EXECUTION COPY
CENDANT CORPORATION
(a Delaware Corporation)
CENDANT CAPITAL I
(a Delaware Business Trust)
26,000,000 FELINE PRIDES
consisting of
24,000,000 Income PRIDES
and
2,000,000 Growth PRIDES
2,000,000 TRUST ORIGINATED PREFERRED SECURITIES
UNDERWRITING AGREEMENT
Dated: February 24, 1998
CENDANT CORPORATION
(A DELAWARE CORPORATION)
CENDANT CAPITAL I
(A DELAWARE BUSINESS TRUST)
26,000,000 FELINE PRIDES(Service Mark)
(Stated Amount of $50 per FELINE PRIDES),
consisting of
24,000,000 Income PRIDES (SERVICE MARK)
each consisting of
a Purchase Contract of Cendant Corporation Requiring the Purchase on
February 16, 2001 (or earlier) of certain Shares of Common Stock of
Cendant Corporation
and
a 6.45% Trust Originated Preferred Security(Service Mark)
(TOPrS(Service Mark)) of Cendant Capital I
and
2,000,000 Growth PRIDES(Service Mark)
each consisting of
a Purchase Contract of Cendant Corporation Requiring the
Purchase on February 16, 2001 (or earlier) of certain
Shares of Common Stock of Cendant Corporation
and
a 1/20 Undivided Beneficial Interest in a Zero-Coupon U.S. Treasury Security
Having a Principal Amount Equal to $1,000 and maturing on February 15, 2001;
and
2,000,000 6.45% Trust Originated Preferred Securities (TOPrS)
of Cendant Capital (Liquidation Amount $50 per Trust Originated
Preferred Security (TOPrS)
- ----------------
(Service Mark) "FELINE PRIDES," "INCOME PRIDES," "GROWTH PRIDES,"
"TRUST ORIGINATED PREFERRED SECURITIES" AND "TOPRS" ARE SERVICE MARKS OF
MERRILL LYNCH & CO., INC.
UNDERWRITING AGREEMENT
February 24, 1998
To the Underwriters named in Schedule A
Ladies and Gentlemen:
Cendant Corporation, a Delaware corporation (the "Company"), and
Cendant Capital I, a Delaware statutory business trust (the "Trust" and,
together with the Company, the "Offerors"), confirm their agreement with the
several underwriters named in Schedule A hereto (collectively, the
"Underwriters", which term shall also include any underwriter substituted as
hereinafter provided in Section 10 hereof), for whom Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") serves as
representative (in such capacity, the "Representative"), with respect to the
sale to the Underwriters of (A) 26,000,000 FELINE PRIDESSM, of which (I)
24,000,000 will initially consist of a unit (referred to as Income PRIDESSM)
with a Stated Amount of $50 comprised of (a) a stock purchase contract (the
"Purchase Contract") under which (i) the holder will purchase from the Company
on February 16, 2001, a number of shares (the "Shares") of common stock, $0.01
par value per share, of the Company (the "Common Stock") equal to the
Settlement Rate as set forth in the Purchase Contract Agreement (defined below)
and (ii) the Company will pay to the holder contract adjustment payments, if
any, and (b) beneficial ownership of a 6.45% Trust Originated Preferred
SecuritySM of the Trust, having a liquidation amount of $50 (each an "Income
PRIDES Preferred Security"), and (II) 2,000,000 will initially consist of a
unit (referred to as Growth PRIDESSM) with a Stated Amount of $50 comprised of
(a) a Purchase Contract and (b) a 1/20 undivided beneficial interest in a
zero-coupon U.S. Treasury Security (CUSIP No. 912833 CD 0) (each a "Treasury
Security") maturing on February 15, 2001, and (B) 2,000,000 6.45% Trust
Originated Preferred Securities of the Trust, having a liquidation amount of
$50 (the "Separate Preferred Securities" and, together with the Income PRIDES
Preferred Securities, the "Preferred Securities"; such Income PRIDES, Growth
PRIDES and Separate Preferred Securities being referred to herein collectively
as the "Initial Securities") and with respect to the grant by the Offerors to
the Underwriters, acting severally and not jointly, of options to purchase up
to 3,600,000 additional Income PRIDES (the "Option Income PRIDES"), 300,000
additional Growth PRIDES (the "Option Growth PRIDES") and 300,000 additional
Separate Preferred Securities (the "Option Preferred Securities" and, together
with the Option Income PRIDES and the Option Growth PRIDES, the "Option
Securities"; the Option Securities together with the Initial Securities being
referred to herein as the "Securities") as described in Section 2(b) hereof. In
accordance with the terms of the Purchase Contract Agreement, to be dated as of
March 2, 1998, between the Company and The First National Bank of Chicago, as
Purchase Contract Agent (the "Purchase Contract Agent"), the Income PRIDES
Preferred Securities and the Treasury Securities will be pledged by the
Purchase Contract Agent, on behalf of the holders of Securities that are Income
PRIDES and Growth PRIDES, respectively, to The Chase Manhattan Bank, as
Collateral Agent, pursuant to the Pledge Agreement, to be dated as of March 2,
1998 (the "Pledge Agreement"), among the Company, the Purchase Contract Agent
and the Collateral
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Agent, to secure such holders' obligation to purchase Common Stock under the
Purchase Contracts. The rights and obligations of (i) a holder of Income PRIDES
in respect of Preferred Securities, subject to the pledge thereof, and Purchase
Contracts, (ii) a holder of Growth PRIDES in respect of beneficial interest in
the Treasury Securities, subject to the pledge thereof, and Purchase Contracts
and (iii) a holder of Separate Preferred Securities will be evidenced by
Security Certificates (the "Security Certificates") to be issued pursuant to
the Purchase Contract Agreement.
The Preferred Securities will be guaranteed by the Company with
respect to distributions and payments upon liquidation, redemption and
otherwise (the "Preferred Securities Guarantee") pursuant to the Preferred
Securities Guarantee Agreement, to be dated as of March 2, 1998 (the "Preferred
Securities Guarantee Agreement"), executed and delivered by the Company and
Wilmington Trust Company, as trustee (the "Guarantee Trustee"), for the benefit
of the holders from time to time of the Preferred Securities, and certain
back-up undertakings of the Company. All, or substantially all, of the proceeds
from the sale of the Preferred Securities will be combined with the entire net
proceeds from the sale by the Trust to the Company of its common securities
(the "Common Securities" and, together with the Preferred Securities, the
"Trust Securities") that will be guaranteed by the Company with respect to
distributions and payments upon liquidation and redemption (the "Common
Securities Guarantee" and, together with the Preferred Securities Guarantee,
the "Guarantees") pursuant to the Common Securities Guarantee Agreement, to be
dated as of March 2, 1998 (the "Common Securities Guarantee Agreement" and,
together with the Preferred Securities Guarantee Agreement, the "Guarantee
Agreements"), executed and delivered by the Company for the benefit of the
holders from time to time of the Common Securities, and certain back-up
undertakings of the Company, and will be used by the Trust to purchase the
6.45% Debentures due February 16, 2003 (the "Debentures") of the Company. The
Preferred Securities and the Common Securities will be issued pursuant to the
amended and restated declaration of trust of the Trust, dated as of February
24, 1998 (the "Declaration"), among the Company, as Sponsor, Michael P. Monaco
and James E. Buckman (the "Regular Trustees"), and Wilmington Trust Company, as
the institutional trustee (the "Institutional Trustee"), and Wilmington Trust
Company, as the Delaware trustee (the "Delaware Trustee" and, together with the
Institutional Trustee and the Regular Trustees, the "Trustees"), and the
holders from time to time of undivided beneficial interests in the assets of
the Trust. The Debentures will be issued pursuant to the Indenture, dated as of
February 24, 1998 (the "Base Indenture"), between the Company and The Bank of
Nova Scotia Trust Company of New York, as Trustee (the "Debt Trustee"), as
supplemented by the First Supplemental Indenture, dated February 24, 1998 (the
Base Indenture, as supplemented and amended, being referred to as the
"Indenture"). Capitalized terms used herein without definition shall be used as
defined in the Prospectus (defined below).
Pursuant to a remarketing agreement (the "Remarketing Agreement") to
be dated as of March 2, 1998, among the Company, the Trust, the Purchase
Contract Agent and a
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nationally recognized investment banking firm chosen by the Company, certain
Preferred Securities may be remarketed, subject to certain terms and
conditions.
Prior to the purchase and public offering of the Securities by the
several Underwriters, the Offerors and the Underwriters shall enter into an
agreement substantially in the form of Exhibit A hereto (the "Pricing
Agreement"). The Pricing Agreement may take the form of an exchange of any
standard form of written communication between the Offerors and the
Underwriters and shall specify such applicable information as is indicated in
Exhibit A hereto. The offering of the Securities will be governed by this
Agreement, as supplemented by the Pricing Agreement. From and after the date of
the execution and delivery of the Pricing Agreement, this Agreement shall be
deemed to incorporate the Pricing Agreement.
The Company and the Trust have filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (No.
333-45227) and pre-effective amendments no. 1, no. 2 and no. 3 thereto covering
the registration of securities of the Company and the Trust, including the
Securities and the Purchase Contracts and Preferred Securities included in and
shares of Common Stock underlying, the Securities, under the Securities Act of
1933, as amended (the "1933 Act"), including the related preliminary prospectus
or prospectuses, and the offering thereof from time to time in accordance with
the rules and regulations of the Commission under the 1933 Act (the "1933 Act
Regulations") and the Company has filed such pre- and post-effective amendments
thereto as may be required prior to the execution of the Pricing Agreement.
Such registration statement, as so amended, has been declared effective by the
Commission. Such registration statement, as so amended, including the exhibits
and schedules thereto, if any, and the information, if any, deemed to be a part
thereof pursuant to Rule 430A(b) of the 1933 Act Regulations (the "Rule 430A
Information") or Rule 434(d) of the 1933 Act Regulations (the "Rule 434
Information"), is referred to herein as the "Registration Statement"; and the
final prospectus relating to the offering of the Securities (including any base
prospectus and prospectus supplement), in the form first furnished to the
Underwriters by the Company for use in connection with the offering of the
Securities, are collectively referred to herein as the "Prospectus"; provided,
however, that all references to the "Registration Statement" and the
"Prospectus" shall be deemed to include all documents incorporated therein by
reference pursuant to the Securities Exchange Act of 1934, as amended (the
"1934 Act"), prior to the execution of the applicable Pricing Agreement;
provided, further, that if the Offerors file a registration statement with the
Commission pursuant to Section 462(b) of the 1933 Act Regulations (the "Rule
462(b) Registration Statement"), then after such filing, all references to
"Registration Statement" shall be deemed to include the Rule 462(b)
Registration Statement; and provided, further, that if the Offerors elect to
rely upon Rule 434 of the 1933 Act Regulations, then all references to
"Prospectus" shall be deemed to include the final or preliminary prospectus and
the applicable term sheet or abbreviated term sheet (the "Term Sheet"), as the
case may be, in the form first furnished to the Underwriters by the Company in
reliance upon Rule 434 of the 1933 Act Regulations, and all references in this
Underwriting Agreement to the date of the Prospectus shall mean the date of the
Term Sheet. A "preliminary
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prospectus" shall be deemed to refer to any prospectus used before the
registration statement became effective and any prospectus that omitted, as
applicable, the Rule 430A Information, the Rule 434 Information or other
information to be included upon pricing in a form of prospectus filed with the
Commission pursuant to Rule 424(b) of the 1933 Act Regulations, that was used
after such effectiveness and prior to the execution and delivery of the
applicable Pricing Agreement. For purposes of this Agreement, all references to
the Registration Statement, any preliminary prospectus, the Prospectus or any
Term Sheet or any amendment or supplement to any of the foregoing shall be
deemed to include the electronically transmitted copy thereof filed with the
Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
system ("EDGAR").
All references in this Agreement to financial statements and schedules
and other information that is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus or the Prospectus (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information that is incorporated
by reference in the Registration Statement, any preliminary prospectus or the
Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, any preliminary
prospectus or the Prospectus shall be deemed to mean and include the filing of
any document under the 1934 Act that is incorporated by reference in the
Registration Statement, such preliminary prospectus or the Prospectus, as the
case may be.
The Offerors understand that the Underwriters propose to make a public
offering of the Securities as soon as the Underwriters deem advisable after the
Registration Statement is declared effective, the Pricing Agreement has been
executed and delivered and the Declaration, the Indenture and the Preferred
Securities Guarantee Agreement have been qualified under the Trust Indenture
Act of 1939, as amended (the "1939 Act").
SECTION 1. Representations and Warranties. (a) The Offerors represent
and warrant to and agree with each Underwriter as of the date hereof, as of the
date of the Pricing Agreement (such later date being hereinafter referred to as
the "Representation Date") and on each Date of Delivery (as defined in Section
2(b) of this Agreement) that:
(i) No stop order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that purpose has been
initiated or, to the knowledge of the Offerors, threatened by the
Commission.
(ii) The Company and the Trust meet, and at the respective times of
the commencement and consummation of the offering of the Securities will
meet, the requirements for the use of Form S-3 under the 1933 Act. Each of
the Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act. At the respective times the
Registration Statement, any Rule 462(b)
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Registration Statement and any post-effective amendments thereto
became effective, at each Representation Date, at the Closing Time (as
defined herein) and at any Date of Delivery, the Registration Statement,
any Rule 462 Registration Statement and any amendments or supplements
thereto complied and will comply in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations and the 1939 Act
and the rules and regulations of the Commission under the 1939 Act (the
"1939 Act Regulations") and did not and will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading. At the date of the Prospectus, at the Closing Time and at each
Date of Delivery, the Prospectus and any amendments and supplements thereto
did not and will not include an untrue statement of a material fact or omit
to state a material fact necessary, in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. If the Offerors elect to rely upon Rule 434 of the 1933 Act
Regulations, the Offerors will comply with the requirements of Rule 434.
Notwithstanding the foregoing, the representations and warranties in this
subsection shall not apply to statements in or omissions from the
Registration Statement or the Prospectus made in reliance upon and in
conformity with information furnished to the Offerors in writing by the
Underwriters through the Representative expressly for use in the
Registration Statement or the Prospectus.
Each preliminary prospectus and prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied as so
filed in all material respects with the 1933 Act Regulations and, if
applicable, each preliminary prospectus and the Prospectus delivered to the
Underwriters for use in connection with the offering of the Securities
will, at the time of such delivery, be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR,
except to the extent permitted by Regulation S-T.
(iii) The documents incorporated or deemed to be incorporated by
reference in the Registration Statement or the Prospectus, at the time they
were or hereafter are filed or last amended, as the case may be, with the
Commission, complied and will comply in all material respects with the
requirements of the 1934 Act, and the rules and regulations of Commission
thereunder (the "1934 Act Regulations"), and at the time of filing or as of
the time of any subsequent amendment, did not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were or are made, not misleading; and any
additional documents deemed to be incorporated by reference in the
Registration Statement or the Prospectus will, if and when such documents
are filed with the Commission, or when amended, as appropriate, comply in
all material respects to the requirements of the 1934 Act and the 1934 Act
Regulations and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated
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therein or necessary to make the statements therein not misleading;
provided, however, that the representations and warranties in this
subsection shall not apply to statements in or omissions from the
Registration Statement or the Prospectus made in reliance upon and in
conformity with information furnished to the Offerors in writing by the
Underwriters through the Representative expressly for use in the
Registration Statement or the Prospectus.
(iv) The accountants (individually an "Accountant" and together the
"Accountants") who have reported upon the audited financial statements and
schedules included or incorporated by reference in the Registration
Statement are each independent public accountants as required by the 1933
Act and the 1933 Act Regulations with respect to (i) the Company and (ii)
each corporation whose financial statements have been included in the
Registration Statement for each of the years reported on by such
Accountants.
(v) The consolidated financial statements of the Company included or
incorporated by reference in the Registration Statement and the Prospectus,
together with the related schedules and notes, present fairly the financial
position of the Company and its consolidated subsidiaries as at the dates
indicated and the results of their operations for the periods specified.
Except as otherwise stated therein such financial statements have been
prepared in conformity with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods involved. The
supporting schedules, if any, included or incorporated by reference in the
Registration Statement and the Prospectus present fairly in accordance with
GAAP the information required to be stated therein. The consolidated ratio
of earnings to fixed charges included in the Prospectus has been calculated
in compliance with Item 503(d) of Regulation S-K of the Commission. Any
selected financial information and summary financial data included in the
Prospectus present fairly the information shown therein and have been
compiled on a basis consistent with that of the audited financial
statements included in the Registration Statement and the Prospectus. Any
pro forma financial statements and the related notes thereto included in
the Registration Statement and the Prospectus present fairly the
information shown therein, have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements and have been properly compiled on the bases described therein,
and the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions
and circumstances referred to therein.
(vi) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, and except as otherwise
stated therein, (A) there has been no material adverse change and no
development that could reasonably be expected to result in a material
adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiar-
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ies, considered as one enterprise whether or not arising in the
ordinary course of business (a "Material Adverse Effect"), (B) there have
been no transactions entered into by the Company or any of its
subsidiaries, other than those arising in the ordinary course of business,
that are material with respect to the Company and its subsidiaries,
considered as one enterprise, (C) except for regular dividends on the
Common Stock in amounts per share that are consistent with past practice or
the applicable charter document or supplement thereto, respectively, there
has been no dividend or distribution of any kind declared, paid or made by
the Company on any class of its capital stock.
(vii) The Company is duly organized and is validly existing in good
standing as a corporation under the laws of the State of Delaware, with
corporate power and corporate authority to own, lease and operate its
properties and to conduct its business as presently conducted and as
described in the Prospectus and to enter into and perform its obligations
under, or as contemplated under, this Agreement, the Pricing Agreement, the
Remarketing Agreement, the Purchase Contract Agreement, the Pledge
Agreement, the Indenture, the First Supplemental Indenture, the
Declaration, the Debentures and the Guarantee Agreements. The Company is
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure to so qualify or be in good standing
would not have a Material Adverse Effect.
