Effective
Time and (II) the Closing Date Parent Stock Price.
"Total Dissenting Cash" shall mean the product of (I) the number of shares
of Dissenting Common Stock and (II) the greater of (X) $33.00 and (Y) the sum
of (a) the product of the Per Share Stock Consideration (determined prior to
any increase pursuant to Section 2.2(a)(iii)) and the Closing Date Parent Stock
Price and (b) the Per Share Cash Consideration (determined prior to any
decrease pursuant to Section 2.2(a)(ii)).
"Total Parent Owned Company Shares" shall mean the number of shares of
Company Common Stock, if any, owned by Parent (or any Subsidiary of Parent) at
the Effective Time.
"Total Closing Date Stock Consideration Value" shall mean the product of (I)
the number of Actual Aggregate Parent Shares and (II) the Closing Date Parent
Stock Price.
"Total Outstanding Company Shares" shall mean the total number of issued and
outstanding shares of Company Common Stock immediately prior to the Effective
Time.
(v) As a result of the Merger and without any action on the part of the
holders thereof, at the Effective Time, all shares of Company Common Stock
shall cease to be outstanding and shall be cancelled and retired and shall
cease to exist, and each holder of a share of Company Common Stock (other
than the Company or holders of Total Parent Owned Company Shares) shall
thereafter cease to have any rights with respect to such shares of Company
Common Stock, except the right to receive, without interest, the Merger
Consideration in accordance with Section 2.3 upon the surrender of a
certificate or certificates representing such shares of Company Common
Stock.
(vi) Each share of Company Common Stock included in Total Parent Owned
Company Shares or held in the Company's treasury at the Effective Time
shall, by virtue of the Merger and without any action on the part of the
holder thereof, cease to be outstanding and shall be cancelled and retired
without payment of any consideration therefor.
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(b) Special Voting Preferred Stock.
(i) At the Effective Time, without any action on the part of the holders
thereof, any and all shares of Special Voting Preferred Stock, par value
$.01 per share, of the Company (the "Special Voting Preferred Stock") then
outstanding shall be redeemed by the Company for an amount in cash equal to
$100.00 per share (the "Preferred Redemption Price"), payable by the
Company by certified check to each holder thereof at its address as set
forth on the books of the Company at such time, shall cease to be
outstanding or exist, and each holder of shares of Special Voting Preferred
Stock shall thereafter cease to have any rights with respect to such shares
of Special Voting Preferred Stock, except the right to receive, without
interest, the Preferred Redemption Price in accordance with Section
2.3(b)(iv) below upon the surrender of a certificate or certificates
representing such shares of Special Voting Preferred Stock. All funds
necessary to pay the Preferred Redemption Price and any expenses relating
to the redemption of the Special Voting Preferred Stock shall come solely
from the Company. All shares of Special Voting Preferred Stock so redeemed
shall be retired and shall not thereafter be reissued as part of any series
of Preferred Stock of the Company.
(ii) Each share of Special Voting Preferred Stock issued and held in the
Company's treasury at the Effective Time shall, by virtue of the Merger,
cease to be outstanding and shall be cancelled and retired without payment
of any consideration therefor.
(iii) Without limiting the generality or effect of Section 1.4(d) and
subject thereto, any and all directors elected to the Company's Board of
Directors by holders of Special Voting Preferred Stock shall, at the
Effective Time and the time of the actions set forth in Section 2.2(b)(i)
above, automatically and without any further action by such directors or
such holders be deemed to have resigned from the Company's Board of
Directors.
(iv) At the Effective Time, the Company shall cause to be mailed to each
holder of Special Voting Preferred Stock a notice of redemption instructing
such holder to surrender its certificate(s) representing Special Voting
Preferred Stock in exchange for the Preferred Redemption Price. Upon
surrender of such certificate(s), the Company shall deliver to such holder
the Preferred Redemption Price and the certificate(s) representing such
shares shall forthwith be cancelled.
(c) Options and SARs; Employee Stock Purchase Plan.
(i) Without limiting the generality or effect of Section 2.2(a) or 2.3,
but subject to subsection (v) of this Section 2.2(c), the Company shall
take all action necessary (which includes satisfying the requirements of
Rule 16b-3(e) promulgated under Section 16 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) to provide that, immediately
prior to the Effective Time, all options to acquire shares of Company
Common Stock and all stock appreciation rights related to the price of
Company Common Stock (individually, an "Option" and collectively, the
"Options") outstanding immediately prior to the Effective Time under any
Company stock option plan or other equity incentive plan (the "Company
Stock Option Plans"), whether or not then exercisable, shall (A) cease to
represent options to acquire shares of, or stock appreciation rights
related to the price of, Company Common Stock, (B) be converted into
options to purchase shares of, or stock appreciation rights related to the
price of, Parent Common Stock in an amount and at an exercise price
determined as provided below and (C) with respect to unvested options or
unvested stock appreciation rights that have an exercise price that is less
than the Average Company Trading Price (as hereinafter defined), become
fully vested and exercisable (and otherwise be subject to the terms of the
applicable option plans and the applicable option agreements representing
grants thereunder) (the "Assumed Options"):
(1) The number of shares of Parent Common Stock to be subject to
each new option or right shall be equal to the product of the number of
shares of Company Common Stock subject to the original option or right
and the Option Exchange Ratio (as hereinafter defined); provided that
any fractional shares of Parent Common Stock resulting from such
multiplication shall be rounded to the nearest whole share; and
A-6
(2) The exercise price per share of Parent Common Stock under each
new option or right shall be equal to the exercise price per share of
Company Common Stock under the original option or right divided by the
Option Exchange Ratio; provided that such exercise price shall be
rounded to the nearest whole cent.
The adjustment provided herein with respect to any options that are
intended to be "incentive stock options" (as defined in Section 422 of the
Code) shall be and is intended to be effected in a manner that is
consistent with Section 424(a) of the Code. The duration and other terms of
the new options and rights shall, except as provided above, be the same as
the original options and rights except that all references to the Company
shall be deemed to be references to Parent. For purposes of this Section
2.2(c), (A) "Average Company Trading Price" shall mean the arithmetic
average of the per share 4:00 p.m. Eastern time closing sales price of the
Company Common Stock on the NYSE (as reported on the New York Stock
Exchange Composite Tape) for the 20 consecutive trading days immediately
preceding the third trading day prior to the date of the Stockholders
Meeting and (B) "Option Exchange Ratio" shall mean the quotient derived by
dividing $33.00 by the Average Parent Trading Price per share of Parent
Common Stock; provided that (X) if the foregoing would result in an Option
Exchange Ratio less than 1.65000, the Option Exchange Ratio shall be deemed
to be 1.65000 and (Y) if the foregoing would result in an Option Exchange
Ratio greater than 1.94118, the Option Exchange Ratio shall be deemed to be
1.94118; provided further, however, that if the event described in the
first sentence of Section 5.4(e) occurs, the Option Exchange Ratio shall be
appropriately and equitably increased to take into account the amount of
the Per Share Additional Stock Consideration.
(ii) As soon as practicable following the Effective Time, Parent shall
deliver, upon due surrender of the Assumed Options, to holders of Assumed
Options appropriate agreements representing the right to acquire Parent
Common Stock, or stock appreciation rights related to the price of Parent
Common Stock, on the same terms and conditions as contained in the Assumed
Options (except as otherwise set forth in this Section 2.2(c)). Except as
expressly contemplated herein, Parent shall comply with the terms of the
Company Stock Option Plans as they apply to the Assumed Options. Parent
shall take all corporate action necessary to reserve for issuance a
sufficient number of shares of Parent Common Stock for delivery upon
exercise of the Assumed Options in accordance with this Section 2.2(c).
Parent shall file with the SEC (as hereinafter defined) a registration
statement on Form S-8 (or any successor form) under the Securities Act of
1933, as amended (the "Securities Act") or on another appropriate form,
effective as of, or reasonably promptly following, the Effective Time, with
respect to Parent Common Stock subject to the Assumed Options and shall use
commercially reasonable efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as
the Assumed Options remain outstanding and exercisable. With respect to
those individuals, if any, who, subsequent to the Effective Time, will be
subject to the reporting requirements of Section 16 of the Exchange Act,
Parent shall administer the Company Stock Option Plans, where applicable,
in a manner that complies with Rule 16b-3 promulgated under the Exchange
Act.
(iii) Effective at or before the Effective Time, the Company shall take
all actions necessary to cause the termination of the Galileo
International, Inc. Employee Stock Purchase Plan (the "Company ESPP") and
shall take all necessary steps to refund, without interest, to each
Participant (as defined in the Company ESPP) any amounts withheld from such
Participant's compensation pursuant to a subscription agreement under the
Company ESPP to the extent that such amount has not been used to purchase
Company Common Stock on a Purchase Date (as defined in the Company ESPP)
occurring prior to the effective date of termination of the Company ESPP.
(iv) After the Effective Time, all options to acquire shares of common
stock, par value $.01 per share ("Quantitude Common Stock"), of Quantitude,
Inc., a Delaware corporation and a wholly owned subsidiary of the Company
("Quantitude"), and shares of common stock, par value $.01 per share ("Trip
Common Stock"), of Trip.com, Inc., a Delaware corporation and a wholly
owned subsidiary of the Company ("Trip"), outstanding immediately prior to
the Effective Time under the Quantitude Inc. 2001
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Equity Incentive Plan in the form heretofore provided to Parent (the
"Quantitude Stock Option Plan") and the Trip.com, Inc. 2001 Equity
Incentive Plan in the form heretofore provided to Parent (the "Trip Stock
Option Plan," and together with the Quantitude Stock Option Plan the
"Subsidiary Plans"), whether or not exercisable, shall remain outstanding
following the Effective Time and remain subject to the terms of the
applicable Subsidiary Plan and the applicable option agreements
representing grants thereunder.
(v) The Company and its Subsidiaries shall use its reasonable best
efforts (which include satisfying the requirements of Rule 16b-3(e)
promulgated under Section 16 of the Exchange Act) to provide that,
immediately prior to the Effective Time, all stock appreciation rights
related to Company Stock (individually, an "SAR" and collectively, the
"SARs") outstanding immediately prior to the Effective Time under any
equity incentive plan of the Company ("Company Equity Incentive Plan"),
whether or not then exercisable, shall be cancelled and each holder of SAR
shall promptly after the Effective Time receive from the Surviving
Corporation, for each SAR, (I) an amount in cash equal to the difference of
the Merger Consideration minus the per share exercise price of such SAR,
without interest, to the extent such difference is a positive number or
(II) to the extent such difference is a negative number, such other
consideration as is described in subsection (B) below (hereinafter referred
to as the "SAR Consideration"), and that all SARs will be terminated and
thereafter represent only the right to receive the SAR Consideration;
provided, however that with respect to any Person subject to Section 16(a)
of the Exchange Act, any such amount will be paid as soon as practicable
after the first date payment can be made without liability to such Person
under Section 16(b) of the Exchange Act.
(A) Notwithstanding anything herein stated, no SAR Consideration
will be paid with respect to any SAR unless, at or prior to the time of
such payment (i) such SAR is cancelled and (ii) to the extent necessary
under the terms of such SAR, the holder of such SAR has executed and
delivered a release of any and all rights the holder had or may have
had in respect of such.
(B) Without limiting the generality or effect of the foregoing,
prior to the Effective Time, the Company will use reasonable best
efforts to obtain all necessary consents or releases, if any, from
holders of SARs under any Company Equity Incentive Plan and take all
such other lawful action as may be necessary to give effect to the
transactions contemplated by this Section. In the event that any SAR is
not cancelled in accordance with the foregoing, such SAR shall be
converted to a stock appreciation right related to the price of Parent
Common Stock in accordance with Section 2.2(c)(i). The Company or its
Subsidiaries may, but shall not be required to, offer additional
consideration for the purpose of obtaining such consents or releases.
Such additional consideration shall be subject to the advance approval
of Parent, which approval shall not be unreasonably withheld.
2.3 Exchange of Certificates Representing Company Common Stock.
(a) As of the Effective Time, (i) Parent shall appoint a commercial bank or
trust company, reasonably satisfactory to the Company, to act as exchange agent
(the "Exchange Agent") hereunder for payment of the Merger Consideration upon
surrender of certificates representing any shares of Company Common Stock
cancelled pursuant to Section 2.2(a) (the "Certificates") and (ii) Parent shall
enter into an agreement with the Exchange Agent reasonably satisfactory to the
Company which shall provide that Parent shall deposit with the Exchange Agent
as of the Effective Time, for the benefit of the holders of shares of Company
Common Stock, for exchange in accordance with this Article II, through the
Exchange Agent, certificates representing the aggregate number of whole shares
of Parent Common Stock (rounded up to the nearest whole share) issuable
pursuant to Section 2.2 in exchange for outstanding shares of Company Common
Stock and an amount of cash equal to the aggregate amount payable to the
holders of outstanding shares of Company Common Stock (such shares of Parent
Common Stock and cash, together with any dividends or distributions with
respect thereto with a record date after the Effective Time being hereinafter
collectively referred to as the "Exchange Fund").
(b) As promptly as possible after the Effective Time, Parent shall cause the
Exchange Agent to mail to each holder of record of shares of Company Common
Stock whose shares were converted into the right to
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receive the Merger Consideration pursuant to Section 2.1 (i) a letter of
transmittal which shall specify that delivery shall be effected, and risk of
loss and title to Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and which letter shall be in such form and
have such other provisions as are customary for letters of this nature, and
(ii) instructions for effecting the surrender of such Certificates in exchange
for the Merger Consideration. Upon surrender of a Certificate to the Exchange
Agent together with such letter of transmittal, duly executed and completed in
accordance with the instructions thereto, and such other documents as may be
reasonably required by the Exchange Agent, (i) the holder of such Certificate
representing Company Common Stock shall be entitled to receive in exchange
therefor certificates representing that number of whole shares of Parent Common
Stock which such holder has the right to receive pursuant to the provisions of
this Article II, certain dividends or other distributions in accordance with
Section 2.3(c) and a check in the amount equal to the cash which such holder
has the right to receive pursuant to the provisions of this Article II
(including any cash in lieu of any fractional shares in accordance with Section
2.3(e)), and (ii) the shares represented by the Certificate so surrendered
shall forthwith be cancelled. No interest will be paid or will accrue on the
cash payable upon surrender of any Certificate. In the event of a transfer of
ownership of Company Common Stock that is not registered in the transfer
records of the Company, exchange and payment may be made with respect to such
Company Common Stock to such a transferee if the Certificate representing such
shares of Company Common Stock is presented to the Exchange Agent, accompanied
by all documents required to evidence and effect such transfer and to evidence
that any applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.3, each Certificate shall be deemed at any time
after the Effective Time for all purposes, to represent the right to receive
upon surrender the Merger Consideration with respect to the shares formerly
represented thereby. Notwithstanding the foregoing, Certificates representing
Company Common Stock surrendered for exchange by any person constituting an
"affiliate" of the Company shall not be exchanged until Parent has received an
Affiliate Letter as provided in Exhibit B hereto. From and after the Effective
Time, there shall be no transfers on the stock transfer books of the Company of
the shares of Company Common Stock that were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation, they shall be cancelled and exchanged as provided in
this Article II.
(c) No dividends or other distributions with respect to Parent Common Stock
with a record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to shares of Parent Common Stock
represented thereby, and no cash which such holder has the right to receive
pursuant to the provisions of this Article II (including any cash payment in
lieu of fractional shares pursuant to Section 2.3(e)) shall be paid to any such
holder, and all such dividends, other distributions and cash shall be paid by
Parent to the Exchange Agent and shall be included in the Exchange Fund, in
each case until the surrender of such Certificate in accordance with this
Article II. Subject to the effect of applicable escheat or similar laws,
following surrender of any such Certificate there shall be paid to the holder
of the certificate representing whole shares of Parent Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock and the amount of cash which such holder has the right to receive
pursuant to the provisions of this Article II (including any cash payable in
lieu of a fractional share of Parent Common Stock to which such holder is
entitled pursuant to Section 2.3(e)) and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record date after the
Effective Time and with a payment date subsequent to such surrender payable
with respect to each whole share of Parent Common Stock.
(d) All shares of Parent Common Stock issued upon the surrender for exchange
of Certificates in accordance with the terms of this Article II (including any
cash paid pursuant to this Article II) shall be deemed to have been issued (and
paid) at the Effective Time in full satisfaction of all rights pertaining to
the shares of Company Common Stock, theretofore represented by such
Certificates, subject, however, to the Surviving Corporation's obligation to
pay any dividends or make any other distributions with a record date prior to
the Effective Time which may have been declared or made by the Company on such
shares of Company Common Stock in accordance with the terms of the Agreement,
which remain unpaid at the Effective Time.
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(e) (i) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of Parent Common Stock
shall be issued in the Merger upon the surrender for exchange of Certificates,
no dividend or distribution of Parent shall relate to such fractional share
interests and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of Parent. In lieu of the
issuance of such fractional shares, the Exchange Agent shall sell such number
of whole shares of Parent Common Stock (rounded up to the nearest whole share)
in the open market in order to pay each former holder of Company Common Stock
an amount in cash equal to the product obtained by multiplying (A) the
fractional share interest to which such former holder (after taking into
account all shares of Company Common Stock held at the Effective Time by such
holder) would otherwise be entitled by (B) the Average Parent Trading Price.
(ii) As soon as practicable after the determination of the amount of cash,
if any, to be paid to holders of Certificates formerly representing Company
Common Stock with respect to any fractional share interests, the Exchange Agent
shall make available such amounts to such holders of Certificates formerly
representing Company Common Stock subject to and in accordance with the terms
of Section 2.3(b).
(f) Any portion of the Exchange Fund (including the proceeds of any interest
and other income received by the Exchange Agent in respect of all such funds)
that remains unclaimed by the former stockholders of the Company six months
after the Effective Time shall be delivered to Parent. Any former stockholders
of the Company who have not theretofore complied with this Article II shall
thereafter look only to the Surviving Corporation as general creditors for
payment of any Merger Consideration, without any interest thereon, that may be
payable in respect of each share of Company Common Stock such stockholder holds
as determined pursuant to this Agreement.
(g) None of Parent, the Company, the Surviving Corporation, the Exchange
Agent or any other person shall be liable to any former holder of shares of
Company Common Stock for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(h) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by the Surviving
Corporation, the posting by such person of a bond in such reasonable amount as
the Surviving Corporation may direct as indemnity against any claim which may
be made against it with respect to such Certificate, the Exchange Agent will
issue, in each case, in exchange for such lost, stolen or destroyed
Certificate, the Merger Consideration payable in respect thereof pursuant to
this Agreement.
2.4 Adjustment of Merger Consideration.
(a) If, subsequent to the date of this Agreement but prior to the Effective
Time, the outstanding shares of Company Common Stock or Parent Common Stock are
changed into a different number of shares or a different class as a result of a
stock split, reverse stock split, stock dividend, subdivision,
reclassification, combination, exchange, recapitalization or other similar
transaction, the Exchange Ratio and the Merger Consideration shall be
appropriately and equitably adjusted.
(b) If, subsequent to the date of this Agreement but prior to the Effective
Time, Parent declares, sets aside or pays any dividend or makes any other
distribution or payment (whether in cash, stock, property or any combination
thereof), in each such case with respect to its outstanding shares of Parent
Common Stock, including, without limitation, any of the foregoing in connection
with a spin-off, split-off or split-up, the record date for which is prior to
the Effective Time (a "Section 2.4(b) Transaction"), then the following
adjustments shall be made to the Low-End Ratio, the High-End Ratio and the
Walk-Away Price (as hereinafter defined):
(i) the High-End Ratio shall equal the number determined by dividing the
Per Share Stock Amount by the Adjusted High-End Price;
(ii) the Low-End Ratio shall equal the number determined by dividing the
Per Share Stock Amount by the Adjusted Low-End Price; and
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(iii) the Walk-Away Price shall equal $14.00 minus the Adjustment
Factor.
(c) As used in this Section 2.4, the following terms shall have the
following meanings:
(i) "Adjusted High-End Price" shall mean an amount equal to $17.00 minus
the Adjustment Factor;
(ii) "Adjusted Low-End Price" shall mean an amount equal to $20.00 minus
the Adjustment Factor; and
(iii) "Adjustment Factor" shall mean the number determined by dividing
the Distribution Value by the aggregate number of shares of Parent Common
Stock outstanding immediately prior to the Effective Time.
(iv) "Distribution Value" shall mean (I) for Section 2.4(b) Transactions
not involving a Spin-Off (as hereinafter defined) the aggregate fair market
value on the distribution date of the assets, property, cash, securities,
rights, warrants or options distributed in respect of the Parent Common
Stock in the Section 2.4(b) Transaction, as determined in good faith by the
Board of Directors of Parent; or (II) in respect of a dividend or other
distribution of shares of capital stock of any class or series, or similar
equity interests, of or relating to a Subsidiary or other business unit of
Parent, which securities are listed for and are actually trading on an
exchange or the Nasdaq National Market System (a "Spin-Off"), the product
of (x) the arithmetic average of the per share 4:00 p.m. Eastern time
closing sales price of such securities for the 10 consecutive trading days
commencing on and including the first day of trading of such securities
after the effectiveness of the Spin-Off, and (y) the aggregate number of
such securities outstanding during such 10-day period.
(d) Parent shall not, during the Pricing Period, effect any Section 2.4(b)
Transaction or cause the Parent Common Stock to trade ex-dividend with respect
to any Section 2.4(b) Transaction.
(e) Parent shall not, prior to the Effective Time, effect, or cause the
Parent Common Stock to trade ex-dividend with respect to, any Section 2.4(b)
Transaction other than the previously announced Spin-Off of Parent's
individual membership and loyalty business.
2.5 Dissenting Company Stockholders. Notwithstanding any provision of this
Agreement to the contrary, shares of Company Common Stock that are issued and
outstanding immediately prior to the Effective Time and which are held by
holders of such shares of Company Common Stock who properly exercise appraisal
rights with respect thereto in accordance with Section 262 of the DGCL (the
"Dissenting Common Stock") shall not be exchangeable for the right to receive
the Merger Consideration, and holders of such shares of Dissenting Common
Stock will be entitled only to receive payment of the appraised value of such
shares of Company Common Stock in accordance with the provisions of such
Section 262 unless and until such holders fail to perfect or effectively
withdraw or lose their rights to appraisal and payment under the DGCL. If,
after the Effective Time, any such holder fails to perfect or effectively
withdraws or loses such right, such shares of Company Common Stock will
thereupon be treated as if they had been converted into and to have become
exchangeable for, at the Effective Time, the right to receive the Merger
Consideration, without any interest thereon. The Company shall give Parent (i)
prompt notice of any demands received by the Company for appraisals of shares
of Company Common Stock and (ii) the opportunity to direct all negotiations
and proceedings with respect to demands for appraisal under the DGCL. The
Company shall not, except with the prior written consent of Parent, make any
payment with respect to any demands for appraisal or offer to settle or settle
any such demands.
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ARTICLE III
Representations and Warranties of the Company
The Company hereby represents and warrants to Parent and Purchaser as
follows:
3.1 Existence; Good Standing; Corporate Authority. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation. The Company is duly qualified to do
business as a foreign corporation and is in good standing under the laws of any
other state of the United States in which the ownership of its properties or
the conduct of its business requires such qualification, except where the
failure to be so qualified or in good standing has not had and would not
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the assets, liabilities, business, results of operations, or
financial condition of the Company and its Subsidiaries, taken as a whole,
except any such effect resulting primarily from (a) this Agreement, the
transactions contemplated by this Agreement or the announcement thereof, (b)
Parent's announcement or other communication of Parent of the plans or
intentions of Parent with respect to the conduct of the business (or any
portion thereof) of the Company or any of its Subsidiaries, (c) changes or
conditions (including changes in economic, financial market, regulatory or
political conditions) affecting generally the air travel industry, the CRS
industry, or the information services industry in which the Company or its
Subsidiaries participates or (d) the Company's or its Subsidiaries' failure to
engage in actions and activities in accordance with Section 5.2(b) in
furtherance of the Company's web hosting business or Quantitude's third party
telecommunications business (a "Company Material Adverse Effect") and would not
prevent or materially delay consummation of the transactions contemplated
hereby. The Company has all requisite corporate power and authority to own or
lease and operate its properties and to carry on its business as now conducted,
except where the failure to have such power and authority has not had and would
not reasonably be expected to have a Company Material Adverse Effect and would
not prevent or materially delay consummation of the transactions contemplated
hereby. Except as set forth in Schedule 3.1 of the disclosure letter, dated
this date, delivered by the Company to Parent (the "Company Disclosure
Letter"), the Company has heretofore delivered to Parent true and correct
copies of the Certificate of Incorporation and Bylaws (or equivalent
organizational documents) as currently in effect for the Company and each of
its Subsidiaries. Except as set forth in Schedule 3.1 of the Company Disclosure
Letter, such Certificates of Incorporation and Bylaws (or equivalent
organizational documents) are in full force and effect and no other
organizational documents are applicable to or binding upon the Company or its
Subsidiaries. The term "Subsidiaries," when used in this Agreement with respect
to any party, means any corporation or other organization, whether incorporated
or unincorporated, of which such party directly or indirectly owns or controls
more than 50% of the securities or other interests having by their terms
ordinary voting power to elect a majority of the board of directors or other
governing body performing similar functions.
3.2 Authorization, Validity and Effect of Agreements. The Company's Board of
Directors has on or prior to the date of this Agreement (a) declared the Merger
advisable and in the best interest of the Company and its stockholders and
approved this Agreement in accordance with applicable Law, (b) resolved to
recommend the approval of this Agreement by the Company's stockholders at a
meeting thereof duly called and held in accordance with the Company's
Certificate of Incorporation and Bylaws and the requirements of the DGCL (the
"Stockholders Meeting") and (c) directed that this Agreement be submitted to
the Company's stockholders for approval (collectively, the "Board
Recommendation"). The Company has the requisite corporate power and authority
to execute and deliver this Agreement, the Option Agreement and all other
agreements and documents contemplated hereby (the "Ancillary Documents") to
which it is a party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement, the Option Agreement and
the Ancillary Documents to which it is a party by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
have been duly and validly authorized by the Company's Board of Directors, and
no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement, the Option Agreement and the Ancillary Documents to
which it is a party or to consummate the transactions contemplated hereby and
thereby other than (i) assuming the accuracy of Parent's and Purchaser's
representation and warranty set forth in Section 4.16, the approval of
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this Agreement by the affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock (voting as one class with each share
of Company Common Stock having one vote) (the "Company Stockholder Approval")
and (ii) the filing and recordation of the Certificate of Merger in accordance
with the DGCL. This Agreement and the Option Agreement have been, and any
Ancillary Document to which the Company is a party at the time of execution
shall have been, duly and validly executed and delivered by the Company, and
(assuming this Agreement and such Ancillary Documents each constitutes a valid
and binding obligation of any other parties thereto) constitutes and will
constitute the valid and binding obligations of the Company, enforceable in
accordance with their respective terms, subject, as to enforceability, to
applicable bankruptcy, insolvency, moratorium or other similar laws, now or
hereafter in effect, relating to creditors' rights and general principles of
equity.
3.3 Compliance with Laws. Except as set forth in Schedule 3.3 of the Company
Disclosure Letter, the Company and each of its Subsidiaries are in compliance
with and are not in default under or in violation of (a) their respective
Certificates of Incorporation and Bylaws (or equivalent organizational
documents), (b) any order of any foreign, federal, state or local judicial,
legislative, executive, administrative or regulatory body or authority or any
arbitration board or tribunal ("Governmental Entity") or (c) any foreign,
federal, state or local law, statute, ordinance, rule, regulation, order,
judgment or decree ("Laws") applicable to the Company or such Subsidiaries or
any of their respective properties or assets, except, in the case of clauses
(b) and (c) above, where such non-compliance, default or violation,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Company Material Adverse Effect, would not prevent or
materially delay consummation of the transactions contemplated hereby and would
not impose a risk of criminal liability, criminal fines, imprisonment or
confinement, in each case, upon any officer, employee or director of the
Company, Parent or any of their respective Subsidiaries. Schedule 3.3 of the
Company Disclosure Letter sets forth any material order of any Governmental
Entity binding on the Company or such Subsidiaries.
3.4 Capitalization. The authorized capital stock of the Company consists of
(a) 250,000,000 shares of Company Common Stock, (b) 7 shares of Special Voting
Preferred Stock of which (i) 1 share has been designated Series A Special
Voting Preferred Stock (the "Series A Special Voting Preferred Stock"), (ii) 1
share has been designated Series B Special Voting Preferred Stock (the "Series
B Special Voting Preferred Stock"), (iii) 1 share has been designated Series C
Special Voting Preferred Stock (the "Series C Special Voting Preferred Stock"),
(iv) 1 share has been designated Series D Special Voting Preferred Stock (the
"Series D Special Voting Preferred Stock"), (v) 1 share has been designated
Series E Special Voting Preferred Stock (the "Series E Special Voting Preferred
Stock"), (vi) 1 share has been designated Series F Special Voting Preferred
Stock (the "Series F Special Voting Preferred Stock"), and (vii) 1 share has
been designated Series G Special Voting Preferred Stock (the "Series G Special
Voting Preferred Stock"), and (c) 25,000,000 shares of ordinary preferred
stock, par value $.01 per share (the "Ordinary Preferred Stock," and,
collectively with the Special Voting Preferred Stock, the "Preferred Stock").
2,500,000 shares of Ordinary Preferred Stock have been designated as Series H
Junior Participating Preferred Stock ("Series H Preferred Stock") in connection
with the Rights issued pursuant to the Rights Agreement. As of May 31, 2001,
(A) 87,390,109 shares of Company Common Stock were issued and outstanding, (B)
(1) 1 share each of Series A, B and E of Special Voting Preferred Stock were
issued and outstanding, (2) no shares of Ordinary Preferred Stock were issued
and outstanding, (3) no shares of Series H Preferred Stock were issued or
outstanding, and (4) no other shares of capital stock of the Company were
issued and outstanding, (C) 4,047,545 shares of Company Common Stock were
reserved for issuance upon the exercise of outstanding stock options, and (D)
18,021,476 shares of Company Common Stock were held by the Company in its
treasury. Except for the Rights and the aforementioned stock options, and
except as set forth in Schedule 3.4 of the Company Disclosure Letter and the
Option Agreement, the Company has no outstanding bonds, debentures, notes or
other obligations entitling the holders thereof to vote (or which are
convertible into or exercisable for securities having the right to vote) with
the stockholders of the Company on any matter. All issued and outstanding
shares of capital stock of the Company are duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights. Except for the Rights,
the Option Agreement and the aforementioned stock options and other than
pursuant to the Company Benefit Plans (as defined in Section 3.11) or as set
forth in Schedule 3.4 of the Company Disclosure
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Letter, there are no existing options, warrants, calls, subscriptions,
convertible securities, or other rights, agreements or commitments (Y) to which
the Company or any of its Subsidiaries is a party of any character relating to
the issued or unissued capital stock or other equity interests of the Company
or any of its Subsidiaries, or (Z) obligating the Company or any Subsidiary of
the Company to (1) issue, transfer or sell any shares of capital stock or other
equity interests of the Company or any Subsidiary of the Company or securities
convertible into or exchangeable for such shares or equity interests, (2)
grant, extend or enter into any such subscription, option, warrant, call,
convertible securities or other similar right, agreement, arrangement or
commitment, (3) redeem or otherwise acquire any such shares of capital stock or
other equity interests or (4) make any investment (in the form of a loan,
capital contribution or otherwise) in any person in an amount in excess of
$1,000,000, individually or in the aggregate. Except as set forth under the
heading "Certain Relationships and Related Transactions" in the Company's
definitive proxy statement for its annual meeting of stockholders held on May
17, 2001 (the "2001 Proxy Statement"), or in Schedule 3.4 of the Company
Disclosure Letter, there are no voting trusts, voting agreements or other
agreements or understandings to which the Company or any of its Subsidiaries is
a party with respect to the voting of the capital stock or other equity
interest of the Company or any of its Subsidiaries.
