(3)
, 199_
Dear (name):
I am pleased to advise you that the Compensation Committee (the
"Committee") of the Board of Directors of CUC International Inc.
(the "Corporation") on ___________, ____ authorized the granting
to you of a non-statutory option to purchase ________ shares of
common stock, $.01 par value, of the Corporation (the "Common
Stock") at a price of $_____ per share (the "Exercise Price"),
which the Committee believes to be the fair market value on that
date. Your option has been granted under the Company's 1997
Stock Option Plan (the "Plan").
Terms not defined herein shall have the meaning set forth in the
Plan.
Your option may be exercised under the following terms:
(a) This option shall not be transferable except: by will or the
laws of descent and distribution; pursuant to a domestic
relations order, as defined in the Internal Revenue Code of
1986, as amended (the "Code") or Title I of the Employee
Retirement Security Act or the rules thereunder; or as a
gift to your family members, trusts for the benefit of your
family members or charities or other not-for-profit
organizations.
(b) Subject to the provisions of paragraphs (e), (f) and (g)
hereof, this option may be exercisable by you as follows:
You may purchase ____________ of the Common Stock for which
options are herein granted on or after February 1, ____ and
an additional _____________ on or after each successive
February 1.
Your right to exercise this option shall be cumulative. The
Board of Directors of the Corporation may at any time
accelerate the vesting of this option. This option shall
expire on the tenth anniversary of the date of grant.
(c) If required by the Corporation, prior to the delivery to you
of a certificate or certificates representing the shares of
Common Stock purchased by you upon the exercise of this
option, you shall have deposited with the Corporation a non-
disposition letter (restricting disposition by you of the
shares of Common Stock) in form satisfactory to counsel for
the Corporation.
(d) In the event of a stock split, stock dividend,
recapitalization, reorganization, merger, consolidation,
extraordinary dividend, split-up, spin-off, combination,
stock repurchase, exchange of shares, warrants or rights
offering to purchase stock at a price substantially below
fair market value or other similar corporate event affecting
the Common Stock, the number and kind of shares subject to
this option and the Exercise Price shall be equitably
adjusted (including by payment of cash to you) in the
discretion of the Committee in order to preserve the
benefits or potential benefits intended to be made available
to you under this option. The determination of the
Committee as to what adjustments shall be made, and the
extent thereof, shall be final. Unless otherwise determined
by the Committee, such adjustments shall be subject to the
same vesting schedule and restrictions to which this option
is subject. No fractional shares of Common Stock shall be
reserved or authorized or made subject to this option by any
such adjustment.
(e) Notwithstanding anything herein to the contrary, if you die
while in the employ of the Corporation or any of its
subsidiaries or if you die within a period of three (3)
months after your employment has terminated or if your
employment is terminated by reason of total and permanent
disability (as defined in Section 22(e)(3) of the Code),
this option shall become immediately exercisable in full
and, in the case of your death, your estate shall have the
right to exercise your rights hereunder.
(f) Notwithstanding anything herein to the contrary, in the
event your employment or relationship with the Corporation
or any of its subsidiaries is terminated for any reason
other than death or total and permanent disability (as
defined in Section 22(e)(3) of the Code,) you shall be
entitled to exercise your options hereunder, to the extent
exercisable on the date of termination, for a period of four
(4) months from such termination, but in no event after the
expiration of the term of the option.
(g) You may pay for shares purchased pursuant hereto as follows:
(i) You may pay the Exercise Price per share in cash or
check at the time of exercise;
(ii) You may pay the Exercise Price by remitting to the
Corporation in cash or by check an amount equal to or
greater than the product of (a) the par value of the
Corporation's Common Stock and (b) the number of shares
of Common Stock acquired pursuant to the exercise of
this option (such amount is hereinafter referred to as
the "Minimum Payment") and by executing a promissory
note for the balance equal to (A) the product of (i)
the Exercise Price and (ii) the number of shares of
Common Stock acquired pursuant to the exercise of this
option less (B) the Minimum Payment (such balance is
hereinafter referred to as the "Principal Amount").
Pursuant to the terms of the promissory note, interest
will be charged per year at the lowest interest rate in
effect at the time of exercise, which will prevent any
imputation of income under Sections 483 or 7872 of the
Code. Five years from the date of exercise, the
Principal Amount plus interest compounded annually will
be due. In the discretion of the Corporation's Board
of Directors, the Corporation may demand repayment of
the Principal Amount plus accrued interest upon a
termination of your employment with the Corporation or
any of its subsidiaries. With notice of your exercise
of your option, you must give notice of your election
to use the loan arrangement described above. In the
discretion of the Corporation's Board of Directors, you
may be required to execute a pledge agreement. The
Corporation will retain possession of certificates
representing shares of Common Stock acquired pursuant
to the exercise of this option until the loan is repaid
in full;
(iii) Provided that at the time of exercise, Common
Stock is publicly traded and quoted regularly in the
Wall Street Journal, you may pay for the shares of
Common Stock purchased pursuant hereto by delivery of
already-owned shares of Common Stock owned by you free
and clear of any liens, claims, encumbrances or
security interests, which Common Stock shall be valued
(a) if listed on a national securities exchange, at the
average closing price for the ten (10) trading days
immediately preceding the date of exercise, or (b)
otherwise at the average of the closing bid and ask
quotations published in the Wall Street Journal for the
ten (10) trading days immediately preceding the date of
exercise (as so valued, the "Fair Market Value");
(iv) If approved by the Committee, you may request that
the Corporation withhold from the number of shares of
Common Stock which you would otherwise acquire upon
exercise of your option and payment of the Exercise
Price therefor, that number of shares of Common Stock
which have an aggregate Fair Market Value equal to the
aggregate Exercise Price of all or any portion of the
options which you are then exercising; or
(v) You may pay with any other legal consideration
that may be acceptable to the Committee in its sole
discretion at the time of exercise.
When you wish to exercise your stock option in whole or in part,
please refer to the provisions of this letter and correspond in
writing with the Secretary of the Corporation. This is not an
incentive stock option under Section 422A of the Code.
Very truly yours,
E. Kirk Shelton
President and Chief Operating Officer
EKS:kg