(viii) Each significant subsidiary (as such term is defined in clauses
(1) and (2) of Rule 1-02(w) of Regulation S-X promulgated under the 1933
Act), if any, of the Company (each, a "Significant Subsidiary") is set
forth on Schedule B hereto. Each Significant Subsidiary is duly organized
and is validly existing and in good standing under the laws of the
jurisdiction of its incorporation with corporate power and corporate
authority under such laws to own, lease and operate its properties and
conduct its business. Each Significant Subsidiary is duly qualified to
transact business as a foreign corporation and is in good standing in each
other jurisdiction in which it owns or leases property of a nature, or
transacts business of a type, that would make such qualification necessary,
except to the extent that the failure to so qualify or be in good standing
would not have a Material Adverse Effect. Except as otherwise stated in the
Registration Statement and the Prospectus, all of the outstanding shares of
capital stock of each Significant Subsidiary have been duly authorized and
validly issued and are fully paid and nonassessable and are owned by the
Company, directly or through one or more Significant Subsidiaries, free and
clear of any pledge, lien, security interest, charge, claim, equity or
encumbrance of any kind (each, a "Lien") except for such Liens as are not,
individually or in the aggregate, material to the Company and its
Significant Subsidiaries, considered as one enterprise.
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(ix) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus; since the date indicated in the
Prospectus there has been no change in the consolidated capitalization of
the Company and its subsidiaries (other than changes in outstanding Common
Stock resulting from employee benefit plan or dividend reinvestment and
stock purchase plan transactions); all of the issued and outstanding
capital stock of the Company has been authorized and validly issued, is
fully paid and non-assessable and conforms to the descriptions thereof
contained in the Prospectus; and no holder thereof is or will be subject to
personal liability by reason of being such a holder.
(x) The Trust has been created and is validly existing in good
standing as a business trust under the Delaware Business Trust Act (the
"Delaware Act") with the power and authority to own property and to conduct
its business as described in the Registration Statement and Prospectus and
to enter into and perform its obligations under this Agreement, the Pricing
Agreement, the Preferred Securities, the Common Securities and the
Declaration; the Trust is qualified to transact business as a foreign
company and is in good standing in each jurisdiction in which such
qualification is necessary, except where the failure to so qualify or be in
good standing would not have a material adverse effect on the condition,
financial or otherwise, or on the earnings, business affairs or business
prospects of the Trust; the Trust is not a party to or otherwise bound by
any material agreement other than those described in the Prospectus; the
Trust is and will, under current law, be classified for United States
federal income tax purposes as a grantor trust and not as an association
taxable as a corporation.
(xi) This Agreement, the Pricing Agreement (if any) and the
Remarketing Agreement have been duly authorized, executed and delivered by
each of the Company and the Trust.
(xii) The Purchase Contract Agreement has been authorized by the
Company and at the Closing Time and at each Date of Delivery, when validly
executed and delivered by the Company and assuming due authorization,
execution and delivery of the Purchase Contract Agreement by the Purchase
Contract Agent, will constitute a legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms
except to the extent that enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws affecting
creditors' rights generally or by general principles of equity (regardless
of whether enforcement is considered in a proceeding at law or in equity)
(the "Bankruptcy Exceptions"), and will conform in all material respects to
the description thereof contained in the Prospectus.
(xiii) The Pledge Agreement has been authorized by the Company and, at
the Closing Time and at each Date of Delivery, when validly executed and
delivered by the
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Company and assuming due authorization, execution and delivery of the
Pledge Agreement by the Collateral Agent and the Purchase Contract Agent,
will constitute a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms except to the
extent that enforcement thereof may be limited by the Bankruptcy
Exceptions, and will conform in all material respects to the description
thereof contained in the Prospectus.
(xiv) The Common Securities have been authorized by the Declaration
and, when issued and delivered by the Trust to the Company against payment
therefor as described in the Registration Statement and the Prospectus,
will be validly issued and will represent undivided beneficial interests in
the assets of the Trust and will conform in all material respects to the
description thereof contained in the Prospectus; the issuance of the Common
Securities is not subject to preemptive or other similar rights; and at the
Closing Time all of the issued and outstanding Common Securities of the
Trust will be directly owned by the Company free and clear of any material
security interest, mortgage, pledge, lien, encumbrance, claim or equitable
right.
(xv) The Declaration has been authorized by the Company and, at the
Closing Time, will have been executed and delivered by the Company and the
Trustees, and assuming due authorization, execution and delivery of the
Declaration by the Institutional Trustee and the Delaware Trustee, the
Declaration will, at the Closing Time, be a legal, valid and binding
obligation of the Company and the Regular Trustees, enforceable against the
Company and the Regular Trustees in accordance with its terms, except to
the extent that enforcement thereof may be limited by the Bankruptcy
Exceptions, and will conform in all material respects to the description
thereof contained in the Prospectus; the Declaration has been duly
qualified under the 1939 Act.
(xvi) Each of the Guarantee Agreements has been authorized by the
Company and, when validly executed and delivered by the Company, and, in
the case of the Preferred Securities Guarantee Agreement, assuming due
authorization, execution and delivery of the Preferred Securities Guarantee
by the Guarantee Trustee, will constitute a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance
with its terms except to the extent that enforcement thereof may be limited
by the Bankruptcy Exceptions, and each of the Guarantees and the Guarantee
Agreements will conform in all material respects to the description thereof
contained in the Prospectus; the Guarantee Agreements have been duly
qualified under the 1939 Act.
(xvii) The Securities have been authorized for issuance and sale to
the Underwriters and, when issued and delivered against payment therefor as
provided herein, will be validly issued and fully paid and non-assessable
and will conform in all material respects to the description thereof
contained in the Prospectus; the issuance of the Securities is not subject
to preemptive or other similar rights.
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(xviii) The Shares have been duly authorized and validly reserved for
issuance by the Company and, when issued and delivered in accordance with
the provisions of the Purchase Contract Agreement and the Pledge Agreement,
will be validly issued and fully paid and non-assessable and will conform
in all material respects to the description thereof contained in the
Prospectus; and the issuance of such Shares will not be subject to
preemptive or other similar rights. All corporate action required to be
taken for the authorization, issuance and delivery of the Shares has been
validly taken.
(xix) The Indenture has been authorized by the Company and qualified
under the 1939 Act and, at the Closing Time, will have been executed and
delivered and will constitute a legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms
except to the extent that enforcement thereof may be limited by the
Bankruptcy Exceptions; the Indenture will conform in all material respects
to the description thereof contained in the Prospectus.
(xx) The Debentures have been authorized by the Company and, at the
Closing Time, will have been executed by the Company and, when
authenticated in the manner provided for in the Indenture and delivered
against payment therefor as described in the Prospectus, will constitute
legal, valid and binding obligations of the Company, enforceable against
the Company in accordance with their terms except to the extent that
enforcement thereof may be limited by the Bankruptcy Exceptions, and will
be in the form contemplated by, and entitled to the benefits of, the
Indenture and will conform in all material respects to the description
thereof contained in the Prospectus.
(xxi) Each of the Regular Trustees of the Trust is an employee of the
Company and has been authorized by the Company to execute and deliver the
Declaration.
(xxii) Neither the Company nor any of its Significant Subsidiaries is
in violation of its charter or by-laws. The Trust is not in violation of
the Declaration or its certificate of trust filed with the State of
Delaware on February 5, 1998 (the "Certificate of Trust"); none of the
Company, any of its Significant Subsidiaries or the Trust is in default in
the performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, note, lease, loan
or credit agreement or any other agreement or instrument (the "Agreements
and Instruments") to which the Company, any of its Significant Subsidiaries
or the Trust is a party or by which any of them may be bound, or to which
any of the property or assets of the Company, any Significant Subsidiary or
the Trust is subject, or in violation of any applicable law, rule or
regulation or any judgment, order or decree of any government, governmental
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or any of its Significant Subsidiaries or any of their respective
properties or assets, which violation or default would, singly or in the
aggregate, have a Material Adverse Effect.
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(xxiii) The entry by the Company into the Purchase Contracts
underlying the Income PRIDES and the Growth PRIDES, the offer of the
Securities as contemplated herein and in the Prospectus, the issue of the
Shares and the sale of the Shares by the Company pursuant to the Purchase
Contracts; the execution, delivery and performance of this Agreement, the
Pricing Agreement, the Remarketing Agreement, the Purchase Contracts, the
Purchase Contract Agreement, the Pledge Agreement, the Declaration, the
Preferred Securities, the Common Securities, the Indenture, the Debentures,
the Guarantee Agreements and the Guarantees, and the consummation of the
transactions contemplated herein, therein and in the Registration Statement
(including the issuance and sale of the Securities and the use of proceeds
from the sale of the Securities as described in the Prospectus under the
caption "Use of Proceeds") and compliance by the Offerors with their
obligations hereunder and thereunder do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with or
constitute a breach of any of the terms or provisions of, or constitute a
default or Repayment Event (as defined below) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company, any subsidiary or the Trust pursuant to, the
Agreements and Instruments (except for such conflicts, breaches or defaults
or liens, charges or encumbrances that would not result in a Material
Adverse Effect), nor will such action result in any violation of any
applicable law, statute, rule, regulation, judgment, order, writ or decree
of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any of its Significant
Subsidiaries, or the Trust, or any of their assets, properties or
operations (except for such violations that would not result in a Material
Adverse Effect), nor will such action result in any violation of the
provisions of the charter or by-laws of the Company or any Significant
Subsidiary or the Declaration or Certificate of Trust. As used herein, a
"Repayment Event" means any event or condition that gives the holder of any
note, debenture or other evidence of indebtedness of the Company, any
Significant Subsidiary or the Trust (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment of all
or a portion of such indebtedness by the Company, any Significant
Subsidiary or the Trust.
(xxiv) There is no action, suit, proceeding, inquiry or investigation
before or by any court or governmental agency or body, domestic or foreign,
now pending or to the knowledge of the Company threatened against or
affecting the Trust, the Company or any of its Significant Subsidiaries
that is required to be disclosed in the Registration Statement and the
Prospectus (other than as stated therein), or that might reasonably be
expected to result in a Material Adverse Effect, or that might be
reasonably expected to materially and adversely affect the consummation of
this Agreement, the Pricing Agreement, the Remarketing Agreement, the
Purchase Contracts, the Purchase Contract Agreement, the Pledge Agreement,
the Guarantee Agreements, the Indenture or the transactions contemplated
herein or therein. The aggregate of all pending legal or governmental
proceedings to which the Trust, the Company or any Significant Subsidiary
14
is a party or of which any of their respective properties or operations is
the subject that are not described in the Registration Statement and the
Prospectus, including ordinary routine litigation incidental to the
business, could not reasonably be expected to result in a Material Adverse
Effect.
(xxv) The Company and each Significant Subsidiary have good and
marketable title to all properties and assets, including, without
limitation, intangible property rights described in the Prospectus as owned
by it, free and clear of all liens, charges, encumbrances, restrictions
(other than as described in Section 1(a)(xxvi) hereof) or defects, except
such as (A) are described in (1) the Indenture dated as of October 1, 1994
between the Company and the Bank of America, Illinois, as trustee, (2) the
Indenture and Supplemental Indenture No. 1 dated as of February 28, 1996
between the Company and First Trust of Illinois, National Association, as
trustee, (3) the 364 Day Credit Agreement, dated as of March 4, 1997, among
PHH Corporation, PHH Vehicle Management Services Inc., the lenders
thereunder and The Chase Manhattan Bank, (4) the Five Year Credit
Agreement, dated as of March 4, 1997, among PHH Corporation, the lenders
thereunder and The Chase Manhattan Bank, (5) the Five Year Revolving Credit
and Competitive Advance Facility Agreement, dated as of October 2, 1996,
among the Company, the lenders thereunder and The Chase Manhattan Bank, (6)
the Indenture dated as of June 5, 1997 between PHH Corporation and The
First National Bank of Chicago and (8) the Amended and Restated Pooling and
Servicing Agreement, dated as of October 5, 1994, as amended, among Cendant
Mobility Funding Corporation, Cendant Mobility Services, Inc., Citicorp
North America, Inc. and Bankers Trust Company, the Amended and Restated
Purchase Agreement dated as of October 5, 1994, as amended, between Cendant
Mobility Services, Inc. and Cendant Mobility Funding Corporation and the
Amended and Restated Investor Funding Agreement, dated as of October 5,
1994, as amended, among Cendant Mobility Funding Corporation, Bankers Trust
Company, Citicorp North America, Inc., as agent, Bank of America, Illinois,
as co-agent, and the investors named therein, (B) are leases of real
property in which the Company or its Significant Subsidiaries have good
title and that would be marketable but for the requirement that the
landlord consent to an assignment of the lease or (B) are neither material
in amount nor materially significant in relation to the business of the
Company and its Significant Subsidiaries, considered as one enterprise; all
of the leases and subleases material to the business of the Company and the
Significant Subsidiaries, considered as one enterprise, and under which the
Company or any Significant Subsidiary holds properties described in the
Prospectus, are in full force and effect, and neither the Company nor any
Significant Subsidiary has any notice of any material claim of any sort
that has been asserted by anyone adverse to the rights of the Company or
any Significant Subsidiary under any such lease or sublease.
(xxvi) Subject to each of the franchise and license agreements entered
into by the Company or any of its Significant Subsidiaries, the Company and
each of the Significant
15
Subsidiaries own or have the unrestricted right to use such patents,
patent licenses, trademarks, trademark licenses, service marks, service
mark licenses and trade names and registrations thereof (collectively,
"Intellectual Property") as are necessary to carry on their respective
businesses as presently conducted, except where the failure to own or
possess any of the Marks (as defined below) or Ramada Marks (as defined
below) would not have a Material Adverse Effect. In addition to, and not
in, limitation of, anything else contained in this paragraph (xxvi), the
Company or a Significant Subsidiary (y) is the exclusive owner of all
rights, title and interest (subject to all existing franchise and license
agreements referred to above) in and to the Marks within the United States
and outside the United States is the owner of the registrations and
applications as are necessary to carry on its business as described in the
Prospectus and as currently conducted, except where the failure to be such
owner would not have a Material Adverse Effect and (z) is the exclusive
licensee in the United States of the Ramada Marks. The Intellectual
Property with respect to the Company's Century 21, Coldwell Banker and ERA,
Days Inns of America, Inc., Super 8 Motels, Inc., Villager Franchise
Systems, Inc., Knights Franchise Systems, Inc., Howard Johnson and
Travelodge Hotels, Inc. businesses (each as described in the Prospectus and
as currently conducted) is referred to herein as the "Marks" and the
Intellectual Property with respect to the Company's Ramada business (as
described in the Prospectus and as currently conducted) is referred to
herein as the "Ramada Marks".
(xxvii) To the best knowledge of the Company without having made any
inquiry or independent investigation, no labor problem exists with the
employees of any party that licenses a franchise, directly or indirectly,
from a Significant Subsidiary (a "Franchisee") or is imminent that could
reasonably be expected to have a Material Adverse Effect.
(xxviii) To the best knowledge of the Company, no dispute exists or is
imminent with any Franchisee or with the Franchisees that could reasonably
be expected to have a Material Adverse Effect.
(xxix) Each Franchisee is such by virtue of being a party to a
franchise contract with either the Company or a Significant Subsidiary and
assuming each such contract has been duly authorized, executed and
delivered by the parties thereto, other than the Company or a Significant
Subsidiary, each such contract constitutes a valid, legal and binding
obligation of each party thereto, enforceable against the Company or a
Significant Subsidiary in accordance with its terms, except (A) for any one
or more of such franchise contracts as would not have a Material Adverse
Effect, and (B) to the extent that enforcement thereof may be limited by
the Bankruptcy Exceptions.
(xxx) The Company and each Significant Subsidiary have complied and
are currently complying in all material respects with the rules and
regulations of the United
16
States Federal Trade Commission and the comparable laws, rules and
regulations of each state or state agency applicable to the franchising
business of the Company and such Significant Subsidiary in each state in
which the Company or such Significant Subsidiary is doing business. The
Company and each Significant Subsidiary have complied and are currently
complying in all material respects with the Federal Real Estate Settlement
Procedures Act and the real estate brokerage laws, rules and regulations of
each state or state agency applicable to the real estate franchising
business of the Company and such Significant Subsidiary in each state in
which the Company or such Significant Subsidiary is doing business.
(xxxi) No authorization, approval, consent, order, registration or
qualification of or with any court or governmental authority or agency is
required for the entry into the Purchase Contracts underlying the Income
PRIDES or the Growth PRIDES or in connection with the issuance and sale of
the Common Securities, the offering of the Securities and the issuance and
sale of the Shares by the Company pursuant to such Purchase Contracts,
except such as have been obtained and made under the federal securities
laws and such as may be required under state or foreign securities or Blue
Sky laws.
(xxxii) Neither of the Trust and the Company is, nor upon the issuance
and sale of the Securities as herein contemplated and the application of
the net proceeds therefrom as described in the Prospectus will be, an
"investment company" or an entity "controlled" by an "investment company"
as such terms are defined in the Investment Company Act of 1940, as amended
(the "1940 Act").
(xxxiii) None of the Company or its Significant Subsidiaries has taken
any action resulting in a violation of Regulation M under the 1934 Act, or
designed to cause or result in, or that has constituted or that reasonably
might be expected to constitute, the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of
the Securities or the Common Stock, in each case in violation of applicable
law.
(xxxiv) No "forward looking statement" (as defined in Rule 175 under
the 1933 Act) contained in the Registration Statement, any preliminary
prospectus or the Prospectus was made or reaffirmed without a reasonable
basis or was disclosed other than in good faith.
(b) Any certificate signed by any officer of the Company or a Trustee
of the Trust and delivered to the Underwriters or to counsel for the
Underwriters shall be deemed a representation and warranty by the Company or
the Trust, as the case may be, to the Underwriters as to the matters covered
thereby.
