UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended April 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number: 1-10308
CUC International Inc.
(Exact name of registrant as specified in its charter)
Delaware 06-0918165
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
707 Summer Street
Stamford, Connecticut 06901
(Address of principal executive offices) (Zip Code)
(203) 324-9261
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes No .
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $.01 par value - 191,537,342 shares as of May 31,
1996
INDEX
CUC INTERNATIONAL INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - April 30, 1996
and January 31, 1996. 3
Condensed Consolidated Statements of Income - Three months
ended April 30, 1996 and 1995. 4
Condensed Consolidated Statements of Cash Flows -
Three months ended April 30, 1996 and 1995. 5
Notes to Condensed Consolidated Financial Statements. 6
Independent Accountants' Review Report. 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders 13
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 17
INDEX TO EXHIBITS 18
PART I. FINANCIAL INFORMATION
CUC INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
April 30, January 31,
1996 1996
Assets (Unaudited)
Current Assets
Cash and cash equivalents $286,344 $269,987
Receivables 305,380 297,842
Prepaid membership materials 42,302 39,061
Prepaid expenses, deferred taxes
and other 105,702 100,104
Total Current Assets 739,728 706,994
Membership solicitations in process 61,663 60,713
Deferred membership acquisition costs 278,001 273,102
Contract renewal rights and intangible
assets - net of accumulated
amortization of $97,448 and $92,415 281,545 276,047
Properties, at cost, less accumulated
depreciation of $77,698 and $73,575 65,491 61,441
Deferred income taxes and other 40,243 36,111
$1,466,671 $1,414,408
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and accrued expenses $101,107 $124,902
Federal and state income taxes payable 12,887 24,943
Total Current Liabilities 113,994 149,845
Deferred membership income, net 523,233 513,219
Zero coupon convertible notes - net of
unamortized original issue discount
of $178 and $588 14,709 14,410
Other 9,164 9,722
Shareholders' Equity
Common stock-par value $.01 per share;
authorized 400 million shares;
issued 194,381,429 shares
and 191,820,896 shares 1,944 1,918
Additional paid-in capital 370,389 323,704
Retained earnings 482,657 434,407
Treasury stock, at cost, 3,868,011
shares and 3,410,631 shares (48,161) (30,998)
Foreign currency translation (1,258) (1,819)
Total Shareholders' Equity 805,571 727,212
$1,466,671 $1,414,408
See notes to condensed consolidated financial statements.
CUC INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share amounts)
Three Months Ended
April 30,
1996 1995
REVENUES
Membership and service fees and other $390,026 $325,114
Total Revenues 390,026 325,114
EXPENSES
Operating 105,801 89,186
Marketing 151,962 128,520
General and administrative 54,408 48,709
Interest income, net (805) (348)
Total Expenses 311,366 266,067
INCOME BEFORE INCOME TAXES 78,660 59,047
Provision for income taxes 30,410 23,001
NET INCOME $48,250 $36,046
Net Income Per Common Share $0.25 $0.19
Weighted Average Number of
Common and Dilutive Common
Equivalent Shares Outstanding 196,736 192,371
See notes to condensed consolidated financial statements.
CUC INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
APRIL 30,
THREE MONTHS ENDED 1996 1995
OPERATING ACTIVITIES:
Net income $48,250 $36,046
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Membership acquisition costs (122,372) (83,874)
Amortization of membership
acquisition costs 117,473 97,205
Deferred membership income 9,776 (10,762)
Membership solicitations in process (950) (4,659)
Amortization of contract renewal 5,033 4,503
rights and excess cost
Deferred income taxes (2,007) 3,784
Amortization of original issue
discount on convertible notes 406 426
Depreciation 4,287 3,765
Changes in working capital items, net of acquisitions:
Increase in receivables (7,538) (13,725)
(Increase) decrease in prepaid
membership materials (3,241) 2,130
Increase in prepaid expenses (5,598) (11,323)
Net decrease in accounts payable
& accrued expenses and federal
& state income taxes payable (13,235) (20,746)
Other, net (1,987) (2,852)
Net cash provided by (used in) operating
activities 28,297 (82)
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (10,668) (51,172)
Acquisitions of properties (7,962) (7,617)
Net cash used in investing activities (18,630) (58,789)
FINANCING ACTIVITIES:
Issuance of Common Stock 5,463 10,017
Repayments of long-term obligations 1,227 378
Net cash provided by financing activities 6,690 10,395
Net increase (decrease) in cash and cash
equivalents 16,357 (48,476)
Cash and cash equivalents at beginning of
period 269,987 209,054
Cash and cash equivalents at end of
period $286,344 $160,578
See notes to condensed consolidated financial statements.
CUC INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three months ended
April 30, 1996 are not necessarily indicative of the results that
may be expected for the year ending January 31, 1997. For
further information, refer to the financial statements and
footnotes thereto included in the Company's Form 10-K filing for
the year ended January 31, 1996. The condensed consolidated
financial statements at April 30, 1996 and for the three months
ended April 30, 1996 and 1995 are unaudited, but have been
reviewed by independent accountants and their report is included
herein. Certain balance sheet amounts were reclassified to
conform with the April 30, 1996 presentation.
NOTE 2 -- MERGERS AND ACQUISITIONS
During February 1996, the Company entered into two separate
Agreements and Plans of Merger to acquire Davidson & Associates,
Inc. ("Davidson") and Sierra On-Line, Inc. ("Sierra")
(collectively, the "Software Mergers"). Under the terms of the
respective agreements, the Company plans to issue .85 of one
share of its common stock, par value $.01 per share ("Common
Stock") for each share of Davidson common stock issued and
outstanding and 1.225 shares of its Common Stock for each share
of Sierra common stock issued and outstanding, immediately prior
to the respective effective dates of the Software Mergers. The
consummations of the Software Mergers are subject to certain
customary closing conditions, including the approval of the
holders of Davidson and Sierra common stock, respectively.
Additionally, the Boards of Directors of Davidson and Sierra
have the right (but are not required) to terminate the respective
merger agreements if the average price per share of the Company's
Common Stock in specified periods prior to their respective
stockholders' meetings is below $29. Neither transaction is
contingent upon the consummation of the other transaction. The
transactions will be accounted for under the pooling-of-interests
method of accounting and are expected to be completed during the
second quarter of fiscal 1997.
During April 1996, the Company entered into an Agreement and Plan
of Merger to acquire Ideon Group, Inc. ( the "Ideon Merger"). In
the Ideon Merger, each share of Ideon Group, Inc. ("Ideon")
common stock outstanding on the effective date of the Ideon
Merger will be converted into Common Stock at a value of $13.50
per share, subject to certain adjustments if the average stock
price of a share of Common Stock falls outside of a specified
range. The consummation of the Ideon Merger is subject to
certain customary closing conditions, including the approval of
the holders of Ideon common stock. The Company expects upon
closing of the Ideon Merger to reserve for costs to be incurred
related to the Ideon Merger, which will include integration and
transaction costs as well as costs relating to certain
outstanding litigation matters previously discussed in Ideon's
public filings. This transaction will be accounted for under the
pooling-of-interests method of accounting and is expected to be
completed during the second or third quarter of fiscal 1997.
CUC INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
NOTE 3 -- SHAREHOLDERS' EQUITY
Net income per share, assuming the conversions of the zero coupon
convertible notes during the three months ended April 30, 1996
occurred at the beginning of such period, would not differ
significantly from the Company's actual earnings per share for
such period.
NOTE 4 -- INCOME TAXES
The Company's effective tax rate differs from the Federal
statutory rate principally because of state income taxes and non-
deductible amortization of the excess of cost over net assets
acquired.
Independent AccountantsO Review Report
Shareholders and Board of Directors
CUC International Inc.
We have reviewed the accompanying condensed consolidated balance
sheet of CUC International Inc. as of April 30, 1996, and the
related condensed consolidated statements of income and cash
flows for the three-month periods ended April 30, 1996 and 1995.
These financial statements are the responsibility of the
CompanyOs management.
We conducted our reviews in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data, and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, which will be performed for the full year with the
objective of expressing an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such
an opinion.
Based on our reviews, we are not aware of any material
modifications that should be made to the accompanying condensed
consolidated financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of CUC
International Inc. as of January 31, 1996, and the related
consolidated statements of income, shareholders' equity and cash
flows for the year then ended, not presented herein, and in our
report dated March 19, 1996, we expressed an unqualified opinion
on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated
balance sheet as of January 31, 1996, is fairly stated, in all
material respects, in relation to the consolidated balance sheet
from which it has been derived.
ERNST & YOUNG LLP
Stamford, Connecticut
May 22, 1996
ITEM 2. CUC INTERNATIONAL INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Three Months Ended April 30, 1996 vs.
Three Months Ended April 30, 1995
The Company's overall membership base continues to grow at a
rapid rate (from 36.9 million members at April 30, 1995 to 48
million members at April 30, 1996), which is the largest
contributing factor to the 20% increase in revenues (from $325.1
million for the quarter ended April 30, 1995 to $390 million for
the quarter ended April 30, 1996). While the overall membership
base increased by approximately 1.5 million members during the
quarter, the average annual fee collected for the Company's
membership services increased by 1%. The Company divides its
memberships into three categories: individual, wholesale and
discount program memberships. Individual memberships consist of
members that pay directly for the services and the Company pays
for the marketing costs to solicit the member primarily using
direct marketing techniques. Wholesale memberships include
members that pay directly for the services to their sponsor and
the Company does not pay for the marketing costs to solicit the
members. Discount program memberships are generally marketed
through a direct sales force, participating merchant or general
advertising and the related fees are either paid directly by the
member or the local retailer. All of these categories share
various aspects of the Company's marketing and operating
resources.
Compared to the previous year's first quarter, individual,
wholesale and discount program memberships grew by 16%, 20% and
61%, respectively, including members which came from acquisitions
completed during fiscal 1996 (members resulting from acquisitions
being "Acquired Members"). Discount program memberships have
incurred the largest increase from Acquired Members, principally
from Advance Ross Corporation, acquired in fiscal 1996, which
provides local discounts to consumers. For the quarter ended
April 30, 1996, individual, wholesale and discount coupon program
memberships represented 63%, 14% and 23% of revenues,
respectively. The Company maintains a flexible marketing plan so
that it is not dependent on any one service for the future growth
of the total membership base.
As the Company's services continue to mature, a greater
percentage of the total individual membership base is in its
renewal years. This results in increased profit margins for the
Company due to the significant decrease in certain marketing
costs incurred on renewing members. Improved response rates for
new members also favorably impact profit margins. As a result,
operating income before interest and taxes ("EBIT") increased
from $58.7 million to $77.9 million, and EBIT margins improved
from 18.1% to 20%.
Individual membership usage continues to increase, which
contributes to additional service fees and indirectly contributes
to the Company's strong renewal rate. Historically, an increase
in overall membership usage has had a favorable impact on renewal
rates. The Company records its deferred revenue net of estimated
cancellations which are anticipated in the Company's marketing
programs.
CUC INTERNATIONAL INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Three Months Ended April 30, 1996 vs.
