SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT /X/
FILED BY A PARTY OTHER THAN THE REGISTRANT / /
CHECK THE APPROPRIATE BOX:
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/ / DEFINITIVE PROXY STATEMENT
/ / DEFINITIVE ADDITIONAL MATERIALS
/ / SOLICITING MATERIAL PURSUANT TO RULE 14a-11(c) OR RULE 14a-12
CUC INTERNATIONAL INC.
________________________________________________________________________________
(Name of Registrant as Specified in its Charter)
CUC INTERNATIONAL INC.
________________________________________________________________________________
(Name of Person Filing Proxy Statement)
Payment of Filing Fee (Check appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
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14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration No.:
3) Filing Party:
4) Date Filed:
[CUC LOGO]
May , 1996
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
CUC International Inc. The meeting will be held on Wednesday, June 5, 1996, at
10:00 a.m. at the Hyatt Regency Greenwich, 1800 East Putnam Avenue, Old
Greenwich, Connecticut.
At this meeting, you will be asked to consider and vote upon the election of
Directors, an amendment to the Corporation's Restated Certificate of
Incorporation to increase the number of shares of Common Stock authorized for
issuance, the amendment of the Corporation's 1992 Directors Stock Option Plan,
the amendment of the Corporation's 1994 Directors Stock Option Plan, and the
ratification of the appointment of the Corporation's independent auditors for
the fiscal year ending January 31, 1997.
You are entitled to vote all shares of Common Stock registered in your name
at the close of business on April 26, 1996. If you attend the meeting and desire
to vote in person, your proxy will not be used.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, WE URGE YOU TO SIGN THE
ENCLOSED PROXY AND RETURN IT IN THE ACCOMPANYING ENVELOPE AS SOON AS POSSIBLE SO
THAT YOUR SHARES WILL BE REPRESENTED AT THE MEETING.
We hope that you will find it convenient to attend the meeting, where we
will also report on the Corporation's current operations and outlook.
On behalf of the Board of Directors and the employees of CUC International
Inc., thank you for your continued interest and support.
Sincerely,
/s/ Walter A. Forbes
Walter A. Forbes
Chairman and
Chief Executive Officer
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
CUC INTERNATIONAL INC.
707 SUMMER STREET
STAMFORD, CONNECTICUT 06901
To CUC Shareholders:
The 1996 Annual Meeting of Shareholders of CUC International Inc. (the
"Corporation") will be held on Wednesday, June 5, 1996, at 10:00 a.m. at the
Hyatt Regency Greenwich, 1800 East Putnam Avenue, Old Greenwich, Connecticut. At
the Annual Meeting, the shareholders of the Corporation will be asked to
consider and vote upon the following proposals:
1. To elect Messrs. T. Barnes Donnelley, Christopher K. McLeod and
Stanley M. Rumbough, Jr. to the Board of Directors of the Corporation, each
for a term to expire at the 1999 Annual Meeting;
2. To amend the Corporation's Restated Certificate of Incorporation to
increase the number of shares of Common Stock, $.01 par value ("Common
Stock"), authorized for issuance from four hundred million to six hundred
million;
3. To amend the Corporation's 1992 Directors Stock Option Plan;
4. To amend the Corporation's 1994 Directors Stock Option Plan;
5. To ratify the appointment of Ernst & Young LLP as the Independent
Auditors of the Corporation for the fiscal year ending January 31, 1997; and
6. To transact such other business as may properly come before the
meeting or any postponement or adjournment thereof.
The foregoing items of business are described more fully in the Proxy
Statement accompanying this Notice.
The Board of Directors of the Corporation has fixed the close of business on
April 26, 1996 as the record date for the determination of shareholders entitled
to notice of and to vote at the Annual Meeting. You are entitled to vote all
shares of Common Stock registered in your name at the close of business on April
26, 1996. If you attend the meeting and desire to vote in person, your proxy
will not be used.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, WE
URGE YOU TO SIGN THE ENCLOSED PROXY, WHICH IS SOLICITED BY THE BOARD OF
DIRECTORS OF THE CORPORATION, AND RETURN IT IN THE ACCOMPANYING ENVELOPE AS SOON
AS POSSIBLE, SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING. IT IS
IMPORTANT THAT YOUR PROXY BE RETURNED PROMPTLY IN ORDER TO AVOID THE ADDITIONAL
EXPENSE OF FURTHER SOLICITATION.
A list of shareholders entitled to vote at the 1996 Annual Meeting will be
open to the examination of any shareholder, for any purpose germane to the
meeting, for ten days prior to the meeting at the Corporation's corporate
office, 707 Summer Street, Stamford, Connecticut 06901.
By Order of the Board of Directors,
/s/ Robert T. Tucker
Robert T. Tucker
Secretary
May , 1996
Stamford, CT
CUC INTERNATIONAL INC.
707 SUMMER STREET
STAMFORD, CONNECTICUT 06901
-------------------
PROXY STATEMENT
-------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 5, 1996
-------------------
Your proxy is solicited by the Board of Directors (the "Board") of CUC
International Inc. (the "Corporation") in connection with the Annual Meeting of
Shareholders of the Corporation to be held on Wednesday, June 5, 1996, at 10:00
a.m. at the Hyatt Regency Greenwich, 1800 East Putnam Avenue, Old Greenwich,
Connecticut, and any postponement or adjournment thereof (the "Annual Meeting").
The Corporation has authorized two classes of voting securities: common
stock, par value $.01 per share ("Common Stock"), and preferred stock, par value
$.01 per share ("Preferred Stock"). There were shares of Common Stock
issued and outstanding at the close of business on April 26, 1996 (the "Record
Date"). No shares of Preferred Stock have been issued. All shareholders of
record of the Common Stock at the close of business on the Record Date will be
entitled to vote at the Annual Meeting. Each share of Common Stock is entitled
to one vote. The presence at the Annual Meeting, in person or by proxy, of the
holders of at least one third of the shares of Common Stock outstanding on the
Record Date will constitute a quorum.
If the accompanying proxy is properly executed, returned to the Corporation
in time to be voted at the Annual Meeting, and not revoked, the shares of Common
Stock represented thereby will be voted in accordance with the instructions
marked on the proxy. Unless contrary instructions are given, the persons
designated as proxy holders in the proxy will vote FOR the slate of nominees
proposed by the Board of Directors, FOR amendment of the Corporation's Restated
Certificate of Incorporation, FOR amendment of the Corporation's 1992 Directors
Stock Option Plan, FOR amendment of the Corporation's 1994 Directors Stock
Option Plan, and FOR ratification of Ernst & Young LLP as the Corporation's
Independent Auditors for the fiscal year ending January 31, 1997. Any
shareholder giving a proxy has the right to attend the Annual Meeting to vote
his or her shares of Common Stock in person (thereby revoking any prior proxy)
and also has the right to revoke a previously granted proxy at any time before
it is exercised by written notice filed with the Secretary of the Corporation.
Attendance at the Annual Meeting will not, in itself, constitute revocation of a
previously granted proxy.
The approximate date on which this Proxy Statement and the accompanying form
of proxy, Notice of Meeting and Annual Report to Shareholders for the fiscal
year ended January 31, 1996 ("Fiscal Year 1996"), which contains the
Corporation's financial statements for Fiscal Year 1996, were first mailed to
the Corporation's shareholders was May , 1996.
The Corporation has retained D.F. King & Co., Inc. to aid in the
solicitation of proxies for a fee estimated not to exceed $8,000 plus
reimbursement of expenses. In addition to solicitation by mail, officers,
directors ("Directors") and employees of the Corporation may solicit proxies by
telephone, telecopy and personal contact. All costs of solicitation, including
printing and mailing of this Proxy Statement and accompanying materials, fees
and expenses of D.F. King & Co., Inc., reimbursement of brokerage firms and
others for their expenses in forwarding solicitation material to the beneficial
owners of the Corporation's Common Stock, and supplementary solicitations to
submit proxies, if any, will be borne by the Corporation.
1
VOTING PROCEDURES
Directors of the Corporation must be elected by a majority of the vote of
the shares of Common Stock present in person or represented by proxy at the
Annual Meeting. Consequently, only shares that are voted in favor of a
particular nominee will be counted toward such nominee's achievement of a
majority. Abstentions and instructions on a proxy to withhold authority to vote
for one or more of the nominees for Director will have the effect of a negative
vote for such nominees. However, if a broker indicates that it does not have
authority to vote certain shares of Common Stock, those votes will not be
considered as shares present and entitled to vote at the Annual Meeting with
respect to the election of Directors and will not be counted toward the outcome
of the vote, although they will have the practical effect of reducing the number
of affirmative votes required to achieve a majority for the election of the
nominees for Director by reducing the total number of shares of Common Stock
from which such majority is calculated.
With respect to each of Proposal 2, the amendment of the Corporation's
Restated Certificate of Incorporation, Proposal 3, the amendment of the
Corporation's 1992 Directors Stock Option Plan and Proposal 4, the amendment of
the Corporation's 1994 Directors Stock Option Plan, the affirmative vote of a
majority of the shares of Common Stock outstanding and entitled to vote at the
Annual Meeting is required for that particular matter to become effective. With
respect to Proposal 5, the ratification of the Corporation's Independent
Auditors, and all other matters submitted to the shareholders for a vote, the
affirmative vote of the holders of at least a majority of the shares of Common
Stock present in person or represented by proxy at the Annual Meeting for a
particular matter is required to become effective. With respect to Proposals 2,
3 and 4, abstentions and indications by brokers that they do not have authority
to vote certain shares will have the effect of negative votes on these
proposals. With respect to Proposal 5 and all other matters, abstentions will
have the effect of negative votes on those matters, but if a broker indicates
that it does not have authority to vote certain shares of Common Stock, those
votes will not be considered as shares present and entitled to vote at the
Annual Meeting with respect to such matters and will not be counted toward the
outcome of the vote, although they will have the practical effect of reducing
the number of affirmative votes required to achieve a majority for such matters
by reducing the total number of shares of Common Stock from which such majority
is calculated.
In order that your shares of Common Stock may be represented at the Annual
Meeting, you are requested to:
. indicate your instructions on the proxy;
. date and sign the proxy;
. mail the proxy promptly in the enclosed envelope; and
. allow sufficient time for the proxy to be received before the date of
the Annual Meeting.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT, AND, IF GIVEN
OR MADE, SUCH INFORMATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED AND
THE DELIVERY OF THIS PROXY STATEMENT SHALL, UNDER NO CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CORPORATION
SINCE THE DATE OF THIS PROXY STATEMENT.
2
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
On each of June 7, 1995, April 2, 1993 and June 2, 1992, the Corporation
declared a three-for-two stock split in the nature of a stock dividend, for
shareholders of record on June 19, 1995, April 16, 1993 and June 12, 1992,
respectively. The distributions were made on June 30, 1995, April 30, 1993 and
July 2, 1992, respectively. All share numbers and per share amounts in this
Proxy Statement reflect these stock splits.
The following table sets forth each person known by the Corporation to be
the beneficial owner as of February 29, 1996 of more than 5% of the
Corporation's outstanding shares of Common Stock.
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER OWNERSHIP COMMON STOCK
------------------- ------------------ ------------
W.P. Stewart & Co. Inc.
527 Madison Avenue
New York, NY 10022......................................... 9,668,149(1) 5.07%
- ------------
(1) W.P. Stewart & Co. Inc. filed a Schedule 13G statement, dated February 15,
1996, pursuant to Section 13(g) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), reflecting the beneficial ownership of
9,668,149 shares of Common Stock. W.P. Stewart & Co. Inc. has the power to
make investment decisions in respect of such Common Stock for many unrelated
clients, but has no economic interest in such securities.
After giving effect to the Corporation's proposed acquisition of Davidson &
Associates, Inc. ("Davidson"), pursuant to which the Corporation will issue .85
shares of Common Stock for each share of Davidson common stock outstanding,
Robert M. Davidson, Chairman and Chief Executive Officer of Davidson, will be
the beneficial owner of approximately 13,600,106 shares of Common Stock
(including certain shares held in trusts to which Robert and Janice Davidson
exercise shared voting and investment power, but not including certain shares
owned by Janice Davidson as her sole and separate property or owned by a certain
trust for which Janice Davidson serves as trustee), and Janice G. Davidson,
President of Davidson and Mr. Davidson's wife, will be the beneficial owner of
approximately 13,600,276 shares of Common Stock (including certain shares held
in trusts to which Robert and Janice Davidson exercise shared voting and
investment power, but not including certain shares owned by Robert Davidson as
his sole and separate property or owned by a certain trust for which Robert
Davidson serves as trustee). Based on the number of shares of Davidson common
stock owned by Robert and Janice Davidson on March 18, 1996, Mr. and Mrs.
