RESTATED EMPLOYMENT AGREEMENT
OF
WALTER A. FORBES
This amended and restated employment agreement
("Agreement") made effective as of May 15, 1996 by and between
CUC International Inc., a Delaware corporation (the "Company")
and Walter A. Forbes (the "Executive").
In consideration of the mutual covenants contained in this
Agreement, 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
other terms and conditions provided in this Agreement.
SECTION II
POSITION AND RESPONSIBILITIES
During the Period of Employment the Executive agrees to
serve as the Company's Chief Executive Officer and to be
responsible for the general management of the affairs of the
Company, reporting only to the Board of Directors of the
Company and as a member of the Board of Directors of the
Company for the period for which he is and shall from time to
time be elected. During the Period of Employment, the Executive
also agrees to serve, if elected, as an Officer and Director of
any subsidiary or affiliate of the Company. The Company will
undertake to elect the Executive to its Board of Directors.
SECTION III
TERMS AND DUTIES
A. Period of Employment
The period of the Executive's employment under this
Agreement (the "Period of Employment") shall continue through
December 31, 2001, subject to extension or termination as
provided in this Agreement. On January 1, 1997, and on each
January 1 thereafter, the Period of Employment will be
automatically extended by twelve additional calendar months
unless prior to January 1, 1997, or any subsequent January 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, 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 Board of Directors of the Company. Nothing in this
Agreement shall preclude the Executive from devoting time
during reasonable periods required for:
i. Serving, with the prior approval of the Board of
Directors 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 foregoing activities 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
For all services rendered by the Executive in any capacity
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:
A. Base Salary
The Company shall pay the Executive a fixed base salary
("Base Salary") as determined by the Company's Board of
Directors, subject to annual increases as the Board of
Directors of the Company or a committee assigned by the Board
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 twice each month.
B. Annual Incentive Awards
The Company will pay the Executive annual incentive
compensation awards, if any, as may be granted by the Board or
a committee assigned by the Board of Directors to the Executive
under an annual incentive program. The annual incentive
program will be adopted by the Board or by a committee assigned
by the Board. The Board or committee will establish
appropriate criteria for the granting of such awards at the
beginning of each calendar year based on the financial and
strategic results achieved that year.
C. Long-Term Incentive Awards
Subject to any approval or ratification by shareholders as
required the Company will grant the Executive Incentive Stock
Options and Non-Qualified Stock Options at fair market value
from time to time based on the financial and strategic results
achieved each year, and at a competitive level based on the
then current Base Salary of the Executive. These options will
be a combination of Incentive Stock Options and Non-Qualified
Stock Options, the combination determined by the Board and
subject to any maximum restrictions determined by existing tax
legislation at that time.
D. Additional Benefits
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 any salaried employees are eligible under any plan or
program now or later established by the Company for salaried
employees. 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
group hospitalization, health, dental care, life or other
insurance, tax qualified pension, savings, thrift and profit
sharing plans, termination pay programs, sick leave plans,
vacation, 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 or senior executives as long as
such amendment or termination is applicable to all salaried
employees or senior executives, as the case may be.
Specifically, the Company shall furnish the Executive,
without cost to the Executive, group term and supplemental term
life insurance for the benefit of the Executive's beneficiary
in the combined amount of at least $2,500,000, coverage under
the Company's group hospitalization, health and dental care
insurance plans, supplemental medical reimbursement plan,
coverage for expenses incurred by the Executive or his
dependents who are covered under the Company's group
hospitalization, health and dental insurance plans which are
not covered by other Company plans and which do not exceed
$10,000 per year, and long-term disability insurance for the
benefit of the Executive in an amount no less than sixty
percent (60%) of base salary. The Executive will be entitled
to a minimum of four (4) weeks vacation annually.
E. Perquisites
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 Chairman of the Compensation Committee of the
Board of Directors. 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 $15,000 per
year.
The Company shall pay directly (or reimburse the Executive
for) $15,000 per year of dues incurred by the Executive with
respect to clubs used primarily for business purposes.
Executive shall provide whatever information the Company might
request to ensure that such payment (or reimbursement) is tax
deductible for the Corporation.
F. Life Insurance Policies
i. The Executive owns insurance policies nos.