17
SECTION 2. Sale and Delivery to Underwriter; Closing. (a) On the basis
of the representations and warranties herein contained and subject to the terms
and conditions herein set forth, the Offerors agree to sell to each
Underwriter, and each Underwriter severally and not jointly agrees to purchase
from the Offerors, at the price per security set forth in the Pricing
Agreement, the number of Initial Securities set forth in Schedule A hereto
opposite the name of such Underwriter, plus any additional number of Initial
Securities that such Underwriter may become obligated to purchase pursuant to
the provisions of Section 10 hereof.
(1) If the Offerors have elected not to rely upon Rule 430A of the
1933 Act Regulations, the initial public offering prices per Security and
the purchase prices per Security to be paid by the several Underwriters for
the Securities have each been determined and set forth in the Pricing
Agreement, dated the date hereof, and any necessary amendments to the
Registration Statement and the Prospectus will be filed before the
Registration Statement becomes effective.
(2) If the Offerors have elected to rely upon Rule 430A of the 1933
Act Regulations, the purchase prices per Security to be paid by the several
Underwriters shall be an amount equal to the respective initial public
offering prices per Security, less an amount per such Security to be
determined by agreement between the Underwriters and the Offerors. The
initial public offering prices per Security shall be a fixed price for
Income PRIDES, Growth PRIDES and Separate Preferred Securities,
respectively, to be determined by agreement between the Underwriters and
the Offerors. The initial public offering prices and the purchase prices,
when so determined, shall be set forth in the Pricing Agreement. In the
event that such prices have not been agreed upon and the Pricing Agreement
has not been executed and delivered by all parties thereto by the close of
business on the fourteenth business day following the date of this
Agreement, this Agreement shall terminate forthwith, without liability of
any party to any other party, unless otherwise agreed to by the Offerors
and the Underwriters.
(b) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Offerors hereby grant options to the Underwriters, severally and not jointly,
to purchase at their election (x) up to 3,600,000 Option Income PRIDES, (y) up
to 300,000 Option Growth PRIDES and (z) up to 300,000 Option Preferred
Securities, in each case at the respective prices per Security set forth in the
Pricing Agreement. The options hereby granted will expire automatically at the
close of business on the 30th calendar day after (i) the later of the date the
Registration Statement and any Rule 462(b) Registration Statement becomes
effective, if the Offerors have elected not to rely upon Rule 430A under the
1933 Act Regulations, or (ii) the Representation Date, if the Offerors have
elected to rely upon Rule 430A under the 1933 Act Regulations, and may be
exercised in whole or in part from time to time only for the purpose of
covering overallotments that may be made in connection with the offering and
distribution of the Initial Securities upon notice by the Underwriters to the
Offerors setting forth the aggregate number of additional Option Securities to
18
be purchased and the time and date of delivery for the related Option
Securities. Any such time and date of delivery (a "Date of Delivery") shall be
determined by the Underwriters but shall not be later than seven full business
days after the exercise of such options, nor in any event before the Closing
Time, unless otherwise agreed upon by the Underwriters and the Offerors. If the
options are exercised as to all or any portion of the Option Income PRIDES, the
Option Growth PRIDES or the Option Preferred Securities, each of the
Underwriters, acting severally and not jointly, will purchase from the Company
the same percentage of the total number of such Option Securities as such
Underwriter is purchasing of the Income PRIDES, the Growth PRIDES or the
Separate Preferred Securities, as the case may be, as set forth in Schedule A
hereto (subject in each case to such adjustments as the Underwriters in their
discretion shall make to eliminate any fractional Option Securities).
(c) The Income PRIDES Preferred Securities and the Treasury Securities
will be pledged with the Collateral Agent to secure the obligations of holders
of the Income PRIDES and Growth PRIDES, as applicable, to purchase Common Stock
under the Purchase Contracts. Such pledge shall be effected by the transfer to
the Collateral Agent of the Income PRIDES Preferred Securities at the Closing
Time and appropriate Date of Delivery, if any, in accordance with the Pledge
Agreement.
(d) Delivery of certificates for the Initial Securities and the Option
Securities (if any of the options provided for in Section 2(b) hereof shall
have been exercised on or before the first business day prior to the Closing
Time) shall be made at the offices of the Underwriters in New York, against the
delivery to the Collateral Agent of the Income PRIDES Preferred Securities and
the Treasury Securities by such Underwriters or on their behalf, and payment of
the purchase price for such Securities shall be made at the offices of Skadden,
Arps, Slate, Meagher & Flom LLP, 919 Third Ave, New York 10022 or at such other
place as shall be agreed upon by the Underwriters and the Offerors, at 9:00
a.m. (New York time) on the third business day after the date the Registration
Statement becomes effective (or, if the Offerors have elected to rely upon Rule
430A, the third full business day after execution of the Pricing Agreement (or,
if pricing of the Securities occurs after 4:30 p.m., Eastern time, on the
fourth full business day thereafter)), or such other time not later than ten
business days after such date as shall be agreed upon by the Underwriters and
the Offerors (such time and date of payment and delivery being referred to
herein as the "Closing Time"). Payment for the Securities purchased by the
Underwriters shall be made by wire transfer of immediately available funds,
payable to the Company, against delivery to the respective accounts of the
Underwriters of the Securities to be purchased by it. Delivery of, and payment
for, the Securities shall be made through the facilities of the Depository
Trust Company. In addition, if the Underwriters purchase any or all of the
Option Securities, payment of the purchase price and delivery of certificates
for such Option Securities shall be made at the offices of Skadden, Arps,
Slate, Meagher & Flom LLP set forth above, or at such other place as shall be
agreed upon by the Underwriters and the Offerors, on each Date of Delivery as
specified in the relevant notice from the Underwriters to the Offerors.
19
Certificates for the Initial Securities and the Option Securities, if
any, shall be in such denominations and registered in such names as the
Underwriters may request in writing at least two full business days before the
Closing Time or any Date of Delivery, as the case may be. Merrill Lynch,
individually and not as representative of the Underwriters, may (but shall be
obligated to) make payment of the purchase price for the Securities, if any, to
be purchased by any Underwriter whose funds have not been received by the
Closing Time, or the Date of Delivery, as the case may be, but such payment
shall not relieve such Underwriter from its obligations hereunder. The
certificates for the Initial Securities and the Option Securities, if any, will
be made available for examination by the Underwriters no later than 10:00 a.m.
(New York City time) on the last business day prior to the Closing Time or the
Date of Delivery, as the case may be.
(e) If settlement for the Option Securities occurs after the Closing
Time, the Offerors will deliver to the Underwriters on the relevant Date of
Delivery, and the obligations of the Underwriters to purchase the Option
Securities shall be conditioned upon the receipt of, supplemental opinions,
certificates and letters confirming as of such date the opinions, certificates
and letters delivered at the Closing Time pursuant to Section 5(j) hereof.
SECTION 3. Covenants of the Offerors. The Offerors agree with the
Underwriters as follows:
(a) Promptly following the execution of this Agreement, the Offerors
will cause the Prospectus to be filed with the Commission pursuant to Rule
424 of the 1933 Act Regulations and the Offerors will promptly advise the
Underwriters when such filing has been made. Prior to the filing, the
Offerors will cooperate with the Underwriters in the preparation of such
Prospectus to assure that the Underwriters have no reasonable objection to
the form or content thereof when filed or mailed.
(b) The Offerors will comply with the requirements of Rule 430A of the
1933 Act Regulations and/or Rule 434 of the 1933 Act Regulations if and as
applicable, and will notify the Underwriters immediately (i) of the
effectiveness of any post-effective amendment to the Registration Statement
or the filing of any supplement or amendment to the Prospectus, (ii) the
receipt of any comments from the Commission, (iii) of any request by the
Commission for any amendment to the Registration Statement or any amendment
or supplement to the Prospectus or for additional information, (iv) of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or the initiation of any proceedings for that
purpose and (v) of the issuance by any state securities commission or other
regulatory authority of any order suspending the qualification or the
exemption from qualification of the Securities or the Shares under state
securities or Blue Sky laws or the initiation or threatening of any
proceeding for such purpose. The Offerors will make all reasonable efforts
to prevent the
20
issuance of any stop order and, if any stop order is issued, to
promptly obtain the lifting thereof.
(c) The Offerors will give the Underwriters notice of its intention to
file or prepare any amendment to the Registration Statement (including any
post-effective amendment and any filing under Rule 462(b) of the 1933 Act
Regulations), any Term Sheet or any amendment, supplement or revision to
either the prospectus included in the Registration Statement at the time it
became effective or to the Prospectus, whether pursuant to the 1933 Act,
the 1934 Act or otherwise; will furnish the Underwriters with copies of any
such Rule 462(b) Registration Statement, Term Sheet, amendment, supplement
or revision a reasonable amount of time prior to such proposed filing or
use, as the case may be; and will not file any such Rule 462(b)
Registration Statement, Term Sheet, amendment, supplement or revision to
which the Underwriters or counsel for the Underwriters shall reasonably
object.
(d) The Company will deliver to Merrill Lynch and counsel for the
Underwriters, without charge, conformed copies of the Registration
Statement as originally filed and of each amendment thereto (including
exhibits filed therewith or incorporated by reference therein and documents
incorporated or deemed to be incorporated by reference therein) and
conformed copies of all consents and certificates of experts, and will also
deliver to Merrill Lynch, without charge, a conformed copy of the
Registration Statement as originally filed and of each amendment thereto
(without exhibits) for each of the Underwriters. If applicable, the copies
of the Registration Statement and each amendment thereto furnished to the
Underwriters will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.
(e) The Company has delivered to each Underwriter, without charge, as
many copies of each preliminary prospectus as such Underwriter reasonably
requested, and the Company hereby consents to the use of such copies for
purposes permitted by the 1933 Act. The Company will furnish to each
Underwriter, without charge, during the period when the Prospectus is
required to be delivered under the 1933 Act or the 1934 Act, such number of
copies of the Prospectus (as amended or supplemented) as such Underwriter
may reasonably request. If applicable, the Prospectus and any amendments or
supplements thereto furnished to the Underwriter will be identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(f) The Offerors will comply with the 1933 Act and the 1933 Act
Regulations and the 1934 Act and the 1934 Act Regulations so as to permit
the completion of the distribution of the Securities as contemplated in
this Agreement and in the Registration Statement and the Prospectus. If at
any time when the Prospectus is required by the 1933
21
Act or the 1934 Act to be delivered in connection with sales of the
Securities, any event shall occur or condition shall exist as a result of
which it is necessary, in the opinion of counsel for the Underwriters or
for the Offerors, to amend the Registration Statement in order that the
Registration Statement will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or to amend or
supplement the Prospectus in order that the Prospectus will not include an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in the
light of the circumstances existing at the time it is delivered to a
purchaser, or if it shall be necessary, in the opinion of such counsel, at
any such time to amend the Registration Statement or amend or supplement
the Prospectus in order to comply with the requirements of the 1933 Act or
the 1933 Act Regulations, the Offerors will promptly prepare and file with
the Commission, subject to Section 3(c), such amendment or supplement as
may be necessary to correct such statement or omission or to make the
Registration Statement or the Prospectus comply with such requirements, and
the Offerors will furnish to the Underwriters, without charge, such number
of copies of such amendment or supplement as the Underwriters may
reasonably request.
(g) The Offerors will use their best efforts, in cooperation with the
Underwriters, to qualify the Securities for offering and sale under the
applicable securities laws of such states and other jurisdictions (domestic
or foreign) as the Representative may designate; provided, however, that
the Company shall not be obligated to qualify as a foreign corporation in
any jurisdiction in which it is not so qualified or subject itself to
taxation in respect of doing business in any jurisdiction in which it is
not otherwise so subject. In each jurisdiction in which the Securities have
been so qualified, the Offerors will file such statements and reports as
may be required by the laws of such jurisdiction to continue such
qualification in effect for so long as may be required in connection with
distribution of the Securities and the Shares.
(h) The Company will make generally available to its securityholders
as soon as practicable, but not later than 45 days (or 90 days, in the case
of a period that is also the Company's fiscal year) after the close of the
period covered thereby, an earnings statement of the Company and its
subsidiaries (in form complying with the provisions of Rule 158 of the 1933
Act Regulations) covering a twelve-month period beginning not later than
the first day of the Company's fiscal quarter next following the "effective
date" (as defined in said Rule 158) of the Registration Statement.
(i) The Company will use the net proceeds received by it from the sale
of the Securities in the manner specified in the Prospectus under "Use of
Proceeds."
(j) If, at the time that the Registration Statement became (or in the
case of a post-effective amendment becomes) effective, any information
shall have been omitted
22
therefrom in reliance upon Rule 430A or Rule 434 of the 1933 Act
Regulations, then immediately following the execution of the Pricing
Agreement, the Offerors will prepare, and file or transmit for filing with
the Commission in accordance with such Rule 430A or Rule 434 and Rule
424(b) of the 1933 Act Regulations, copies of an amended Prospectus or Term
Sheet, or, if required by such Rule 430A, a post-effective amendment to the
Registration Statement (including an amended Prospectus), containing all
information so omitted.
(k) If the Offerors elect to rely upon Rule 462(b), the Offerors shall
file a Rule 462(b) Registration Statement with the Commission in compliance
with Rule 462(b) and pay the applicable fees in accordance with Rule 111 of
the 1933 Act Regulations by the earlier of (i) 10:00 p.m. Eastern time on
the date of the Pricing Agreement and (ii) the time confirmations are sent
or given, as specified by Rule 462(b)(2).
(1) The Offerors, during the period when the Prospectus is required to
be delivered under the 1933 Act, will file all documents required to be
filed with the Commission pursuant to Section 13, 14 or 15 of the 1934 Act
within the time periods required by the 1934 Act and the 1934 Act
Regulations.
(m) The Offerors will use their best efforts to effect the listing of
the Securities and the Shares on the New York Stock Exchange and to cause
the Securities to be registered under the 1934 Act.
(n) During a period of 90 days (or, in the case of debt securities
issued pursuant to any medium-term note program of the Company, 14 days)
from the date of the Pricing Agreement, neither the Trust nor the Company
will, without the prior written consent of Merrill Lynch, (A) directly or
indirectly, offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any
option for the sale of or otherwise transfer or dispose of any Securities,
Purchase Contracts, Preferred Securities or Common Stock or any security of
the Company similar to the Securities, Purchase Contracts, Preferred
Securities or Common Stock or any security convertible into or exchangeable
or exercisable for Securities, Purchase Contracts, Preferred Securities,
Common Stock or any equity securities substantially similar to the
Securities, Purchase Contracts, Preferred Securities or Common Stock;
provided, however, that such restriction shall not affect the ability of
the Offerors to take any such action (i) in connection with any employee
benefit, dividend reinvestment and stock option or stock purchase plans of
the Company or its subsidiaries; (ii) in connection with the offering of
the Securities, including the Preferred Securities issued pursuant to this
Agreement; (iii) in connection with any securities issued pursuant to or
sold in connection with any securities of the Company or its subsidiaries,
outstanding as of the date hereof, that are convertible into or
exchangeable or exercisable for any securities of the Company and its
subsidiaries; (iv) any securities issued pursuant to a merger or
23
acquisition; (v) the Growth PRIDES or Income PRIDES to be created or
recreated upon substitution of Pledged Securities, or shares of Common
Stock issuable upon early settlement of the Income PRIDES or Growth PRIDES;
(vi) upon exercise of stock options or (vii) any securities issued in the
ordinary course of business pursuant to any medium-term note program of PHH
Corporation; or (B) enter into any swap or any other agreement or any
transaction that transfers, or is the equivalent of transferring, in whole
or in part, directly or indirectly, the economic equivalent of ownership of
the Securities, Purchase Contracts, Preferred Securities or Common Stock,
any security convertible into or exchangeable into or exercisable for the
Securities, Purchase Contracts, Preferred Securities or Common Stock, or
equity securities substantially similar to the Securities, Purchase
Contracts, Preferred Securities or Common Stock, whether any such swap or
transaction is to be settled by delivery of Securities, Purchase Contracts,
Preferred Securities or Common Stock, or other securities, in cash or
otherwise.
(o) For a period of two years from the Closing Time, the Company will
furnish to the Representative copies of all annual reports, quarterly
reports and current reports filed with the Commission on Forms 10-K, 10-Q
and 8-K, or such similar forms as may be designated by the Commission, and
such other documents, reports and information as shall be furnished by the
Company to its stockholders or securityholders generally, provided,
however, that the Company shall not be required to provide the
Representative with any such reports or similar forms that have been filed
with the Commission by electronic transmission pursuant to EDGAR.
(p) The Company will reserve and keep available at all times, free of
preemptive or other similar rights and liens and adverse claims, sufficient
shares of Common Stock to satisfy any obligations to issue Shares upon
settlement of the Purchase Contracts and shall take all actions necessary
to keep effective the Registration Statement with respect to the Shares.
(q) Neither the Company nor its Significant Subsidiaries will take,
directly or indirectly, any action resulting in a violation of Regulation M
under the 1934 Act, or designed to cause or result in, or that reasonably
might be expected to constitute, the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of
the Securities or the Common Stock, in each case, in violation of
applicable law.