3.5 Subsidiaries. Schedule 3.5 of the Company Disclosure Letter lists all of
the Subsidiaries of the Company. Except as set forth in Schedule 3.5 of the
Company Disclosure Letter, each of the Company's Subsidiaries is a corporation,
partnership, limited liability company or similar form of entity duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization and has the corporate,
partnership or similar power and authority to own or lease and operate its
properties and carry on its business as now conducted. Except as set forth in
Schedule 3.5 of the Company Disclosure Letter, each of the Company's
Subsidiaries is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which the ownership of its property or
the conduct of its business requires such qualification, except where the
failure to be so qualified or in good standing, individually or in the
aggregate, has not had and would not reasonably be expected to have a Company
Material Adverse Effect and would not prevent or materially delay consummation
of the transactions contemplated hereby. The Company owns, directly or
indirectly, all of the outstanding shares of capital stock (or other ownership
interests having by their terms ordinary voting power to elect a majority of
directors or others performing similar functions with respect to such
Subsidiaries) of each of the Company's Subsidiaries, free and clear of all
liens, pledges, security interests, claims or other encumbrances (collectively,
"Liens"). Except as set forth in Schedule 3.5 of the Company Disclosure Letter,
neither the Company or any of its Subsidiaries nor any of their respective
officers, employees or directors have issued, granted or sold, or promised,
committed or proposed to issue, grant or sell, to any person any options,
warrants, shares or other equity interests in any Subsidiary of the Company,
including Quantitude and Trip. No Subsidiary of the Company owns any capital
stock or has any equity interest in the Company. Each of the outstanding shares
of capital stock (or such other ownership interests) of each of the Company's
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable.
Schedule 3.5 of the Company Disclosure Letter sets forth the following
information for each Subsidiary of the Company: (a) its name and jurisdiction
of incorporation or organization, (b) its authorized capital stock or share
capital, (c) the number of issued and outstanding shares of capital stock,
share capital or other equity interests, and (d) any debt securities issued by
it. Except for the Company's interests in the Subsidiaries as set forth in
Schedule 3.5 of the Company Disclosure Letter or as otherwise set forth in such
Schedule, neither the Company nor the Subsidiaries own, directly or indirectly,
any stock, interest or investment (whether equity or debt) in any corporation,
partnership, limited liability company, joint venture, business, trust or other
form of entity.
3.6 No Violation; Consents. Except as set forth in Schedule 3.6 of the
Company Disclosure Letter, neither the execution and delivery by the Company of
this Agreement, the Option Agreement or any of the Ancillary Documents to which
it is a party nor the consummation by the Company of the transactions
contemplated hereby or thereby will: (a) violate, conflict with or result in a
breach of the respective Certificates of Incorporation or Bylaws (or equivalent
organizational documents) of the Company or any Subsidiary of the Company; (b)
violate, conflict with, result in a breach of, constitute (with or without due
notice or lapse of time or both) a default under, result in the termination or
in a right of termination of, accelerate the performance
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required by or benefit obtainable under, result in the triggering of any
payment or other obligations pursuant to, result in the creation of any Lien
upon any of the properties of the Company or its Subsidiaries under, or result
in there being declared void, voidable, or without further binding effect, any
of the terms, conditions or provisions of any loan or credit agreement, note,
bond, mortgage, indenture, deed of trust or any license, franchise, permit,
lease, sublease, contract, agreement or other instrument, commitment or
obligation (each, a "Contract" and, collectively, "Contracts") to which the
Company or any of its Subsidiaries is a party, or by which the Company or any
of its Subsidiaries or any of their respective properties or assets is bound,
except for any of the foregoing matters which, individually or in the
aggregate, has not had and would not reasonably be expected to have a Company
Material Adverse Effect; (c) provided that the authorizations, filings and
registrations described in clause (d) of this Section 3.6 have been obtained
and made, violate any Laws applicable to the Company, any Subsidiary of the
Company or any of their respective properties or assets except for any such
violations which, individually or in the aggregate, has not had and would not
reasonably be expected to have a Company Material Adverse Effect; or (d)
require any consent, approval or authorization of, or filing or registration
with, any Governmental Entity, except (i) for (A) applicable requirements of
the Securities Act and the Exchange Act, (B) the applicable pre-merger
notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended and the rules and regulations thereunder (the "HSR Act"),
any required filings with or approvals under the EC Merger Regulation (as
hereinafter defined) and the Australian Approval (as hereinafter defined), (C)
such other required filings with or approvals of foreign competition Law
authorities, (D) the applicable requirements of the Communications Act of 1934,
as amended (the "FCC Act"), and (E) the filing and recordation of a Certificate
of Merger pursuant to the DGCL, or (ii) where the failure to obtain any such
consent, approval or authorization, or to make any such filing or registration
would not, individually or in the aggregate, have or reasonably be expected to
have a Company Material Adverse Effect and would not prevent or materially
delay consummation of the transactions contemplated hereby.
3.7 Company Reports; Financial Statements. (a) The Company filed all forms,
reports, schedules, statements and other documents required to be filed by it
with the Securities and Exchange Commission (the "SEC") since December 31, 1998
(collectively, including all exhibits and information incorporated by reference
therein, the "Company Reports"). As of their respective dates (and if amended
or supplemented by a filing prior to the date of this Agreement, then as of the
date of such filing), the Company Reports (i) complied in all material respects
with the then-applicable requirements of the Securities Act, the Exchange Act,
and the rules and regulations promulgated thereunder and (ii) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
No Subsidiary of the Company is required to file any forms, reports or other
documents with the SEC.
(b) Except as set forth in Schedule 3.7 of the Company Disclosure Letter,
each of the consolidated balance sheets (including all related notes) included
in the Company Reports fairly presents the consolidated financial position of
the Company and its Subsidiaries as of its date, and each of the consolidated
statements of income (including all related notes), retained earnings and cash
flows of the Company included in the Company Reports fairly presents the
results of operations, retained earnings or cash flows of the Company and its
Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal, recurring year-end audit adjustments, none of
which are material in kind or amount), in each case, in accordance with United
States generally accepted accounting principles consistently applied ("GAAP")
during the periods involved, except as may be noted therein.
3.8 Litigation. Except as set forth in Schedule 3.8 of the Company
Disclosure Letter or under the heading "Legal Proceedings" in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2000 (the
"2000 Annual Report"), there are no actions, suits, proceedings, inquiries or,
to the knowledge of the Company, investigations ("Litigation") pending,
publicly announced or, to the knowledge of the Company, threatened in writing
against or affecting the Company or any of its Subsidiaries, at law or in
equity, and there are no orders of any Governmental Entity outstanding against
the Company or any of its Subsidiaries that, individually or in the aggregate,
(a) have had or would reasonably be expected to have a
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Company Material Adverse Effect, (b) would prevent or materially delay
consummation of the transactions contemplated hereby or (c) as of the date
hereof, question or challenge the validity of this Agreement.
3.9 Absence of Certain Changes. Except as set forth in Schedule 3.9 of the
Company Disclosure Letter, since March 31, 2001, the Company and its
Subsidiaries have conducted their respective businesses only in the ordinary
course, consistent with past practice, and there has not been or occurred (a)
any event, condition, circumstance or state of facts that, individually or in
the aggregate, has had or would reasonably be expected to have a Company
Material Adverse Effect or (b) any action taken by the Company that, if taken
after the date of this Agreement without the prior written consent of Parent,
would be a violation of Section 5.2 hereof.
3.10 Taxes. (a) Except as set forth in Schedule 3.10 of the Company
Disclosure Letter and except as, individually or in the aggregate, has not had
and would not reasonably be expected to have a Company Material Adverse Effect,
each of the Company and its Subsidiaries (i) have timely filed all Tax Returns
(as defined below) required to be filed by each of the Company and its
Subsidiaries, and all such Tax Returns are complete and correct and (ii) except
for those Taxes (as defined below) being contested in good faith and for which
adequate reserves have been established in the financial statements included in
the Company Reports in accordance with GAAP, each of the Company and its
Subsidiaries have paid (or the Company has paid on its behalf) all Taxes
required to be paid by each of the Company and its Subsidiaries. Except as set
forth in Schedule 3.10 of the Company Disclosure Letter, the financial
statements included in the Company Reports reflect an adequate reserve in
accordance with GAAP for all Taxes payable by the Company and each of its
Subsidiaries for all taxable periods and portions thereof accrued through the
date of such financial statements. Except as set forth in Schedule 3.10 of the
Company Disclosure Letter, there is no action, suit, claim or assessment
pending with respect to Taxes that is not adequately reserved for or which, if
upheld, individually or in the aggregate, has not had and would not reasonably
be expected to have a Company Material Adverse Effect. Except as set forth in
Schedule 3.10 of the Company Disclosure Letter, each of the Company and its
Subsidiaries have complied with all applicable rules and regulations relating
to the withholding of Taxes and have withheld and paid over to the relevant
taxing authority all Taxes required to have been withheld and paid, including,
without limitation, withholding in connection with payments to employees,
independent contractors, creditors, stockholders or other third parties, except
for Taxes which, individually or in the aggregate, have not had and would not
reasonably be expected to have a Company Material Adverse Effect. Except as set
forth in Schedule 3.10 of the Company Disclosure Letter, there is no agreement,
contract, plan or arrangement involving the Company or any of its Subsidiaries
and covering any person that individually or collectively could give rise to
the payment of any amount that would not be deductible by Parent, Purchaser,
the Company or any of their respective Subsidiaries by reason of Section 280G
of the Code. For purposes of this Agreement, (A) "Tax" (and, with correlative
meaning, "Taxes") means any (x) federal, state, local or foreign income, gross
receipts, property, sales, use, license, excise, franchise, employment,
payroll, premium, withholding, alternative or added minimum, ad valorem,
transfer or excise tax, or any other tax, custom, duty, governmental fee or
other like assessment or charge of any kind whatsoever, together with any
interest or penalty, imposed by any Governmental Entity, (y) liability for the
payment of any amounts described in clause (x) above as a result of being a
member of an affiliated, consolidated, combined, unitary or similar group or as
a result of transferor or successor liability and (z) liability for the payment
of any amounts as a result of being a party to any tax sharing agreement or as
a result of any agreement to indemnify any other person with respect to the
payment of any amounts of the type described in clause (x) or (y) above, and
(B) "Tax Return" means any return, report or similar statement required to be
filed with respect to any Tax (including any attached schedules), including,
without limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.
(b) None of the Company nor any of its affiliates has taken or agreed to
take any action, has failed to take any action, or knows of any fact,
agreement, plan or other circumstance that is reasonably likely to prevent the
Merger from qualifying as a reorganization within the meaning of Section 368(a)
of the Code.
3.11 Employee Benefit Plans. (a) All employee benefit plans, compensation
arrangements and other benefit arrangements, whether or not "employee benefit
plans" (within the meaning of Section 3(3) of ERISA (as hereinafter defined),
whether or not subject to ERISA), providing cash- or equity-based incentives,
health,
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medical, dental, disability, accident or life insurance benefits or severance,
retirement, pension or savings benefits, which are subject to U.S. Law and
cover employees, directors, former employees and former directors of the
Company or its Subsidiaries (the "Company Benefit Plans") and all employee
agreements (excluding (i) offer letters establishing the terms of at-will
employment and (ii) non-U.S. employment or consulting agreements, which in each
case are required or imposed by the Law of the jurisdiction) providing
compensation, severance or other benefits to any officer, employee or former
employee of the Company or its Subsidiaries are set forth in Schedule 3.11 of
the Company Disclosure Letter. Except as set forth in Schedule 3.11 of the
Company Disclosure Letter, any Company Benefit Plan intended to be qualified
under Section 401(a) or 401(k) of the Code has received a determination letter
from the Internal Revenue Service and, to the knowledge of the Company,
continues to satisfy the requirements for such qualification, except for where
the failure to so qualify, individually or in the aggregate, has not had and
would not reasonably be expected to have a Company Material Adverse Effect.
Except as set forth in Schedule 3.11 of the Company Disclosure Letter, neither
the Company nor any ERISA Affiliate of the Company maintains, contributes to,
or has since January 1, 1996, maintained or contributed to, any benefit plan
which is covered by Title IV of ERISA or Section 412 of the Code. Except as set
forth in Schedule 3.11 of the Company Disclosure Letter, no Company Benefit
Plan and neither the Company nor its Subsidiaries has incurred any liability or
penalty under Section 4975 of the Code or Section 502(i) of ERISA which,
individually or in the aggregate, has not had and would reasonably be expected
to result in a Company Material Adverse Effect or has engaged in any
transaction which is reasonably likely to result in any such liability or
penalty. Except as set forth in Schedule 3.11 of the Company Disclosure Letter,
each Company Benefit Plan has been maintained and administered in compliance
with its terms and with ERISA and the Code to the extent applicable thereto,
except for such non-compliance which, individually or in the aggregate, has not
had and would not reasonably be expected to have a Company Material Adverse
Effect. Except as set forth in Schedule 3.8 or Schedule 3.11 of the Company
Disclosure Letter, there is no pending or, to the knowledge of the Company,
threatened Litigation against or otherwise involving any of the Company Benefit
Plans and no Litigation (excluding routine claims for benefits incurred in the
ordinary course of Company Benefit Plan activities) has been brought against or
with respect to any such Company Benefit Plan, except for any of the foregoing
which, individually or in the aggregate, has not had and would not reasonably
be expected to have a Company Material Adverse Effect. Except as required by
Law or as set forth in Schedule 3.11 of the Company Disclosure Letter, neither
the Company nor its Subsidiaries maintains or contributes to any plan or
arrangement which, and no Company Benefit Plan, provides, or has any liability
to provide, life insurance or medical or other employee welfare benefits to any
employee or former employee upon his retirement or termination of employment.
Except as set forth in Schedule 3.11 of the Company Disclosure Letter, all
contributions required to be made with respect to any Company Benefit Plan on
or prior to the Closing Date have been timely made or are reflected on the
balance sheet of the Company dated March 31, 2001, except for such failures to
contribute as, individually or in the aggregate, has not had and would not
reasonably be expected to have a Company Material Adverse Effect. Except as
would not be reasonably expected to result in a Material Adverse Effect, and
except as set forth in Schedule 3.11 of the Company Disclosure Letter, there
has been no formal amendment by the Company to any Company Benefit Plan that
would increase materially the expense of maintaining such Plan above the level
or expense incurred in respect thereof for the year ended December 31, 2000.
Except as set forth in Schedule 3.11 of the Company Disclosure Letter, the
consummation of the transactions contemplated by this Agreement will not,
either alone or in combination with another event, (A) entitle any current or
former employee or officer of the Company or any ERISA Affiliate to severance
pay, unemployment compensation or any other payment, except as expressly
provided in this Agreement, or (B) accelerate the time of payment or vesting,
or increase the amount of compensation due any such employee or officer except
as expressly provided in this Agreement, and no amounts payable under the
Company Benefit Plans will fail to be deductible for federal income tax
purposes by virtue of Section 280G of the Code. Except as set forth in Schedule
3.11 of the Company Disclosure Letter, no liability under Title IV of ERISA has
been incurred by the Company, any of its Subsidiaries or any of its ERISA
Affiliates since the effective date of ERISA that has not been satisfied in
full and that, individually or in the aggregate, has had or would reasonably be
expected to have a Company Material Adverse Effect. Except as set forth in
Schedule 3.11 of the Company Disclosure Letter, with respect to each Company
Benefit Plan that is subject to Title IV of ERISA, the present value of
projected benefit obligations under such Company Benefit
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Plan, as determined by the Company Benefit Plan's actuary based upon the
actuarial assumptions used for funding purposes in the most recent actuarial
report prepared by the Company Benefit Plan's actuary with respect to such
Company Benefit Plan, did not, as of its latest valuation date, exceed the then
current value of the assets of such Company Benefit Plan allocable to such
projected benefit obligations. Except as set forth in Schedule 3.11 of the
Company Disclosure Letter, no Company Benefit Plan is a "multiemployer plan,"
as such term is defined in Section 3(37) of ERISA, or a "multiple employer
plan" as such term is defined in Section 413 of the Code. Each Company Benefit
Plan that is intended to satisfy the requirements of Section 501(c)(9) of the
Code satisfies the requirements of Section 501(c)(9) of the Code, except where
non-compliance would not be reasonably expected to have a Material Adverse
Effect. Except as set forth in Schedule 3.11 of the Company Disclosure Letter,
with respect to each Company Benefit Plan that is not subject to United States
Law (a "Foreign Benefit Plan"): (i) all employer and employee contributions to
each Foreign Benefit Plan required by Law or by the terms of such Foreign
Benefit Plan have been made, or if applicable, accrued in accordance with
normal accounting practices except for such contributions or accruals, the
failure of which to make or accrue, individually or in the aggregate, has not
had and would not reasonably be expected to have a Company Material Adverse
Effect; (ii) the fair market value of the assets of each funded Foreign Benefit
Plan, the liability of each insurer for any Foreign Benefit Plan funded through
insurance or the book reserve established for any Foreign Benefit Plan,
together with any accrued contributions, is sufficient to procure or provide
for the accrued benefit obligations, as of the Closing Date, with respect to
all current and former participants in such plan according to the actuarial
assumptions and valuations most recently used to determine employer
contributions to such Foreign Benefit Plan and no transaction contemplated by
this Agreement shall cause such assets or insurance obligations to be less than
such benefit obligations, except in each case, for insufficiencies or
transactions which, individually or in the aggregate, has not had and would not
reasonably be expected to have a Company Material Adverse Effect; and (iii)
each Foreign Benefit Plan required to be registered has been registered and has
been maintained in good standing with applicable regulatory authorities except
for such failures to register or maintain as, individually or in the aggregate,
has not had and would not reasonably be expected to have a Company Material
Adverse Effect.
(b) For purposes of this Agreement, "ERISA Affiliate" means any business or
entity which is a member of the same "controlled group of corporations," under
"common control" or an "affiliated service group" with an entity within the
meanings of Sections 414(b), (c) or (m) of the Code, or required to be
aggregated with the entity under Section 414(o) of the Code, or is under
"common control" with the entity, within the meaning of Section 400l(a)(14) of
ERISA, or any regulations promulgated or proposed under any of the foregoing
Sections.
3.12 Labor and Employment Matters. Except as set forth in Schedule 3.12 of
the Company Disclosure Letter or to the extent imposed or implied by applicable
foreign Law, neither the Company nor any of its Subsidiaries is a party to, or
bound by, any collective bargaining agreement with employees or other Contracts
or understandings with a labor union or labor organization. Except as set forth
in Schedule 3.12 of the Company Disclosure Letter, there are no strikes or
lockouts with respect to any employee of the Company or any Subsidiary, and to
the knowledge of the Company, there is no union organizing effort pending or
threatened against the Company or any Subsidiary. Except for such matters
which, individually or in the aggregate, have not had and would not reasonably
be expected to have a Company Material Adverse Effect or except as set forth in
Schedule 3.12 of the Company Disclosure Letter, (a) there is no unfair labor
practice, labor dispute (other than routine individual grievances) or labor
arbitration proceeding pending or, to the knowledge of the Company, threatened
against the Company or its Subsidiaries relating to their business; (b) there
is no slowdown, work stoppage or threat thereof by or with respect to such
employees; and (c) the Company and its Subsidiaries are in compliance with all
applicable Laws respecting (A) employment and employment practices, (B) terms
and conditions of employment and wages and hours, and (C) unfair labor
practices. Except as set forth in Schedule 3.8 or Schedule 3.12 of the Company
Disclosure Letter, there is no Litigation pending or, to the knowledge of the
Company, threatened in writing against the Company or any of its Subsidiaries,
at law or in equity, alleging a violation of applicable Laws, rules or
regulations respecting employment and employment practices, terms and
conditions of employment and wages and hours, or unfair labor practice that,
individually or in the aggregate, has had or would reasonably by expected to
have a Company Material Adverse Effect. Except as set forth in
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Schedule 3.12 of the Company Disclosure Letter, neither the Company nor any of
its Subsidiaries has any liabilities under the Worker Adjustment and Retraining
Notification Act (the "WARN Act") as a result of any action taken by the
Company (other than at the written direction of Parent) and that, individually
or in the aggregate, has had or would reasonably be expected to have a Company
Material Adverse Effect.
3.13 Intellectual Property Rights.
(a) Schedule 3.13 of the Company Disclosure Letter set forth a complete and
accurate list of all U.S. and foreign patents, patent applications, trademarks,
trademark applications, trademark registrations, Internet domain name
registrations, service marks, service mark applications, service mark
registrations, logos, copyrights, copyright registrations and copyright
applications, and such Schedule sets forth a complete and accurate list of all
technical know-how and other proprietary intellectual property rights and
software programs and systems (collectively, "Intellectual Property Rights")
that are material to the conduct of the business of (i) the Company and its
Subsidiaries taken as a whole, (ii) Trip or (iii) Quantitude, in each case, as
currently or planned to be conducted, and identifying the owner or licensor of
such material Intellectual Property Rights. Each of the Company and its
Subsidiaries owns, or is validly licensed or otherwise has the right to use all
the Intellectual Property Rights that are material to the conduct of the
business of the Company and its Subsidiaries taken as a whole ("Material
Intellectual Property Rights") used by it in connection with its businesses as
currently conducted or planned to be conducted, in each case, free and clear of
all Liens, except for where the failure to own, be validly licensed or have the
right to use such Material Intellectual Property Rights or where the presence
of Liens on such Material Intellectual Property Rights would not reasonably be
expected to result in a Company Material Adverse Effect.
(b) Except as set forth in Schedule 3.13 of the Company Disclosure Letter,
no claims are pending or, to the knowledge of the Company, threatened in
writing that the Company or any of its Subsidiaries are infringing,
misappropriating or otherwise violating or interfering with the rights of any
person with regard to any Intellectual Property Rights. Except as set forth in
Schedule 3.13 of the Company Disclosure Letter, as of the date of this
Agreement, to the knowledge of the Company, no person or persons are
infringing, misappropriating or otherwise violating or interfering with the
rights of the Company or of any of its Subsidiaries with respect to any
Intellectual Property Rights.
(c) Except as set forth in Schedule 3.13 of the Company Disclosure Letter,
no claims are pending or, to the knowledge of the Company, threatened in
writing with regard to ownership or enforceability by the Company or any of its
Subsidiaries of any of their respective Intellectual Property Rights.
(d) Except as set forth in Schedule 3.13 of the Company Disclosure Letter,
the Material Intellectual Property Rights owned by the Company and its
Subsidiaries are in full force and effect, and have not expired or been
cancelled or abandoned, and, to the knowledge of the Company, are valid and
enforceable, except where such cancellation, expiration or abandonment,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Company Material Adverse Effect. Except as set forth in
Schedule 3.13 of the Company Disclosure Letter, all material patents,
trademarks and applications and registrations therefor owned by the Company or
any of its Subsidiaries have been duly registered, filed with or issued by each
appropriate Governmental Entity in the jurisdiction indicated on Schedule 3.13
of the Company Disclosure Letter, all necessary affidavits of continuing use
have been filed and all necessary maintenance and other applicable fees have
been timely paid to continue all such rights in effect, except failures to
register, file or pay that, individually or in the aggregate, have not had and
would not reasonably be expected to have a Company Material Adverse Effect.
Except as set forth in Schedule 3.13 of the Company Disclosure Letter, none of
the material patents and patent applications listed on Schedule 3.13 of the
Company Disclosure Letter has been declared invalid or unenforceable, in whole
or in part, by any Governmental Entity. Except as set forth in Schedule 3.13 of
the Company Disclosure Letter, each inventor named on the patents and patent
applications identified as being owned by the Company or any of its
Subsidiaries on Schedule 3.13 of the Company Disclosure Letter has executed an
agreement assigning his, her or its entire right, title and interest in and to
such patent or patent application, and the inventions embodied and claimed
therein, to the Company or a Subsidiary of the Company, except to the extent
that any failures to assign would not reasonably be expected to have a Company
Material Adverse Effect.
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(e) Except as set forth in Schedule 3.13 of the Company Disclosure Letter,
the Company uses, and has used, reasonable best efforts to maintain the
confidentiality of its trade secrets and other confidential proprietary
information.
(f) Except as set forth in Schedule 3.13 of the Company Disclosure Letter,
all of the Material Intellectual Property Rights that are owned by the Company
or one of its Subsidiaries were either developed (i) by employees of the
Company or any Subsidiary (or a predecessor entity thereof) within the scope of
their employment or (ii) by independent contractors who have assigned their
rights to the Company or any Subsidiary pursuant to written agreements.
(g) Except as set forth in Schedule 3.13 of the Company Disclosure Letter,
neither the Company nor any Subsidiary has licensed its rights in any
Intellectual Property Rights owned by it except pursuant to written agreement,
except as have not had and would not reasonably be expected to have a Company
Material Adverse Effect.
(h) Except as set forth in Schedule 3.13 of the Company Disclosure Letter,
no royalties, honoraria or other fees are payable by the Company or any
Subsidiary to any third parties (other than Governmental Entities) for the use
of or right to use any Intellectual Property Rights except (i) pursuant to
written agreements or (ii) as have not had and would not reasonably be expected
to have a Company Material Adverse Effect.
3.14 Permits. Except as set forth in Schedule 3.14 of the Company Disclosure
Letter, the Company and its Subsidiaries are in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances, exceptions,
consents, certificates, approvals and orders of any Governmental Entity
necessary for the Company and its Subsidiaries to own, lease and operate their
properties and assets or to carry on their businesses as they are now being
conducted (the "Company Permits"), except where the failure to have any of the
Company Permits, individually or in the aggregate, has not had and would not
reasonably be expected to have a Company Material Adverse Effect and would not
prevent or materially delay consummation of the transactions contemplated
hereby. Except as set forth in Schedule 3.14 of the Company Disclosure Letter,
all Company Permits are in full force and effect, except where the failure to
be in full force and effect has not had and would not reasonably be expected to
have a Company Material Adverse Effect and would not prevent or materially
delay consummation of the transactions contemplated hereby.
3.15 Environmental Compliance. Except for any non-compliance which,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Company Material Adverse Effect or as set forth in Schedule
3.15 of the Company Disclosure Letter, (a) the Company and its Subsidiaries are
in compliance with all applicable Laws relating to Environmental Matters (as
hereinafter defined); (b) the Company and its Subsidiaries have obtained, and
are in compliance with, all permits, licenses, authorizations, registrations
and other governmental consents required by applicable Laws for the use,
storage, treatment, transportation, release, emission and disposal of raw
materials, by-products, wastes and other substances used or produced by or
otherwise relating to the operations of the Company or its Subsidiaries; and
(c) to the Company's knowledge, there are no past or present events,
conditions, or activities by the Company or its Subsidiaries that would prevent
compliance or continued compliance with any Law or give rise to any
Environmental Liability (as hereinafter defined).
As used in this Agreement, the term "Environmental Matters" means any matter
arising out of or relating to pollution or protection of the environment, human
safety or health, or sanitation, including matters relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants, or
hazardous or toxic materials or wastes into ambient air, surface water, ground
water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants or hazardous or toxic materials or wastes.
"Environmental Liability" means any liability or obligation arising from or
relating to any Environmental Matter or arising under any Law or under any
current theory of law or equity (including, without limitation, any liability
for personal injury, property damage or remediation) that results from, or is
based upon or related to, the manufacture, processing, distribution, use,
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treatment, storage, disposal, transport or handling, or the emission,
discharge, release or threatened release into the environment, of any
pollutant, contaminant, chemical, or industrial, toxic or hazardous substance
or waste.
3.16 Material Contracts.
(a) Except as set forth in Schedule 3.16(a) of the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries is a party to or is
bound by any of the following Contracts (collectively, the "Material
Contracts"):
(i) Contracts with any current or former director or officer of the
Company other than (A) Contracts with former directors or officers that are
no longer in effect, (B) Contracts pursuant to any Company Benefit Plan or
similar arrangement listed in Section 3.11 or in Schedule 3.11 of the
Company Disclosure Letter, and (C) Contracts entered into in the ordinary
course of business consistent with past practice;
(ii) Contracts involving amounts in excess of $3,000,000 and which
cannot be cancelled by the Company or a Subsidiary of the Company within 90
days following notice thereof without the payment of a material penalty (A)
for the sale of any of the assets of the Company or any of its
Subsidiaries, other than contracts entered into in the ordinary course of
business, consistent with past practice, or (B) for the grant to any person
of any preferential rights to purchase any of its assets;
(iii) Any non-competition agreements or other Contracts which restrict
the Company or any of its Subsidiaries from competing in any line of
business or with any person in any geographical area in any material
manner; or otherwise limit in any material respect the manner in which or
localities in which the Company and its Subsidiaries conduct their
businesses ("Non-Competition Contracts");
(iv) Any Contract that requires the Company to conduct business
exclusively with one or more Persons in any particular geographic area or
with respect to any particular product or service and that cannot be
canceled by the Company within 90 days following notice thereof without the
payment of a material penalty ("Exclusivity Contracts");
(v) Indentures, credit agreements, security agreements, mortgages,
guarantees and promissory notes, and other Contracts relating to the
borrowing of money or the lending of money by the Company or any of its
Subsidiaries involving amounts in excess of $3,000,000 ("Loan Contracts");
(vi) Contracts between the Company or any of its Subsidiaries, on the
one hand, and any holder of more than 5% of the Company's equity
securities, on the other hand, including United and SAir Group Ltd.