2913144, 3023808, and 3001153 with Guardian Life Insurance
Company of America ("Guardian"), policies nos. 1046438 and
1071502 with Security Mutual Life Insurance Company of New York
("Security") and policy 2633-125 with Canada Life (the
Guardian, Security and Canada Life 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 subparagraph
vi. As part of the compensation paid by the Company to the
Executive pursuant to this Section IV, the Company has advanced
certain premium payments on the Old Policies.
ii. 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 $540,000 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-one (61) 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 the "Covenant Not To
Compete" annexed hereto as Exhibit A and described in
subparagraph iii. below. All references in such Exhibit A to
"Effective Date" shall refer to June 1, 1994.
iii. In consideration of the Required Premiums
to be advanced annually by the Company pursuant to this Section
IV F., whether or not the Executive is employed by the Company
pursuant to this Agreement, the Executive agrees not to compete
with the Company pursuant to the terms of the "Covenant Not To
Compete" annexed hereto as Exhibit A.
iv. In further consideration of the premiums to be
advanced annually by the Company, the Executive further agrees
that pursuant to the terms of this Paragraph F., 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.
v. 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 between the Company, the Executive and the Escrow
Agent annexed hereto as Exhibit B (the "Escrow Agreement"). In
the event the Executive violates the terms of the Covenant Not
To Compete 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 and the
provisions of subparagraph viii. below. The Executive has
executed an assignment agreement ("Assignment Agreement"),
annexed hereto as Exhibit C, 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 the terms of the Covenant Not To
Compete, 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 Covenant Not To Compete, but subject to the New Collateral
Assignments described in subparagraph vi. below.
vi. Pursuant to collateral assignment agreements
dated December 12, 1988 and March 18, 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 Life (respectively), the Company and the
Executive, copies of which are annexed hereto as Exhibit D
("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.
vii. During the term of this Agreement and further
provided that the Executive does not breach the terms of the
Covenant Not To Compete 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.
viii. Any such disputes regarding (a) the
interpretation and application of this Paragraph F., (b) the
Policies and (c) the documents set forth in Exhibits A, B, C
and D to this Agreement, except that the Covenant Not To
Compete as set forth in Exhibit A shall be included for
purposes of this subparagraph viii. only until the Executive
attains age sixty (60), which cannot be settled amicably within
thirty (30) days after written notice by one party to the other
of a dispute (or after such longer period agreed to in writing
by the parties), shall thereafter be determined by arbitration
in Stamford, Connecticut under the rules of the American
Arbitration Association and shall be the sole remedy for any
disputes arising under this Paragraph F. Judgment on the award
rendered in such arbitration may be entered in any court of
competent jurisdiction. If there is a dispute relating to any
matter under this Paragraph F. which would go to arbitration
any action to be taken by a party hereto or the Escrow Agent
shall be deferred until the final determination of the
arbitration proceedings.
ix. In the event the Executive breaches the Covenant
Not To Compete after attaining age sixty (60), the Company may
seek an injunction in a court of competent jurisdiction barring
the Executive from breaching the Covenant Not To Compete.
SECTION V
BUSINESS EXPENSES
The Company will reimburse the Executive for all
reasonable travel, entertainment, business and other expenses
incurred by the Executive in connection with the performance of
his duties and obligations under this Agreement.
SECTION VI
DISABILITY
A. In the event of disability of the Executive during
the Period of Employment, the Company will continue to pay the
Executive according to the compensation provisions of this
Agreement during the period of his disability. However, in the
event the Executive is disabled for a continuous period of six
months or more, the Company may terminate the employment of the
Executive and make payments to the Executive under Section VIII
D. of this Agreement.
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, the Executive will furnish
information and assistance 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 Board of Directors. 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.
C. The term "disability" will have the same meaning as
under the disability insurance provided pursuant to this
Agreement.
SECTION VII
DEATH
In the event of the death of the Executive during the
Period of Employment, the Company's obligation to make payments
under this Agreement shall cease as of the date of death,
except as provided in Section VIII D. of this Agreement. 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.
SECTION VIII
EFFECT OF TERMINATION OF EMPLOYMENT
A. If the Executive's employment terminates due to a
Termination for Cause, earned but unpaid Base Salary will be
paid on a lump sum basis for the year in which the termination
occurs. Earned but unpaid incentive awards for any prior years
shall be payable in full, but no other payments will be made or
benefits provided by the Company.
B. Upon termination of the Executive's employment (other
than for reasons due to death, disability, retirement or
pursuant to Paragraph D. of this section or Section XII), 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.