SECTION 4. Payment of Expenses. The Company will pay all expenses
incident to the performance of its obligations under this Agreement, the
Pricing Agreement, the Purchase Contracts, the Purchase Contract Agreement and
the Pledge Agreement, including, without limitation, expenses related to the
following, if incurred: (i) the preparation, delivery, printing and filing of
the Registration Statement and Prospectus as originally filed (including
financial statements and exhibits) and of each amendment thereto; (ii) the
printing and delivery
24
to the Underwriters of this Agreement, the Pricing Agreement, any Agreement
among Underwriters and such other documents as may be required in connection
with the offering, purchase, sale and delivery of the Securities; (iii) the
preparation, issuance and delivery of the certificates for the Securities and
the Shares; (iv) the fees and disbursements of the Company's counsel,
accountants and other advisors or agents (including the transfer agents and
registrars), as well as fees and disbursements of the Trustees, the Purchase
Contract Agent, the Collateral Agent and any Depositary, and their respective
counsel; (v) the qualification of the Securities and the Shares under
securities laws in accordance with the provisions of Section 3(g), including
filing fees and the reasonable fees and disbursements of counsel for the
Underwriters in connection therewith and in connection with the preparation of
the Blue Sky Survey and any Legal Investment Survey; (vi) the printing and
delivery to the Underwriters of copies of the Registration Statement as
originally filed and of each amendment thereto, of each preliminary prospectus,
any Term Sheet and of the Prospectus and any amendments or supplements thereto;
(vii) the printing and delivery to the Underwriters of copies of the Blue Sky
Survey and any Legal Investment Survey; (viii) any fees payable in connection
with the rating of the Securities by nationally recognized statistical rating
organizations; (ix) the filing fees incident to, and the fees and disbursements
of counsel to the Underwriters in connection with, the review, if any, by the
National Association of Securities Dealers, Inc. (the "NASD") of the terms of
the sale of the Securities; (x) any fees payable to the Commission; and (xi)
any fees payable or expenses incurred pursuant to any Uniform Commercial Code
related filings; and (xii) the fees and expenses incurred in connection with
the listing of the Securities and the Shares on the New York Stock Exchange.
If this Agreement is terminated by the Underwriters in accordance with
the provisions of Section 5 or Section 9(a)(i) hereof, the Company shall
reimburse the Underwriters for all of their reasonable out-of-pocket expenses,
including the reasonable fees and disbursements of Shearman & Sterling, counsel
for the Underwriters.
SECTION 5. Conditions of Underwriters' Obligations. The obligations of
the Underwriters to purchase and pay for the Securities pursuant to this
Agreement are subject to the accuracy of the representations and warranties of
the Offerors herein contained or in certificates of any officer of the Company
or any subsidiary or the trustees of the Trust delivered pursuant to the
provisions hereof, to the performance by the Offerors of their obligations
hereunder, and to the following further conditions:
(a) The Registration Statement, including any Rule 462(b) Registration
Statement, shall have become effective under the 1933 Act not later than
5:30 p.m., New York City time, on the date hereof, and on the date hereof
and at the Closing Time and any Date of Delivery, no stop order suspending
the effectiveness of the Registration Statement or any part thereof shall
have been issued under the 1933 Act or proceedings therefor initiated or
threatened by the Commission, and any request on the part of the Commission
for additional information shall have been complied with to the
satisfaction
25
of counsel to the Underwriters. A prospectus containing information
relating to the description of the Securities, the specific method of
distribution and similar matters shall have been filed with the Commission
in accordance with Rule 424(b)(1), (2), (3), (4) or (5), as applicable (or
any required post-effective amendment providing such information shall have
been filed and declared effective in accordance with the requirements of
Rule 430A), or, if the Company has elected to rely upon Rule 434 of the
1933 Act Regulations, a Term Sheet including the Rule 434 Information shall
have been filed with the Commission in accordance with Rule 424(b)(7).
(b) At the Closing Time the Underwriters shall have received:
(1) The favorable opinion, dated as of the Closing Time, of James
E. Buckman, Senior Executive Vice President and General Counsel of the
Company, in form and substance reasonably satisfactory to counsel for
the Underwriters as set forth on Exhibit B attached hereto.
(2) The favorable opinion, dated as of the Closing Time, of
Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to the
Offerors, in form and substance satisfactory to counsel for the
Underwriters as set forth on Exhibit B attached hereto.
(3) The favorable opinion, dated as of the Closing Time of
Morris, James, Hitchens & Williams, counsel to Wilmington Trust
Company, as Delaware Trustee, and to Wilmington Trust Company, as
Institutional Trustee under the Declaration, and Guarantee Trustee
under the Preferred Securities Guarantee Agreement, in form and
substance satisfactory to counsel for the Underwriters, to the effect
that:
(i) Wilmington Trust Company is a Delaware banking association
with trust powers, duly organized, validly existing and in
good standing under the laws of Delaware with all
necessary corporate power and authority to execute,
deliver, and to carry out and perform its obligations
under the terms of, the Declaration and the Guarantee.
(ii) Wilmington Trust Company is a Delaware corporation, duly
organized, validly existing and in good standing, with
full corporate power and authority to execute and deliver,
and to carry out and perform its obligations under the
terms of, the Declaration.
26
(iii) The execution, delivery and performance by Wilmington
Trust Company of the Declaration, and the execution,
delivery and performance by Wilmington Trust Company, in
its capacity as the Guarantee Trustee, of the Preferred
Securities Guarantee, have been duly authorized by all
necessary corporate action on the part of Wilmington Trust
Company. The Declaration and the Preferred Securities
Guarantee have been duly executed and delivered by
Wilmington Trust Company in the case of the Declaration
and of Wilmington Trust Company, in its capacity as the
Guarantee Trustee, in the case of the Preferred Securities
Guarantee, and the Declaration constitutes the legal,
valid and binding obligation of Wilmington Trust Company
enforceable against Wilmington Trust Company in accordance
with its terms, except to the extent that enforcement
thereof may be limited by the Bankruptcy Exceptions.
(iv) The execution, delivery and performance by Wilmington
Trust Company of the Declaration, and the execution,
delivery and performance by Wilmington Trust Company, in
its capacity as the Guarantee Trustee, of the Preferred
Securities Guarantee, do not conflict with, or constitute
a breach of, Wilmington Trust Company's charter or bylaws.
(v) No consent, approval or authorization of, or registration
with or notice to, any Delaware or federal banking
authority is required for the execution, delivery or
performance by Wilmington Trust Company of the
Declaration, or by Wilmington Trust Company, in its
capacity as the Guarantee Trustee, of the Preferred
Securities Guarantee.
(4) The favorable opinion, dated as of the Closing Time, of the
legal department of The First National Bank of Chicago, as Purchase
Contract Agent, in form and substance satisfactory to counsel for the
Underwriters, to the effect that:
(i) The First National Bank of Chicago is duly incorporated
and is validly existing as a national banking association
with trust powers under the laws of the United States with
all necessary power and authority to execute, deliver and
perform its obligations under the Purchase Contract
Agreement and the Pledge Agreement.
27
(ii) The execution, delivery and performance by the Purchase
Contract Agent of the Purchase Contract Agreement, the
Pledge Agreement and the Remarketing Agreement, and the
authentication and delivery of the Securities have been
duly authorized by all necessary corporate action on the
part of the Purchase Contract Agent. The Purchase Contract
Agreement, the Pledge Agreement and the Remarketing
Agreement have been duly executed and delivered by the
Purchase Contract Agent, and constitute the legal, valid
and binding obligations of the Purchase Contract Agent,
enforceable against the Purchase Contract Agent in
accordance with its terms, except to the extent that
enforcement thereof may be limited by the Bankruptcy
Exceptions.
(iii) The execution, delivery and performance of the Purchase
Contract Agreement, the Pledge Agreement and the
Remarketing Agreement by the Purchase Contract Agent does
not conflict with or constitute a breach of the charter or
by-laws of the Purchase Contract Agent.
(iv) No consent, approval or authorization of, or registration
with or notice to, any Illinois or federal governmental
authority or agency is required for the execution,
delivery or performance by the Purchase Contract Agent of
the Purchase Contract Agreement and the Pledge Agreement.
(5) The favorable opinion, dated as of the Closing Time, of
Shearman & Sterling, counsel for the Underwriters, in form and
substance satisfactory to the Underwriters, with respect to the
issuance and sale of the Securities, and other related matters as the
Underwriters may reasonably require, and the Company shall have
furnished to such counsel such documents as they request for the
purpose of enabling them to pass upon such matters. In giving such
opinion, such counsel may rely, as to matters of Delaware law, upon
the opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special
counsel to the Offerors.
(c) Between the date of this Agreement and the Closing Time, no
material adverse change shall have occurred in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of
the Trust or the Company and its Significant Subsidiaries, considered as
one enterprise, whether or not in the ordinary course of business.
28
(d) At the Closing Time, the Underwriters shall have received a
certificate of the President or a Vice-President of the Company and of the
Chief Financial Officer or Chief Accounting Officer of the Company and a
certificate of a Regular Trustee of the Trust, on behalf of the Company and
the Trust, respectively, and dated as of the Closing Time, to the effect
that (i) there has been no material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Trust or the Company and its Significant Subsidiaries
considered as one enterprise, whether or not in the ordinary course of
business, (ii) the representations and warranties in Section 1 hereof are
true and correct as though expressly made at and as of the Closing Time,
(iii) the Company and the Trust have complied with all agreements and
satisfied all conditions on their part to be performed or satisfied at or
prior to the Closing Time, and (iv) no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been initiated or, to the knowledge of
such officers, threatened by the Commission.
(e) At the time of the execution of this Agreement, the Underwriters
shall have received letters from Deloitte & Touche LLP, KPMG Peat Marwick
LLP and Ernst & Young LLP, dated such date and substantially in the form of
Exhibit D, Exhibit E and Exhibit F attached hereto, respectively.
(f) At the Closing Time, the Underwriters shall have received a letter
or letters from each Accountant that furnished a letter pursuant to
subsection (e) of this Section, dated as of the Closing Time, to the effect
that it reaffirms the statements made in the letter furnished pursuant to
subsection (e) of this Section, except that the specified date referred to
shall be a date not more than five days prior to the Closing Time.
(g) At the Closing Time, and at each Date of Delivery, if any, counsel
for the Underwriters shall have been furnished with such documents and
opinions as they may require for the purpose of enabling them to pass upon
the issuance and sale of the Securities as herein contemplated and related
proceedings, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the conditions
herein contained; and all proceedings taken by the Offerors in connection
with the issuance and sale of the Securities as herein contemplated shall
be satisfactory in form and substance to the Underwriters and counsel for
the Underwriters.
(h) At the Closing Time, (i) the Securities shall be rated in one of
the four highest rating categories for preferred stock ("Investment Grade")
by at least one nationally recognized statistical rating agency, and the
Offerors shall have delivered to the Underwriters a letter, dated the
Closing Time, from such nationally recognized statistical rating agency, or
other evidence satisfactory to the Underwriters, confirming that the
Securities have Investment Grade ratings; (ii) there shall not have
occurred any decrease in the rating assigned to the Securities or any
securities of the Company by any "nation-
29
ally recognized statistical rating organization," as defined for purposes
of Rule 436(g)(2) under the 1933 Act Regulations since the date of this
Agreement, and (iii) no such organization shall have publicly announced
that it has under surveillance or review, without indicating an
improvement, its rating of the Securities or any securities of the Company.
(i) At the Closing Time, the Income PRIDES, the Growth PRIDES, the
Preferred Securities and the Shares shall have been approved for listing on
the New York Stock Exchange upon notice of issuance.
(j) In the event that the Underwriters exercise any or all of their
options provided in Section 2(b) hereof to purchase all or any portion of
the Option Securities, the representations and warranties of the Offerors
contained herein and the statements in any certificates furnished by the
Offerors hereunder shall be true and correct as of, and as if made on, each
Date of Delivery, and at the relevant Date of Delivery, the Underwriters
shall have received:
(1) A certificate, dated such Date of Delivery, of the President
or a Vice President of the Company and the Chief Financial Officer or
Chief Accounting Officer of the Company and a certificate of a Regular
Trustee of the Trust confirming that the certificate delivered at the
Closing Time pursuant to Section 5(d) hereof is true and correct as
of, and as if made on, such Date of Delivery.
(2) The favorable opinion of James E. Buckman, Senior Executive
Vice President and General Counsel of the Company, in form and
substance satisfactory to counsel for the Underwriters, dated such
Date of Delivery, relating to the Option Securities and otherwise to
the same effect as the opinion required by Section 5(b)(1) hereof.
(3) The favorable opinion of Skadden, Arps, Slate, Meagher & Flom
LLP, special counsel and special tax counsel for the Offerors, in form
and substance satisfactory to counsel for the Underwriters, dated such
Date of Delivery, relating to the Option Securities and otherwise to
the same effect as the opinion required by Section 5(b)(2) hereof.
(4) The favorable opinion of Morris, James, Hitchens & Williams,
counsel to Wilmington Trust Company, as Institutional Trustee and as
Delaware Trustee, in form and substance satisfactory to counsel for
the Underwriters, dated such Date of Delivery, relating to the Option
Securities and otherwise to the same effect as the opinion required by
Section 5(b)(3) hereof.
30
(5) The favorable opinion of the legal department of The First
National Bank of Chicago, as Purchase Contract Agent, in form and
substance satisfactory to counsel for the Underwriters, dated such
Date of Delivery, relating to the Option Securities and otherwise to
the same effect as the opinion required by Section 5(b)(4) hereof.
(6) The favorable opinion of Shearman & Sterling, counsel for the
Underwriters, dated such Date of Delivery, relating to the Option
Securities and otherwise to the same effect as the opinion required by
Section 5(b)(5) hereof.
(7) A letter from each Accountant that furnished a letter
pursuant to Section 5(e) hereof in form and substance satisfactory to
the Underwriters and dated such Date of Delivery, substantially the
same in form and substance as the letter furnished to the Underwriters
pursuant to Section 5(e) hereof, except that the "specified date" in
the letter furnished pursuant to this Section shall be a date not more
than five days prior to such Date of Delivery.
(8) At such Date of Delivery, (i) the Securities shall be rated
("Investment Grade") by at least one nationally recognized statistical
rating agency, and the Offerors shall have delivered to the
Underwriters a letter, dated such Date of Delivery, from such
nationally recognized statistical rating agency, or other evidence
satisfactory to the Underwriters, confirming that the Securities have
Investment Grade ratings; (ii) there shall not have occurred any
decrease in the rating assigned to the Securities or any securities of
the Company by any "nationally recognized statistical rating
organization," as defined for purposes of Rule 436(g)(2) under the
1933 Act Regulations since the date of the notice given by the
Underwriters to the Offerors of the Underwriters' intent to exercise
their options in accordance with Section 2(b) hereof, and (iii) no
such organization shall have publicly announced that it has under
surveillance or review, without indicating an improvement, its rating
of the Securities or any securities of the Company.
If any condition specified in this Section 5 shall not have been fulfilled when
and as required to be fulfilled, this Agreement, or, in the case of any
condition to the purchase of Option Securities on a Date of Delivery that is
after the Closing Time, the obligations of the several Underwriters to purchase
the relevant Option Securities, may be terminated by the Underwriters by notice
to the Company at any time at or prior to the Closing Time, or such Date of
Delivery, as the case may be, and such termination shall be without liability
of any party to any other party except as provided in Section 4 and except that
Sections 1, 6, 7 and 8 shall survive any such termination and remain in full
force and effect.
31
SECTION 6. Indemnification. (a) The Offerors agree to jointly and
severally indemnify and hold harmless each Underwriter and each person, if any,
who controls any Underwriter within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(or any amendment thereto), including the Rule 430A Information and the
Rule 434 Information deemed to be part thereof, if applicable, or the
omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not misleading
or arising out of any untrue statement or alleged untrue statement of a
material fact included in any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, provided, that (subject to Section
6(d) below) any such settlement is effected with the written consent of the
Offerors; and
(iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by Merrill Lynch, other than
as provided in Section 6(d) hereof), reasonably incurred in investigating,
preparing or defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Offerors by
any Underwriter through Merrill Lynch expressly for use in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information deemed to be a part thereof, if applicable, or any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) or (B) made in any preliminary prospectus supplement and corrected in
the Prospectus, as supplemented, where the person asserting any such loss,
liability, claim, damage or expense purchased the Securities that are the
subject
32
thereof, and it shall have been established (i) that there was not sent
or given, at or prior to the written confirmation of such sale, a copy of the
Prospectus (excluding documents incorporated by reference) in any case where
such delivery is required by the 1933 Act and (ii) the Company shall have
previously furnished copies thereof in sufficient quantities to such
Underwriter.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, its directors, each of its officers who signed the Registration
Statement, the Trust and each of its Trustees who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all
loss, liability, claim, damage and expense described in the indemnity contained
in subsection (a) of this Section, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information deemed to be a part thereof, if
applicable, or any preliminary prospectus or the Prospectus (or any amendment
or supplement thereto) in reliance upon and in conformity with written
information furnished to the Offerors by such Underwriter through Merrill Lynch
expressly for use in the Registration Statement (or any amendment thereto) or
such preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
hereunder to the extent it is not materially prejudiced as a result thereof and
in any event shall not relieve it from any liability that it may have otherwise
than on account of this indemnity agreement. In the case of parties indemnified
pursuant to Section 6(a) above, counsel to the indemnified parties shall be
selected by Merrill Lynch, and, in the case of parties indemnified pursuant to
Section 6(b) above, counsel to the indemnified parties shall be selected by the
Company. An indemnifying party may participate at its own expense in the
defense of any such action; provided, however, that counsel to the indemnifying
party shall not (except with the consent of the indemnified party) also be
counsel to the indemnified party. In no event shall the indemnifying parties be
liable for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances. No indemnifying party shall, without the prior written consent
of the indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 6 or Section 7 hereof (whether or not the indemnified
parties are actual or potential parties thereto), unless such settlement,
compromise or consent (i) includes an unconditional release of each indemnified
party from all liability arising out of such litigation investigation,
33
proceeding or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act by or on behalf of any indemnified
party.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 6(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement
at least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
Notwithstanding the immediately preceding sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, an indemnifying party shall
not be liable for any settlement of the nature contemplated by Section 6(a)(ii)
affected without its consent if such indemnifying party (i) reimburses such
indemnified party in accordance with such request to the extent it considers
such request to be reasonable and (ii) provides written notice to the
indemnified party substantiating the unpaid balance as unreasonable, in each
case prior to the date of such settlement.
SECTION 7. Contribution. If the indemnification provided for in
Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Offerors on the one hand, and the Underwriters, on the other hand, from the
offering of the Securities pursuant to this Agreement or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Offerors on the one hand,
and the Underwriters, on the other hand, in connection with the statements or
omissions that resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.