Davidson (together with certain trusts for which they serve as fiduciaries) will
beneficially own approximately 9.8% of the Corporation's then-outstanding shares
of Common Stock, if the Davidson acquisition is consummated, and will
beneficially own approximately 8.4% of the Corporation's then-outstanding shares
of Common Stock, if the Davidson acquisition and the Corporation's acquisitions
of Sierra On-Line, Inc. ("Sierra") and Ideon Group, Inc. ("Ideon") are
consummated (assuming that the Ideon acquisition takes place at the mid-point of
the range of possible exchange ratios for such transaction). For additional
information concerning Mr. and Mrs. Davidson, see "Proposal 1: Election of
Directors," below. For additional information concerning the Ideon transaction,
see "Executive Compensation and Other Information--Performance Graph."
The following table shows the number of shares of the Corporation's Common
Stock beneficially owned as of January 31, 1996 by each Director of the
Corporation, by each nominee for Director of the Corporation, by each executive
officer of the Corporation named in the "Summary Compensation Table" set forth
in "Executive Compensation and Other Information--Summary of Cash and Other
Compensation," below (the "Named Executive Officers"), and by all Directors and
current executive officers of the Corporation as a group.
Each person named in the following table has sole voting and investment
power with respect to all shares of Common Stock shown as beneficially owned by
such person, except as otherwise set forth in the notes to the table. Shares of
Common Stock that any person has a right to acquire within 60 days
3
after January 31, 1996 pursuant to an exercise of options or otherwise are
deemed to be outstanding for the purpose of computing the percentage ownership
of such person, but are not deemed to be outstanding for computing the
percentage ownership of any other person shown in the table.
AMOUNT AND NATURE OF PERCENT OF
NAME BENEFICIAL OWNERSHIP COMMON STOCK
---- -------------------- ------------
Bartlett Burnap............................................ 2,206,813(1) 1.17%
Cosmo Corigliano........................................... 196,694(2) *
T. Barnes Donnelley........................................ 1,376,573(3) *
Walter A. Forbes........................................... 761,215(4) *
Stephen A. Greyser......................................... 108,561(5) *
Amy N. Lipton.............................................. 144,043(6) *
Christopher K. McLeod...................................... 1,156,696(7) *
Burton C. Perfit........................................... 88,286(8) *
Robert P. Rittereiser...................................... 108,561(9) *
Stanley M. Rumbough, Jr.................................... 1,283,598(10) *
E. Kirk Shelton............................................ 987,387(11) *
All Directors and Executive Officers as a group (11
persons)................................................. 8,418,427 4.47%
- ------------
* Amount represents less than one percent of Common Stock.
(1) Amount includes options to purchase 99,375 shares of Common Stock and
2,042,562 shares of Common Stock held by Sun Valley Investments, a limited
partnership in which Mr. Burnap is the sole general and sole limited
partner. Amount does not include 139,767 shares of Common Stock held by Mr.
Burnap's spouse and 100,000 shares of Common Stock held by the Bartlett
Burnap Charitable Remainder Trust Dated August 10, 1995, as to which Mr.
Burnap disclaims beneficial ownership.
(2) Amount includes options to purchase 162,814 shares of Common Stock.
(3) Amount includes options to purchase 99,375 shares of Common Stock. Amount
also includes: 762,812 shares of Common Stock held indirectly by Mr.
Donnelley under a trust under the will of Mr. Donnelley; 74,958 shares of
Common Stock held indirectly by Mr. Donnelley under a grantor retained
annuity trust of which Mr. Donnelley is the income beneficiary and Mr.
Donnelley's children have a residual interest, as to which Mr. Donnelley
disclaims beneficial ownership; and 5,726 shares of Common Stock held by a
custodian for Mr. Donnelley's children, as to which Mr. Donnelley disclaims
beneficial ownership.
(4) Amount includes options to purchase 413,812 shares of Common Stock. Amount
does not include 6,349 shares of Common Stock held by Mr. Forbes' wife nor
13,111 shares of Common Stock held by Mr. Forbes' wife as custodian for
their children, as to which Mr. Forbes disclaims beneficial ownership.
(5) Amount includes options to purchase 99,375 shares of Common Stock.
(6) Amount includes options to purchase 123,063 shares of Common Stock and
9,075 shares of Common Stock held by Ms. Lipton's husband.
(7) Amount includes options to purchase 629,954 shares of Common Stock. Amount
does not include 28,612 shares of Common Stock held by a charitable
foundation founded by Mr. McLeod, as to which Mr. McLeod disclaims
beneficial ownership.
(8) Amount includes options to purchase 79,375 shares of Common Stock.
(9) Amount includes options to purchase 99,375 shares of Common Stock.
(10) Amount includes options to purchase 99,375 shares of Common Stock.
(11) Amount includes options to purchase 616,370 shares of Common Stock.
As described below in "Proposal 1: Election of Directors," in connection
with the Corporation's proposed acquisitions of Davidson and Sierra, the
Corporation has agreed that upon consummation of the respective transactions,
the Corporation will increase the size of the Board and will appoint as
4
Directors Robert M. Davidson, Chairman and Chief Executive Officer of Davidson,
and Janice G. Davidson, President of Davidson and Mr. Davidson's wife, upon the
consummation of the Davidson acquisition, and Kenneth A. Williams, Chief
Executive Officer of Sierra, upon the consummation of the Sierra acquisition.
After giving effect to the Corporation's proposed acquisition of both Davidson
and Sierra, pursuant to which the Corporation will issue .85 shares and 1.225
shares of Common Stock for each share of Davidson and Sierra common stock
outstanding, respectively, Mr. Davidson will be the beneficial owner of
approximately 13,600,106 shares of Common Stock (including certain shares held
in trusts to which Robert and Janice Davidson exercise shared voting and
investment power, but not including certain shares owned by Janice Davidson as
her sole and separate property or owned by a certain trust for which Janice
Davidson serves as trustee) and Mrs. Davidson will be the beneficial owner of
approximately 13,600,276 shares of Common Stock (including certain shares held
in trusts to which Robert and Janice Davidson exercise shared voting and
investment power, but not including certain shares owned by Robert Davidson as
his sole and separate property or owned by a certain trust for which Robert
Davidson serves as trustee). Robert and Janice Davidson (together with certain
trusts for which they serve as fiduciaries) will beneficially own approximately
8.8% of the Corporation's outstanding shares of Common Stock, if the Davidson
and Sierra acquisitions both are consummated, and approximately 8.4% of the
Corporation's outstanding shares of Common Stock, if the Davidson, Sierra and
Ideon acquisitions all are consummated (assuming that the Ideon acquisition
takes place at the mid-point of the range of possible exchange ratios for such
transaction). None of the Davidson, Sierra and Ideon acquisitions are contingent
upon the consummation by the Corporation of any of the other proposed
transactions. After giving effect to the Corporation's proposed acquisitions of
both Davidson and Sierra, Mr. Williams will be the beneficial owner of
approximately 2,217,640 shares of Common Stock, which is less than one percent
of the Corporation's outstanding shares of Common Stock, and which would be less
than one percent of the Corporation's outstanding shares of Common Stock if the
Davidson, Sierra and Ideon acquisitions all are consummated.
PROPOSAL 1: ELECTION OF DIRECTORS
Three persons are to be elected to the Board of Directors of the Corporation
at the Annual Meeting, to hold office for a term of three years or until their
respective successors are duly elected and qualified, and the remaining six
Directors will continue in office for the terms specified below. The persons
named in the enclosed proxy intend to vote for the election of the three
nominees listed below, unless instructions to the contrary are given therein.
All three of the nominees are currently Directors.
The three nominees have indicated that they are able and willing to serve as
Directors. However, if some unexpected occurrence should require the
substitution of some other person or persons for any one or more of the
nominees, the person or persons voting the proxies will vote for such nominee or
nominees as the Corporation may select. The Corporation has no reason to believe
that any nominee will be unable to serve if elected. The affirmative vote of a
majority of the shares present and entitled to vote at the Annual Meeting is
required to elect each nominee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH NOMINEE. UNLESS MARKED TO
THE CONTRARY, PROXIES RECEIVED BY THE CORPORATION WILL BE VOTED FOR THE ELECTION
OF THE THREE NOMINEES LISTED BELOW.
The following table lists, as of March 1, 1996, the name, age, position(s)
with the Corporation and principal occupation of each of the three nominees and
the six continuing Directors, the year in which each Director's term of office
will expire (assuming, in the case of each of the three nominees, that such
nominee is elected at the Annual Meeting) and the year in which each Director
was first appointed or elected as a Director of the Corporation. For information
regarding the beneficial ownership of Common Stock by the nominees and current
Directors of the Corporation, see "Security Ownership of Management and Certain
Beneficial Owners," above.
5
NOMINEES:
YEAR IF
FIRST ELECTED,
APPOINTED OR YEAR
PRINCIPAL OCCUPATION & ELECTED TO TERM
NAME OTHER DIRECTORSHIPS AGE THE BOARD EXPIRES
---- ---------------------- --- ------------- --------
T. BARNES DONNELLEY............... Mr. Donnelley is, and has been for at 62 1977 1999
least the past five years, an
independent investor.
CHRISTOPHER K. MCLEOD............. Mr. McLeod has been an Executive Vice 40 1995 1999
President of the Corporation since
1986, a member of the Office of the
President of the Corporation since
1988 and served as President of the
Corporation's Comp-U-Card Division
between 1988 and August 1995.
STANLEY M. RUMBOUGH, JR........... Mr. Rumbough is, and has been for at 76 1976 1999
least the past five years, an
independent investor and is a
director of International Flavors
and Fragrances, Inc.
CONTINUING DIRECTORS:
YEAR
FIRST
APPOINTED OR YEAR
PRINCIPAL OCCUPATION & ELECTED TO TERM
NAME OTHER DIRECTORSHIPS AGE THE BOARD EXPIRES
---- ---------------------- --- ------------- --------
BARTLETT BURNAP................... Mr. Burnap is an independent 64 1976 1997
investor. Since 1978, he has been
President of the Ralph J. Weiler
Foundation, a charitable
foundation. Since 1981, he has been
President of CIB Associates, a
venture capital firm. Mr. Burnap
was Chairman of the Corporation's
Board of Directors between 1976 and
1983.
WALTER A. FORBES.................. Mr. Forbes has been Chairman of the 53 1974 1997
Corporation's Board of Directors
since 1983 and its Chief Executive
Officer since 1976 and was the
Corporation's President between
1982 and May 1991. Mr. Forbes is a
director of Sierra On-Line, Inc.
and NFO Research, Inc.
STEPHEN A. GREYSER................ Mr. Greyser is a professor of 61 1984 1998
marketing at the Harvard Business
School, on whose faculty he has
served for over 25 years. He also
serves as a director of Edelman
Worldwide (a public relations firm)
and Opinion Research Corporation
and is a past Vice Chairman of the
Public Broadcasting Service.
BURTON C. PERFIT.................. In 1986, Mr. Perfit retired from Jack 67 1982 1998
Eckerd Corporation after fifteen
years of service. Mr. Perfit became
a Senior Vice President of Eckerd
in 1980 and served as such until
1986.
ROBERT P. RITTEREISER............. Mr. Rittereiser is President and 57 1982 1997
Chief Executive Officer of Gruntal
Financial Corp., an investment
services firm based in New York
6
YEAR
FIRST
APPOINTED OR YEAR
PRINCIPAL OCCUPATION & ELECTED TO TERM
NAME OTHER DIRECTORSHIPS AGE THE BOARD EXPIRES
---- ---------------------- --- ------------ -------
City. He is Chairman of Yorkville
Associates Corp., a private
investment and financial concern
formed in April 1989. He served as
Chairman since November 1992, a
Director since 1990, and President
and Chief Executive Officer from
March 1993 until February 1995 of
Nationar Inc., a banking services
corporation. On February 6, 1995,
the Acting Superintendent of Banks
of the State of New York filed a
petition to take over the business
of such corporation, and the New
York State Banking Department has
since been liquidating the assets
of such corporation. He is a
director of Ferrofluidics
Corporation, Interchange Financial
Services Corp. and Wallace Computer
Services, Inc. and a Trustee of the
DBL Liquidating Trust.
