AGREEMENT
This Agreement made effective as of May 15, 1996 by and
between CUC International Inc. (the "Company"), a Delaware
corporation, and E. Kirk Shelton("Executive").
WHEREAS, the Executive and the Company are parties to a
certain Agreement dated February 1, 1987, as amended on
November 1, 1991 and February 1, 1996 (the "Agreement"); and
WHEREAS, the Executive and the Company wish to make
certain further amendments to the Agreement and to restate
the Agreement as so amended in its entirety herein for ease
of reference.
NOW THEREFORE, in consideration of the foregoing and
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties
hereby agree as follows:
SECTION 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 this Agreement.
SECTION II
POSITION AND RESPONSIBILITIES
During the Period of Employment, the Executive agrees
to serve as President and Chief Operating Officer of the
Company and to be responsible for the typical management
responsibilities expected of an officer holding such
position, reporting directly to the Chief Executive Officer
of the Company.
SECTION 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 May 15, 1996 and shall continue until February 1, 2001,
subject to extension or termination as provided in this
Agreement. On February 1, 2001, and on each February 1
thereafter, the Period of Employment will be automatically
extended by twelve additional calendar months unless prior
to February 1, 2001 or any subsequent February 1 the Company
shall deliver to the Executive, or the Executive shall
deliver to the Company, written notice that the Period of
Employment will end at the expiration of the then-existing
Period of Employment, including any previous extensions
thereof, and will not be further extended except by
agreement of the Company and the Executive. The Period of
Employment shall continue until the expiration of all
automatic extensions unless it is terminated as provided in
this Agreement.
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 all of his
business time, attention and skill exclusively to the
business and affairs of the Company and its subsidiaries.
The Executive will not engage in any other business activity
and will perform faithfully the duties which may be assigned
to him from time to time by the Chief Executive Officer of
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, with the prior approval of the Chief
Executive Officer of the Company, 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;
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.
The activities described in clauses i, ii and iii, above
will be allowed as long as they do not materially affect or
interfere with the performance of the Executive's duties and
obligations to the Company.
SECTION IV
COMPENSATION AND BENEFITS
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 any subsidiary of the
Company, the Executive shall be compensated as follows:
i. Base Salary
The Company shall pay the Executive a fixed
base salary ("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. Annual increases in Base Salary, once
granted, shall not be subject to revocation. 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.
iii. Long-Term Incentive Awards
The Executive will be eligible for
discretionary stock option awards.
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 on the same basis as similarly situated
senior executives of the Company. The Executive will
participate 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, company auto
allowance or auto lease plans, 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. The
Company will furnish to the Executive long-term disability
insurance in an amount not less than sixty percent (60%) of
Base Salary. The Company will reimburse the Executive for
the cost of an annual physical examination of the Executive
by a physician selected by the Executive, the results of
which will be reported to the Chief Executive Officer. The
Company will also furnish to the Executive (or reimburse the
Executive for) personal financial, investment or tax advice
in an amount not to exceed $4,500 per year.
ii. The Executive will be entitled to a minimum
of four (4) weeks of paid vacation annually.
SECTION 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.
SECTION VI
DISABILITY
A. i. If the Executive becomes Disabled, as defined
below, 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 an 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,
until the Executive reaches the age of sixty-five (65) (or
such earlier date on which he is no longer Disabled), the
Company shall continue to pay the Executive 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. 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. No incentive compensation shall be
deemed earned within the meaning of this Agreement until the
Executive is informed in writing as to the amount of such
incentive compensation the Executive is to be awarded as to
a particular period.
ii. The Company will also continue the benefits
and perquisites described in this Agreement for a period of
sixty (60) months subsequent to any such termination.
iii. 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.
iv. In the event of any such termination, any
restrictions on any shares of restricted stock issued to the
Executive prior to such termination shall be deemed to lapse
fully on the date of such termination.
