AGREEMENT AND PLAN OF MERGER
BETWEEN
CUC INTERNATIONAL INC.
AND
HFS INCORPORATED
DATED AS OF MAY 27, 1997
TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGER
SECTION 1.1. The Merger . . . . . . . . . . . . . . . . 2
SECTION 1.2. Closing . . . . . . . . . . . . . . . . . 2
SECTION 1.3. Effective Time . . . . . . . . . . . . . . 2
SECTION 1.4. Effects of the Merger . . . . . . . . . . 2
SECTION 1.5. Certificate of Incorporation and By-laws . 2
SECTION 1.6. Boards, Committees and Officers . . . . . 3
SECTION 1.7. Name of the Surviving Corporation . . . . 3
SECTION 1.8. Reservation of Right to Revise
Transaction . . . . . . . . . . . . . . . 4
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.1. Effect on Capital Stock . . . . . . . . . 4
SECTION 2.2. Exchange of Certificates . . . . . . . . . 5
SECTION 2.3. Certain Adjustments. . . . . . . . . . . . 10
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of HFS . . 11
(a) Organization, Standing and Corporate Power . . 11
(b) Subsidiaries . . . . . . . . . . . . . . . . . 12
(c) Capital Structure . . . . . . . . . . . . . . 12
(d) Authority; Noncontravention . . . . . . . . . 14
(e) SEC Documents; Undisclosed Liabilities . . . . 16
(f) Information Supplied . . . . . . . . . . . . . 16
(g) Absence of Certain Changes or Events . . . . . 17
(h) Compliance with Applicable Laws; Litigation . 18
(i) Absence of Changes in Benefit Plans . . . . . 19
(j) ERISA Compliance . . . . . . . . . . . . . . . 20
(k) Taxes . . . . . . . . . . . . . . . . . . . . 22
(l) Voting Requirements . . . . . . . . . . . . . 23
(m) State Takeover Statutes . . . . . . . . . . . 23
(n) Accounting Matters . . . . . . . . . . . . . . 24
(o) Brokers . . . . . . . . . . . . . . . . . . . 24
(p) Opinion of Financial Advisor . . . . . . . . . 24
(q) Ownership of CUC Common Stock . . . . . . . . 24
(r) Intellectual Property . . . . . . . . . . . . 25
(s) Certain Contracts . . . . . . . . . . . . . . 25
SECTION 3.2. Representations and Warranties of CUC . . 26
(a) Organization, Standing and Corporate Power . . 26
(b) Subsidiaries . . . . . . . . . . . . . . . . . 27
(c) Capital Structure . . . . . . . . . . . . . . 27
(d) Authority; Noncontravention . . . . . . . . . 29
(e) SEC Documents; Undisclosed Liabilities . . . . 30
(f) Information Supplied . . . . . . . . . . . . . 31
(g) Absence of Certain Changes or Events . . . . . 32
(h) Compliance with Applicable Laws; Litigation . 33
(i) Absence of Changes in Benefit Plans . . . . . 34
(j) ERISA Compliance . . . . . . . . . . . . . . . 34
(k) Taxes . . . . . . . . . . . . . . . . . . . . 37
(l) Voting Requirements . . . . . . . . . . . . . 38
(m) State Takeover Statutes . . . . . . . . . . . 38
(n) Accounting Matters . . . . . . . . . . . . . . 39
(o) Brokers . . . . . . . . . . . . . . . . . . . 39
(p) Opinion of Financial Advisor . . . . . . . . . 39
(q) Ownership of HFS Common Stock . . . . . . . . 39
(r) Intellectual Property . . . . . . . . . . . . 40
(s) Certain Contracts . . . . . . . . . . . . . . 40
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1. Conduct of Business . . . . . . . . . . . 41
SECTION 4.2. No Solicitation by HFS . . . . . . . . . . 48
SECTION 4.3. No Solicitation by CUC . . . . . . . . . . 51
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1. Preparation of the Form S-4 and the Joint
Proxy Statement; Stockholders Meetings . 54
SECTION 5.2. Letters of HFS's Accountants . . . . . . . 56
SECTION 5.3. Letters of CUC's Accountants . . . . . . . 56
SECTION 5.4. Access to Information; Confidentiality . . 57
SECTION 5.5. Best Efforts . . . . . . . . . . . . . . . 57
SECTION 5.6. Stock Options . . . . . . . . . . . . . . 58
SECTION 5.7. HFS Stock Plans and Certain
Employee Matters . . . . . . . . . . . . 60
SECTION 5.8. Indemnification, Exculpation and
Insurance . . . . . . . . . . . . . . . . 61
SECTION 5.9. Fees and Expenses . . . . . . . . . . . . 62
SECTION 5.10. Public Announcements . . . . . . . . . . . 63
SECTION 5.11. Affiliates . . . . . . . . . . . . . . . . 64
SECTION 5.12. NYSE Listing . . . . . . . . . . . . . . . 64
SECTION 5.13. Stockholder Litigation . . . . . . . . . . 65
SECTION 5.14. Tax Treatment . . . . . . . . . . . . . . 65
SECTION 5.15. Pooling of Interests . . . . . . . . . . . 65
SECTION 5.16. Standstill Agreements; Confidentiality
Agreement . . . . . . . . . . . . . . . . 65
SECTION 5.17. Company Officers; Employment Contracts;
Equity Awards. . . . . . . . . . . . . . 65
SECTION 5.18. Post-Merger Operations . . . . . . . . . 67
SECTION 5.19. Conveyance Taxes . . . . . . . . . . . . . 67
SECTION 5.20. HFS Convertible Notes . . . . . . . . . . 67
SECTION 5.21. Transition Planning . . . . . . . . . . . 68
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1. Conditions to Each Party's Obligation to
Effect the Merger . . . . . . . . . . . . 68
SECTION 6.2. Conditions to Obligations of CUC . . . . . 70
SECTION 6.3. Conditions to Obligations of HFS . . . . . 71
SECTION 6.4. Frustration of Closing
Conditions . . . . . . . . . . . . . . . 73
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1. Termination . . . . . . . . . . . . . . . 73
SECTION 7.2. Effect of Termination . . . . . . . . . . 75
SECTION 7.3. Amendment . . . . . . . . . . . . . . . . 75
SECTION 7.4. Extension; Waiver . . . . . . . . . . . . 75
SECTION 7.5. Procedure for Termination, Amendment,
Extension or Waiver . . . . . . . . . . . 75
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1. Nonsurvival of Representations and