E. KIRK SHELTON................... Mr. Shelton has been President of the 41 1995 1998
Corporation since May 1991, Chief
Operating Officer of the
Corporation since 1988 and
Executive Vice President of the
Corporation from 1984 to 1991.
In connection with the Corporation's merger agreement with Davidson, dated
as of February 19, 1996, the Corporation has agreed that, upon consummation of
the Corporation's acquisition of Davidson, the Corporation will increase the
size of the Board by two members and will appoint Robert M. Davidson, Chairman
and Chief Executive Officer of Davidson, to a term as a Director expiring in
1998, and Janice G. Davidson, President of Davidson and Mr. Davidson's wife, to
a term as a Director expiring in 1997. The Corporation has also agreed that Mr.
Davidson will become a Vice Chairman of the Board of Directors of the
Corporation at such time. For further information on Mr. and Mrs. Davidson, see
"Security Ownership of Management and Certain Beneficial Owners," above.
In connection with the Corporation's merger agreement with Sierra, dated as
of February 19, 1996, the Corporation has agreed that, upon consummation of the
Corporation's acquisition of Sierra, the Corporation will increase the size of
the Board by one member and will appoint Kenneth A. Williams, Chief Executive
Officer of Sierra, to a term as a Director expiring in 1999. The Corporation has
also agreed that Mr. Williams will become a Vice Chairman of the Board of
Directors of the Corporation and will be appointed as a member of the
Corporation's Office of the President at such time. For further information on
Mr. Williams, see "Security Ownership of Management and Certain Beneficial
Owners," above.
The Corporation anticipates that meetings of the shareholders of each of
Davidson and Sierra to vote upon the Corporation's respective acquisitions of
Davidson and Sierra will take place in the late spring or early summer of 1996.
It is anticipated that each transaction will be consummated shortly after such
shareholder approval is received.
7
DIRECTORS AND EXECUTIVE OFFICERS
BOARD OF DIRECTORS
During Fiscal Year 1996, the Board of Directors held eight meetings. The
Board has four committees: the Executive Committee, the Audit Committee, the
Compensation Committee, and the Nominating Committee. No Director attended fewer
than 75% of the total number of meetings of the Board and all committees thereof
on which he served during Fiscal Year 1996.
EXECUTIVE COMMITTEE
The Executive Committee has and may exercise all of the powers of the Board
of Directors when the Board is not in session, usually between regular Board
meetings and when timing is critical, except that the Executive Committee does
not have the power to elect Directors or officers of the Corporation, to alter,
amend or repeal by-laws of the Corporation or any resolution of the Board
relating to the Executive Committee, to declare any dividend or distribution to
the shareholders of the Corporation, to appoint any member of the Executive
Committee, or to take any other action specifically reserved by law to the Board
of Directors.
The Executive Committee is composed of the Chairman of the Board, the
President of the Corporation and three other Directors. The following five
Directors serve on the Executive Committee: Walter A. Forbes (Chairman of the
Board of Directors), E. Kirk Shelton (President of the Corporation), Bartlett
Burnap, Robert P. Rittereiser and Stanley M. Rumbough, Jr. The Executive
Committee was first appointed on January 7, 1996, and held no meetings during
Fiscal Year 1996.
AUDIT COMMITTEE
The Audit Committee recommends to the Board of Directors a firm of
independent auditors to conduct the annual audit of the Corporation's financial
statements, reviews with such firm the overall scope and results of the annual
audit, reviews and approves the performance by such independent auditors of
professional services in addition to those which are audit-related, and reviews
the fees charged by the independent auditors for professional services. In
addition, the Audit Committee meets periodically with the independent auditors
and representatives of management to review accounting activities, financial
controls and reporting.
The following three non-employee Directors serve on the Audit Committee: T.
Barnes Donnelley, Stephen A. Greyser, and Burton C. Perfit (Chairman). During
Fiscal Year 1996, the Audit Committee held four meetings. Various members of
management (including the Chief Financial Officer and the Director of Internal
Audit) generally attend the Audit Committee meetings.
COMPENSATION COMMITTEE
The Compensation Committee recommends to the Board of Directors overall
compensation philosophy and policies for the Corporation and determines the
salary range for different executive levels and the specific compensation for
the Corporation's Chief Executive Officer. See "Executive Compensation and Other
Information--Compensation Committee Report on Executive Compensation." The
Compensation Committee reviews and makes recommendations to the Board concerning
plans, programs, and benefits which relate to executive compensation, and makes
incentive compensation and stock option awards. In addition, the Compensation
Committee reviews and makes recommendations to the Board concerning selection,
recruiting, hiring, and promotion of key executive personnel. During Fiscal Year
1996, the Compensation Committee held six meetings.
The following four non-employee Directors serve on the Compensation
Committee: Bartlett Burnap, Stephen A. Greyser, Robert P. Rittereiser (Chairman)
and Stanley M. Rumbough, Jr.
8
NOMINATING COMMITTEE
The principal functions of the Nominating Committee are to develop and
review criteria for the qualifications of potential Board of Directors members
and to identify and recommend to the Board new candidates for election to the
Board. During Fiscal Year 1996, the Nominating Committee held one meeting.
The following four non-employee Directors serve on the Nominating Committee:
Bartlett Burnap (Chairman), Stephen A. Greyser, Robert P. Rittereiser and
Stanley M. Rumbough, Jr.
Nominees for Directors may be proposed by shareholders in accordance with
the procedures set forth in the Corporation's By-Laws. Recommendations for the
1997 Annual Meeting must be received by January 5, 1997. Shareholders interested
in recommending nominees for Directors should submit their recommendations in
writing to the Secretary of the Corporation at 707 Summer Street, Stamford,
Connecticut 06901.
EXECUTIVE OFFICERS
The executive officers of the Corporation as of the date of this Proxy
Statement are set forth in the table below. All executive officers are appointed
at the annual meeting or interim meetings of the Board of Directors. Each
executive officer is appointed by the Board to hold office until his or her
successor is duly appointed and qualified.
NAME AGE POSITION AND PERIOD SERVED
---- --- --------------------------
WALTER A. FORBES...................... 53 Chairman of the Corporation's Board of Directors
since 1983, Chief Executive Officer since 1976
and President from 1982 to May 1991.
E. KIRK SHELTON....................... 41 President of the Corporation since May 1991,
Chief Operating Officer since 1988 and Executive
Vice President from 1984 to May 1991.
CHRISTOPHER K. MCLEOD................. 40 Executive Vice President of the Corporation since
1986, member of the Office of the President
since 1988 and President of the Corporation's
Comp-U-Card Division from 1988 to August 1995.
COSMO CORIGLIANO...................... 36 Senior Vice President of the Corporation since
1991, Chief Financial Officer of the Corporation
since February 1, 1995 and Controller of the
Corporation from 1984 through January 1995.
AMY N. LIPTON......................... 41 Senior Vice President and General Counsel of the
Corporation since 1990, Vice President and
General Counsel of the Corporation since 1987.
Section 16(a) of the Exchange Act requires the Corporation's Directors and
executive officers, and each person who is the beneficial owner of more than ten
percent of the Corporation's outstanding equity securities, to file with the
Securities and Exchange Commission ("SEC") initial reports of ownership and
changes in ownership of equity securities of the Corporation. To the
Corporation's knowledge, based solely on review of the copies of reports
furnished to the Corporation and written representations that no other reports
were required, all filing requirements pursuant to Section 16(a) of the Exchange
Act applicable to the Corporation's executive officers, Directors and greater
than ten percent beneficial owners were complied with during Fiscal Year 1996,
except that one such report on Form 3 filed on behalf of the Bartlett Burnap
Charitable Remainder Trust Dated August 10, 1995 (of which Bartlett Burnap is a
Trustee) was not filed on a timely basis.
9
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND OTHER COMPENSATION
The following table shows, for the fiscal years ended January 31, 1996, 1995
and 1994, the compensation awarded to, earned by or paid to each of the
Corporation's Chief Executive Officer and the four other most highly compensated
executive officers of the Corporation earning qualifying compensation in excess
of $100,000 and who served as executive officers of the Corporation during
Fiscal Year 1996.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION(1) SECURITIES
------------------ UNDERLYING ALL OTHER
NAME AND FISCAL SALARY BONUS OPTIONS/SARS COMPENSATION(2)
PRINCIPAL POSITION YEAR ($) ($) (#) ($)
------------------ ------ ------- ------- ------------ ------------
Walter A. Forbes................... 1996 732,470 725,000 75,000 264,828
Chief Executive Officer 1995 676,249 660,000 522,000 263,257
and Chairman of the Board 1994 625,939 610,000 468,750 147,899
E. Kirk Shelton.................... 1996 450,000 450,000 52,500 131,223
President and Chief Operating 1995 410,000 410,000 502,500 51,239
Officer 1994 377,500 380,000 463,125 50,734
Christopher K. McLeod.............. 1996 450,000 450,000 52,500 122,057
Executive Vice President, Member 1995 410,000 410,000 502,500 48,363
of the Office of the President 1994 377,500 315,000 480,000 47,894
Cosmo Corigliano................... 1996 160,000 30,000 12,000 7,044
Senior Vice President and Chief 1995 71,463(3) 0(3) 188,346 1,583
Financial Officer 1994 127,500 0(3) 110,250 1,462
Amy N. Lipton...................... 1996 210,000 80,000 7,500 7,129
Senior Vice President and General 1995 187,000 0(3) 172,500 1,226
Counsel 1994 176,000 28,750(3) 102,938 1,462
- ------------
(1) For each of the Named Executive Officers for each of the fiscal years ended
January 31, 1996, 1995 and 1994, there were no payments of (i) perquisites
over the lesser of $50,000 or 10% of the individual's total salary and bonus
for the year, (ii) above-market preferential earnings on deferred
compensation, (iii) earnings with respect to long-term incentive plans, (iv)
tax reimbursements, or (v) preferential discounts on stock.
(2) "All Other Compensation" includes: (i) contributions of $1,584 for each of
Messrs. Forbes, Shelton, McLeod and Corigliano and Ms. Lipton to the
Corporation's 401(k) Plan to match Fiscal Year 1996 pre-tax elective
deferral contributions (included under Salary) made by each such individual
to such plan; and (ii) the premiums paid by the Corporation for the term
life component of "split-dollar" life insurance policies (the "Insurance
Program") procured by the Corporation in respect of these executives' lives.
In Fiscal Year 1996, premiums of $26,483, $3,980, $3,694, $649 and $734 were
paid in respect of Messrs. Forbes, Shelton, McLeod and Corigliano and Ms.
Lipton, respectively. "All Other Compensation" also includes the present
dollar value, determined in accordance with SEC regulations, and based on
actuarial computations, as of each of January 31, 1996, 1995 and 1994,
respectively, of the benefit to the Named Executive Officers of the
remainder of the premium payments made by the Corporation in respect of such
Named Executive Officers in each of Fiscal Year 1996, Fiscal Year 1995 and
Fiscal Year 1994, respectively. The present dollar value of such payments as
of January 31, 1996 is as follows: Walter A. Forbes--$236,761; E. Kirk
Shelton--$125,659; Christopher K. McLeod--$116,779; Cosmo
Corigliano--$4,811; and Amy N. Lipton--$4,811.
(3) Mr. Corigliano and Ms. Lipton received stock options for all or a part of
their respective salaries and/or bonuses during each of the fiscal years
ended January 31, 1995 and 1994.
10
Each participant in the Insurance Program is provided ordinary life
insurance coverage and enters into a split-dollar agreement with the
Corporation. The Corporation pays the full premium of the policy. The
participant is the owner of the policy and is obligated to pay tax on the value
of a portion of the coverage. The Corporation retains an interest in the policy
equal to the accumulated premiums paid. Upon Messrs. Forbes', Shelton's and
McLeod's retirement, and upon the Corporation's termination of their respective
policies in the case of Mr. Corigliano and Ms. Lipton (each a "Termination
Date"), the Corporation is entitled to recover all of its previous premium
payments, and any remaining cash outlays by the Corporation will cease. Any cash
value in the policy in excess of the premiums recovered by the Corporation is
retained by the participant. In the event of the participant's death prior to
the Termination Date, the Corporation is entitled to recover all premium
payments from the death benefit and the balance of the death benefit will be
paid to the participant's estate.