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. During
the disability period, the Executive is responsible and
reports directly to the Company's Chief Executive Officer.
If the Company fails to make a payment or provide a benefit
required as part of this Agreement, the Executive's
obligation to furnish information and assistance will end.
SECTION 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 the benefit of Executive's
beneficiaries and surviving family for a period of thirty-
six (36) months commencing on the Executive's death. Any
stock options held by the Executive shall be deemed fully
vested on the date of the Executive's death 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. Any restrictions on any shares of restricted stock
held by the Executive at the time of Executive's death shall
be deemed to lapse fully on the date of the Executive's
death.
SECTION VIII
EFFECT OF TERMINATION OF EMPLOYMENT
A. 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 below, the Company shall pay the Executive (or his
surviving spouse, estate or personal representative, as
applicable) upon such Without Cause Termination or
Constructive Discharge in a lump sum an amount equal to
three hundred percent (300%) of his Base Salary as in effect
at the time of such termination. Earned but unpaid Base
Salary and earned but unpaid incentive compensation awards
also 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 thirty-six (36) months
following such termination. In the event of any such Without
Cause Termination or Constructive Discharge, any unvested
stock options held by the Executive shall be deemed to vest
in full on the date of such termination, notwithstanding
anything to the contrary in any applicable stock option
agreements. In the event of any such Without Cause
Termination or Constructive Discharge, any restrictions on
any shares of restricted stock held by the Executive shall
be deemed to lapse fully on the date of such termination.
B. If the Executive resigns or the Executive's
employment terminates due to a Termination for Cause, 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. In addition, if
the Executive resigns, any unvested stock options that would
have otherwise vested during the thirty-six (36) months
following the date of such resignation shall be deemed to
vest in full on the date of such resignation. No other
payments will be made or benefits or perquisites provided by
the Company.
C. Upon termination of the Executive's employment
other than for reasons due to death, disability, or pursuant
to Paragraph A of this Section VIII 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.
D. For this Agreement, the following terms have the
following meanings:
i. "Termination for Cause" means termination of
the Executive's employment by the Company upon a good faith
determination by the Board of Directors, by written notice
to the Executive specifying the event relied upon for such
termination, due to the Executive's serious, willful
misconduct with respect to his duties under this Agreement
(including but not limited to conviction for a felony or
perpetration of a common law fraud) which has resulted or is
likely to result in material economic damage to the Company
and which, in any such case, is not cured (if such is
capable of being 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 its 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 Period of Employment,
or other compensation; or failure to appoint or reappoint
the Executive to the office of President and Chief Operating
Officer; or other material change by the Company in the
functions, duties or responsibilities of the Executive's
position which would reduce the ranking or level, dignity,
responsibility, importance or scope of such position; or any
relocation of the Executive outside of the Stamford,
Connecticut area). 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 ninety (90) 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, or Termination for Cause. Without limiting the
generality of the foregoing, the Executive shall be deemed
to have been terminated Without Cause if the Company
provides notice to the Executive pursuant to Section III A.
of this Agreement that the Period of Employment will end at
the expiration of the then-existing Period of Employment.
SECTION 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. The Executive recognizes and acknowledges that all
information pertaining to this Agreement or to the affairs;
business; results of operations; accounting methods,
practices and procedures; members; acquisition candidates;
financial condition; clients; customers or other
relationships of the Company or any of its affiliates
("Information") is confidential and is a unique and valuable
asset of the Company or any of its affiliates. Access to
and knowledge of certain of the Information is essential to
the performance of the Executive's duties under this
Agreement. The Executive will not during the Period of
Employment or thereafter, except to the extent reasonably
necessary in performance of his duties under this Agreement,
give to any person, firm, association, corporation, or
governmental agency any Information, except as may be
required by law. The Executive will not make use of the
Information for his own purposes or for the benefit of any
person or organization other than the Company or any of its
affiliates. The Executive will also use his best efforts to
prevent the disclosure of this Information by others. All
records, memoranda, etc. 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.