Warranties . . . . . . . . . . . . . . . 76
SECTION 8.2. Notices . . . . . . . . . . . . . . . . . 76
SECTION 8.3. Definitions . . . . . . . . . . . . . . . 77
SECTION 8.4. Interpretation . . . . . . . . . . . . . . 78
SECTION 8.5. Counterparts . . . . . . . . . . . . . . . 79
SECTION 8.6. Entire Agreement; No Third-Party
Beneficiaries . . . . . . . . . . . . . . 79
SECTION 8.7. Governing Law . . . . . . . . . . . . . . 79
SECTION 8.8. Assignment . . . . . . . . . . . . . . . . 79
SECTION 8.9. Consent to Jurisdiction . . . . . . . . . 79
SECTION 8.10. Headings . . . . . . . . . . . . . . . . . 80
SECTION 8.11. Severability . . . . . . . . . . . . . . . 80
Exhibit A-1 Certificate of Incorporation of Surviving
Corporation
Exhibit A-2 Amended and Restated By-laws of the Surviving
Corporation
Exhibit B Corporate Governance of Surviving Corporation
Following the Effective Time
Exhibit C Form of Affiliate Letter
Exhibit D CUC Tax Representations
Exhibit E HFS Tax Representations
AGREEMENT AND PLAN OF MERGER dated as of May
27, 1997, between CUC INTERNATIONAL INC., a Delaware
corporation ("CUC"), and HFS INCORPORATED, a Delaware
corporation ("HFS").
WHEREAS, the respective Boards of Directors of
CUC and HFS have each approved the merger of HFS with and
into CUC (the "Merger"), upon the terms and subject to
the conditions set forth in this Agreement, whereby each
issued and outstanding share of common stock, par value
$.01 per share, of HFS ("HFS Common Stock"), other than
shares owned by CUC or HFS, will be converted into the
right to receive the Merger Consideration (as defined in
Section 1.8);
WHEREAS, the respective Boards of Directors of
CUC and HFS have each determined that the Merger and the
other transactions contemplated hereby are consistent
with, and in furtherance of, their respective business
strategies and goals and are in the best interests of
their respective stockholders;
WHEREAS, CUC and HFS desire to make certain
representations, warranties, covenants and agreements in
connection with the Merger and also to prescribe various
conditions to the Merger;
WHEREAS, for federal income tax purposes, it is
intended that the Merger will qualify as a reorganization
under the provisions of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for financial accounting purposes, it
is intended that the Merger will be accounted for as a
pooling of interests transaction under United States
generally accepted accounting principles ("GAAP").
NOW, THEREFORE, in consideration of the
representations, warranties, covenants and agreements
contained in this Agreement, the parties agree as
follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. Upon the terms and
subject to the conditions set forth in this Agreement,
and in accordance with the Delaware General Corporation
Law (the "DGCL"), HFS shall be merged with and into CUC
at the Effective Time (as defined in Section 1.3).
Following the Effective Time, CUC shall be the surviving
corporation (the "Surviving Corporation") and shall
succeed to and assume all the rights and obligations of
HFS in accordance with the DGCL.
SECTION 1.2. Closing. The closing of the
Merger (the "Closing") will take place at 10:00 a.m. on a
date to be specified by the parties (the "Closing Date"),
which shall be no later than the second business day
after satisfaction or waiver of the conditions set forth
in Article VI, unless another time or date is agreed to
by the parties hereto. The Closing will be held at such
location in the City of New York as is agreed to by the
parties hereto.
SECTION 1.3. Effective Time. Subject to the
provisions of this Agreement, as soon as practicable on
the Closing Date, the parties shall cause the Merger to
be consummated by filing a certificate of merger or other
appropriate documents (in any such case, the "Certificate
of Merger") executed in accordance with the relevant
provisions of the DGCL and shall make all other filings
or recordings required under the DGCL. The Merger shall
become effective at such time as the Certificate of
Merger is duly filed with the Secretary of State of
Delaware, or at such subsequent date or time as CUC and
HFS shall agree and specify in the Certificate of Merger
(the time the Merger becomes effective being hereinafter
referred to as the "Effective Time").
SECTION 1.4. Effects of the Merger. The
Merger shall have the effects set forth in Section 259 of
the DGCL.
SECTION 1.5. Certificate of Incorporation and
By-laws of the Surviving Corporation. The restated
certificate of incorporation of CUC, as in effect
immediately prior to the Effective Time, shall be amended
as of the Effective Time as described in Exhibit A-1 and,
as so amended, such restated certificate of incorporation
shall be the restated certificate of incorporation of the
Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law (as so amended,
the "Restated Certificate"). The by-laws of CUC, as in
effect immediately prior to the Effective Time, shall be
amended as of the Effective Time as described in Exhibit
A-2 and, as so amended, such by-laws shall be the by-laws
of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law (as so
amended, the "Restated By-laws"). Such amendment and
restatement of CUC's certificate of incorporation and by-
laws are referred to herein as the "Certificate
Amendment" and the "By-laws Amendment," respectively.
SECTION 1.6. Boards, Committees and Officers.