The relative benefits received by Offerors on the one hand, and the
Underwriters, on the other hand, in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of such
Securities (before deducting expenses) received by the Offerors and the total
underwriting discount or commission received by the Underwriters, in each case
as set forth on the cover of the Prospectus, or, if Rule 434 is used, the
corresponding location on the Term Sheet bear to the aggregate initial public
offering price of such Securities as set forth on such cover.
The relative fault of the Offerors, on the one hand, and the
Underwriters, on the other hand, shall be determined by reference to, among
other things, whether the untrue or
34
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Offerors or by
the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Offerors and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to above in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged
untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages that such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter,
and each director of the Company, each officer of the Company and each Trustee
of the Trust who signed the Registration Statement, and each person, if any,
who controls the Company and the Trust within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as the Offerors. The Underwriters' respective obligations to
contribute pursuant to this Section 7 are several in proportion to the number
or aggregate principal amount, as the case may be, of Initial Securities set
forth opposite their respective names in Schedule A to this Agreement, and not
joint.
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement and the Pricing Agreement, or contained in certificates of officers
of the Company or its subsidiaries or trustees of the Trust submitted pursuant
hereto, shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or controlling person, or
35
by or on behalf of the Company, and shall survive delivery of and payment for
the Securities to the Underwriters.
SECTION 9. Termination of Agreement. (a) The Underwriters may
terminate this Agreement, by notice to the Company at any time at or prior to
the Closing Time, if (i) there has been, since the date of this Agreement or
since the respective dates as of which information is given in the Prospectus,
any material adverse change or any development that could reasonably be
expected to result in a prospective material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its Significant Subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, or (ii)
there has occurred any material adverse change in the financial markets in the
United States or any outbreak of hostilities or escalation of hostilities or
other calamity or crisis, or any change or development involving a prospective
change in national or international political, financial or economic conditions
the effect of which is such as to make it, in the judgment of Merrill Lynch
impracticable to market the Income PRIDES, the Growth PRIDES or the Separate
Preferred Securities or to enforce contracts for the sale of the Income PRIDES,
the Growth PRIDES or the Separate Preferred Securities, or (iii) if trading in
the Common Stock or any other security of the Company has been suspended or
limited by the Commission, NASD or the New York Stock Exchange, or if trading
generally on either the American Stock Exchange, the New York Stock Exchange or
in the over-the-counter market has been suspended or limited, or minimum or
maximum prices for trading have been fixed, or maximum ranges for prices for
securities have been required, by either of said exchanges or by such system or
by order of the Commission, NASD or any other governmental authority, or (iv)
if a banking moratorium has been declared by either Federal, New York, New
Jersey, or Delaware authorities.
(b) If this Agreement and the Pricing Agreement are terminated
pursuant to this Section 9, such termination shall be without liability of any
party to any other party except as provided in Section 4, and provided,
further, that Sections 1, 6, 7 and 8 shall survive such termination and remain
in full force and effect.
SECTION 10. Default by One or More of the Underwriters. If one or more
of the Underwriters shall fail at the Closing Time or a Date of Delivery, as
the case may be, to purchase the Securities that it or they are obligated to
purchase under this Agreement and the Pricing Agreement (the "Defaulted
Securities"), Merrill Lynch shall have the right, within 24 hours thereafter,
to make arrangements for one or more of the non-defaulting Underwriters, or any
other underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, Merrill Lynch shall not have completed such arrangements
within such 24-hour period, then:
(a) if the number or aggregate principal amount, as the case may be,
of Defaulted Securities does not exceed 10% of the total number or
aggregate principal amount, as the case may be, of the Income PRIDES,
Growth PRIDES or Separate
36
Preferred Securities to be purchased on such date, the non-defaulting
Underwriters shall be obligated, severally and not jointly, to purchase the
full amount thereof in the proportions that their respective underwriting
obligations hereunder bear to the underwriting obligations of all
non-defaulting Underwriters, or
(b) if the number or aggregate principal amount, as the case may be,
of Defaulted Securities exceeds 10% of the total number or aggregate
principal amount, as the case may be, of the Income PRIDES, Growth PRIDES
or Separate Preferred Securities to be purchased on such date, this
Agreement shall terminate without liability on the part of any
non-defaulting Underwriter.
No action taken pursuant to this Section 10 shall relieve any
defaulting Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, or, in the case of a Date of Delivery that is
after the Closing Time, that does not result in a termination of the obligation
of the Underwriters to purchase and the Company to sell the relevant Option
Securities, as the case may be, either the Representative or the Company shall
have the right to postpone the Closing Time or the relevant Date of Delivery,
as the case may be, for a period not exceeding seven days in order to effect
any required changes in the Registration Statement or the Prospectus or in any
other documents or arrangements. As used herein, the term "Underwriter"
includes any person substituted for an Underwriter under this Section 10.
SECTION 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Underwriters c/o Merrill Lynch at Merrill
Lynch World Headquarters, World Financial Center, North Tower, New York, New
York 10281, Attention of David Johnson, Managing Director, with a copy to
Shearman & Sterling, Attention of Robert Evans III, Esq.; notices to the
Company shall be directed to it at Cendant Corporation, 6 Sylvan Way, P.O. Box
656, Parsippany, New Jersey 07054-0656, Attention of Eric J. Bock, Esq., Vice
President Legal.
SECTION 12. Parties. This Agreement and the Pricing Agreement shall
each inure to the benefit of and be binding upon the Offerors and the
Underwriters and their respective successors. Nothing expressed or mentioned in
this Agreement or the Pricing Agreement is intended or shall be construed to
give any person, firm or corporation, other than the Underwriters and the
Offerors and their respective successors and the controlling persons and
officers and directors referred to in Sections 6 and 7 and their heirs and
legal representatives, any legal or equitable right, remedy or claim under or
in respect of this Agreement or the Pricing Agreement or any provision herein
or therein contained. This Agreement and the Pricing Agreement and all
conditions and provisions hereof and thereof are intended to be for the sole
37
and exclusive benefit of the parties hereto and thereto and their respective
successors and legal representatives, and said controlling persons and officers
and directors and their heirs and legal representatives, and for the benefit of
no other person, firm or corporation. No purchaser of Securities from any
Underwriter shall be deemed to be a successor by reason merely of such
purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT AND THE PRICING
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME UNLESS
OTHERWISE INDICATED.
SECTION 14. Effect of Headings. The Article and Section headings
herein are for convenience only and shall not affect the construction hereof.
SECTION 15. Counterparts. This Agreement may be executed in one or
more counterparts and, if executed in more than one counterpart, the executed
counterparts hereof shall constitute a single instrument.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, shall become a binding
agreement among the Company, the Trust and the Underwriters in accordance with
its terms.
Very truly yours,
CENDANT CORPORATION
By: /s/ James E. Buckman
------------------------------
Name: James E. Buckman
Title: Senior Executive Vice
President and General
Counsel
CENDANT CAPITAL I
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
Merrill Lynch & Co.
Merrill Lynch, Pierce,
Fenner & Smith Incorporated
Chase Securities Inc.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
-------------------------------
Authorized Signatory
SCHEDULE A
Number of Number of Number of
Name of Underwriter Income PRIDES Growth PRIDES Preferred Securities
- ------------------- ------------- ------------- --------------------
Merrill Lynch, Pierce,
Fenner & Smith
Incorporated............ 21,600,000 1,800,000 1,800,000
Chase Securities Inc...... 2,400,000 200,000 200,000
---------- --------- ---------
TOTAL................. 24,000,000 2,000,000 2,000,000
========== ========= =========
SCHEDULE B
Significant Subsidiaries of the Company
---------------------------------------
Cendant Operations, Inc.
HFS Car Rental Holdings, Inc.
Cendant Car Rental, Inc.
Wizard Co. Inc.
PHH Corporation
Cendant Mobility Services Corp.
Cendant Mortgage Corporation
PHH Vehicle Management Corporation
RCI General Holdco 1, Inc.
RCI General Holdco 2, Inc.
Resort Condominiums International, LLC
RCI Holdings One, Inc.
TM Acquisition Corp.
Ideon Group, Inc.
FISI*Madison Financial Corporation
Benefit Consultants, Inc.
Entertainment Publications, Inc.
Cendant Membership Services, Inc. (incl. Comp-U-Card division)
Hebdo Mag Inc.
Cendant Software Corporation
Benefit Consultants Membership Inc.
Sierra-On-Line, Inc.
Davidson & Associates, Inc.
Advance Ross Corporation
Getko Group, Inc.
EXHIBIT A
CENDANT CORPORATION
(A DELAWARE CORPORATION)
CENDANT CAPITAL I
(A DELAWARE BUSINESS TRUST)
20,000,000 FELINE PRIDES(Service Mark)
(Stated Amount of $50 per FELINE PRIDES),
consisting of
26,000,000 Income PRIDES(Service Mark)
each consisting of
a Purchase Contract of Cendant Corporation Requiring the
Purchase on February 16, 2001 (or earlier) of certain
Shares of Common Stock of Cendant Corporation
and
a 6.45% Trust Originated Preferred Security(Service Mark)
(TOPrS(Service Mark)) of Cendant Capital I
and
2,000,000 Growth PRIDES(Service Mark)
each consisting of
a Purchase Contract of Cendant Corporation Requiring the
Purchase on February 16, 2001 (or earlier) of certain
Shares of Common Stock of Cendant Corporation
and
a 1/20 Undivided Beneficial Interest in a Zero-Coupon U.S. Treasury Security
Having a Principal Amount Equal to $1000 and maturing on February 15, 2001;
and
2,000,000 6.45% Trust Originated Preferred Securities (TOPrS)
of Cendant Capital I (Liquidation Amount $50 per Trust Originated
Preferred Security (TOPrS)
- --------------
(Service Mark) "FELINE PRIDES," "INCOME PRIDES," "GROWTH PRIDES," "TRUST
ORIGINATED PREFERRED SECURITIES" AND "TOPRS" ARE SERVICE MARKS OF MERRILL LYNCH
& CO. INC.
PRICING AGREEMENT
-----------------
February 24, 1998
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED, as representative of the
several Underwriters named in the within-
mentioned Underwriting Agreement
Merrill Lynch World Headquarters
World Financial Center
North Tower
New York, New York 10281
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement, dated February 24,
1998 (the "Underwriting Agreement"), relating to the purchase by the Several
Underwriters named in Schedule A thereto of the above Income PRIDES (the
"Income PRIDES"), Growth PRIDES (the "Growth PRIDES") and Trust Originated
Preferred Securities (the "Separate Preferred Securities" and, together with
the Income PRIDES and Growth PRIDES, the "Securities") of Cendant Corporation
(the "Company"), and Cendant Capital I (the "Trust"). The Securities are being
issued and sold by the Company and the Trust to the Underwriters on the terms
and conditions set forth in the Underwriting Agreement and on Schedule I
hereto.
Pursuant to Section 2 of the Underwriting Agreement, the Company and
the Trust agree with each Underwriter as follows:
1. The initial public offering price per security for the Securities,
determined as provided in said Section 2, shall be (a) in the case of each
Income PRIDES, $50.00, (b) in the case of each Growth PRIDES, $42.52 and
(c) in the case of each Separate Preferred Security, $50.00.
2. The respective purchase prices per security for the Securities to
be paid by the several Underwriters shall be equal to the initial public
offering prices set forth in paragraph 1. above. The Company shall pay a
commission to the Underwriters equal, in the case of the Initial
Securities, $39.5 million dollars and, with respect to the Option
Securities, $1.50 per security in the case of Option Income PRIDES, $1.22
per security in the case of Option Growth PRIDES and less $0.50 per
security in the case of Option Preferred Securities.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Underwriters and the Company and the Trust in accordance
with its terms.
Very truly yours,
CENDANT CORPORATION
By: /s/ James E. Buckman
-------------------------------
Name: James E. Buckman
Title: Senior Executive Vice
President and General
Counsel
CENDANT CAPITAL I
By: /s/ James E. Buckman
-------------------------------
Name: James E. Buckman
Title: Regular Trustee
By: /s/ Michael P. Monaco
-------------------------------
Name: Michael P. Monaco
Title: Regular Trustee
CONFIRMED AND ACCEPTED,
as of the date first above written:
Merrill Lynch & Co.
Merrill Lynch, Pierce,
Fenner & Smith Incorporated
Chase Securities Inc.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ David Johnson
-------------------------------
Authorized Signatory
Schedule I
TERMS OF THE SECURITIES
SECURITIES OFFERED
20,000,000 FELINE PRIDES, consisting of ,000,000 Income PRIDES and at least
2,000,000 Growth PRIDES, and at least 2,000,000 separate Trust Preferred
Securities. ,000,000 Trust Preferred Securities will be initially issued and
held as a component of the Income PRIDES.
ISSUERS
Cendant Corporation and Cendant Capital I.
STATED AMOUNT
$50 per FELINE PRIDES.
LISTING OF THE INCOME PRIDES, GROWTH PRIDES AND TRUST PREFERRED SECURITIES
Application will be made to list the Income PRIDES, the Growth PRIDES and the
Trust Preferred Securities on the NYSE, subject to official notice of issuance.
NYSE SYMBOL OF COMMON STOCK
"CD"
USE OF PROCEEDS
Substantially all of the proceeds from the sale of the Growth PRIDES will be
used to purchase the underlying Treasury Securities to be transferred to
holders of the Growth PRIDES pursuant to the terms thereof, and the Company
will receive no proceeds from the sale of the Growth PRIDES. All or
substantially all of the proceeds from the sale of the Income PRIDES, the Trust
Preferred Securities which are not components of Income PRIDES and the Common
Securities will be invested by the Trust in Debentures of the Company. The
Company currently anticipates using all of the net proceeds from the sale of
the Debentures, estimated to be approximately $ million, to repay outstanding
indebtedness under the Company's revolving credit facilities, including (i) $
million of outstanding indebtedness under the $1.25 billion 364-Day Competitive
Advance and Revolving Credit Agreement dated as of October 2, 1996, as amended
and restated, among the Company (as successor by Merger with HFS), the lenders
named therein (the "Lenders") and The Chase Manhattan Bank ("Chase"), as
Administrative Agent (the "364-Day Revolving Credit Facility") and (ii) $
million of outstanding indebtedness under the $750 million Five-Year
Competitive Advance and Revolving Credit Agreement dated as of October 2, 1996,
as amended
and restated, among the Company, the Lenders and Chase (the "Five Year
Revolving Credit Facility" and, together with the 364-Day Revolving Credit
Facility, the "Revolving Credit Facilities").
The 364-Day Revolving Credit Facility will mature on September 30, 1998,
provided that the Company is entitled to annually request a 364-day extension
of such maturity date, and the Five Year Revolving Credit Facility will mature
on October 1, 2001.
The 364-Day Revolving Credit Facility and the Five Year Revolving Credit
Facility provide for revolving loans which bear interest, at the option of the
Company, at rates based on competitive bids of Lenders participating in such
facilities, at a prime rate or at LIBOR plus a margin approximating 22.5 basis
points. The proceeds of such loans have been used for general corporate
purposes, primarily for business acquisitions.
FELINE PRIDES
Components of FELINE PRIDES
The 20,000,000 FELINE PRIDES offered hereby will initially consist of (A)
,000,000 units referred to as Income PRIDES and (B) at least 2,000,000 units
referred to as Growth PRIDES. Each Income PRIDES will initially consist of a
unit comprised of (a) a Purchase Contract under which (i) the holder will
purchase from the Company on the Purchase Contract Settlement Date, for an
amount of cash equal to the Stated Amount, a number of newly issued shares of
Common Stock of the Company equal to the Settlement Rate, and (ii) the Company
will pay Contract Adjustment Payments at the rate of % of the Stated Amount
per annum to the holder, and (b) either beneficial ownership of a % Trust
Originated Preferred Security, having a stated liquidation amount equal to the
Stated Amount, representing a preferred, undivided beneficial interest in the
assets of the Trust or upon the occurrence of a Tax Event Redemption prior to
the Purchase Contract Settlement Date, the appropriate the Applicable Ownership
Interest in the Treasury Portfolio. The purchase price of each Income PRIDES
will be allocated between the related Purchase Contract and the related Trust
Preferred Security in proportion to their respective fair market values at the
time of purchase. Each Growth PRIDES will initially consist of a unit comprised
of (a) a Purchase Contract under which (i) the holder will purchase from the
Company on the Purchase Contract Settlement Date, for an amount in cash equal
to the Stated Amount, a number of newly issued shares of Common Stock of the
Company, equal to the Settlement Rate, and (ii) the Company will pay Contract
Adjustment Payments at the rate of % of the Stated Amount per annum and (b)
a 1/20 undivided beneficial interest in a % Treasury Security having a
principal amount of $1,000 and maturing on , 2001. The purchase price
of each Growth PRIDES will be allocated between the related Purchase Contract
and the related interest in the Treasury Security in proportion to their
respective fair market values at the time of purchase.
The applicable distribution rate on the Trust Preferred Securities and the
interest rate on the related Debentures that remain outstanding on and after
the Purchase Contract Settlement Date will be reset on the third Business Day
immediately preceding the Purchase Contract Settlement
Date to the Reset Rate, to be determined by a nationally recognized investment
banking firm chosen by the Company (the "Reset Agent").
The Company will have the right at any time to dissolve the Trust and, after
satisfaction of liabilities to creditors of the Trust, if any, to cause the
Debentures to be distributed to the holders of the Trust Preferred Securities.
