EMPLOYMENT AGREEMENT
This Agreement made effective as of July 24, 1996 by and
between CUC International Inc. (the "Company"), a Delaware
corporation, and Kenneth A. Williams ("Executive").
I
EMPLOYMENT
The Company agrees to employ the Executive and the
Executive agrees to be employed by the Company for the
Period of Employment as provided in Section III.A below and
upon the terms and conditions provided in the Agreement.
II
POSITION AND RESPONSIBILITIES
During the Period of Employment, the Executive agrees to
serve as a director and the Chief Executive Officer of the
Company's Sierra On-Line, Inc. ("Sierra") subsidiary
("Subsidiary"). The Executive shall be responsible for
overall management of Subsidiary, subject to the reasonable
directives of senior management and the Board of Directors
of the Company. During the Period of Employment, the Company
shall cause the Executive to be (i) elected to the Board of
Directors of the Company and to serve as a Vice Chairman of
such Board, (ii) appointed to the Office of the President of
the Company, and (iii) elected to the Board of Directors of
the Company's CUC Software Services, Inc. subsidiary. The
Executive shall report to the President of the Company.
III
TERMS AND DUTIES
A. Period of Employment
The period of the Executive's employment under
this Agreement (the "Period of Employment") will commence as
of July 24, 1996 and shall continue for a period of thirty-
six (36) full calendar months through July 24, 1999, subject
to extension or termination as provided in this Agreement.
The period of the Executive's employment may be extended
upon the mutual agreement of the Company and the Executive.
B. Duties
During the Period of Employment and except for
illness, incapacity or any reasonable vacation periods in
any calendar year, the Executive shall devote substantially
all of his business time, attention and skill to the
business and affairs of the Company and its subsidiaries.
The Executive will not engage in any other business activity
that would materially interfere with the performance of the
Executive's duties under this Agreement and will perform
faithfully and competently the duties which may be assigned
to him from time to time by the Company consistent with
Section II of this Agreement. Nothing in this Agreement
shall preclude the Executive from devoting time during
reasonable periods required for:
i. Serving as a director or member of a committee or
organization involving no actual or potential conflict of
interest with the Company;
ii. Delivering lectures and fulfilling speaking
engagements and publishing books and articles;
iii. Engaging in charitable and community activities;
and
iv. Investing his personal assets in such form or
manner that will not violate this Agreement or require services
on the part of the Executive in the operation or affairs of the
companies in which those investments are made (except that the
Executive may, subject to clause i. above, serve on the board
of directors of such companies).
The activities described in clauses i., ii. and iii.
above will be allowed as long as they do not materially
interfere with the performance of the Executive's duties and
obligations to the Company.
IV
COMPENSATION
A. Compensation
For all services rendered by the Executive pursuant
to this Agreement during the Period of Employment, including
services as an executive, officer, director or committee member
of the Company or subsidiary of the Company, the Executive
shall be compensated as follows:
i. Base Salary
The Company shall pay the Executive a fixed base
salary of $333,000.00 per annum ("Base Salary"), subject to
annual increases as the Company deems appropriate, in
accordance with the Company's customary procedures regarding
the salaries of senior officers. Base Salary shall be payable
according to the customary payroll practices of the Company but
in no event less frequently than once each month.
ii. Annual Incentive Awards
The Executive will be eligible for discretionary
annual incentive compensation awards on the same terms as are
applicable to the senior executives of the Company. The
Executive's target bonus shall not be less than his target bonus
at Subsidiary as most recently approved by Subsidiary's board of
directors and disclosed to the Company prior to the date of this
Agreement.
B. Additional Benefits
i. In addition, the Executive will be entitled to
participate in all compensation or employee benefit plans or
programs and receive all benefits and perquisites for which
salaried employees of the Company generally are eligible under
any plan or program now or established later by the Company.
The Executive will participate on the same basis as similarly
situated senior executives of the Company to the extent
permissible under the terms and provisions of such plans or
programs, in accordance with program provisions. These include
any group hospitalization, health, dental care, life or other
insurance, savings, thrift and profit sharing plans, termination
pay programs, sick leave plans, travel or accident insurance,
disability insurance, and contingent compensation plans,
including capital accumulation programs and stock option plans,
which the Company may establish. Nothing in this Agreement will
preclude the Company from amending or terminating any of the
plans or programs applicable to salaried employees or senior
executives as long as such amendment or termination is
applicable to all salaried employees or senior executives, as
the case may be.
ii. The Executive will be entitled to a minimum of four (4)
weeks of paid vacation annually.