Prior to the Effective Time, CUC shall adopt resolutions
in the form attached hereto as part of Exhibit B,
establishing the Board of CUC and committees thereof from
and after the Effective Time. From and after the
Effective Time, the members of the Board of Directors,
the committees of the Board of Directors, the composition
of such committees (including chairmen thereof) and the
officers of the Surviving Corporation shall be as set
forth on or designated in accordance with the Restated
Certificate, the Restated By-laws and Exhibit B hereto
until the earlier of the resignation or removal of any
individual set forth on or designated in accordance with
the Restated Certificate, the Restated By-laws and
Exhibit B or until their respective successors are duly
elected and qualified, as the case may be, or until as
otherwise provided in the Restated Certificate, the
Restated By-laws and Exhibit B. If any officer set forth
on or designated in accordance with Exhibit B ceases to
be a full-time employee of either HFS or CUC at or before
the Effective Time, CUC, in the case of any such employee
of CUC on the date hereof or any such employee to be
designated by CUC, or HFS, in the case of any such
employee of HFS on the date hereof or any such employee
to be designated by HFS, shall designate another person
to serve in such person's stead.
SECTION 1.7. Name of the Surviving
Corporation. The name of the Surviving Corporation shall
be as agreed to between the parties prior to the
Effective Time.
SECTION 1.8. Reservation of Right to Revise
Transaction. If each of HFS and CUC agree, the parties
hereto may change the method of effecting the business
combination between CUC and HFS, and each party shall
cooperate in such efforts, including to provide for (a) a
merger of a wholly owned subsidiary of CUC with and into
HFS, or (b) mergers (to occur substantially
simultaneously) of separate subsidiaries of a Delaware
corporation jointly formed by CUC and HFS for such
purpose into each of CUC and HFS; provided, however, that
no such change shall (i) alter or change the amount or
kind of consideration to be issued to holders of HFS
Common Stock as provided for in this Agreement (the
"Merger Consideration"), other than, in the case of
clause (b) above, the issuer thereof, (ii) adversely
affect the proposed accounting treatment for the Merger
or the tax treatment to CUC, HFS or their respective
stockholders as a result of receiving the Merger
Consideration, or (iii) materially delay receipt of any
approval referred to in Section 6.1(c) or the
consummation of the transactions contemplated by this
Agreement.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.1. Effect on Capital Stock. As of
the Effective Time, by virtue of the Merger and without
any action on the part of the holder of any shares of HFS
Common Stock:
(a) Cancellation of Treasury Stock and CUC-
Owned Stock. Each share of HFS Common Stock that is
owned by HFS or CUC shall automatically be cancelled and
retired and shall cease to exist, and no consideration
shall be delivered in exchange therefor.
(b) Conversion of HFS Common Stock. Subject
to Section 2.2(e), each issued and outstanding share of
HFS Common Stock (other than shares to be cancelled in
accordance with Section 2.1(a)) shall be converted into
the right to receive 2.4031 (the "Exchange Ratio")
validly issued, fully paid and nonassessable shares of
common stock, par value $.01 per share ("CUC Common
Stock"), of CUC. As of the Effective Time, all such
shares of HFS Common Stock shall no longer be outstanding
and shall automatically be cancelled and retired and
shall cease to exist, and each holder of a certificate
representing any such shares of HFS Common Stock shall
cease to have any rights with respect thereto, except the
right to receive the Merger Consideration and any cash in
lieu of fractional shares of CUC Common Stock to be
issued or paid in consideration therefor upon surrender
of such certificate in accordance with Section 2.2,
without interest.
SECTION 2.2. Exchange of Certificates. (a)
Exchange Agent. As of the Effective Time, CUC shall
enter into an agreement with such bank or trust company
as may be designated by CUC and reasonably satisfactory
to HFS (the "Exchange Agent"), which shall provide that
CUC shall deposit with the Exchange Agent as of the
Effective Time, for the benefit of the holders of shares
of HFS Common Stock, for exchange in accordance with this
Article II, through the Exchange Agent, certificates
representing the shares of CUC Common Stock (such shares
of CUC Common Stock, together with any dividends or
distributions with respect thereto with a record date
after the Effective Time, any Excess Shares (as defined
in Section 2.2(e)) and any cash (including cash proceeds
from the sale of the Excess Shares) payable in lieu of
any fractional shares of CUC Common Stock being
hereinafter referred to as the "Exchange Fund") issuable
pursuant to Section 2.1 in exchange for outstanding
shares of HFS Common Stock.
(b) Exchange Procedures. As soon as
reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to
the Effective Time represented outstanding shares of HFS
Common Stock (the "Certificates") whose shares were
converted into the right to receive the Merger
Consideration pursuant to Section 2.1, (i) a letter of
transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in such form and have such
other provisions as CUC and HFS may reasonably specify)
and (ii) instructions for use in surrendering the
Certificates in exchange for the Merger Consideration.