Three Months Ended April 30, 1995
Operating costs increased 19% (from $89.2 million to $105.8
million). The major components of the Company's operating costs
continue to be personnel, telephone, computer processing,
participant insurance premiums (the cost of obtaining insurance
coverage for members) and travel cash awards. Travel members are
entitled to receive cash awards based on travel booked with the
Company. For the quarter ended April 30, 1996, these awards
represent less than 5% of total operating costs. The increase in
overall operating costs is due principally to the variable nature
of many of these costs and, therefore, the additional costs
incurred to support the growth in the membership base.
Historically, the Company has seen a direct correlation between
providing a high level of service to its members and improved
retention.
Marketing costs decreased as a percentage of revenue (from 40% to
39%). This decrease is primarily due to improved per member
acquisition costs and an increase in renewing members. Membership
acquisition costs incurred increased 46% (from $83.9 million to
$122.4 million) as a result of the increased marketing effort
which resulted in an increased number of new members acquired.
Marketing costs include the amortization of membership
acquisition costs and other marketing costs, which primarily
consist of membership communications and sales expenses.
Amortization of membership acquisition costs increased by 21%
(from $97.2 million to $117.5 million). Other marketing costs
increased by 10% (from $31.3 million to $34.5 million). These
increases resulted primarily from the costs of servicing a larger
membership base. The marketing functions for the Company's
consumer services are combined for its various services and,
accordingly, there are no significant changes in marketing costs
by service.
The Company routinely reviews all renewal rates and has not seen
any material change over the last year in the average renewal
rate. Renewal rates are calculated by dividing the total number
of renewing members not requesting a refund during their renewal
year by the total members up for renewal.
General and administrative costs decreased as a percentage of
revenue (from 15% to 14%). This is principally the result of the
Company's ongoing ability to control overhead. Interest income,
net, increased from $.3 million to $.8 million primarily due to
the reduced level of amortization associated with the Company's
zero coupon convertible notes and the net interest income from
the increased level of cash generated by the Company for
investment.
CUC INTERNATIONAL INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Membership Information
The following chart sets forth the approximate number of members
and net additions for the respective periods.
Net New Member
Number of Additions
Period Members for the Period
Quarter Ended April 30, 1996 48,015,000 1,535,000
Year Ended January 31, 1996 46,480,000 12,630,000*
Quarter Ended April 30, 1995 36,850,000 3,000,000**
Year Ended January 31, 1995 33,850,000 3,000,000
*Includes approximately 8 million Acquired Members.
**Includes approximately 1.7 million Acquired Members.
The membership acquisition costs incurred applicable to obtaining
a new member, for memberships other than coupon book memberships,
generally approximate the initial membership fee. Initial
membership fees for coupon book memberships generally exceed the
membership acquisition costs incurred applicable to obtaining a
new member.
Membership cancellations processed by certain of the Company's
clients report membership information only on a net basis.
Accordingly, the Company does not receive actual numbers of gross
additions and gross cancellations for certain types of
memberships. In calculating the number of members, the Company
has deducted its best estimate of cancellations which may occur
during the trial membership periods offered in its marketing
programs. Typically these periods range from one to three
months.
Liquidity And Capital Resources; Inflation; Seasonality
Funds for the Company's operations and acquisitions have been
provided through cash flow from operations. The Company also has
a credit agreement, dated March 26, 1996, with certain banks
signatory thereto; The Chase Manhattan Bank, N.A., Bank of
Montreal, Morgan Guaranty Trust Company of New York and The
Sakura Bank, Limited, as Co-Agents; and The Chase Manhattan Bank,
N.A., as Administrative Agent (the "Credit Agreement"). The
Credit Agreement provides for a $500 million revolving credit
facility with a variety of different types of loans available
thereunder. The Credit Agreement contains certain customary
restrictive covenants including, without limitation, financial
covenants and restrictions on certain corporate transactions, and
also contains various event of default provisions including,
without limitation, defaults arising from certain changes in
control of the Company. The amount of borrowings available to
the Company under the Credit Agreement was $500 million at April
30, 1996, as there were no borrowings under the Credit Agreement
at that date. The Credit Agreement is scheduled to expired March
26, 2001.
CUC INTERNATIONAL INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Liquidity And Capital Resources; Inflation; Seasonality
(continued)
The Company invested approximately $10.7 million in acquisitions,
net of cash acquired, during the three months ended April 30,
1996. These acquisitions have been fully integrated into the
Company's operations. The Company is not aware of any trends,
demands or uncertainties that will have a material effect on the
Company's liquidity. The Company anticipates that cash flow from
operations and the Credit Agreement will be sufficient to achieve
its current long-term objectives.
The Company does not anticipate any material capital expenditures
for the next year. Total capital expenditures were $8 million
for the three months ended April 30, 1996.
The Company intends to continue to review potential acquisitions
that it believes would enhance the Company's growth and
profitability. Any acquisitions paid for in cash will initially
be financed through excess cash flow from operations and the
Credit Agreement. However, depending on the financing necessary
to complete an acquisition, additional funding may be required.
To date, the overall impact of inflation on the Company has not
been material. Except for the cash receipts from the sale of
coupon book memberships, the Company's business is generally not
seasonal. Most cash receipts from these coupon book memberships
are received in the fourth quarter and, to a lesser extent, in
the first and the third quarters of each fiscal year.
For the three months ended April 30, 1996, the Company's
international businesses represented less than 5% of EBIT.
Operating in international markets involves dealing with
sometimes volatile movements in currency exchange rates. The
economic impact of currency exchange rate movements on the
Company is complex because it is linked to variability in real
growth, inflation, interest rates and other factors. Because the
Company operates in a mix of membership services and numerous
countries, management believes currency exposures are fairly well
diversified. To date, currency exposure has not been a
significant competitive factor at the local market operating
level. As international operations continue to expand and the
number of cross-border transactions increases, the Company
intends to continue monitoring its currency exposures closely and
take prudent actions as appropriate.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Matters as specified in the Company's Proxy Statement dated May
3, 1996, a copy of which has previously been filed with the
Securities and Exchange Commission, were considered and approved
by the Company's shareholders at the annual shareholders' meeting
held on June 5, 1996. The results of such matters are as follows:
Proposal 1: To elect Messrs. T. Barnes Donnelley, Christopher
K. McLeod and Stanley M. Rumbough, Jr. to the
Board of Directors of the Company, each for a
term to expire at the 1999 Annual Meeting.
Results: Total Vote For Total Vote Withheld
T. Barnes Donnelley 161,779,934 487,560
Christopher K. McLeod 161,780,685 486,809
Stanley M. Rumbough, Jr. 161,696,624 570,870
The terms of office as a director of each of Bartlett Burnap,
Walter A. Forbes, Stephen A.Greyser, Burton C. Perfit, Robert
P. Rittereiser and E. Kirk Shelton continued after the meeting.
Proposal 2: To amend the Company's Restated Certificate of
Incorporation to increase the number of shares of
Common Stock authorized for issuance.
Results: For Against Abstain
156,774,873 4,560,166 932,455
Proposal 3: To amend the Company's 1992 Directors Stock Option
Plan.
Results: For Against Abstain
139,888,891 21,179,183 1,199,420
Proposal 4: To amend the Company's 1994 Directors Stock Option
Plan.
Results: For Against Abstain
139,317,819 21,728,586 1,221,089
Proposal 5: To ratify the appointment of Ernst & Young LLP as
the Company's Independent Auditors for the fiscal
year ending January 31, 1997.
Results: For Against Abstain
161,874,573 102,457 290,464
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit
No. Description
3.1 Amended and Restated Certificate of Incorporation
of the Company, as filed June 5, 1996.
10.1-10.16 Management Contracts, Compensatory Plans and
Arrangements
10.1 Form of Employment Contract with E. Kirk Shelton
and Christopher K. McLeod, dated February 1, 1987, as
amended November 1, 1991 (filed as Exhibit 10.1 to the
Company's Annual Report on Form 10-K for the fiscal
year ended January 31, 1994).*
10.2 Amendment to Employment Contract with E. Kirk
Shelton, dated February 1, 1996 (filed as Exhibit 10.2
to the Company's Annual Report on Form 10-K for the
fiscal year ended January 31, 1996).*
10.3 Amendment to Employment Contract with Christopher
K. McLeod, dated February 1, 1996 (filed as Exhibit
10.3 to the Company's Annual Report on Form 10-K for
the fiscal year ended January 31, 1996).*
10.4 Employment Contract with Walter A. Forbes, dated
January 1, 1987, as amended January 1, 1991, January 1,
1993 and October 1, 1993 (filed as Exhibit 10.2 to the
Company's Annual Report on Form 10-K for the fiscal
year ended January 31, 1994) (the "Forbes Employment
Agreement").*
10.5 Fourth Amendment to Forbes Employment Agreement,
dated as of June 1, 1994 (filed as Exhibit 10.3 to the
Company's Form 10-Q for the period ended July 31,
1994).*
10.6 Agreement with Cosmo Corigliano, dated February 1,
1994 (filed as Exhibit 10.6 to the Company's Annual
Report on Form 10-K for the fiscal year ended January
31, 1995).*
10.7 Amendment to Agreement with Cosmo Corigliano,
dated February 21, 1996 (filed as Exhibit 10.7 to the
Company's Annual Report on Form 10-K for the fiscal
year ended January 31, 1996).*
10.8 Agreement with Amy N. Lipton, dated February 1,
1996 (filed as Exhibit 10.8 to the Company's Annual
Report on Form 10-K for the fiscal year ended January
31, 1996).*
10.9 Form of Employee Stock Option under the 1987 Stock
Option Plan (filed as Exhibit 10.6 to the Company's
Form 10-Q for the period ended April 30, 1995).*
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (continued)
10.10 Form of Director Stock Option for 1990 and
1992 Directors Stock Options Plans (filed as Exhibit
10.4 to the Company's Annual Report for the fiscal
year ended January 31, 1991, as amended December 12,
1991 and December 19, 1991).*
10.11 Form of Director Stock Option for 1994
Directors Stock Option Plan, as amended.
10.12 1987 Stock Option Plan, as amended (filed
as Exhibit 10.9 to the Company's Form 10-Q for the
period ended April 30, 1995).*
10.13 1990 Directors Stock Option Plan, as
amended (filed as Exhibit 10.10. to the Company's
Form 10-Q for the period ended April 30, 1995).*
10.14 1992 Directors Stock Option Plan, as amended.
10.15 1994 Directors Stock Option Plan, as amended.
10.16 Restricted Stock Plan and Form of
Restricted Stock Plan Agreement (filed as Exhibit
10.24 to the Company's Annual Report on Form 10-K for
the fiscal year ended January 31, 1991, as amended
December 12, 1991 and December 19, 1991).*
10.17 Credit Agreement, dated as of March 26,
1996, among: CUC International Inc.; the Banks
signatory thereto; The Chase Manhattan Bank, N.A.,
Bank of Montreal, Morgan Guaranty Trust Company of
New York, and The Sakura Bank, Limited as Co-Agents;
and The Chase Manhattan Bank, N.A., as Administrative
Agent (filed as Exhibit 10.17 to the Company's Annual
Report on Form 10-K for the fiscal year ended January
31, 1996).*
10.18 Agreement and Plan of Merger, dated
October 17, 1995, among CUC International Inc.,
Retreat Acquisition Corporation and Advance Ross
Corporation (filed as Exhibit 2 to the Company's
Registration Statement on Form S-4, Registration No.