V
BUSINESS EXPENSES
The Company will reimburse the Executive for all reasonable
travel and other expenses incurred by the Executive in connection
with the performance of his duties and obligations under this
Agreement. The Executive shall comply with such limitations and
reporting requirements with respect to expenses as may be
established from time to time and made applicable to similarly
situated employees; provided that the Executive may travel first
class.
VI
DISABILITY
A. i. If the Executive becomes Disabled during the
Period of Employment, the Period of Employment may be terminated at
the option of the Executive upon notice of resignation to the
Company or at the option of the Company upon notice of termination
to the Executive. "Disabled" means a determination by independent
competent medical authority that the Executive is unable to perform
his duties under this Agreement and in all reasonable medical
likelihood such inability will continue for a period in excess of
one hundred and eighty (180) days. Unless otherwise agreed by the
Executive and the Company, the independent medical authority shall
be selected by the Executive and the Company each selecting a board-
certified licensed physician and the two physicians selected
designating an independent medical authority, whose determination
that the Executive is Disabled shall be binding upon the Company and
the Executive. In such event, the Company shall continue to pay the
Executive until two (2) years after the date on which the Period of
Employment otherwise would have expired, had the Executive not
so resigned or his employment not been so terminated, sixty percent
(60%) of his Base Salary as in effect at the time of the
termination, minus the amount of any disability payments the
Executive may receive under any long-term disability insurance
maintained by the Company but in no event shall the aggregate
payments under this sentence exceed two hundred and fifty thousand
dollars per annum. Such amount shall be payable as provided in
Section IV.A. hereof. Earned but unpaid Base Salary and earned but
unpaid incentive compensation awards will be paid in a lump sum at
the time of such termination.
i. The Company will also continue the benefits and
perquisites described in this Agreement for a period of twelve
(12) months subsequent to any such termination.
ii. In the event of any such termination, all
unvested stock options held by the Executive shall be deemed fully
vested on the date of such termination and shall remain fully
exercisable until the applicable expiration dates contained in the
applicable stock option agreements pursuant to which such stock
options were granted.
B. During the period the Executive is receiving payments of
either regular compensation or disability insurance described in
this Agreement and as long as he is physically and mentally able
to do so without undue burden, the Executive will furnish
information and assistance to the Company as reasonably requested
and from time to time will make himself reasonably available to
the Company to undertake assignments consistent with his prior
position with the Company and his physical and mental health. If
the Company fails to make a payment or provide a benefit required
as part of the Agreement, the Executive's obligation to furnish
information and assistance will end.
VII
DEATH
In the event of the death of the Executive during the Period
of Employment, the Period of Employment shall end and the
Company's obligation to make payments under this Agreement shall
cease as of the date of death, except for earned but unpaid Base
Salary and any earned but unpaid incentive compensation awards,
which will be paid to the Executive's surviving spouse, estate or
personal representative, as applicable, in a lump sum within
sixty (60) days after the date of the Executive's death. The
Executive's designated beneficiary will be entitled to receive
the proceeds of any life or other insurance or other death
benefit programs provided in this Agreement. The Company will
also continue the benefits and perquisites described in this
Agreement for a period of twelve (12) months commencing on the
Executive's death. Any stock options held by the Executive
will vest and become immediately exercisable upon his death,
without regard to the provisions of the agreements under which
such options were granted.
VIII
TERMINATION; EFFECT OF TERMINATION OF EMPLOYMENT
A. The Executive's employment may at any time be
terminated by the Company without Cause or for Cause.
B. If the Executive's employment terminates due to
either a Without Cause Termination or a Constructive Discharge
(other than as contemplated by Section XI), as defined in this
Section below, the Company shall pay the Executive (or his
surviving spouse, estate or personal representative, as applicable)
his Base Salary as in effect at the time of the termination for a
period of twenty-four (24) months following such termination. Such
amount shall be payable as provided in Section IV.A hereof. Earned
but unpaid Base Salary and earned but unpaid incentive compensation
awards will be paid in a lump sum at the time of such termination.