Upon surrender of a Certificate for cancellation to the
Exchange Agent, together with such letter of transmittal,
duly executed, and such other documents as may reasonably
be required by the Exchange Agent, the holder of such
Certificate shall be entitled to receive in exchange
therefor a certificate representing that number of whole
shares of CUC Common Stock which such holder has the
right to receive pursuant to the provisions of this
Article II, certain dividends or other distributions in
accordance with Section 2.2(c) and cash in lieu of any
fractional share of CUC Common Stock in accordance with
Section 2.2(e), and the Certificate so surrendered shall
forthwith be cancelled. Notwithstanding anything to the
contrary contained herein, no certificate representing
CUC Common Stock or cash in lieu of a fractional share
interest shall be delivered to a person who is an
affiliate of HFS for purposes of qualifying the Merger
for pooling of interests accounting treatment under
Opinion 16 of the APB and applicable Securities and
Exchange Commission ("SEC") rules and regulations, unless
such person has executed and delivered an agreement in
the form of Exhibit C hereto. In the event of a
surrender of a Certificate representing shares of HFS
Common Stock which are not registered in the transfer
records of HFS under the name of the person surrendering
such Certificate, a certificate representing the proper
number of shares of CUC Common Stock may be issued to a
person other than the person in whose name the
Certificate so surrendered is registered if such
Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the person requesting such
issuance shall pay any transfer or other taxes required
by reason of the issuance of shares of CUC Common Stock
to a person other than the registered holder of such
Certificate or establish to the satisfaction of CUC that
such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.2, each
Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive
upon such surrender the Merger Consideration which the
holder thereof has the right to receive in respect of
such Certificate pursuant to the provisions of this
Article II, certain dividends or other distributions in
accordance with Section 2.2(c) and cash in lieu of any
fractional share of CUC Common Stock in accordance with
Section 2.2(e). No interest shall be paid or will accrue
on any cash payable to holders of Certificates pursuant
to the provisions of this Article II.
(c) Distributions with Respect to Unexchanged
Shares. No dividends or other distributions with respect
to CUC Common Stock with a record date after the
Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of
CUC Common Stock represented thereby, and, in the case of
Certificates representing HFS Common Stock, no cash
payment in lieu of fractional shares shall be paid to any
such holder pursuant to Section 2.2(e), and all such
dividends, other distributions and cash in lieu of
fractional shares of CUC Common Stock shall be paid by
CUC to the Exchange Agent and shall be included in the
Exchange Fund, in each case until the surrender of such
Certificate in accordance with this Article II. Subject
to the effect of applicable escheat or similar laws,
following surrender of any such Certificate there shall
be paid to the holder of the certificate representing
whole shares of CUC Common Stock issued in exchange
therefor, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions
with a record date after the Effective Time theretofore
paid with respect to such whole shares of CUC Common
Stock and, in the case of Certificates representing HFS
Common Stock, the amount of any cash payable in lieu of a
fractional share of CUC Common Stock to which such holder
is entitled pursuant to Section 2.2(e) and (ii) at the
appropriate payment date, the amount of dividends or
other distributions with a record date after the
Effective Time and with a payment date subsequent to such
surrender payable with respect to such whole shares of
CUC Common Stock.
(d) No Further Ownership Rights in HFS Common
Stock. All shares of CUC Common Stock issued upon the
surrender for exchange of Certificates in accordance with
the terms of this Article II (including any cash paid
pursuant to this Article II) shall be deemed to have been
issued (and paid) in full satisfaction of all rights
pertaining to the shares of HFS Common Stock, theretofore
represented by such Certificates, subject, however, to
the Surviving Corporation's obligation to pay any
dividends or make any other distributions with a record
date prior to the Effective Time which may have been
declared or made by HFS on such shares of HFS Common
Stock which remain unpaid at the Effective Time, and
there shall be no further registration of transfers on
the stock transfer books of the Surviving Corporation of
the shares of HFS Common Stock which were outstanding
immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the
Surviving Corporation or the Exchange Agent for any
reason, they shall be cancelled and exchanged as provided
in this Article II, except as otherwise provided by law.
(e) No Fractional Shares. (i) No
certificates or scrip representing fractional shares
of CUC Common Stock shall be issued upon the
surrender for exchange of Certificates, no dividend
or distribution of CUC shall relate to such
fractional share interests and such fractional share
interests will not entitle the owner thereof to vote
or to any rights of a stockholder of CUC.
(ii) As promptly as practicable
following the Effective Time, the Exchange Agent
shall determine the excess of (A) the number of
whole shares of CUC Common Stock delivered to the
Exchange Agent by CUC pursuant to Section 2.2(a)
over (B) the aggregate number of whole shares of CUC
Common Stock to be distributed to former holders of
HFS Common Stock pursuant to Section 2.2(b) (such
excess being herein called the "Excess Shares").
Following the Effective Time, the Exchange Agent
shall, on behalf of the former stockholders of HFS,
sell the Excess Shares at then-prevailing prices on
the New York Stock Exchange, Inc. ("NYSE"), all in
the manner provided in Section 2.2(e)(iii).
(iii) The sale of the Excess Shares by
the Exchange Agent shall be executed on the NYSE
through one or more member firms of the NYSE and
shall be executed in round lots to the extent
practicable. The Exchange Agent shall use
reasonable efforts to complete the sale of the
Excess Shares as promptly following the Effective
Time as, in the Exchange Agent's sole judgment, is
practicable consistent with obtaining the best
execution of such sales in light of prevailing
market conditions. Until the net proceeds of such
sale or sales have been distributed to the holders
of Certificates formerly representing HFS Common
Stock, the Exchange Agent shall hold such proceeds
in trust for such holders (the "Common Shares
Trust"). The Surviving Corporation shall pay all
commissions, transfer taxes and other out-of-pocket
transaction costs, including the expenses and
compensation of the Exchange Agent incurred in
connection with such sale of the Excess Shares. The
Exchange Agent shall determine the portion of the
Common Shares Trust to which each former holder of
HFS Common Stock is entitled, if any, by multiplying
the amount of the aggregate net proceeds comprising
the Common Shares Trust by a fraction, the numerator
of which is the amount of the fractional share
interest to which such former holder of HFS Common
Stock is entitled (after taking into account all
shares of HFS Common Stock held at the Effective
Time by such holder) and the denominator of which is
the aggregate amount of fractional share interests
to which all former holders of HFS Common Stock are
entitled.