33-64801, filed on December 7, 1995).*
10.19 Agreement and Plan of Merger, dated as of
February 19, 1996, by and among Davidson &
Associates, Inc., CUC International Inc. and Stealth
Acquisition I Corp. (filed as Exhibit 2(a) to the
Company's Report on Form 8-K filed March 12, 1996).*
10.20 Agreement and Plan of Merger, dated as of
February 19, 1996, by and among Sierra On-Line, Inc.,
CUC International Inc. and Larry Acquisition Corp.
(filed as Exhibit 2(b) to the Company's Report on
Form 8-K filed March 12, 1996).*
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (continued)
10.21 Agreement and Plan of Merger, dated as of
April 19, 1996, by and among Ideon Group, Inc., CUC
International Inc. and IG Acquisition Corp. (filed as
Exhibit 10.21 to the Company's Annual Report on Form
10-K for the fiscal year ended January 31, 1996).*
11. Statement re: Computation of Per Share Earnings
(Unaudited)
15. Letter re: Unaudited Interim Financial
Information
(b) During the quarter ended April 30, 1996, the Company filed
the following Current Reports on Form 8-K:
(1) Current Report on Form 8-K, filed on February 21, 1996,
reporting an Item 5 ("Other Events") event.
(2) Current Report on Form 8-K, filed on February 22, 1996,
reporting an Item 5 ("Other Events") event.
(3) Current Report on Form 8-K, filed on March 12, 1996,
reporting an Item 5 ("Other Events") event.
(4) Current Report on Form 8-K, filed on April 22, 1996,
reporting an Item 5 ("Other Events") event.
*Incorporated by reference
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CUC INTERNATIONAL INC.
(Registrant)
Date: June 14, 1996 By: WALTER A. FORBES
Walter A. Forbes -
Chief Executive Officer
and Chairman of the Board
(Principal Executive Officer)
Date: June 14, 1996 By: COSMO CORIGLIANO
Cosmo Corigliano - Senior Vice
President and Chief Financial
Officer (Principal Financial
and Accounting Officer)
INDEX TO EXHIBITS
Exhibit
No. Description Page
3.1 Amended and Restated Certificate of
Incorporation of the Company, as filed
June 5, 1996.
10.1-10.16 Management Contracts, Compensatory
Plans and Arrangements
10.1 Form of Employment Contract with E. Kirk
Shelton and Christopher K. McLeod, dated
February 1, 1987, as amended November 1,
1991 (filed as Exhibit 10.1 to the
Company's Annual Report on Form 10-K for
the fiscal year ended January 31, 1994).*
10.2 Amendment to Employment Contract with E.
Kirk Shelton, dated February 1, 1996
(filed as Exhibit 10.2 to the Company's
Annual Report on Form 10-K for the fiscal
year ended January 31, 1996).*
10.3 Amendment to Employment Contract with
Christopher K. McLeod, dated February 1,
1996 (filed as Exhibit 10.3 to the
Company's Annual Report on Form 10-K for
the fiscal year ended January 31, 1996).*
10.4 Employment Contract with Walter A.
Forbes, dated January 1, 1987, as amended
January 1,1991, January 1, 1993 and
October 1, 1993 (filed as Exhibit 10.2 to
the Company's Annual Report on Form 10-K
for the fiscal year ended January 31,
1994) (the "Forbes Employment
Agreement").*
10.5 Fourth Amendment to Forbes Employment
Agreement, dated as of June 1, 1994
(filed as Exhibit 10.3 to the Company's
Form 10-Q for the period ended July 31,
1994).*
10.6 Agreement with Cosmo Corigliano, dated
February 1, 1994 (filed as Exhibit 10.6
to the Company's Annual Report on Form 10-
K for the fiscal year ended January 31,
1995).*
10.7 Amendment to Agreement with Cosmo
Corigliano, dated February 21, 1996
(filed as Exhibit 10.7 to the Company's
Annual Report on Form 10-K for the fiscal
year ended January 31, 1996).*
10.8 Agreement with Amy N. Lipton, dated
February 1, 1996 (filed as Exhibit 10.8
to the Company's Annual Report on Form 10-
K for the fiscal year ended January 31,
1996).*
10.9 Form of Employee Stock Option under the
1987 Stock Option Plan (filed as Exhibit
10.6 to the Company's Form 10-Q for the
period ended April 30, 1995).*
INDEX TO EXHIBITS (continued)
Exhibit
No. Description Page
10.10 Form of Director Stock Option for 1990
and 1992 Directors Stock Options Plans
(filed as Exhibit 10.4 to the Company's
Annual Report for the fiscal year ended
January 31, 1991, as amended December
12, 1991 and December 19, 1991).*
10.11 Form of Director Stock Option for 1994
Directors Stock Option Plan, as amended.
10.12 1987 Stock Option Plan, as amended
(filed as Exhibit 10.9 to the Company's
Form 10-Q for the period ended April 30,
1995).*
10.13 1990 Directors Stock Option Plan, as
amended (filed as Exhibit 10.10. to the
Company's Form 10-Q for the period ended
April 30, 1995).*
10.14 1992 Directors Stock Option Plan, as
amended.
10.15 1994 Directors Stock Option Plan, as
amended.
10.16 Restricted Stock Plan and Form of
Restricted Stock Plan Agreement (filed
as Exhibit 10.24 to the Company's Annual
Report on Form 10-K for the fiscal year
ended January 31, 1991, as amended
December 12, 1991 and December 19,
1991).*
10.17 Credit Agreement, dated as of March 26,
1996, among: CUC International Inc.; the
Banks signatory thereto; The Chase
Manhattan Bank, N.A., Bank of Montreal,
Morgan Guaranty Trust Company of New
York, and the Sakura Bank, Limited as Co-
Agents; and The Chase Manhattan Bank,
N.A., as Administrative Agent (filed as
Exhibit 10.17 to the Company's Annual
Report on Form 10-K for the fiscal year
ended January 31, 1996).*
10.18 Agreement and Plan of Merger, dated
October 17, 1995, among CUC
International Inc., Retreat Acquisition
Corporation and Advance Ross Corporation
(filed as Exhibit 2 to the Company's
Registration Statement on Form S-4,
Registration No. 33-64801, filed on
December 7, 1995).*
10.19 Agreement and Plan of Merger, dated as
of February 19, 1996, by and among
Davidson & Associates, Inc., CUC
International Inc. and Stealth
Acquisition I Corp. (filed as Exhibit
2(a) to the Company's Report on Form 8-
K filed March 12, 1996).*
10.20 Agreement and Plan of Merger, dated as
of February 19, 1996, by and among
Sierra On-Line, Inc., CUC International
Inc. and Larry Acquisition Corp. (filed
as Exhibit 2(b) to the Company's Report
on Form 8-K filed March 12, 1996).*
INDEX TO EXHIBITS (continued)
Exhibit
No. Description Page
10.21 Agreement and Plan of Merger, dated as
of April 19, 1996, by and among Ideon
Group, Inc., CUC International Inc. and
IG Acquisition Corp. (filed as Exhibit
10.21 to the Company's Annual Report on
Form 10-K for the fiscal year ended
January 31, 1996).*
11. Statement re: Computation of Per Share
Earnings (Unaudited)
15. Letter re: Unaudited Interim Financial
Information
*Incorporated by reference
CUC INTERNATIONAL INC. AND SUBSIDIARIES
EXHIBIT 11 - COMPUTATION OF PER SHARE EARNINGS (UNAUDITED)
(In thousands, except per share amounts)
Three Months
Ended April 30,
-----------------
1996 1995
PRIMARY -----------------
Average shares outstanding 185,337 179,431
Net effect of dilutive stock options -
based on the treasury stock method
using average market price 11,399 12,940
-------- -------
Total 196,736 192,371
======= =======
Net Income $48,250 $36,046
======= =======
Net income per common share $0.245 $0.187
======= =======
FULLY DILUTED
Average shares outstanding 185,337 179,431
Net effect of dilutive stock options -
based on the treasury stock method
using the period - end market price,
if higher than the average market price 11,722 13,744
Net effect of zero coupon convertible
notes - based on the if converted method 2,268 2,660
-------- -------
Total 199,327 195,835
======= =======
Net Income $48,250 $36,046
Zero Coupon Convertible Notes 249 263
------- --------
$48,499 $36,309
======= =======
Net income per common share $0.243 $0.185
======= =======
CUC INTERNATIONAL INC. AND SUBSIDIARIES
EXHIBIT 15-LETTER RE: UNAUDITED INTERIM FINANCIAL INFORMATION
June 12, 1996
Shareholders and Board of Directors
CUC International Inc.
We are aware of the incorporation by reference in the
Registration Statements (Form S-8s: Numbers 33-17247, 33-17248,
33-17249, 33-26875, 33-75682, 33-93322, 33-41823, 33-48175, 33-
58896, 33-91656, 333-03241, 33-74068, 33-74066, 33-91658, 333-
00475, 333-03237, 33-75684, 33-80834 and 33-93372) of the CUC
International Inc. 1985 Non-Qualified Stock Option Plan, the CUC
International Inc. 1985 Incentive Stock Option Plan, the CUC
International Inc. 1987 Performance Share Stock Option Plan, the
CUC International Inc. 1987 Stock Option Plan, the CUC
International Inc. 1987 Stock Option Plan as amended, the CUC
International Inc. 1987 Stock Option Plan as amended, the CUC
International Inc. 1990 Directors' Stock Option Plan, the
Entertainment Publications Inc. 1988 Non-Qualified Stock Option
Plan, the CUC International Inc. 1992 Bonus and Salary
Replacement Stock Option Plan, the CUC International Inc. 1992
Bonus and Salary Replacement Stock Option Plan as amended, the
CUC International Inc. 1992 Bonus and Salary Replacement Stock
Option Plan as amended, the CUC International Inc. 1992 Directors
Stock Option Plan, the CUC International Inc. 1992 Employee Stock
Option Plan, the CUC International Inc. 1992 Employee Stock
Option Plan as amended, the CUC International Inc. Employee Stock
Option Plan as amended, the CUC International Inc. 1994 Employee
Stock Purchase Plan, the CUC International Inc. 1994 Employee
Stock Option Plan as amended, the CUC International Inc. Savings
Incentive Plan, and the CUC International Inc. 1994 Directors
Stock Option Plan, respectively and in the Registration
Statements (Form S-3s: Numbers 33-30306, 33-47271, 33-58598, 33-
63237 and 33-95126) and in the Registration Statement (Form S-4:
Number 33-64801) of our report dated May 22, 1996 relating to the
unaudited condensed consolidated interim financial statements of
CUC International Inc. which are included in its Form 10-Q for
the quarter ended April 30, 1996.
Pursuant to Rule 436(c) of the Securities Act of 1933, our report
is not a part of the registration statements prepared or
certified by accountants within the meaning of Section 7 or 11 of
the Securities Act of 1933.
ERNST & YOUNG LLP
Stamford, Connecticut
5
0000723612
CUC INTERNATIONAL INC.