The benefits and perquisites described in this Agreement will be
continued for twenty-four (24) months. In the event of any such
Without Cause Termination or Constructive Discharge, all unvested
stock options held by the Executive shall immediately vest and
become exercisable in full, notwithstanding anything to the
contrary in the stock option agreements under which such options
were granted.
C. If the Executive resigns or the Executive's employment
terminates due to a Termination for Cause, as defined in this
Section below, earned but unpaid Base Salary and any earned but
unpaid incentive compensation will be paid to the Executive in a
lump sum within sixty (60) days of such termination. No other
payments will be made or benefits or perquisites provided by the
Company.
D. Upon termination of the Executive's employment other
than for reasons due to death, disability, or pursuant to
Paragraph B of this Section or Section XI, the Period of
Employment and the Company's obligation to make payments
under this Agreement will cease as of the date of the
termination, except as expressly provided in this Agreement.
E. For this Agreement, the following terms have the
following meanings:
i. "Termination for Cause" or "terminated for
Cause" means termination of the Executive's employment by the
Company by written notice to the Executive specifying the event
relied upon for such termination, due to the Executive's
material breach of any of his duties or covenants under this
Agreement or his serious, willful misconduct with respect to
the Company or any of its affiliates (including but not limited
to conviction for a felony or perpetration of a common law
fraud) which, in any such case, if curable, is not cured within
thirty (30) days after written notice thereof to the Executive.
ii. "Constructive Discharge" means termination of
the Executive's employment by the Executive due to a failure of
the Company to fulfill any of its material obligations under
this Agreement in any material respect (including without
limitation any reduction of the Executive's Base Salary as the
same may be increased during the Employment Term (other than
reductions applicable to all senior executives of the Company)
or other material change by the Company in the functions,
duties or responsibilities of the Executive's position which
materially diminishes the ranking, scope and importance of the
Executive's position); or any relocation of the Executive
outside of the Seattle area. Without limiting the generality
of the foregoing, "Constructive Discharge" shall not include
the consolidation of one or more functions pertaining to
Larry's business (other than software design and development)
into other Company affiliates. The Executive will provide the
Company a written notice which describes the circumstances
being relied on for the termination with respect to this
Agreement within one hundred twenty (120) days after the event
giving rise to the notice. The Company will have thirty (30)
days after receipt of such notice to remedy the situation prior
to the termination for Constructive Discharge.
iii. "Without Cause Termination" or "terminated Without
Cause" means termination of the Executive's employment by the
Company other than due to death, disability, expiration of the
Period of Employment or Termination for Cause.
IX
OTHER DUTIES OF THE EXECUTIVE
DURING AND AFTER THE PERIOD OF EMPLOYMENT
A. The Executive will with reasonable notice during or
after the Period of Employment furnish information as may be in
his possession and fully cooperate with the Company and its
affiliates as may be requested in connection with any claims or
legal action in which the Company or any of its affiliates is or
may become a party.
B. Simultaneously with the execution and delivery of this
Agreement, the Executive and the Company are entering into a Non
Competition Agreement. The Executive agrees to comply with the
provisions of such agreement during the Period of Employment.
C. During and after the Period of Employment, the
Executive will disclose to the Company all ideas, inventions and
business plans developed by him during the Period of Employment
which relate directly to the Company's business or to the
business of any of its subsidiaries or affiliates, including, but
not limited to, any process, operation, product or improvement
which may be patentable or copyrightable. The Executive agrees
that such will be the property of the Company and that, at the
Company's reasonable request and cost, he will do whatever is
reasonably necessary to secure the rights thereto to the Company,
by patent, copyright or otherwise. All records, memoranda and
similar items relating to the business of the Company or its
affiliates, whether made by the Executive or otherwise coming into
his possession, are confidential and will remain the property of
the Company or its affiliates.