(iv) Notwithstanding the provisions of
Section 2.2(e)(ii) and (iii), the Surviving
Corporation may elect at its option, exercised prior
to the Effective Time, in lieu of the issuance and
sale of Excess Shares and the making of the payments
hereinabove contemplated, to pay each former holder
of HFS Common Stock an amount in cash equal to the
product obtained by multiplying (A) the fractional
share interest to which such former holder (after
taking into account all shares of HFS Common Stock
held at the Effective Time by such holder) would
otherwise be entitled by (B) the average of the
closing prices of the CUC Common Stock as reported
on the NYSE Composite Transaction Tape (as reported
in The Wall Street Journal, or, if not reported
therein, any other authoritative source) during the
ten trading days preceding the fifth trading day
prior to the Closing Date (such average, the
"Average XXX Xxxxx"), and, in such case, all
references herein to the cash proceeds of the sale
of the Excess Shares and similar references shall be
deemed to mean and refer to the payments calculated
as set forth in this Section 2.2(e)(iv).
(v) As soon as practicable after the
determination of the amount of cash, if any, to be
paid to holders of Certificates formerly
representing HFS Common Stock with respect to any
fractional share interests, the Exchange Agent shall
make available such amounts to such holders of
Certificates formerly representing HFS Common Stock
subject to and in accordance with the terms of
Section 2.2(c).
(f) Termination of Exchange Fund. Any portion
of the Exchange Fund which remains undistributed to the
holders of the Certificates for six months after the
Effective Time shall be delivered to CUC, upon demand,
and any holders of the Certificates who have not
theretofore complied with this Article II shall
thereafter look only to CUC for payment of their claim
for Merger Consideration, any dividends or distributions
with respect to CUC Common Stock and any cash in lieu of
fractional shares of CUC Common Stock.
(g) No Liability. None of CUC, HFS, the
Surviving Corporation or the Exchange Agent shall be
liable to any person in respect of any shares of CUC
Common Stock, any dividends or distributions with respect
thereto, any cash in lieu of fractional shares of CUC
Common Stock or any cash from the Exchange Fund, in each
case delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(h) Investment of Exchange Fund. The Exchange
Agent shall invest any cash included in the Exchange
Fund, as directed by CUC, on a daily basis. Any interest
and other income resulting from such investments shall be
paid to CUC.
(i) Lost Certificates. If any Certificate
shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed
and, if required by the Surviving Corporation, the
posting by such person of a bond in such reasonable
amount as the Surviving Corporation may direct as
indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent
shall issue in exchange for such lost, stolen or
destroyed Certificate the Merger Consideration and, if
applicable, any unpaid dividends and distributions on
shares of CUC Common Stock deliverable in respect thereof
and any cash in lieu of fractional shares, in each case
pursuant to this Agreement.
SECTION 2.3. Certain Adjustments. If between
the date hereof and the Effective Time, the outstanding
shares of HFS Common Stock or of CUC Common Stock shall
be changed into a different number of shares by reason of
any reclassification, recapitalization, split-up,
combination or exchange of shares, or any dividend
payable in stock or other securities shall be declared
thereon with a record date within such period, the
Exchange Ratio shall be adjusted accordingly to provide
to the holders of HFS Common Stock the same economic
effect as contemplated by this Agreement prior to such
reclassification, recapitalization, split-up,
combination, exchange or dividend.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of
HFS. Except as disclosed in the HFS Filed SEC Documents
(as defined in Section 3.1(g)) or as set forth on the
Disclosure Schedule delivered by HFS to CUC prior to the
execution of this Agreement (the "HFS Disclosure
Schedule") and making reference to the particular
subsection of this Agreement to which exception is being
taken, HFS represents and warrants to CUC as follows:
(a) Organization, Standing and Corporate
Power. (i) Each of HFS and its subsidiaries (as
defined in Section 8.3) is a corporation or other
legal entity duly organized, validly existing and in
good standing (with respect to jurisdictions which
recognize such concept) under the laws of the
jurisdiction in which it is organized and has the
requisite corporate or other power, as the case may
be, and authority to carry on its business as now
being conducted, except, as to subsidiaries, for
those jurisdictions where the failure to be so
organized, existing or in good standing individually
or in the aggregate would not have a material
adverse effect (as defined in Section 8.3) on HFS.
Each of HFS and its subsidiaries is duly qualified
or licensed to do business and is in good standing
(with respect to jurisdictions which recognize such
concept) in each jurisdiction in which the nature of
its business or the ownership, leasing or operation
of its properties makes such qualification or
licensing necessary, except for those jurisdictions
where the failure to be so qualified or licensed or
to be in good standing individually or in the
aggregate would not have a material adverse effect
on HFS.
(ii) HFS has delivered to CUC prior to
the execution of this Agreement complete and correct
copies of its certificate of incorporation and by-
laws, as amended to date.
(iii) In all material respects, the
minute books of HFS contain accurate records of all
meetings and accurately reflect all other actions
taken by the stockholders, the Board of Directors
and all committees of the Board of Directors of HFS
since January 1, 1995.
(b) Subsidiaries. Exhibit 21 to HFS's Annual
Report on Form 10-K for the fiscal year ended December
31, 1996 and Section 3.1(b) of the HFS Disclosure
Schedule together include all the subsidiaries of HFS
which as of the date of this Agreement are Significant
Subsidiaries (as defined in Rule 1-02 of Regulation S-X
of the SEC). All the outstanding shares of capital stock
of, or other equity interests in, each such Significant
Subsidiary have been validly issued and are fully paid
and nonassessable and are owned directly or indirectly by
HFS, free and clear of all pledges, claims, liens,
charges, encumbrances and security interests of any kind
or nature whatsoever (collectively, "Liens") and free of
any other restriction (including any restriction on the
right to vote, sell or otherwise dispose of such capital
stock or other ownership interests).