STOCK OPTIONS
The following table contains information concerning the grant of options to
purchase Common Stock under the Corporation's 1987 Stock Option Plan (the "1987
Plan") to the Named Executive Officers of the Corporation during Fiscal Year
1996.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-----------------------------------------------------
PERCENT OF
NUMBER OF TOTAL GRANT DATE
SECURITIES OPTIONS VALUE
UNDERLYING GRANTED TO EXERCISE ----------
OPTIONS EMPLOYEES OR BASE GRANT DATE
GRANTED IN FISCAL PRICE EXPIRATION PRESENT
NAME (#)(1) YEAR ($/SH) DATE VALUE $(3)
---- ---------- ------------- -------- ---------- ----------
Walter A. Forbes................... 75,000(2) 1.5% $25.1667 4/20/05 $791,250
E. Kirk Shelton.................... 52,500(2) 1.1% $25.1667 4/20/05 $553,875
Christopher K. McLeod.............. 52,500(2) 1.1% $25.1667 4/20/05 $553,875
Cosmo Corigliano................... 12,000(2) 0.2% $25.1667 4/20/05 $126,600
Amy N. Lipton...................... 7,500(2) 0.2% $25.1667 4/20/05 $ 79,125
- ------------
(1) Options granted in Fiscal Year 1996 under the 1987 Plan are scheduled to
vest and become exercisable in yearly increments of 25% beginning on
February 1, 1996, with full vesting occurring on February 1, 1999. Options
expire ten years after grant. Under the terms of the Corporation's 1987
Plan, the Compensation Committee retains discretion to modify the terms of
outstanding options provided that the options, as modified, do not violate
the terms of the 1987 Plan. The vesting of options held by the Named
Executive Officers also accelerates under certain circumstances (including a
change in control of the Corporation), under the terms of their respective
employment agreements. See "--Employment Contracts, Termination of
Employment and Change-in-Control Arrangements."
(2) Granted April 20, 1995. The closing market price of Common Stock on such
date was $25.1667.
(3) The values assigned to each reported option on this table are computed using
the Black-Scholes option pricing model. The calculations assume a risk-free
rate of return of 7.02%, which represents the ten-year yield of United
States Treasury Bills on April 20, 1995, the option grant date. The
calculations also assume 25% volatility; however, there can be no assurance
as to the actual volatility of the Common Stock in the future. The
calculations also assume no dividend payout and a straight-line, four-year
vesting schedule. The value of these options was discounted by 25% to
reflect the fact that the options are not marketable and are subject to
forfeiture. In assessing these option values, it should be kept in mind that
no matter what theoretical value is placed on a stock option on the date of
grant to a Named Executive Officer, its ultimate value will depend on the
market value of the Common Stock at a future date.
11
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of options to purchase Common Stock
during Fiscal Year 1996 and unexercised options to purchase Common Stock held as
of the end of Fiscal Year 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
AT FY-END(#) AT FY-END($)
VALUE ----------------- ----------------------
SHARES ACQUIRED REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) ($)(1) UNEXERCISABLE UNEXERCISABLE(2)
- --------------------- --------------- ----------- ----------------- ----------------------
Walter A. Forbes..... 486,562 $13,114,732 46,125/1,388,063 $1,020,611/$29,080,661
E. Kirk Shelton...... 520,263 $11,427,441 13,126/1,358,673 $247,763/$28,767,101
Christopher K.
McLeod............. 133,358 $2,488,788 263,625/1,371,329 $7,582,883/$29,091,451
Cosmo Corigliano..... 90,162 $2,843,684 70,532/359,689 $1,835,539/$7,334,843
Amy N. Lipton........ 75,125 $1,937,726 37,375/344,438 $961,593/$7,087,816
- ------------
(1) Amounts reflect the market value of the underlying shares of Common Stock on
the date of exercise less the exercise price.
(2) Amounts reflect the market value of the underlying shares of Common Stock at
the end of Fiscal Year 1996 (the closing price of a share of Common Stock on
the New York Stock Exchange, Inc. ("NYSE") on January 31, 1996, which was
$36.875), less the exercise price.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Corporation has an employment contract with Walter A. Forbes, which
commenced on January 1, 1987 and which was most recently amended as of June 1,
1994. This contract is automatically extended as of January 1 of each year for
an additional one-year period, unless prior to any such January 1 renewal date a
notice of termination is given. Under this contract, the Corporation may
terminate Mr. Forbes' employment at any time. If termination is without cause,
the Corporation is required to pay to Mr. Forbes, as severance, all salary to
which Mr. Forbes would otherwise be entitled under the contract for the
remainder of his period of employment. In addition, in the event of Mr. Forbes'
death, or termination without cause, all options held by Mr. Forbes otherwise
subject to vesting restrictions become immediately exercisable. In the event of
a change in control (as defined in this contract) of the Corporation, Mr. Forbes
may, at any time, immediately resign upon written notice to the Corporation. In
such event, the Corporation is required to pay to Mr. Forbes, in a lump sum,
140% of his then-current annual base salary, multiplied by 2.5. If there is a
change in control, all options held by Mr. Forbes otherwise subject to vesting
restrictions will become immediately exercisable, whether or not his employment
is terminated, and he will continue to receive the benefits and perquisites
described in his contract for five years after his resignation following a
change of control. All options which so vest upon a change of control will be
exercisable through the date these options would have otherwise expired had
their vesting not been so accelerated. If Mr. Forbes dies, the Corporation is
required to pay his estate his earned but unpaid base salary and annual
incentive compensation for the year in which his death occurs.
The Corporation's employment contract with Mr. Forbes also requires that the
Corporation advance annual premium payments on certain insurance policies
("Forbes Policies") in the aggregate amount of $540,000 per year, or such other
amount as agreed to by the Corporation and Mr. Forbes, through the calendar year
in which Mr. Forbes turns sixty-one years of age, regardless of whether Mr.
Forbes is employed by the Corporation at such time (unless Mr. Forbes breaches
certain covenants not
12
to compete with the Corporation contained therein). Mr. Forbes agrees to abide
by certain covenants not to compete with the Corporation contained therein, to
not withdraw any amount from the Forbes Policies before he turns sixty years of
age, and that, prior to turning sixty years of age, the Forbes Policies will be
held in escrow. Mr. Forbes also assigns to the Corporation an interest in the
Forbes Policies equal to the premiums advanced by the Corporation. See the
column "All Other Compensation" within the Summary Compensation Table in
"Executive Compensation And Other Information-- Summary of Cash and Other
Compensation."
The Corporation has employment contracts, which commenced on February 1,
1987 and extend until January 31, 1997, with each of E. Kirk Shelton and
Christopher K. McLeod. These contracts provide that the Corporation may
terminate the employment of these employees at any time. In the event of a
change in control (as defined in these contracts) of the Corporation, either of
these employees may resign at any time upon notice to the Corporation. In this
event, the Corporation is required to pay, as severance to the affected
individual, a lump-sum amount equal to 200% of his then-current annual base
salary. If there is a change of control, all options held by such individual
otherwise subject to vesting restrictions will become immediately exercisable,
whether or not his employment is terminated, and he will continue to receive the
benefits and perquisites described in his contract for three years after his
resignation following a change of control. All options which so vest upon a
change of control will be exercisable through the date these options would have
otherwise expired had their vesting not been so accelerated. If either of these
individuals is terminated without cause, all stock options owned by such
individual which would have vested during the thirty-six months following such
termination will be deemed vested on the date of such termination. Also, if
either of these individuals is terminated without cause, the Corporation must
pay the affected individual a lump sum equal to 300% of his then-current annual
base salary and he will continue to receive the benefits and perquisites
described in his contract for three years following such termination. If either
of these individuals dies, any stock options granted to him will become
immediately exercisable. These contracts provide that the employee's base salary
is to be reviewed annually by the Corporation's Board of Directors.
The Corporation's employment contracts with Messrs. Shelton and McLeod also
require that the Corporation advance annual premium payments on certain
insurance policies ("Executive Policies") in the aggregate amount of $285,000
for Mr. Shelton and $265,000 for Mr. McLeod per year, or such other amount as
agreed to by the Corporation and each of Messrs. Shelton and McLeod, through the
calendar year in which the applicable individual turns sixty years of age,
regardless of whether Messrs. Shelton and McLeod are employed by the Corporation
at such time (unless Messrs. Shelton and McLeod breach certain covenants not to
compete with the Corporation contained therein). Each of Messrs. Shelton and
McLeod agrees to abide by certain covenants not to compete with the Corporation
contained therein, to not withdraw any amount from the Executive Policies before
he turns sixty years of age, and that, prior to turning sixty years of age, the
Executive Policies will be held in escrow. Each of Messrs. Shelton and McLeod
also assigns to the Corporation an interest in the Executive Policies equal to
the premiums advanced by the Corporation. See the column "All Other
Compensation" within the Summary Compensation Table in "Executive Compensation
And Other Information--Summary of Cash and Other Compensation."
The Corporation also has an employment contract, which commenced on February
1, 1994 and extends until January 30, 1999, with Cosmo Corigliano. This contract
provides that the Corporation may terminate Mr. Corigliano's employment at any
time. In the event of a change in control (as defined in this contract) of the
Corporation and the subsequent termination of Mr. Corigliano not for cause, the
Corporation is required to pay, as severance to Mr. Corigliano, a lump-sum
amount equal to 100% of his then-current annual base salary, and Mr. Corigliano
will continue to receive the benefits and perquisites described in his contract
for one year after such termination. Also, if there is a change of control, any
options held by Mr. Corigliano otherwise subject to vesting restrictions will
become immediately exercisable, whether or not his employment is terminated. All
options which so vest upon a change of control will be exercisable through the
date these options would have otherwise expired had their vesting not been so
accelerated. If Mr. Corigliano is terminated without cause or is constructively
discharged (other than in connection with a change in control), the Corporation
must pay him a lump sum equal to
13
100% of his then-current annual base salary, Mr. Corigliano will continue to
receive the benefits and perquisites described in such contract for a period of
twelve months following such termination, and all stock options held by Mr.
Corigliano which would have vested during the twelve months following such
termination shall be deemed vested on the date of such termination. This
contract provides that Mr. Corigliano's base salary is to be reviewed annually
by the Corporation's Board of Directors. In addition, the Corporation has funded
certain split-dollar life insurance policies for Mr. Corigliano. See the column
"All Other Compensation" within the Summary Compensation Table in "Executive
Compensation And Other Information--Summary of Cash and Other Compensation."
The Corporation also has an employment contract, which commenced on February
1, 1996, with Amy N. Lipton. The contract provides for an initial term of sixty
months and for automatic extensions as of February 1 of each year thereafter for
an additional one-year period, unless prior to any such February 1 renewal date
a notice of termination is given. In the event of a change in control (as
defined in this contract) of the Corporation and the subsequent termination of
Ms. Lipton without cause, the Corporation is required to pay to Ms. Lipton her
then-current annual base salary for a period of two years following such
termination, and Ms. Lipton will continue to receive the benefits and
perquisites described in her contract for two years after such termination.
Also, if there is a change of control, all unvested options held by Ms. Lipton
shall immediately vest and shall remain exercisable through the date these
options would have otherwise expired had their vesting not been so accelerated,
whether or not her employment is terminated. If Ms. Lipton is terminated without
cause or is constructively discharged (other than in connection with a change in
control), the Corporation must pay Ms. Lipton her annual base salary at such
time for a period of one year following such termination, Ms. Lipton will
continue to receive the benefits and perquisites described in such contract for
a period of twenty four months following such termination, and all stock options
held by Ms. Lipton which would have vested during the eighteen months following
such termination shall continue to vest. If Ms. Lipton dies, the benefits and
perquisites described in such contract will continue for a period of thirty six
months, and any stock options granted to her will become immediately exercisable
and shall remain fully exercisable through the date these options would have
otherwise expired had their vesting not been so accelerated. In addition, the
Corporation has funded certain split-dollar life insurance policies for Ms.
Lipton. See the column "All Other Compensation" within the Summary Compensation
Table in "Executive Compensation And Other Information--Summary of Cash and
Other Compensation."
For the purposes of the Corporation's employment contracts with each of
Messrs. Forbes, Shelton, McLeod and Corigliano and Ms. Lipton, change in control
is defined to include consummation of a tender offer for 51% or more of the
outstanding voting securities of the Corporation, the merger or consolidation of
the Corporation as a result of which less than 75% of the outstanding voting
securities of the resulting entity shall be owned by former shareholders of the
Corporation, a sale of substantially all of the Corporation's assets to another
entity, or the acquisition of 25% or more (51% or more, in the case of Ms.
