EXHIBIT 1
OPTION AGREEMENT
THIS OPTION AGREEMENT (the "Option Agreement") is made and entered
into as of August 5, 2003, by and between Cendant Membership Services
Holdings, Inc., a Delaware corporation ("Cendant") and Homestore, Inc., a
Delaware corporation ("Homestore").
RECITALS
WHEREAS, Cendant owns certain shares of common stock, par value $0.001 per
share, of Homestore, Inc. (the "Common Stock") and Cendant desires to grant to
Homestore, and Homestore desires to accept from Cendant, an option to acquire
up to 7,264,812 shares of the Common Stock held by Cendant pursuant to the
terms of this Option Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Option. Subject to the terms and conditions set forth herein,
Cendant hereby grants to Homestore an option (the "Option") to purchase up to
7,264,812 shares of the Common Stock held by Cendant (the "Option Shares").
The parties hereby acknowledge that the exercise price per share of the Option
Shares shall be the highest closing price per share of the Common Stock, as
reported on the Nasdaq SmallCap Market System, on any of the five (5) most
recent trading days that the Common Stock traded ending on the date Homestore
exercises the Option (the "Option Price"). The number and character of such
Option Shares are subject to adjustment as provided pursuant to Section 6.
2. Option Exercise Period. This Option shall only be exercisable, if
at all, on and from August 15, 2003 through October 4, 2003.
3. Partial Exercise. This Option may be exercised in whole or in part
as to the Option Shares. Any Option Shares remaining outstanding following a
partial exercise shall continue to be subject to the provisions hereof in all
respects.
4. Method of Exercising Option. Subject to the terms and conditions
of this Option Agreement, the Option may be exercised by written notice
("Notice") to Cendant in accordance with Section 10(e) and in accordance with
covenants, agreements and conditions set forth in the following sentences.
Such Notice (i) shall state the election to exercise this Option, (ii) shall
state the number of shares that Homestore desires to exercise, (iii) shall
state that Homestore (it being agreed that, in the event of an assignment of
this Option Agreement, the term "Homestore" refers solely to such assignee and
not to Homestore) is not in possession of, and has not been in possession of
any material, nonpublic information concerning Homestore (it being agreed
that, in the event of an assignment of this Option Agreement, the term
"Homestore" refers only to Homestore and not to the assignee) for a period of
at least five trading days prior to and including the date of the Notice, and
(iv) shall be signed by Homestore. The Option Price with respect to the Option
Shares exercised shall be paid in cash or immediately available funds (to a
bank wire account identified by Cendant) within one (1) business day following
delivery of the Notice. Upon payment of the Option Price with respect to the
Option Shares exercised, Cendant shall deliver, or cause to be delivered, to
Homestore a certificate or certificates, and such additional instruments as
specified in Section 8(a)(ii) below, representing such shares as soon as
practicable (but in no event more than five (5) days from the date of
exercise).
5. Transferability. This Option is transferable or assignable by
Homestore in whole or in part without the prior written consent of Cendant,
provided that such Option shall not be transferable to more than five (5)
transferees and provided further that Cendant shall be the beneficiary of and
entitled to any consideration received by Homestore in connection with such
option transfer. In the event the Option is transferred in whole by Homestore,
Cendant agrees to cooperate in the issuance of a replacement option or options
identical to the terms set forth herein (except as provided in Section 8(b)
below) as requested by Homestore and such transferee upon the delivery of this
Option, with applicable transfer instructions, to Cendant for such
replacement.
6. Adjustments. The Option Shares shall be subject to adjustment from
time to time in accordance with this Section 6.
If Homestore (i) pays a dividend in shares of capital stock of
Homestore on Cendant's outstanding Common Stock; (ii) distributes shares of
capital stock of Homestore to holders of Common Stock; (iii) subdivides the
outstanding shares of Common Stock into a greater number of shares of Common
Stock; or (iv) combines the outstanding shares of Common Stock into a smaller
number of the shares of Common Stock, then the Option Shares shall be adjusted
so that the Homestore shall be entitled to receive, upon payment of the Option
Price, the number of shares that Homestore would have owned immediately
following such action had the Option been exercised immediately prior to the
action. Any adjustment made pursuant to this paragraph shall be effective on
the record date in the case of a dividend or distribution, and shall become
effective on the effective date of a subdivision or combination.