("SAirGroup") or any affiliate thereof;
(vii) Agreements involving the provision of services by the Company
involving annual amounts in excess of $3,000,000 and that cannot be
canceled by the Company within 90 days following notice thereof without the
payment of a material penalty;
(viii) Partnership, joint venture and similar agreements ("Partnership
Contracts");
(ix) Bonds or agreements of guarantee or indemnification in which the
Company or any Subsidiary of the Company acts as surety, guarantor or
indemnitor with respect to any obligation (fixed or contingent) in excess
of $3,000,000 and that cannot be terminated by the Company or such
Subsidiary of the Company within 90 days following notice thereof without
the payment of a material penalty, other than any of the foregoing relating
to obligations of the Company or any Subsidiary of the Company
("Guarantees");
(x) Any Contract (other than (A) Contracts pursuant to any Company
Benefit Plan or similar arrangement listed in Section 3.11 or in Schedule
3.11 of the Company Disclosure Letter or (B) Contracts with former
directors, officers or employees of the Company or any of its Subsidiaries
that are no longer in effect) providing for future payments in excess of
$3,000,000 that are conditioned, in whole or in part, on a change in
control of the Company or any of its Subsidiaries ("Change in Control
Contracts");
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(xi) Any nondisclosure, confidentiality or standstill agreements with
any Person (excluding nondisclosure agreements with any Person entered into
in the ordinary course of business consistent with past practice)
("Confidentiality Contracts"); provided, however, that any such agreement
that was entered into in connection with the strategic evaluation process
that led to the execution of this Agreement shall be provided in form only,
with a schedule of material changes or modifications to such form agreed to
by the Company;
(xii) Any Contracts having a value in excess of $3,000,000 and (A) that
grant or obtain any right to use or practice any Material Intellectual
Property Rights or (B) restricting the Company's or any of its
Subsidiaries' right to use any Material Intellectual Property Rights;
(xiii) Any lease or sublease pursuant to which the Company and its
Subsidiaries leases or subleases material facilities ("Leases"); and
(xiv) Any Contract that cannot be cancelled by the Company within 90
days following notice thereof without the payment of a material penalty and
that obligates the Company to make any annual payments to any person,
including for the purchase of goods or services, in excess of $3,000,000
("Miscellaneous Contracts").
(b) Except as set forth in Schedule 3.16 (b) of the Company Disclosure
Letter, all of the Material Contracts are in full force and effect and are the
legal, valid and binding obligations of the Company and/or its Subsidiaries,
enforceable against them in accordance with their respective terms, subject, as
to enforceability, to applicable bankruptcy, insolvency, reorganization,
moratorium and similar Laws, now or hereafter in effect, affecting creditors'
rights and remedies generally and to general principles of equity (regardless
of whether enforcement is sought in proceeding at law or in equity). Except as
set forth in Schedule 3.16 (b) of the Company Disclosure Letter, neither the
Company nor any of its Subsidiaries is in breach of or default under any
Material Contract nor, to the knowledge of the Company, is any other party to
any Material Contract in breach thereof or default thereunder, except, in each
case, for such breaches or defaults that, individually or in the aggregate,
have not had and would not reasonably be expected to have a Company Material
Adverse Effect.
(c) Except as set forth on Schedule 3.16(c), the Company has not received
written notice from any of the persons listed on Schedule 3.16(c) under the
heading "Section 3.16(c) Persons" of the Company Disclosure Letter terminating,
or threatening to terminate any of its Material Contracts listed in Schedule
3.16(a) of the Company Disclosure Letter or the business relationship arising
therefrom.
3.17 Title to Property. Except as set forth in Schedule 3.16 or Schedule
3.17 of the Company Disclosure Letter, each of the Company and its Subsidiaries
(a) has good and marketable title to all real property owned by it and (b) has
good and marketable title to, or valid leasehold interests in, or the right to
use, all its material properties and assets necessary for the conduct of their
respective businesses, except, in each case, for defects in title, easements,
restrictions, restrictive covenants and encumbrances that, individually or in
the aggregate, have not had and would not reasonably be expected to have a
Company Material Adverse Effect.
3.18 Brokers. Except for J.P. Morgan Securities, Inc. (the "Financial
Advisor"), no broker, finder or financial advisor is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement that is based upon any arrangement made by or on
behalf of the Company or any of its Subsidiaries. True and correct copies of
the engagement letter between the Company and the Financial Advisor have been
made available to Parent.
3.19 Opinion of Financial Advisor. The Company has received the written
opinion of the Financial Advisor to the effect that, as of the date hereof, the
Merger Consideration is fair, from a financial point of view, to the
stockholders of the Company.
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3.20 Rights Agreement. The Company has caused the Rights Agreement to be
amended to be inapplicable to the approval, execution and delivery of (a) this
Agreement, (b) the Option Agreement and (c) the Transaction Support Agreement,
and the consummation of the transactions contemplated hereby or thereby.
3.21 State Takeover Statutes. Prior to the date hereof, the Company's Board
of Directors has approved the Merger, this Agreement, the Transaction Support
Agreement, the Option Agreement and the transactions contemplated hereby and
thereby and, assuming the accuracy of Parent's and Purchaser's representation
and warranty set forth in Section 4.16, such approval is sufficient to render
inapplicable to the Merger, this Agreement, the Option Agreement, the
Transaction Support Agreement and the transactions contemplated hereby and
thereby, the limitations on business combinations contained in Section 203 of
the DGCL. To the knowledge of the Company and, assuming the accuracy of
Parent's and Purchaser's representations and warranties set forth in Section
4.16, no other state takeover statute or similar statute or regulation applies
to the transactions contemplated hereby and by the Ancillary Documents and no
such statute or regulation, and no similar provision of the Certificate of
Incorporation or Bylaws of the Company or any of its Subsidiaries would,
directly or indirectly, restrict or impair the ability of Parent to vote, or
otherwise to exercise the rights of a stockholder with respect to, shares of
Company Common Stock that may be acquired or controlled by Parent.
3.22 No Undisclosed Liabilities. Except (i) as disclosed in Schedule 3.22 of
the Company Disclosure Letter, (ii) as reflected or reserved against in the
Company's consolidated balance sheets (or the notes thereto) included in the
2000 Annual Report or in the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 2001 (the "2001 Quarterly Report"), (iii) for
liabilities incurred in connection with this Agreement or the transactions
contemplated hereby, and (iv) for liabilities and obligations incurred in the
ordinary course of business, consistent with past practice, since March 31,
2001, neither the Company nor any Subsidiary of the Company has any liabilities
or obligations of any nature, whether or not accrued, contingent or otherwise,
that would be required by GAAP to be reflected on a consolidated balance sheet
of the Company and its Subsidiaries (or in the notes thereto).
3.23 Vote Required. Assuming the accuracy of Parent's and Purchaser's
representation and warranty set forth in Section 4.16, the Company Stockholder
Approval is the only vote of holders of any class or series of the Company's
capital stock required to approve the Merger and adopt this Agreement and the
Ancillary Agreements to which the Company is a party under the DGCL, the
Company's Certificate of Incorporation and the Company's Bylaws.
3.24 Form S-4; Proxy Statement. None of the information supplied in writing
by the Company for inclusion in, and none of the information regarding the
Company incorporated by reference in (a) the registration statement on Form S-4
to be filed with the SEC by Parent in connection with the issuance of shares of
Parent Common Stock in connection with the Merger, or any of the amendments or
supplements thereto (collectively, the "Form S-4") will, at the time the Form
S-4 is filed with the SEC, at any time it is amended or supplemented, at the
time it becomes effective under the Securities Act and at the time of the
Stockholders Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and (b) the proxy statement for use
relating to the adoption by the stockholders of the Company of this Agreement
or any of the amendments or supplements thereto (collectively, the "Proxy
Statement"), will, at the date it is first mailed to the Company's stockholders
and at the time of the Stockholders Meeting contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. The Proxy Statement
will comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder, except that no
representation is made by the Company with respect to statements made or
incorporated by reference therein based on information supplied by Parent or
Purchaser specifically for inclusion or incorporation by reference in the Proxy
Statement.
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ARTICLE IV
Representations and Warranties of Parent and Purchaser
Parent and Purchaser hereby represent and warrant to the Company as follows:
4.1 Existence; Good Standing; Corporate Authority. Each of Parent and
Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation. Each of Parent
and Purchaser is duly qualified to do business as a foreign corporation and is
in good standing under the laws of any other state of the United States in
which the ownership of its properties or the conduct of its business requires
such qualification, except where the failure to be so qualified or in good
standing has not had and would not reasonably be expected to have, individually
or in the aggregate, a material adverse effect on the assets, liabilities,
business, results of operations, or financial condition of Parent and its
Subsidiaries, taken as a whole, except any such effect resulting primarily from
(a) this Agreement and would not materially and adversely impair Parent's and
Purchaser's ability to consummate the Merger, the transactions contemplated by
this Agreement or the announcement thereof, in and of themselves, (b) Parent's
announcement or other communication of Parent of the plans or intentions of
Parent with respect to the conduct of the business (or any portion thereof) of
the Company or any of its Subsidiaries; or (c) changes or conditions (including
changes in economic, financial market, regulatory or political conditions)
affecting generally the industries in which Parent operates its business (a
"Parent Material Adverse Effect") and would not prevent or materially delay
consummation of the transactions contemplated hereby. Parent has all requisite
corporate power and authority to own or lease and operate its properties and to
carry on its business as now conducted, except where the failure to have such
power and authority has not had and would not reasonably be expected to have a
Parent Material Adverse Effect and would not prevent or materially delay
consummation of the transactions contemplated hereby. Parent has heretofore
delivered to the Company true and correct copies of the Certificate of
Incorporation and Bylaws (or equivalent organizational documents) as currently
in effect for Parent and Purchaser. Such Certificates of Incorporation and
Bylaws (or equivalent organizational documents) are in full force and effect
and no other organizational documents are applicable to or binding upon Parent
or Purchaser.
4.2 Authorization, Validity and Effect of Agreements. The respective Boards
of Directors of Parent and Purchaser have, on or prior to the date of this
Agreement, approved this Agreement in accordance with applicable Law. Each of
Parent and Purchaser has the requisite corporate power and authority to execute
and deliver this Agreement, the Option Agreement, the Transaction Support
Agreement and the Ancillary Documents to which it is a party and to consummate
the transactions contemplated hereby and thereby. The execution and delivery of
this Agreement, the Option Agreement, the Transaction Support Agreement and the
Ancillary Documents to which it is a party and the consummation by Parent and
Purchaser of the transactions contemplated hereby and thereby have been duly
and validly authorized by the respective Boards of Directors of Parent and
Purchaser and by Parent as the sole stockholder of Purchaser and no other
corporate proceedings on the part of Parent or Purchaser are necessary to
authorize this Agreement, the Option Agreement, the Transaction Support
Agreement and the Ancillary Documents to which it is a party or to consummate
the transactions contemplated hereby and thereby (other than the filing and
recordation of the Certificate of Merger in accordance with the DGCL). This
Agreement, the Option Agreement and the Transaction Support Agreement each have
been, and any Ancillary Document to which it is a party at the time of
execution shall have been, duly and validly executed and delivered by Parent
and/or Purchaser, as applicable, and (assuming this Agreement, the Option
Agreement, the Transaction Support Agreement and such Ancillary Documents each
constitutes a valid and binding obligation of any other parties thereto)
constitutes and will constitute the valid and binding obligations of each of
Parent and Purchaser, enforceable in accordance with their respective terms,
subject, as to enforceability, to applicable bankruptcy, insolvency, moratorium
or other similar laws, now or hereafter in effect, relating to creditors'
rights and general principles of equity.
4.3 Compliance with Laws. Parent and Purchaser and each of their respective
Subsidiaries are in compliance with and are not in default under or in
violation of (a) their respective Certificates of Incorporation and Bylaws (or
equivalent organizational documents), (b) any order of any Governmental Entity,
or (c) any
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Laws applicable to Parent, Purchaser or such Subsidiaries or any of their
respective properties or assets, except, in the case of clauses (b) and (c)
above, where such non-compliance, default or violation, individually or in the
aggregate, has not had and would not reasonably be expected to have a Parent
Material Adverse Effect, would not prevent or materially delay consummation of
the transactions contemplated hereby and would not impose a risk of criminal
liability, criminal fines or imprisonment or confinement, in each case upon any
officer, employee or director of the Company, Parent or any of their
Subsidiaries. Schedule 4.3 of the Parent Disclosure Letter sets forth any
material order of any Governmental Entity binding Parent, Purchaser or such
Subsidiaries.
4.4 Capitalization. The authorized capital stock of Parent consists of (a)
2,500,000,000 shares of common stock, par value $0.01 per share, of which (i)
2,000,000,000 shares are designated as Parent Common Stock and (ii) 500,000,000
shares are designated as Move.com common stock ("Move.com Common Stock") and
(b) 10,000,000 shares of preferred stock, par value $.01 per share, of Parent
("Parent Authorized Preferred Stock"). As of May 31, 2001, (A) 854,257,638
shares of Parent Common Stock and 1,861,995 shares of Move.com Common Stock
were issued and outstanding; (B) no shares of Parent Authorized Preferred Stock
and no other shares of capital stock of Parent were issued and outstanding; (C)
283,363,275 shares of Parent Common Stock and no shares of Move.com Common
Stock were reserved for issuance pursuant to the stock-based plans identified
in Schedule 4.4 of the Parent Disclosure Letter (such plans, collectively, the
"Parent Stock Plans"), of which approximately 227,320,729 shares of Parent
Common Stock and no shares of Move.com Common Stock are subject to outstanding
employee stock options or other rights to purchase or receive Parent Common
Stock granted under the Parent Stock Plans (collectively, "Parent Employee
Stock Options"); (D) 1,563,214 shares of Parent Common Stock and no shares of
Move.com Common Stock are subject to warrants (collectively, "Parent
Warrants"); and (E) 176,564,752 shares of Parent Common Stock were held by
Parent in its treasury. Except as set forth in this Section 4.4, Parent has no
outstanding bonds, debentures, notes or other obligations entitling the holders
thereof to vote (or which are convertible into or exercisable for securities
having the right to vote) with the stockholders of Parent on any matter. All
issued and outstanding shares of capital stock of Parent are duly authorized,
validly issued, fully paid, nonassessable and free of preemptive rights. Except
(1) as set forth in this Section 4.4, (2) for the 3% Convertible Subordinated
Notes, (3) for the Zero Coupon Senior Convertible Contingent Debt Securities
(CODESSM), (4) the Zero Coupon Convertible Debentures, (5) for changes since
May 31, 2001 resulting from the issuance of shares of Parent Common Stock
pursuant to the Parent Stock Plans or Parent Employee Stock Options or Parent
Warrants and other rights referred to in this Section 4.4, and (6) as set forth
in Schedule 4.4 of the disclosure letter, dated this date, delivered by Parent
to the Company (the "Parent Disclosure Letter"), there are no existing options,
warrants, calls, subscriptions, convertible securities, or other rights,
agreements or commitments (x) to which Parent or any of its Subsidiaries is a
party of any character relating to the issued or unissued capital stock or
other equity interests of Parent or any of its Subsidiaries, or (y) obligating
Parent or any Subsidiary of Parent to (1) issue, transfer or sell any shares of
capital stock or other equity interests of Parent or any Subsidiary of Parent
or securities convertible into or exchangeable for such shares or equity
interests, (2) grant, extend or enter into any such subscription, option,
warrant, call, convertible securities or other similar right, agreement,
arrangement or commitment, (3) redeem or otherwise acquire any such shares of
capital stock or other equity interests or (4) make any investment (in the form
of a loan, capital contribution or otherwise) in any person in an amount over
$1,000,000, individually or in the aggregate. Except as set forth in Schedule
4.4 of the Parent Disclosure Letter, there are no voting trusts, voting
agreements or other agreements or understandings to which Parent or any of its
Subsidiaries is a party with respect to the voting of the capital stock or
other equity interest of Parent or any of its Subsidiaries.
4.5 No Violation; Consents. Neither the execution and delivery by Parent and
Purchaser of this Agreement, the Option Agreement, the Transaction Support
Agreement or any of the Ancillary Documents to which it is a party, nor the
consummation by them of the transactions contemplated hereby or thereby, will:
(a) violate, conflict with or result in a breach of the respective Certificates
of Incorporation or Bylaws (or equivalent organizational documents) of Parent
or Purchaser; (b) violate, conflict with or result in a breach of, constitute
(with or without due notice or lapse of time or both) a default under, result
in the termination or in a right of termination of, accelerate the performance
required by or benefit obtainable under, result in the
A-25
triggering of any payment or other obligations pursuant to, result in the
creation of any Lien upon any of the properties of Parent or Purchaser under,
or result in there being declared void, voidable, or without further binding
effect, any of the terms, conditions or provisions of any Contract to which
Parent or Purchaser is a party, or by which Parent or Purchaser, or any of
their respective properties or assets is subject, except for any of the
foregoing matters which, individually or in the aggregate, has not had and
would not reasonably be expected to have a Parent Material Adverse Effect; (c)
provided that the authorizations, filings and registrations described in clause
(d) of this Section 4.5 have been obtained and made, violate any Laws
applicable to Parent or Purchaser or any of their respective properties or
assets, except for any such violations which, individually or in the aggregate,
have not had and would not reasonably be expected to have a Parent Material
Adverse Effect; or (d) require any consent, approval or authorization of, or
filing or registration with, any Governmental Entity, except (i) for (A)
applicable requirements of the Securities Act and the Exchange Act, (B) the
applicable pre-merger notification requirements of the HSR Act, any required
filings with or approvals under the EC Merger Regulation and the Australian
Approval, (C) such other required filings with or approvals of foreign
Governmental Entities, including foreign investment, exchange control,
telecommunications and competition Law authorities, (D) the applicable
requirements of the FCC Act, and (E) the filing of a Certificate of Merger
pursuant to the DGCL, or (ii) where the failure to obtain any such consent,
approval or authorization, or to make any such filing or registration would
not, individually or in the aggregate, have or reasonably be expected to have a
Parent Material Adverse Effect and would not prevent or materially delay
consummation of the transactions contemplated hereby.
4.6 Parent Reports. (a) Parent filed all forms, reports, schedules,
statements and other documents required to be filed by it with the SEC since
December 31, 1998 (collectively, including all exhibits and information
incorporated by reference therein, the "Parent Reports"). As of their
respective dates (and if amended or supplemented by a filing prior to the date
of this Agreement, then as of the date of such filing), the Parent Reports (i)
complied in all material respects with the then-applicable requirements of the
Securities Act, the Exchange Act, and the rules and regulations promulgated
thereunder and (ii) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading. No Subsidiary of Parent is required to file any
forms, reports or other documents with the SEC.
(b) Each of the consolidated balance sheets (including all related notes)
included in the Parent Reports fairly presents the consolidated financial
position of Parent and its Subsidiaries as of its date, and each of the
consolidated statements of income (including all related notes), retained
earnings and cash flows of Parent included in the Parent Reports fairly
presents the results of operations, retained earnings or cash flows of Parent
and its Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal, recurring year-end audit adjustments, none of
which are material in kind or amount), in each case, in accordance with GAAP
during the periods involved, except as may be noted therein.
4.7 Litigation. Except as set forth in Schedule 4.7 of the Parent Disclosure
Letter or under the heading "Legal Proceedings" in Parent's Annual Report on
Form 10-K for the fiscal year ended December 31, 2000 (the "Parent 2000 Annual
Report"), there is no Litigation pending, publicly announced or, to the
knowledge of Parent, threatened in writing against or affecting Parent or any
of its Subsidiaries, at law or in equity, and there are no orders of any
Governmental Entity outstanding against Parent or any of its Subsidiaries that,
individually or in the aggregate, (a) have had or would reasonably be expected
to have a Parent Material Adverse Effect, (b) would prevent or materially delay
consummation of the transactions contemplated hereby or (c) as of the date
hereof, question or challenge the validity of this Agreement.
4.8 Absence of Certain Changes. Except as set forth in Schedule 4.8 of the
Parent Disclosure Letter, from March 31, 2001 through the date hereof, Parent,
Purchaser and their respective Subsidiaries have conducted their respective
businesses only in the ordinary course, consistent with past practice, and
there has not been or occurred any event, condition, circumstance or state of
facts that, individually or in the aggregate, has had or would reasonably be
expected to have a Parent Material Adverse Effect.
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4.9 Interim Operations of Purchaser. Purchaser was formed solely for the
purpose of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations as contemplated
hereby.
4.10 Form S-4; Proxy Statement. None of the information supplied in writing
by Parent or Purchaser for inclusion in and none of the information regarding
Parent incorporated by reference in (a) the Form S-4 will, at the time the Form
S-4 is filed with the SEC, at any time it is amended or supplemented, at the
time it becomes effective under the Securities Act and at the time of the
Stockholders Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and (b) the Proxy Statement will, at the
date it is first mailed to the Company's stockholders and at the time of the
Stockholders Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under which
they are made, not misleading. The Form S-4 will comply as to form in all
material respects with the requirements of the Securities Act and the rules and
regulations thereunder, except that no representation is made by Parent or
Purchaser with respect to statements made or incorporated by reference therein
based on information supplied by the Company specifically for inclusion or
incorporation by reference in the Form S-4.
4.11 Tax Matters. None of Parent nor any of its affiliates has taken or
agreed to take any action, has failed to take any action, or knows of any fact,
agreement, plan or other circumstance that is reasonably likely to prevent the
Merger from qualifying as a reorganization within the meaning of Section 368(a)
of the Code.
4.12 State Takeover Statutes. Prior to the date hereof, Parent's Board of
Directors has approved the Merger, this Agreement, the Option Agreement, the
Transaction Support Agreement and the transactions contemplated hereby and
thereby. To the knowledge of Parent, no state takeover statute or similar
statute or regulation applies to the transactions contemplated hereby and by
the Ancillary Documents and no such statute or regulation and no similar
provision of the Certificate of Incorporation or Bylaws of Parent would,
directly or indirectly, restrict or impair the ability of Parent to consummate
the transactions contemplated hereby.
4.13 No Undisclosed Liabilities. Except (a) as reflected or reserved against
in Parent's consolidated balance sheets (or the notes thereto) included in the
Parent 2000 Annual Report or in Parent's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 2001, (b) for liabilities incurred in connection
with this Agreement or the transactions contemplated hereby and (c) for
liabilities incurred in the ordinary course of business, consistent with past
practice since March 31, 2001, neither Parent nor any Subsidiary of Parent has
any liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, that would be required by GAAP to be reflected on a
consolidated balance sheet of Parent and its Subsidiaries (or in the notes
thereto).
4.14 Parent Shareholder Approval. This Agreement and the transactions
contemplated hereby, including the issuance of shares of Parent Common Stock
pursuant to Article II hereof, do not require the approval of the holders of
any shares of capital stock of Parent.
4.15 Parent Common Stock. All shares of Parent Common Stock which may be
issued pursuant to this Agreement or pursuant to the Assumed Options shall be,
when issued in accordance with this Agreement, duly authorized, validly issued,
fully paid and nonassessable shares of Parent Common Stock, and shall not be
subject to preemptive rights.
4.16 Ownership of Company Common Stock. To Parent's knowledge, neither
Parent, Purchaser nor any of their respective affiliates, (i) beneficially owns
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, or
(ii) is an owner or owns (as defined in Section 203(c)(9) of the DGCL), in each
case, shares of capital stock of the Company, except, in each such case, as may
result from the execution or performance of the Option Agreement and the
Transaction Support Agreement.
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ARTICLE V
Covenants
5.1 Alternative Proposals.
(a) Except as set forth below, from and after the date hereof and prior to
the Effective Time, the Company agrees that neither it nor any Subsidiary or
affiliate of it, nor any officer, director, employee, investment banker, agent
or other representative of it or its Subsidiaries shall, directly or
indirectly, (i) encourage, invite, initiate or solicit any inquiries relating
to or the submission or making of a proposal by any person with respect to a
Third-Party Acquisition (as defined below) or (ii) participate in or encourage,
invite, initiate or solicit negotiations or discussions with, or furnish or
cause to be furnished any information to, any person relating to a Third-Party
Acquisition. Upon the execution of this Agreement, the Company shall
immediately (A) cease, or cause to be ceased, any discussions or negotiations
with any person, entity or group in connection with any proposed or potential
Third-Party Acquisition and shall request the prompt return to the Company, or
destruction of, any confidential information provided in connection with any
such discussions or negotiations and (B) take all actions necessary to
terminate, effective as of the business day immediately following the date
hereof, the Company's stock repurchase program authorized by the Company's
Board of Directors on April 21, 2000 (the "Stock Repurchase Program"). Except
as otherwise provided in Sections 5.1(d) and 5.3, the Company's Board of
Directors shall not (1) make a Change in the Company Recommendation (as defined
in Section 5.3(b)), or (2) cause the Company to enter into any memorandum of
understanding, agreement in principle, letter of intent, contract or agreement
(whether written or oral) (each, a "Company Acquisition Agreement") related to
any Third-Party Acquisition.
(b) Prior to the Stockholders Meeting, if the Company, without being in
violation of the terms of this Section 5.1, receives an unsolicited bona fide
written proposal from any person or group with respect to a Third-Party
Acquisition which the Company's Board of Directors (after consideration of
advice it shall have obtained from its legal and financial advisors) reasonably
expects will result in a Superior Proposal (as hereinafter defined), then the
Company may, directly or indirectly, furnish information and access to such
person or group pursuant to an appropriate confidentiality agreement and may
participate in discussions and negotiations with such person or group;
provided, however, that the terms of such confidentiality agreement shall not
be less restrictive than the terms set forth in the confidentiality agreement
between the Company and Parent, dated as of March 9, 2001 (the "Confidentiality
Agreement").
(c) The Company shall notify Parent in writing of the receipt of any
proposal, written or oral, as soon as possible, but, in any event, within
twenty-four (24) hours of the receipt of any such proposal, relating to a
Third-Party Acquisition or any request for non-public information relating to
the Company or any of its Subsidiaries in connection with any pending, proposed
or contemplated Third-Party Acquisition or for access to the properties, books
or records of the Company or any Subsidiary by any person that, to the
knowledge of the Company, is considering making, or has made, a proposal
relating to a Third-Party Acquisition. Such notice shall identify the person
submitting the proposal, attach a copy of any written correspondence or other
written materials relating to such proposal, and summarize any significant
terms of such proposal not reflected in any such attached materials, and, to
the extent then known by the Company, state whether the Company is providing or
intends to provide the person or group making such proposal with access to
information concerning the Company or any of its Subsidiaries, in accordance
with this Section 5.1, including any expectation by the Company's Board of
Directors, if then known, that such Third-Party Acquisition proposal will
result in a Superior Proposal or, if not then known, then the Company shall
thereafter give prompt notice to Parent of any subsequent determination as to
the provision to the person or group making such proposal of access to such
information, and any such expectation. The Company shall keep Parent informed
of the status of any such negotiations and shall further update, to the extent
of any significant developments, the information required to be provided in
each notice upon the request of Parent.
(d) Notwithstanding anything in this Agreement to the contrary, (i) the
Company or its Board of Directors shall be permitted, to the extent applicable,
to comply with Rule 14e-2(a) of the Exchange Act or to make any
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required disclosure to the stockholders of the Company if, in the good faith
judgment of the Board of Directors of the Company (after consideration of
advice it shall have obtained from its outside counsel) failure to so disclose
would constitute a violation of applicable law and (ii) in the event that the
Company's Board of Directors determines in good faith, after consideration of
advice it shall have obtained from its outside counsel, that failure to take
such action would create a substantial probability of violating the Company's
Board of Directors' fiduciary duties to the Company's stockholders under
applicable Law, the Company's Board of Directors may make a Change in the
Company Recommendation and disclose to the Company's stockholders the position
of the Company's Board of Directors with respect to the transactions
contemplated hereby or otherwise make disclosure to them, with respect to the
matters to be considered at the Stockholders Meeting. Notwithstanding the
foregoing, the obligation of the Company to duly call, give notice of, convene
and hold the Stockholders Meeting in accordance with Section 5.3 hereof shall
not be affected by the commencement, proposal, public disclosure or
communication to the Company of a Third-Party Acquisition or a Superior
Proposal or by the taking of any action by the Company's Board of Directors in
accordance with this Section 5.1.
(e) As used in this Agreement, the term "Third-Party Acquisition" shall mean
any of the following events other than, in each case, the transactions
contemplated by this Agreement: (i) the merger, reorganization, share exchange,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving the Company, or any purchase or sale of the
consolidated assets (including without limitation stock of Subsidiaries) of the
Company and its Subsidiaries, taken as a whole having an aggregate value of 20%
or more of the total assets of the Company, or any purchase or sale of, or
tender or exchange offer for 20% or more of the equity securities of the
Company, or a "merger of equals" with, any person which includes any officer or
director of the Company or any of its affiliates or any affiliate of such
officer or director) other than a Subsidiary of Parent (a "Third Party"); (ii)
the acquisition by a Third Party of twenty percent (20%) or more of the
outstanding shares of Company Common Stock; (iii) the acquisition by a Third
Party of Quantitude or Trip; (iv) the adoption by the Company of a plan of
liquidation or the declaration or payment of an extraordinary dividend; or (v)
the repurchase by the Company or any of its Subsidiaries of more than twenty
percent (20%) of the outstanding shares of Company Common Stock.
(f) As used in this Agreement, "Superior Proposal" means any bona fide
written proposal to acquire, directly or indirectly, for consideration
consisting of cash and/or securities, all of the shares of Company Common Stock
then outstanding or all or substantially all of the assets of the Company, that
(i) is not subject to any financing conditions or contingencies, (ii) provides
holders of Company Common Stock with per share consideration that the Company's
Board of Directors determines in good faith (after consideration of advice that
it shall have obtained from its financial advisor) to be more favorable to the
stockholders of the Company from a financial point of view than the Merger
Consideration (taking into account all the terms and conditions of such
proposal and this Agreement (including any changes to the financial or other
terms of this Agreement proposed by Parent in response to such offer or
otherwise), (iii) is determined by the Company's Board of Directors in its good
faith judgment (after consideration of advice that it shall have obtained from
its legal or financial advisor) to be reasonably capable of being completed
(taking into account all legal, financial, regulatory and other aspects of the
proposal, the person making the proposal and the expected timing to complete
the proposal) and (iv) does not, in the definitive Company Acquisition
Agreement, contain any "due diligence" conditions.
5.2 Interim Operations.
(a) From the date of this Agreement until the Effective Time, except as set
forth in Schedule 5.2 of the Company Disclosure Letter, or unless Parent has
consented in writing thereto, which consent shall not be unreasonably withheld,
the Company shall, and shall cause its Subsidiaries to, (i) conduct its
operations only in, and not take any actions except in, the ordinary course of
business, consistent with past practice; (ii) use its reasonable best efforts
to preserve intact its business organizations and goodwill, keep available the
services of its officers and employees, and maintain satisfactory relationships
with those persons having business relationships with them; and (iii) upon the
discovery thereof, promptly notify Parent of the existence of any
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breach of any representation or warranty contained herein (or, in the case of
any representation or warranty that makes no reference to Company Material
Adverse Effect other than the representations and warranties in Section 3.4 or
Section 3.7(b), any breach of such representation or warranty that would
reasonably be expected to result in costs to the Company in excess of
$3,000,000 ("Excess Costs")) or the occurrence of any event that would cause
any representation or warranty contained herein no longer to be true and
correct (or, in the case of any representation or warranty that makes no
reference to Company Material Adverse Effect other than the representations and
warranties in Section 3.4 or Section 3.7(b), where the effect of no longer
being true and correct would reasonably be expected to result in Excess Costs).