Lipton's and Mr. Corigliano's contracts) of the outstanding voting securities of
the Corporation by any person.
DIRECTOR COMPENSATION
For their service on the Board of Directors, the Corporation pays each
non-employee Director $30,000 per year, as well as $1,000 for each Board meeting
and each Committee meeting attended. Committee Chairmen are paid an additional
$250 per Committee meeting. Each member of the Board is reimbursed for expenses
incurred in connection with each Board or Committee meeting attended.
Non-employee Directors have also received grants of stock options under the
Corporation's 1990 Directors Stock Option Plan, 1992 Directors Stock Option Plan
and/or 1994 Directors Stock Option Plan. See "Proposal 3: Amendment of the
Corporation's 1992 Directors Stock Option Plan" and "Proposal 4: Amendment of
the Corporation's 1994 Directors Stock Option Plan," below.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Directors Bartlett Burnap, Stephen A. Greyser, Robert P. Rittereiser
(Chairman) and Stanley M. Rumbough, Jr. serve on the Compensation Committee of
the Corporation. Messrs. Burnap, Greyser, Rittereiser and Rumbough were not
employees of the Corporation during Fiscal Year 1996 or before.
14
Notwithstanding anything to the contrary set forth in any of the
Corporation's previous filings under the Securities Act of 1933, as amended, or
the Exchange Act that might incorporate future filings, including this Proxy
Statement, in whole or in part, the following Compensation Committee Report on
Executive Compensation and Performance Graph shall not be incorporated by
reference into any such filings.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION PROCESS
This is a report submitted by the four-member Compensation Committee (the
"Committee") of the Board of Directors addressing the Corporation's compensation
policies for Fiscal Year 1996 as they affected the executive officers of the
Corporation. Decisions on compensation of the Corporation's executive officers
are made by the Committee. The Committee members are all non-employee Directors
who have considerable experience by way of service on other Boards of Directors;
several members have served on compensation committees of other corporations.
The full Board reviews all decisions of the Committee relating to the
compensation of the Corporation's executive officers, except for decisions about
awards under certain of the Corporation's stock-based compensation plans, which
must be made solely by the Committee for the grants or awards under such plans
to satisfy Rule 16b-3 promulgated under the Exchange Act.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Committee's executive officer compensation philosophy and objectives are
designed to provide competitive levels of compensation that integrate pay with
the Corporation's annual and long-term performance goals, reward executive
officers for above-average corporate performance, recognize individual
initiative and achievements, and assist the Corporation in attracting and
retaining qualified executives. The Committee aims to provide compensation that
is fair and equitable to both the employee and the Corporation.
The Committee believes that stock ownership by management is beneficial in
aligning management's and shareholders' interests in enhancing shareholder
value; therefore, the Committee includes a stock-based element in the
Corporation's compensation packages for its executive officers, although the
Committee does not have specific target ownership levels for Corporation equity
holdings by executives.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), enacted in 1993, precludes a public corporation from taking a tax
deduction for certain compensation in excess of $1 million paid to its chief
executive officer or any of its four other highest-paid executive officers. This
limitation, however, does not apply to certain performance-based compensation.
Based on regulations issued by the Internal Revenue Service ("IRS") on December
20, 1995 to implement Section 162(m), including detailed descriptions of what
constitutes performance-based compensation under Section 162(m) with respect to
stock option grants, the Corporation will not be precluded as a result of
Section 162(m) of the Code from deducting compensation expense derived in Fiscal
Year 1996 pursuant to the exercise of stock option grants by its executive
officers, because these stock options were granted under and pursuant to a
performance-based plan. The Corporation will be precluded from deducting a
portion of the cash compensation (salary and bonus) paid in Fiscal Year 1996 to
certain of its executive officers. The Committee does not plan to make any
immediate changes to the Corporation's compensation programs as a result of
Section 162(m) of the Code. While the Committee will take into account the
deduction limits under Section 162(m) when making executive compensation
decisions, the Committee recognizes that part of the annual compensation paid to
senior executive officers in the future may not qualify for tax deductibility.
15
COMPONENTS OF EXECUTIVE OFFICER COMPENSATION
The three primary components of executive officer compensation are:
. Base Salary
. Annual Bonus
. Stock Options
These three elements are structured by the Committee to provide the
Corporation's executive officers with levels of total compensation consistent
with the Committee's executive officer compensation philosophy and objectives
described above.
Base Salary
The Corporation's executive officer salary levels are subjectively
determined by the Committee based on the experience of the Committee members and
are intended to be consistent with competitive practices and the executive's
level of responsibility, professional qualifications, business experience,
expertise and their resultant combined value to the Corporation's performance
and growth (with salary increases reflecting competitive and economic trends,
the overall financial performance of the Corporation and the performance of the
individual executive). Salary levels for the Corporation's executive officers
are generally determined annually. The Committee, in calculating the executive
officer's annual salary for each year, takes into consideration the base salary
previously paid to such executive officer and the responsibilities assigned to
such executive. The Committee attempts to keep the Corporation's executive
officer salary increases as low as possible, preferring to emphasize the
importance of the annual bonus and stock option aspects of an executive's
compensation when considering an increase in overall compensation, which accords
with the Committee's policy of trying to integrate executive pay with the
performance of the Corporation on an annual and long-term basis. These
limitations on salary increases are tied to the Corporation's policy of
emphasizing the incentive-based components of total compensation of executive
officers. Factors considered in gauging the Corporation's overall financial
performance include the Corporation's revenues and profits. Base salary paid to
each of the Corporation's executive officers during Fiscal Year 1996 was
determined by the Committee and the Board in January 1995.
Annual Bonus
Annual bonus amounts paid to each of the Corporation's executive officers in
each fiscal year are determined by the Committee. Factors taken into account in
awarding annual bonuses are described below. Although annual bonuses generally
are not set within a specified percentage range of base salary, they generally
do not exceed 100% of the base salary. For the Named Executive Officers, bonuses
averaged approximately 46.4% of their Fiscal Year 1996 total salary and bonus
compensation. Annual bonuses paid to each of the Corporation's executive
officers during Fiscal Year 1996 were determined by the Committee and the Board
in April 1995.
Stock Options
Stock options are periodically granted to the Corporation's executive
officers under the Corporation's 1987 Plan. No specific formulas or executive
officer stock ownership targets are used in determining stock option grants,
which are made to encourage executives to retain stock-based incentives and to
enhance the importance of aligning their interests with those of the Corporation
and its shareholders, as ownership of stock options rewards executives as well
as shareholders as the price of the underlying security increases. Factors taken
into account in awarding stock options are generally the same as those used in
awarding annual bonuses and are described below. The number of options
previously awarded to and held by executive officers and the expected
contribution of such executives to
16
the Corporation's future performance are also reviewed in determining the size
of current option grants. The number of stock options granted to each of the
Corporation's executive officers during Fiscal Year 1996 was determined by the
Committee in April 1995.
RELATIONSHIP OF CORPORATE PERFORMANCE TO EXECUTIVE OFFICER COMPENSATION
The factors which the Committee considers in awarding annual bonuses and
stock options under the Corporation's 1987 Plan are based on the Corporation's
performance and the individual executive officer's performance. The evaluation
of these factors is largely subjective and based on the Committee's substantial
knowledge of the Corporation, familiarity with the Corporation's objectives and
strategy, and long-term working relationship with the Corporation's executive
officers. Factors considered include: (1) the Corporation's targeted versus
actual annual operating budget; (2) the individual executive officer's ability
to undertake special projects, facilitate strategic acquisitions and (in the
case of certain of these executive officers) develop new distribution channels
for the Corporation's products; (3) the Corporation's after-tax
earnings-per-share growth over the last fiscal year; and (4) the Corporation's
compound annual rate of total shareholder return over the last five fiscal
years. The Committee does not use any specific formulas or weightings in
considering any of these factors.
Targeted Versus Actual Operating Budget
Targeted versus actual operating performance is a major factor used to
determine the extent to which annual bonuses will be paid and awards made under
the Corporation's stock-based compensation plans to the Corporation's executive
officers. The performance of individual executive officers is generally reviewed
either as to the Corporation as a whole, or, for those executives in charge of
an operating unit, as to such executive's particular operating unit. Performance
targets are based on business plans developed by the Corporation's management
and approved by the Board at the start of each fiscal year. In developing these
business plans, consideration is given to integrating the business of any
recently acquired subsidiaries, divisions or businesses and expanding the
Corporation's mix of services and distribution channels.
In determining annual bonus and stock option compensation for executive
officers in Fiscal Year 1996, the Committee reviewed, among other things,
targeted versus actual operating performance in the Corporation's fiscal year
ended January 31, 1995 ("Fiscal Year 1995"), and noted that, in virtually all
cases, targeted goals were either met or exceeded.
Special Projects; Strategic Acquisitions; New Distribution Channels and
Responsiveness to Evolving Market Conditions
The Committee also takes into account the executive officers' performance in
special projects undertaken during the past year, contribution to strategic
acquisitions and alliances and development of new distribution channels for the
Corporation's products. The Committee evaluates the executive officers' ability
to exploit new opportunities and respond quickly to evolving marketplace
conditions.
In determining annual bonus and stock option compensation for executive
officers in Fiscal Year 1996, the Committee took notice of the following
significant events which took place in Fiscal Year 1995 and through the date of
determination of the executive officer's annual bonus or stock option grant, as
the case may be: the Corporation's acquisition of The NetMarket Company in
November 1994; the Corporation's acquisition of Essex Corporation in January
1995; the Corporation's acquisition of Welcome Wagon International, Inc. in
February 1995; and the Corporation's acquisitions of CUC Europe Limited and
Credit Card Sentinel (U.K.) in March 1995.
17
After-Tax Earnings-Per-Share Growth
In addition, the Committee considers the growth in after-tax earnings per
share of Common Stock in determining the annual bonus and stock option portions
of executive officer compensation.
In determining annual bonus and stock option compensation for executive
officers in Fiscal Year 1996, the Committee considered the growth in after-tax
earnings per share of Common Stock to $.66 in the most recently completed full
fiscal year of the Corporation at the time of such determination, Fiscal Year
1995, from $.51 per share in the Corporation's prior completed fiscal year, the
fiscal year ended January 31, 1994, an increase of 29.4%.
Compound Rate of Total Shareholder Return
Another consideration in determining the annual bonus and stock option
portions of executive officer compensation is the compound rate of total
shareholder return over the last five fiscal years. Compound rate of total
shareholder return is determined by comparing the average market value of a
share of Common Stock in the first year of the five-year period with the average
market value of a share of Common Stock in the last year of the period.
In determining annual bonus and stock option compensation for executive
officers in Fiscal Year 1996, the Committee noted the increase of the average
market value of a share of the Common Stock to an average of $20.59 in the most
recently completed full fiscal year of the Corporation at the time of such
determination, Fiscal Year 1995, from an average of $3.65 in the Corporation's
fiscal year ended January 31, 1991, an increase of 464%.
FISCAL YEAR 1996 COMPENSATION OF CHIEF EXECUTIVE OFFICER
In addition to the factors mentioned above, the Committee's general approach
in setting Mr. Forbes' annual compensation is to reward Mr. Forbes' strategic
management abilities in spearheading the Corporation's global expansion efforts
and its development and exploitation of new distribution channels and
technologies.
Mr. Forbes' annual salary increase in Fiscal Year 1996 (from $676,249 in
Fiscal Year 1995 to $732,470) was based primarily on the Corporation's overall
performance generally and Mr. Forbes' performance in Fiscal Year 1995.
Specifically, in determining Mr. Forbes' annual salary for Fiscal Year 1996, the
Committee considered Mr. Forbes' qualifications, experience and expertise and
his responsibilities as Chief Executive Officer in overseeing the Corporation's
acquisitions and growing on-line activities, as well as the Corporation's
overall business and performance.
The annual bonus paid to Mr. Forbes during Fiscal Year 1996 ($725,000) was
largely based on the Committee's subjective evaluation of Mr. Forbes'
performance and the performance of the Corporation during Fiscal Year 1995 and
through the date of determination of Mr. Forbes' annual bonus. Specifically, in
determining Mr. Forbes' annual bonus during Fiscal Year 1996, the Committee
considered Mr. Forbes' role in: the Corporation's acquisition of The NetMarket
Company in November 1994; the Corporation's acquisition of Essex Corporation in
January 1995; the Corporation's acquisition of Welcome Wagon International, Inc.
in February 1995; and the Corporation's acquisitions of CUC Europe Limited and
Credit Card Sentinel (U.K.) in March 1995. The Committee also took into account
Mr. Forbes' involvement in overseeing the continued development of the
Corporation's on-line and interactive activities and ventures. The Committee
also considered the performance of the Corporation's Common Stock, which the
Committee believes reflects Mr. Forbes' significant contribution. In assessing
the Corporation's overall performance to determine Mr. Forbes' annual bonus, the
Committee considered all of the factors above but did not use any specific
formulas or weightings in considering any of the factors.