References herein to Trust Preferred Securities, unless the context otherwise
requires, mean (i) the Trust Preferred Securities or (ii) the Debentures which
have been delivered to the holders of the Trust Preferred Securities upon
dissolution of the Trust. In addition, as described below, upon the occurrence
of a Tax Event (as defined herein) prior to the Purchase Contract Settlement
Date, the Company may at its option cause the Debentures (and, thus, the Trust
Preferred Securities) to be redeemed at the Redemption Price and the Treasury
Portfolio will be substituted for the redeemed Trust Preferred Securities in
the manner described herein to secure the Income PRIDES holders' obligations
under their related Purchase Contracts. The distribution rate and the payment
dates for the Trust Preferred Securities will correspond to the interest rate
and the payment dates for the Debentures, which will be the sole assets of the
Trust. As long as a FELINE PRIDES is in the form of an Income PRIDES or Growth
PRIDES, the related Trust Preferred Securities, Treasury Securities or the
Treasury Portfolio, as applicable, will be pledged pursuant to a pledge
agreement, to be dated as of February , 1998 (the "Pledge Agreement"), between
the Company and The Chase Manhattan Bank, as collateral agent for the Company
(together with any successor thereto in such capacity, the "Collateral Agent"),
to secure the holder's obligation to purchase Common Stock under the related
Purchase Contract.
Purchase Contract Agreement
The FELINE PRIDES will be issued under a Purchase Contract Agreement, to be
dated as of February , 1998 (the "Purchase Contract Agreement"), between the
Company and The First National Bank of Chicago, as agent for the holders of the
FELINE PRIDES (together with any successor thereto in such capacity, the
"Purchase Contract Agent").
Substitution of Pledged Securities
Each holder of an Income PRIDES will have the right, on or prior to the fifth
Business Day immediately preceding the Purchase Contract Settlement Date, to
substitute for the related Trust Preferred Securities held by the Collateral
Agent zero-coupon U.S. Treasury Securities in an amount per Income PRIDES equal
to the Stated Amount per Trust Preferred Security. Such Treasury Securities
will be substituted for the Trust Preferred Securities and will be pledged with
the Collateral Agent to secure the holder's obligation to purchase Common Stock
under the related Purchase Contracts. Because Treasury Securities are issued in
integral multiples of $1,000, holders of Income PRIDES may make such
substitutions only in integral multiples of 20 Income PRIDES; provided,
however, if a Tax Event Redemption has occurred prior to the Purchase Contract
Settlement Date and the Treasury Portfolio has become a component of the Income
PRIDES, holders of Income PRIDES may make such substitutions only in integral
multiples of 32,000 Income PRIDES (but obtaining the release of the appropriate
Applicable Ownership Interest of the Treasury Portfolio rather than the Trust
Preferred Securities) at any time on or prior to the second
Business Day immediately preceding the Purchase Contract Settlement Date. In
the event that Contract Adjustment Payments are at a higher rate for Growth
PRIDES than for Income PRIDES, holders of Income PRIDES wishing to create
Growth PRIDES will also be required to deliver cash in an amount equal to the
excess of the Contract Adjustment Payments that would have accrued since the
last Payment Date through the date of substitution on the Growth PRIDES being
created by such holders, over the Contract Adjustment Payments that have
accrued over the same time period on the related Income PRIDES.
Each holder of Growth PRIDES will have the right, on or prior to the fifth
Business Day immediately preceding the Purchase Contract Settlement Date, to
create Income PRIDES by delivering 20 Growth PRIDES to the Purchase Contract
Agent plus 20 Trust Preferred Securities to the Collateral Agent in exchange
for 20 Income PRIDES and the release of the related Treasury Security to such
holder; provided, however, if a Tax Event Redemption has occurred prior to the
Purchase Contract Settlement Date and the Treasury Portfolio has become a
component of the Income PRIDES, holders of Growth PRIDES may make such
substitution (but using the Treasury Portfolio rather than Trust Preferred
Securities) only in integral multiples of 32,000 Growth PRIDES at any time on
or prior to the second Business Day immediately preceding the Purchase Contract
Settlement Date. Such Trust Preferred Securities or the appropriate Applicable
Ownership Interest of the Treasury Portfolio, as the case may be, will be
pledged with the Collateral Agent to secure the holder's obligation to purchase
Common Stock under the related Purchase Contracts. In the event that Contract
Adjustment Payments are at a higher rate for Income PRIDES than for Growth
PRIDES, holders of Growth PRIDES wishing to create Income PRIDES will also be
required to deliver cash in an amount equal to the excess of the Contract
Adjustment Payments that would have accrued since the last Payment Date through
the date of substitution on the Income PRIDES being created by such holders,
over the Contract Adjustment Payments that have accrued over the same time
period on the related Growth PRIDES.
Holders who elect to substitute Pledged Securities (as defined in "Description
of the Purchase Contracts -- Pledged Securities and Pledge Agreement"), will be
responsible for any fees or expenses payable in connection therewith.
Recreating Income PRIDES or Growth PRIDES
On or prior to the fifth Business Day immediately preceding the Purchase
Contract Settlement Date, a holder of Growth PRIDES will have the right to
recreate Income PRIDES by delivering 20 Growth PRIDES to the Purchase Contract
Agent plus 20 Trust Preferred Securities to the Collateral Agent in exchange
for 20 Income PRIDES and the release of the related Treasury Security to such
holder; provided, however, if a Tax Event Redemption has occurred prior to the
Purchase Contract Settlement Date and the Treasury Portfolio has become a
component of the Income PRIDES, holders of Growth PRIDES may make such
substitution (but using the Treasury Portfolio rather than Trust Preferred
Securities) only in integral multiples of 32,000 Growth PRIDES at any time on
or prior to the second Business Day immediately preceding the Purchase Contract
Settlement Date. Such Trust Preferred Securities or the appropriate Applicable
Ownership Interest of the Treasury Portfolio, as the case may be, will be
pledged with the
Collateral Agent to secure the holder's obligation to purchase Common Stock
under the related Purchase Contracts. In the event that Contract Adjustment
Payments are at a higher rate for Income PRIDES than for Growth PRIDES, holders
of Growth PRIDES wishing to recreate Income PRIDES will also be required to
deliver cash in an amount equal to the excess of the Contract Adjustment
Payments that would have accrued since the last Payment Date through the date
of substitution on the Income PRIDES being recreated by such holders, over the
Contract Adjustment Payments that have accrued over the same time period on the
related Growth PRIDES.
On or prior to the fifth Business Day immediately preceding the Purchase
Contract Settlement Date, a holder of Income PRIDES will have the right to
subsequently recreate Growth PRIDES by delivering 20 Income PRIDES to the
Purchase Contract Agent plus a Treasury Security to the Collateral Agent in
exchange for 20 Growth PRIDES and the release of the 20 related Trust Preferred
Securities to such Income PRIDES, holder; provided, however, if a Tax Event
Redemption has occurred and the Treasury Portfolio has become a component of
the Income PRIDES, holders of Income PRIDES may make such substitutions only in
integral multiples of 32,000 Income PRIDES. In the event that Contract
Adjustment Payments are at a higher rate for Growth PRIDES than for Income
PRIDES, holders of Income PRIDES wishing to recreate Growth PRIDES will also be
required to deliver cash in an amount equal to the excess of the Contract
Adjustment Payments that would have accrued since the last Payment Date through
the date of substitution on the Growth PRIDES being recreated by such holders,
over the Contract Adjustment Payments that have accrued over the same time
period on the related Income PRIDES.
Current Payments
Holders of Income PRIDES will be entitled to receive aggregate cash
distributions at a rate of % of the Stated Amount per annum from and after
16, 1998, payable quarterly in arrears, consisting of cumulative cash
distributions on the related Trust Preferred Securities or the Treasury
Portfolio, as applicable, payable at the rate of % of the Stated Amount per
annum, and Contract Adjustment Payments, payable by the Company at the rate of
% of the Stated Amount per annum, subject (in the case of both the
distributions on the Trust Preferred Securities and of the Contract Adjustment
Payments), to the Company's right to defer the payment of such amounts. The
ability of the Trust to make the quarterly distributions on the related Trust
Preferred Securities will be solely dependent upon the receipt of corresponding
interest payments from the Company on the Debentures. The Company's obligations
with respect to the Debentures will be senior and unsecured and will rank on a
parity in right of payment with all other senior unsecured obligations of the
Company.
If a Tax Event Redemption has occurred prior to the Purchase Contract
Settlement Date as described herein and the Treasury Portfolio has become a
component of the Income PRIDES, quarterly distributions on the appropriate
Applicable Ownership Interest of the Treasury Portfolio, as a portion of the
cumulative quarterly distribution to the holders of Income PRIDES, will not be
deferred.
Holders of Growth PRIDES will be entitled to receive quarterly cash
distributions of Contract Adjustment Payments, payable by the Company at the
rate of % of the Stated Amount per annum, subject to the Company's rights of
deferral described herein. In addition, OID would continue to accrue on the
related Treasury Securities.
Contract Adjustment Payments
Contract Adjustment Payments will be fixed at a rate per annum of % of the
Stated Amount per Purchase Contract in the case of Income PRIDES, and % of the
Stated Amount per Purchase Contract, in the case of Growth PRIDES. The Contract
Adjustment Payments, if any, will be subordinated and junior in right of
payment to the Senior Indebtedness.
Option to Extend Distribution Payment Periods
The Company has the right at any time, and from time to time, limited to a
period not extending beyond the maturity date of the Debentures, to defer the
interest payments due on the Debentures. As a consequence of such deferral, the
corresponding quarterly distributions to holders of Trust Preferred Securities
and Income PRIDES would be deferred (but despite such deferral, would continue
to accumulate quarterly and would accrue interest thereon compounded quarterly
at the rate of % per annum through and including 15, 2001, and at
the Reset Rate thereafter). The Company also has the right to defer the payment
of Contract Adjustment Payments on the related Purchase Contracts until no
later than the Purchase Contract Settlement Date; however, such deferred
Contract Adjustment Payments will bear additional Contract Adjustment Payments
at the rate of % per annum (the higher of (i) the rate which would accrue on
Income PRIDES for such payments and (ii) the rate which would accrue on Growth
PRIDES for such payments) (such deferred Contract Adjustment Payments together
with such additional Contract Adjustment Payments shall be referred to as the
"Deferred Contract Adjustment Payments"). If interest payments on the
Debentures or the Contract Adjustment Payments are deferred, the Company has
agreed, among other things, not to declare or pay any dividend on or repurchase
its capital stock (subject to certain exceptions) during the period of such
deferral. If a Tax Event Redemption has occurred prior to the Purchase Contract
Settlement Date and the Treasury Portfolio has become a component of the Income
PRIDES, quarterly distributions on the appropriate Applicable Ownership
Interest Treasury Portfolio as a portion of the cumulative quarterly
distributions to the holders of Income PRIDES will not be deferred.
In the event that the Company elects to defer the payment of Contract
Adjustment Payments on the related Purchase Contracts until the Purchase
Contract Settlement Date, each holder of the related Income PRIDES or Growth
PRIDES will receive on the Purchase Contract Settlement Date in respect of such
Deferred Contract Adjustment Payments, in lieu of a cash payment, a number of
shares of Common Stock equal to (x) the aggregate amount of Deferred Contract
Adjustment Payments payable to such holder divided by (y) the Applicable Market
Value (as defined herein).
Payment Dates
Subject to the deferral provisions described herein, the current payments
described above in respect of the Income PRIDES will be payable quarterly in
arrears on February 16, May 16, August 16 and November 16 of each year,
commencing 16, 1998, through and including (i) in the case of the Contract
Adjustment Payments, the earlier of the Purchase Contract Settlement Date or
the most recent such quarterly date on or prior to any early settlement of the
related Purchase Contracts and (ii) in the case of Trust Preferred Securities,
the most recent such quarterly date on or prior to the earlier of the Purchase
Contract Settlement Date and the date the liquidation amount of a Trust
Preferred Security, together with all accumulated and unpaid distributions
thereon (each, a "Payment Date").
Remarketing
Unless a Tax Event Redemption has occurred, pursuant to a remarketing agreement
(the "Remarketing Agreement") dated as of , 1998, among the Company,
the Trust, the Purchase Contract Agent and a nationally recognized investment
banking firm chosen by the Company (the "Remarketing Agent"), and subject to
the terms of a Remarketing Underwriting Agreement to be dated as of the third
Business Day immediately preceding the Purchase Contract Settlement Date among
such parties (the "Remarketing Underwriting Agreement"), the Trust Preferred
Securities of such Income PRIDES holders who have failed to notify the Purchase
Contract Agent, on or prior to the fifth Business Day immediately preceding the
Purchase Contract Settlement Date, of their intention to settle the related
Purchase Contracts with separate cash, will be remarketed on the third Business
Day immediately preceding the Purchase Contract Settlement Date. The
Remarketing Agent will use its reasonable efforts to remarket such Trust
Preferred Securities (bearing the Reset Rate) on such date for settlement on
the Purchase Contract Settlement Date at a price of approximately 100.5% of the
aggregate stated liquidation amount of such Trust Preferred Security, plus
accrued and unpaid distributions (including any deferred distributions), if
any, thereon. The portion of the proceeds from such remarketing equal to the
aggregate stated liquidation amount of such Trust Preferred Securities will be
automatically applied to satisfy in full such Income PRIDES holders'
obligations to purchase Common Stock under the related Purchase Contracts. In
addition, after deducting as the Remarketing Fee an amount not exceeding 25
basis points (.25%) of the aggregate stated liquidation amount of the
remarketed securities from any amount of such proceeds in excess of the
aggregate stated liquidation amount of the remarketed Trust Preferred
Securities plus any accrued and unpaid distributions (including any deferred
distributions), the Remarketing Agent will remit the remaining portion of the
proceeds, if any, for the benefit of such holder. Income PRIDES holders, whose
Trust Preferred Securities are so remarketed will not otherwise be responsible
for any Remarketing Fee in connection therewith. If, despite using its
reasonable efforts, the Remarketing Agent cannot remarket the related Trust
Preferred Securities of such holders of Income PRIDES at a price not less than
100% of the aggregate stated liquidation amount of such Trust Preferred
Securities plus accrued and unpaid distributions, including deferred
distributions, if any, resulting in a Failed Remarketing, the Company will
exercise its rights as a secured party to dispose of the Trust Preferred
Securities in accordance with applicable law and to satisfy in full, from the
proceeds of such disposition, such holder's obligation to purchase Common Stock
under the related Purchase Contracts, provided, that if the Company exercises
such rights as a secured party with respect to such Trust Preferred
Securities, any accrued and unpaid distributions (including any deferred
distributions) on such Trust Preferred Securities will be paid in cash by the
Company to the holder of record of such Trust Preferred Securities. The Company
will cause a notice of such Failed Remarketing to be published on the second
Business Day immediately preceding the Purchase Contract Settlement Date. It is
currently anticipated that Merrill Lynch, Pierce, Fenner & Smith Incorporated
will be the Remarketing Agent.
Purchase Contract Settlement Date
16, 2001.
Settlement of Purchase Contracts
On the Business Day immediately preceding the Purchase Contract Settlement
Date, unless a holder of Income PRIDES or Growth PRIDES (i) has settled the
related Purchase Contracts through the early delivery of cash to the Purchase
Contract Agent in the manner described herein, (ii) in the case of Income
PRIDES, has settled the related Purchase Contracts with separate cash on the
Business Day prior to the Purchase Contract Settlement Date pursuant to prior
notification to the Purchase Contract Agent, (iii) has had the Trust Preferred
Securities related to such holder's Purchase Contracts remarketed in the manner
described herein in connection with settling such Purchase Contracts, or (iv)
an event described in the Prospectus under the heading "Description of the
Purchase Contracts -- Termination" has occurred, (A) in the case of Income
PRIDES (unless a Tax Event Redemption has occurred), the Company will exercise
its rights as a secured party to dispose of the related Trust Preferred
Securities in accordance with the applicable law, and (B) in the case of Growth
PRIDES or Income PRIDES (if a Tax Event Redemption has occurred) the principal
amount of the related Treasury Securities or the appropriate Applicable
Ownership Interest of the Treasury Portfolio, as applicable, when paid at
maturity, will automatically be applied, pursuant to the exercise of such
rights by the Company to satisfy in full such holder's obligation to purchase
Common Stock under the related Purchase Contracts.
In the event that a holder of either Income PRIDES or Growth PRIDES effects the
early settlement of the related Purchase Contracts through the delivery of cash
or, in the case of an Income PRIDES, settles such Purchase Contracts with cash
on the Business Day immediately preceding the Purchase Contract Settlement
Date, the related Trust Preferred Securities, the appropriate Applicable
Ownership Interest of the Treasury Portfolio or the Treasury Securities, as the
case may be, will be released to such holder as described herein.
Settlement Rate
The number of newly issued shares of Common Stock issuable upon settlement of
each Purchase Contract on the Purchase Contract Settlement Date (the
"Settlement Rate") will be calculated as follows (subject to adjustment under
certain circumstances): (a) if the Applicable Market Value is equal to or
greater than $ (the "Threshold Appreciation Price," which is
approximately % above the last reported sale price of the Common Stock set
forth on the cover page of the final Prospectus
Supplement (the "Reference Price")), the Settlement Rate (which will be equal
to the Stated Amount divided by the Threshold Appreciation Price) will be ;
accordingly, if, between the date of the final Prospectus Supplement and the
period during which the Applicable Market Value is measured, the market price
for the Common Stock increases to an amount that is higher than the Threshold
Appreciation Price, the aggregate market value of the shares of Common Stock
issued upon settlement of each Purchase Contract (assuming that such market
value is the same as the Applicable Market Value of such Common Stock) will be
higher than the Stated Amount, and if such market price is the same as the
Threshold Appreciation Price, the aggregate market value of such shares
(assuming that such market value is the same as the Applicable Market Value of
such Common Stock) will be equal to the Stated Amount; (b) if the Applicable
Market Value is less than the Threshold Appreciation Price but greater than the
Reference Price, the Settlement Rate will be equal to the Stated Amount divided
by the Applicable Market Value; accordingly, if the market price for the Common
Stock increases between the date of the final Prospectus Supplement and the
period during which the Applicable Market Value is measured but such market
price is less than the Threshold Appreciation Price, the aggregate market value
of the shares of Common Stock issued upon settlement of each Purchase Contract
(assuming that such market value is the same as the Applicable Market Value of
such Common Stock) will be equal to the Stated Amount; and (c) if the
Applicable Market Value is less than or equal to the Reference Price, the
Settlement Rate (which will be equal to the Stated Amount divided by the
Reference Price) will be ; accordingly, if the market price for the Common
Stock decreases between the date of the final Prospectus Supplement and the
period during which the Applicable Market Value is measured, the aggregate
market value of the shares of Common Stock issued upon settlement of each
Purchase Contract (assuming that such market value is the same as the
Applicable Market Value of such Common Stock) will be less than the Stated
Amount, and if such market price stays the same, the aggregate market value of
such shares (assuming that such market value is the same as the Applicable
Market Value of such Common Stock) will be equal to the Stated Amount.