(b) Without limiting the generality of Section 5.2(a), from and after the
date of this Agreement until the Effective Time, except for actions required to
be taken by the Company or any of its Subsidiaries in the performance of their
respective obligations under the Contracts listed in Schedule 3.16 of the
Company Disclosure Letter, or as set forth in Schedule 5.2 of the Company
Disclosure Letter, unless Parent has consented in writing thereto or except as
otherwise expressly contemplated by this Agreement, the Company shall not, and
shall not permit its Subsidiaries to:
(i) amend their respective organizational documents;
(ii) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of its
capital stock or other ownership interest in the Company or any
Subsidiaries or any securities convertible into or exchangeable for any
such shares or ownership interest, or any rights, warrants or options to
acquire or with respect to any such shares of capital stock, ownership
interest, or convertible or exchangeable securities (other than (A)
issuances of Company Common Stock in respect of any exercise of stock
options outstanding on the date hereof and disclosed in Schedule 5.2 of the
Company Disclosure Letter and (B) as set forth in Section 5.2(b)(iv);
(iii) split, combine or reclassify its capital stock, or otherwise
change its capitalization as it exists on the date hereof, or propose the
issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its capital stock or any other equity interest;
(iv) grant, confer or award any option, warrant, convertible security or
other right to acquire any shares of its capital stock or take any action
to cause to be exercisable any otherwise unexercisable option under any
existing stock option plan (except (A) as otherwise required by the express
terms of any unexercisable options outstanding on the date hereof or (B) in
connection with grants of options to purchase Company Common Stock to newly
hired employees of the Company or any of its Subsidiaries in the ordinary
course of business, consistent with past practice);
(v) declare, set aside or pay any dividend or make any other
distribution or payment (whether in cash, stock or property or any
combination thereof) with respect to any shares of its capital stock or
other ownership interests, including any constructive or deemed
distributions, or make any other payments to stockholders in their capacity
as such (other than any such payments by any Subsidiary to the Company);
(vi) from and after the date set forth in Section 5.1(a)(B), directly or
indirectly redeem, purchase or otherwise acquire any shares of its capital
stock or capital stock of the Subsidiaries (including repurchases of
Company Common Stock pursuant to the Stock Repurchase Program);
(vii) transfer, license, mortgage, encumber, sell, lease or otherwise
dispose of any of its material assets (including capital stock of the
Subsidiaries);
(viii) acquire by merger, purchase or any other manner, any business,
entity or division, or make any capital expenditures or otherwise acquire
any material property or assets, except for (A) purchases of supplies or
capital equipment in the ordinary course of business, consistent with past
practice or (B) capital expenditures or purchases of property and assets in
accordance with the Company's Capital Plan attached to Schedule 5.2 of the
Company Disclosure Letter (the "Capital Plan"); provided, however, that
capital expenditures (X) for which the Company has no binding commitment to
third parties on the date
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hereof and (Y) are primarily for the purpose of supporting Quantitude's
third-party telecommunications or the Company's web-hosting business shall
not be made without the prior written consent of Parent.
(ix) incur, assume, guarantee or otherwise become liable for any
indebtedness for borrowed money except for in the ordinary course of
business, consistent with past practice, (A) under the Company's existing
credit agreements or (B) to trade creditors of the Company or its
Subsidiaries;
(x) make or forgive any loans, advances or capital contributions (which
shall expressly be deemed not to include marketing incentive payments or
up-front financial assistance payments, however structured) to, or
investments in, any other person in an amount in excess of $3,000,000
individually, or $10,000,000 the aggregate, (other than advances in respect
of business expenses and loans and advances in respect of relocation
arrangements, in each case made to officers or employees in the ordinary
course of business, consistent with past practice);
(xi) grant any stock-related or stock-based awards other than as
described in subsections (b)(ii) or (b)(iv) of this Section 5.2;
(xii) modify, amend, terminate or waive any rights under any
Confidentiality Contract entered into in connection with any Third-Party
Acquisition Proposal;
(xiii) other than (A) in accordance with the Company's Capital Plan, or
(B) Material Contracts not involving costs, individually or in the
aggregate, in excess of Excess Costs, enter into any Material Contract;
(xiv) modify, amend, terminate or waive any rights under any Material
Contract in any manner that would reasonably be expected to (A) have a
Company Material Adverse Effect, or (B) result in Excess Costs;
(xv) (A) increase the compensation, severance or, except pursuant to
plan amendments permitted under clause (C) below, other benefits payable or
to become payable to its directors, officers or employees, other than (I)
annual increases for officers or employees of the Company or its
Subsidiaries in the ordinary course of business consistent with past
practice (including in connection with annual compensation reviews), (II)
salary increases for officers and employees of Southern Cross Distribution
Systems Pty Limited in an amount not in excess of 6% of aggregate
compensation, (B) grant any severance or termination pay (except payments
required to be made under employee benefit plans or other obligations
existing on the date hereof in accordance with the terms of such
obligations) to, or enter into any employment, consulting, salary
continuation or severance agreement with, any officer or director of the
Company or any of its Subsidiaries (other than any of the foregoing arising
by operation of Law), or (C) establish, adopt, enter into, amend or modify
in any material respect or in any manner that would result in Excess Costs
any collective bargaining agreement, employee benefit plan, trust, fund,
policy or arrangement for the benefit of any current or former directors,
officers or employees or any of their beneficiaries, except, in each case,
as may be required by Law;
(xvi) take any action to change accounting policies, procedures or
practices, except as required by a change in GAAP, SEC position or
applicable Law after the date hereof ("Reporting Requirements");
(xvii) subject to Section 5.3, approve or authorize any action to be
submitted to the stockholders of the Company for approval other than
pursuant to this Agreement, other than, if the transactions contemplated
hereby have not been consummated by January 1, 2002, the election of
directors and ratification of auditors at an annual meeting of stockholders
to be held after June 1, 2002;
(xviii) materially change any method of reporting income, deductions or
other material items for income Tax purposes, make or change any material
election with respect to Taxes, agree to or settle any material claim or
assessment in respect of Taxes, or agree to an extension or waiver of the
limitation period to any material claim or assessment in respect of Taxes,
other than in the ordinary course of business consistent with past practice
or as required by Reporting Requirements;
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(xix) settle or compromise any pending or threatened suit, action or
claim not covered by insurance in an aggregate amount in excess of
$3,000,000;
(xx) amend in any material respect any Material Contract so as to
include any "change of control" provision which would be triggered upon the
Merger or any sale of the Company or any of its Subsidiaries;
(xxi) enter into, amend in any material respect or renew any Contract
with any customer or supplier set forth in Schedule 3.16(c) of the Company
Disclosure Letter;
(xxii) enter into, amend or renew any Contract set forth on Schedule
5.2(b)(xxii) of the Company Disclosure Letter;
(xxiii) amend, extend, renew or otherwise modify any material Lease in
any manner that would reasonably be expected to have a Material Adverse
Effect or result in Excess Costs; or
(xxiv) enter into any Contract to provide web-hosting services or third
party telecommunications services; or
(xxv) agree in writing or otherwise to take any of the foregoing
actions.
(c) Parent shall respond to any request from the Company for any consents
sought pursuant to this Section 5.2 as promptly as practicable, with due regard
and consideration to the relevant business needs of the Company in seeking and
obtaining such consent.
5.3 Preparation of the Form S-4 and the Proxy Statement; Company Stockholder
Approval.
(a) Promptly following the date of this Agreement, the Company shall, with
the assistance and approval of Parent (which approval shall not be unreasonably
withheld or delayed), prepare and file with the SEC the Proxy Statement, and
Parent shall, with the assistance and approval of the Company (which approval
shall not be unreasonably withheld or delayed), prepare and file with the SEC
the Form S-4, in which the Proxy Statement will be included as a prospectus
(the "Proxy Statement/Prospectus"). Each of the Company and Parent shall use
its reasonable best efforts to have the Form S-4 declared effective under the
Securities Act as promptly as practicable after such filing. The Company will
use its reasonable best efforts to cause the Proxy Statement to be mailed to
its stockholders as promptly as practicable after the Form S-4 is declared
effective under the Securities Act and, subject to Section 5.1, solicit from
holders of shares of Company Common Stock proxies in favor of the adoption of
this Agreement and take all other action reasonably necessary or advisable to
secure, at the Stockholders Meeting, the Company Stockholder Approval. Parent
also shall take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified) required to be taken under
any applicable state securities law in connection with the issuance of Parent
Common Stock in connection with the Merger, and the Company shall furnish all
information concerning the Company and the holders of the Company Common Stock
and rights to acquire Company Common Stock pursuant to the Company Stock Option
Plans as may be reasonably required in connection with any such action. No
filing of, or amendment or supplement to, the Form S-4 or the Proxy Statement
will be made by Parent or the Company, respectively, without providing the
other party the opportunity to review and comment thereon; provided, that with
respect to documents filed by a party which are incorporated by reference in
the Form S-4 or Proxy Statement/Prospectus, this right of approval shall apply
only with respect to information relating to the other party or its business,
financial condition or results of operations; and provided, further, that the
Company, in connection with a Change in the Company Recommendation, may amend
or supplement the Proxy Statement/Prospectus (including by incorporation by
reference) pursuant to a Qualifying Amendment (as defined below) to effect a
Change in the Company Recommendation, and in such event, this right of review
and comment shall be satisfied if the Company files the Qualifying Amendment no
earlier than 24 hours after providing Parent with notice and a copy thereof. A
"Qualifying Amendment" means an amendment or supplement to the Proxy
Statement/Prospectus or Form S-4 (including by incorporation by reference) to
the extent it contains (i) a Change in the Company Recommendation, (ii) a
statement of the reasons of the Company's Board of Directors for making such
Change in the Company Recommendation and (iii) additional
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information reasonably related to the foregoing. Parent will advise the
Company, promptly after it receives notice thereof, of the time when the Form
S-4 has become effective or any supplement or amendment has been filed, the
issuance of any stop order, the suspension of the qualification of the Parent
Common Stock issuable in connection with the Merger for offering or sale in any
jurisdiction, or any request by the SEC for amendment of the Form S-4 or
comments thereon and responses thereto or requests by the SEC for additional
information. The Company will inform Parent, promptly after it receives notice
thereof, of any request by the SEC for the amendment of the Proxy Statement and
responses thereto or requests by the SEC for additional information. Each of
Parent, Purchaser and the Company shall furnish all information concerning
itself to the other as may be reasonably requested in connection with any such
action and the preparation, filing and distribution of the Form S-4 and the
preparation, filing and distribution of the Proxy Statement. The Company,
Parent and Purchaser each agree to correct any information provided by it for
use in the Form S-4 or the Proxy Statement which shall have become false or
misleading. If, at any time prior to the Effective Time, any information
relating to Parent or the Company, or any of their respective affiliates,
officers or directors, should be discovered by Parent or Company which should
be but is not set forth in an amendment or supplement to any of the Form S-4 or
the Proxy Statement, so that any of such documents would not include any
misstatement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, the party which discovers such information shall
promptly notify the other parties hereto and an appropriate amendment or
supplement describing such information shall be promptly filed with the SEC
and, to the extent required by Law, disseminated to the stockholders of the
Company.
(b) The Company, acting through the Company's Board of Directors, shall in
accordance with applicable Law (i) duly call, give notice of, convene and hold,
as promptly as practicable following the date upon which the Form S-4 becomes
effective, the Stockholders Meeting and (ii) use its reasonable best efforts to
solicit from holders of shares of Company Common Stock proxies in favor of the
adoption of this Agreement and take all other action necessary or advisable to
secure, at the Stockholders Meeting, the Company Stockholder Approval, by the
vote described in Section 3.2 of this Agreement, and the Company's Board of
Directors shall recommend adoption of this Agreement by the stockholders of the
Company to the effect set forth in Section 3.2 of this Agreement (the "Company
Recommendation"), and shall not, in response to any proposal for a Third-Party
Acquisition, a Superior Proposal or otherwise (1) withdraw, revoke or change
the Company Recommendation, or (2) approve or recommend, or propose publicly to
approve or recommend, any Third-Party Acquisition (collectively, a "Change in
the Company Recommendation"); provided, the foregoing shall not prohibit
accurate disclosure (and such disclosure shall not be deemed to be a Change in
the Company Recommendation) of factual information regarding the business,
financial condition or results of operations of Parent or the Company or the
fact that a proposal for a Third-Party Acquisition has been made, the identity
of the party making such proposal or the material terms of such proposal in the
Form S-4 or the Proxy Statement/Prospectus or otherwise, to the extent such
information, facts, identity or terms is required to be disclosed under
applicable Law; provided that the Company affirmatively states that it
recommends that its stockholders vote in favor of the Merger and, provided
further, that, without limitation of the foregoing, the Company's Board of
Directors may make a Change in the Company Recommendation pursuant to Section
5.1 hereof.
(c) If there is a Change in the Company Recommendation in accordance with
Section 5.1 hereof and this Agreement has not been terminated pursuant to
Article VII hereof, then, without limiting the Company's ability to take the
action otherwise permitted by Sections 5.1 and 5.3:
(i) from and after the date of such Change in the Company
Recommendation, in performing its obligations under this Section 5.3, the
Company shall not be obligated to solicit from holders of shares of Company
Common Stock proxies in favor of the adoption of this Agreement or to take
all action necessary or advisable to secure, at the Stockholders Meeting,
the Company Stockholder Approval, but instead shall be obligated to solicit
impartially from holders of shares of Company Common Stock proxies to be
voted at the Stockholders Meeting (making no instructions to vote in favor
or against, but merely to
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return a completed proxy card or cards) and to take all action necessary or
advisable to maximize, at the Stockholders Meeting, the number of proxies
submitted by holders of Company Common Stock;
(ii) the Company shall be obligated to vote all unspecified but executed
proxies submitted by holders of shares of Company Common Stock after the
Change in the Company Recommendation proportionately in accordance with the
manner in which all specified proxies shall have been voted;
(iii) Parent and its affiliates and agents shall have the right, as a
participant in the Company's solicitation of proxies, to communicate with
and solicit from holders of shares of Company Common Stock the submission
of Company proxies in favor of the adoption of this Agreement and to take
all actions necessary or advisable to secure, at the Stockholders Meeting,
the Company Stockholders Approval and otherwise to act as a participant in
the Company's solicitation, all in accordance with applicable Law; and
(iv) The parties shall cooperate with each other in connection with any
actions taken in connection with the Stockholders Meeting and make any
filings under federal securities Laws required in connection herewith.
5.4 Filings; Other Action. (a) Subject to the terms and conditions herein
provided, each of the Company, Parent and Purchaser shall: (i) use reasonable
best efforts to cooperate with one another in (A) determining which filings are
required or advisable to be made prior to the Effective Time with, and which
consents, approvals, permits or authorizations are required or advisable to be
obtained prior to the Effective Time from, Governmental Entities or other third
parties in connection with the execution and delivery of this Agreement, the
Option Agreement, the Transaction Support Agreement and any other Ancillary
Documents to which it is a party and the consummation of the transactions
contemplated hereby and thereby and (B) timely making all such filings and
timely seeking all such consents, approvals, permits, authorizations and
waivers; and (ii) use reasonable best efforts to take, or cause to be taken,
all other action and do, or cause to be done, all other things necessary,
proper or appropriate to consummate and make effective the transactions
contemplated by this Agreement, the Option Agreement, the Transaction Support
Agreement and the Ancillary Documents to which it is a party. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purpose of this Agreement, the proper officers and directors of Parent
and the Surviving Corporation shall take all such necessary action.
(b) In furtherance and not in limitation of the foregoing, each party hereto
agrees to make an appropriate filing of a Notification and Report Form pursuant
to the HSR Act and any other Regulatory Law (as hereinafter defined) with
respect to the transactions contemplated hereby as promptly as practicable
after the date hereof and to supply as promptly as practicable any additional
information and documentary material that may be requested pursuant to the HSR
Act and any other Regulatory Law and to take all other actions necessary to
cause the expiration or termination of the applicable waiting periods under the
HSR Act and any Regulatory Law as soon as practicable. Nothing in this
Agreement shall require any of Parent and its Subsidiaries or the Company and
its Subsidiaries to sell, hold separate or otherwise dispose of or conduct
their business in a specified manner, or agree to sell, hold separate or
otherwise dispose of or conduct their business in a specified manner, or permit
the sale, holding separate or other disposition of, any assets of Parent, the
Company or their respective Subsidiaries or the conduct of their business in a
specified manner, whether as a condition to obtaining any approval from a
Governmental Entity or any other person or for any other reason ("Regulatory
Restrictions").
(c) Each of Parent and the Company shall, in connection with the efforts
referenced in Section 5.4(a) obtain all requisite material approvals and
authorizations for the transactions contemplated by this Agreement under the
HSR Act or any other Regulatory Law, use its reasonable best efforts to (i)
cooperate in all respects with each other in connection with any filing or
submission and in connection with any investigation or other inquiry, including
any proceeding initiated by a private party, (ii) promptly inform the other
party of any communication received by such party from, or given by such party
to, the Antitrust Division of the Department of Justice (the "DOJ"), the
Federal Trade Commission (the "FTC") or any other Governmental Entity and of
any material communication received or given in connection with any proceeding
by a private
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party, in each case regarding any of the transactions contemplated hereby, and
(iii) permit the other party to review any communication given by it to, and
consult with each other in advance of any meeting or conference with, the DOJ,
the FTC or any such other Governmental Entity or, in connection with any
proceeding by a private party, with any other person, and to the extent
appropriate or permitted by the DOJ, the FTC or such other applicable
Governmental Entity or other person, give the other party the opportunity to
attend and participate in such meetings and conferences. For purposes of this
Agreement, "Regulatory Law" means the Sherman Act, as amended, Council
Regulation No. 4064/89 of the European Community, as amended (the "EC Merger
Regulation") the Clayton Act, as amended, the HSR Act, the Federal Trade
Commission Act, as amended, the Foreign Acquisition and Takeovers Act 1975(th)
of the Commonwealth of Australia, as amended, and all other federal, state and
foreign, if any, statutes, rules, regulations, orders, decrees, administrative
and judicial doctrines and other laws that are designed or intended to
prohibit, restrict or regulate (A) foreign investment, (B) antitrust or
competition law or (C) telecommunications.
(d) Subject to the terms and conditions of this Agreement, in furtherance
and not in limitation of the covenants of the parties contained in Section
5.4(a) and 5.4(b), if any administrative or judicial action or proceeding,
including any proceeding by a private party, is instituted (or threatened to be
instituted) challenging any transaction contemplated by this Agreement as
violative of any Regulatory Law (a "Regulatory Challenge"), each of Parent and
the Company shall cooperate in all respects with each other and use its
respective reasonable best efforts in order to contest and resist any such
Regulatory Challenge and to have vacated, lifted, reversed or overturned any
decree, judgment, injunction or other order whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents or restricts
consummation of the transactions contemplated by this Agreement.
(e) If any objections are asserted with respect to the transactions
contemplated hereby under any Regulatory Law or if any suit is instituted by
any Governmental Entity or any private party challenging any of the
transactions contemplated hereby as violative of any Regulatory Law, each of
Parent and the Company shall use its reasonable best efforts and cause its
respective Subsidiaries to use their reasonable best efforts to resolve any
such objections or challenge as such Governmental Entity or private party may
have to such transactions under such Regulatory Law so as to permit
consummation of the transactions contemplated by this Agreement.
(f) If, primarily as a result of the execution by Parent or any Subsidiary
thereof of a Restricted Acquisition Agreement, the consents, approvals, permits
or authorizations described in this Section 5.4 hereof are not obtained by (i)
the date that is 180 days from the date hereof, then (A) the Merger
Consideration shall be increased by an amount calculated in accordance with
Section 2.2(a) hereof, and (B) from and after such 180th day, Parent and
Purchaser shall be deemed to have waived (I) the condition set forth in Section
6.2(a) relating to the failure of any representation or warranty set forth in
Section 3.8, Section 3.9, the third sentence of Section 3.10(a), the sixth
sentence of Section 3.11(a), Section 3.12 (other than clause (c) thereto),
Sections 3.13(b) and (c), Section 3.16(c) or Section 3.22, to be true and
correct as of the Effective Time where such failure to be true and correct
would reasonably be expected to result in a Company Material Adverse Effect,
and (II) the condition set forth in Section 6.2(e) hereof, in either of clause
(I) or (II) to the extent such condition otherwise would fail to be satisfied
primarily as a result of any event, change, development or circumstance
occurring after such 180th day or (ii) March 31, 2002, then Parent shall, or
shall cause any applicable Subsidiary to, promptly terminate the Restricted
Acquisition Agreement. In this regard, Parent shall not, and shall not permit
any of its Subsidiaries to, enter into any Restricted Acquisition Agreement
unless such Restricted Acquisition Agreement permits Parent or such Subsidiary
to terminate such Restricted Acquisition Agreement under the circumstances
described above in clause (ii) of this Section 5.4(f). As used herein, (x)
"Restricted Acquisition" shall mean (A) a merger, reorganization, share
exchange, consolidation, or similar transaction involving Parent or any of its
Subsidiaries and any Restricted Person (as defined below), (B) any purchase of
all or a substantial portion of the assets of a Restricted Person or any
division or unit thereof by Parent or any of its Subsidiaries, (C) any purchase
of, or tender or exchange offer for, more than 20% of the outstanding equity
securities of any Restricted Person by Parent or any of its Subsidiaries, or
(D) any other transaction similar in nature to the foregoing with a Restricted
Person that would otherwise be subject to any Regulatory Law, (y) "Restricted
Acquisition Agreement" shall mean any memorandum of understanding,
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agreement in principle, letter of intent, contract or agreement (whether
written or oral) related to a Restricted Acquisition and (z) "Restricted
Person" shall mean any person described in Schedule 5.4(f) hereof.
5.5 Access to Information. (a) From the date of this Agreement until the
Closing, the Company shall, and shall cause its Subsidiaries to, (i) give
Parent, its officers and a reasonable number of its employees and its
authorized representatives, reasonable access at all reasonable times during
normal business hours to the Contracts, books, records, analysis, projections,
plans, systems, personnel, commitments, offices and other facilities and
properties of the Company and its Subsidiaries and their accountants and
accountants' work papers and (ii) furnish Parent on a timely basis with such
financial and operating data and other information with respect to the business
and properties of the Company and its Subsidiaries as Parent may from time to
time reasonably request and use reasonable best efforts to make available at
all reasonable times during normal business hours to the officers, employees,
accountants, counsel, financing sources and other representatives of the Parent
the appropriate individuals (including management personnel, attorneys,
accountants and other professionals) for discussion of the Company's business,
properties, prospects and personnel as Parent may reasonably request.
(b) From the date of this Agreement until the Closing, Parent shall, and
shall cause its Subsidiaries to, (i) give the Company, its officers and a
reasonable number of its employees and its authorized representatives,
reasonable access at all reasonable times during normal business hours to the
contracts, books, records, analysis, projections, plans, systems, personnel,
commitments, offices and other facilities and properties of Parent and its
Subsidiaries and their accountants and accountants' work papers and (ii)
furnish the Company on a timely basis with such financial and operating data
and other information with respect to the business and properties of Parent and
its Subsidiaries as the Company may from time to time reasonably request and
use reasonable best efforts to make available at all reasonable times during
normal business hours to the officers, employees, accountants, counsel,
financing sources and other representatives of the Company the appropriate
individuals (including management personnel, attorneys, accountants and other
professionals) for discussion of Parent's business, properties, prospects and
personnel as the Company may reasonably request.
(c) As soon as practicable after the execution of this Agreement, the
Company shall permit Parent to electronically link the Company's financial
reporting system to Parent's financial reporting system ("Hyperion"). Access to
Hyperion will be provided by Parent's financial reporting staff and the tasks
necessary to complete the link to Hyperion will be led by Parent's accounting
staff, with the necessary assistance from the Company's accounting staff and
other technical staff, if necessary, at no cost to the Company and provided
that neither such installment nor the operation or use by Parent of Hyperion
shall interfere with or disrupt the normal operation of the Company's business
or its financial reporting system or violate any applicable software licenses.
Parent will provide the necessary Hyperion software to be installed on a
computer in the Company's accounting department; provided, however, that the
information retrieved from the Company's financial reporting system will not be
made available to persons who are directly involved in pricing or any other
competitive activity at Parent or any Subsidiary of Parent; provided, further,
that Parent shall not use such information other than for purposes of assessing
the financial condition of the Company for purposes of the transactions
contemplated by this Agreement, and shall not share, provide or sell the
information to any third party or use the information in any manner that could
reasonably be considered a restraint on competition or result in a violation of
any applicable Laws. Any information provided under this Section 5.5(c) shall
be subject to the terms of the Confidentiality Agreement.
(d) All such information provided to or obtained by Parent under this
Section 5.5 shall be subject to the terms and conditions of the Confidentiality
Agreement.
5.6 Publicity. The initial press release relating to this Agreement shall be
issued jointly by the Company and Parent in a form previously agreed upon by
the Company and Parent. Thereafter, Parent, Purchaser and the Company shall
consult with each other, and use reasonable efforts to agree upon the text of
any press release, before issuing any press release or making any public
statement with respect to this Agreement, the Merger or the other transactions
contemplated hereby and shall not issue any such press release or make any such
public statement without the prior consent of the other parties, which shall
not be
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unreasonably withheld; provided, however, that any party may, without the prior
consent of the others, issue such press release or make such public statement
as may, upon the advice of counsel, be required by law or the rules and
regulations of the SEC or the NYSE, in advance of obtaining such prior consent,
in which case, the parties shall cooperate to reach mutual agreement as to the
language of any such report, statement or press release.
5.7 Further Action. Upon the terms and subject to the conditions set forth
in this Agreement, but without limiting the rights of the parties hereunder,
each of the parties agrees to use its reasonable best efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, the Option Agreement and the Transaction Support Agreement,
including using its reasonable best efforts to accomplish the following:
(a) the taking of all acts reasonably necessary to cause the Closing to be
satisfied as promptly as practicable;
(b) subject to Section 5.4, the obtaining of all necessary actions or
nonactions, waivers, consents and approvals from Governmental Entities and the
making of all necessary registrations and filings (including filings with
Governmental Entities), including, without limitation, filings pursuant to the
FCC Act and any other required filings or approvals under the
telecommunications regulatory laws of any jurisdiction where the Company or any
of its Subsidiaries holds Company Permits, and the taking of all steps as may
be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, a Governmental Entity;
(c) the obtaining of all necessary consents, approvals or waivers from third
parties;
(d) the defending of any lawsuits or other legal proceedings, whether
judicial or administrative, challenging this Agreement, the Option Agreement,
the Transaction Support Agreement or the consummation of the transactions
contemplated hereby and thereby;
(e) taking all necessary actions to prevent the entry of Restraints (as
hereinafter defined) and to appeal as promptly as possible any such Restraints
that may be entered; and
(f) the execution and delivery of any additional instruments reasonably
necessary to consummate the transactions contemplated by, and to fully carry
out the purposes of, this Agreement, the Option Agreement and the Transaction
Support Agreement.
5.8 Insurance; Indemnity.
(a) Parent will cause the Surviving Corporation to maintain in effect for
not less than six years after the Effective Time, the Company's current
directors' and officers' insurance policies, if such insurance is obtainable
(or policies equivalent in all material respects to those maintained by or on
behalf of the Company and its Subsidiaries on the date hereof, and having at
least the same coverage and containing terms and conditions no less
advantageous to the current and all former directors and officers of the
Company) with respect to acts or failures to act prior to the Effective Time;
provided, however, that in order to maintain or procure such coverage, Parent
and the Surviving Corporation shall not be required to maintain or obtain
policies providing such coverage except to the extent such coverage can be
provided at an annual cost of no greater than two times the most recent annual
premium paid by the Company prior to the date hereof (the "Cap"); and provided,
further, that if equivalent coverage cannot be obtained, or can be obtained
only by paying an annual premium in excess of the Cap, Parent or the Surviving
Corporation shall be required to only obtain as much coverage as can be
obtained by paying an annual premium equal to the Cap.
(b) From and after the Effective Time, Parent and the Surviving Corporation
shall indemnify and hold harmless to the fullest extent permitted under
applicable law, each person who is, or has been at any time prior to the date
hereof or who becomes prior to the Effective Time, an officer or director of
the Company or any of its Subsidiaries (each, an "Indemnified Party") against
all losses, claims, damages, liabilities, costs or expenses
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(including attorneys fees), judgments, fines, penalties and amounts paid in
settlement in connection with any claim, action, suit, proceeding or
investigation arising out of or pertaining to acts or omissions, or alleged
acts or omissions, by them in their capacities as such, which acts or omissions
occurred prior to the Effective Time, whether asserted or claimed prior to, at
or after the Effective Time. In the event of any such claim, action, suit,
proceeding or investigation (an "Action"), the Surviving Corporation shall
control the defense of such Action with counsel selected by the Surviving
Corporation, which counsel shall be reasonably acceptable to the Indemnified
Party; provided, however, that the Indemnified Party shall be permitted to
participate in the defense of such Action through counsel selected by the
Indemnified Party, which counsel shall be reasonably acceptable to the
Surviving Corporation, at the Indemnified Party's expense. Notwithstanding the
foregoing, if there is any conflict between the Surviving Corporation and any
Indemnified Parties or there are additional defenses available to any
Indemnified Parties, the Indemnified Parties shall be permitted to participate
in the defense of such Action with counsel selected by the Indemnified Parties,
which counsel shall be reasonably acceptable to the Surviving Corporation, and
Parent shall cause the Surviving Corporation to pay the reasonable fees and
expenses of such counsel, as accrued and in advance of the final disposition of
such Action to the full extent permitted by applicable law; provided, however,
that the Surviving Corporation shall not be obligated to pay the reasonable
fees and expenses of more than one counsel for all Indemnified Parties in any
single Action except to the extent that the Surviving Corporation and any
Indemnified Party have conflicting interests in the outcome of such Action.
(c) Parent shall cause the Surviving Corporation to keep in effect for a
period of not less than six years from the Effective Time (or, in the case of
matters occurring prior to the Effective Time which have not been resolved
prior to the sixth anniversary of the Effective Time, until such matters are
finally resolved) all provisions in the Surviving Corporation's Certificate of
Incorporation and Bylaws that provide for exculpation of director and officer
liability and indemnification (and advancement of expenses related thereto) of
the past and present officers and directors of the Company to the fullest
extent permitted by the DGCL, and such provisions shall not be amended except
as either required by applicable Law or to make changes permitted by Law that
would enhance the rights of past or present officers and directors to
indemnification or advancement of expenses.