C. i. During the Period of Employment and for
a twelve (12) month period thereafter (the "Restricted
Period"), irrespective of the cause, manner or time of any
termination, the Executive will not use his status with the
Company or any of its affiliates to obtain loans, goods or
services from another organization on terms that would not
be available to him in the absence of his relationship to
the Company or any of its affiliates.
ii. During the Restricted Period, the Executive
will not make any statements or perform any acts intended to
or which may have the effect of advancing the interest of
any existing or prospective competitors of the Company or
any of its affiliates or in any way injuring the interests
of the Company or any of its affiliates. During the
Restricted Period, the Executive, without prior express
written approval by the Board of Directors of the Company,
will not engage in, or directly or indirectly (whether for
compensation or otherwise) own or hold proprietary interest
in, manage, operate, or control, or join or participate in
the ownership, management, operation or control of, or
furnish any capital to or be connected in any manner with,
any party which competes in any way or manner with the
business of the Company or any of its affiliates, as such
business or businesses may be conducted from time to time,
either as a general or limited partner, proprietor, common
or preferred shareholder, officer, director, agent,
employee, consultant, trustee, affiliate, or otherwise. The
Executive acknowledges that the Company's and its
affiliates' businesses are conducted nationally and
internationally and agrees that the provisions in the
foregoing sentence shall operate throughout the United
States and the world.
iii. During the Restricted Period, the Executive,
without express prior written approval from the Board of
Directors, will not solicit any members or the then-current
clients of the Company or any of its affiliates for any
existing business of the Company or any of its affiliates or
discuss with any employee of the Company or any of its
affiliates information or operation of any business intended
to compete with the Company or any of its affiliates.
iv. During the Restricted Period, the Executive
will not meddle with the employees or affairs of the Company
or any of its affiliates or solicit or induce any person who
is an employee of the Company or any of its affiliates to
terminate any relationship such person may have with the
Company or any of its affiliates, nor shall the Executive
during such period directly or indirectly engage, employ or
compensate, or cause or permit any person with which the
Executive may be affiliated, to engage, employ or
compensate, any employee of the Company or any of its
affiliates. The Executive hereby represents and warrants
that the Executive has not entered into any agreement,
understanding or arrangement with any employee of the
Company or any of its affiliates pertaining to any business
in which the Executive has participated or plans to
participate, or to the employment, engagement or
compensation of any such employee.
v. For the purposes of this Agreement,
proprietary interest means legal or equitable ownership,
whether through stock holding or otherwise, of an equity
interest in a business, firm or entity or ownership of more
than 5% of any class of equity interest in a publicly-held
company and the term "affiliate" shall include without
limitation all subsidiaries and licensees of the Company.
vi. The Company's obligation to make any payments
under the terms of this Agreement will cease upon any
violation of the preceding paragraphs.
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.
SECTION 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 the
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 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.
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 favor of the
Executive.
SECTION XI
CHANGE IN CONTROL
A. In the event there is a Change in Control, as
defined below, the Executive may at any time immediately
resign upon written notice to the Company. In the event of
such resignation, or if the Executive is terminated Without
Cause following a Change in Control, the Company shall
immediately upon such resignation or termination pay to the
Executive in a lump sum an amount equal to five hundred
percent (500%) of the sum of his Base Salary as in effect at
the time of such resignation, plus the largest annual
incentive award paid to the Executive within the previous
three (3) year period. In addition, earned but unpaid Base
Salary and any earned but unpaid incentive compensation
awards will be paid to the Executive in a lump sum at such
time. The benefits and perquisites described in this
Agreement will also be continued for three (3) years from
the date of such resignation or termination Without Cause
pursuant to a Change in Control. In the event there is a
Change in Control, all unvested stock options held by the
Executive shall immediately upon such Change in Control be
deemed fully vested and shall remain exercisable until the
applicable expiration dates contained in the applicable
stock option agreements pursuant to which such stock options
were granted, whether or not the Executive resigns. In the
event there is a Change in Control, all restrictions on any
shares of restricted stock held by the Executive shall be
deemed to lapse fully immediately upon such Change in
Control, whether or not the Executive resigns. 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 fifty-one percent (51%) or more of the
outstanding voting securities of the Company, (ii) the
Company or any subsidiary thereof shall be merged with or
into or consolidated with another corporation and as a
result of such merger or consolidation less than seventy-
five percent (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, (iii)
the Company shall sell substantially all of its assets to
another corporation which is not a wholly-owned subsidiary
of the Company, (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 twenty-five percent (25%) 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.
