$2.8 Billion Settlement in Cendant Corporation Securities Class Action Suit Announced by Bernstein Litowitz Berger & Grossmann LLP and Barrack, Rodos & Bacine.

NEW YORK--(BUSINESS WIRE)--Dec. 7, 1999--

A landmark $2.8 billion settlement was announced today in the securities class action law suit filed against Cendant Corporation (NYSE: CD), the company formed through the December, 1997 merger of HFS International and CUC International, Inc., according to Lead Counsel, the law firms of Bernstein Litowitz Berger & Grossmann LLP and Barrack, Rodos & Bacine.

The $2.8 billion settlement amount is over three times the highest recovery ever obtained in a securities class action case (WPPSS), and approximately 10 times the recovery in the next largest securities class action case involving fraudulent financial statements (Lincoln Savings).

The two firms were appointed as Lead Counsel for the Class in October, 1998 by the Honorable William H. Walls, U.S. District Court Judge in the District of New Jersey. The firms had been retained as counsel by the three largest public retirement and pension funds in the United States - the California Public Employees' Retirement System ("CalPERS"), the New York State Common Retirement Fund, and various New York City Pension Funds. These three pension systems were appointed by the Court to serve as Lead Plaintiffs for the case.

The settlement successfully resolves all claims of the Class against all defendants in the case, except for Ernst & Young LLP, which had audited the financial statements of CUC. The Class consists of persons and entities, other than defendants and their affiliates, that purchased or otherwise acquired publicly traded securities of Cendant and its predecessor, CUC International, other than Cendant PRIDES, during the period from May 31, 1995 through and including August 28, 1998.

"This is an extraordinary result that our clients have achieved for the entire Class. The settlement will provide recovery of a substantial portion of the losses suffered by the Class, and we are continuing to prosecute the case against Ernst & Young. Equally important are the wide-ranging corporate governance changes that Cendant has committed to institute, which should go far in ensuring that the type of fraud that occurred here will not be repeated," said Leonard Barrack, senior partner at Barrack, Rodos & Bacine.

The Settlement requires Cendant to institute corporate governance changes, that are far-reaching and unprecedented in securities class action litigation. These changes include:

The Board's Audit Committee, Nominating Committee and

Compensation Committee will each be comprised entirely of

independent directors (according to stringent definitions,

endorsed by the institutional investment community, of what

constitutes an independent director);

The majority of the Board will be independent within two

years following final approval of the Settlement;

Cendant will take the steps necessary to provide that,

subject to amendment of the Certificate of Incorporation 

de-classifying the Board of Directors by vote of the

required super-majority of shareholders, all directors shall

be elected annually; and

No employee stock option shall be "re-priced" following its

grant without an approving vote of shareholders (except in

accordance with its terms to take into account corporate

transactions such as stock dividends, stock splits,

recapitalization, merger or distributions).

Max W. Berger, senior partner at Bernstein Litowitz Berger & Grossmann LLP, stated "We are truly gratified by the confidence that our clients and the Court vested in us, in selecting us as their counsel and as counsel for the Class, and we are delighted to have been a part of procuring this magnificent result. It is, by far, the largest recovery ever obtained in a securities class action and demonstrates the importance of institutional investors, like our clients in this case, taking the lead in securities law class action cases."

The two firms, representing Lead Plaintiffs and the Class, will continue to prosecute claims against Ernst & Young. In addition, as part of the Settlement, the Class will be entitled to receive 50% of any recovery that Cendant and its officers and/or directors might achieve from prosecution of claims they will pursue against Ernst & Young. The Class will not be charged any costs or expenses in connection with Cendant and others continuing to pursue claims against E&Y, and will not be taxed for such costs in the event that there is no recovery from E&Y.

The parties anticipate that a formal Stipulation of Settlement will be signed and submitted to the Court by mid-January, 2000, and that a final hearing on the Settlement will occur in April, 2000. The settlement amount will begin accruing interest upon District Court approval of the settlement.

FACT SHEET

IN RE CENDANT CORPORATION LITIGATION

MASTER FILE NO. 98-1664 (WHW) (D.N.J.)

THE CLASS - The case was brought on behalf of all persons and entities, other than defendants and their affiliates, who purchased or otherwise acquired publicly traded securities of Cendant and its predecessor, CUC International, Inc. (other than Cendant PRIDES), during the period from May 31, 1995 through August 28, 1998, inclusive. The Class encompasses persons and entities who acquired: (a) Cendant and CUC common stock, including stock acquired in exchange for HFS International common stock in the merger between HFS and CUC, which combined to form Cendant on December 17, 1997; (b) Cendant and CUC common stock options; (c) Cendant 5_% Senior Notes due 2003; (d) Cendant 4 3/4% Convertible Senior Notes due 2003; and (e) Cendant 3% Convertible Subordinated Notes due 2002.

LEAD PLAINTIFFS FOR THE CLASS - The California Public Employees' Retirement System (CalPERS); the New York State Common Retirement Fund; and the New York City Pension Funds.

COUNSEL FOR THE CLASS - Lead Plaintiffs and the Class are represented by the law firms of Bernstein Litowitz Berger & Grossmann LLP, based in New York, and Barrack, Rodos & Bacine, based in Philadelphia.