D. The Executive hereby acknowledges that damages at law
may be an insufficient remedy to the Company if the Executive
violates the terms of this Agreement and that the Company shall
be entitled, upon making the requisite showing, to preliminary
and/or permanent injunctive relief in any court of competent
jurisdiction to restrain the breach of or otherwise to specifically
enforce any of the covenants contained in this Agreement without
the necessity of showing any actual damage or that monetary damages
would not provide an adequate remedy. Such right to an injunction
shall be in addition to, and not in limitation of, any other rights
or remedies the Company may have. Without limiting the generality
of the foregoing, neither party shall oppose any motion the other
party may make for any expedited discovery or hearing in connection
with any alleged breach of this Section IX.
E. The period of time during which the provisions of this
Section IX shall be in effect shall be extended by the length of
time during which the Executive is in breach of the terms hereof
as determined by any court of competent jurisdiction on the
Company's application for injunctive relief.
F. The Executive agrees that the restrictions contained in
this Section IX are an essential element of the compensation the
Executive is granted hereunder and but for the Executive's
agreement to comply with such restrictions, the Company would not
have entered into this Agreement.
X
INDEMNIFICATION; LITIGATION
A. The Company will indemnify the Executive to the fullest
extent permitted by the laws of the state of the Company's
incorporation in effect at that time, or certificate of
incorporation and by-laws of the Company, whichever affords the
greater protection to the Executive. The Executive will be
entitled to any insurance policies the Company may elect to
maintain generally for the benefit of its officers and
directors, including without limitation the insurance policies
the Company agreed to maintain pursuant to the Agreement and
Plan of Merger dated as of February 19, 1996 among the Company,
Sierra and Larry Acquisition Corp. (the "Merger Agreement"),
against all costs, charges and expenses incurred in connection
with any action, suit or proceeding to which he may be made a
party by reason of being a director or officer of the Company.
This Section shall not limit the obligations of the Company
under the Merger Agreement with respect to indemnification and
insurance.
B. In the event of any litigation or other proceeding
between the Company and the Executive with respect to the
subject matter of this Agreement, the Company shall reimburse
the Executive for all costs and expenses related to the
litigation or proceeding including attorney's fees and
expenses, providing that the litigation or proceeding results
in either settlement requiring the Company to make a payment to
the Executive or judgment in whole or in part in favor of the
Executive.
XI
CHANGE IN CONTROL
A. In the event there is a Change in Control of the
ownership of the Company and the Executive resigns or the
Executive's employment is terminated Without Cause or the
Executive's employment terminates due to a Constructive
Discharge, in any such case within two (2) years after such
Change of Control, the Company shall pay to the Executive (or
his surviving spouse, estate or personal representative, as
applicable) his Base Salary as in effect at the time of such
termination of employment for a period of two (2) years
following such termination. In addition, in such event earned
but unpaid Base Salary and any earned but unpaid incentive
compensation awards will be paid to the Executive (or his
surviving spouse, estate or personal representative, as
applicable) in a lump sum at the time of such termination. In
such event, any unvested stock options held by the Executive
shall vest immediately and become exercisable in full,
notwithstanding the terms of the stock option agreements under
which such options were granted. The benefits and perquisites
described in this Agreement will also be continued for two (2)
years from the effective date of termination of employment.
The Executive shall not be entitled to receive any duplicative
payments as a result of the implementation of the provisions of
this Section XI.
B. The Executive shall not be required to mitigate the
amount of any payment provided for after a Change in Control by
seeking other employment or otherwise, nor shall the amount of any
such payment be reduced by any compensation earned by the Executive
as the result of employment by another employer after the date the
Executive's employment hereunder terminates.
C. 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 with or into 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
Securities Exchange Act of 1934, as amended) 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, (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 Securities
Exchange Act of 1934, as amended, shall acquire 51% or more of
the outstanding voting securities of the Company (whether
directly, indirectly, beneficially or of record) or (v) any
other event shall take place that a majority of the Board of
Directors of the Company, in its sole discretion, shall
determine constitutes a "Change in Control" for the purposes
hereof. 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 Securities
Exchange Act of 1934, as amended.
XII
WITHHOLDING TAXES
The Company may directly or indirectly withhold from any
payments under this Agreement all federal, state, city or other
taxes that shall be required pursuant to any law or governmental
regulation.