D. i. In the event that any payment or benefit
received or to be received by the Executive pursuant to the
terms of this Agreement (the "Contract Payments") or of any
other plan, arrangement or agreement of the Company or any
affiliate ("Other Payments" and, together with the Contract
Payments, the "Payments") would, in the opinion of
independent tax counsel selected by the Company and
reasonably acceptable to the Executive ("Tax Counsel"), be
subject to the excise tax (the "Excise Tax") imposed by
Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code") (in whole or in part), as determined as
provided below, the Payments shall be reduced (but not below
zero) until no portion of the Payments would be subject to
the Excise Tax. For purposes of this limitation, (a) no
portion of the Payments the receipt or enjoyment of which the
Executive shall have effectively waived in writing shall be
taken into account, (b) only the portion of the Payments
which in the opinion of Tax Counsel constitute a "parachute
payment" within the meaning of Section 280G(b)(2) of the
Code shall be taken into account, (c) the Payments shall be
reduced only to the extent necessary so that the Payments
would not be subject to the Excise Tax, in the opinion of
Tax Counsel, and (d) the value of any noncash benefit or any
deferred payment or benefit included in such Payments shall
be determined by the Tax Counsel in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code. If
any reduction in Payments is necessary to satisfy this
Paragraph, the Executive shall be entitled, at any time by
written notice to the Company, to reduce the amount of any
Payment otherwise payable to him (including, without
limitation, by waiving, in whole or in part, the accelerated
vesting under this Agreement on options previously granted
the Executive), and to select from among the Payments those
to be so reduced in order to satisfy the limitations of this
Paragraph and the Company shall reduce the amount of such
Payments accordingly. Any options the vesting of which
would have otherwise accelerated but for the provisions of
this Paragraph shall continue to vest in accordance with
their respective terms; and shall upon such vesting remain
exercisable until the applicable expiration dates contained
in the applicable stock option agreements pursuant to which
such stock options were granted, whether or not the
Executive's employment is terminated.
ii. If it is established pursuant to an opinion
of Tax Counsel or a final determination of a court or an
Internal Revenue Service proceeding that, notwithstanding
the good faith of the Executive and the Company in applying
the terms of this Paragraph D., any Payments paid to the
Executive or for his benefit exceeded the limitation
contained in this Paragraph D., then the Executive shall pay
to the Company, within sixty (60) days of receipt of notice
of such final determination or opinion, an amount equal to
the sum of (a) the excess of the Payments paid to him or for
his benefit over the maximum Payments that should have been
paid to or for his benefit taking into account the
limitations contained in this Paragraph D. and (b) interest
on the amount set forth in clause (a) of this sentence at
the applicable federal rate (as defined in Section 1274(d)
of the Code) from the date of his receipt of such excess
until the date of such payment; provided, however, that (x)
he shall not be required to make any payment to the Company
pursuant to this Paragraph D.ii., (1) if such final
determination requires the payment by him of an Excise Tax
by reason of any Payment or portion thereof or (2) in the
case of the opinion of Tax Counsel, until the expiration of
the application statute of limitations or a final
determination of a court or an Internal Revenue Service
proceeding that no Excise Tax is due and (y) he shall only
be required to make a payment to the Company pursuant to
this Paragraph D.ii. to the extent such payment is
deductible (or excludable from income) for federal income
tax purposes.
