Cendant Corporation Litigation

Lead Plaintiffs, the California Public Employees' Retirement System ("CalPERS"), the New York State Common Retirement Fund (the "NYSCRF") and the New York City Pension Funds (the "NYCPF") (collectively, "Lead Plaintiffs"), represented by Lead Counsel, Bernstein Litowitz Berger and Grossmann LLP and Barrack, Rodos & Bacine, have entered into two separate proposed settlements that together will resolve all claims of the plaintiffs and Class Members against all defendants ("Defendants") in the action filed by Lead Plaintiffs on behalf of the Class (except for actions brought on behalf of purchasers of PRIDES) under Master File No. 98-1664 (WHW) (the "Action"). One proposed settlement is with Cendant Corporation ("Cendant") and Henry R. Silverman, John D. Snodgrass, Michael P. Monaco, James E. Buckman, Scott E. Forbes, Steven P. Holmes, Robert D. Kunisch, Leonard S. Coleman, Christel DeHaan, Martin L. Edelman, Brian Mulroney, Robert E. Nederlander, Robert W. Pittman, E. John Rosenwald, Jr., Leonard Schutzman and Robert F. Smith (the "HFS Individual Defendants"); the other is with Ernst & Young LLP ("E&Y"). These two proposed settlements (collectively, the "Settlements") are separate and independent.

The Settlements will create a settlement fund (the "Settlement Fund") that totals $3,186,500,000 in cash plus interest. The settlement with Cendant and the HFS Individual Defendants (the "Cendant Settlement") includes a payment for the Class of $2,851,500,000 in cash, and the settlement with E&Y (the "E&Y Settlement") includes a payment for the Class of $335,000,000 in cash. As part of the Cendant Settlement, the Class also will receive one-half of any net recovery that Cendant or the HFS Individual Defendants may obtain from E&Y as a result of their continuing litigation against E&Y. Also, as part of the Cendant Settlement, Cendant has agreed to corporate governance changes that Lead Plaintiffs believe are significant, including adoption of a specific definition for who may qualify as an "independent director"; requiring its Board of Directors to have a majority of independent directors; requiring the Audit, Compensation and Nominating Committees to consist entirely of independent directors (at least one member of the Audit Committee must have accounting or financial management expertise); precluding the re-pricing of employee stock options under most conditions (except in connection with certain corporate transactions) without a vote of shareholders; and not objecting to a declassification of its Board of Directors. As to the cash settlement payments, the average recovery per share will depend on when Class Members purchased and sold Cendant or CUC International, Inc. ("CUC") common stock, notes or options, the number of shares, notes or options affected, and the amount of inflation per share, note or option. According to Lead Plaintiffs, each share of Cendant and CUC common stock purchased or acquired during the Class Period was affected, to varying degrees, by the alleged fraud. The experts on damages retained by Lead Plaintiffs calculate that, in all, approximately 967 million shares of Cendant common stock were traded during the Class Period. Assuming that all affected shares elected to participate in the Settlements, the average recovery per share would be $2.95 from the Cendant Settlement and $0.35 from the E&Y Settlement, for a total of $3.30 per share from the two Settlements, but with some Class Members recovering more and some less, depending on when their shares were acquired, as more fully described in the accompanying Plan of Allocation of Net Settlement Fund (the "Plan of Allocation").

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