(d) If Parent or the Surviving Corporation or any of their respective
successors or assigns (i) shall consolidate with or merge into any other
corporation or other entity and shall not be the continuing or surviving
corporation or entity of the consolidation or merger or (ii) shall transfer all
or substantially all of its properties and assets to any individual,
corporation or other entity, then and in each such case, proper provisions
shall be made so that the successors and assigns of Parent or the Surviving
Corporation shall assume all of the obligations set forth in this Section 5.8.
(e) The provisions of this Section 5.8 are intended to be for the benefit
of, and shall be enforceable by, each of the Indemnified Parties, their heirs
and their representatives.
5.9 Employee Benefit Plans. (a) For a period of one year following the
Effective Time, Parent shall cause the Surviving Corporation to continue to
provide employees of the Company and its Subsidiaries (each, a "Company
Employee") as of the Effective Time and former employees who, as of the
Effective Time, have satisfied the requirements for benefits under any Company
Benefit Plan (and their eligible dependents) employee benefits on terms
substantially identical to those provided by the Company and its Subsidiaries
as of the date hereof, and such employee benefits shall be provided by means of
plans, policies and arrangements that are substantially identical to the
Company Benefit Plans. Notwithstanding the foregoing, (i) except as otherwise
provided in Section 5.9(d), the terms of the plans, policies or arrangements
(including, without limitation, eligibility policies) by which Parent provides
equity-based incentives to employees of the Surviving Corporation for such one-
year period shall not be required to be substantially similar to any Company
Stock Option Plan or the Subsidiary Plans (including, without limitation,
eligibility policies); provided that Company Employees shall participate or not
participate in Parent equity-based plans, policies and arrangements on the same
basis as similarly situated employees of Parent and its Subsidiaries, and (ii)
Parent shall cause the
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Surviving Corporation to maintain the Galileo International L.L.C. Severance
Plan and the severance plan of any Subsidiary listed in Schedule 5.9(a) (each a
"Severance Plan"), as in effect as of the date hereof, with respect to any
eligible Company Employee who is employed by the Company or any of its
Subsidiaries as of the Effective Time and whose employment is terminated (A)
during the one-year period commencing at the Effective Time (the "Measurement
Period") for any reason other than cause as determined under such Plan, or (B)
from and after the end of the Measurement Period, as a result of (I) the Merger
or any of the transactions contemplated by this Agreement, including, without
limitation, on account of any combination, restructuring or reorganization of
operations or facilities, or reduction in force, provided that, during the
Measurement Period, the Parent provides written notification of such
termination to the Company Employee, or (II) any combination, restructuring or
reorganization of operations or facilities, or reduction in force not related
to the Merger and set forth in Disclosure Schedule 5.9(a).
(b) From and after the Effective Time, Parent will cause the Surviving
Corporation and its Subsidiaries to honor, pay and perform all of their
respective covenants and obligations (i) with respect to the Strategic
Alternative Bonus Payments as set forth in paragraph 5 of Disclosure Schedule
5.2, (ii) under all employment, stock plan, severance, termination protection,
consulting and other employee agreements between the Company or its
Subsidiaries and any officer, director or employee of the Company or any of its
Subsidiaries, in accordance with the terms thereof as in effect immediately
prior to the date hereof, and (iii) the Company Benefit Plans, in each case, to
the extent disclosed on the Company Disclosure Letter.
(c) For purposes of determining eligibility and vesting (but not for benefit
accrual) under any Parent benefit plans, each Company Employee shall be
credited with their years of service with the Company or its Subsidiaries
(except to the extent necessary to avoid the duplication of benefits). To the
extent that any Parent benefit plan in which a Company Employee participates
after the Effective Time provides medical, dental, vision or other welfare
benefits, Parent shall cause (i) all pre-existing condition exclusions and
actively at work requirements of such plan to be waived for such Company
Employee and his or her covered dependents, and (ii) any eligible expenses
incurred by such Company Employee on or before the Effective Time to be taken
into account under such plan for purposes of satisfying all deductible,
coinsurance and maximum out-of-pocket requirements applicable to such Company
Employee and his or her covered dependents for the applicable plan year.
(d) (i) Effective immediately following the Effective Time, Parent shall
cause to be granted to each employee or officer of the Surviving Corporation
who was, as of the Effective Time, (i) a Company Employee or an officer of the
Company or any of its Subsidiaries and (ii) eligible for an award under a
Company Stock Option Plan (an "Option Eligible Employee"), options to purchase
Parent Common Stock under Parent's stock option plans ("Parent Option Plan"),
as in effect at the Effective Time, at fair market value (as defined in such
plan) on the date of grant on such terms as apply as of the date hereof, to
similarly situated employees of Parent, where applicable (or with respect to
Non-Management Employees and Managers, on terms at least as favorable as those
terms applicable to participants in Parent's stock option plans in the closest
salary grade to such Company Employees immediately prior to the Effective
Time), except that, notwithstanding the foregoing, the number of such options
shall be determined as set forth in Section 5.9(d)(ii) and shall become vested
in accordance with the following vesting schedule:
Cumulative
Vested
Vesting Date Percentage
------------ ----------
First anniversary of date of grant 25%
Second anniversary of date of grant 50%
Third anniversary of date of grant 100%
(ii) In connection with the option award described in Section 5.9(d)(i),
prior to the Effective Time, the Company's Compensation Committee shall
designate with respect to each Option Eligible Employee a
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number of options to purchase Company Common Stock ("Designated Number"),
based on the following ("2001 Option Awards"): (A) in the category of Non-
Management Employee or Manager, the target number of options set forth in
Schedule 5.9(d) applicable to such Option Eligible Employee, or (B) with
respect to the categories of Chief Executive Officer, Executive and Senior
Vice President, Director and Vice President of Galileo International,
L.L.C., the number of options derived under the formulaic target listed in
Schedule 5.9(d); provided that, with respect to clause (B), in each
individual case, such award may exceed such target, but in no event shall
the aggregate awards with respect to all such Option Eligible Employees
exceed 105% of the aggregate targets otherwise applicable to all such
employees. In lieu of any 2001 Option Awards, Parent shall grant the number
of options to purchase Parent Stock to be awarded to each such Option
Eligible Employee pursuant to this Section 5.9(d)(ii) by multiplying the
Designated Number by the Option Exchange Ratio in accordance with Section
2.2(c)(i), assuming for purposes of Section 2.2(c)(i)(2)(A) and (B), such
options had been granted prior to the Effective Time.
(iii) Notwithstanding the foregoing, in the event that the Effective
Time occurs after December 31, 2001, in lieu of the awards described in
Section 5.9(d)(i) and (ii), the Company shall be entitled to grant, prior
to the Effective Time, the 2001 Option Awards on the same terms and
conditions as in effect with respect to such Option Eligible Employees as
of the date hereof (and further providing, with respect to Vice Presidents
and director level employees who are Option Eligible Employees, for the
immediate vesting of such options in the event that such employee's
employment with the Company or its Subsidiaries is terminated other than
for Cause, as defined in the Form of Stock Option Agreement applicable as
of the date hereof to Executive Vice Presidents of Galileo International
L.L.C., within two years after the Effective Time), except that in no event
shall the Company award any 2001 Option Awards to any person, including the
Chief Executive Officer or any Executive Vice President or Senior Vice
President, to the extent that such grant or any accelerated vesting of such
options as a result of the Merger would, either alone or in conjunction
with another event, result in an "excess parachute payment" within the
meaning of Code Section 280G(b)(2) ("280G Persons"), provided, however,
that all 280G Persons shall be included in the option grant described in
Sections 5.9(d)(i) and (ii). Notwithstanding Section 2.2(c)(i), the 2001
Options awarded by the Company pursuant to this Section 5.9(d)(iii) shall
not become vested at or prior to the Effective Time; provided that Parent
reserves the right to cause such awards to become vested immediately prior
to the Effective Time.
5.10 Conveyance Taxes. The Company and Parent shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees and any similar Taxes which become payable in
connection with the transactions contemplated by this Agreement that are
required or permitted to be filed on or before the Effective Time. Each of
Parent and the Company shall pay, without deduction from any amount payable to
holders of Company Common Stock and without reimbursement from the other party,
any such Taxes or fees imposed on it by any Governmental Entity (and/or for
which its shareholders are primarily liable), which becomes payable in
connection with the transactions contemplated by this Agreement.
5.11 Certain Tax Matters. (a) During the period from the date hereof to the
Effective Time, the Company shall and shall cause each of its Subsidiaries to:
(i) timely file all Tax Returns ("Post Signing Returns") required to be filed
by it and, subject to Section 5.2(b)(xviii), such Post Signing Returns shall be
prepared in a manner consistent with past practice, (ii) timely pay all Taxes
due and payable in respect of such Post Signing Returns that are so filed,
(iii) accrue a reserve in its books and records and financial statements, in
accordance with past practice, for all Taxes payable by it for which no Post
Signing Return is due prior to the Effective Time, and (iv) promptly notify
Parent of any federal or state income or franchise, or other material tax,
suit, claim, action, investigation, proceeding or audit pending against or with
respect to the Company or any of its Subsidiaries in respect of any Tax matters
(or any significant developments with respect to any ongoing Tax matters),
including material Tax liabilities and material refund claims.
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(b) Neither the Company nor Parent nor their respective affiliates shall
directly or indirectly (without the consent of the other) take any action or
fail to take any action, that would reasonably be expected to adversely affect
the qualification of the Merger as a reorganization under Section 368(a) of the
Code.
(c) Officers of Parent, Purchaser and the Company shall execute and deliver
to Skadden, Arps, Slate, Meagher & Flom LLP ("Skadden Arps"), tax counsel to
Parent, and Jones Day, tax counsel to the Company, certificates substantially
in the form agreed to by the parties and such law firms at such time or times
as may be reasonably requested by such law firms, including contemporaneously
with the execution of this Agreement, at the time the Form S-4 and Proxy
Statement is declared effective by the SEC and at the Effective Time, in
connection with such tax counsel's respective delivery of opinions, pursuant to
Sections 6.2(e) and 6.3(d) hereof, with respect to the tax treatment of the
Merger.
(d) None of Parent, Purchaser or the Company shall take or cause to be taken
any action which would cause to be untrue (or fail to take or cause not to be
taken any action which would cause to be untrue) any of the certifications and
representations included in the certificates described in Section 5.11(b).
5.12 Section 16 Matters. The Company and Parent shall take all such steps as
may be required to cause any dispositions of Company Common Stock (including
derivative securities with respect to the Company Common Stock) and the
acquisition of Parent Common Stock, as the case may be, resulting from the
transactions contemplated by this Agreement by each officer or director of the
Company who is subject to the reporting requirements of Section 16(a) of the
Exchange Act with respect to the Company to be exempt under Rule 16b-3
promulgated under the Exchange Act, such steps to be taken in accordance with
the No-Action Letter, dated January 12, 1999, issued by the SEC to Skadden
Arps.
5.13 Stock Options and SARs. By adopting or approving this Agreement the
Board of Directors of each of the Company and Parent shall be deemed to have
approved and authorized, and the stockholders of the Company shall be deemed to
have approved and ratified, each and every amendment to (and such other actions
in respect of ) the Company Stock Option Plans, the Company ESPP, and the
agreements evidencing awards under the Company Stock Option Plans and the
Company ESPP as the officers of the Company and Parent may deem necessary or
appropriate to give effect to the provisions of Section 2.2(c).
5.14 Stock Exchange Listing. Parent shall use its reasonable best efforts to
have approved for listing on the NYSE prior to the Effective Time, subject to
official notice of issuance, the Parent Common Stock to be issued in the Merger
and any and all shares of Parent Common Stock to be reserved for issuance upon
exercise of the Assumed Options.
5.15 Amendments to the Rights Agreement; Section 203.
(a) The Company agrees that it will not amend, modify or waive any provision
of the Rights Agreement, take any action to redeem the Rights, or render the
Rights inapplicable to any Third-Party Proposal.
(b) The Company agrees that it will not take any action to render Section
203 of the DGCL or any other state takeover statute or similar statute or
regulation inapplicable to any person in respect of any Third-Party Proposal.
5.16 Affiliates. As soon as practicable after the date hereof, the Company
shall deliver to Parent a letter identifying all persons who may be deemed, at
the time this Agreement is submitted for adoption by the stockholders of the
Company, "affiliates" of the Company for purposes of Rule 145 under the
Securities Act. The Company shall use its reasonable best efforts to cause each
such person to deliver to Parent at least 30 days prior to the Closing Date a
written agreement substantially in the form attached as Exhibit B hereto.
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ARTICLE VI
Conditions
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to
the satisfaction or waiver, where permissible, prior to the Effective Time, of
the following conditions:
(a) The Company Stockholder Approval shall have been obtained at or prior to
the Effective Time in accordance with the DGCL.
(b) No temporary restraining order, preliminary or permanent injunction or
other judgment or order issued by any court of competent jurisdiction or other
statute, law, rule, legal restraint or prohibition (collectively, "Restraints")
shall be in effect preventing the consummation of the Merger.
(c) No action, suit or proceeding shall have been instituted, or shall be
pending or threatened, by a Governmental Entity (i) seeking to restrain in any
material respect to prohibit the consummation of the Merger, (ii) seeking to
obtain from the Company, Parent or Purchaser any damages that, individually or
in the aggregate, would be reasonably likely to result in a Company Material
Adverse Effect or a Parent Material Adverse Effect, or (iii) seeking to impose
the Restraints referred to in subsection (b) above.
(d) The Form S-4 and any required post-effective amendment thereto shall
have become effective under the Securities Act and shall not be the subject of
any stop order or proceedings seeking a stop order.
(e) The shares of Parent Common Stock issuable to the holders of Company
Common Stock and issuable upon exercise to holders of Assumed Options pursuant
to this Agreement have been approved for listing on the NYSE, subject to
official notice of issuance.
(f) (I) Any waiting period (and any extension thereof) applicable to the
Merger under the HSR Act shall have been terminated or expired, (II) the
European Commission shall have issued a decision under Article 6(1)(b) or 8(2)
of the EC Merger Regulation (or shall be deemed to have done so under Article
10(6) of the EC Merger Regulation) declaring the Merger compatible with the EC
Common Market, (III) the governmental approval and consent of the Treasurer of
the Commonwealth of Australia under the Foreign Acquisition and Takeovers Act
1975(th) (the "Australian Approval") shall have been obtained and (IV) any
applicable waiting periods under Section 123 of the Canadian Competition Act
shall have expired or been earlier terminated or waived, and the Commission of
Competition thereunder shall have issued an advance ruling certificate in
respect of the Merger to the effect that he does not intend to take any action
with the Competition Tribunal in respect of the Merger.
(g) All consents, approvals and actions of, and filings with and notices to
any Governmental Entity required of the Company, Parent, Purchaser or any of
their respective Subsidiaries under any Regulatory Law (other than the filings
set forth in Section 6.1(f)) to consummate the Merger and the other
transactions contemplated by this Agreement, the failure of which to be
obtained or made would (I) impose a risk of criminal liability, criminal fines,
imprisonment or confinement, in each case, upon any officer, employee or
director of the Company, Parent or any of their respective Subsidiaries, (II)
reasonably be expected to have a Company Material Adverse Effect or a Parent
Material Adverse Effect, or (III) impose operating or other Regulatory
Restrictions in jurisdictions from which more than 10% of the consolidated
revenues of the Company and its Subsidiaries are generated, shall have been
obtained or made.
6.2 Conditions to Obligation of Parent and Purchaser to Effect the
Merger. The obligation of Parent and Purchaser to effect the Merger shall be
subject to the fulfillment or waiver (to the extent permitted by applicable
Law) at or prior to the Effective Time of the following conditions:
(a) (I) The representations and warranties of the Company set forth in this
Agreement (other than the representations and warranties set forth in Section
3.2 and Section 3.4 and in Section 3.7(b) shall be true and correct both when
made and as of the Effective Time (except to the extent expressly made as of a
specified date, in which case as of such date), except where the failure of
such representations and warranties to be so
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true and correct (without giving effect to any limitation as to "materiality"
or "Company Material Adverse Effect" set forth therein) would not, individually
or in the aggregate, reasonably be expected to have a Company Material Adverse
Effect.
(II) The representations and warranties of the Company set forth in Section
3.2 and Section 3.4 and in Section 3.7(b) shall be true and correct in all
material respects both when made and as of the Effective Time (except to the
extent expressly made as of a specified date, in which case as of such date).
(b) The Company shall have performed and complied in all material respects
with all obligations, agreements and covenants required by this Agreement to be
performed or complied with by it prior to the Effective Time.
(c) Parent shall have received a certificate signed by the chief financial
officer of the Company, dated as of the Closing Date, to the effect that, to
the best of such officer's knowledge, the conditions set forth in Section
6.2(a) and Section 6.2(b) have been satisfied.
(d) There shall have been no event, change, development or circumstance
(regardless of whether such event, change, development or circumstance arose
before or after the date of this Agreement or was disclosed on the Company
Disclosure Letter) that would reasonably be expected to have a Company Material
Adverse Effect after the date of this Agreement.
(e) Parent shall have received the opinion of Skadden Arps, in form and
substance reasonably satisfactory to Parent, dated as of the Closing Date, on
the basis of the facts, certifications, representations and assumptions set
forth in such opinion, all of which are consistent with the state of facts
existing as of the Effective Time, to the effect that the Merger will qualify
as a reorganization within the meaning of Section 368(a) of the Code. In
rendering such opinion, Skadden Arps shall have received and may rely upon the
certifications and representations set forth in the certificates referred to in
Section 5.11(c).
(f) A Change in the Company Recommendation shall not have occurred; or
(g) Parent shall have received from each person named in the letter referred
to in Section 5.16 an executed copy of the letter set forth as Exhibit B
hereto.
6.3 Conditions to Obligations of the Company to Effect the Merger. The
obligation of the Company to effect the Merger shall be subject to the
fulfillment or waiver (to the extent permitted by applicable Law) at or prior
to the Effective Time of the following conditions:
(a) (I) The representations and warranties of Parent and Purchaser set forth
in this Agreement (other than the representations and warranties set forth in
Section 4.2, Section 4.4, Section 4.6(b), Section 4.8, Section 4.13 and Section
4.16) shall be true and correct both when made and as of the Effective Time
(except to the extent expressly made as of an earlier date, in which case as of
such date) except where the failure of such representations and warranties to
be so true and correct, without giving effect to any limitation as to
"materiality" or "Parent Material Adverse Effect" set forth therein, would not,
individually or in the aggregate, be reasonably expected to have a Parent
Material Adverse Effect.
(II) The representations and warranties of Parent and Purchaser set forth in
Section 4.2, Section 4.4, Section 4.6(b) and Section 4.16 shall be true and
correct in all material respects both when made and at and as of the Effective
Time (except to the extent expressly made as of an earlier date, in which case
as of such date).
(b) Parent and Purchaser shall have performed and complied in all material
respects with all obligations, agreements and covenants required by this
Agreement to be performed and complied with by it prior to the Effective Time.
(c) The Company shall have received a certificate signed by the chief
financial officer of Parent, dated as of the Closing Date, to the effect that,
to the best of such officer's knowledge, the conditions set forth in Section
6.3(a) and Section 6.3(b) have been satisfied.
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(d) The Company shall have received the opinion of Jones Day, in form and
substance reasonably satisfactory to the Company, dated as of the Closing Date,
on the basis of the facts, certifications, representations and assumptions set
forth in such opinion, all of which are consistent with the state of facts
existing as of the Effective Time, to the effect that the Merger will qualify
as a reorganization within the meaning of Section 368(a) of the Code. In
rendering such opinion, Jones Day shall have received and may rely upon the
certifications and representations set forth in the certificates referred to in
Section 5.11(b).
ARTICLE VII
Termination
7.1 Termination by Mutual Consent. This Agreement may be terminated at any
time prior to the Effective Time, whether or not the Company Stockholder
Approval has been obtained, by the mutual consent of Parent and the Company.
7.2 Termination by Either Parent or Company. This Agreement may be
terminated by action of the Board of Directors of either Parent or the Company,
whether or not the Company Stockholder Approval has been obtained, as follows:
(a) if the Effective Time shall not have occurred on or prior to July 1,
2002; provided, however, that the right to terminate this Agreement under this
Section 7.2(a) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Merger to be consummated on or prior to such date; or
(b) if a Governmental Entity shall have issued a nonappealable final order,
decree or ruling or taken any other nonappealable final action having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger (which order, decree, ruling or other action the party seeking to
terminate this Agreement shall have used their reasonable best efforts to
lift); or
(c) if the Stockholders Meeting has been held and the Company Stockholder
Approval shall not have been obtained.
7.3 Termination by the Company. This Agreement may be terminated at any time
prior to the Effective Time by action of the Company's Board of Directors,
whether or not the Company Stockholder Approval has been obtained, as follows:
(a) upon a material breach of any covenant or agreement set forth in this
Agreement (a "Terminating Breach") on the part of Parent or Purchaser; provided
that, if such Terminating Breach is curable on or prior to the earlier of (i)
forty-five days following notice of such Terminating Breach and (ii) July 1,
2002 by Parent or Purchaser through the exercise of its reasonable best efforts
and for so long as Parent and Purchaser continue to exercise such reasonable
best efforts, the Company may not terminate this Agreement under this Section
7.3(a) until the earlier of (i) forty-five days following notice of such
Terminating Breach and (ii) July 1, 2002;
(b) if Parent or Purchaser shall have breached any representation and
warranty set forth in this Agreement in any material respect; provided that,
(i) if such breach is curable prior to the earlier of (A) forty-five days
following notice of such breach and (B) July 1, 2002 by Parent or Purchaser, as
the case may be, through the exercise of its reasonable best efforts and for so
long as Parent or Purchaser, as the case may be, continues to exercise such
reasonable best efforts, the Company may not terminate this Agreement under
this Section 7.3(b) until the earlier of (A) forty-five days following notice
of such breach and (B) July 1, 2002, and (ii) such breach would give rise to
the failure of a condition set forth in Section 6.3(a); or
(c) if the Average Parent Trading Price is less than or equal to the Walk
Away Price.
7.4 Termination by Parent. This Agreement may be terminated at any time
prior to the Effective Time, by action of the Board of Directors of Parent, on
behalf of Parent and Purchaser, whether or not the Company Stockholder Approval
has been obtained, as follows:
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(a) upon a Terminating Breach on the part of the Company; provided that, if
such Terminating Breach is curable on or prior to the earlier of (i) forty-five
days following notice of such Terminating Breach and (ii) July 1, 2002 by the
Company through the exercise of its reasonable best efforts and for so long as
the Company continues to exercise such reasonable best efforts, Parent may not
terminate this Agreement under this Section 7.4(a) until the earlier of (i)
forty-five days following notice of such Terminating Breach and (ii) July 1,
2002;
(b) if a Change in the Company Recommendation shall have occurred; or
(c) if the Company shall have breached any representation and warranty set
forth in this Agreement in any material respect; provided that, (i) if such
breach is curable on or prior to the earlier of (A) forty-five days following
notice of such breach and (B) July 1, 2002 by the Company through the exercise
of its reasonable best efforts and for so long as the Company continues to
exercise such reasonable best efforts, Parent may not terminate this Agreement
under this Section 7.4(c) until the earlier of (A) forty-five days following
notice of such breach and (B) July 1, 2002, and (ii) such breach would give
rise to the failure of a condition set forth in Section 6.2(a).
7.5 Effect of Termination and Abandonment; Termination Fee. In the event of
the termination of this Agreement pursuant to Article VII, written notice
thereof shall forthwith be given to the other party or parties specifying the
provision hereof pursuant to which such termination is made, and this Agreement
shall forthwith become void and there shall be no liability on the part of any
party hereto or any of its affiliates, directors, officers, stockholders,
representatives or agents, except for any obligation of the Company or Parent
set forth in Article VII hereof, if any. Notwithstanding the foregoing, or any
other provision of this Agreement (including Section 7.6), nothing herein shall
relieve the Company, Parent or Purchaser from liability for any prior material
breach hereof; provided, however, that in the event of termination of this
Agreement pursuant to Article VII as a result of which Parent is entitled to
the Fee and Parent Expenses under Section 7.6(a) of this Agreement, the Company
shall have no liability for any breach of this Agreement other than for any
prior willful breach hereof by the Company; provided, further however, that if
Parent has initiated any claim, proceeding or litigation asserting any breach
of this Agreement by the Company prior to any payment of the Fee, or any
determination of whether Parent is entitled to such a Fee ("Fee
Determination"), final resolution of such claim, proceeding or litigation shall
be deferred without prejudice to Parent, pending resolution of a Fee
Determination.
7.6 Fees and Expenses.
(a) The Company shall pay, or cause to be paid, to Parent, the Parent
Expenses (as hereinafter defined) actually incurred and a fee of $100 million
(the "Fee") upon the first to occur of any of the following events:
(i) the termination of this Agreement by Parent or the Company pursuant
to Section 7.2(a), or the termination of this Agreement by Parent pursuant
to Section 7.4(a) or (c); provided, that, prior to such termination, the
Company becomes aware that any person has made or intends to make a
proposal relating to a Third-Party Acquisition and, within twelve months
following the date of such termination, a Third-Party Acquisition is
consummated or a definitive agreement with respect to a Third-Party
Acquisition is executed by the Company;
(ii) the termination of this Agreement by Parent pursuant to Section
7.4(b); or
(iii) the termination of this Agreement by Parent or the Company
pursuant to Section 7.2(c); provided, that (I) (A) Parent had the right to
terminate under Section 7.4(b) or (B) a Third-Party Acquisition shall be
publicly announced or otherwise made known to the public at or prior to the
Stockholders Meeting and, within twelve months following the date of such
termination, a Third-Party Acquisition is consummated or a definitive
agreement with respect to a Third-Party Acquisition is executed by the
Company.
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(b) "Parent Expenses" means all out-of-pocket expenses and fees (including
fees and expenses payable to all banks, investment banking agents and counsel
for arranging, committing to provide or providing any financing for the
transactions contemplated hereby or structuring the transactions contemplated
hereby and all fees of counsel, accountants, experts and consultants to Parent
and Purchaser and all printing and advertising expenses) actually incurred or
accrued by either of them or on their behalf in connection with the
transactions contemplated hereby, including the financing thereof, and actually
incurred by banks, investment banking firms, other financial institutions and
other persons and incurred by Parent and Purchaser in connection with the
negotiation, preparation, execution and performance of this Agreement, the
structuring and financing of the Transactions and any financing commitments or
agreements relating thereto; provided, however, that the Parent Expenses shall
not exceed $10,000,000 in the aggregate.
(c) The Fee and Parent Expenses shall be paid by wire transfer of same day
funds to an account designated by Parent within two business days after a
demand for payment following the first to occur of any of the events described
in Section 7.6(a).
(d) In the event of a termination of this Agreement pursuant to Section
7.2(c) in circumstances where Section 7.6(a)(iii) is not applicable, the
Company shall pay, or cause to be paid, to Parent the Parent Expenses actually
incurred. The Parent Expenses shall be paid by wire transfer of same day funds
to an account designated by Parent within two business days after Parent shall
have provided to the Company's independent public accountants documentation
supporting the calculation of the Parent Expenses in reasonable detail.
(e) Notwithstanding anything in Section 7.6(a) or the Option Agreement to
the contrary, in no event will the sum of (i) the Fee paid to Parent pursuant
to this Agreement and (ii) the aggregate amounts actually paid to or realized
by Parent pursuant to Sections 11(b)(i), (ii) and (iii) of the Option
Agreement, exceed $100 million.
(f) The agreements contained in this Section 7.6 are an integral part of the
transactions contemplated hereby and do not constitute a penalty. In the event
of any dispute between the Company and Parent as to whether the Fee and Parent
Expenses under this Section 7.6 is due and payable, the prevailing party shall
be entitled to receive from the other party the reasonable costs and expenses
(including reasonable legal fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action, relating to such
dispute. Interest shall be paid on the amount of any unpaid Fee or Parent
Expenses at the publicly announced prime rate of Citibank, N.A. from the date
such Fee and Parent Expenses was required to be paid.
7.7 Extension; Waiver. At any time prior to the Effective Time, any party
hereto, by action taken by its Board of Directors, may, to the extent legally
allowed, (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein;
provided, that, any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE VIII
General Provisions
8.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement, or in any instrument
delivered pursuant to this Agreement, shall survive the Effective Time.
8.2 Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date of receipt and shall be delivered personally or mailed by
registered or certified mail (postage prepaid, return receipt requested), sent
by overnight courier or
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sent by facsimile, to the applicable party at the following addresses or
facsimile numbers (or at such other address or telecopy number for a party as
shall be specified by like notice):
If to Parent or Purchaser:
Cendant Corporation
9 West 57th Street
New York, New York 10019
Attn: General Counsel
Facsimile: 212-413-1922
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
Wilmington, Delaware 19801
Attn: Patricia Moran, Esq.
Facsimile: 302-651-3001
If to the Company:
Galileo International, Inc.
9700 West Higgins Road, Suite 400
Rosemont, Illinois 60018
Attn: General Counsel
Facsimile: 847-518-4915
With a copy to:
Jones, Day, Reavis & Pogue
77 West Wacker Drive
Chicago, Illinois 60601-1692
Attn: Elizabeth C. Kitslaar, Esq.
Facsimile: 312-782-8585
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed. Any party to this Agreement
may notify any other party of any changes to the address or any of the other
details specified in this paragraph; provided that such notification shall only
be effective on the date specified in such notice or five business days after
the notice is given, whichever is later. Rejection or other refusal to accept
or the inability to deliver because of changed address of which no notice was
given shall be deemed to be receipt of the notice as of the date of such
rejection, refusal or inability to deliver.
8.3 Assignment; Binding Effect; No Third-Party Beneficiaries. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties; provided,
however, that either Parent or Purchaser (or both) may assign its rights
hereunder to a wholly owned subsidiary of Parent; and, further provided, that
nothing shall relieve the assignor from its obligations hereunder. Subject to
the preceding sentence, this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and assigns.
Notwithstanding anything contained in this Agreement to the contrary, except
for the provisions of Section 5.8, nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties hereto, or
their respective heirs, successors, executors, administrators and assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
8.4 Entire Agreement. This Agreement, the Option Agreement, the Transaction
Support Agreement, the Confidentiality Agreement, the Disclosure Letters, the
Exhibits, the Ancillary Documents and any other
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documents delivered by the parties in connection herewith constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior representations, warranties, agreements and understandings
among the parties, both written and oral, with respect thereto; provided, that
if there is any conflict between the Confidentiality Agreement and this
Agreement, this Agreement shall prevail; provided, further, that
notwithstanding anything to the contrary contained in the Confidentiality
Agreement, following the receipt of any notice from the Company pursuant to
Section 5.1(c) hereof of a proposal relating to a Third-Party Acquisition and
prior to termination of this Agreement, Parent may respond to any such
proposal, including responding by making a proposal to revise the transactions
contemplated hereby.