(c) Capital Structure. The authorized capital
stock of HFS consists of 600,000,000 shares of HFS Common
Stock and 10,000,000 shares of preferred stock, par value
$1.00 per share ("HFS Preferred Stock"). At the close of
business on May 21, 1997: (i) 158,291,401 shares of HFS
Common Stock were issued and outstanding; (ii) no shares
of HFS Common Stock were held by HFS in its treasury;
(iii) no shares of HFS Preferred Stock were issued and
outstanding; (iv) 40,013,543 shares of HFS Common Stock
were reserved for issuance pursuant to the HFS 1992 Stock
Option Plan and the HFS 1993 Stock Option Plan, complete
and correct copies of which have been delivered to CUC
(such plans, collectively, the "HFS Stock Plans"); and
(v) 8,080,102 shares of HFS Common Stock were reserved
for issuance upon conversion of HFS's 4-1/2% Convertible
Senior Notes due 1999 and 3,598,320 shares of HFS Common
Stock were reserved for issuance upon conversion of HFS's
4-3/4% Convertible Senior Notes due 2003 (collectively,
the "HFS Convertible Securities"). Section 3.1(c) of the
HFS Disclosure Schedule sets forth a complete and correct
list, as of May 21, 1997, of the number of shares of HFS
Common Stock subject to employee stock options or other
rights to purchase or receive HFS Common Stock granted
under the HFS Stock Plans (collectively, "HFS Employee
Stock Options"), the dates of grant and exercise prices
thereof. All outstanding shares of capital stock of HFS
are, and all shares which may be issued will be, when
issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights.
Except as set forth in this Section 3.1(c) and except for
changes since May 21, 1997 resulting from the issuance of
shares of HFS Common Stock pursuant to the HFS Employee
Stock Options, the HFS Convertible Securities or as
permitted by Section 4.1(a)(i)(y) and 4.1(a)(ii), (x)
there are not issued, reserved for issuance or
outstanding (A) any shares of capital stock or other
voting securities of HFS, (B) any securities of HFS or
any HFS subsidiary convertible into or exchangeable or
exercisable for shares of capital stock or voting
securities of HFS, (C) any warrants, calls, options or
other rights to acquire from HFS or any HFS subsidiary,
and any obligation of HFS or any HFS subsidiary to issue,
any capital stock, voting securities or securities
convertible into or exchangeable or exercisable for
capital stock or voting securities of HFS, and (y) there
are no outstanding obligations of HFS or any HFS
subsidiary to repurchase, redeem or otherwise acquire any
such securities or to issue, deliver or sell, or cause to
be issued, delivered or sold, any such securities. There
are no outstanding (A) securities of HFS or any HFS
subsidiary convertible into or exchangeable or
exercisable for shares of capital stock or other voting
securities or ownership interests in any HFS subsidiary,
(B) warrants, calls, options or other rights to acquire
from HFS or any HFS subsidiary, and any obligation of HFS
or any HFS subsidiary to issue, any capital stock, voting
securities or other ownership interests in, or any
securities convertible into or exchangeable or
exercisable for any capital stock, voting securities or
ownership interests in, any HFS subsidiary or (C)
obligations of HFS or any HFS subsidiary to repurchase,
redeem or otherwise acquire any such outstanding
securities of HFS subsidiaries or to issue, deliver or
sell, or cause to be issued, delivered or sold, any such
securities. Neither HFS nor any HFS subsidiary is a
party to any agreement restricting the transfer of,
relating to the voting of, requiring registration of, or
granting any preemptive or, except as provided by the
terms of the HFS Employee Stock Options and the HFS
Convertible Securities, antidilutive rights with respect
to, any securities of the type referred to in the two
preceding sentences. Other than the HFS subsidiaries,
HFS does not directly or indirectly beneficially own any
securities or other beneficial ownership interests in any
other entity except for non-controlling investments made
in the ordinary course of business in entities which are
not individually or in the aggregate material to HFS and
its subsidiaries as a whole.
(d) Authority; Noncontravention. HFS has all
requisite corporate power and authority to enter into
this Agreement and, subject, in the case of the Merger,
to the HFS Stockholder Approval (as defined in Section
3.1(l)) to consummate the transactions contemplated by
this Agreement. The execution and delivery of this
Agreement by HFS and the consummation by HFS of the
transactions contemplated by this Agreement have been
duly authorized by all necessary corporate action on the
part of HFS, subject, in the case of the Merger, to the
HFS Stockholder Approval. This Agreement has been duly
executed and delivered by HFS and, assuming the due
authorization, execution and delivery by CUC, constitutes
the legal, valid and binding obligation of HFS,
enforceable against HFS in accordance with its terms.
The execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated by this
Agreement and compliance with the provisions of this
Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any
obligation or loss of a benefit under, or result in the
creation of any Lien upon any of the properties or assets
of HFS or any of its subsidiaries under, (i) the
certificate of incorporation or by-laws of HFS or the
comparable organizational documents of any of its
subsidiaries, (ii) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license or
similar authorization applicable to HFS or any of its
subsidiaries or their respective properties or assets or
(iii) subject to the governmental filings and other
matters referred to in the following sentence, any
judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to HFS or any of its subsidiaries
or their respective properties or assets, other than, in
the case of clauses (ii) and (iii), any such conflicts,
violations, defaults, rights, losses or Liens that
individually or in the aggregate would not (x) have a
material adverse effect on HFS or (y) reasonably be
expected to impair the ability of HFS to perform its
obligations under this Agreement. No consent, approval,
order or authorization of, action by or in respect of, or
registration, declaration or filing with, any federal,
state, local or foreign government, any court,
administrative, regulatory or other governmental agency,
commission or authority or any nongovernmental self-
regulatory agency, commission or authority (a
"Governmental Entity") is required by or with respect to
HFS or any of its subsidiaries in connection with the
execution and delivery of this Agreement by HFS or the
consummation by HFS of the transactions contemplated by
this Agreement, except for (1) the filing of a pre-merger
notification and report form by HFS under the Xxxx-Xxxxx-
Xxxxxx Antitrust Improvements Act of 1976, as amended
(the "HSR Act"); (2) the filing with the SEC of (A) a
proxy statement relating to the HFS Stockholders Meeting
(as defined in Section 5.1(b)) (such proxy statement,
together with the proxy statement relating to the CUC
Stockholders Meeting (as defined in Section 5.1(c)), in
each case as amended or supplemented from time to time,
the "Joint Proxy Statement"), and (B) such reports under
Section 13(a), 13(d), 15(d) or 16(a) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as
may be required in connection with this Agreement and the
transactions contemplated by this Agreement; (3) the
filing of the Certificate of Merger with the Secretary of
State of Delaware and appropriate documents with the
relevant authorities of other states in which HFS is
qualified to do business and such filings with
Governmental Entities to satisfy the applicable
requirements of state securities or "blue sky" laws; and
(4) such consents, approvals, orders or authorizations
the failure of which to be made or obtained individually
or in the aggregate would not (x) have a material adverse
effect on HFS or (y) reasonably be expected to impair the
ability of HFS to perform its obligations under this
Agreement.