C. For this Agreement the following terms have the
following meanings:
i. "Termination 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 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 is not cured
(if such breach 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 any of its obligations under this
Agreement in any material respect including any reduction of
the Executive's Base Salary or failure to appoint or reappoint
the Executive to the office of Chief Executive Officer or Board
of Directors or other material change by the Company in the
functions, duties or responsibilities of the position which
would reduce the ranking or level, responsibility, importance
or scope of the position. This would also include any
assignment or reassignment by the Company of the Executive to a
place of employment other than the Company's present
headquarters or another location in the New York Metropolitan
Area. The Executive will provide the Company with 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
expiration of the Period of Employment or Termination for
Cause.
D. In the event (i) the Executive's employment with the
Company terminates for any reason (including, without
limitation, disability, death, resignation, retirement, Without
Cause Termination or Constructive Discharge) other than
Termination for Cause and other than as a result of a Change of
Control (as defined in Section XII), (ii) in the case of the
Executive's proposed resignation or retirement (each, a
"voluntary termination") the Executive gives the Company no
less than six (6) months prior written notice of such proposed
voluntary termination of employment, and (iii) the Executive at
the time of any voluntary termination under (i) is over the age
of 55, the Company shall pay to the Executive or the Executive
(or his estate in the event of his death) shall be entitled to,
in lieu of any other payment or entitlement under the prior
provisions of this Section VIII, the following described in
(x), (y) and (z), below, as applicable:
(x) In the event of voluntary termination of
employment
a) $2,500,000 if termination occurs at or after
age 55 and before age 56;
b) $5,000,000 if termination occurs at or
after age 56 and before age 57;
c) $7,500,000 if termination occurs at or
after age 57 and before age 58; or
d) $10,000,000 if termination occurs at or
after age 58.
The payments referred to in (x) shall be made in
ten (10) equal, consecutive, pro rata installments, commencing
no later than thirty (30) days after the effective date of such
voluntary termination of employment and on each anniversary
thereof, together with interest on the unpaid principal balance
of such payments, based upon a 360 day year of twelve 30 day
months at a rate of seven percent (7%) per annum; provided,
however, that all such payments shall become immediately due
and payable in the event of any Change of Control (as defined
in Section XII). Interest payments shall be made on each such
anniversary date until the principal amount of such payments
shall be paid in full. If any such anniversary is not a
business day, such installment shall be paid on the business
day next following such anniversary. For purposes of this
Agreement, "business day" means any day on which commercial
banks are authorized to be open in New York City for the
transaction of business. Nothing in this section shall entitle
Executive to any of the payments or entitlements payable under
Section XII of this Agreement.
(y) In the event of termination of employment under
(i) other than voluntary termination, the amount of
$10,000,000.
(z) a) all earned but unpaid Base Salary and
Incentive Compensation Awards on a pro rata basis for the year
in which such termination occurs,
b) any stock options granted to the Executive
prior to such termination shall become fully vested upon such
termination,
c) any restrictions on any shares of
Restricted Stock issued to the Executive prior to such
termination shall lapse upon such termination,
d) the Company shall immediately contribute to
the Escrow Agent (or another escrow agent mutually acceptable
to the parties hereto), in a lump sum, all the Required
Premiums that would thereafter be payable under Section IV
F.ii., as if the Executive's employment continued through the
calendar year in which the Executive would have attained age
sixty-one (61), which Required Premiums shall be held pursuant
to an escrow agreement mutually acceptable to the parties
hereto, with all interest and/or dividends thereon to be paid
periodically to the Company, and
e) the welfare benefits otherwise provided to
the Executive under Section IV D., including without limitation
group hospitalization, health, dental care, life insurance and
disability insurance shall be continued for a period of five
years following such termination of employment for the benefit
of the Executive and, to the extent applicable, the Executive's
spouse.
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 cooperate with the Company as may reasonably
be requested in connection with any claims or legal actions in
which the Company is or may become a party.
B. The Executive recognizes and acknowledges that all
information pertaining to the affairs, business, clients,
customers or other relationships of the Company is confidential
and is a unique and valuable asset of the Company. Access to
and knowledge of this information are essential to the
performance of the Executive's duties under this Agreement.
The Executive will not during the Period of Employment or
after, 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
concerning the affairs, business, clients, customers or other
relationships of the Company except as required by law. The
Executive will not make use of this type of information for his
own purposes or for the benefit of any person or organization
other than the Company. 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 whether made by the Executive or otherwise
coming into his possession are confidential and will remain the
property of the Company.