8.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to its rules
of conflict of laws. Each of the Company, Parent and Purchaser hereby
irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the courts of the State of Delaware and of the United States of
America located in the State of Delaware (the "Delaware Courts") for any
litigation arising out of or relating to this Agreement and the transactions
contemplated hereby (and agrees not to commence any litigation relating thereto
except in such courts), waives any objection to the laying of venue of any such
litigation in the Delaware Courts and agrees not to plead or claim in any
Delaware Court that such litigation brought therein has been brought in an
inconvenient forum.
8.6 Fee and Expenses. Whether or not the Merger is consummated, except as
otherwise provided by Section 7.6, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs and expenses; provided, that all
liability for transfer taxes, if any, incurred by the Company or holders of
Company Common Stock in connection with the transactions contemplated hereby
shall be paid by the Company out of the Company's funds and will not be paid,
directly or indirectly, by Parent.
8.7 Certain Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(i) "affiliate" of a Person means a Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned Person.
(ii) "business day" means any day other than a Saturday, Sunday or day
on which banks in Chicago, Illinois or New York, New York are authorized or
required by Law to close.
(iii) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
(iv) "knowledge" of any party hereto shall mean the actual knowledge,
after reasonable inquiry, of any of the executive officers of that party
named in such party's most recent report on Form 10-K filed with the SEC.
(v) "person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization, entity
or group (as defined in the Exchange Act).
8.8 Headings. Headings of the Articles and Sections of this Agreement are
for the convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever. The table of contents contained in this
Agreement is for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
8.9 Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and
vice versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa. Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be understood to be followed by the words "without
limitation." The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement will refer to this Agreement as a whole and
not to any particular provision of this Agreement. All terms used herein with
initial capital letters have the meanings
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ascribed to them herein and all terms defined in this Agreement will have such
defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the
plural forms of such terms and to the masculine as well as to the feminine and
neuter genders of such term. Any agreement, instrument or statute defined or
referred to herein or in any agreement or instrument that is referred to herein
means such agreement, instrument or statute as from time to time amended,
modified or supplemented, including (in the case of agreements or instruments)
by waiver or consent and (in the case of statutes) by succession of comparable
successor statutes and references to all attachments thereto and instruments
incorporated therein. References to a person are also to its permitted
successors and assigns. Each of the parties has participated in the drafting
and negotiation of this Agreement. If an ambiguity or question of intent or
interpretation arises, this Agreement must be construed as if it is drafted by
all the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of authorship of any of the provisions of this
Agreement.
8.10 Waivers. Except as otherwise provided herein, no action taken pursuant
to this Agreement, including, without limitation, any investigation by or on
behalf of any party, shall be deemed to constitute a waiver by the party taking
such action of compliance with any representations, warranties, covenants or
agreements contained in this Agreement or in any of the Ancillary Documents.
Any term, covenant or condition of this Agreement may be waived at any time by
the party which is entitled to the benefit thereof, but only by a written
notice signed by such party expressly waiving such term or condition. The
waiver by any party hereto of a breach of any provision hereunder shall not
operate or be construed as a waiver of any prior or subsequent breach of the
same or any other provision hereunder.
8.11 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable. Upon such determination that
any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in an
acceptable manner in order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent possible.
8.12 Parent Actions. The Company hereby acknowledges that from and after the
date of this Agreement, Parent or any of its Subsidiaries may take actions
involving (i) a merger, reorganization, share exchange, spin-off,
consolidation, recapitalization, liquidation, dissolution or similar
transaction involving Parent or any of its Subsidiaries, (ii) any purchase or
sale of the consolidated assets of a person or any division or unit thereof by
Parent or any of its Subsidiaries, (iii) any purchase or sale of, or tender or
exchange offer for, equity securities of any person by Parent or any of its
Subsidiaries, (iv) the acquisition of twenty percent (20%) or more of the
outstanding equity securities of any person by Parent or any of its
Subsidiaries or (v) any financings by the Company or any of its Subsidiaries;
provided, however, that this Section 8.12 shall not modify, abrogate or
diminish the Company's rights or Parent's obligations under this Agreement.
8.13 Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with its specific terms or was otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any Delaware Court, this being
in addition to any other remedy to which they are entitled at law or in equity.
8.14 Amendment. Subject to applicable law, this Agreement may be amended by
the parties hereto, by action taken by their respective boards of directors, at
any time before or after the Company Stockholder Approval, but after any such
Company Stockholder Approval, no amendment shall be made which by law requires
the further approval of stockholders without obtaining such further approval.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties.
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8.15 Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT.
8.16 Execution. This Agreement may be executed by facsimile signatures by
any party and such signature shall be deemed binding for all purposes hereof,
without delivery of an original signature being thereafter required.
8.17 Date for Any Action. In the event that any date on which any action is
required to be taken hereunder by any of the parties hereto is not a business
day, such action shall be required to be taken on the next succeeding day which
is a business day.
8.18 Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which, when so executed and delivered, shall be
an original. All such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
In Witness Whereof, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first written
above.
Galileo International, Inc.
/s/ James E. Bartlett
By: _________________________________
Its: Chairman, President and
Chief Executive Officer
Cendant Corporation
/s/ Samuel L. Katz
By: _________________________________
Its: Senior Executive Vice
President,
Strategic and Business Development
Galaxy Acquisition Corp.
/s/ Samuel L. Katz
By: _________________________________
Its: Senior Executive Vice
President,
Strategic and Business Development
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EXHIBIT A
TO THE MERGER AGREEMENT
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
GALILEO INTERNATIONAL, INC.
FIRST: The name of the Corporation is Galileo International, Inc.
(hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in the State
of Delaware is 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of its registered agent at that address is The Corporation
Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware as set forth in Title 8 of the Delaware Code (the
"DGCL").
FOURTH: The total number of shares of stock which the Corporation shall have
authority to issue is one thousand (1,000) shares of Common Stock, each having
a par value of $.01.
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the stockholders to
make, alter, amend, change, add to or repeal the By-Laws of the
Corporation.
(3) The number of directors of the Corporation shall be as from time to
time fixed by, or in the manner provided in, the By-Laws of the
Corporation. Election of directors need not be by written ballot unless the
By-Laws so provide.
(4) In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the
provisions of the DGCL, this Certificate of Incorporation, and any By-Laws
adopted by the stockholders; provided, however, that no By-Laws hereafter
adopted by the stockholders shall invalidate any prior act of the directors
which would have been valid if such By-Laws had not been adopted.
SIXTH: Meetings of stockholders may be held within or without the State of
Delaware, as the By-Laws may provide. The books of the Corporation may be kept
(subject to any provision contained in the DGCL) outside the State of Delaware
at such place or places as may be designated from time to time by the Board of
Directors or in the By-Laws of the Corporation.
SEVENTH: (a) The Corporation (i) shall indemnify any person who was or is a
party or is threatened to be made a party to, or is involved in any manner in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that he or she
is or was a director or an officer of the Corporation, or is or was serving at
the request of the Corporation as a director or an officer of another
corporation, partnership, joint venture, trust or other enterprise; and (ii)
may indemnify, if the Board of Directors determines such indemnification is
appropriate, any person who was or is a party or is
A-A-1
threatened to be made a party to, or is involved in any manner in, any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that he or she
is or was an employee or agent of the Corporation, or is or was serving at the
request of the Corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, in each case, to the
fullest extent authorized or permitted by law, as now or hereafter in effect.
(b) Notwithstanding anything to the contrary contained in subsection (a) of
this Article SEVENTH, except for proceedings to enforce rights to
indemnification, the Corporation shall not be obligated to indemnify any person
in connection with a proceeding (or part thereof) initiated by such person
unless such proceeding (or part thereof) was authorized in advance, or
unanimously consented to, by the Board of Directors.
(c) The rights to indemnification conferred in this Article SEVENTH also
include, to the fullest extent permitted by applicable law, the right to be
paid the expenses (including attorneys' fees) incurred in connection with any
such civil, criminal, administrative or investigative action, suit or
proceeding in advance of its final disposition.
(d) The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against any liability asserted against him or her and
incurred by him or her in any such capacity, or arising out of his or her
status as such, whether or not the Corporation would have the power to
indemnify him or her against such liability under the provisions of applicable
law.
(e) Any repeal or modification of this Article SEVENTH by the stockholders
of the Corporation shall not adversely affect any rights to indemnification and
to advancement of expenses that any person may have at the time of such repeal
or modification with respect to any acts or omissions occurring prior to such
repeal or modification.
EIGHTH: (a) A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for
any transaction from which the director derived any improper personal benefit.
(b) If the DGCL is amended hereafter to authorize the further elimination or
limitation of the liability of directors, then the liability of a director of
the Corporation shall be eliminated or limited to the fullest extent authorized
by the DGCL, as so amended, without further action by either the Board of
Directors or the stockholders of the Corporation.
(c) Any repeal or modification of this Article EIGHTH shall not adversely
affect any right or protection of a director of the Corporation existing
hereunder with respect to any act or omission occurring prior to or at the time
of such repeal or modification.
NINTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
A-A-2
EXHIBIT B
TO THE MERGER AGREEMENT
Form of Affiliate Letter
Dear Sirs:
The undersigned, a holder of shares of common stock, par value $0.01 per
share ("Company Common Stock"), of Galileo International, Inc., a Delaware
corporation (the "Company"), acknowledges that the undersigned may be deemed an
"affiliate" of the Company within the meaning of Rule 145 ("Rule 145")
promulgated under the Securities Act of 1933, as amended (the "Securities
Act"), by the Securities and Exchange Commission (the "SEC"), although nothing
contained herein should be construed as an admission of either such fact.
Pursuant to the terms of the Agreement and Plan of Merger dated as of June 15,
2001, among Cendant Corporation, a Delaware corporation ("Parent"), Galaxy
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), and the Company, Merger Sub will be merged with and into
the Company (the "Merger"), and in connection with the Merger, the undersigned
is entitled to receive common stock, par value $0.01 per share ("Parent Common
Stock"), of Parent.
If in fact the undersigned were an affiliate under the Securities Act, the
undersigned's ability to sell, assign or transfer the shares of Parent Common
Stock received by the undersigned in exchange for any shares of Company Common
Stock in connection with the Merger may be restricted unless such transaction
is registered under the Securities Act or an exemption from such registration
is available. The undersigned understands that such exemptions are limited and
the undersigned has obtained or will obtain advice of counsel as to the nature
and conditions of such exemptions, including information with respect to the
applicability to the sale of such securities of Rules 144 and 145(d)
promulgated under the Securities Act. The undersigned understands that Parent
will not be required to maintain the effectiveness of any registration
statement under the Securities Act for the purposes of resale of Parent Common
Stock by the undersigned.
The undersigned hereby represents to and covenants with Parent that the
undersigned will not sell, assign or transfer any of the shares of Parent
Common Stock received by the undersigned in exchange for shares of Company
Common Stock in connection with the Merger except (i) pursuant to an effective
registration statement under the Securities Act, (ii) in conformity with the
volume and other limitations of Rule 145 or (iii) in a transaction which, in
the opinion of counsel to the undersigned, such counsel to be reasonably
satisfactory to Parent and such opinion to be in form and substance reasonably
satisfactory to Parent, or as described in a "no-action" or interpretive letter
from the Staff of the SEC specifically issued with respect to a transaction to
be engaged in by the undersigned, is not required to be registered under the
Securities Act.
In the event of a sale or other disposition by the undersigned of the shares
of Parent Common Stock pursuant to Rule 145, the undersigned will supply Parent
with evidence of compliance with such Rule, in the form of a letter in the form
of Annex I hereto or the opinion of counsel or no-action letter referred to
above. The undersigned understands that Parent may instruct its transfer agent
to withhold the transfer of any shares of Parent Common Stock disposed of by
the undersigned, but that (provided such transfer is not prohibited by any
other provision of this letter agreement) upon receipt of such evidence of
compliance, Parent shall cause the transfer agent to effectuate the transfer of
the shares of Parent Common Stock sold as indicated in such letter.
Parent covenants that it will take all such actions as may be reasonably
available to it to permit the sale or other disposition of the shares of Parent
Common Stock by the undersigned under Rule 145 in accordance with the terms
thereof.
The undersigned acknowledges and agrees that the legend set forth below will
be placed on certificates representing the shares of Parent Common Stock
received by the undersigned in connection with the Merger or held by a
transferee thereof, which legend will be removed by delivery of substitute
certificates upon receipt of
A-B-1
an opinion in form and substance reasonably satisfactory to Parent from counsel
reasonably satisfactory to Parent to the effect that such legend is no longer
required for purposes of the Securities Act.
There will be placed on the certificates for Parent Common Stock issued to
the undersigned in connection with the Merger, or any substitutions therefor, a
legend stating in substance:
"The shares represented by this certificate were issued, in a transaction to
which Rule 145 promulgated under the Securities Act of 1933 applies. The shares
have not been acquired by the holder with a view to, or for resale in
connection with, any distribution thereof within the meaning of the Securities
Act of 1933. The shares may not be sold, pledged or otherwise transferred
except in accordance with an exemption from the registration requirements of
the Securities Act of 1933."
It is understood and agreed that certificates with the legend set forth
above will be substituted by delivery of certificates without such legends if
(i) one year shall have elapsed from the date the undersigned acquired the
Parent Common Stock received in the Merger and the provisions of Rule 145(d)(2)
are then available, (ii) two years shall have elapsed from the date the
undersigned acquired the Parent Common Stock received in the Merger and the
provisions of Rule 145(d)(3) are then available or (iii) Parent has received
either a written opinion of counsel, which opinion of counsel shall be
reasonably satisfactory to Parent, or a "no-action" letter obtained by the
undersigned from the SEC, to the effect that the restrictions imposed by Rule
145 under the Securities Act no longer apply to the undersigned.
The undersigned acknowledges that (i) the undersigned has carefully read
this letter and understands the requirements hereof and the limitations imposed
upon the distribution, sale, transfer or other disposition of Parent Common
Stock and (ii) the receipt by Parent of this letter is an inducement to
Parent's obligations to consummate the Merger.
Very truly yours,
Dated: , 2001
A-B-2
ANNEX I
TO EXHIBIT B
[Name] [Date]
On , the undersigned sold the securities of Cendant Corporation, a
Delaware corporation ("Parent"), described below in the space provided for that
purpose (the "Securities"). The Securities were received by the undersigned in
connection with the merger of Galaxy Acquisition Corp., a Delaware corporation
and a wholly owned subsidiary of Parent, with and into Galileo International,
Inc., a Delaware corporation.
Based upon the most recent report or statement filed by Parent with the
Securities and Exchange Commission, the Securities sold by the undersigned were
within the prescribed limitations set forth in paragraph (e) of Rule 144
promulgated under the Securities Act of 1933, as amended (the "Securities
Act").
The undersigned hereby represents that the Securities were sold in "brokers'
transactions" within the meaning of Section 4(4) of the Securities Act or in
transactions directly with a "market maker" as that term is defined in Section
3(a)(38) of the Securities Exchange Act of 1934, as amended. The undersigned
further represents that the undersigned has not solicited or arranged for the
solicitation of orders to buy the Securities, and that the undersigned has not
made any payment in connection with the offer or sale of the Securities to any
person other than to the broker who executed the order in respect of such sale.
Very truly yours,
[Space to be provided for description of the Securities]
A-B-3
Annex B
TRANSACTION SUPPORT AGREEMENT
THIS TRANSACTION SUPPORT AGREEMENT (this "Agreement"), dated as of June 15,
2001, by and among Cendant Corporation, a Delaware corporation ("Cendant"),
United Air Lines, Inc., a Delaware corporation ("United"), and Covia LLC, a
Delaware limited liability company and a wholly owned subsidiary of United (the
"Stockholder").
WITNESSETH:
Whereas, simultaneously with the execution of this Agreement, Cendant,
Galaxy Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary
of Cendant ("Merger Sub"), and Galileo International, Inc., a Delaware
corporation (the "Company"), have entered into an Agreement and Plan of Merger
dated the date hereof (the "Merger Agreement"), which provides, among other
things, for the merger (the "Merger") of Merger Sub with and into the Company
upon the terms and subject to the conditions set forth therein;
Whereas, the Stockholder is the beneficial owner of, and has the sole right
to vote and dispose of, 15,940,000 shares of the Company's common stock, par
value $.01 per share (the "Company Common Stock"), and 2 shares of the
Company's special preferred stock, par value $.01 per share (the "Special
Preferred Stock"); and
Whereas, as an inducement and a condition to its execution and delivery of
the Merger Agreement and performance of the obligations set forth therein,
including the Merger, Cendant has required that United and the Stockholder
enter into this Agreement.
Now, Therefore, in consideration of the foregoing and the mutual promises,
representations, warranties, respective covenants and agreements of the parties
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each of the parties hereto, the
parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
Certain Definitions
Section 1.1 Capitalized Terms. Capitalized terms used in this Agreement and
not otherwise defined herein shall have the respective meanings ascribed to
such terms in the Merger Agreement.
Section 1.2 Other Definitions. For the purposes of this Agreement:
"Affiliate" means, with respect to any specified Person, any Person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person specified. For
purposes of this Agreement, with respect to the Stockholder, "Affiliate" shall
not include the Company and the Persons that directly, or indirectly through
one or more intermediaries, are controlled by the Company.
"Beneficial Owner" or "Beneficial Ownership" or "Beneficially Owned" with
respect to any securities means having "beneficial ownership" of such
securities as determined pursuant to Rule 13d-3 under the Exchange Act,
including pursuant to any agreement, arrangement or understanding, whether or
not in writing. Without duplicative counting of the same securities by the same
holder, securities Beneficially Owned by a Person shall include securities
Beneficially Owned by all Affiliates of such Person and all other persons with
whom such Person would constitute a "group" within the meaning of Section 13(d)
of the Exchange Act and the rules promulgated thereunder.
"Company Common Stock" shall include all shares of capital stock or other
voting securities into which shares of Company Common Stock may be
reclassified, sub-divided, consolidated or converted and any rights and
benefits arising therefrom including any extraordinary distributions of
securities which may be declared in
B-1
respect of the shares of Company Common Stock and entitled to vote in respect
of the matters contemplated by Article II of this Agreement.
"Owned Shares" means the 15,940,000 shares of Company Common Stock owned by
the Stockholder on the date hereof, together with any other shares of Company
Common Stock or any other securities of the Company entitled, or which may be
entitled, to vote upon any of the matters referred to in Section 2.1 hereof
which may hereafter be owned by the Stockholder.
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, association, trust, estate, unincorporated organization or other
entity, including any governmental entity.
"Representative" means, with respect to any particular Person, any officer,
director, employee, agent, consultant, advisor or other representative of such
Person (including legal counsel, accountants, and financial advisors).
"Restated Certificate of Incorporation" means the Restated Certificate of
Incorporation of the Company dated as of July 30, 1997.
"Stockholders' Agreement" means the Stockholders' Agreement among the
Company, the Stockholder, certain other stockholders of the Company and certain
related parties of such stockholders, dated as of July 30, 1997, as amended.
"Transfer" means, with respect to any security, the sale, transfer, pledge,
hypothecation, encumbrance, assignment or disposition of such security or the
Beneficial Ownership thereof, the offer to make such a sale, transfer or other
disposition, and each option, agreement, arrangement or understanding, whether
or not in writing, to effect any of the foregoing.
ARTICLE II
Voting Agreement and Proxy
Section 2.1 Agreement to Vote. Upon the terms and subject to the conditions
hereof, the Stockholder irrevocably and unconditionally agrees that, until this
Agreement is terminated pursuant to Section 5.1 hereof, at any meeting (whether
annual or special, and whether or not an adjourned or postponed meeting) of the
Company's stockholders, however called, or in connection with any written
consent of the Company's stockholders, the Stockholder shall vote, or cause to
be voted (including by written consent, if applicable) all of its Owned Shares
(i) in favor of the adoption of the Merger Agreement, (ii) against any Third
Party Acquisition and (iii) against any proposed action by the Company, the
Company's stockholders or any other Person the result of which action could
prevent or materially delay completion of the Merger. Each of United and the
Stockholder agrees not to enter into any agreement or commitment with any
Person the effect of which would be inconsistent with or violative of the
provisions and agreements contained in this Article II.
Section 2.2 Irrevocable Proxy.
THE STOCKHOLDER HEREBY GRANTS TO, AND APPOINTS CENDANT AND ANY DESIGNEE OF
CENDANT, EACH OF THEM INDIVIDUALLY, SUCH STOCKHOLDER'S IRREVOCABLE PROXY AND
ATTORNEY-IN-FACT (WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION) TO VOTE
THE OWNED SHARES OF SUCH STOCKHOLDER (INCLUDING BY WRITTEN CONSENT) (I) IN
FAVOR OF THE ADOPTION OF THE MERGER AGREEMENT, (II) AGAINST ANY THIRD PARTY
ACQUISITION AND (III) AGAINST ANY PROPOSED ACTION BY THE COMPANY, THE COMPANY'S
STOCKHOLDERS OR ANY OTHER PERSON THE RESULT OF WHICH ACTION COULD PREVENT OR
MATERIALLY DELAY COMPLETION OF THE MERGER. THE STOCKHOLDER SHALL TAKE SUCH
FURTHER ACTION OR EXECUTE SUCH OTHER INSTRUMENTS AS MAY BE NECESSARY TO
EFFECTUATE THE INTENT OF THIS PROXY. THE STOCKHOLDER HEREBY REVOKES ANY PROXIES
PREVIOUSLY GRANTED BY SUCH STOCKHOLDER WITH RESPECT TO THE STOCKHOLDER'S OWNED
SHARES. THE PROXY GRANTED IN THIS SECTION 2.2 SHALL AUTOMATICALLY EXPIRE UPON
THE TERMINATION OF THIS AGREEMENT.
B-2
ARTICLE III
Representations and Warranties
Section 3.1 Representations and Warranties of United and the Stockholder.
Each of United and the Stockholder, jointly and severally, represents and
warrants to Cendant that the following statements are as of the date of this
Agreement, and shall be as of the date of the Stockholders Meeting, true and
correct:
(a) United is a corporation duly incorporated and validly existing under the
laws of the State of Delaware. The Stockholder is a limited liability company
duly formed and validly existing under the laws of the State of Delaware.
(b) Each of United and the Stockholder has all necessary power and authority
to enter into this Agreement and to perform all of its obligations hereunder.
Each of United and the Stockholder has taken all necessary action to authorize
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby by it.
(c) This Agreement has been duly and validly executed and delivered by each
of United and the Stockholder and constitutes a valid and binding obligation of
each of United and the Stockholder enforceable against each of United and the
Stockholder in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and by general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
(d) As of the date of this Agreement, the Stockholder is the record and
beneficial owner of 15,940,000 shares of Company Common Stock and 2 shares of
Special Preferred Stock (together, the "Galileo Stock") and, except as provided
in this Agreement or by applicable law, the Stockholders' Agreement or the
Restated Certificate of Incorporation, has full and unrestricted power to
dispose of and vote all of the Galileo Stock. The Stockholder has good and
valid title to the Galileo Stock, free and clear of any and all pledges,
mortgages, liens, charges, proxies, voting agreements, encumbrances, adverse
claims, options, security interests and demands of any nature or kind
whatsoever, other than those created by this Agreement or provided in the
Stockholders' Agreement or the Restated Certificate of Incorporation. As of the
date of this Agreement, the Galileo Stock constitutes all of the capital stock
of the Company that is Beneficially Owned by the Stockholder or by United
(other than any such capital stock owned by officers of UAL Corporation, a
Delaware corporation, or its subsidiaries) and, except for the Galileo Stock,
none of United, the Stockholder or any other subsidiary of United Beneficially
Owns or has any right to acquire (whether currently, upon lapse of time,
following the satisfaction of any conditions, upon the occurrence of any event
or any combination of the foregoing) any shares of Company Common Stock,
Special Preferred Stock or any other capital stock of the Company, or any
securities convertible into shares of Company Common Stock, Special Preferred
Stock or other capital stock of the Company.
(e) None of the execution and delivery of this Agreement by United or the
Stockholder, the consummation by United or the Stockholder of the transactions
contemplated hereby or compliance by United or the Stockholder with any of the
provisions hereof shall (i) result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a default (or give rise to
any third party right of termination, cancellation, material modification or
acceleration) under, any note, loan agreement, bond, mortgage, indenture,
license, contract, commitment, arrangement, understanding, agreement or other
instrument or obligation of any kind to which United or the Stockholder is a
party or by which United or the Stockholder or any of their respective
properties or assets (including the Galileo Stock) may be bound or (ii) violate
any order, writ, injunction, decree, judgment, statute, rule or regulation
applicable to United or the Stockholder or any of their respective properties
or assets (including the Galileo Stock).
B-3
(f) No broker, investment banker, financial advisor or other Person is
entitled to any broker's, finder's, financial adviser's or other similar fee or
commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of United or the Stockholder.
(g) Each of United and the Stockholder understands and acknowledges that
Cendant is entering into the Merger Agreement and is incurring the obligations
set forth therein in reliance upon the execution and delivery of this Agreement
by United and the Stockholder.
Section 3.2 Representations and Warranties of Cendant.
Cendant represents and warrants to United and the Stockholder that the
following statements are as of the date of this Agreement, and shall be as of
the date of the Stockholders Meeting, true and correct:
(a) Cendant is a corporation duly incorporated and validly existing under
the laws of the State of Delaware.
(b) Cendant has all necessary corporate power and authority to enter into
this Agreement and to perform all of its obligations hereunder. The execution,
delivery and performance of this Agreement and the Merger Agreement by Cendant
and the consummation of the transactions contemplated hereby and thereby have
been duly and validly approved by the board of directors of Cendant and no
other corporate proceedings on the part of Cendant are necessary to authorize
the execution, delivery and performance of this Agreement or the Merger
Agreement or the consummation of the transactions contemplated hereby or
thereby.
(c) This Agreement has been duly and validly executed and delivered by
Cendant and constitutes a valid and binding obligation of Cendant enforceable
against Cendant in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
(d) None of the execution and delivery of this Agreement by Cendant, the
consummation by Cendant of the transactions contemplated hereby or compliance
by Cendant with any of the provisions hereof shall (i) result in a violation or
breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any third party right of termination, cancellation,
material modification or acceleration) under, any note, loan agreement, bond,
mortgage, indenture, license, contract, commitment, arrangement, understanding,
agreement or other instrument or obligation of any kind to which Cendant is a
party or by which Cendant or any of its properties or assets may be bound or
(ii) violate any order, writ, injunction, decree, judgment, statute, rule or
regulation applicable to Cendant or any of its properties or assets.
ARTICLE IV
Covenants of the Stockholder
Section 4.1 General. Each of United and the Stockholder (each, a "United
Party"), jointly and severally, covenants and agrees with Cendant that, during
the period commencing on the date hereof and ending on the date this Agreement
is terminated under Article V hereof:
(a) The Stockholder shall not, directly or indirectly, Transfer to any
Person any or all of the Owned Shares or the Special Preferred Stock.
(b) Such United Party shall promptly notify Cendant in writing upon any
representation or warranty of such United Party contained in this Agreement
becoming untrue or incorrect in any material respect during the term of this
Agreement and, for the purposes of this provision, each representation and
warranty shall be deemed to be given at and as of all times during such term
(irrespective of any language which suggests that it is only being given as at
a particular date).
B-4
(c) Such United Party shall execute and deliver such other documents and
instruments and take such further actions as may be necessary in order to
ensure that Cendant receives the full benefit of this Agreement.
Section 4.2 Standstill Obligations. Each of United and the Stockholder,
jointly and severally, covenants and agrees with Cendant that, during the
period commencing on the date hereof and ending on the date this Agreement is
terminated under Article V hereof:
(a) Such United Party shall not, nor shall such United Party permit any
Affiliate of such United Party to, nor shall such United Party act in concert
with or permit any such Affiliate to act in concert with any Person to, solicit
or participate in any solicitation of proxies with respect to any shares of
Company Common Stock, nor shall they seek to advise or influence any Person
with respect to the voting of any shares of Company Common Stock, other than to
recommend that stockholders of the Company vote in favor of the Merger and the
Merger Agreement and otherwise as expressly provided in Article II of this
Agreement.
(b) Such United Party shall not, nor shall such United Party permit any
Affiliate of such United Party to, nor shall such United Party act in concert
with or permit any such Affiliate to act in concert with any Person to, deposit
any shares of Company Common Stock or Special Preferred Stock in a voting trust
or subject any shares of Company Common Stock or Special Preferred Stock to any
arrangement or agreement with any Person with respect to the voting of such
shares of Company Common Stock or Special Preferred Stock, except as provided
by Article II of this Agreement.
(c) Such United Party shall not, nor shall such United Party permit any
Affiliate of such United Party to, nor shall such United Party act in concert
with or permit any such Affiliate to act in concert with any Person to,
otherwise act, alone or in concert with others, to seek control of the
management, Board of Directors or policies of the Company, except to the extent
such activities arise in connection with discussions and negotiations permitted
pursuant to the proviso to subsection 4.2(d) below.
(d) Such United Party shall not, nor shall such United Party permit any
Affiliate of such United Party to, nor shall such United Party act in concert
with or permit any such Affiliate to act in concert with any Person, nor shall
it permit any Representative of such United Party or any such Affiliate to (i)
encourage, invite, initiate or solicit any inquiries relating to or the
submission or making of a proposal by any Person with respect to a Third-Party
Acquisition or (ii) participate in or encourage, invite, initiate or solicit
negotiations or discussions with, or furnish or cause to be furnished any
information to, any Person relating to a Third-Party Acquisition; provided,
however, that, prior to the Stockholders Meeting, if (x) such United Party,
without being in violation of the terms of this Section 4.2, or the Company,
without being in violation of Section 5.1 of the Merger Agreement, receives an
unsolicited bona fide written proposal from any Person or group with respect to
a Third-Party Acquisition which United determines in good faith could
reasonably be expected to result in a Superior Proposal, or (y) there is a
Superior Proposal which has been made by any Person, then such United Party and
its Affiliates and Representatives may, directly or indirectly, furnish
information and access to such Person or group pursuant to an appropriate
confidentiality agreement and may participate in discussions and negotiations
with such Person or group.
(e) Such United Party shall not request a waiver of any of the terms or
provisions hereof in any manner that would require a public disclosure by
Cendant, the Company or United.
(f) Notwithstanding the foregoing provisions of this Section 4.2, Cendant
acknowledges that United has two representatives on the Company's Board of
Directors and, subject to the terms of the Merger Agreement, such persons may
act in their capacities as directors of the Company in accordance with their
fiduciary duties to the Company and its stockholders.