XIII
EFFECT OF PRIOR AGREEMENTS
This Agreement contains the entire understanding between
the Company and the Executive with respect to the subject matter
hereof and supersedes any prior employment agreement between the
Company and the Executive, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring
to the Executive of a kind elsewhere provided and not expressly
provided in this Agreement.
XIV
CONSOLIDATION, MERGER OR SALE OF ASSETS
Nothing in this Agreement shall preclude the Company from
consolidating or merging into or with, or transferring all or
substantially all of its assets to, another corporation which
assumes this Agreement and all obligations and undertakings of
the Company hereunder. Upon such a consolidation, merger or
sale of assets, the term "the Company" will mean the other
corporation and this Agreement shall continue in full force and
effect.
XV
MODIFICATION
This Agreement may not be modified or amended except in
writing signed by the parties. No term or condition of this
Agreement will be deemed to have been waived except in writing
by the party charged with waiver. A waiver shall operate only
as to the specific term or condition waived and will not
constitute a waiver for the future or act on anything other than
that which is specifically waived.
XVI
GOVERNING LAW; CONSTRUCTION
This Agreement has been executed and delivered in the State
of Connecticut and its validity, interpretation, performance and
enforcement shall be governed by the internal laws of that
state.
XVII
ARBITRATION
A. Any controversy, dispute or claim arising out of or
relating to this Agreement or the breach hereof which cannot be
settled by mutual agreement (other than with respect to the
matters covered by Section IX for which the Company may, but
shall not be required to, seek injunctive relief) shall be
finally settled by binding arbitration in accordance with the
Federal Arbitration Act (or if not applicable, the applicable
state arbitration law) as follows: Any party who is aggrieved
shall deliver a notice to the other party setting forth the
specific points in dispute. Any points remaining in dispute
twenty (20) days after the giving of such notice may be
submitted to arbitration in New York, New York or Seattle,
Washington, whichever the complaining party chooses, to
Jams/Endispute, before a single arbitrator appointed in
accordance with the arbitration rules of Jams/Endispute,
modified only as herein expressly provided. After the aforesaid
twenty (20) days, either party, upon ten (10) days notice to the
other, may so submit the points in dispute to arbitration. The
arbitrator may enter a default decision against any party who
fails to participate in the arbitration proceedings.
B. The decision of the arbitrator on the points in
dispute will be final, unappealable and binding, and judgment on
the award may be entered in any court having jurisdiction
thereof.
C. Except as otherwise provided in this Agreement, the
arbitrator will be authorized to apportion its fees and expenses
and the reasonable attorneys fees and expenses of any such party
as the arbitrator deems appropriate. In the absence of any such
apportionment, the fees and expenses of the arbitrator will be
borne equally by each party, and each party will bear the fees
and expenses of its own attorney.
D. The parties agree that this Section has been included to
rapidly and inexpensively resolve any disputes between them with
respect to this Agreement, and that this Section shall be grounds
for dismissal of any court action commenced by either party with
respect to this Agreement, other than post-arbitration actions
seeking to enforce an arbitration award. In the event that any
court determines that this arbitration procedure is not binding,
or otherwise allows any litigation regarding a dispute, claim, or
controversy covered by this Agreement to proceed, the parties
hereto hereby waive any and all right to a trial by jury in or
with respect to such litigation.
XVIII
SURVIVAL
Sections VI, VII, VIII, IX, X, XI, XVI, XVII and XIX shall
continue in full force in accordance with their respective
terms notwithstanding any termination of the Period of
Employment.
XIX
SEPARABILITY
All provisions of this Agreement are intended to be
severable. In the event any provision or restriction contained
herein is held to be invalid or unenforceable in any respect,
in whole or in part, such finding shall in no way affect the
validity or enforceability of any other provision of this
Agreement. The parties hereto further agree that any such
invalid or unenforceable provision shall be deemed modified so
that it shall be enforced to the greatest extent permissible
under law, and to the extent that any court of competent
jurisdiction determines any restriction herein to be
unreasonable in any respect, such court may limit this
Agreement to render it reasonable in the light of the
circumstances in which it was entered into and specifically
enforce this Agreement as limited.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
CUC INTERNATIONAL INC.
By:___________________________
E. Kirk Shelton
President
___________________________
Kenneth A. Williams