C. During the Period of Employment and upon a
Termination for Cause, for a 12-month period thereafter the
Executive will not use his status with the Company 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. During such period, the Executive
will not make any statements or perform any acts intended to
advance the interest of any existing or prospective competitors
of the Company in any way that will injure the interest of the
Company. During such period, the Executive without express
prior written approval from the Board of Directors will not
solicit any members of the thencurrent clients of the Company
or discuss with any employee of the Company information or
operation of any business intended to compete with the Company.
The Company's obligation to make payments under the terms of
this Agreement will cease upon any violation of the preceding
paragraphs.
The parties desire that the provisions of Section IX are
enforced to the fullest extent permissible under the laws and
public policies applied in the jurisdictions in which
enforcement is sought. If any portion of Section IX is judged
to be invalid or unenforceable, Section IX will be amended to
conform to the legal changes so that the remainder of this
Agreement remains in effect.
SECTION X
RETIREMENT
The Executive may elect with no less than six (6) months
written advance notice to the Company to retire under this
Agreement. In the event of retirement, the Period of
Employment shall cease as of the retirement date (except as
provided in Section VIII D. of this Agreement).
SECTION XI
INDEMNIFICATION, LITIGATION
A. The Company will indemnify the Executive to the
fullest extent permitted by the laws of the Company's state of
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 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, and the enforcement of the
rights under 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 XII
EFFECTS OF CHANGE OF CONTROL
A. In the event there is a Change of Control (as defined
below) of the ownership of the Company, the Executive may, at
any time, immediately resign upon written notice to the
Company. Within thirty (30) days of any such termination of
employment, the Company shall pay to the Executive, or to his
estate in the event of death, the sum of $10,000,000. In
addition, there shall be paid to the Executive or he (or his
estate, in the event of his death) shall be entitled to:
i. all earned but unpaid Base Salary and Incentive
Compensation Awards on a pro rata basis for the year in which
such termination occurs,
ii. the Company shall immediately contribute to the
Escrow Agent (or another escrow agent mutually acceptable to
the parties hereto), in a lump sum, all the Required Premiums
that would thereafter be payable under Section IV F.ii. as if
the Executive's employment continued through the calendar year
in which the Executive would have attained age sixty-one (61),
which Required Premiums shall be held pursuant to an escrow
agreement mutually acceptable to the parties hereto, with all
interest and/or dividends thereon to be paid periodically to
the Company, and
iii. welfare benefits otherwise provided to the
Executive under Section IV D., including without limitation,
group hospitalization, health, dental care, life insurance and
disability insurance shall be continued for a period of five
(5) years following such termination of employment for the
benefit of the Executive and, to the extent applicable, the
Executive's spouse,
In the event that there is a Change of Control, whether or
not the Executive resigns, any stock options granted to the
Executive prior to such Change of Control shall become fully
vested upon such Change of Control, and any restrictions on any
shares of Restricted Stock issued to the Executive prior to
such Change of Control shall lapse upon such Change of Control.
The foregoing payments and entitlements under this Section XII
shall be in lieu of any entitlements or amounts otherwise
payable under Section VIII of this Agreement.
B. 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
of options previously granted 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 B., any Payments paid to the Executive or for his
benefit exceeded the limitation contained in Paragraph B.
hereof, then the Executive shall pay to the Company, within 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
B. 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 B.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 B.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 B.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 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 B.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 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 B.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).
C. A "Change Of 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 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 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 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
of 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 13d3(d)(I)(i) (as in effect on the date
hereof) pursuant to the Securities Exchange Act of 1934, as
amended.
SECTION XIII
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 XIV
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 XV
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" as used herein will mean
the other corporation and this Agreement shall continue in full
force and effect.
SECTION XVI
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 XVII
GOVERNING LAW
This Agreement has been executed and delivered in the
State of Connecticut and its validity, interpretation,
performance and enforcement shall be governed by the laws of
that state.
SECTION XVIII
SURVIVAL
Sections IV, V, VI, VII, VIII, IX, X, XI, XII, XV and XVII
shall continue in full force and effect in accordance with
their respective terms, notwithstanding any termination of the
Period of Employment.
In Witness Whereof, the undersigned have caused the foregoing
agreement to be executed as of the date first above written.
CUC International Inc.
By:
_________________________
E. Kirk Shelton
President
____________________________
Walter A. Forbes