B-5
ARTICLE V
Termination
Section 5.1 Termination. This Agreement shall terminate upon the earlier of
(i) the Effective Time or (ii) the termination of the Merger Agreement or (iii)
a Change in the Company Recommendation as a result of a Superior Proposal or
(iv) if an amendment, modification or waiver of or with respect to any
provision of the Merger Agreement is effected and United reasonably determines
in good faith that such amendment, modification or waiver is adverse in a
material respect to United, the delivery of a notice by United to Cendant in
respect of such determination under this clause (iv) at least five days prior
to the Stockholders Meeting to the effect that United and the Stockholder are
terminating this Agreement as a result of such amendment, modification or
waiver.
Section 5.2 Effect of Termination. Upon termination of this Agreement, the
covenants, representations, warranties, agreements and obligations of the
parties shall terminate and become void without further action by any party.
ARTICLE VI
General
Section 6.1 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (a) on the date of delivery if delivered personally, (b) on the
first Business Day following the date of dispatch if delivered by a nationally
recognized next-day courier service, (c) on the fifth Business Day following
the date of mailing if delivered by registered or certified mail, return
receipt requested, postage prepaid or (d) if sent by facsimile transmission,
with a copy mailed on the same day in the manner provided in (a) or (b) above,
when transmitted and receipt is confirmed by telephone; provided, that any
notice received by facsimile or otherwise at the addressee's location on any
Business Day after 5:00 p.m. (addressee's local time) shall be deemed to have
been received at 9:00 a.m. (addressee's local time) on the next Business Day.
Any party to this Agreement may notify any other party of any changes to the
address or any of the other details specified in this paragraph, provided that
such notification shall only be effective on the date specified in such notice
or five (5) Business Days after the notice is given, whichever is later.
Rejection or other refusal to accept or the inability to deliver because of
changed address of which no notice was given shall be deemed to be receipt of
the notice as of the date of such rejection, refusal or inability to deliver.
All notices hereunder shall be delivered to the parties as set forth below, or
pursuant to such other instructions as may be designated in writing by the
party to receive such notice:
if to United and/or the Stockholder:
United Air Lines, Inc.
1200 East Algonquin Road
Elk Grove Township, Illinois 60007
Attention: Senior Vice President, Finance
Facsimile No.: (847) 700-4412
with a copy to (which shall not constitute notice):
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Scott A. Barshay, Esq.
Facsimile No.: (212) 474-3700
B-6
if to Cendant:
Cendant Corporation
9 West 57th Street
New York, New York 10019
Attention: General Counsel
Facsimile No.: (212) 413-1922
with a copy to (which shall not constitute notice):
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
Wilmington, Delaware 19801
Attention: Patricia Moran, Esq.
Facsimile No.: (302) 651-3001
Section 6.2 No Third-Party Beneficiaries. This Agreement is not intended to
confer third-party beneficiary rights upon any Person.
Section 6.3 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware applicable to contracts
executed and to be performed fully within such State, without giving effect to
the principles of conflicts or choice of law thereof or any other jurisdiction.
Section 6.4 Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances,
is held to be invalid, illegal or unenforceable in any respect for any reason
under any present or future law, public policy or order, (i) such provision
shall be fully severable and (ii) this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith with a view to the substitution therefor of a suitable
and equitable solution in order to carry out to the maximum extent possible, so
far as may be valid, legal and enforceable, the intent and purpose of such
invalid provision; provided, however, that the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be in any way impaired thereby,
it being intended that all of the rights and privileges of the parties hereto
shall be enforceable to the fullest extent permitted by law.
Section 6.5 Assignment. Except for any assignment by Cendant, in whole or in
part, to a direct or indirect subsidiary of Cendant (provided that any such
subsidiary agrees in writing to be bound by and liable for all of the terms,
conditions and provisions contained herein that would otherwise be applicable
to Cendant and provided further that Cendant shall remain liable for all of its
duties and obligations hereunder in the event such subsidiary shall fail to
perform hereunder), neither this Agreement nor the rights or the obligations of
either party hereto are assignable in whole or in part (whether by operation of
law or otherwise), without the written consent of the other party and any
attempt to do so in contravention of this Section 6.5 shall be void.
Section 6.6 Successors. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns.
Section 6.7 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words "include," "includes" or "including"
are used in this Agreement, they shall be deemed to be followed by the words
"without limitation." The words "hereof," "herein" and "herewith" and words of
similar import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole and not to any particular provision of this Agreement. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement or instrument defined
or referred to herein or in any agreement or instrument that is referred to
herein means such agreement or instrument as from time to time amended,
modified or supplemented and attachments thereto and instruments incorporated
therein. References to a Person are also to its successors and permitted
assigns. The parties have participated jointly in the negotiation and drafting
of this Agreement. In the
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event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement. Any
reference to any federal, state, local or foreign statute or law shall be
deemed to also to refer to any amendments thereto and all rules and regulations
promulgated thereunder, unless the context requires otherwise.
Section 6.8 Amendments. This Agreement may not be amended except by written
agreement signed by the parties to this Agreement.
Section 6.9 Fees and Expenses. Except as expressly provided in this
Agreement, each of the parties shall be responsible for his or its own fees and
expenses (including, without limitation, the fees and expenses of financial
consultants, investment bankers, accountants and counsel) in connection with
the entry into of this Agreement and the consummation of the transactions
contemplated hereby.
Section 6.10 Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations, representations
and warranties, and discussions, whether oral or written, among the parties
hereto, with respect to the subject matter hereof.
Section 6.11 Time of Essence. Time shall be of the essence in this
Agreement.
Section 6.12 Remedies Cumulative. Except as otherwise herein provided, the
rights and remedies provided herein shall be cumulative and not exclusive of
any rights or remedies provided by applicable law.
Section 6.13 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties.
Section 6.14 Execution. This Agreement may be executed by facsimile
signatures by any party and such signature shall be deemed binding for all
purposes hereof, without delivery of an original signature being thereafter
required.
Section 6.15 Jurisdiction. Each of the parties hereto irrevocably agrees
that any action, suit, claim or other legal proceeding with respect to this
Agreement or in respect of the transactions contemplated hereby brought by any
other party hereto or its successors or assigns shall be brought and determined
in any state or federal court located in the State of Delaware or any appeals
courts thereof (the "Delaware Courts"), and each of the parties hereto
irrevocably submits with regard to any such proceeding for itself and in
respect to its property, generally and unconditionally, to the exclusive
jurisdiction of the Delaware Courts. Each of the parties hereto irrevocably
waives, and agrees not to assert, by way of motion, as a defense, counterclaim
or otherwise, in any action or proceeding with respect to this Agreement, (a)
any claim that it is not personally subject to the jurisdiction of the Delaware
Courts for any reason, (b) that it or its property is exempt or immune from
jurisdiction of any Delaware Court or from any legal process commenced in any
Delaware Court (whether through service of notice, attachment before judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise)
and (c) to the fullest extent permitted by applicable law, that (i) the
proceeding in any Delaware Court is brought in an inconvenient forum, (ii) the
venue of such proceeding is improper or (iii) this Agreement, or the subject
matter hereof, may not be enforced in or by a Delaware Court. Notwithstanding
the foregoing, each of the parties hereto agrees that the other party shall
have the right to bring any action or proceeding for enforcement of a judgment
entered by the Delaware Courts in any other court or jurisdiction.
Section 6.16 United Guarantee. United hereby fully and unconditionally
guarantees the full performance and discharge by the Stockholder of its
obligations hereunder.
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In Witness Whereof, each party hereto has caused this Transaction Support
Agreement to be signed as of the date first above written.
Cendant Corporation
/s/ Eric J. Bock
By: _________________________________
Name:Eric J. Bock
Title: Senior Vice President, Law
and Corporate Secretary
United Air Lines, Inc.
/s/ Rono J. Dutta
By: _________________________________
Name:Rono J. Dutta
Title:President
Covia, LLC
/s/ Frederic F. Brace
By: _________________________________
Name:Frederic F. Brace
Title:Vice President and Treasurer
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Annex C
STOCK OPTION AGREEMENT
Stock Option Agreement (this "Agreement"), dated June 15, 2001, between
Galileo International, Inc., a Delaware corporation (the "Company"), and
Cendant Corporation, a Delaware corporation ("Cendant").
RECITALS
Whereas, the Company, Cendant and Galaxy Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Cendant ("Merger Sub"), are
entering into an Agreement and Plan of Merger dated as of the date hereof (the
"Merger Agreement"), which provides, among other things, that, upon the terms
and subject to the conditions contained therein, Merger Sub shall be merged
(the "Merger") with and into the Company; and
Whereas, the Company has agreed, in order to induce Cendant to enter into
the Merger Agreement, to grant the Option (as hereinafter defined) to Cendant
upon the terms and subject to the conditions set forth herein; and
Whereas, simultaneously with the execution and delivery of this Agreement,
and as a condition to Cendant's willingness to enter into this Agreement,
Cendant and United Air Lines, Inc., a Delaware corporation ("UAL") and Covia,
LLC a Delaware limited liability company ("Covia" and, together with UAL,
"United") are entering into a transaction support agreement (the "Transaction
Support Agreement") pursuant to which Covia has agreed, among other things, to
grant Cendant a proxy to vote its shares of Company Common Stock (as
hereinafter defined) in favor of the Merger, upon the terms and subject to the
conditions set forth therein;
Whereas, capitalized terms used herein and not otherwise defined herein
shall have the respective meanings ascribed to them in the Merger Agreement.
Now, Therefore, in consideration of the premises and the representations,
warranties, mutual covenants and agreements set forth herein and in the Merger
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
1. Grant of Option. The Company hereby grants to Cendant an irrevocable
option (the "Option") to purchase, subject to the terms and conditions set
forth herein, up to 17,041,071 shares (subject to adjustment as set forth
herein, the "Company Shares") of common stock, par value $0.01 per share, of
the Company (the "Company Common Stock"), together with the preferred stock
purchase rights (the "Rights") associated with such shares issued pursuant to
the Rights Agreement, dated as of February 22, 2001, between the Company and
LaSalle National Bank Association, as Rights Agent (the "Rights Agreement"), in
the manner set forth below at a price per share of $33.00 (subject to
adjustment as set forth herein, the "Exercise Price"); provided, however, that
in no event shall the number of shares of Company Common Stock for which the
Option is exercisable exceed 19.5% of the Company's issued and outstanding
shares of Company Common Stock. References herein to the Company Shares shall
also be deemed to included the associated Rights.
2. Exercise of Option.
(a) The Option may be exercised by Cendant, in whole or in part, at any time
or from time to time after the Merger Agreement becomes terminable by Cendant
under circumstances which could entitle Cendant to the Fee under Section 7.6(a)
of the Merger Agreement (regardless of whether the Merger Agreement is actually
terminated), any such event being referred to herein as a "Trigger Event";
provided, however, that the Trigger Event shall not have occurred and the
Option shall not be exercisable unless and until the Transaction Support
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Agreement shall have been terminated in accordance with its terms. In the event
Cendant wishes to exercise the Option, Cendant shall deliver to the Company a
written notice (an "Exercise Notice") specifying the total number of Company
Shares it wishes to purchase and a date and time for the closing of such
purchase (a "Closing"), which date shall not be less than two nor more than
three days after the later of (a) the date such Exercise Notice is given and
(b) the expiration or termination of any applicable waiting period under the
HSR Act and the making of all required filings and receipt of all required
approvals under foreign competition laws. The Option shall terminate upon the
earliest of: (i) the Effective Time; (ii) the termination of the Merger
Agreement pursuant to Article VII thereof (other than a termination following
the occurrence of a Trigger Event); and (iii) 5:00 p.m., New York City time, on
the date that is the one-year anniversary of the termination of the Merger
Agreement following the occurrence of a Trigger Event, or if, at the expiration
of such one-year period, the Option cannot be exercised by reason of any
applicable judgment, decree, order, law or regulation, ten Business Days after
such impediment to exercise shall have been removed or shall have become final
and not subject to appeal.
(b) If Cendant proposes to exercise the Option following the record date of
the Stockholders Meeting, the Company, at Cendant's request given no later than
five days prior to the Stockholders Meeting, shall take all actions necessary
to fix a new record date and to hold the Stockholders Meeting at such time that
provides Cendant the opportunity to vote the Company Shares at the Stockholders
Meeting; provided, however, that the Company's Board of Directors shall not be
required to take such action in the event that the Company's Board of Directors
determines, in good faith (with due regard for the intention of the parties
hereto that, upon exercise of the Option, Cendant be able to vote the Company
Shares at the Stockholders Meeting) and after consideration of advice it shall
have obtained from outside counsel, that taking such action would create a
substantial probability of violating the Company's Board of Directors'
fiduciary duties to the Company's Stockholders under applicable law.
3. Conditions to Closing. The obligation of the Company to issue the Company
Shares to Cendant hereunder is subject to the conditions that (a) all waiting
periods, if any, under the HSR Act applicable to the issuance of the Company
Shares hereunder shall have expired or shall have been terminated and all
required filings shall have been made and all required approvals shall have
been obtained under foreign competition laws and (b) no statute, rule or
regulation shall be in effect, and no order, decree or injunction entered by
any court of competent jurisdiction or governmental entity in the United States
shall be in effect, that prohibits or restrains the exercise of the Option
pursuant to the terms of this Agreement.
4. Closing. At any Closing, (a) upon receipt of the payment provided for by
this Section 4, the Company shall deliver to Cendant a single certificate in
definitive form representing the number of Company Shares designated by Cendant
in its Exercise Notice, such certificate to be registered in the name of
Cendant (or its designee) and to bear the legend set forth in Section 12 of
this Agreement, and (b) Cendant shall deliver to the Company the aggregate
price for the Company Shares so designated in an amount equal to the product
obtained by multiplying the Exercise Price by the number of Company Shares to
be purchased by wire transfer of immediately available funds payable to the
Company pursuant to the Company's instructions. At any Closing at which Cendant
is exercising the Option in part, Cendant shall present and surrender this
Agreement to the Company in exchange for the delivery to Cendant by the Company
of a duly executed new agreement with the same terms as this Agreement
evidencing the right to purchase the balance of the Company Shares.
5. Representations and Warranties of the Company. The Company represents and
warrants to Cendant that:
(a) the Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and has the corporate
power and authority to enter into this Agreement and to perform its obligations
hereunder;
(b) the execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part
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of the Company and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or any of the transactions
contemplated hereby;
(c) this Agreement has been duly executed and delivered by the Company and,
assuming this Agreement constitutes a valid and binding obligation of Cendant,
constitutes a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally, the availability of
injunctive relief and other equitable remedies, and limitations imposed by law
on indemnification for liability under securities laws;
(d) the Company has taken all necessary corporate action to authorize and
reserve for issuance and to permit it to issue, upon exercise of the Option,
and at all times from the date hereof through the expiration of the Option
shall have reserved, 17,041,071 unissued Company Shares and such other shares
of the Company Common Stock or other securities which may be issued pursuant to
Section 10 of this Agreement, all of which, upon their issuance, payment and
delivery in accordance with the terms of this Agreement, shall be duly
authorized, validly issued, fully paid and nonassessable, and free and clear of
all claims, liens, charges, encumbrances and security interests of any nature
whatsoever (other than those (i) created by or through Cendant, or any of its
affiliates, (ii) which arise under this Agreement, or (iii) which arise under
the Securities Act of 1933, as amended (the "Securities Act"), or any
applicable state securities laws); upon such issuance, payment and delivery,
Cendant shall have full and unrestricted power to vote such Company Shares; and
the 17,041,071 Company Shares represent 19.5% of the issued and outstanding
shares of Company Common Stock on the date hereof;
(e) the execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company shall not, conflict with,
or result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or the loss of a material benefit under, or the
creation of a lien, pledge, security interest or other encumbrance on assets
pursuant to (any such conflict, violation, default, right of termination,
cancellation or acceleration, loss or creation, a "Violation"), (i) any
provision of the Certificate of Incorporation or By-laws of the Company, (ii)
any provisions of any loan or credit agreement, note, mortgage, indenture,
lease or other material contract, agreement, obligation, instrument, permit,
concession, franchise, license of or applicable to the Company (other than (A)
restrictions contained in the Company's debt, loan and credit agreements
applicable to Section 7 of this Agreement and (B) restrictions contained in the
Registration Rights Agreement, dated as of July 30, 1997, among the Company,
Covia, USAM Corp., RESNET Holdings, Inc., Distribution Systems, Inc., Roscor
A.G., Travel Industry Systems B.V., Retford Limited, Racom Teledata S.p.a.,
Travidata, Inc., Olynet, Inc. and Coporga, Inc. (the "Existing Registration
Rights Agreement") applicable to Section 9 of this Agreement), or (iii) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company or its properties or assets (other than, with respect to Section
9 of this Agreement, compliance with the Securities Act and applicable state
securities laws), except for such Violations, in the case of each of clauses
(ii) and (iii), (1) set forth on Schedule 3.6 of the Company Disclosure Letter
delivered pursuant to the Merger Agreement or (2) that, individually or in the
aggregate, has not had and would not reasonably be expected to have a material
adverse effect on the Company's ability to consummate the transactions
contemplated by this Agreement;
(f) the execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company shall not, (i) result in a
"Triggering Event" under the Rights Agreement; or (ii) render Section 203 of
the General Corporation Law of the State of Delaware (the "DGCL") applicable to
this Agreement or the transactions contemplated hereby; and
(g) except as described in this Agreement or in Section 3.6 of the Merger
Agreement and other than the HSR Act and applicable Regulatory Laws and, with
respect to Section 9 hereof, compliance with the provisions of the Securities
Act and any applicable state securities laws, the execution and delivery of
this Agreement by the Company does not, and the performance of this Agreement
by the Company shall not, require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Entity.
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6. Representations and Warranties of Cendant. Cendant represents and
warrants to the Company that:
(a) Cendant is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has the corporate power
and authority to enter into this Agreement and to perform its obligations
hereunder;
(b) the execution and delivery of this Agreement by Cendant and the
consummation by Cendant of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Cendant and no
other corporate proceedings on the part of Cendant are necessary to authorize
this Agreement or any of the transactions contemplated hereby;
(c) this Agreement has been duly executed and delivered by Cendant and,
assuming this Agreement constitutes a valid and binding obligation of the
Company, constitutes a valid and binding obligation of Cendant enforceable
against Cendant in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and the
availability of injunctive relief and other equitable remedies and limitations
imposed by law on indemnification for liability under applicable securities
laws;
(d) the execution and delivery of this Agreement by Cendant does not, and
the performance of this Agreement by Cendant shall not, result in any
Violation pursuant to (i) any provision of the Certificate of Incorporation or
By-laws of Cendant, (ii) any provisions of any loan or credit agreement, note,
mortgage, indenture, lease, or other material contract, agreement, obligation,
instrument, permit, concession, franchise, license of or applicable to Cendant
or (iii) any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Cendant or its properties or assets (other than, with
respect to Section 9 of this Agreement, compliance with the Securities Act and
applicable state securities laws), except for such Violations, in the case of
each of clauses (ii) and (iii), that, individually or in the aggregate, has
not has and would not reasonably be expected to have a material adverse effect
on Cendant's ability to consummate the transactions contemplated by this
Agreement;
(e) except as described in this Agreement or in Section 4.5 of the Merger
Agreement, and other than the HSR Act and applicable Regulatory Laws and, with
respect to Section 9 hereof, compliance with the provisions of the Securities
Act and any applicable state securities laws, the execution and delivery of
this Agreement by Cendant does not, and the performance of this Agreement by
Cendant shall not, require any consent, approval, authorization or permit of,
or filing with or notification to, any Governmental Entity; and
(f) any Company Shares acquired upon exercise of the Option shall not be,
and the Option is not being, acquired by Cendant with a view to public
distribution or resale in any manner which would be in violation of federal or
state securities laws.
7. Put Right.
(a) Exercise of Put. At any time during which the Option is exercisable
pursuant to Section 2 or would be exercisable but for the circumstances
referred to in Section 3 (the "Repurchase Period"), upon demand by Cendant,
Cendant shall have the right to sell to the Company (or any successor entity
thereof), and the Company (or such successor entity) shall be obligated to
repurchase from Cendant (the "Put"):
(i) all or any portion of the Option, at a price equal to the product
obtained by multiplying (A) the difference between (1) the Market/Offer
Price (as defined below) for shares of Company Common Stock as of the date
(the "Notice Date") the notice of exercise of the Put is given to the
Company and (2) the Exercise Price, by (B) the number of Company Shares
purchasable pursuant to the Option (or portion thereof with respect to
which Cendant is exercising the Put); or
(ii) all or any portion of the Company Shares purchased by Cendant upon
exercise of the Option pursuant hereto, at a price equal to the product
obtained by multiplying (A) the higher of (1) the Exercise
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Price paid by Cendant for the Company Shares acquired pursuant to the
Option and (2) the Market/Offer Price by (B) the number of Company Shares
with respect to which Cendant is exercising the Put.
As used herein, "Market/Offer Price" shall mean the higher of (x) the highest
price per share offered as of the Notice Date pursuant to any tender or
exchange offer or proposed pursuant to any other Third-Party Acquisition
proposal which was commenced or proposed prior to the Notice Date and not
terminated or withdrawn as of the Notice Date and (y) the average of the
closing sales prices of the Company Common Stock reported on the NYSE Composite
Tape for the 5 consecutive Trading Days ending on (and including) the Trading
Day immediately preceding the Notice Date. In determining the Market/Offer
Price, the value of consideration other than cash or stock as provided above
shall be determined by a nationally recognized investment banking firm selected
by Cendant and reasonably acceptable to the Company.
(b) Payment and Redelivery of Option or Shares. In the event Cendant
exercises the Put pursuant to this Section 7, the Company shall, within three
Business Days of the Notice Date, pay the required amount to Cendant in cash by
wire transfer of immediately available funds to an account specified by Cendant
two Business Days prior to the date that payment is due and Cendant shall
surrender to the Company the Option and/or the certificates evidencing the
Company Shares with respect to which Cendant is exercising the Put, and Cendant
shall warrant that it owns such Company Shares and that such Company Shares are
then free and clear of all liens, claims, charges and encumbrances of any kind
or nature whatsoever. Upon any exercise by Cendant of the Put with respect to
less than all of the Option, Cendant shall present and surrender this Agreement
to the Company in exchange for the delivery to Cendant by the Company of a duly
executed new agreement with the same terms as this Agreement evidencing the
right to purchase the balance of the Company Shares.
8. Restrictions on Certain Actions. Until the termination of the Option
pursuant to Section 2, the Company shall not (a) amend the Rights Agreement or
adopt any shareholder rights plan or any amendment thereto in any manner which
would cause Cendant to become an "Acquiring Person" under such Rights Agreement
or shareholder rights plan solely by reason of the beneficial ownership by
Cendant or any of its affiliates of the Company Shares subject to the Option or
by ownership by Cendant or any of its affiliates of any Company Shares acquired
pursuant to the Option; or (b) take any action, or rescind any prior action, in
any manner which would cause the Merger or any other transaction contemplated
by the Merger Agreement to become subject to Section 203 of the DGCL solely by
reason of the beneficial ownership by Cendant or any of its affiliates of the
Company Shares subject to the Option or by ownership by Cendant or any of its
affiliates of any Company Shares acquired pursuant to the Option.
9. Registration Rights.
(a) Demand. The Company shall, if requested in writing (a "Registration
Notice") by Cendant at any time and from time to time within two years of the
exercise of the Option (the "Registration Period"), as expeditiously as
possible, prepare and file registration statements under the Securities Act if
such registration is necessary in order to permit the sale or other disposition
of any or all shares of Company Common Stock or other securities that have been
acquired by or are issuable to Cendant upon exercise of the Option
("Registrable Securities"); provided, however, that Cendant shall be entitled
to no more than an aggregate of two effective registration statements
hereunder. Any such Registration Notice must relate to a number of Registrable
Securities equal to at least twenty percent (20%) of the Company Shares, unless
the remaining number of Registrable Securities is less than such amount, in
which case Cendant shall be entitled to exercise its rights hereunder but only
for all of the remaining Registrable Securities (a "Permitted Offering").
Cendant's rights hereunder shall terminate at such time as Cendant shall be
entitled to sell all of the remaining Registrable Securities pursuant to Rule
144(k) under the Act. The Company (and/or any person designated by the Company)
shall upon receipt of the Registration Notice relating to a proposed sale by
Cendant of Registrable Securities in an underwritten registration (subject to
revocation of such Registration Notice) have the option exercisable by written
notice delivered to Cendant within 20 Business Days after the receipt of the
Registration Notice, irrevocably to agree to purchase all or any part of the
Registrable Securities proposed to be so sold for cash at a price (the "Option
Price") equal to the product of (i) the number of Registrable Securities to be
so
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purchased by the Company and (ii) the average of the daily closing sales price
for such shares reported on the NYSE Composite Tape for the 10 consecutive
Trading Days ending on (and including) the Trading Date immediately preceding
the date such notice was delivered by the Company to Cendant. Any such purchase
of Registrable Securities by the Company (or its designee) hereunder shall take
place at a closing to be held at the principal executive offices of the Company
or at the offices of its counsel at any reasonable date and time designated by
the Company and/or such designee in such notice within 20 Business Days after
delivery of such notice. Any payment for the shares to be purchased shall be
made by delivery at the time of such closing of the Option Price in immediately
available funds. If the Company does not elect to exercise its option pursuant
to this Section 9 with respect to all Registrable Securities, the Company shall
use its reasonable best efforts to qualify such shares of Company Common Stock
or other securities not purchased under any applicable state securities laws;
provided, however, that the Company shall not be required to qualify to do
business, consent to general service of process or submit to taxation in any
jurisdiction by reason of this provision. If the managing underwriters of such
offering advise the Company in writing that in their opinion the number of
shares of the Company Common Stock requested to be included in such
registration or qualification exceeds the number that could reasonably be
expected to be sold by Cendant or other Holders (as defined in the Existing
Registration Rights Agreement), as the case may be, in such offering, the
Company shall, subject to the rights of any Holders party to the Existing
Registration Rights Agreement, include the shares of Company Common Stock
requested to be included therein by Cendant and such other Holders pro rata
(based on the number of shares of Company Common Stock requested to be included
therein). The Company shall use reasonable efforts to cause each such
registration statement to become effective, to obtain all consents or waivers
of other parties which are required therefor, and to keep such registration
statement or prospectus effective for such period not in excess of 120 calendar
days from the day such registration statement first becomes effective as may be
reasonably necessary to effect such sale or other disposition. The obligations
of the Company hereunder to file a registration statement or prospectus and to
maintain its effectiveness may be suspended for up to 90 calendar days in the
aggregate during any 12-month period if the Company shall have determined, in
its reasonable judgment and upon the advice of outside counsel, that the filing
of such registration statement or prospectus or the maintenance of its
effectiveness would require premature disclosure of nonpublic information that
would materially and adversely affect the Company or otherwise interfere with
or adversely affect any pending or proposed offering of securities of the
Company or any other material transaction involving the Company, or the Company
would be required under the Securities Act to include audited financial
statements for any period in such registration statement or prospectus and such
financial statements are not yet available for inclusion in such registration
statement or prospectus. Subject to applicable law, the expenses associated
with the preparation and filing of any registration statement or prospectus
prepared and filed under this Section 9, and any sale covered thereby,
including the reasonable fees and expenses of one law firm to act as Cendant's
counsel ("Registration Expenses"), shall be paid by the Company, except for
underwriting discounts or commissions and brokers' fees. In connection with any
registration statement or prospectus prepared pursuant to this Section 11,
Cendant shall furnish, or cause any holder of the Option or Company Shares (a
"Holder") to furnish, the Company with such information concerning itself and
the proposed sale or distribution as shall reasonably be required in order to
ensure compliance with the requirements of the Securities Act and to provide
representations and warranties customary for selling stockholders who are
unaffiliated with the Company. In addition, Cendant shall, and Cendant shall
cause each Holder to contractually agree to, indemnify and hold the Company,
its underwriters and each of their respective affiliates harmless against any
and all losses, claims, damages, liabilities and expenses (including, without
limitation, investigation expenses and fees and disbursements of counsel and
accountants), joint or several, to which the Company, its underwriters and each
of their respective affiliates may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) arise out of or are based solely upon an untrue
statement or alleged untrue statement of a material fact contained in written
information furnished by Cendant or any Holder to the Company expressly for use
in such registration statement. Except for losses, claims, damages, liabilities
or expenses (or actions in respect thereof) arising out of or based solely upon
an untrue statement or alleged untrue statement of a material fact contained in
written information furnished by Cendant and any Holder to the Company
expressly for use in any registration statement, the Company shall indemnify
and hold Cendant and each Holder and each of its respective affiliates harmless
against any and all
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losses, claims, damages, liabilities and expenses (including, without
limitation, investigation expenses and fees and disbursement of counsel and
accountants), joint or several, to which Cendant and each Holder and each of
its respective affiliates may become subject under the Securities Act or
otherwise.
(b) Piggyback. If, during the Registration Period, the Company effects a
registration under the Securities Act of the Company Common Stock for its own
account or for the account of any other stockholders of the Company pursuant to
a firm commitment underwriting (other than on Form S-4 or Form S-8, or any
successor form), it shall use reasonable best efforts to allow Cendant the
right to participate in such registration or qualification as long as Cendant
participates in such underwriting on terms reasonably satisfactory to the
managing underwriters of such offering, and such participation shall not affect
the obligation of the Company to effect demand registration statements for
Cendant under Section 9(a); provided, that, if the managing underwriters of
such offering advise the Company in writing that in their opinion the number of
shares of the Company Common Stock requested to be included in such
registration or qualification exceeds the number that could reasonably be
expected to be sold by the Company or other stockholders, as the case may be,
in such offering, the Company shall, after fully including therein all shares
of Company Common Stock to be sold by the Company or other stockholders, as the
case may be, include the shares of Company Common Stock requested to be
included therein by Cendant pro rata (based on the number of shares of Company
Common Stock requested to be included therein) with the shares of Company
Common Stock requested to be included therein by persons other than the Company
and persons on whose behalf the registration statement was proposed to be
filed, including any person to whom the Company owes a contractual obligation.
(c) In connection with any registration or qualification pursuant to this
Section 9, the Company and Cendant shall provide each other and any underwriter
of the offering with customary representations, warranties, covenants,
indemnification, and contribution in connection with such registration or
qualification. The Company shall provide to any underwriters such documentation
(including certificates, opinions of counsel and "comfort" letters from
auditors) as are customary in connection with underwritten public offerings as
such underwriters may reasonably require.
(d) If the Company's securities of the same type as the Company Common Stock
beneficially owned by Cendant are then authorized for quotation or trading or
listing on The New York Stock Exchange (the "NYSE") or any other securities
exchange or automated quotations system, the Company, upon the request of
Cendant, shall promptly file an application, if required, to authorize for
quotation, trading or listing such shares of the Company Common Stock on such
exchange or system and shall use its reasonable efforts to obtain approval, if
required, of such quotation, trading or listing as soon as practicable.