1,000
3-MOS
JAN-31-1997
APR-30-1996
286,344
0
305,380
0
0
739,728
143,189
77,698
1,466,671
113,994
14,709
0
0
1,944
803,627
1,466,671
390,026
390,026
0
312,171
0
0
(805)
78,660
30,410
48,250
0
0
0
48,250
.245
.243
12
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CUC INTERNATIONAL INC.
* * * *
The undersigned, E. Kirk Shelton, President, and Robert
T. Tucker, Secretary, of CUC International Inc. (the
"Corporation"), do hereby certify under seal of the Corporation
as follows:
FIRST: The name of the Corporation is CUC
INTERNATIONAL INC.
SECOND: The original Certificate of Incorporation of
the Corporation was filed with the Secretary of State of the
State of Delaware on August 1, 1974 under the name COMP-U-CARD OF
AMERICA, INC.
THIRD: This Amended and Restated Certificate of
Incorporation has been duly adopted in accordance with Section
245 of the General Corporation Law of the State of Delaware, by a
unanimous written consent of the Board of Directors of the
Corporation, and adopted by the stockholders in the manner and by
the vote prescribed by Section 242 of the General Corporation Law
of the State of Delaware. It restates and integrates the
provisions of the Corporation's Certificate of Incorporation as
heretofore amended or restated, and further amends paragraph 4
only to provide for the increase in the number of shares which
the Corporation shall have authority to issue.
FOURTH: Upon the filing of this Amended and Restated
Certificate of Incorporation with the Secretary of State, the
Corporation's Certificate of Incorporation, as heretofore amended
or restated, shall be amended and restated so as to read in its
entirety as follows:
1. The name of the Corporation is CUC INTERNATIONAL
INC.
2. The address of its registered office in the State
of Delaware is Corporation Trust Center, 1209 Orange Street, in
the City of Wilmington, County of New Castle. The name of its
registered agent at such address is The Corporation Trust
Company.
3. The nature of the business or purposes to be
conducted or promoted is:
To engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law
of Delaware.
4. The total number of shares of all classes of stock
which the Corporation shall have authority to issue is
601,000,000 shares, of which 1,000,000 shall be Preferred Stock,
par value $.01 per share, and 600,000,000 shall be Common Stock,
par value $.01 per share. No stockholder shall have any
preemptive right to subscribe to or purchase any additional
shares of stock of the Corporation or any securities convertible
into any such shares or representing a right or option to
purchase any such shares.
The Board of Directors is expressly authorized to
adopt, from time to time, a resolution or resolutions providing
for the issuance of Preferred Stock in one or more series, to fix
the number of shares in each such series (subject to the
aggregate limitations thereon in this Article) and to fix the
designations and the powers, preferences and relative,
participating, optional or other special rights, and the
qualifications, limitations and restrictions, of each such
series. The authority of the Board of Directors with respect to
each such series shall include determination of the following
(which may vary as between the different series of Preferred
Stock):
(a) The number of shares constituting the shares
and the distinctive designation of the series;
(b) The dividend rate on the shares of the series
and the extent, if any, to which dividends thereon shall be
cumulative;
(c) Whether shares of the series shall be
redeemable and, if redeemable, the redemption price payable on
redemption thereof, which price may, but need not, vary according
to the time or circumstances of such redemption;
(d) The amount or amounts payable upon the shares
of the series in the event of voluntary or involuntary
liquidation, dissolution or winding up of the Corporation prior
to any payment or distribution of the assets of the Corporation
to any class or classes of stock of the Corporation ranking
junior to the Preferred Stock;
(e) Whether the shares of the series shall be
entitled to the benefit of a sinking or retirement fund to be
applied to the purchase or redemption of shares of the series
and, if so entitled, the amount of such fund and the manner of
its application, including the price or prices at which the
shares may be redeemed or purchased through the application of
such fund;
(f) Whether the shares of the series shall be
convertible into, or exchangeable for, shares of any other class
or classes or of any other series of the same or any other class
or classes of stock of the Corporation, and, if so convertible or
exchangeable, the conversion price or prices, or the rates of
exchange, and the adjustments thereof, if any, at which such
conversion or exchange may be made, and any other terms and
conditions of such conversion or exchange;
(g) The extent, if any, to which the holders of
shares of the series shall be entitled to vote on any question or
in any proceedings or to be represented at or to receive notice
of any meeting of stockholders of the Corporation;
(h) Whether, and the extent to which, any of the
voting powers, designations, preferences, rights and
qualifications, limitations or restrictions of any such series
may be made dependent upon facts ascertainable outside of the
Certificate of Incorporation or of any amendment thereto, or
outside the resolution or resolutions providing for the issuance
of such series adopted by the Board of Directors, provided that
the manner in which such facts shall operate upon the voting
powers, designations, preferences, rights and qualifications,
limitations or restrictions of such series is clearly and
expressly set forth in the resolution or resolutions providing
for the issuance of such series adopted by the Board of
Directors; and
(i) Any other preferences, privileges and powers
and relative, participating, optional or other special rights and
qualifications, limitations or restrictions of such series, as
the Board of Directors may deem advisable, which shall not affect
adversely any other class or series of Preferred Stock at the
time outstanding and which shall not be inconsistent with the
provisions of this Certificate of Incorporation.
Shares of Common Stock and of Preferred Stock may be issued from
time to time as the Board of Directors shall determine and on
such terms and for such consideration, not less than par value,
as shall be fixed by the Board of Directors. No consent by any
series of Preferred Stock shall be required for the issuance of
any other series of Preferred Stock unless the Board of Directors
in the resolution providing for the issuance of any series of
Preferred Stock expressly provides that such consent shall be
required.
Subject to the rights, if any, of holders of shares of Preferred
Stock from time to time outstanding, dividends may be paid upon
the Common Stock as and when declared by the Board of Directors
out of any funds legally available therefor.
Except as otherwise provided by law or as otherwise expressly
provided in the resolution or resolutions providing for the
issuance of shares of any series of the Preferred Stock, the
holders of shares of the Common Stock shall have the exclusive
right to vote for the election of directors and for all other
purposes. Each holder of shares of Common Stock of the
Corporation entitled at any time to vote shall have one vote for
each share thereof held. Except as otherwise provided with
respect to shares of Preferred Stock authorized from time to time
by the Board of Directors, the exclusive voting power for all
purposes shall be vested in the holders of shares of Common
Stock.
5. The Corporation is to have perpetual existence.
6. In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly
authorized:
(a) To make, alter, or repeal the By-Laws of the
Corporation.
(b) To authorize and cause to be executed
mortgages and liens upon the real and personal property of the
Corporation.
(c) To set apart out of any of the funds of the
Corporation available for dividends a reserve or reserves for any
proper purpose and to abolish any such reserve in the manner in
which it was created.
(d) By a majority of the whole Board of
Directors, to designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. The
Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. The By-Laws
may provide that in the absence or disqualification of a member
of a committee, the member at any meeting or members thereof
present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in
the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board
of Directors, or in the By-Laws of the Corporation, shall have
and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; but no such committee
shall have the power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders a dissolution of
the Corporation or a revocation of a dissolution, or amending the
By-Laws of the Corporation; and, unless the resolution or By-Laws
expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of
stock.
(e) When and as authorized by the stockholders in
accordance with statute, to sell, lease or exchange all or
substantially all of the property and assets of the Corporation,
including its goodwill and its corporate franchises, upon such
terms and conditions and for such consideration, which may
consist in whole or in part of money or property, including
shares of stock in, and/or other securities of, any other
corporation or corporations, as its Board of Directors shall deem
expedient and for the best interests of the Corporation.
7. Whenever a compromise or arrangement is proposed
between this Corporation and its creditors or any class of them
and/or between this Corporation and its stockholders or any class
of them, any court of equitable jurisdiction within the State of
Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this
Corporation under the provisions of Section 291 of Title 8 of the
Delaware Code or on the application of trustees in dissolution or
of any receiver or receivers appointed for this Corporation under
the provisions of Section 279 of Title 8 of the Delaware Code,
order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as
the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in
value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the
case may be, agree to any compromise or arrangement to any
reorganization of this Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and
the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders
or class of stockholders of this Corporation, as the case may be,
and also on this Corporation.
8. Meetings of stockholders may be held within or
without the State of Delaware, as the By-Laws may provide. The
books of the Corporation may be kept (subject to any provision
contained in the statutes) outside the State of Delaware at such
place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
Elections of directors need not be written ballot unless the By-
Laws of the Corporation shall so provide.
9. For the management of the business and for the
conduct of the affairs of the Corporation, and in further
creation, definition, limitation and regulation of the power of
the Corporation and of its directors and of its stockholders, it
is further provided:
(a) Election of Directors. Elections of
Directors need not be by written ballot unless the By-Laws of the
Corporation shall so provide.
(b) Number, Election and Terms of Directors. The
number of Directors of the Corporation shall be fixed from time
to time by or pursuant to the By-Laws. The Directors shall be
classified, with respect to the time for which they severally
hold office, into three classes, as nearly equal in number as
possible, as shall be provided in the manner specified in the By-
Laws, one class to hold office initially for a term expiring at
the annual meeting of stockholders to be held in 1986, another
class to hold office initially for a term expiring at the annual
meeting of stockholders to be held in 1987, and another class to
hold office initially for a term expiring at the annual meeting
of stockholders to be held in 1988, with the members of each
class to hold office until their successors are elected and
qualified. At each annual meeting of the stockholders of the
Corporation, the successors to the class of Directors whose term
expires at that meeting shall be elected to hold office for a
term expiring at the annual meeting of stockholders held in the
third year following the year of their election.
(c) Stockholder Nomination of Director
Candidates. Advance notice of nominations for the election of
Directors, other than by the Board of Directors or a Committee
thereof, shall be given in the manner provided in the By-Laws.
(d) Newly Created Directorships and Vacancies.
Newly created directorships resulting from any increase in the
number of Directors and any vacancies on the Board of Directors
resulting from death, resignation, disqualification, removal or
other cause shall be filled solely by the affirmative vote of a
majority of the remaining Directors then in office, even though
less than a quorum of the Board of Directors. Any Director
elected in accordance with the preceding sentence shall hold
office for the remainder of the full term of the class of
Directors for which the new directorship was created or the
vacancy occurred and until such Director's successor shall have
become elected and qualified. No decrease in the number of
Directors constituting the Board of Directors shall shorten the
term of any incumbent Director.
(e) Removal of Directors. Any Director may be
removed from office without cause only by the affirmative vote of
the holders of 80% of the combined voting power of the then
outstanding shares of stock entitled to vote generally in the
election of Directors voting together as a single class.
(f) Stockholder Action. Any action required or
permitted to be taken by the stockholders of the Corporation must
be effected at a duly called annual or special meeting of such
holders and may not be effected by any consent in writing by such
holders. Except as otherwise required by law, special meetings
of stockholders of the Corporation may be called only by the
Chairman of the Board, the President or the Board of Directors
pursuant to a resolution approved by a majority of the entire
Board of Directors.