"Applicable Market Value" means the average of the Closing Price (as defined
herein) per share of Common Stock on each of the twenty consecutive Trading
Days (as defined herein) ending on the third Trading Day immediately preceding
the Purchase Contract Settlement Date.
Early Settlement
A holder of Income PRIDES (unless a Tax Event Redemption has occurred) may
settle the related Purchase Contracts on or prior to the fifth Business Day
immediately preceding the Purchase Contract Settlement Date in the manner
described herein, but only in integral multiples of 20 Income PRIDES; provided,
however, if a Tax Event Redemption has occurred prior to the Purchase Contract
Settlement Date and the Treasury Portfolio has become a component of the Income
PRIDES, holders of Income PRIDES may settle early only in integral multiples of
32,000 Income PRIDES at any time on or prior to the second Business Day
immediately preceding the Purchase Contract Settlement Date. A holder of Growth
PRIDES may settle the related Purchase Contracts on or prior to the second
Business Day immediately preceding the Purchase Contract Settlement Date in the
manner described herein (in either case, an "Early Settlement"). Upon such
Early Settlement, (a) the holder will pay to the Company through the Purchase
Contract Agent in immediately available funds an amount equal to the Stated
Amount for each Purchase Contract to
be settled and deliver the Income PRIDES or Growth PRIDES, as the case may be,
to the Purchase Contract Agent, (b) the related Trust Preferred Securities, the
appropriate Applicable Ownership Interest of the Treasury Portfolio or the
Treasury Securities, as the case may be, within three Business Days of the date
of Early Settlement, will be transferred to the holder free and clear of the
Company's security interest therein, and (c) the Company, within three Business
Days of the date of Early Settlement, will deliver newly issued shares of
Common Stock an amount equal to the Stated Amount divided by the Threshold
Appreciation Price) to the holder for each Purchase Contract so settled. Upon
Early Settlement, (i) the holder's rights to receive Deferred Contract
Adjustment Payments, if any, on the Purchase Contracts being settled will be
forfeited, (ii) the holder's right to receive additional Contract Adjustment
Payments, if any, in respect of such Purchase Contracts will terminate and
(iii) no adjustment will be made to or for the holder on account of Deferred
Contract Adjustment Payments, or any amount accrued in respect of Contract
Adjustment Payments.
Termination
The Purchase Contracts and the rights and obligations of The Company and the
holders of the FELINE PRIDES thereunder(including the right thereunder to
receive accrued or Deferred Contract Adjustment Payments, if any, and the
obligation to purchase Common Stock) will automatically terminate upon the
occurrence of certain events of bankruptcy, insolvency or reorganization with
respect to the Company. Upon such termination, the Collateral Agent will
release the related Trust Preferred Securities, the appropriate Applicable
Ownership Interest of the Treasury Portfolio or Treasury Securities, as the
case may be, held by it to the Purchase Contract Agent for distribution to the
holders, subject in the case of the Treasury Portfolio to the Purchase Contract
Agent's disposition of the subject securities for cash, and the payment of such
cash to the holders, to the extent that the holder would otherwise have been
entitled to receive less than $1,000 of any such security. Upon such
termination, there may be a delay before such release and distribution. In the
event that the Company becomes the subject of a case under the United States
Bankruptcy Code of 1978, as amended (the "Bankruptcy Code"), such delay may
occur as a result of the automatic stay under the Bankruptcy Code and continue
until such automatic stay has been lifted. The Company expects any such delay
to be limited.
Voting and Certain Other Rights
Holders of Trust Preferred Securities will not be entitled to vote to appoint,
remove or replace, or to increase or decrease the number of Regular Trustees
(as defined herein) and will generally have no voting rights except in the
limited circumstances described under "Description of Trust Preferred
Securities --Voting Rights." Holders of Purchase Contracts forming part of the
Income PRIDES or Growth PRIDES in their capacities as such holders will have no
voting or other rights in respect of the Common Stock.
TRUST PREFERRED SECURITIES
The Trust
The Trust is a Delaware statutory business trust. The sole assets of the Trust
will consist of the Debentures. The Company will directly or indirectly own all
of the Common Securities representing common undivided beneficial ownership
interests in the assets of the Trust.
Trust Preferred Securities
% Trust Preferred Securities (liquidation amount $50 per Trust Preferred
Security), representing preferred, undivided beneficial ownership interests in
the assets of the Trust.
Distributions
Distributions on the Trust Preferred Securities, which will constitute all or a
portion of the distributions on the Income PRIDES, will be cumulative, will
accrue from the first date of issuance of the Trust Preferred Securities and
will be payable initially at the annual rate of % of the liquidation amount of
$50 per Trust Preferred Security to but excluding the Purchase Contract
Settlement Date, and in the case of Trust Preferred Securities that remain
outstanding on and after the Purchase Contract Settlement Date, from the
Purchase Contract Settlement Date to but excluding 16, 2003, at the
Reset Rate, in each case, when, as and if funds are available for payment.
Subject to the distribution deferral provisions, distributions will be payable
quarterly in arrears on each February 16, May 16, August 16 and November 16,
commencing 16, 1998.
Market Rate Reset
The applicable quarterly distribution rate on the Trust Preferred Securities
and the interest rate on the Debentures on and after the Purchase Contract
Settlement Date, will be reset on the third Business Day immediately preceding
the Purchase Contract Settlement Date to the Reset Rate, determined by the
Reset Agent as the rate the Trust Preferred Securities should bear in
order for a Trust Preferred Security to have an approximate market value of
100.5% of the Stated Amount on the third Business Day immediately preceding the
Purchase Contract Settlement Date, provided, that the Company may limit such
Reset Rate to be no higher than the rate on the Two-Year Benchmark Treasury
plus 200 basis points (2%). Such market value may be less than 100.5% if the
Reset Spread is limited to a maximum of 2%. It is currently anticipated that
Merrill Lynch, Pierce, Fenner & Smith Incorporated will be the Reset Agent.
Optional Remarketing
Pursuant to the Remarketing Agreement and subject to the terms of Remarketing
Underwriting Agreement, on or prior to the Business Day immediately preceding
the Purchase Contract Settlement Date, but no earlier than the Business Day
immediately preceding the Purchase Contract Settlement Date, holders of
separate Trust Preferred Securities which are not components of Income PRIDES
may elect to have their Trust Preferred Securities remarketed, by delivering
their Trust Preferred Securities along with a notice of such election to the
Collateral Agent. Holders of Trust Preferred Securities electing to have their
Trust Preferred Securities remarketed will also have the right to withdraw such
election on or prior to the Business Day immediately
preceding the Purchase Contract Settlement Date. On the fourth Business Day
immediately preceding the Purchase Contract Settlement Date, the Collateral
Agent will deliver such Trust Preferred Securities to the Remarketing Agent for
remarketing. The Remarketing Agent will use its reasonable efforts to remarket
such Trust Preferred Securities (bearing the Reset Rate) on the third Business
Day immediately preceding the Purchase Contract Settlement Date at a price of
approximately 100.5% of the aggregate stated liquidation amount of such Trust
Preferred Securities, plus accrued and unpaid distributions (including deferred
distributions), if any, thereon. The portion of the proceeds from such
remarketing equal to the aggregate stated liquidation amount of such Trust
Preferred Securities will be remitted by the Remarketing Agent to the
Collateral Agent for the benefit of such Trust Preferred Securities holders. In
addition, after deducting as the Remarketing Fee an amount not exceeding 25
basis points (.25%) of the aggregate stated liquidation amount of the
remarketed securities from any amount of such proceeds in excess of the
aggregate stated liquidation amount of the remarketed Trust Preferred
Securities plus any accrued and unpaid distributions (including any deferred
distributions), the Remarketing Agent will remit to the Collateral Agent the
remaining portion of the proceeds, if any, for the benefit of such holder of
Trust Preferred Securities. If, despite using its reasonable efforts, the
Remarketing Agent cannot remarket the Trust Preferred Securities of such
holders of Trust Preferred Securities at a price not less than 100% of the
aggregate stated liquidation amount of such Trust Preferred Securities plus
accrued and unpaid distributions, including deferred distributions, if any,
resulting in a Failed Remarketing, the Remarketing Agent will return such Trust
Preferred Securities to the Collateral Agent to return such Trust Preferred
Securities to such holders. The Company will cause a notice of such Failed
Remarketing to be published on the second Business Day immediately preceding
the Purchase Contract Settlement Date. It is currently anticipated that Merrill
Lynch, Pierce, Fenner & Smith Incorporated will be the Remarketing Agent.
The ability of the Trust to pay distributions on the Trust Preferred Securities
will be solely dependent on the receipt of interest payments from the Company
on the Debentures. The Company will have the right at any time, and from time
to time, to defer the interest payments due on the Debentures for successive
extension periods (the "Extension Periods") limited, in the aggregate, to a
period not extending beyond the maturity date of the Debentures. The
corresponding quarterly distributions on the Trust Preferred Securities would
be deferred by the Trust (but would continue to accumulate quarterly and would
accrue interest, compounded quarterly, at the rate of % per annum through and
including 15, 2001, and at the Reset Rate thereafter) until the end
of any such Extension Period. If a deferral of an interest payment occurs, the
holders of the Trust Preferred Securities will be required to accrue interest
income for United States federal income tax purposes in advance of the receipt
of any corresponding cash distribution with respect to such deferred interest
payment.
Rights Upon Deferral of Distribution
During any period in which interest payments on the Debentures are deferred,
interest will accrue on the Debentures (compounded quarterly) and the
corresponding quarterly distributions on the
Trust Preferred Securities will continue to accumulate with interest thereon at
the rate of % per annum through and including 15, 2001, and at the
Reset Rate thereafter, compounded quarterly.
Liquidation Preference
In the event of any liquidation of the Trust, and after satisfaction of
liabilities to creditors of the Trust, if any, holders will be entitled to
receive Debentures in an aggregate principal amount equal to the aggregate
stated liquidation amount of the Trust Preferred Securities.
Put Option
If a Failed Remarketing has occurred, holders of Trust Securities (including,
following the distribution of the Debentures upon a dissolution of the Trust as
described herein, such Debenture holders), holding such Trust Securities or
Debentures, as the case may be, following the Purchase Contract Settlement Date
will have the right, in the case of Trust Securities, to require the Trust to
put to the Company the related Debentures, or in the case of Debentures, to put
such Debentures directly to the Company on , 2001, upon at least
three Business Days' prior notice, at a price equal to the principal amount,
plus accrued and unpaid interest (including deferred interest), if any,
thereon. Upon the repurchase of such Debentures the proceeds of such repurchase
shall simultaneously be applied (in the case of Trust Securities) to redeem
such Trust Securities of such holder in an aggregate stated liquidation amount
equal to the aggregate principal amount of the Debentures so repurchased and
(ii) any accrued and unpaid distributions (including deferred distributions)
with respect to such Trust Securities will be paid to such holder in cash.
Distribution of Debentures
In certain circumstances involving an Investment Company Event, the Trust would
be dissolved, with the result that, after satisfaction of liabilities to
creditors of the Trust, if any, Debentures with an aggregate principal amount
equal to the aggregate stated liquidation amount of the Trust Preferred
Securities would be distributed to the holders of the Trust Preferred
Securities on a pro rata basis including the Collateral Agent. In such event an
Income PRIDES would thereafter consist of beneficial ownership of a Debenture
with a principal amount equal to the Stated Amount of such Income PRIDES and
the related Purchase Contract, and such Debenture would be otherwise treated as
if it were a Trust Preferred Security.
Tax Event Redemption
The Debentures (and, thus, the Trust Securities) are redeemable, at the option
of the Company, on not less than 30 days or more than 60 days prior written
notice in whole but not in part upon the occurrence and continuation of a Tax
Event under the circumstances described herein at a Redemption Price equal to,
for each Debenture, the Redemption Amount together with accrued and unpaid
distributions (including deferred distributions). If the Company so redeems all
of the Debentures, the Trust must redeem all of the Trust Securities and pay in
cash such Redemption Price to the holders of such Trust Securities. If such Tax
Event Redemption occurs prior to the
Purchase Contract Settlement Date, the Redemption Price payable in liquidation
of any Income PRIDES holders' interest in the Trust, will be distributed to the
Collateral Agent, who in turn will apply an amount equal to the Redemption
Amount of such Redemption Price to purchase the Treasury Portfolio on behalf of
the holders of Income PRIDES and remit the remaining portion, if any, of such
Redemption Price to the Purchase Contract Agent for payment to holders of such
Income PRIDES. The Treasury Portfolio will be substituted for the Trust
Preferred Security and will be pledged with the Collateral Agent to secure such
Income PRIDES holders' obligations to purchase the Common Stock under their
Purchase Contracts.
Other than in the event of a Tax Event Redemption, the Company will not have
the ability to redeem the Debentures prior to their stated maturity date.
The Company will irrevocably and unconditionally guarantee (the "Guarantee"),
generally on a senior unsecured basis, the payment in full of (i) distributions
on the Trust Preferred Securities to the extent the Trust has funds available
therefor, (ii) the redemption price of Trust Preferred Securities in respect of
which the related Debentures have been repurchased by the Company on the
Purchase Contract Settlement Date, to the extent the Trust has funds available
therefor, and (iii) generally, the liquidation amount of the Trust Preferred
Securities or the Redemption Price upon a Tax Event Redemption, to the extent
the Trust has assets available for distribution to holders of Trust Preferred
Securities in the event of a dissolution of the Trust. The Company's
obligations under the Guarantee will be a senior unsecured obligation of the
Company and will rank on a parity with all of the Company's other senior
unsecured obligations.
Debentures
Unless a Tax Event Redemption has occurred, the Debentures will mature on
16, 2003, and will bear interest initially at the rate of % per
annum, payable quarterly in arrears on each February 16, May 16, August 16 and
November 16, commencing 16, 1998. The interest rate on the
Debentures, and the distribution rate on the Trust Preferred Securities, that
remain outstanding after the Purchase Contract Settlement Date will be reset on
the third Business Day immediately preceding the Purchase Contract Settlement
Date to the Reset Rate determined by the Reset Agent. Interest payments on the
Debentures may be deferred from time to time by the Company for successive
Extension Periods not extending, in the aggregate, beyond the stated maturity
date of the Debentures. During any Extension Period, interest at the rate of
% per annum through and including 15, 2001, and at the Reset Rate
thereafter would continue to accrue and compound quarterly. Upon the
termination of any Extension Period and the payment of all amounts then due,
the Company may commence a new Extension Period, provided such new Extension
Period does not extend beyond the stated maturity date of the Debentures. No
interest shall be due during an Extension Period until the end of such period.
During an Extension Period, the Company will be prohibited (subject to certain
exceptions) from paying dividends on or purchasing any of its capital stock and
making certain other restricted payments until quarterly interest payments are
resumed and all amounts then due on the Debentures are paid. The Debentures
will be senior unsecured obligations of the Company and will rank on a parity
with all of the Company's other senior unsecured obligations.
Provided the Company does not exercise its right to defer interest on the
Debentures, a beneficial owner of Income PRIDES and Trust Preferred Securities
will include in gross income its pro rata share of the stated interest on the
Debentures when such interest income is paid or accrued in accordance with its
regular method of tax accounting. The Company intends to report the Contract
Adjustment Payments as income to holders of Income PRIDES and Growth PRIDES,
but holders should consult their tax advisors concerning the possibility that
the Contract Adjustment Payments may be treated as loans, purchase price
adjustments, rebates or option premiums rather than being includible in income
on a current basis. A beneficial owner of Growth PRIDES will be required to
include in gross income its allocable share of any OID with respect to the
Treasury Securities as it accrues on a constant yield to maturity basis. If a
Tax Event Redemption has occurred, a beneficial owner of Income PRIDES will be
required to include in gross income its allocable share of OID on the Treasury
Portfolio as it accrues on a constant yield to maturity basis.
Exhibit B
FORM OF OPINION OF JAMES E. BUCKMAN, SENIOR EXECUTIVE VICE
PRESIDENT AND GENERAL COUNSEL OF THE COMPANY
Based upon and subject to the limitations, qualifications, exceptions
and assumptions set forth above, I am of the opinion that:
(i) The Company has been incorporated and is validly existing as a
corporation under the laws of the State of Delaware.
(ii) The Company has corporate power and authority (i) to own, lease
and operate its properties and to conduct its business as described in the
Prospectus and (ii) to enter into this Agreement, the Pricing Agreement,
the Remarketing Agreement, the Purchase Contract Agreement, the Pledge
Agreement, each Guarantee Agreement, the Indenture, the First Supplemental
Indenture, the Debentures and the Declaration and to perform its
obligations under, or as contemplated under, each thereof.
(iii) The Company is qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, except where the failure to so qualify or be in
good standing would not result in a Material Adverse Effect.
(iv) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus (except for subsequent issuances,
if any, pursuant to incentive compensation plan, employee benefit plan or
dividend reinvestment and stock purchase plan transactions), and the shares
of issued and outstanding capital stock of the Company have been authorized
and validly issued and are fully paid and non-assessable; no holder thereof
is or will be subject to personal liability by reason of being such a
holder.