(e) Cendant shall not effect any public sale or distribution (including
sales pursuant to Rule 144) of equity securities of the Company, or any
securities convertible into or exchangeable or exercisable for such securities,
during the seven days prior to, and the 90-day period beginning on, the
effective date of any underwritten registration statement relating to shares of
the Company's Common Stock (except to the extent such securities are included
in such underwritten registration), unless the underwriters managing the
registered public offering otherwise agree.
(f) Notwithstanding anything herein to the contrary, to the extent there is
a conflict between the provisions of this Section 9 and the provisions of the
Existing Registration Rights Agreement, the provisions of the Existing
Registration Rights Agreement shall control.
10. Adjustment Upon Changes in Capitalization.
(a) In the event of any change in the Company Common Stock by reason of
stock dividends, split-ups, mergers, recapitalizations, combinations, exchange
of shares or the like, the type and number of shares or securities subject to
the Option, and the Exercise Price, shall be adjusted appropriately, and proper
provision shall be made in the agreements governing such transaction so that
Cendant shall receive, upon exercise of the Option, the number and class of
shares or other securities or property that Cendant would have received in
respect of the Company Common Stock if the Option had been exercised
immediately prior to such event or the record date therefor, as applicable. In
the event that any additional shares of Company Common Stock
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otherwise become outstanding after the date of this Agreement (other than
pursuant hereto), the number of shares of Company Common Stock subject to the
Option shall be increased to equal 19.5% of the number of shares of Company
Common Stock then issued and outstanding.
(b) In the event that the Company shall enter into an agreement: (i) to
consolidate with or merge into any person, other than Cendant, Merger Sub or
another direct or indirect wholly-owned subsidiary of Cendant, and shall not be
the continuing or surviving corporation of such consolidation or merger; (ii)
to permit any person, other than Cendant, Merger Sub or another direct or
indirect wholly-owned subsidiary of Cendant, to merge into the Company and the
Company shall be the continuing or surviving corporation, but, in connection
with such merger, the then-outstanding shares of Company Common Stock shall be
changed into or exchanged for stock or other securities of the Company or any
other person or cash or any other property or the outstanding shares of Company
Common Stock immediately prior to such merger shall after such merger represent
less than 50% of the outstanding shares and share equivalents of the surviving
corporation; or (iii) to sell or otherwise transfer all or substantially all of
its assets to any person, other than Cendant, Merger Sub or another direct or
indirect wholly-owned subsidiary of Cendant, then, and in each such case, the
Company shall immediately so notify Cendant, and the agreement governing such
transaction shall make proper provisions so that, upon the consummation of any
such transaction and upon the terms and conditions set forth herein, Cendant
shall, upon exercise of the Option, receive for each Company Share with respect
to which the Option has not been exercised an amount of consideration in the
form of and equal to the per share amount of consideration that would be
received by the holder of one share of Company Common Stock less the Exercise
Price (and, in the event of an election or similar arrangement with respect to
the type of consideration to be received by the holders of Company Common
Stock, subject to the foregoing, proper provision shall be made so that the
holder of the Option would have the same election or similar rights as would
the holder of the number of shares of Company Common Stock for which the Option
is then exercisable).
11. Profit Limitation.
(a) Notwithstanding any other provision of this Agreement, in no event shall
the Total Payment (as hereinafter defined) received by Cendant and its
affiliates exceed $100 million and, if it otherwise would exceed such amount,
Cendant, at its sole election, shall either (i) reduce the number of shares of
Company Common Stock subject to the Option, (ii) deliver to the Company for
cancellation Company Shares previously purchased by Cendant (valued, for the
purposes of this Section 11(a) at the average of the closing sales prices of
the Company Common Stock reported on the NYSE Composite Tape for the 20
consecutive Trading Days ending on (and including) the Trading Day immediately
preceding the day on which the Total Payment exceeds $100 million), (iii) pay
cash to the Company, or (iv) any combination thereof, so that the actually
realized Total Payment shall not exceed $100 million after taking into account
the foregoing actions.
(b) As used herein, the term "Total Payment" shall mean the sum (before
taxes) of the following: (i) any amount received by Cendant pursuant to Section
7 hereof, (ii) (x) the net (I) cash amounts received or (II) the fair market
value of securities received by Cendant pursuant to the sale, disposition,
conversion or exchange (including any sale, disposition, conversion or exchange
in connection with any Third Party Acquisition) of Company Shares (or any
securities into which the Company Shares shall be converted or exchanged) to
any unaffiliated party within twelve months following exercise of the Option,
less (y) the aggregate Exercise Price for such shares, (iii) any amounts
received by Cendant upon transfer of the Option (or any portion thereof) to any
unaffiliated party, and (iv) the amount, if any, of the Fee actually received
by Cendant pursuant to Section 7.6(a) of the Merger Agreement.
(c) Notwithstanding any other provision of this Agreement and subject to
Section 11(a) and Section 11(b) hereof, nothing in this Agreement shall affect
the ability of Cendant to receive, or the Company's obligation to pay, the Fee
and the Parent Expenses pursuant to Section 7.6 of the Merger Agreement.
12. Restrictive Legends. Each certificate representing shares of Company
Common Stock issued to Cendant pursuant to the Option shall include a legend in
substantially the following form:
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"THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO CERTAIN PROVISIONS OF AN AGREEMENT BETWEEN THE REGISTERED HOLDER HEREOF
AND THE COMPANY AND TO RESALE RESTRICTIONS ARISING UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICE OF THE COMPANY AND SHALL BE PROVIDED TO THE HOLDER HEREOF WITHOUT
CHARGE UPON RECEIPT BY THE COMPANY OF A WRITTEN REQUEST THEREFOR."
The Company shall, upon written request of the holder thereof, issue such
holder a new certificate evidencing such Company Shares without such legend in
the event (i) the sale of such Company Shares has been registered pursuant to
the Securities Act, or (ii) such holder shall have delivered to the Company an
opinion of counsel to the effect that subsequent transfers of such Company
Shares may be effected without registration under the Securities Act.
13. NYSE Listing and Antitrust Filings. The Company, upon request of
Cendant, shall as promptly as practicable file an application to list Company
Shares to be acquired upon exercise of the Option for listing on the NYSE and
shall use its reasonable efforts to obtain approval for such listing as
promptly as practicable. Promptly after the date hereof, each of the parties
hereto shall file all required pre-merger notification and report forms and
other documents and exhibits required to be filed under the HSR Act and any
foreign competition laws to permit the acquisition of the Company Shares
subject to the Option at the earliest practicable date.
14. Binding Effect; No Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. Except as expressly provided for in this Agreement and
except for any assignment by Cendant, in whole or in part, to a wholly owned,
direct or indirect, subsidiary of Cendant (provided that any such subsidiary
agrees in writing to be bound by and liable for all of the terms, conditions
and provisions contained herein that would otherwise be applicable to Cendant
and provided further that Cendant shall remain liable for all of its duties and
obligations hereunder in the event such subsidiary shall fail to perform
hereunder), neither this Agreement nor the rights or the obligations of either
party hereto are assignable in whole or in part (whether by operation of law or
otherwise), without the written consent of the other party and any attempt to
do so in contravention of this Section 14 shall be void. Nothing contained in
this Agreement, express or implied, is intended to confer upon any person other
than the parties hereto and their respective permitted assigns any rights or
remedies of any nature whatsoever by reason of this Agreement.
15. Specific Performance. The parties recognize and agree that if for any
reason any of the provisions of this Agreement are not performed in accordance
with their specific terms or are otherwise breached, immediate and irreparable
harm or injury would be caused for which money damages would not be an adequate
remedy. Accordingly, each party agrees that, in addition to other remedies, the
other party shall be entitled to an injunction or injunctions restraining any
violation or threatened violation of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof in the Delaware Courts (as
hereinafter defined). In the event that any action should be brought in equity
to enforce the provisions of this Agreement, neither party shall allege, and
each party hereby waives the defense that there is adequate remedy at law.
16. Entire Agreement. This Agreement and the Merger Agreement (including the
Exhibits and Schedules thereto) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all other prior
discussions, representations and warranties, agreements and understandings,
both written and oral, among the parties or any of them with respect to the
subject matter hereof.
17. Further Assurances. Subject to the terms and conditions hereof, if
Cendant exercises the Option, or any portion thereof, in accordance with the
terms of this Agreement, each party shall execute and deliver all such further
documents and instruments and take all such further action including obtaining
necessary regulatory approvals and making necessary filings (including, without
limitation, filings under the HSR Act and any Regulatory Laws, the Securities
Act and filings with the NYSE) as may be necessary in order to
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consummate the transactions expressly contemplated hereby (including the
issuance, registration and listing of the Company Shares).
18. Interpretation. When a reference is made in this Agreement to Sections,
such reference shall be to a Section of this Agreement unless otherwise
indicated. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The words "hereof," "herein" and "herewith" and words of similar
import shall, unless otherwise stated, be construed to refer to this Agreement
as a whole and not to any particular provision of this Agreement. All terms
defined in this Agreement shall have the defined meaning contained herein when
used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the gender and neuter genders of such term. Any
agreement or instrument defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement or instrument as
from time to time amended, modified or supplemented and attachments thereto and
instruments incorporated therein. References to a person are also to its
successors and permitted assigns. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any federal, state,
local or foreign statute or law shall be deemed to also to refer to any
amendments thereto and all rules and regulations promulgated thereunder, unless
the context requires otherwise.
19. Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect. In
the event any court or other competent authority holds any provision of this
Agreement to be null, void or unenforceable, under any present or future law,
public policy or order, and if the rights or obligations of any party hereto
under this Agreement or the Merger Agreement, and the economic or legal
substance of the transactions contemplated hereby and thereby, shall not be
materially and adversely affected thereby, (i) such provision shall be fully
severable and (ii) this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof.
Upon such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith
the execution and delivery of an amendment to this Agreement in order to the
maximum extent possible to effectuate, to the extent permitted by law, the
intent of the parties hereto with respect to such provision. Each party agrees
that, should any court or other competent authority hold any provision of this
Agreement or part hereof to be null, void or unenforceable, or order any party
to take any action inconsistent herewith, or not take any action required
herein, the other party shall not be entitled to specific performance of such
provision or part hereof or to any other remedy, including but not limited to
money damages, for breach hereof or of any other provision of this Agreement or
part hereof as the result of such holding or order.
20. Notices. Any notice, request, claim, demand or communication required or
permitted hereunder shall be in writing and either delivered personally,
telegraphed or telecopied or sent by certified or registered mail, postage
prepaid, and shall be deemed to be given, dated and received (a) on the date of
delivery if delivered personally, including by courier, (b) upon receipt if
delivered by registered or certified mail, return receipt requested, postage
prepaid or (c) upon receipt if sent by facsimile transmission, provided that
any notice received by telecopy or otherwise at the addressee's location on any
Business Day after 5:00 p.m. (addressee's local time) shall be deemed to have
been received at 9:00 a.m. (addressee's local time) on the next Business Day.
Any party to this Agreement may notify any other party of any changes to the
address or any of the other details specified in this paragraph, provided that
such notification shall only be effective on the date specified in such notice
or five Business Days after the notice is given, whichever is later. Rejection
or other refusal to accept or the inability to deliver because of changed
address of which no notice was given shall be deemed to be receipt of the
notice as of the date of such rejection, refusal or inability to deliver. All
notices hereunder shall be delivered to the parties to the addresses or
facsimile numbers set forth below, or pursuant to such other instructions as
may be designated in writing by the party to receive such notice:
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If to the Company, to:
Galileo International, Inc.
9700 West Higgins Road, Suite 400
Rosemont, Illinois 60018
Facsimile No.: (847) 518-4918
Attention: General Counsel
with a copy to (which shall not constitute notice):
Jones, Day, Reavis & Pogue
77 West Wacker Drive
Chicago, Illinois 60601
Facsimile No.: (312) 782-8585
Attention: Elizabeth C. Kitslaar, Esq.
If to Cendant, to:
Cendant Corporation
9 West 57th Street
New York, New York 10019
Facsimile No.: (212) 413-1922
Attention: General Counsel
with a copy to (which shall not constitute notice):
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
Wilmington, Delaware 19801
Facsimile No.: (302) 651-3001
Attention: Patricia Moran, Esq.
21. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts
executed and to be performed fully within such State, without giving effect to
the principles of conflicts or choice of law thereof or any other jurisdiction.
22. Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
23. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other parties. A facsimile copy of a
signature page shall be deemed to be an original signature page.
24. Expenses. Except as otherwise expressly provided herein or in the Merger
Agreement, all costs and expenses incurred by a party in connection with the
transactions contemplated by this Agreement, including fees and expenses of its
own financial consultants, investment bankers, accountants and counsel, shall
be paid by the party incurring such expenses.
25. Amendments; Waiver. This Agreement may be amended by the parties hereto
and the terms and conditions hereof may be waived only by an instrument in
writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument in writing signed on behalf of the party waiving
compliance.
26. Consent to Jurisdiction. Each of the parties hereto irrevocably agrees
that any action, suit, claim or other legal proceeding with respect to this
Agreement or in respect of the transactions contemplated hereby
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brought by any other party hereto or its successors or assigns shall be brought
and determined in any state or federal court located in the State of Delaware
or any appeals courts thereof (the "Delaware Courts"), and each of the parties
hereto irrevocably submits with regard to any such proceeding for itself and in
respect to its property, generally and unconditionally, to the exclusive
jurisdiction of the Delaware Courts. Each of the parties hereto irrevocably
waives, and agrees not to assert, by way of motion, as a defense, counterclaim
or otherwise, in any action or proceeding with respect to this Agreement, (a)
any claim that it is not personally subject to the jurisdiction of the Delaware
Courts for any reason, (b) that it or its property is exempt or immune from
jurisdiction of any Delaware Court or from any legal process commenced in any
Delaware Court (whether through service of notice, attachment before judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise)
and (c) to the fullest extent permitted by applicable law, that (i) the
proceeding in any Delaware Court is brought in an inconvenient forum, (ii) the
venue of such proceeding is improper or (iii) this Agreement, or the subject
matter hereof, may not be enforced in or by a Delaware Court. Notwithstanding
the foregoing, each of the parties hereto agrees that the other party shall
have the right to bring any action or proceeding for enforcement of a judgment
entered by the Delaware Courts in any other court or jurisdiction.
27. Remedies Cumulative. Except as otherwise herein provided, the rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by applicable law.
28. Limitations on Warranties.
(a) Except for the representations and warranties contained in this
Agreement and the Merger Agreement, the Company makes no other express or
implied representation or warranty to Cendant. Cendant acknowledges that, in
entering into this Agreement, it has not relied on any representations or
warranties of the Company or any other person other than the representations
and warranties of the Company set forth in this Agreement or the Merger
Agreement.
(b) Except for the representations and warranties contained in this
Agreement and the Merger Agreement, Cendant makes no other express or implied
representation or warranty to the Company. The Company acknowledges that, in
entering into this Agreement, it has not relied on any representations or
warranties of Cendant or any other person other than the representations and
warranties of Cendant set forth in this Agreement and the Merger Agreement.
29. Date for Any Action. In the event that any date on which any action is
required to be taken hereunder by any of the parties hereto is not a Business
Day, such action shall be required to be taken on the next succeeding day which
is a Business Day.
In Witness Whereof, the parties hereto have caused this Stock Option
Agreement to be executed by their respective duly authorized officers as of the
date first above written.
Galileo International, Inc.
/s/ James E. Barlett
By: _________________________________
Name: James E. Barlett
Title: Chairman, President
and Chief Executive Officer
Cendant Corporation
/s/ Eric J. Bock
By: _________________________________
Name: Eric J. Bock
Title: Senior Vice President, Law
and Corporate Secretary
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Annex D
[LOGO OF JPMORGAN]
June 15, 2001
The Board of Directors
Galileo International, Inc.
9700 West Higgins Road, Suite 400
Rosemont, Illinois 60018
Members of the Board of Directors:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of common stock, par value $.01 per share (including the
associated Preferred Stock Purchase Rights, the "Company Common Stock"), of
Galileo International, Inc. (the "Company") of the consideration to be received
by such holders in the proposed merger (the "Merger") of the Company with
Galaxy Acquisition Corp. (the "Merger Sub"), a wholly-owned subsidiary of
Cendant Corporation (the "Merger Partner"). Pursuant to the Agreement and Plan
of Merger (the "Agreement") among the Company, the Merger Partner and the
Merger Sub, the Company will become a wholly-owned subsidiary of the Merger
Partner, and each outstanding share of Company Common Stock, other than shares
of Company Common Stock held in treasury or owned by the Merger Partner and its
affiliates and other than shares of Dissenting Common Stock (as defined in the
Agreement), will be converted into the right to receive consideration equal to
(i) a number of shares (the "Exchange Ratio") of the Merger Partner's common
stock, par value $.01 per share (the "Merger Partner Common Stock") equal to
(A) $26.565 divided by (B) the average of the per share closing sales price of
the Merger Partner Common Stock during the 20 consecutive trading days
preceding the third consecutive trading day before the date of the Company's
shareholder meeting to vote on the Merger (the "Average Share Price"); provided
that the Exchange Ratio will not be less than 1.32825 nor more than 1.56265;
plus (ii) $6.435; provided that the aggregate amount of cash payable to the
holders of the Company Common Stock in the Merger shall not exceed the Cash
Limitation Amount (as defined in Section 2.2(a) of the Agreement). The
Agreement further provides that if the Merger is not consummated for certain
specified reasons by the 180th day following the date of the Agreement,
interest shall be payable on the consideration referred to in the preceding
sentence, in the amount and form specified in Section 2.2(a) of the Agreement.
The Agreement also provides that the Company shall have the right to terminate
the Agreement if the Average Share Price is less than or equal to $14.00.
In arriving at our opinion, we have (i) reviewed a draft dated June 10, 2001
of the Agreement; (ii) reviewed certain publicly available business and
financial information concerning the Company and the Merger Partner and the
industries in which they operate; (iii) compared the financial and operating
performance of the Company and the Merger Partner with publicly available
information concerning certain other companies we deemed relevant and reviewed
the current and historical market prices of the Company Common Stock and the
Merger Partner Common Stock and certain publicly traded securities of such
other companies; (iv) reviewed certain internal financial analyses and
forecasts prepared by the managements of the Company and the Merger Partner
relating to their respective businesses; and (v) performed such other financial
studies and analyses and considered such other information as we deemed
appropriate for the purposes of this opinion. We note that we did not compare
the proposed financial terms of the Merger with the terms of other
transactions, because there were no transactions involving companies which we
deemed relevant and for which the financial terms were publicly available.
In addition, we have held discussions with certain members of the management
of the Company and the Merger Partner with respect to certain aspects of the
Merger, and the past and current business operations of the Company and the
Merger Partner, the financial condition and future prospects and operations of
the Company and the Merger Partner, the effects of the Merger on the financial
condition and future prospects of the Company and the Merger Partner, and
certain other matters we believed necessary or appropriate to our inquiry.
D-1
In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was
publicly available or was furnished to us by the Company and the Merger Partner
or otherwise reviewed by us, and we have not assumed any responsibility or
liability therefor. We have not conducted any valuation or appraisal of any
assets or liabilities, nor have any such valuations or appraisals been provided
to us. In relying on financial analyses and forecasts provided to us, we have
assumed that they have been reasonably prepared based on assumptions reflecting
the best currently available estimates and judgments by management as to the
expected future results of operations and financial condition of the Company
and the Merger Partner to which such analyses or forecasts relate. We have also
assumed that the Merger will qualify as a tax-free reorganization for United
States federal income tax purposes, and that the other transactions
contemplated by the Agreement will be consummated as described in the
Agreement. We have relied as to all legal matters relevant to rendering our
opinion upon the advice of counsel. We have also assumed that the definitive
Agreement will not differ in any material respects from the draft thereof
furnished to us. We have further assumed that all material governmental,
regulatory or other consents and approvals necessary for the consummation of
the Merger will be obtained without any adverse effect on the Company or the
Merger Partner or on the contemplated benefits of the Merger.
Our opinion is necessarily based on economic, market and other conditions as
in effect on, and the information made available to us as of, the date hereof.
It should be understood that subsequent developments may affect this opinion
and that we do not have any obligation to update, revise, or reaffirm this
opinion. Our opinion is limited to the fairness, from a financial point of
view, to the holders of the Company Common Stock of the consideration to be
received by the holders of the Company Common Stock in the proposed Merger and
we express no opinion as to the underlying decision by the Company to engage in
the Merger. We are expressing no opinion herein as to the price at which the
Merger Partner Common Stock will trade at any future time.
We have acted as financial advisor to the Company with respect to the
proposed Merger and will receive a fee from the Company for our services. We
will also receive an additional fee if the proposed Merger is consummated.
Please be advised that we and our affiliates have provided, and continue to
provide on an ongoing basis, certain financial advisory and financing services
to the Merger Partner, in each case unrelated to the Merger, for customary
compensation. In the ordinary course of our businesses, we and our affiliates
may actively trade the debt and equity securities of the Company or the Merger
Partner for our own account or for the accounts of customers and, accordingly,
we may at any time hold long or short positions in such securities.
On the basis of and subject to the foregoing, it is our opinion as of the
date hereof that the consideration to be received by the holders of the Company
Common Stock in the proposed Merger is fair, from a financial point of view, to
such holders.
This letter is provided to the Board of Directors of the Company in
connection with and for the purposes of its evaluation of the Merger. This
opinion does not constitute a recommendation to any shareholder of the Company
as to how such shareholder should vote with respect to the Merger or any other
matter. This opinion may not be disclosed, referred to, or communicated (in
whole or in part) to any third party for any purpose whatsoever except with our
prior written approval. This opinion may be reproduced in full in any proxy or
information statement mailed to shareholders of the Company but may not
otherwise be disclosed publicly in any manner without our prior written
approval.
Very truly yours,
J.P. Morgan Securities Inc.
J.P. Morgan Securities Inc.
D-2
Annex E
Delaware General Corporation Law
SECTION 262
(S)262 APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to (S)228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and
the words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions
thereof, solely of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to (S)251 (other than a merger effected pursuant to (S)251(g)
of this title), (S)252, (S)254, (S)257, (S)258, (S)263 or (S)264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of (S)251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to (S)251,
(S)252, (S)254, (S)257, (S)258, (S)263 and (S)264 of this title to accept
for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S)253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsection (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholder's shares shall deliver
to the corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of such stockholder's shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such stockholder's shares. A proxy or vote against
the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation shall
notify each stockholder of each constituent corporation who has complied
with this subsection and has not voted in favor of or consented to the
merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to (S)228 or
(S)253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall
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be such effective date. If no record date is fixed and the notice is given
prior to the effective date, the record date shall be the close of business
on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10
days after such stockholder's written request for such a statement is received
by the surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court may,
in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted such stockholder's certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder is not
entitled to appraisal rights under this section.
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(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the merger or consolidation
as provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the
Court of Chancery shall be dismissed as to any stockholder without the approval
of the Court, and such approval may be conditioned upon such terms as the Court
deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
E-4
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers
Subsection (a) of Section 145 of the General Corporation Law of the State of
Delaware, or DGCL, empowers a corporation to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation)
by reason of the fact that the person is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by the person in connection with such action,
suit or proceeding if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe the person's conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a manner
which the person reasonably believed to be in or not opposed to the best
interest of the corporation, and with respect to any criminal action or
proceeding, had reasonable cause to believe that the person's conduct was
unlawful.
Subsection (b) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by the person in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner the person reasonably believed to be in or not
opposed to the best interests of the corporation, and except that no
indemnification may be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Delaware Court of Chancery or such other court shall deem
proper.
Subsection (d) of Section 145 of the DGCL provides that any indemnification
under subsections (a) and (b) of Section 145 (unless ordered by a court) shall
be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the present or former director, officer,
employee or agent is proper in the circumstances because the person has met the
applicable standard of conduct set forth in subsections (a) and (b) of Section
145. Such determination shall be made, with respect to a person who is a
director or officer at the time of such determination, (1) by a majority vote
of the directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (2) by a committee of such directors designated
by the majority vote of such directors, even though less than a quorum, or (3)
if there are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion, or (4) by the stockholders.
Section 145 of the DGCL further provides that to the extent a present or
former director or officer of a corporation has been successful on the merits
or otherwise in the defense of any action, suit or proceeding referred to in
subsections (a) and (b) of Section 145, or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith and that such expenses may be paid by the corporation in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that such person is not entitled to be
II-1
indemnified by the corporation as authorized in Section 145 of the DGCL; that
any indemnification and advancement of expenses provided by, or granted
pursuant to, Section 145 shall not be deemed exclusive of any other rights to
which the indemnified party may be entitled; that indemnification provided by,
or granted pursuant to, Section 145 shall, unless otherwise provided when
authorized and ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of such
person's heirs, executors and administrators; and empowers the corporation to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against such person and incurred by such person
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liabilities
under Section 145.
Cendant also provides liability insurance for its directors and officers
which provides for coverage against loss from claims made against directors and
officers in their capacity as such, including, subject to certain exceptions,
liabilities under the federal securities laws.
Section 102(b)(7) of the DGCL provides that a certificate of incorporation
may contain a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, provided that such provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for
any transaction from which the director derived an improper personal benefit.
Article 11 of Cendant's amended and restated certificate of incorporation
contains similar provisions.
The directors and officers of Cendant are covered by insurance policies
indemnifying them against certain liabilities, including certain liabilities
arising under the Securities Act, which might be incurred by them in such
capacities and against which they cannot be indemnified by Cendant. Any agents,
dealers or underwriters who execute any underwriting or distribution agreement
relating to securities offered pursuant to this Registration Statement will
agree to indemnify Cendant's directors and their officers who signed the
Registration Statement against certain liabilities that may arise under the
Securities Act of 1933 with respect to information furnished to Cendant by or
on behalf of such indemnifying party.
For the undertaking with respect to indemnification, see Item 22 herein.
Item 21. Exhibits and Financial Statement Schedules
(a) See Exhibit Index.
(b) Not applicable.
(c) The opinion of J.P.Morgan Securities Inc. is included as Annex D to the
proxy statement-prospectus included as part of this Registration Statement.
Item 22. Undertakings.
The undersigned Registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
II-2
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of each
of the Registrants' annual reports pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(g)(1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of
a prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The undersigned Registrant hereby undertakes that every prospectus: (i)
that is filed pursuant to paragraph 1 immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
each registrant pursuant to the foregoing provisions, or otherwise, each
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by a
Registrant of expenses incurred or paid by a director, officer or controlling
person of such Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Joint Proxy
Statement/Prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other
II-3
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through the date
of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a consolidation, and the company
being acquired involved therein, that was not the subject of and included in
the Registration Statement when it became effective.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Cendant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 24, 2001.
Cendant Corporation
(Registrant)
/s/ James E. Buckman
By: _________________________________
Name: James E. Buckman
Title: Vice Chairman, General
Counsel and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* Chairman of the Board, July 24, 2001
______________________________________ President, Chief
Henry R. Silverman Executive Office, and
Director
* Senior Executive Vice July 24, 2001
______________________________________ President and Chief
Kevin M. Sheehan Financial Officer
(Principal Financial
Officer)
* Executive Vice President, July 24, 2001
______________________________________ Finance and Chief
Tobia Ippolito Accounting Officer
/s/ James E. Buckman Vice Chairman, General July 24, 2001
______________________________________ Counsel and Director
James E. Buckman
* Vice Chairman and Director July 24, 2001
______________________________________
Stephen P. Holmes
* Director July 24, 2001
______________________________________
Myra J. Biblowit
* Director July 24, 2001
______________________________________
The Honorable William S. Cohen
* Director July 24, 2001
______________________________________
Lonard S. Coleman
* Director July 24, 2001
______________________________________
Martin L. Edelman
II-5
Signature Title Date
--------- ----- ----
* Director July 24, 2001
______________________________________
Dr. John C. Malone
* Director July 24, 2001
______________________________________
Cheryl D. Mills
* Director July 24, 2001
______________________________________
The Rt. Hon. Brian Mulroney, P.C.,
L.L.D.
* Director July 24, 2001
______________________________________
Robert E. Nederlander
* Director July 24, 2001
______________________________________
Robert W. Pittman
* Director July 24, 2001
______________________________________
Sheli Z. Rosenberg
* Director July 24, 2001
______________________________________
Robert F. Smith
/s/ Eric J. Bock
*By: _______________________
Eric J. Bock
Attorney-In-Fact
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EXHIBIT INDEX
Exhibit No. Exhibit Description
----------- -------------------
2.1 Agreement and Plan of Merger, dated as of June 15, 2001, by and
between Cendant, Galaxy Acquisition Corp. and Galileo (the "Merger
Agreement"), included as Annex A in the Proxy Statement-Prospectus
included as part of this Registration Statement. Cendant agrees to
furnish supplementally a copy of any omitted schedule to the
Merger Agreement to the Securities and Exchange Commission upon
request.
3.1 Amended and Restated Certificate of Incorporation of Cendant
(incorporated by reference to Exhibit 3.1 to Cendant's Quarterly
Report on Form 10-Q/A filed by Cendant on July 28, 2000 for the
quarterly period ended March 31, 2000).
3.2 Amended and Restated Bylaws of Cendant (incorporated by reference
to Exhibit 3.2 of Cendant's Quarterly Report on Form 10-Q/A filed
by Cendant on July 28, 2000 for the quarterly period ended March
31, 2000).
5.1 Opinion of Eric J. Bock, Esq., Senior Vice President--Law and
Corporate Secretary of Cendant Corporation, as to the validity of
the shares of Cendant Corporation common stock designated CD
common stock being registered hereby.
8.1 Opinion of Jones, Day, Reavis & Pogue as to certain tax matters.
8.2 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to certain
tax matters.
23.1 Consent of Deloitte & Touche LLP relating to the audited financial
statements of Cendant.
23.2 Consent of Deloitte & Touche LLP relating to the audited financial
statements of Avis Group.
23.3 Consent of KPMG LLP relating to the audited financial statements
of Galileo.
23.4 Consent of Attorney (included in Exhibit 5.1).
23.5 Consent of Jones, Day, Reavis & Pogue (included in Exhibit 8.1).
23.6 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
Exhibit 8.2).
24.1+ Power of Attorney of Directors and Officers of Cendant.
99.1 Transaction Support Agreement, dated as of June 15, 2001, by and
between Cendant, United and Covia, included as Annex B in the
Proxy Statement-Prospectus included as part of this Registration
Statement.
99.2 Stock Option Agreement, dated as of June 15, 2001 by and between
Galileo and Cendant, included as Annex C in the Proxy Statement-
Prospectus included as part of this Registration Statement.
99.3 Opinion of J.P.Morgan Securities Inc. (attached as Annex D to the
Proxy Statement-Prospectus).
99.4 Form of Proxy Card
--------
+ Previously filed.