18
The award to Mr. Forbes during Fiscal Year 1996 of stock options under the
1987 Plan to acquire 75,000 shares of the Corporation's Common Stock was also
largely based on the Committee's subjective evaluation of Mr. Forbes'
performance and the performance of the Corporation during Fiscal Year 1995 and
through the date of determination of Mr. Forbes' stock option grant. In addition
to the factors discussed in the preceding paragraph, which the Committee took
into account when determining Mr. Forbes' stock option award, the Committee also
considered Mr. Forbes' performance and an informal comparison by Committee
members of his overall compensation package relative to that of other chief
executives of publicly-traded corporations of which the Committee members were
aware, including through their experience by way of service on other Boards of
Directors and through their knowledge of public information (although no
particular corporations were identified for comparative purposes by the
Committee as a whole). This grant epitomizes the Committee's compensation
philosophy and objectives by promoting management retention while further
aligning shareholders' and management's interest in the performance of the
Corporation's Common Stock.
COMPENSATION COMMITTEE:
Bartlett Burnap
Stephen A. Greyser
Robert P. Rittereiser, Chairman
Stanley M. Rumbough, Jr.
19
PERFORMANCE GRAPH
The following graph assumes $100 invested on January 31, 1991 and compares
(a) the yearly percentage change in the Corporation's cumulative total
shareholder return on the Common Stock (as measured by dividing (i) the sum of
(A) the cumulative amount of dividends, assuming dividend reinvestment during
the five years commencing on the last trading day before February 1, 1991 and
ending on January 31, 1996, and (B) the difference between the Corporation's
share price at the end and the beginning of the periods presented; by (ii) the
share price at the beginning of the periods presented) with (b)(i) the Standard
& Poor's 500 Index (the "S&P 500 Index") and (ii) a Peer Group Index. The Peer
Group consists of H&R Block, Inc.; CPI Corporation; Metromedia International
Group, Inc. (formerly The Actava Group Inc. and prior to that Fuqua Industries,
Inc.); Rollins, Incorporated; Service Corporation International (all of which
comprise the Dow Jones Consumer Services Non-Cyclical Index) and Ideon (formerly
SafeCard Services, Inc.), and is weighted by market capitalization. Stock prices
are adjusted for stock splits and stock dividends. On April 19, 1996, the
Corporation entered into an agreement and plan of merger with Ideon pursuant to
which the Corporation proposes to acquire Ideon.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG CUC INTERNATIONAL INC., THE S&P 500 INDEX AND A PEER GROUP
Total Shareholder Returns
Jan 91 Jan 92 Jan 93 Jan 94 Jan 95 Jan 96
CUC INTERNATIONAL INC. 100 187.31 244.03 429.84 465.10 743.00
S&P 500 INDEX 100 122.69 135.67 153.14 153.96 213.48
PEER GROUP 100 136.46 149.29 183.26 169.99 199.95
Year Ending
* $100 INVESTED ON 1/31/91 IN STOCK OR INDEX--INCLUDING REINVESTMENT OF
DIVIDENDS.
20
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 19, 1996, the Corporation entered into a merger agreement to
acquire Sierra. Walter A. Forbes, the Chairman of the Board and Chief Executive
Officer of the Corporation, also is a director of Sierra and owns 6,020 shares
of the common stock of Sierra and has options to purchase up to an additional
93,000 shares of the common stock of Sierra, of which options to purchase 25,800
of such shares were exercisable as of March 1, 1996. Mr. Forbes did not
participate in any meetings or deliberations of Sierra's board of directors
regarding the proposed acquisition of Sierra by the Corporation and abstained
from the vote of the Corporation's Board of Directors regarding this
transaction. If the Corporation's acquisition of Sierra is consummated, Mr.
Forbes will receive 7,375 shares of Common Stock in exchange for the common
stock of Sierra he currently owns, and his options to purchase Sierra common
stock will be assumed by the Corporation and converted into options to purchase
113,925 shares of Common Stock. If the Corporation's acquisition of Sierra is
consummated, the Corporation will, in the aggregate, issue approximately 24.9
million shares of Common Stock in exchange for outstanding shares of Sierra
common stock and will convert outstanding options to purchase Sierra common
stock into options to purchase approximately 2.9 million shares of Common Stock.
21
PROPOSAL 2: AMENDMENT OF THE CORPORATION'S
RESTATED CERTIFICATE OF INCORPORATION TO INCREASE
AUTHORIZED COMMON STOCK
The Corporation currently has 400,000,000 authorized shares of Common Stock,
of which 190,460,240 were issued and outstanding as of March 29, 1996;
39,656,404 shares are reserved for issuance under the Corporation's various
compensatory plans and upon the conversion of the Corporation's Zero Coupon
Convertible Subordinated Debentures due 1996; and 3,868,021 shares are held in
the Corporation's treasury. The Corporation has also reserved 30,000,000 shares
of Common Stock in connection with its proposed acquisition of Davidson,
30,000,000 shares of Common Stock in connection with its proposed acquisition of
Sierra, and 19,500,000 shares of Common Stock in connection with its proposed
acquisition of Ideon. Therefore, there are 86,515,335 shares which are not
issued and outstanding, reserved for issuance, or held in the Corporation's
treasury. Because of the limited number of shares of Common Stock available to
be issued, the Board of Directors has proposed a resolution which would
authorize an additional 200,000,000 shares of Common Stock of the same class as
is presently authorized. None of the Corporation's shares will have preemptive
rights.
Although the Corporation has no present plans, agreements or understandings
regarding the issuance of any of the additional shares of Common Stock proposed
to be authorized, the Board of Directors believes that adoption of the amendment
is advisable because it will provide the Corporation with needed flexibility in
connection with possible future financing transactions, acquisitions of other
companies or business properties, stock splits, employee benefit plans and other
corporate purposes. While the issuance of additional shares of Common Stock may
dilute the ownership interest of a person seeking to obtain control of the
Corporation, and thus discourage a change in control of the Corporation by
making it more difficult or costly, the Corporation is not aware of anyone
seeking to accumulate Common Stock for such purpose and has no present intention
of using any additional Common Stock to deter a change in control. Except as
otherwise required by applicable law or stock exchange rules, authorized but
unissued shares of Common Stock may be issued at such time, for such purposes,
and for such consideration as the Board may determine to be appropriate, without
further authorization by the shareholders.
Authorization of the proposed amendment, which will be presented at the
Annual Meeting in the form of the following resolution, will require the
affirmative vote of the holders of a majority of shares of Common Stock
outstanding and entitled to vote at the Annual Meeting.
"RESOLVED, that the first sentence of the first paragraph of Article 4
of the Corporation's Restated Certificate of Incorporation be, and it hereby
is, amended and restated in its entirety to read as follows: 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."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR AMENDMENT OF
THE CORPORATION'S RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER
OF SHARES OF AUTHORIZED COMMON STOCK. UNLESS MARKED TO THE CONTRARY, PROXIES
RECEIVED BY THE CORPORATION WILL BE VOTED IN FAVOR OF AMENDMENT OF THE
CORPORATION'S RESTATED CERTIFICATE OF INCORPORATION.
PROPOSAL 3: AMENDMENT OF THE CORPORATION'S
1992 DIRECTORS STOCK OPTION PLAN
GENERAL
Shareholders are being asked to approve an amendment to the Corporation's
1992 Directors Stock Option Plan (the "1992 Plan") to provide for participation
in the 1992 Plan by "directors emeriti" of the Corporation. The amendment to
Section 7(e) of the 1992 Plan (the "1992 Plan Amendment") is
22
attached hereto as Annex A. The 1992 Plan was adopted by the Board on August 28,
1992, and approved by the shareholders of the Corporation in June 1993.
The 1992 Plan Amendment provides that if any optionee under the 1992 Plan
(that is, any Director who has been granted options under the 1992 Plan) is
subsequently appointed by the Board as a director emeritus of the Corporation,
then such optionee's membership on the Board for purposes of the 1992 Plan will
not be deemed to terminate or expire until such optionee is no longer serving as
a director emeritus of the Corporation. Pursuant to the 1992 Plan Amendment, if
such optionee ceases to serve as a director emeritus because of physical or
mental disability or death, then such optionee's options under the 1992 Plan
shall become immediately exercisable by his executor, administrator or other
person entitled by law to his rights and shall remain exercisable for one year
after the optionee ceases to serve as a director emeritus; if such optionee
ceases to serve as a director emeritus because of removal by the Board, such
optionee's options under the 1992 Plan shall expire immediately upon his removal
as a director emeritus; and if such optionee ceases to serve as a director
emeritus for any other reason, the options granted to such optionee under the
1992 Plan shall remain exercisable until the expiration of five years after the
optionee ceases to serve as a director emeritus.
The 1992 Plan Amendment was adopted by the committee of the Board of
Directors which administers the 1992 Plan on June 7, 1995. The purpose of the
1992 Plan Amendment is to attract and retain well-qualified non-employee
Directors to serve on the Board of Directors and to provide an incentive for
such individuals to continue to provide advice and input to the Corporation, the
Board and the Corporation's management in an honorary capacity as directors
emeriti even after such individuals no longer serve in the capacity of
Directors. The position of director emeritus is available to former Directors of
the Corporation who, in the judgment of the Board of Directors, have rendered
exceptionally valuable service to the Corporation in the past and whose
continued interest in and association with the Corporation in an honorary
capacity would be of value to the Corporation. Directors emeriti are appointed
by and serve at the pleasure of the Board and provide advice and counsel when
requested; however, directors emeriti are not entitled to regularly attend
meetings of the Board or to vote at meetings of the Board. Mr. Henry C. McCall
was appointed a director emeritus of the Corporation by the Board on June 7,
1995. Mr. McCall served as a Director of the Corporation from 1985 until such
date.
The Board has directed that the 1992 Plan Amendment be submitted to the
shareholders of the Corporation for their approval. The approval of the 1992
Plan Amendment will require the affirmative vote of a majority of the shares of
Common Stock outstanding and entitled to vote at the Annual Meeting. If not
approved by shareholders at the Annual Meeting, the 1992 Plan Amendment will be
null and void and the 1992 Plan will continue to operate without giving effect
to the 1992 Plan Amendment.
ADMINISTRATION AND SUMMARY OF THE 1992 PLAN
The 1992 Plan provides that options to acquire an aggregate of up to 450,000
shares of Common Stock of the Corporation may be granted to non-employee
Directors of the Corporation. Employees of the Corporation are not eligible to
participate. Each non-employee Director of the Corporation on August 28, 1992
was granted options for 45,000 shares of Common Stock. No participant to whom
options are granted under the 1992 Plan is eligible to receive any additional
options under the 1992 Plan. In addition, upon adoption of the Corporation's
1994 Directors Stock Option Plan, described below in "Proposal 4: Amendment of
the Corporation's 1994 Directors Stock Option Plan," the Board determined that
no future Directors of the Corporation would be eligible to receive any further
grants of options under the 1992 Plan.
The 1992 Plan is to be administered by a committee of the Board of Directors
(the "1992 Committee"), which shall consist of no fewer than three non-employee
members of the Board of Directors, all of whom are "disinterested persons"
within the meaning of Rule 16b-3 promulgated under the Exchange Act. The
Compensation Committee currently serves the function of the 1992 Committee.
23
The 1992 Committee has the authority, subject to the express provisions of the
1992 Plan, to make all determinations necessary or advisable for administering
the 1992 Plan and, with the consent of the optionee, to modify an option
(provided such option as modified does not violate the terms of the 1992 Plan).
The purchase price of the shares of Common Stock purchasable under each
option shall be 100% of the fair market value of the shares of Common Stock on
the date on which the option is granted. Consideration paid upon exercise of
options (which may be payable in full or in installments as the 1992 Committee
shall determine at time of grant) may be in cash or certified check, previously
acquired Common Stock, or by a combination thereof.