(g) By-Law Amendments. The Board of Directors
shall have power to make, alter, amend and repeal the By-Laws
(except so far as the By-Laws adopted by the stockholders shall
otherwise provide). Any By-Laws made by the Directors under the
powers conferred hereby may be altered, amended or repealed by
the Directors or by the stockholders. Notwithstanding the
foregoing and anything contained in this Certificate of
Incorporation to the contrary, Sections 1, 2 and 3 of Article II,
and Sections 1, 2 and 3 of Article III of the By-Laws shall not
be altered, amended or repealed and no provision inconsistent
therewith shall be adopted without the affirmative vote of the
holders of at least 80% of the voting power of all the shares of
the Corporation entitled to vote generally in the election of
Directors, voting together as a single class.
(h) Amendment, Repeal. Notwithstanding anything
contained in this Certificate of Incorporation to the contrary,
the affirmative vote of the holders of at least 80% of the voting
power of all shares of the Corporation entitled to vote generally
in the election of Directors, voting together as a single class,
shall be required to alter, amend, adopt any provision
inconsistent with, or repeal, this Article 9 or any provision
hereof.
10. (a) Vote Required for Certain Business
Combinations.
A. Higher Vote for Certain Business Combinations. In
addition to any affirmative vote required by law or this
Certificate of Incorporation, and except as otherwise expressly
provided herein in:
(i) any merger or consolidation of the Corporation or
any Subsidiary (as hereinafter defined) with (a)
any Interested Stockholder (as hereinafter
defined) or (b) any other corporation (whether or
not itself an Interested Stockholder) which is, or
after such merger or consolidation would be, an
Affiliate (as hereinafter defined) of an
Interested Stockholder; or
(ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction
or a series of transactions) to or with any
Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate
Fair Market Value of $10 million or more; or
(iii) the issuance or transfer by the Corporation
or any Subsidiary (in one transaction or series of
transactions) of any securities of the Corporation
or any subsidiary to any Interested Stockholder or
to any Affiliate of any Interested Stockholder in
exchange for cash, securities or other property
(or a combination thereof) having an aggregate
Fair Market Value of $10 million or more; or
(iv) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation
proposed by or on behalf of any Interested
Stockholder or any Affiliate of any Interested
Stockholder; or
(v) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any
other transaction (whether or not with or into or
otherwise involving an Interested Stockholder)
which has the effect, directly or indirectly, of
increasing the proportionate share of the
outstanding shares of any class of Equity Security
(as hereinafter defined) of the Corporation or any
Subsidiary which is directly or indirectly owned
by any Interested Stockholder or any Affiliate of
any Interested Stockholder;
shall require the affirmative vote of the holders of at least
80% of the voting power of the then outstanding shares of capital
stock of the Corporation entitled to vote generally in the
election of directors (the "Voting Stock"), voting together as a
single class (it being understood that for the purposes of
Article 10, each share of the Voting Stock shall have one vote).
Such affirmative vote shall be required notwithstanding the fact
that no vote may be required, or that a lesser percentage may be
specified, by law or in any agreement with any national
securities exchange or otherwise.
B. Definition of "Business Combination". The term
"Business Combination" used in this Article 10 shall mean any
transaction which is referred to in any one or more of clauses
(i) through (v) of Paragraph A hereof.
(b) When Higher Vote is Not Required. The
provisions of Article 10(a) shall not be applicable to any
particular Business Combination, and such Business Combination
shall require only such affirmative vote as is required by law
and any other provision of this Certificate of Incorporation, if
all of the conditions specified in either of the following
Paragraphs A and B are met:
A. Approval by Disinterested Directors. The Business
Combination shall have been approved by majority of the
Disinterested Directors (as hereinafter defined).
B. Price and Procedure Requirements. All of the
following conditions shall have been met:
(i) The aggregate amount of the cash and the Fair
Market Value (as hereinafter defined) as of the
date of the consummation of the Business
Combination of consideration other than cash to be
received per share by holders of Common Stock in
such Business Combination shall be at least equal
to the higher of the following:
(a) (if applicable) the highest per share
price (including any brokerage
commissions, transfer taxes and
soliciting dealers' fees) paid by the
Interested Stockholder for any shares of
Common Stock acquired by it (1) within
the two-year period immediately prior to
the first public announcement of the
terms of the proposed Business
Combination (the "Announcement Date") or
(2) in the transaction in which it
became an Interested Stockholder,
whichever is higher; and
(b) the Fair Market Value per share of
Common Stock on the Announcement Date or
on the date on which the Interested
Stockholder became an Interested
Stockholder (such latter date is
referred to in this Paragraph 10 as the
"Determination Date"), whichever is
higher.
(ii) The aggregate amount of the cash and the Fair
Market Value as of the date of the consummation of
the Business Combination of consideration other
than cash to be received per share by holders of
shares of any other class of outstanding Voting
Stock shall be at least equal to the higher of the
following:
(a) (if applicable) the highest per share
price (including any brokerage
commissions, transfer taxes and
soliciting dealers' fees) paid by the
Interested Stockholder for any shares of
Common Stock acquired by it (1) within
the two year period immediately prior to
the Announcement Date or (2) in the
transaction in which it became an
Interested Stockholder, whichever is
higher; and
(b) the Fair Market Value per share of such
class of Voting Stock on the
Announcement Date or on the
Determination Date, whichever is higher.
(iii) The consideration to be received by holders
of Voting Stock shall be in cash or in the same
form as the Interested Stockholder has previously
paid for shares of such class of Voting Stock. If
the Interested Stockholder has paid for any Voting
Stock with varying forms of consideration, the
form of consideration for such Voting Stock shall
be either cash or the form used to acquire the
largest number of shares of such Voting Stock
previously acquired by it. The price determined
in accordance with paragraphs B(i) and B(ii) of
this Article 10(b) shall be subject to appropriate
adjustment in the event of any stock dividend,
stock split, combination of shares or similar
event.
(iv) After such Interested Stockholder has become an
Interested Stockholder and prior to the
consummation of such Business Combination: (a)
there shall have been (1) no reduction in the
annual rate of dividends paid on the Common Stock
(except as necessary to reflect any subdivision of
the Common Stock), except as approved by a
majority of the Disinterested Directors, and (2)
an increase in such annual rate of dividends as
necessary to reflect any reclassification
(including any reverse stock split),
recapitalization, reorganization or any similar
transaction which has the effect of reducing the
number of outstanding shares of the Common Stock,
unless the failure so to increase such annual rate
is approved by a majority of the Disinterested
Directors; and (b) such Interested Stockholder
shall have not become the beneficial owner of any
additional shares of Voting Stock except as part
of the transaction which results in such
Interested Stockholder becoming an Interested
Stockholder.
(c) Certain Definitions. For the purpose of this
Article 10:
A. A "person" shall mean any individual, firm,
corporation or other entity.
B. "Interested Stockholder" shall mean any person
(other than the Corporation or any Subsidiary) who or which:
(i) is the beneficial owner, directly or indirectly,
of 5% or more of the voting power of the
outstanding Voting Stock; or
(ii) is an Affiliate of the Corporation and at any time
within the two year period immediately prior to
the date in question was the beneficial owner,
directly or indirectly, of 5% or more of the
voting power of the then outstanding Voting Stock;
or
(iii) is an assignee of or has otherwise succeeded
to any shares of Voting Stock which were at any
time within the two-year period immediately prior
to the date in question beneficially owned by any
Interested Stockholder, if such assignment or
succession shall have occurred in the course of a
transaction or series of transactions not
involving a public offering within the meaning of
the Securities Act of 1933.
C. A person shall be a "beneficial owner" of any
Voting Stock:
(i) which such person or any of its Affiliates or
Associates (as hereinafter defined) beneficially
owns directly or indirectly; or
(ii) which such person or any of its Affiliates or
Associates has (a) the right to acquire (whether
such right is exercisable immediately or only
after the passage of time), pursuant to any
agreement, arrangement or understanding or upon
the exercise of conversion rights, exchange
rights, warrants or options, or otherwise, or (b)
the right to vote pursuant to any agreement,
arrangement or understanding; or
(iii) which are beneficially owned, directly or
indirectly, by any other person with which such
person or any of its Affiliates or Associates has
any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or
disposing of any shares of Voting Stock.
D. For the purpose of determining whether a person is
an Interested Stockholder pursuant to paragraph B of this Article
10(c), the number of shares of Voting Stock deemed to be
outstanding shall include shares deemed owned through application
of paragraph C of the Article 10(c) but shall not include any
other shares of Voting Stock which may be issuable pursuant to
any agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
E. "Affiliate" or "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act
of 1934, as in effect on January 1, 1985.
F. "Subsidiary" means any corporation of which a
majority of any class of Equity Security is owned directly or
indirectly, by the Corporation, provided, however, that for the
purposes of the definition of Interested Stockholder set forth in
paragraph B of this Article 10(c), the term "Subsidiary" shall
mean only a corporation of which a majority of each class of
Equity Security is owned, directly or indirectly, by the
Corporation.
G. "Disinterested Director" means any member of the
Board of Directors who is unaffiliated with the Interested
Stockholder and was a member of the Board of Directors prior to
the time that the Interested Stockholder became an Interested
Stockholder, and any successor of a Disinterested Director who is
unaffiliated with the Interested Stockholder and is recommended
to succeed a Disinterested Director by a majority of
Disinterested Directors then on the Board of Directors.
H. "Fair Market Value" means: (i) in the case of
stock, the highest closing bid quotation with respect to a share
of such stock during the 30-day period preceding the date in
question on the National Association of Securities Dealers, Inc.
Automated Quotations System or any system then in use, or, if
such stock is then listed on an exchange, the highest closing
sale price during the 30-day period immediately preceding the
date in question of a share of such stock on the Composition Tape
for the New York Stock Exchange -- Listed Stocks, or, if such
stock is not quoted on the Composite Tape, on the New York Stock
Exchange, or, if such stock is not listed on such Exchange, on
the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which such stock is
listed, or, if such stock is not listed on any such exchange or
quoted as aforesaid, the fair market value on the date in
question of a share of such stock as determined by the Board of
Directors in good faith; and (ii) in the case of property other
than cash or stock, the fair market value of such property on the
date in question as determined by the Board of Directors, in good
faith.
I. In the event of any Business Combination in which
the Corporation survives, the phrase "consideration other than
cash to be received" as used in paragraphs B(i) and (ii) of
Article 10(b) shall include the shares of Common Stock retained
by the holders of such shares.
J. "Equity Security" shall have the meaning ascribed
to such term in Section 3(a)(11) of the Securities Exchange Act
of 1934, as in effect on January 1, 1985.
(d) Powers of the Board of Directors. A majority
of the Directors shall have the power and duty to determine for
the purposes of this Article 10 on the basis of information known
to them after reasonable inquiry, (A) whether a person is an
Interested Stockholder, (B) the number of shares of Common Stock
beneficially owned by any person, (C) whether a person is an
Affiliate or Associate of another, (D) whether the assets which
are the subject of any Business Combination have, or the
consideration to be received for an issuance of transfer of
securities by the Corporation or any Subsidiary in any Business
Combination has, or an issuance or transfer of securities by the
Corporation or any Subsidiary in any Business Combination has, an
aggregate Fair Market Value of $10 million or more. A majority
of the Directors shall have the further power to interpret all of
the terms and provisions of this Article 10.