THE FACTUAL BACKGROUND OF THE CASE

On April 15, 1998, Cendant disclosed that it would restate previously reported financial results for 1997, including reducing 1997 net income by $100 million to $115 million, because of unspecified accounting irregularities relating to certain business segments of CUC. Cendant also announced that the Audit Committee of its Board of Directors had retained the law firm of Wilkie Farr & Gallagher ("WF&G") as special legal counsel to investigate the accounting irregularities, and that WF&G had retained the accounting firm of Arthur Andersen LLP ("AA") to perform an independent investigation.

On July 14, 1998, Cendant announced that it would restate CUC's and Cendant's previously reported financial results for 1995, 1996 and 1997, and all quarters of those years. At that time, Cendant revealed its finding that a widespread fraud had occurred at CUC that included improperly recognizing fictitious revenues, falsely coding services sold to customers and fraudulently manipulating merger reserves.

On August 28, 1998, Cendant filed with the SEC a report prepared by WF&G and AA and adopted by the Audit Committee, that detailed the fraud they discovered that had pervaded 17 of CUC's 22 operating units and had caused CUC's and CMS's operating income to be inflated by approximately $500 million; income from continuing operations before income taxes by approximately $297.2 million; earnings per share by $0.61; and quarterly operating income in 1995, 1996 and 1997 by $31 million, $87 million and $175 million, respectively.

As a result of the disclosures, starting on April 15, 1998, the price of Cendant stock fell precipitously. On April 16, 1998, the market price of Cendant stock fell from approximately $35 per share to $19 per share, on trading of approximately 108 million shares, which was the largest market loss in U.S. history. With the announcements of July 14 and August 28, 1998, the stock fell to nearly $11 per share.

PROCEEDINGS IN THE CASE

Over 50 lawsuits were filed in the U.S. District Court for the District of New Jersey following the April 15 announcement. They were assigned to the Honorable William H. Walls, U.S. District Judge. The Court consolidated all of these cases by Order of May 29, 1998.

On September 17, 1998, Judge Walls appointed the New York State Common Retirement Fund, CalPERS and various New York City Pension Funds as the Lead Plaintiffs, pursuant to the Private Securities Litigation Reform Act of 1995, which encourages institutional investors to seek lead positions in securities law class action cases.

On October 9, 1998, Judge Walls appointed the law firms of Bernstein Litowitz Berger & Grossmann LLP and Barrack, Rodos & Bacine, who were selected by the Lead Plaintiffs to represent them, to be Lead Counsel for the Class after a competitive bidding process established by the Court to ensure the best representation for the Class at a fair price.

On December 14, 1998, Lead Plaintiffs filed an Amended Consolidated Class Action Complaint on Behalf of Purchasers and Acquirers of All Cendant and CUC Publicly Traded Securities except PRIDES (the "Complaint"), asserting claims against Cendant; certain of its officers and directors; certain former officers and directors of CUC; and E&Y for alleged violations of the federal securities laws. At the same time, Lead Plaintiffs moved for certification of a Class of all persons and entities, other than defendants and their affiliates, who purchased or acquired publicly traded securities of Cendant and its predecessor, CUC, during the period from May 31, 1995 through August 28, 1998.

On January 27, 1999, the Court granted the motion for certification of the Class requested by motion of December 14, 1998.

On July 8, 1999, the Court heard argument on motions filed by various defendants to dismiss all or portions of the Complaint. On July 27, 1999, the Court denied all such motions, except that the Court granted E&Y's motion to dismiss the claims brought against it for purchases of Cendant publicly traded securities made after April 15, 1998.

On July 27, 1999, the Court also heard oral argument on various motions to stay proceedings in the class action case pending the outcome of an investigation relating to Cendant being conducted by the U.S. Attorneys' Office. While permitting the U.S. Attorneys' Office to intervene for the purpose of moving to stay the case, the Court, with limited exceptions, denied the motions seeking a stay.

DEVELOPMENTS LEADING TO SETTLEMENT OF THE CASE

From the outset of the case, Lead Counsel conducted an extensive investigation concerning the allegations of wrongdoing pertaining to each defendant, the damages suffered by the Class, and the financial capabilities of the defendants. They inspected hundreds of thousands of documents produced by Cendant, Ernst & Young, the Individual Defendants and various non-parties. Lead Counsel further retained Forensic Economics, Inc., an expert consultant in the field of assessing damages in securities law cases, and Lazard Freres & Co. LLC, an internationally renowned investment banking firm, to assist in analysis and settlement negotiations.

Settlement negotiations were conducted under the auspices of Lead Plaintiffs and with constant consultation between the Lead Plaintiffs and our two firms. The discussions with defendants' counsel, which began in earnest in May 1999, were intense, complicated and arduous. While settlement discussions were occurring, Lead Plaintiffs continued to vigorously prosecute the case on behalf of the Class, fighting the motions to dismiss and to stay, and pursuing the extensive factual investigation and analysis of documents.

TIMING

While a formal Stipulation of Settlement must still be completed, Lead Plaintiffs and Cendant have committed to the Settlement being announced today.

It is hoped that the formal Stipulation of Settlement can be submitted to the Judge by early January, and approved at a final settlement hearing sometime in April, 2000. Assuming preliminary approval of the Settlement by the Court, we anticipate that a formal Notice of the Settlement will be mailed to Class members.