If the term of the optionee's membership on the Board of Directors expires
because the optionee (i) is nominated, but is not elected, 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 attaining age 62 (in any case, other than on account of
death or physical or mental disability), options granted to the optionee shall
remain exercisable, to the extent it is exercisable at such time, until the
expiration of one month after the expiration of the optionee's term, at which
time such options shall expire.
If the term of the optionee's membership on the Board of Directors expires
because the optionee (i) resigns after age 65, or (ii) fails to seek election to
the Board for a term commencing after the optionee attains age 62, options
granted to the optionee shall remain exercisable, to the extent such options are
exercisable at such time, until the expiration of five years after the
expiration of the optionee's term, at which time such options shall expire.
If the term of the optionee's membership on the Board of Directors expires
(other than in any of the circumstances described in the preceding paragraph)
because the optionee becomes physically or mentally disabled or dies, options
granted to the optionee shall become immediately exercisable and shall remain
exercisable until the expiration of one year after the expiration of the
optionee's term, at which time such options shall expire.
If the optionee is removed from the Board of Directors by the shareholders
of the Corporation or by the Board of Directors, options granted to the optionee
shall expire immediately upon such removal or disqualification.
In the event of a change in control (as defined in the 1992 Plan) of the
Corporation, all options granted under the 1992 Plan will become immediately
exercisable. A "change of control" is deemed to occur under the 1992 Plan if (i)
a tender offer for ownership of 51% or more of the outstanding voting securities
of the Corporation is consummated, (ii) the Corporation is merged or
consolidated with another corporation, as a result of which less than 75% of the
outstanding voting securities of the surviving corporation are owned by the
former shareholders of the Corporation, (iii) the Corporation sells
substantially all of its assets to another corporation which is not a wholly
owned subsidiary, or (iv) a person acquires 25% or more of the outstanding
voting securities of the Corporation (whether directly, indirectly, beneficially
or of record).
The 1992 Plan provides for appropriate adjustments to be made at the
discretion of the 1992 Committee in the event of a stock dividend,
recapitalization, stock split, merger, consolidation, combination, exchange of
shares or like transaction. No option granted under the 1992 Plan may be
transferred other than by will or by the laws of descent and distribution,
unless such transfer is permitted by Rule 16b-3 under the Exchange Act and the
1992 Committee approves such transferability, and options may be exercised
during the life of the holder only by him.
The Board of Directors may, at any time, suspend or terminate the 1992 Plan
or, from time to time, adopt amendments to the 1992 Plan provided that, without
the consent of the holders of a majority of the outstanding shares of stock
present or represented and entitled to vote thereon at a valid meeting, no such
amendment (other than pursuant to the anti-dilution provisions of the 1992 Plan)
may increase the
24
maximum number of shares as to which options may be granted under the 1992 Plan
or otherwise materially increase the benefits to participants under the 1992
Plan, or materially change the eligibility requirements for individuals entitled
to receive options thereunder.
No suspension or termination of or amendment to the 1992 Plan shall, without
consent of the holder thereof, adversely affect options previously granted.
Unless sooner terminated, the 1992 Plan will terminate ten years after the date
of adoption by the Board of Directors, after which no further options will be
granted under the 1992 Plan, but outstanding options at the date of termination
will not be canceled by such termination.
All transactions under the 1992 Plan are intended to comply with Rule 16b-3
under the Exchange Act, and to the extent any provision of the 1992 Plan or
action by the 1992 Committee fails to so comply it will be voided to the extent
permitted by law and deemed advisable by the 1992 Committee.
FEDERAL INCOME TAX TREATMENT
All options granted under, and to be granted under, and pursuant to the 1992
Plan are, and will be, non-qualified stock options ("Non-Qualified Options").
The following is a general summary of the federal income tax consequences
under current tax law of Non-Qualified Options. This summary does not purport to
cover all of the special rules, including the state or local income or other tax
consequences, inherent in the ownership and exercise of Non-Qualified Options
and the ownership and disposition of the underlying shares.
An individual who receives a Non-Qualified Option will not recognize any
taxable income upon the grant of such Non-Qualified Option. In general, upon
exercise of a Non-Qualified Option, an individual will recognize ordinary income
in an amount equal to the excess (at the time of exercise) of the fair market
value of the shares of Common Stock received over the aggregate exercise price.
However, if the individual is an executive officer or Director of the
Corporation or the beneficial owner of more than ten percent of any class of
equity securities of the Corporation, the timing of recognition of income (and
the determination of the amount thereof) under certain circumstances possibly
may be deferred for a period following the exercise of a Non-Qualified Option
(the "Deferral Period"), unless the individual files a written election with the
IRS, within 30 days after the date of exercise, to include as income the excess
(on the date of exercise) of the fair market value of the shares of Common Stock
received over the aggregate exercise price.
An individual's tax basis in the shares of Common Stock received upon the
exercise of a Non-Qualified Option for cash and/or an installment obligation
will be equal to the sum of any cash paid on exercise and the "issue price" of
any installment obligation, plus the amount of ordinary income recognized by the
optionee upon the exercise of such option. The holding period for such shares
would begin just after the receipt of such shares or, in the case of an
executive officer, Director or beneficial owner of more than ten percent of any
class of equity securities of the Corporation, just after the expiration of the
Deferral Period, if any (unless the individual elected to be taxed as of the
date of exercise). A deduction for federal income tax purposes will be allowed
to the Corporation in an amount equal to the ordinary income included by the
optionee, provided that such deduction constitutes an ordinary and necessary
business expense to the Corporation and is reasonable in amount and the
limitations of Section 162(m) of the Code do not apply.
If an individual exercises a Non-Qualified Option by delivering other shares
of Common Stock, the individual will not recognize gain or loss with respect to
the exchanged shares, even if their then fair market value is different from the
individual's tax basis in such shares. The individual, however, will be taxed as
described above with respect to the exercise of the Non-Qualified Option as if
the individual had paid the exercise price in cash, and the Corporation
generally will be entitled to an equivalent tax deduction Provided the
individual receives a separate identifiable stock certificate therefor, the
individual's tax basis in that number of shares received on such exercise which
is equal to the number of shares surrendered on such exercise will be equal to
the individual's tax basis in the shares surrendered and the
25
individual's holding period for such number of shares received will include the
individual's holding period for the shares surrendered. The individual's tax
basis and holding period for the additional shares received on exercise of a
Non-Qualified Option paid for, in whole or in part, with shares will be the same
as if the individual had exercised the Non-Qualified Option solely for cash.
CERTAIN INFORMATION WITH RESPECT TO THE 1992 PLAN
Under the 1992 Plan, options to purchase 45,000 shares of the Corporation's
Common Stock were granted on August 28, 1992 to each of the Corporation's seven
non-employee Directors at that time (Messrs. Burnap, Donnelley, Greyser, Perfit,
Rittereiser and Rumbough, who are currently Directors, and Mr. McCall, who no
longer serves as a Director of the Corporation but is currently serving as
director emeritus of the Corporation). These grants constituted an aggregate
grant of options to purchase 315,000 shares of Common Stock to all non-employee
Directors as a group. These options were granted an exercise price of $8.11,
which was equal to the closing price of the Common Stock on the date of grant as
reported by the NYSE. On April , 1996, the closing price of the Common Stock
reported by the NYSE was $ . Each option held by a current Director is
currently exercisable for 75% of the aggregate number of shares of Common Stock
subject to such option, and is scheduled to become exercisable for the remaining
25% of the shares subject to such option on February 1, 1997. The option held by
Mr. McCall is also currently exercisable for 75% of the aggregate number of
shares of Common Stock subject to such option, and is scheduled to become
exercisable for the remaining 25% of the shares subject to such option on
February 1, 1997, but only if the 1992 Plan Amendment is approved by the
shareholders. If the 1992 Plan Amendment is not approved by the shareholders,
such remaining shares will not vest and Mr. McCall will not have the option to
purchase the shares of Common Stock subject to such portion of the option.
Currently, there are six non-employee Directors and, subject to approval by the
shareholders of the 1992 Plan Amendment, one director emeritus participating in
the 1992 Plan, although the number of directors emeriti, if the 1992 Plan
Amendment is approved by the shareholders, eligible to participate may change in
the future. As noted above, no current or future Directors will be eligible to
receive any further grants of options under the 1992 Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR AMENDMENT OF
THE CORPORATION'S 1992 DIRECTORS STOCK OPTION PLAN. UNLESS MARKED TO THE
CONTRARY, PROXIES RECEIVED BY THE CORPORATION WILL BE VOTED IN FAVOR OF THE 1992
PLAN AMENDMENT.
PROPOSAL 4: AMENDMENT OF THE CORPORATION'S
1994 DIRECTORS STOCK OPTION PLAN
GENERAL
Shareholders are being asked to approve amendments to the Corporation's 1994
Directors Stock Option Plan (the "1994 Plan") to provide for participation in
the 1994 Plan by "directors emeriti" of the Corporation. The amendments to
Section 7 of the 1994 Plan (the "1994 Plan Amendments") are attached hereto as
Annex B. The 1994 Plan was adopted by the Board on November 23, 1994, and
approved by the shareholders of the Corporation in June 1995.
The 1994 Plan Amendments provide that: (i) if any optionee under the 1994
Plan (that is, any Director who has been granted options under the 1994 Plan) is
subsequently appointed by the Board as a director emeritus of the Corporation,
the "term" of such optionee's "membership on the Board of Directors" for
purposes of the 1994 Plan will not be deemed to terminate or expire until such
optionee is no longer serving as a director emeritus of the Corporation; (ii) if
any optionee ceases to serve as a director emeritus because of physical or
mental disability or death, then such optionee's options under the 1994 Plan
shall become immediately exercisable by his executor, administrator or other
person entitled by law to his rights and shall remain exercisable for one year
after the optionee ceased to serve as a director emeritus; (iii) if such
optionee ceases to serve as a director emeritus because of removal by the Board,
such optionee's options under the 1994 Plan shall expire immediately upon his
removal as a director emeritus; and (iv) if such optionee ceases to serve as a
director emeritus for any other reason, the options granted to such optionee
under the 1994 Plan shall remain exercisable until the expiration of five years
after the optionee ceased to serve as a director emeritus.
26
The 1994 Plan Amendments were adopted by the committee of the Board of
Directors which administers the 1994 Plan on June 7, 1995. The purpose of the
1994 Plan Amendments is to attract and retain well-qualified non-employee
Directors to serve on the Board of Directors and to provide an incentive for
such individuals to continue to provide advice and input to the Corporation, the
Board and the Corporation's management in an honorary capacity as directors
emeriti even after such individuals no longer serve in the capacity of
Directors. For a description of the position of director emeritus, see "Proposal
3: Amendment of the Corporation's 1992 Directors Stock Option Plan--General,"
above. Mr. Henry C. McCall was appointed a director emeritus of the Corporation
by the Board on June 7, 1995. Mr. McCall served as a Director of the Corporation
from 1985 until such date.
The Board has directed that the 1994 Plan Amendments be submitted to the
shareholders of the Corporation for their approval. The approval of the 1994
Plan Amendments will require the affirmative vote of a majority of the shares of
Common Stock outstanding and entitled to vote at the Annual Meeting. If not
approved by shareholders at the Annual Meeting, the 1994 Plan Amendments will be
null and void and the 1994 Plan will continue to operate without giving effect
to the 1994 Plan Amendments.
ADMINISTRATION AND SUMMARY OF THE 1994 PLAN
Pursuant to the 1994 Plan, options to purchase 7,500 shares of Common Stock
are 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 Corporation on such
date. In the event of the expiration of the term of the membership on the Board
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, all of the options under the 1994 Plan which
such individual would have been entitled to receive during the remainder of his
then-current term on the Board, with the exercise thereof subject to the other
provisions of the 1994 Plan described below. The Common Stock that may be
purchased pursuant to options under the 1994 Plan by any one individual shall
not exceed 30,000 shares.
The 1994 Plan will be administered by a committee of the Board of Directors
(the "1994 Committee"), which is to consist of no fewer than three non-employee
Directors, all of whom are "disinterested persons" within the meaning of Rule
16b-3 promulgated under the Exchange Act. The Compensation Committee currently
serves the function of the 1994 Committee. The 1994 Committee has the authority,
subject to the express provisions of the 1994 Plan, to make all determinations
necessary or advisable for administering the 1994 Plan and, with the consent of
the optionee, to modify an option (provided such option as modified does not
violate the terms of the 1994 Plan).