(e) No Effect on Fiduciary Obligations of
Interested Shareholders. Nothing contained in this Article 10
shall be construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
(f) Amendment, Repeal, etc. Notwithstanding any
other provisions of this Certificate of Incorporation or the By-
Laws (and notwithstanding the fact that a lesser percentage may
be specified by law, this Certificate of Incorporation or the By-
Laws) the affirmative vote of the holders of 80% or more of the
outstanding Voting Stock, voting together as a single class,
shall be required to amend or repeal, or adopt any provisions
inconsistent with this Article 10.
11. No director of the Corporation shall be personally
liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty by such director as a
director; provided, however, that this Article 11 shall not
eliminate or limit the liability of a director to the extent
provided by applicable law (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under section
174 of the General Corporation Law of the State of Delaware, or
(iv) for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this
Article 11 shall apply to or have any effect on the liability or
alleged liability of any director of the Corporation for or with
respect to any acts or omissions of such director occurring prior
to such amendment or repeal.
IN WITNESS WHEREOF, we have signed this certificate and
caused the corporate seal of the corporation to be hereunto
affixed this 5th day of June 1996.
/s/E. Kirk Shelton
E. Kirk Shelton, President
ATTEST:
/s/Robert T. Tucker
Robert T. Tucker, Secretary
FORM OF STOCK OPTION CONTRACT -
1994 DIRECTORS STOCK OPTION PLAN
Dear (name):
I am pleased to advise you that the Committee (the "Committee")
of the Board of Directors of CUC International Inc. (the
"Corporation") which administers the Corporation's 1994 Directors
Stock Option Plan (the "Plan") on November __, 199_ authorized
the granting to you under the Plan of a non-statutory option to
purchase 7,500 shares of common stock, $.01 par value, of the
Corporation (the "Common Stock") at a price of $____________ per
share (the "Exercise Price"), which the Committee believes to be
the fair market value of the Common Stock on that date.
Terms not defined herein shall have the meaning set forth in the
Plan.
1. Your option may be exercised under the following terms:
(a) This option shall not be transferable except by
will or the laws of descent and distribution, unless
such transfer is permitted by Rule 16b-3 under the
Securities Exchange Act of 1934 and the Committee has
approved such transferability.
(b) Subject to the provisions of paragraphs (e)
through (i) hereof, this option may be exercisable by
you as follows:
You may purchase some or all of the Common Stock for
which options are herein granted on or after the date
hereof.
Your right to exercise this option shall be cumulative.
This option shall expire on the tenth anniversary of
the date hereof.
(c) If required by the Corporation, prior to the
delivery to you of a certificate or certificates
representing the shares of Common Stock purchased by
you upon the exercise of the option, you shall have
deposited with the Corporation a non-disposition letter
(restricting disposition by you of the shares of Common
Stock) in form satisfactory to counsel for the
Corporation. In no case may you sell the Common Stock
purchased by you upon the exercise of this option until
at least six months after the date hereof. You
acknowledge that, unless the shares of Common Stock
received upon exercise of this option shall have been
registered under an effective registration statement
under the Securities Act of 1933, as amended, such
shares will be acquired for investment and not with a
view to distribution thereof, and that such shares may
not be sold except in compliance with the applicable
provisions of such Act.
-2-
(d) In the event of a stock split, stock dividend,
recapitalization, reorganization, merger,
consolidation, extraordinary dividend, split-up, spin-
off, combination, stock repurchase, exchange of shares,
warrants or rights offering to purchase stock at a
price substantially below fair market value or other
similar corporate event affecting the Common Stock, the
number and kind of shares subject to this option and
the Exercise Price shall be equitably adjusted
(including by payment of cash to you) in the
discretion of the Committee, as defined in the Plan, in
order to preserve the benefits or potential benefits
intended to be made available to you under this option.
The determination of the Committee as to what
adjustments shall be made, and the extent thereof,
shall be final. Unless otherwise determined by the
Committee, such adjustments shall be subject to the
same vesting schedule and restrictions to which this
option is subject. No fractional shares of Common
Stock shall be reserved or authorized or made subject
to this option by any such adjustment.
(e) In the event that the term of your membership on
the Board of Directors expires because you (i) lose an
election for a position on the Board of Directors, (ii)
resign from the Board of Directors prior to attaining
age 65 or (iii) fail to seek election to the Board of
Directors for a term commencing prior to your attaining
age 62 (in any case, other than on account of death or
physical or mental disability), this option shall
remain exercisable until the earlier to occur of the
expiration of one month after the expiration of your
term or the stated expiration date of this option, at
which time this option shall expire.
(f) In the event that the term of your membership on
the Board of Directors expires because you (i) resign
after age 65 or (ii) fail to seek election to the Board
of Directors for a term commencing after you attain age
62, this option shall remain exercisable until the
earlier to occur of the expiration of five years after
the expiration of your term or the stated expiration
date of this option, at which time this option shall
expire.
(g) In the event that the term of your membership on
the Board of Directors expires because you become
physically or mentally disabled (unless such expiration
is described in paragraph (f) above) or you die, the
options granted to you under this letter shall remain
exercisable until the earlier to occur of the
expiration of one year after the expiration of your
term or the stated expiration date of such option, at
which time such options shall expire.
(h) In the event that you are removed from the Board
of Directors by the shareholders of the Corporation or
by the Board of Directors, options granted to you shall
expire immediately upon such removal or
disqualification.
(3)
(i) In the event you are appointed a "director
emeritus" by the Board of Directors, and you cease to
be a director emeritus because of physical or mental
disability or death, the provisions of paragraph 1(g)
shall apply; if you cease to be a director emeritus
because of removal by the Board of Directors, the
provisions of paragraph 1(h) shall apply; and if you
cease to be a director emeritus for any other reason,
the provisions of paragraph 1(f) shall apply.
2. You may pay for shares purchased pursuant hereto as follows:
(a) You may pay the Exercise Price per share in cash
or by certified check at the time of exercise;
(b) Provided that at the time of exercise Common Stock
is publicly traded and quoted regularly in the Wall
Street Journal, you may pay for the shares by delivery
of already-owned shares of Common Stock owned by you
free and clear of any liens, claims, encumbrances or
security interests, which Common Stock shall be valued
(a) if listed on a national securities exchange, at the
average closing price for the ten (10) trading days
immediately preceding the date of exercise or (b)
otherwise at the average of the closing bid and ask
quotations published in the Wall Street Journal for the
ten (10) trading days immediately preceding the date of
exercise; or
(c) You may pay for the shares by any combination of
the methods set forth in (a) and (b) above.
When you wish to exercise your stock option in whole or in part,
please refer to the provisions of this letter and correspond in
writing with the Secretary of the Corporation. This is not an
incentive stock option under Section 422A of the Internal Revenue
Code of 1986, as amended.
Very truly yours,
E. Kirk Shelton
President and Chief Operating Officer
AMENDED THROUGH JUNE 5, 1996
1992 DIRECTORS STOCK OPTION PLAN
OF
CUC INTERNATIONAL INC.
1. PURPOSES OF THE PLAN. This stock option plan (the "Plan")
is designed to provide an incentive to directors of CUC
International Inc., a Delaware corporation (the "Company").
2. STOCK SUBJECT TO THE PLAN. Options may be granted as
provided herein to purchase in the aggregate not more than
Four Hundred Fifty Thousand (450,000) shares of Common
Stock, $.01 par value per share, of the Company ("Common
Stock"). Each individual who on August 28, 1992 was a
director (but not an employee) of the Company was granted on
such date options with respect to twenty thousand (20,000)
shares of Common Stock (which have been adjusted to forty-
five thousand (45,000) to reflect three-for-two stock splits
which occurred on April 30, 1993 and June 30, 1995). Each
individual who after August 28, 1992 becomes a director (but
not an employee) of the Company, on the date of his election
to the Board of Directors, shall be granted an option to
purchase forty-five thousand (45,000) shares of Common
Stock. Such shares may, in the discretion of the Committee,
consist either in whole or in part of authorized but
unissued shares of Common Stock or shares of Common Stock
held in the treasury of the Company. The Company shall at
all times during the term of the Plan reserve and keep
available such number of shares of Common Stock as will be
sufficient to satisfy the requirements of the Plan. Such
options shall be considered "non-qualified stock options,"
within the meaning of the Internal Revenue Code of 1986, as
amended (the "Code"). No director to whom any options are
granted hereunder shall be eligible to receive any
additional options under the Plan. Subject to the provision
of Paragraph 11, any shares subject to an option which for
any reason expires, is cancelled or is terminated
unexercised as to such shares shall again become available
for option under the Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered
by a Committee (the "Committee") consisting of not less than
three members of the Board of Directors who are not
employees of the Company and who are "disinterested persons"
as defined in Rule 16b-3(d) under the Securities Exchange
Act of 1934 (the "34 Act"). A majority of the members shall
constitute a quorum, and the acts of a majority of the
members present at any meeting at which a quorum is present,
and any acts approved in writing by all members without a
meeting, shall be the acts of the Committee.
Subject to the express provisions of the Plan, the Committee
shall have the authority, in its sole discretion, to make
all determinations necessary or advisable for administering
the Plan; and, with the consent of the optionee, to modify
an option, provided such option as modified does not violate
the terms of the Plan. The determinations of the Committee
on the matters referred to in this Paragraph 3 shall be
conclusive.
No member of the Committee shall be liable for anything
whatsoever in connection with the administration of the Plan
except such member's own willful misconduct. Under no
circumstances shall any member of the Committee be liable
for any act or omission of any other member of the
Committee. In their performance of its functions with
respect to the Plan, the Committee shall be entitled to rely
upon information and advice furnished by the Company's
officers, the Company's accountants, the Company's counsel
and any other party the Committee deems necessary and no
member of the Committee shall be liable for any action taken
or not taken in reliance upon any such advice.
4. EXERCISE PRICE. The exercise price of the shares of Common
Stock under each option shall be 100% of the fair market
value of the Common Stock on the date of grant. The
determination of the Committee shall be conclusive in
determining the fair market value of the stock.
5. TERM OF OPTION. The term of each option granted pursuant to
the Plan shall be such term as is established by the
Committee, in its sole discretion, at the time such option
is granted. Options shall be subject to earlier termination
as hereinafter provided.
6. EXERCISE OF OPTION. An option or any part or installment
thereof shall be exercised by giving written notice to the
Company at its principal office (at present 707 Summer
Street, Stamford, Connecticut 06901), specifying the number
of shares as to which such option is being exercised and
accompanied by payment in full of the aggregate exercise
price therefor (or the amount due on exercise if the Stock
Option Contract permits installment payments) (i) in cash or
by certified check, (ii) with previously acquired shares of
Common Stock having an aggregate exercise price of all
options being exercised, or (iii) any combination thereof.
The Company shall have the right to deduct and withhold from
any cash otherwise payable to an optionee, or require that
an optionee make arrangements satisfactory to the Company
for payment of, such amounts as the Company shall determine
for the purpose of satisfying its liability to withhold
Federal, state or local income of FICA taxes incurred by
reason of the grant or exercise of an option.