(e) SEC Documents; Undisclosed Liabilities.
HFS has filed all required registration statements,
prospectuses, reports, schedules, forms, statements and
other documents (including exhibits and all other
information incorporated therein) with the SEC since
December 31, 1994 (the "HFS SEC Documents"). As of their
respective dates, the HFS SEC Documents complied in all
material respects with the requirements of the Securities
Act of 1933, as amended (the "Securities Act"), or the
Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable
to such HFS SEC Documents, and none of the HFS SEC
Documents when filed contained any untrue statement of a
material fact or omitted to state a material fact
required to be stated therein or necessary in order to
make the statements therein, in light of the
circumstances under which they were made, not misleading.
The financial statements of each of HFS or PHH
Corporation ("PHH") included in the HFS SEC Documents
comply as to form, as of their respective dates of filing
with the SEC, in all material respects with applicable
accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP (except, in the case of
unaudited statements, as permitted by Form 10-Q of the
SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes
thereto) and fairly present the consolidated financial
position of HFS and its consolidated subsidiaries (and
PHH, where applicable) as of the dates thereof and the
consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit
adjustments and except that, in the case of financial
statements included therein which were later restated to
account for one or more business combinations accounted
for as poolings-of-interest, such original financial
statements do not reflect such restatements). Except (i)
as reflected in such financial statements or in the notes
thereto or (ii) for liabilities incurred in connection
with this Agreement or the transactions contemplated
hereby, neither HFS nor any of its subsidiaries has any
liabilities or obligations of any nature which,
individually or in the aggregate, would have a material
adverse effect on HFS.
(f) Information Supplied. None of the
information supplied or to be supplied by HFS
specifically for inclusion or incorporation by reference
in (i) the registration statement on Form S-4 to be filed
with the SEC by CUC in connection with the issuance of
CUC Common Stock in the Merger (the "Form S-4") will, at
the time the Form S-4 becomes effective under the
Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required
to be stated therein or necessary to make the statements
therein not misleading or (ii) the Joint Proxy Statement
will, at the date it is first mailed to HFS's
stockholders or at the time of the HFS Stockholders
Meeting, contain any untrue statement of a material fact
or omit to state any material fact required to be stated
therein or necessary in order to make the statements
therein, in light of the circumstances under which they
are made, not misleading. The Joint Proxy Statement will
comply as to form in all material respects with the
requirements of the Exchange Act and the rules and
regulations thereunder, except that no representation or
warranty is made by HFS with respect to statements made
or incorporated by reference therein based on information
supplied by CUC specifically for inclusion or
incorporation by reference in the Joint Proxy Statement.
(g) Absence of Certain Changes or Events.
Except for liabilities incurred in connection with this
Agreement or the transactions contemplated hereby and
except as permitted by Section 4.1(a), since December 31,
1996, HFS and its subsidiaries have conducted their
business only in the ordinary course or as disclosed in
any HFS SEC Document filed since such date and prior to
the date hereof, and there has not been (i) any material
adverse change (as defined in Section 8.3) in HFS, (ii)
any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or
property) with respect to any of HFS's capital stock,
(iii) any split, combination or reclassification of any
of HFS's capital stock or any issuance or the
authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of
HFS's capital stock, except for issuances of HFS Common
Stock upon conversion of HFS Convertible Securities or
upon the exercise of HFS Employee Stock Options, in each
case awarded prior to the date hereof in accordance with
their present terms or issued pursuant to Section 4.1(a),
(iv)(A) any granting by HFS or any of its subsidiaries to
any current or former director, executive officer or
other key employee of HFS or its subsidiaries of any
increase in compensation, bonus or other benefits, except
for normal increases as a result of promotions, normal
increases of base pay in the ordinary course of business
or as was required under any employment agreements in
effect as of December 31, 1996, (B) any granting by HFS
or any of its subsidiaries to any such current or former
director, executive officer or key employee of any
increase in severance or termination pay, or (C) any
entry by HFS or any of its subsidiaries into, or any
amendment of, any employment, deferred compensation,
consulting, severance, termination or indemnification
agreement with any such current or former director,
executive officer or key employee, (v) except insofar as
may have been disclosed in HFS SEC Documents filed and
publicly available prior to the date of this Agreement
(as amended to the date hereof, the "HFS Filed SEC
Documents") or required by a change in GAAP, any change
in accounting methods, principles or practices by HFS
materially affecting its assets, liabilities or business,
(vi) except insofar as may have been disclosed in the HFS
Filed SEC Documents, any tax election that individually
or in the aggregate would have a material adverse effect
on HFS or any of its tax attributes or any settlement or
compromise of any material income tax liability, or (vii)
any action taken by HFS or any of the HFS subsidiaries
during the period from January 1, 1997 through the date
of this Agreement that, if taken during the period from
the date of this Agreement through the Effective Time
would constitute a breach of Section 4.1(a).