The purchase price of the shares of Common Stock purchasable under each
option shall be 100% of the fair market value of the shares of Common Stock on
the date on which the option is granted. Consideration paid upon exercise of
options (which may be payable in full or in installments as the 1994 Committee
shall determine at time of grant) may be in cash, previously acquired Common
Stock, or by a combination thereof. An optionee receiving options under the 1994
Plan may not sell the Common Stock underlying such options until at least six
months have elapsed from the date of such option grant.
If the term of the optionee's membership on the Board of Directors expires
because the optionee (i) is nominated, but is not elected, for a position on the
Board, (ii) resigns from the Board prior to attaining age 65, or (iii) fails to
seek election to the Board for a term commencing prior to attaining age 62 (in
any case, other than on account of death or physical or mental disability),
options granted to the optionee shall remain exercisable, to the extent such
options are exercisable at such time, until the earlier to occur of the
expiration of one month after the expiration of the optionee's term or the
stated expiration date of such options, at which time such options shall expire.
27
If the term of the optionee's membership on the Board of Directors expires
because the optionee (i) resigns after age 65 or (ii) fails to seek election to
the Board for a term commencing after the optionee attains age 62, options
granted to the optionee shall remain exercisable, to the extent such options are
exercisable at such time, until the earlier to occur of the expiration of five
years after the expiration of the optionee's term or the stated expiration date
of such options, at which time such options shall expire.
If the term of the optionee's membership on the Board of Directors expires
(other than in any of the circumstances described in the preceding paragraph)
because the optionee becomes physically or mentally disabled or dies, options
granted to the optionee shall remain exercisable until the earlier to occur of
the expiration of one year after the expiration of the optionee's term or the
stated expiration date of such options, at which time such options shall expire.
If the optionee is removed from the Board of Directors by the shareholders
of the Corporation or by the Board, options granted to the optionee shall expire
immediately upon such removal or disqualification.
In the event of a change in control of the Corporation, each individual who
is a Director (but not an employee) of the Corporation on the effective date of
such change in control shall automatically be granted, as of such date, all of
the options under the 1994 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 1994 Plan provides that grants are to be made.
A "change in control" is deemed to occur under the 1994 Plan if (i) a tender
offer for ownership of 51% or more of the outstanding voting securities of the
Corporation is consummated, (ii) the Corporation is merged or consolidated with
another corporation, as a result of which less than 75% of the outstanding
voting securities of the surviving corporation are owned by the former
shareholders of the Corporation, (iii) the Corporation sells substantially all
of its assets to another corporation which is not a wholly owned subsidiary, or
(iv) a person acquires 25% or more of the outstanding voting securities of the
Corporation (whether directly, indirectly, beneficially or of record).
The 1994 Plan provides for appropriate adjustments to be made at the
discretion of the 1994 Committee in the event of a stock dividend,
recapitalization, stock split, merger, consolidation, combination, exchange of
shares or like transaction. No option granted under the 1994 Plan may be
transferred other than by will or by the laws of descent and distribution,
unless such transfer is permitted by Rule 16b-3 under the Exchange Act and the
1994 Committee approves such transferability, and options may be exercised
during the life of the holder only by him.
The Board of Directors may, at any time, suspend or terminate the 1994 Plan
or, from time to time, adopt amendments to the 1994 Plan provided that, without
the consent of the holders of a majority of the outstanding shares of stock
present or represented and entitled to vote thereon at a valid meeting, no such
amendment (other than pursuant to the anti-dilution provisions of the 1994 Plan)
may increase the maximum number of shares as to which options may be granted
under the 1994 Plan or otherwise materially increase the benefits to
participants under the 1994 Plan, materially change the eligibility requirements
for individuals entitled to receive options thereunder, or materially change the
method for determination of the purchase price to be paid on the exercise of
options under the 1994 Plan, and provided that the 1994 Plan may not be amended
more than once every six 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 suspension or termination of or amendment to the 1994 Plan shall, without
consent of the holder thereof, adversely affect options previously granted.
Unless sooner terminated, the 1994 Plan will terminate ten years after the date
of adoption by the Board of Directors, after which no further options will be
granted under the 1994 Plan, but outstanding options at the date of termination
will not be canceled by such termination.
28
All transactions under the 1994 Plan are intended to comply with Rule 16b-3
under the Exchange Act, and to the extent any provision of the 1994 Plan or
action by the 1994 Committee fails to so comply it will be voided to the extent
permitted by law and deemed advisable by the 1994 Committee.
FEDERAL INCOME TAX TREATMENT
All options granted under and to be granted under and pursuant to the 1994
Plan are and will be Non-Qualified Options. For a general summary of the federal
income tax consequences under current law of Non-Qualified Options, see the
discussion set forth above under "Proposal 3: Amendment of the Corporation's
1992 Directors Stock Option Plan--Federal Income Tax Treatment."
CERTAIN INFORMATION WITH RESPECT TO THE 1994 PLAN
Under the 1994 Plan, options to purchase 7,500 shares of the Corporation's
Common Stock were granted on November 23, 1994 to each of the Corporation's
seven non-employee Directors at that time (Messrs. Burnap, Donnelley, Greyser,
Perfit, Rittereiser and Rumbough, who are currently Directors, and Mr. McCall,
who no longer serves as a Director of the Corporation but is currently serving
as director emeritus of the Corporation). These grants constituted an aggregate
grant of options to purchase 52,500 shares of Common Stock to all non-employee
Directors as a group. These options were granted an exercise price of $19.25,
which was equal to the closing price of the Common Stock on the date of grant as
reported by the NYSE. Under the 1994 Plan, options to purchase 7,500 shares of
the Corporation's Common Stock were granted on November 24, 1995 to each of the
Corporation's six non-employee Directors at that time (Messrs. Burnap,
Donnelley, Greyser, Perfit, Rittereiser and Rumbough, who are currently
Directors). These grants constituted an aggregate grant of options to purchase
45,000 shares of Common Stock to all non-employee Directors as a group. These
options were granted an exercise price of $35.75, which was equal to the closing
price of the Common Stock on the date of grant as reported by the NYSE. On April
, 1996, the closing price of the Common Stock reported by the NYSE was
$ . Each option granted on November 23, 1994 or November 24, 1995 is
currently exercisable as to all of the shares of Common Stock subject to such
option; however, the 1994 Plan prohibits the sale of the Common Stock underlying
any options until six months have elapsed from the date such options were
granted. Currently, there are six non-employee Directors eligible to participate
in future grants under the 1994 Plan, although the number of non-employee
Directors eligible to participate may change in the future.
Mr. McCall, as a director emeritus of the Corporation, will receive no
further grants under the 1994 Plan. If the 1994 Plan Amendments are approved by
the shareholders, Mr. McCall will be entitled to exercise the options he has
previously been granted under the 1994 Plan during the remainder of his term as
director emeritus and for a certain period of time thereafter, the length of
which will depend on the circumstances under which he leaves such position as
described in the 1994 Plan. If the 1994 Plan Amendments are not approved by the
shareholders, Mr. McCall may exercise such options only through June 7, 2000,
which is the date five years after the expiration of his term as a Director.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR AMENDMENT OF
THE CORPORATION'S 1994 DIRECTORS STOCK OPTION PLAN. UNLESS MARKED TO THE
CONTRARY, PROXIES RECEIVED BY THE CORPORATION WILL BE VOTED IN FAVOR OF THE 1994
PLAN AMENDMENTS.
PROPOSAL 5: RATIFICATION OF INDEPENDENT AUDITORS
Subject to ratification by the shareholders at the Annual Meeting, the Board
of Directors has reappointed Ernst & Young LLP as independent auditors to audit
the financial statements of the Corporation for the current fiscal year ending
January 31, 1997. Ernst & Young LLP were the Corporation's independent auditors
for Fiscal Year 1996 and have been the Corporation's independent auditors since
the Corporation's fiscal year ending January 31, 1982.
29
Representatives of the firm of Ernst & Young LLP are expected to be present
at the Annual Meeting, with the opportunity to make a statement if such
representatives desire to do so, and will be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF ERNST & YOUNG
LLP AS INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JANUARY 31, 1997.
OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING
The Board of Directors does not intend to present, and does not have any
reason to believe that others intend to present, any matter of business at the
meeting other than as set forth above. If any other matter should be presented
properly, it is the intention of the persons named in the enclosed form of proxy
to vote any proxies in accordance with their best judgment with respect to any
such matter.
PROPOSALS FOR ANNUAL MEETING
Shareholder proposals for the next Annual Meeting must be received by the
Office of the Secretary, CUC International Inc., 707 Summer Street, Stamford,
Connecticut 06901, no later than January 3, 1997, for inclusion in the proxy
statement and form of proxy relating to that meeting.
ANNUAL REPORT TO SHAREHOLDERS
The Corporation's Annual Report for Fiscal Year 1996, including financial
statements, is being provided to all shareholders together with this Proxy
Statement. The Annual Report does not constitute a part of the proxy
solicitation materials.
SHAREHOLDERS ARE URGED TO FORWARD THEIR PROXIES WITHOUT DELAY.
A PROMPT RESPONSE WILL BE GREATLY APPRECIATED.
30
ANNEX A
AMENDED SECTION 7(E) OF THE 1992 DIRECTORS STOCK OPTION PLAN
OF
CUC INTERNATIONAL INC.
(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; and if such optionee ceases to be a director emeritus for any
other reason, the provisions of Section 7(b) shall apply.
A-1
ANNEX B
AMENDED SECTION 7 OF THE 1994 DIRECTORS STOCK OPTION PLAN
OF
CUC INTERNATIONAL INC.
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; and
if such optionee ceases to be a director emeritus for any other reason, the
provisions of Section 7(b) shall apply.
B-1
AS PROPOSED TO BE AMENDED JUNE 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
2
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
3
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,
4
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
5
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.
6
AS PROPOSED TO BE AMENDED JUNE 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.
2
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:
3
(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,
4
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
5
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.
6
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.
7
P
R CUC INTERNATIONAL INC.
O SOLICITED BY THE BOARD OF DIRECTORS
X ANNUAL MEETING OF SHAREHOLDERS
Y TO BE HELD ON JUNE 5, 1996
The undersigned hereby appoints Walter A. Forbes and Cosmo Corigliano and
each or either of them with full power of substitution, proxies for the
undersigned and authorizes them to represent and vote, as designated below, all
of the shares of common stock of the Corporation which the undersigned may be
entitled to vote at the Annual Meeting of Shareholders to be held at the Hyatt
Regency Greenwich, 1800 East Putnam Avenue, Old Greenwich, Connecticut on June
5, 1996 at 10:00 a.m. and at any adjournments or postponements of such meeting
for the following purposes, and with discretionary authority as to any other
matters that may properly come before the meeting, all in accordance with, and
as described in, the Notice and accompanying Proxy Statement. The undersigned
acknowledge receipt of the Notice of Annual Meeting of Shareholders dated
May ___ , 1996 and the accompanying Proxy Statement. IF NO DIRECTION IS GIVEN,
THIS PROXY WILL BE VOTED FOR THE ELECTION AS DIRECTORS OF THE NAMED NOMINEES
AND FOR PROPOSALS 2, 3, 4 AND 5.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION AS DIRECTORS OF THE
NAMED NOMINEES AND FOR PROPOSALS 2, 3, 4 AND 5.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY SEE REVERSE
USING THE ENCLOSED ENVELOPE. SIDE
[X] Please mark
votes as in
this example.
FOR AGAINST ABSTAIN
1. ELECTION OF DIRECTORS 2. To amend the Corporation's Restated [ ] [ ] [ ]
Nominees: T. Barnes Donnelley, Christopher K. McLeod, Certificate of Incorporation to
and Stanley M. Rumbough, Jr. increase the number of shares of
Common Stock authorized for
FOR WITHHELD issuance.
[ ] [ ]
3. To amend the Corporation's 1992 [ ] [ ] [ ]
Directors Stock Option Plan.
MARK HERE
FOR ADDRESS [ ] 4. To amend the Corporation's 1994 [ ] [ ] [ ]
CHANGE AND Directors Stock Option Plan.
NOTE BELOW
- ------------------------ 5. To ratify the appointment of Ernst & [ ] [ ] [ ]
For all nominees except as noted above Young LLP as the Corporation's
Independent Auditors for the fiscal
year ending January 31, 1997.
Please sign exactly as your name appears and date. When
shares are held jointly, each holder should sign. If signing
as attorney, executor, trustee, guardian, or as officer
signing for a corporation, please give your full title as
such.
Signature _______________________ Date: ___________ Signature: ____________________ Date: ____________