Certificates representing the shares purchased shall be
issued as promptly as practicable, provided that the Company
may postpone issuing certificates for such shares for such
time as the Company, in its sole discretion, may deem
necessary or desirable in order to enable it to comply with
any requirements of the Securities Act of 1933, as amended
("Securities Act"), the 34 Act, any Rules or Regulations of
the Securities and Exchange Commission promulgated under
either the foregoing acts, the listing requirements of any
securities exchange on which the Company's Common Stock may
now or hereafter be listed, or any applicable laws of any
jurisdiction relating the authorization, issuance or sale of
securities. The holder of an option shall not have the
rights of a stockholder with respect to the shares covered
by his option until the date of issuance of a stock
certificate to him for such shares; provided, however, that
until such stock certificate is issued, any option holder
using previously acquired shares in payment of an option
exercise price shall have the rights of a shareholder with
respect to such previously acquired shares. In no case may
a fraction of a share be purchased or issued under the Plan.
7. TERMINATION OF DIRECTOR'S TERM.
(a) In the event that the term of an optionee's
membership on the Board of Directors expires because
the optionee (i) loses an election for a position on
the Board of Directors, (ii) resigns from the Board of
Directors prior to attaining age 65 or (iii) fails to
seek election to the Board of Directors for a term
commencing prior to his attainment of age 62 (in any
case, other than on account of death or physical or
mental disability), options granted to such optionee
shall remain exercisable until expiration of one month
after the expiration of such optionee's term, at which
time such options shall expire.
(b) In the event that the term of an optionee's
membership on the Board of Directors expires because of
the optionee's resignation after age 65 or failure to
seek election to the Board of Directors for a term
commencing after his attainment of age 62, options
granted to such optionee shall remain exercisable until
the expiration of five years after the expiration of
such optionee's term, at which time such options shall
expire.
(c) In the event that the term of an optionee's
membership on the Board of Directors expires because of
the optionee's physical or mental disability (unless
such expiration is described in subsection (b) hereof)
or death, options granted to such optionee shall become
immediately exercisable by his executor, administrator
or other person at the time entitled by law to his
rights under the option and shall remain exercisable
until the expiration of one year after the expiration
of such optionee's term, at which time such options
shall expire.
(d) In the event that an optionee is removed from the
Board of Directors by the shareholders of the Company
or by the Board of Directors, options granted to such
optionee shall expire immediately upon such removal or
disqualification.
(e) For the purposes of this Section 7 only, in the
case of an optionee who is appointed by the Board of
Directors as a "director emeritus" of the Company, the
"term" of such optionee's "membership on the Board of
Directors" shall not be deemed to terminate or expire
until such time as such optionee ceases for any reason
to be a director emeritus of the Company. If such
optionee ceases to be a director emeritus because of
physical or mental disability or death, the provisions
of Section 7(c) shall apply; if such optionee ceases to
be a director emeritus because of removal by the Board
of Directors, the provisions of Section 7(d) shall
apply; if such optionee ceases to be a director
emeritus for any other reason, the provisions of
Section 7(b) shall apply.
8. CHANGE IN CONTROL. In the event of a change in control, as
hereinafter defined, options granted under this Plan shall
become immediately exercisable, provided that such change in
control occurs after the initial vesting of an option grant.
A "change in control" shall be deemed to have occurred if
(i) a tender offer shall be made and consummated for the
ownership of 51% or more of the outstanding voting
securities of the Company, (ii) the Company shall be merged
or consolidated with another corporation and as a result of
such merger or consolidation less than 75% of the
outstanding voting securities of the surviving or resulting
corporation shall be owned in the aggregate by the former
shareholders of the Company, other than affiliates (within
the meaning of the 1934 Act) of any party to such merger or
consolidation, as the same shall have existed immediately
prior to such merger or consolidation, (iii) the Company
shall sell substantially all of its assets to another
corporation which is not a wholly owned subsidiary, or (iv)
a person, within the meaning of Section 3(a)(9) or of
Section 13(d)(3) (as in effect on the date hereof) of the 34
Act, shall acquire 25% or more of the outstanding voting
securities of the Company (whether directly, indirectly,
beneficially or of record). For purposes hereof, ownership
of voting securities shall take into account and shall
include ownership as determined by applying the provisions
of Rule 13d-3(d)(1)(i) (as in effect on the date hereof)
pursuant to the 34 Act.
9. STOCK OPTION CONTRACTS. Each option shall be evidenced by
an appropriate Stock Option Contract, and shall contain such
terms and conditions not inconsistent herewith as may be
determined by the Committee, and which shall provide, among
other things that in the event of the exercise of such
option, unless the shares of Common Stock received upon such
exercise shall have been registered under an effective
registration statement under the Securities Act, such shares
will be acquired for investment and not with a view to
distribution thereof, and that such shares may not be sold
except in compliance with the applicable provisions of the
Securities Act.
10. ADJUSTMENTS UPON CHANGES IN COMMON STOCK. The number and
kind of shares reserved for issuance hereunder may be
equitably adjusted, in the discretion of the Committee, in
the event of a stock split, stock dividend,
recapitalization, reorganization, merger, consolidation,
extraordinary dividend, split-up, spin-off, combination,
stock repurchase, exchange of shares, warrants or rights
offering to purchase stock at a price substantially below
fair market value or other similar corporate event affecting
the stock, in order to preserve the benefits intended to be
made available under the Plan. In the event of any of the
foregoing, the number and kind of shares subject to any
outstanding option granted pursuant to the Plan and the
exercise price of any such option shall be equitably
adjusted (including by payment of cash to the holder of such
option) in the discretion of the Committee in order to
preserve the benefits or potential benefits intended to be
made available to the holder of an option granted pursuant
to the Plan. The determination of the Committee as to what
adjustments shall be made, and the extent thereof, shall be
final. Unless otherwise determined by the Committee, such
adjustments shall be subject to the same vesting schedule
and restrictions to which the underlying option is subject.
No fractional shares of Company stock shall be reserved or
authorized or made subject to any outstanding option by any
such adjustment.
11. AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was
adopted by the Board of Directors on August 28, 1992. No
options may be granted under the Plan after the tenth
anniversary of that date. The Board of Directors, without
further approval of the Company's stockholders, may at any
time suspend or terminate the Plan, in whole or in part, or
amend it from time to time in such respects as it may deem
advisable; provided, however, that no amendment shall be
effective without the prior or subsequent approval of a
majority of the Company's outstanding stock entitled to vote
thereon which would (a) except as specified in Paragraph 10,
increase the maximum number of shares for which options may
be granted under the Plan, (b) otherwise materially increase
the benefits to participants under the Plan or (c)
materially change the eligibility requirements for
individuals entitled to receive options hereunder. No
termination, suspension or amendment of the Plan shall,
without the consent of the holder of an existing option
affected thereby, adversely affect his rights under such
option.
12. NON-TRANSFERABILITY OF OPTIONS. No option granted under the
Plan shall be transferable otherwise than by will or the
laws of descent and distribution, unless such transfer is
permitted by Rule 16b-3 under the 34 Act and the Committee
approves such transferability, and options may be exercised,
during the lifetime of the holder thereof, only by him.
Except to the extent provided in Paragraph 7(c), options may
not be assigned, transferred, pledged, hypothecated or
disposed of in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment
or similar process.
13. STOCKHOLDERS' APPROVAL. The Plan shall be subject to
approval by a majority of the Company's outstanding stock
entitled to vote thereon at the next annual or special
meeting of its stockholders to be held to consider such
approval and no options granted hereunder may be exercised
prior to such approval, provided that the date of grant of
any options granted hereunder shall be determined as if the
Plan had not been subject to such approval.
14. GOVERNING LAW. The Plan and all rights hereunder shall be
construed in accordance with and governed by the internal
laws of the State of Delaware.
15. COMPLIANCE WITH RULE 16b-3. All transactions under the Plan
are intended to comply with all applicable conditions of
Rule 16b-3 or its successors under the 34 Act, regardless of
whether such conditions are set forth in the Plan. To the
extent any provision of the Plan or action by the Committee
fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the
Committee.
AMENDED THROUGH JUNE 5, 1996
1994 DIRECTORS STOCK OPTION PLAN
OF
CUC INTERNATIONAL INC.
1. PURPOSES OF THE PLAN. The 1994 Directors Stock Option Plan
(the "Plan") is designed to attract, retain and provide an
incentive to directors of CUC International Inc., a
Delaware corporation (the "Company"), who are not
employees of the Company, by providing them with an
ownership interest in the Company.
2. STOCK SUBJECT TO THE PLAN. Options may be granted as
provided herein to purchase in the aggregate not more than
Two Hundred Twenty-Five Thousand (225,000) shares of
Common Stock, $.01 par value per share, of the Company
("Common Stock"). Options to purchase seven thousand five
hundred (7,500) shares of Common Stock (as adjusted to
reflect a three-for-two stock split which occurred June
30, 1995 and as it may be adjusted pursuant to Section 10
hereof) shall be automatically granted on November 23 (or
the first succeeding business day thereafter on which the
Common Stock is traded on the principal securities
exchange on which it is listed) of each of 1994, 1995,
1996 and 1997 to each individual who is a director (but
not an employee) of the Company on such date. In the
event of the expiration of the term of the membership on
the Board of Directors of the Company ("Board of
Directors") of any individual who is a director (but not
an employee) of the Company, because of such individual's
physical or mental disability or death, such individual
(or his executor, administrator or other person at the
time entitled by law thereto) shall automatically be
granted, as of the date of the expiration of such
individual's term on the Board of Directors all of the
options under this Plan which such individual would have
been entitled to receive during the remainder of his then
current term on the Board of Directors with the exercise
thereof subject to the provisions of Paragraph 7(c)
hereof. The Common Stock that may be purchased pursuant to
options under this Plan by any one individual shall not
exceed thirty thousand (30,000) shares of Common Stock (as
adjusted to reflect a three-for-two stock split which
occurred June 30, 1995 and as it may be adjusted pursuant
to Section 10 hereof).
Such shares may, in the discretion of the Committee,
consist either in whole or in part of authorized but
unissued shares of Common Stock or shares of Common Stock
held in the treasury of the Company. The Company shall at
all times during the term of the Plan reserve and keep
available such number of shares of Common Stock as will be
sufficient to satisfy the requirements of the Plan. Such
options shall be considered "non-qualified stock options,"
within the meaning of the Internal Revenue Code of 1986,
as amended (the "Code"). Subject to the provision of
Paragraph 11 hereof, any shares subject to an option which
for any reason expires, is cancelled or is terminated
unexercised as to such shares shall again become available
for option under the Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered
by a Committee (the "Committee") appointed by the Board of
Directors consisting of not less than three (3) members of
the Board of Directors who are not employees of the
Company and who are "disinterested persons" as defined in
Rule 16b-3 under the Securities Exchange Act of 1934 (the
"Exchange Act"). A majority of the members of the
Committee shall constitute a quorum, and the acts of a
majority of the members of the Committee present at any
meeting at which a quorum is present, and any acts
approved in writing by all members of the Committee
without a meeting, shall be the acts of the Committee.
Subject to the express provisions of the Plan, the
Committee shall have the authority, in its sole
discretion, to make all determinations necessary or
advisable for administering the Plan; and, with the
consent of the optionee, to modify an option, provided
such option as modified does not violate the terms of the
Plan. The determinations of the Committee on the matters
referred to in this Paragraph 3 shall be conclusive. The
Chief Executive Officer and the President of the Company
shall be authorized to implement the Plan in accordance
with its terms.