(v) Each Significant Subsidiary (as such term is defined in clauses
(1) and (2) of Rule 1-02(w) of Regulation S-X promulgated under the 1933
Act) is forth on Schedule B to the Underwriting Agreement. Each Significant
Subsidiary is duly organized and is validly existing and in good standing
under the laws of the jurisdiction of its incorporation with corporate
power and corporate authority under such laws to own, lease and operate its
properties and conduct its business. Each Significant Subsidiary is duly
qualified to transact business as a foreign corporation and is in good
standing in each other jurisdiction in which it owns or leases property of
a nature, or transacts business of a type, that would make such
qualification necessary, except to the extent that the failure to so
qualify or be in good standing would not have a Material Adverse Effect.
Except as otherwise stated in the Registration Statement and the
Prospectus, all of the outstanding shares of capital stock of each
Significant Subsidiary have been duly authorized and validly issued and are
fully paid and nonassessable and are owned by the Company, directly or
through one or more Significant Subsidiaries, free and clear of any Lien,
except for such Liens as are not,
individually or in the aggregate, material to the Company and its
Significant Subsidiaries, considered as one enterprise.
(vi) Each of the documents incorporated by reference in the
Registration Statement or the Prospectus at the time they were filed or
last amended (other than the financial statements and the notes thereto,
the financial schedules, and any other financial data included or
incorporated by reference therein, as to which I need express no belief),
complied as to form in all material respects with the requirements of the
1934 Act and the 1934 Act Regulations, as applicable.
(vii) The Securities have been authorized for issuance and sale to the
Underwriters pursuant to this Agreement and, when issued and delivered by
the Company pursuant to this Agreement against payment of the consideration
set forth in the Pricing Agreement, will be validly issued and fully paid
and non-assessable.
(viii) The Shares subject to the Purchase Contract Agreement have been
validly authorized and reserved for issuance and, when issued and delivered
by the Company in accordance with the provisions of the Purchase Contract
Agreement, the Purchase Contracts and the Pledge Agreement, will be fully
paid and non-assessable; the issuance of such Shares will not be subject to
preemptive or other similar rights arising by law or otherwise.
(ix) The issuance of the Securities is not subject to preemptive or
other similar rights arising by law or otherwise.
(x) All of the issued and outstanding Common Securities of the Trust
are directly owned by the Company free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equitable right.
(xi) This Agreement, the Pricing Agreement and the Remarketing
Agreement have been duly authorized, executed and delivered by the Company.
(xii) The entry by the Company into the Purchase Contracts underlying
the Securities that are FELINE PRIDES, the offer of the Securities as
contemplated herein and in the Prospectus, the issue of the Shares and the
sale of the Shares by the Company pursuant to the Purchase Contracts; the
execution, delivery and performance of this Agreement, the Pricing
Agreement, the Remarketing Agreement, the Purchase Contracts, the Purchase
Contract Agreement, the Pledge Agreement, the Declaration, the Preferred
Securities, the Common Securities, the Indenture, the Debentures and the
Guarantee Agreements, and the consummation of the transactions contemplated
herein, therein and in the Registration Statement (including the issuance
and sale of the Securities and the use of proceeds from the sale of the
Securities as described in the Prospectus under the caption "Use of
Proceeds") and compliance by the Offerors with their obligations hereunder
and
B-2
thereunder have been authorized by all necessary action (corporate or
trust) and do not and will not, whether with or without the giving of
notice or passage of time or both, conflict with or constitute a breach of
any of the terms or provisions of, or constitute a default or Repayment
Event under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company, any Significant
Subsidiary or the Trust pursuant to, the Agreements and Instruments (except
for such conflicts, breaches or defaults or liens, charges or encumbrances
that would not result in a Material Adverse Effect), nor will such action
result in any violation of any applicable law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over the
Company, any Significant Subsidiary or the Trust or any of their assets,
properties, or operations (except for such violations that would not result
in a Material Adverse Effect), nor will such action result in any violation
of the provisions of the charter or by-laws of the Company or any
Significant Subsidiary or the Declaration or Certificate of Trust.
(xiii) There are no statutes required to be described in or
incorporated by reference in the Registration Statement that are not
described or incorporated by reference; and there are no legal or
governmental proceedings pending or, to my knowledge, threatened that are
required to be disclosed or incorporated by reference in the Registration
Statement, other than those disclosed or incorporated by reference therein.
(xiv) There are no contracts, indentures, mortgages, agreements,
notes, leases or other instruments required to be described or referred to
or incorporated by reference in the Registration Statement or to be filed
as exhibits thereto other than those described or referred to or
incorporated by reference therein or filed as exhibits thereto; and the
descriptions thereof or references thereto are true and correct in all
material respects.
Moreover, nothing has come to my attention that causes me to believe
that the Registration Statement, including any information provided pursuant to
Rule 430A or Rule 434, on the original effective date of the Registration
Statement, on the effective date of the most recent post-effective amendment
thereto, if any, on the date of the filing of any annual report on Form 10-K
after the filing of the Registration Statement, on the date of the Underwriting
Agreement or on any Representation Date, contained an untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, or that the
Prospectus, or any amendment or supplement thereto, at the time the Prospectus
Supplement was issued at the time any such amended or supplemented Prospectus
was issued or at the date hereof, contained or contains an untrue statement of
a material fact or omitted or omits to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that I express no opinion or belief with
respect to the financial statements, schedules and other financial data
included therein or excluded therefrom.
B-3
Exhibit C
FORM OF OPINION OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
Based upon and subject to the limitations, qualifications, exceptions
and assumptions set forth above, we are of the opinion that:
(i) The Registration Statement is effective under the 1933 Act; any
required filing of the Prospectus pursuant to Rule 424(b) under the
Securities Act has been made in the manner and within the time period
required by such Rule 424(b); and, to our knowledge, no stop order
suspending the effectiveness of the Registration Statement has been issued
under the 1933 Act, and no proceedings therefor have been initiated or, to
the best of our knowledge, threatened by the Commission.
(ii) The Registration Statement as of its effective date and the
Prospectus and each amendment or supplement thereto as of its issue date
and as of the date hereof (in each case, other than the financial
statements and the notes thereto, the financial schedules, and any other
financial data included or incorporated by reference therein or the
Statements of Eligibility on Form T-1, as to which we express no belief),
complied as to form in all material respects with the requirements of the
1933 Act and the 1933 Act Regulations; and the Declaration, the Indenture
and the Preferred Securities Guarantee Agreement complied as to form in all
respects with the requirements of the 1939 Act and the 1939 Act
Regulations.
(iii) The Securities have been authorized for issuance and sale to the
Underwriters pursuant to this Agreement and, when issued and delivered by
the Company pursuant to this Agreement against payment of the consideration
set forth in the Pricing Agreement, will be validly issued and fully paid
and non-assessable; the Common Stock and the Securities are each registered
under the 1934 Act, and the FELINE PRIDES issuable at the Closing Time and
the Shares issuable by the Company pursuant to the Purchase Contracts have
been authorized for listing on the New York Stock Exchange, upon official
notice of issuance.
(iv) The Shares subject to the Purchase Contract Agreement have been
validly authorized and reserved for issuance and, when issued and delivered
by the Company in accordance with the provisions of the Purchase Contract
Agreement, the Purchase Contracts and the Pledge Agreement, will be fully
paid and non-assessable; the issuance of such Shares will not be subject to
preemptive or other similar rights arising by law or, to our knowledge,
otherwise.
(v) The issuance of the Securities is not subject to preemptive or
other similar rights arising by law or, to our knowledge, otherwise.
(vi) All of the issued and outstanding Common Securities of the Trust
are directly owned by the Company free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equitable right.
(vii) This Agreement, the Pricing Agreement and the Remarketing
Agreement have been duly authorized, executed and delivered by the Trust.
(viii) The Purchase Contract Agreement has been duly authorized by the
Company and, assuming due authorization, execution and delivery of the
Purchase Contract Agreement by the Purchase Contract Agent, constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms except to the extent that enforcement
thereof may be limited by the Bankruptcy Exceptions.
(ix) The Pledge Agreement has been duly authorized by the Company and,
assuming due authorization, execution and delivery of the Pledge Agreement
by the Collateral Agent and the Purchase Contract Agent, constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms except to the extent that enforcement
thereof may be limited by the Bankruptcy Exceptions.
(x) Each of the Guarantee Agreements has been duly authorized,
executed and delivered by the Company; the Preferred Securities Guarantee
Agreement, assuming it is duly authorized, executed, and delivered by the
Guarantee Trustee, constitutes a legal, valid and binding obligation of the
Company and the Guarantee Trustee, enforceable against the Company and the
Guarantee Trustee in accordance with its terms, except to the extent that
enforcement thereof may be limited by Bankruptcy Exceptions; and the
Preferred Securities Guarantee Agreement has been duly qualified under the
1939 Act.
(xi) The Indenture has been executed and delivered by the Company and,
assuming authorization, execution, and delivery thereof by the Debt
Trustee, is a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except to the
extent that enforcement thereof may be limited by the Bankruptcy
Exceptions; and the Indenture has been duly qualified under the 1939 Act.
(xii) The Debentures are in the form contemplated by the Indenture,
have been duly authorized, executed and delivered by the Company and, when
authenticated by the Debt Trustee in the manner provided for in the
Indenture and delivered against payment therefor by the Trust, will
constitute legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except to the extent
that enforcement thereof may be limited by the Bankruptcy Exceptions.
(xiii) The entry by the Company into the Purchase Contracts underlying
the Securities that are FELINE PRIDES, the offer of the Securities as
contemplated herein and in the Prospectus, the issue of the Shares and the
sale of the Shares by the Company
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pursuant to the Purchase Contracts; the execution, delivery and
performance of this Agreement, the Pricing Agreement, the Remarketing
Agreement, the Purchase Contracts, the Purchase Contract Agreement, the
Pledge Agreement, the Declaration, the Preferred Securities, the Common
Securities, the Indenture, the Debentures and the Guarantee Agreements, and
the consummation of the transactions contemplated herein, therein and in
the Registration Statement (including the issuance and sale of the
Securities and the use of proceeds from the sale of the Securities as
described in the prospectus under the caption "Use of Proceeds") and
compliance by the Offerors with their obligations hereunder and thereunder
have been authorized by all necessary action (corporate or trust) and do
not and will not, whether with or without the giving of notice or passage
of time or both, conflict with or constitute a breach of any of the terms
or provisions of, or constitute a default or Repayment Event under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company, any Significant Subsidiary or
the Trust pursuant to, any agreement or other instrument binding on the
Company or any of its Significant Subsidiaries that is listed as an exhibit
to (a) the Registration Statement, (b) the Company's Annual Report on Form
10-K for the fiscal year ended January 31, 1997, (c) the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, 1997
or (d) the Annual Report on Form 10-K of HFS Incorporated for the fiscal
year ended December 31, 1996, nor will such action result in any violation
of any applicable law, statute, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Company, any Significant Subsidiary
or the Trust or any of their assets, properties, or operations (except for
such violations that would not result in a Material Adverse Effect), nor
will such action result in any violation of the provisions of the charter
or by-laws of the Company or any Significant Subsidiary or the Declaration
or Certificate of Trust.
(xiv) When issued in accordance with the terms of the Purchase
Contract Agreement and delivered against payment therefor as provided in
the Underwriting Agreement, the holders of the FELINE PRIDES will be
entitled to the rights and subject to the obligations specified in the
Purchase Contract Agreement.
(xv) The provisions of the Pledge Agreement are effective to create in
favor of the Collateral Agent for the benefit of the Company a valid
security interest under the UCC in all "securities entitlements" (as
defined in Section 8-102(a)(17) of the UCC and the Federal Book-Entry
Regulations) now or hereafter credited to the Collateral Account and
relating to the Preferred Securities or the Treasury Securities (the
"Pledged Securities Entitlements"); and the provisions of the Pledge
Agreement are effective under the UCC and the Federal Book-Entry
Regulations to perfect the security interest of the Collateral Agent for
the benefit of the Company in the Pledged Securities Entitlements.
(xvi) The Security Certificates are in a form contemplated by the
Purchase Contract Agreement.
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(xvii) The information in the Prospectus under the captions
"Description of the FELINE PRIDES," "Description of the Purchase
Contracts," "Certain Provisions of the Purchase Contract Agreement and the
Pledge Agreement," "Description of the Trust Preferred Securities,"
"Description of the Guarantee," "Description of the Debentures" and
"General Description of Capital Stock--Description of Common Stock," to the
extent that they involve matters of law, summaries of legal matters,
documents or proceedings, or legal conclusions, has been reviewed by us and
is correct in all material respects.
(xviii) No authorization, approval, consent, order, registration or
qualification of or with any court or governmental authority or agency is
required (a) for the execution, delivery and performance by the Company or
the Trust, as the case may be, of this Agreement, the Pricing Agreement,
the Remarketing Agreement, the Purchase Contract Agreement, the Purchase
Contracts, the Pledge Agreement, the Indenture, the Debentures, the
Guarantee Agreements, the Declaration and the Securities or (b) in
connection with the issuance and sale of the Common Securities, the
offering of the Securities and the issuance and sale of the Shares by the
Company pursuant to the Purchase Contracts, except such as have been
obtained and made under the federal securities laws and such as may be
required under state or foreign securities or Blue Sky laws.
(xix) Neither the Trust nor the Company or any of its subsidiaries is,
and upon the issuance and sale of the Securities as herein contemplated and
the application of the net proceeds therefrom as described in the
Prospectus will not be, an "investment company" as such term is defined in
the Investment Company Act of 1940, as amended (the "1940 Act").
(xx) The Trust has been created and is validly existing in good
standing as a business trust under the Delaware Act, and has the business
trust power and authority to conduct its business as described in the
Prospectus.
(xxi) Assuming the due authorization, execution and delivery of the
Declaration by Wilmington Trust Company, the Declaration has been
authorized, executed and delivered by the Company and the Regular Trustees
and is a legal, valid and binding obligation of the Company, enforceable
against the Company and each of the Regular Trustees in accordance with its
terms, except as enforcement thereof may be limited by the Bankruptcy
Exceptions; and the Declaration has been duly qualified under the 1939 Act.
(xxii) Under the Delaware Act and the Declaration, the Trust has the
power and authority to (a) execute and deliver, and to perform its
obligations under, this Agreement and the Pricing Agreement and (b) issue,
and perform its obligations under, the Trust Securities.
(xxiii) Under the Delaware Act and the Declaration, the execution and
delivery by the Trust of this Agreement and the Pricing Agreement, and the
performance by the Trust
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of its obligations hereunder and under the Pricing Agreement, have
been authorized by all necessary action on the part of the Trust.
(xxiv) The Preferred Securities have been authorized by the
Declaration and, when executed by the Trust and delivered against payment
therefor in accordance with the terms of this Agreement, will be validly
issued and, subject to qualifications hereinafter expressed, fully paid and
nonassessable undivided beneficial interests in the assets of the Trust;
the Holders of the Preferred Securities, as beneficial owners of the Trust,
will be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware; said counsel may note that the
holders of the Preferred Securities may be obligated to make payments as
set forth in the Declaration.
(xxv) The Common Securities have been authorized by the Declaration
and, when issued, executed and authenticated in accordance with the terms
of the Declaration, and delivered and paid for as set forth in the
Prospectus, will be validly issued, undivided beneficial interests in the
assets of the Trust.
(xxvi) Under the Delaware Act and the Declaration, the issuance of the
Trust Securities is not subject to preemptive or other similar rights.
(xxvii) None of the execution and delivery by the Trust of, or the
performance by the Trust of its obligations under, this Agreement, the
issuance and sale of the Preferred Securities by the Trust in accordance
with the terms of this Agreement and the Pricing Agreement, or the
consummation by the Trust of the other transactions contemplated thereby,
will violate any provisions of applicable Delaware law or Dela- ware
administrative regulations or the Certificate of Trust or the Declaration.
(xxviii) No authorization, approval, consent or order of any Delaware
court or Delaware state governmental authority or Delaware state agency is
required to be obtained by the Trust solely as a result of the issuance and
sale by the Trust of the Securities, except such as has been obtained and
made under the federal securities laws or such as may be required under
state or foreign securities or blue sky laws.
(xxix) Under current U.S. federal income tax law: (a) the Trust will
be classified as a grantor trust and not as an association taxable as a
corporation; (b) the Debentures will be classified as indebtedness of the
Company and (c) the discussion in the Prospectus under the caption "Certain
Federal Income Tax Consequences" is a fair and accurate summary of the
matters addressed therein, based upon current law and the assumptions
stated or referred to therein. The opinion expressed in clause (c) may be
conditioned on the initial and continuing accuracy of the facts, financial
and other information, covenants and representations set forth in
certificates of officers of the Company and the Trust and other documents
deemed necessary for such opinion.
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(xxx) The issuance and sale of the Income PRIDES and the Growth PRIDES
do not violate the Commodity Exchange Act or the regulations of the
Commodity Futures Trading Commission thereunder.
We have been orally advised by the Commission that the Registration
statement was declared effective under the 1933 Act at 2:30 p.m. on February
23, 1998 and, we have been advised by the Commission that no stop order
suspending the effectiveness of the Registration Statement under the 1933 Act
has been issued and, to the best of our knowledge, no proceedings for that
purpose have been initiated or are pending or threatened by the Commission.
In addition, we have participated in conferences with officers and
representatives of the Company, representatives of the independent accountants
of the Company, and you and your counsel at which the contents of the
Registration Statement and the Prospectus and related matters were discussed
and, although we are not passing upon and do not assume any responsibility for,
the accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus and we have made no independent check
or verification thereof, except as set forth in numbered paragraph (xvii)
above, on the basis of the foregoing, no facts have come to our attention that
have led us to believe that the Registration Statement, at the time it became
effective, contained an untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus, as of the date of
the Prospectus Supplement or as of the date hereof, contained or contains an
untrue statement of a material fact or omitted or omits to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that we
express no opinion or belief with respect to the financial statements,
schedules and other financial data included therein or excluded therefrom,
including any Forms T-1.
Very truly yours,
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Exhibit D
LETTER OF DELOITTE & TOUCHE LLP
Exhibit E
LETTER OF KPMG PEAT MARWICK LLP
Exhibit F
LETTER OF ERNST & YOUNG LLP