7. Rights as Stockholder. Homestore shall have no rights as a
stockholder of Homestore with respect to any shares underlying the Option
until the day of the exercise of the Option and payment of the Option Price in
accordance with the terms and provisions hereof. Cendant shall retain all
rights (voting and otherwise) with respect to the Option Shares prior to any
transfers to Homestore hereunder and Homestore shall have no rights to direct
Cendant to vote such shares in any manner.
8. Covenants. (a) Cendant hereby covenants and agrees to the
following:
(i) Other than pursuant to this Option Agreement, Cendant will
not assign this Option Agreement or sell, transfer or otherwise dispose of the
Option Shares, or grant an option to purchase the Option Shares, or any
portion thereof provided that nothing herein shall prohibit Stockholder from
selling, transferring or otherwise disposing of the Option Shares to any
affiliate of Cendant so long as any disposition of Option Shares to any
affiliate of Cendant shall not extinguish the Option with respect to the
Option Shares in the hands of such affiliate.
(ii) Upon the receipt of the Option Price with respect to the
Option Shares then exercised, Cendant will execute and deliver to Homestore
such instruments of transfer and assignment in such form and substance
reasonably satisfactory to Homestore evidencing the transfer of the Option
Shares to Homestore.
(b) Homestore hereby covenants and agrees that Homestore will not
resell any Option Shares for at least six (6) months from the date of purchase
of the Option Shares from Cendant or any of its affiliates. The preceding
sentence shall not apply to any transferee of this Option, provided, however,
that any transferee of Homestore's rights hereunder represents and warrants
that upon transfer of the Option and exercise of such Option, such transferee
is purchasing such Option and Option Shares for investment purposes only and
not for distribution.
9. Replacement. Upon receipt of evidence reasonably satisfactory to
Cendant of the loss, theft, destruction or mutilation of this Option and (in
the case of loss, theft or destruction) upon delivery of an unsecured
indemnity agreement in an amount reasonably satisfactory to it, or (in the
case of mutilation) upon surrender and cancellation thereof, Cendant will
issue, in lieu hereof, a new Option of like tenor.
10. Miscellaneous.
(a) Binding on Successors and Representatives. The parties understand
that this Option Agreement shall be binding not only upon themselves, but also
upon their representatives, successors and assigns; and the parties agree, for
themselves and their representatives, successors and assigns, to execute any
instrument that may be necessary or desirable legally to effect such
understanding.
(b) Entire Agreement. This Option Agreement evidences the entire
agreement of the parties with respect to the Option and supersedes any
previous agreement whether written or oral, with respect thereto.
(c) Amendment. Neither this Option Agreement nor any of the terms and
conditions herein set forth may be altered or amended orally. Any such
alteration or amendment shall be effective only when reduced to writing and
signed by each of the parties or their respective successors and assigns.
(d) Construction of Terms. Any reference herein to the singular or
plural shall be construed as plural or singular whenever the context requires.
(e) Notices. Any and all notices, requests, demands, or other
communications hereunder, including the notice contemplated under Section 2
and notice of exercise, shall be in writing and be deemed to have been duly
given (i) when delivered by hand, (ii) one (1) business day after being given
to an express overnight courier, or (iii) when sent by confirmed facsimile,
with a copy sent by another means set forth in this Section 10(e), and
addressed to the respective parties as follows, provided that either party may
change its address or designee for notification purposes by giving the other
party prior written notice thereof:
(i) if to Cendant, to the following
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
(ii) if to Homestore, to the following
00000 Xxxxxxx Xxxxx Xx.
Xxxx Xxxx Xxxxxx, XX 00000-000
Attention: Chief Executive Officer
or to such other address as the respective parties may designate by notice.
(f) Governing Law. This Option Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the choice of law provisions thereof.
(g) Severability. The invalidity or unenforceability of any
particular provision of this Option Agreement shall not affect the other
provisions hereof, and this Option Agreement shall be construed in all
respects as if such invalid or unenforceable provisions were omitted.
IN WITNESS WHEREOF, the undersigned has duly executed this Option
Agreement as of the date first set forth above.
CENDANT MEMBERSHIP SERVICES
HOLDINGS, INC.
By: /s/ Xxxxxxx Xxxxxxx
-----------------------------
Name: Xxxxxxx Xxxxxxx
Title: Executive Vice
President - Tax
ACKNOWLEDGED:
HOMESTORE, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: EVP and General Counsel
