AGREEMENT
This Agreement made effective as of July 24, 1996 by and
between CUC International Inc. (the "Company"), a Delaware
corporation, and Robert M. Davidson ("Executive").
The Executive is willing to serve in the employ of the
Company on a full-time basis upon such other terms and
conditions as provided in this Agreement.
In consideration of the mutual covenants contained in
this Agreement, the parties hereby agree as follows:
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.
II
POSITION AND RESPONSIBILITIES
During the Period of Employment, the Executive agrees to
serve as a Vice Chairman (upon election to the Board of
Directors) of the Company, as a director and the Chief
Executive Officer of the Company's Davidson & Associates,
Inc. subsidiary ("Subsidiary") and as a director, Chairman
and Chief Executive Officer of the Company's educational and
entertainment software division, regardless of the corporate
form in which it may be operated (including CUC Software
Services, Inc.). The Executive shall be responsible for
overall management of Subsidiary and the Company's
educational and entertainment software division, subject to
the reasonable directives of senior management and the Board
of Directors of the Company. The Executive shall report to
the President of the Company. For purposes of this
Agreement, "senior management" of the Company shall mean
only the Chairman and Chief Executive Officer of the
Company, the President of the Company and Chris McLeod, an
Executive Vice 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 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 and competently the duties which
may be assigned to him from time to time by the Company.
Nothing in this Agreement shall preclude the Executive from
devoting time during reasonable periods required for:
i. Serving, with prior approval of the President or
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 business 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. These 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.
IV
COMPENSATION
A. 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, 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. 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.
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 for
under any plan or program now or established later by the
Company for salaried employees generally. 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, 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.
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 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's Board of Directors, 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. 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, the Executive will furnish information and assistance to
the Company and from time to time will make himself 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.
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 the remainder of the thirty-six
(36) month term of this Agreement. 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 the remainder of the thirty-six (36) month term
of this Agreement. In the event of any such Without Cause
Termination or Constructive Discharge, any unvested stock
options held by the Executive which would have vested during
the twelve (12) months following such termination, shall
continue to vest in accordance with the respective terms of the
applicable stock option agreements pursuant to which such
options were granted, notwithstanding anything to the contrary
in any such stock option agreements.
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 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 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 has resulted or is likely
to result in material economic damage to the Company) 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); or any relocation of
the Executive outside of the Los Angeles 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 sixty (60) 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. 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.
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 or indirectly 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 request and cost, he will do whatever
is 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. i. During the Period of Employment, 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.
i. During the Period of Employment, the Executive will not
make any statements or perform any acts intended to or which are
reasonably likely to 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 Period of
Employment, the Executive, without prior express written
approval by the Board of Directors of the Company, will not
engage in competition, or directly or indirectly own or hold
proprietary interest in or be employed by or receive
compensation from 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. 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.
ii. During the Period of Employment, 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.
iii. During the Period of Employment, the
Executive will not 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.
iv. 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% (or such greater percentage as may be approved
by the Company) 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.
v. The Company's obligation to make any payments under the
terms of this Agreement will cease upon any violation of the
preceding paragraphs.
E. 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 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.
F. 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.
G. 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
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.
XI
CHANGE IN CONTROL
A. In the event there is a Change in Control of the
ownership of the Company and the Executive's employment is
terminated Without Cause or the Executive's employment
terminates due to a Constructive Discharge, in either case
within two (2) years thereafter, 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 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 continue to vest in accordance with the agreements
pursuant to which such options were granted, notwithstanding
anything to the contrary in any such stock option agreements.
The benefits and perquisites described in this Agreement will
also be continued for two (2) years from the effective date of
termination or Constructive Discharge, as the case may be,
pursuant to a Change of Control as aforesaid.
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. The construction and interpretation of this
Agreement shall not be strictly construed against the drafter.
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 Los Angeles, California, whichever the complaining party may
choose, 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.
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.
XVIII
SURVIVAL
Sections VI, VII, VIII, IX, X, XI, XVI, and XVII shall
continue in full force in accordance with their respective terms
not withstanding 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
_________________________
Robert M. Davidson