iii. If it is established pursuant to an opinion of Tax
Counsel or a final determination of a court or an Internal
Revenue Service proceeding that, notwithstanding the good
faith of the Executive and the Company in applying the terms
of Paragraph D.i. hereof, any Payments paid to him or for
his benefit were in an amount less than the maximum Payments
which could be payable to him without such payments being
subject to the Excise Tax, then the Company shall pay to
him, within ninety (90) days of receipt of notice of such
final determination or opinion, an amount equal to the sum
of (a) the excess, if any, of the payments that should have
been paid to him or for his benefit over the payments paid
to or for his benefit and (b) interest on the amount set
forth in clause (a) of this sentence at the applicable
federal rate (as defined in Section 1274(d) of the Code)
from the date of his non-receipt of such excess until the
date of such payment.
iv. The Company shall pay the Contract Payments
at such times as set forth in the applicable paragraph
hereof; provided, however, that if the Company in good faith
believes that any such payments shall be reduced under the
provisions of Paragraph D.i. hereof, the Company shall pay
to the Executive at such time a good faith estimate of the
reduced payments, the computation of which shall be given to
him in writing together with a written explanation of the
basis for making such adjustment. The Company shall, within
thirty (30) days of the otherwise applicable payment date,
either (a) pay to the Executive the balance of the payments
together with interest thereon at the applicable federal
rate (as defined in Section 1274(d) of the Code) or (b)
deliver to him a copy of the opinion of Tax Counsel referred
to in Paragraph D.i. hereof, as applicable, establishing the
amount of the reduced payments, along with the excess, if
any, of the reduced payments over the estimate previously
paid on account thereof, together with interest thereon at
the applicable federal rate (as defined in Section 1274(d)
of the Code).
SECTION 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.
SECTION 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.
SECTION 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.
SECTION 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.
SECTION XVI
LIFE INSURANCE POLICIES
A. The Executive owns insurance policies nos. 3022608,
2909164, and 2993536 with Guardian Life Insurance Company of
America ("Guardian"), policies nos. 1046440 and 1074718 with
Security Mutual Life Insurance Company of New York
("Security") and policy no. 2636034 with Canada Life
("Canada") (the Guardian, Security and Canada policies are
referred to herein as the "Policies"). The Policies provide
a death benefit equal to the cash surrender value of the
Policies. The Executive has the right to name a beneficiary
for all of the death benefits, subject to the rights of the
Company under the Prior Life Insurance Agreements described
below in Paragraph F. of this Section XVI. As part of the
compensation paid by the Company to the Executive pursuant
to this Agreement, the Company has advanced certain premium
payments on the Policies through the date hereof.
B. In consideration of the services performed by the
Executive pursuant to this Agreement, the Company agrees to
advance annual premium payments for the Policies, in the
aggregate, in the amount of approximately $285,000 or such
other annual amount as may be agreed to in writing between
the Company and the Executive per year (the "Required
Premiums") through the calendar year in which the Executive
attains age sixty (60) regardless of whether the Executive
is employed by the Company at the time the premiums are
paid; provided, however, that the Required Premiums made by
the Company shall cease in the event the Executive breaches
any of the Covenants contained in Section IX hereof (the
"Covenants").
C. In consideration of the Required Premiums to be
advanced annually by the Company pursuant to this Section
XVI, whether or not the Executive is employed by the Company
pursuant to this Agreement, the Executive agrees not to
breach the Covenants.
D. In further consideration of the premiums to be
advanced annually by the Company, the Executive further
agrees that between the date hereof and until the date the
Executive attains age sixty (60), the Executive may not
withdraw any amount (either as a Policy loan or a withdrawal
of cash surrender value) from the Policies.