No member of the Committee shall be liable for anything
whatsoever in connection with the administration of the
Plan except such member's own willful misconduct. Under
no circumstances shall any member of the Committee be
liable for any act or omission of any other member of the
Committee. In the performance of its functions with
respect to the Plan, the Committee shall be entitled to
rely upon information and advice furnished by the
Company's officers, the Company's accountants, the
Company's counsel and any other party the Committee deems
necessary and no member of the Committee shall be liable
for any action taken or not taken in reliance upon any
such advice.
4. EXERCISE PRICE. The exercise price of the shares of Common
Stock under each option shall be 100% of the fair market
value of the Common Stock on the date of grant. The
determination of the Committee shall be conclusive in
determining the fair market value of the Common Stock.
5. TERM OF OPTION. The term of each option granted pursuant to
the Plan shall be such term as is established by the
Committee, in its sole discretion, at the time such option
is granted. Options shall be subject to earlier
termination as hereinafter provided.
6. EXERCISE OF OPTION. An option or any part or installment
thereof shall be exercised by giving written notice to the
Company at its principal office (at present, 707 Summer
Street, Stamford, Connecticut 06901), specifying the
number of shares of Common Stock as to which such option
is being exercised and accompanied by payment in full of
the aggregate exercise price therefor (or the amount due
on exercise if the Stock Option Contract (as described in
Paragraph 9 hereof) permits installment payments) (i) in
cash or by certified check, (ii) with previously acquired
shares of Common Stock having an aggregate exercise price
of all options being exercised, or (iii) any combination
thereof.
The Company shall have the right to deduct and withhold
from any cash otherwise payable to an optionee, or require
that an optionee make arrangements satisfactory to the Company
for payment of, such amounts as the Company shall
determine for the purpose of satisfying its liability to
withhold Federal, state or local income or FICA taxes
incurred by reason of the grant or exercise of an option.
Certificates representing the shares of Common Stock
purchased shall be issued as promptly as practicable,
provided that the Company may postpone issuing
certificates for such shares for such time as the Company,
in its sole discretion, may deem necessary or desirable in
order to enable it to comply with any requirements of the
Securities Act of 1933, as amended ("Securities Act"), the
Exchange Act, any Rules or Regulations of the Securities
and Exchange Commission promulgated under either of the
foregoing acts, the listing requirements of any securities
exchange on which the Company's Common Stock may now or
hereafter be listed, or any applicable laws of any
jurisdiction relating to the authorization, issuance or
sale of securities. The holder of an option shall not
have the rights of a stockholder with respect to the
shares of Common Stock covered by his option until the
date of issuance of a stock certificate to him for such
shares; provided, however, that until such stock
certificate is issued, any option holder using previously
acquired shares of Common Stock in payment of an option
exercise price shall have the rights of a shareholder with
respect to such previously acquired shares. In no case
may a fraction of a share of Common Stock be purchased or
issued under the Plan. An optionee receiving options to
purchase Common Stock under the Plan shall not be able to sell the
Common Stock underlying such options until at least six (6) months have
elapsed from the date such options were granted to such
optionee.
7. TERMINATION OF DIRECTOR'S TERM. Unless otherwise determined
by the Committee, options shall be exercisable following
termination of an optionee's term as a director or
director emeritus only as indicated below:
(a) In the event that the term of an optionee's
membership on the Board of Directors expires because
the optionee (i) loses an election for a position on
the Board of Directors, (ii) resigns from the Board
of Directors prior to attaining age 65, or (iii)
fails to seek election to the Board of Directors for
a term commencing prior to his attainment of age 62
(in any case, other than on account of death or
physical or mental disability), options granted to
such optionee shall remain exercisable until the
earlier to occur of the expiration of one month after
the expiration of such optionee's term or the stated
expiration date of such options, at which time such
options shall expire.
(b) In the event that the term of an optionee's
membership on the Board of Directors expires because
of the optionee's resignation after age 65 or failure
to seek election to the Board of Directors for a term
commencing after his attainment of age 62, options
granted to such optionee shall remain exercisable
until the earlier to occur of the expiration of five
years after the expiration of such optionee's term or
the stated expiration date of such options, at which
time such options shall expire.
(c) In the event that the term of an optionee's
membership on the Board of Directors expires because
of the optionee's physical or mental disability
(unless such expiration is described in subsection
(b) hereof) or death, options granted to such
optionee shall remain exercisable by his executor,
administrator or other person at the time entitled by
law to his rights under the option until the earlier
to occur of the expiration of one year after the
expiration of such optionee's term or the stated
expiration date of such options, at which time such
options shall expire.
(d) In the event that an optionee is removed from
the Board of Directors by the shareholders of the
Company or by the Board of Directors, options granted
to such optionee shall expire immediately upon such
removal or disqualification.
(e) For the purposes of this Section 7 only, in
the case of an optionee who is appointed by the Board
of Directors as a director emeritus of the Company,
the "term" of such optionee's "membership on the
Board of Directors" shall not be deemed to terminate
or expire until such time as such optionee ceases for
any reason to be a director emeritus of the Company.
If such optionee ceases to be a director emeritus
because of physical or mental disability or death,
the provisions of Section 7(c) shall apply; if such
optionee ceases to be a director emeritus because of
removal by the Board of Directors, the provisions of
Section 7(d) shall apply; if such optionee ceases to
be a director emeritus for any other reason, the
provisions of Section 7(b) shall apply.
8. CHANGE IN CONTROL. In the event of a change in control, as
hereinafter defined, each individual who is a director
(but not an employee) of the Company on the effective date
of such change of control shall automatically be granted,
as of such date, all of the options under the Plan which
such individual would have been entitled to receive if
such individual were a non-employee director on November
23 of each remaining year in which the Plan provides that
grants are to be made. A "change in control" shall be
deemed to have occurred if (i) a tender offer shall be
made and consummated for the ownership of 51% or more of
the outstanding voting securities of the Company, (ii) the
Company shall be merged or consolidated with another
corporation and as a result of such merger or
consolidation less than 75% of the outstanding voting
securities of the surviving or resulting corporation shall
be owned in the aggregate by the former shareholders of
the Company, other than affiliates (within the meaning of
the Exchange Act) of any party to such merger or
consolidation, as the same shall have existed immediately
prior to such merger or consolidation, (iii) the Company
shall sell substantially all of its assets to another
corporation which is not a wholly owned subsidiary, or
(iv) a person, within the meaning of Section 3(a)(9) or of
Section 13(d)(3) (as in effect on the date hereof) of the
Exchange Act, shall acquire 25% or more of the outstanding
voting securities of the Company (whether directly,
indirectly, beneficially or of record). For purposes
hereof, ownership of voting securities shall take into
account and shall include ownership as determined by
applying the provisions of Rule 13d-3(d)(1)(i) (as in
effect on the date hereof) pursuant to the Exchange Act.
9. STOCK OPTION CONTRACTS. Each option shall be evidenced by
an appropriate Stock Option Contract, and shall contain
such terms and conditions not inconsistent herewith as may
be determined by the Committee, and which shall provide,
among other things, that in the event of the exercise of
such option, unless the shares of Common Stock received
upon such exercise shall have been registered under an
effective registration statement under the Securities Act,
such shares will be acquired for investment and not with a
view to distribution thereof, and that such shares may not
be sold except in compliance with the applicable
provisions of the Securities Act.
10. ADJUSTMENTS UPON CHANGES IN COMMON STOCK. The number and
kind of shares reserved for issuance hereunder may be
equitably adjusted, in the discretion of the Committee, in
the event of a stock split, stock dividend,
recapitalization, reorganization, merger, consolidation,
extraordinary dividend, split-up, spin-off, combination,
stock repurchase, exchange of shares, warrants or rights
offering to purchase stock at a price substantially below
fair market value or other similar corporate event
affecting the Common Stock, in order to preserve the
benefits intended to be made available under the Plan. In
the event of any of the foregoing, the number and kind of
shares subject to any outstanding option granted pursuant
to the Plan and the exercise price of any such option
shall be equitably adjusted (including by payment of cash
to the holder of such option) in the discretion of the
Committee in order to preserve the benefits or potential
benefits intended to be made available to the holder of an
option granted pursuant to the Plan. The determination of
the Committee as to what adjustments shall be made, and
the extent thereof, shall be final. Unless otherwise
determined by the Committee, such adjustments shall be
subject to the same vesting schedule and restrictions to
which the underlying option is subject. No fractional
shares of Company stock shall be reserved or authorized or
made subject to any outstanding option by any such
adjustment.
11. AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was
adopted by the Board of Directors on November 23, 1994.
No options may be granted under the Plan after the third
anniversary of that date. The Board of Directors, without
further approval of the Company's stockholders, may at any
time suspend or terminate the Plan, in whole or in part,
or amend it from time to time in such respects as it may
deem advisable; provided, however, that no amendment shall
be effective without the prior or subsequent approval of a
majority of the Company's outstanding stock entitled to
vote thereon which would (a) except as specified in
Paragraph 10, increase the maximum number of shares for
which options may be granted under the Plan, (b) otherwise
materially increase the benefits to participants under the
Plan, (c) materially change the eligibility requirements
for individuals entitled to receive options hereunder, or
(d) materially change the method for determination of the
purchase price to be paid for shares of Common Stock upon
the exercise of options granted hereunder; and, provided,
further, that the Plan may not be amended more than once
every six (6) months, other than to comport with changes
in the Code, the Employee Retirement Income Security Act
of 1974, as amended, or the rules promulgated thereunder.
No termination, suspension or amendment of the Plan shall,
without the consent of the holder of an existing option
affected thereby, adversely affect his rights under such option.
12. NON-TRANSFERABILITY OF OPTIONS. No option granted under
the Plan shall be transferable otherwise than by will or
the laws of descent and distribution, unless such transfer
is permitted by Rule 16b-3 under the Exchange Act and the
Committee approves such transferability, and options may
be exercised, during the lifetime of the holder thereof,
only by him. Except to the extent provided in Paragraph
7(c), options may not be assigned, transferred, pledged,
hypothecated or disposed of in any way (whether by
operation of law or otherwise) and shall not be subject to
execution, attachment or similar process.
13. STOCKHOLDERS' APPROVAL. The Plan shall be subject to
approval by a majority of the Company's outstanding stock
entitled to vote thereon at the next annual or special
meeting of its stockholders to be held to consider such
approval and no options granted hereunder may be exercised
prior to such approval, provided that the date of grant of
any options granted hereunder shall be determined as if
the Plan had not been subject to such approval. In the
event such approval is not obtained, any options granted
hereunder shall be null and void.
14. GOVERNING LAW. The Plan and all rights hereunder shall be
construed in accordance with and governed by the internal
laws of the State of Delaware.
15. COMPLIANCE WITH RULE 16b-3. All transactions under the
Plan are intended to comply with all applicable conditions
of Rule 16b-3 or its successors under the Exchange Act,
regardless of whether such conditions are set forth in the
Plan. To the extent any provision of the Plan or action
by the Committee fails to so comply, it shall be deemed
null and void, to the extent permitted by law and deemed
advisable by the Committee.