E. The Policies have been transferred by the
Executive to the escrow agent agreed to by the Executive and
the Company (the "Escrow Agent") pursuant to the escrow
agreement dated as of February 1, 1996 between the Company,
the Executive and the Escrow Agent annexed hereto as Exhibit
A (the "Escrow Agreement"). In the event the Executive
violates the Covenants prior to the Executive attaining age
sixty (60), the Executive shall forfeit any interest in the
Policies, and the Escrow Agent shall transfer the Policies
to the Company, subject to the provisions of the Escrow
Agreement. The Executive has executed an assignment
agreement ("Assignment Agreement"), annexed hereto as
Exhibit B, to reflect the obligation of the Executive to
transfer the Policies to the Company in such event, and the
Assignment Agreement shall be held in escrow by the Escrow
Agent. Upon the Executive having attained age sixty (60)
without having violated any of the Covenants, the Escrow
Agent shall return the Policies to the Executive, and the
Executive shall hold all right, title and interest in and to
the Policies, without regard to the terms of the Covenants,
but subject to the New Collateral Assignments described in
Paragraph F of this Section XVI below.
F. Pursuant to collateral assignment agreements dated
December 13, 1988 and August 13, 1991, the Executive has
assigned to the Company an interest in the Policies issued
by Security equal to the premiums advanced by the Company.
Pursuant to collateral assignment agreements dated June 2,
1988, the Executive has assigned to the Company an interest
in the Policies issued by Guardian equal to the premiums
advanced by the Company. These agreements are referred to
herein collectively as the "Prior Life Insurance
Agreements." New collateral assignments have been entered
into between Guardian, Security and Canada (respectively),
the Company and the Executive, copies of which are annexed
hereto as Exhibit C ("New Collateral Assignments"). Each
provides that the Company shall have an interest in such
respective Policies equal to the premiums advanced by the
Company. The New Collateral Assignments shall supersede the
Prior Life Insurance Agreements.
G. During the term of this Agreement and further
provided that the Executive does not breach the terms of the
Covenants before his attainment of age sixty (60), in the
event that the Company fails to make Required Premium
payments for the Policies for any calendar year by December
31st of such year (the "Default Date"), the Company's right
under any or all of the New Collateral Assignments to be
repaid from the cash surrender value of the Policies, in
respect of the premiums advanced by the Company to the
Executive, shall be reduced by the shortfall (unless
otherwise subsequently advanced by the Company) with
interest at the rate of seven percent (7%) per annum
(without regard to which Policy there is a failure to pay).
Such interest shall be calculated from the Default Date to
the earlier of the (a) date the Company advances Required
Premiums with respect which there is a shortfall and
certifies to the Executive that such payment is being made
to make up for the shortfall, or (b) date of withdrawal of
premiums advanced by the Company pursuant to the New
Collateral Assignment. For purposes of the preceding
sentence, the Executive may request a reduction from any
Policy of the premiums to be repaid to the Company pursuant
to the New Collateral Assignments.
H. In the event the Executive breaches any of the
Covenants after attaining age sixty (60), the Company may
seek an injunction in a court of competent jurisdiction
barring the Executive from breaching such Covenants.
SECTION XVII
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 without giving effect to the
conflicts of laws provisions thereof. The construction and
interpretation of this Agreement shall not be strictly
construed against the drafter.
SECTION XVIII
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, 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 XVIII has been
included to rapidly and inexpensively resolve any disputes
between them with respect to this Agreement, and that this
Section XVIII 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.
E. The parties shall keep confidential, and shall not
disclose to any person, except as may be required by law,
the existence of any controversy hereunder, the referral of
any such controversy to arbitration or the status or
resolution thereof.
SECTION XIX
SURVIVAL
Sections VI, VII, VIII, IX, X, XI, XVI, XVII, XVIII and
XX shall continue in full force in accordance with their
respective terms notwithstanding any termination of the
Period of Employment.
SECTION XX
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:_____________________
Walter A. Forbes
_____________________
E. Kirk Shelton