(h) Compliance with Applicable Laws;
Litigation. (i) HFS, its subsidiaries and
employees hold all permits, licenses, variances,
exemptions, orders, registrations and approvals of
all Governmental Entities which are required for the
operation of the businesses of HFS and its
subsidiaries (the "HFS Permits"), except where the
failure to have any such HFS Permits individually or
in the aggregate would not have a material adverse
effect on HFS. HFS and its subsidiaries are in
compliance with the terms of the HFS Permits and all
applicable statutes, laws, ordinances, rules and
regulations, except where the failure so to comply
individually or in the aggregate would not have a
material adverse effect on HFS. As of the date of
this Agreement, except as disclosed in the HFS Filed
SEC Documents, no action, demand, requirement or
investigation by any Governmental Entity and no
suit, action or proceeding by any person, in each
case with respect to HFS or any of its subsidiaries
or any of their respective properties is pending or,
to the knowledge (as defined in Section 8.3) of HFS,
threatened, other than, in each case, those the
outcome of which individually or in the aggregate
would not (A) have a material adverse effect on HFS
or (B) reasonably be expected to impair the ability
of HFS to perform its obligations under this
Agreement or prevent or materially delay the
consummation of any of the transactions contemplated
by this Agreement.
(ii) Neither HFS nor any HFS subsidiary
is subject to any outstanding order, injunction or
decree which has had or, insofar as can be
reasonably foreseen, individually or in the
aggregate will have a material adverse effect on
HFS.
(i) Absence of Changes in Benefit Plans. HFS
has delivered to CUC true and complete copies of (i) all
severance and employment agreements of HFS with
directors, executive officers or key employees, (ii) all
severance programs and policies of each of HFS and each
HFS subsidiary, and (iii) all plans or arrangements of
HFS and each HFS subsidiary relating to its employees
which contain change in control provisions. Since
December 31, 1996, there has not been any adoption or
amendment in any material respect by HFS or any of its
subsidiaries of any collective bargaining agreement,
employment agreement, consulting agreement, severance
agreement or any material bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan,
arrangement or understanding providing benefits to any
current or former employee, officer or director of HFS or
any of its wholly owned subsidiaries (collectively, the
"HFS Benefit Plans"), or any material change in any
actuarial or other assumption used to calculate funding
obligations with respect to any HFS pension plans, or any
material change in the manner in which contributions to
any HFS pension plans are made or the basis an which such
contributions are determined.
(j) ERISA Compliance. (i) With respect to
the HFS Benefit Plans, no event has occurred and, to
the knowledge of HFS, there exists no condition or
set of circumstances, in connection with which HFS
or any of its subsidiaries could be subject to any
liability that individually or in the aggregate
would have a material adverse effect on HFS under
the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), the Code or any other
applicable law.
(ii) Each HFS Benefit Plan has been
administered in accordance with its terms, except
for any failures so to administer any HFS Benefit
Plan that individually or in the aggregate would not
have a material adverse effect on HFS. HFS, its
subsidiaries and all the HFS Benefit Plans have been
operated, and are, in compliance with the applicable
provisions of ERISA, the Code and all other
applicable laws and the terms of all applicable
collective bargaining agreements, except for any
failures to be in such compliance that individually
or in the aggregate would not have a material
adverse effect on HFS. Each HFS Benefit Plan that
is intended to be qualified under Section 401(a) or
401(k) of the Code has received a favorable
determination letter from the IRS that it is so
qualified and each trust established in connection
with any HFS Benefit Plan that is intended to be
exempt from federal income taxation under Section
501(a) of the Code has received a determination
letter from the IRS that such trust is so exempt.
To the knowledge of HFS, no fact or event has
occurred since the date of any determination letter
from the IRS which is reasonably likely to affect
adversely the qualified status of any such HFS
Benefit Plan or the exempt status of any such trust.
(iii) Neither HFS nor any of its
subsidiaries has incurred any unsatisfied liability
under Title IV of ERISA (other than liability for
premiums to the Pension Benefit Guaranty Corporation
arising in the ordinary course). No HFS Benefit
Plan has incurred an "accumulated funding
deficiency" (within the meaning of Section 302 of
ERISA or Section 412 of the Code) whether or not
waived. To the knowledge of HFS, there are not any
facts or circumstances that would materially change
the funded status of any HFS Benefit Plan that is a
"defined benefit" plan (as defined in Section 3(35)
of ERISA) since the date of the most recent
actuarial report for such plan. No HFS Benefit Plan
is a "multiemployer plan" within the meaning of
Section 3(37) of ERISA.
(iv) With respect to each of the HFS
Benefit Plans (other than any multiemployer plan)
that is subject to Title IV of ERISA, the present
value of accrued benefits under each such plan,
based upon the actuarial assumptions used for
funding purposes in the most recent actuarial report
prepared by such plan's actuary with respect to such
plan, did not, as of its latest valuation date,
exceed the then current value of the aggregate
assets of such plans allocable to such accrued
benefits in any material respect. With respect to
any HFS Benefit Plan that is a multiemployer plan,
(A) none of HFS nor any of its subsidiaries has any
contingent liability under Section 4204 of ERISA,
and no circumstances exist that present a material
risk that any such plan will go into reorganization,
and (B) the aggregate withdrawal liability of HFS
and its subsidiaries, computed as if a complete
withdrawal by HFS and any of its subsidiaries had
occurred under each such HFS Benefit Plan on the
date hereof, would not be material.
(v) No HFS Benefit Plan provides
medical benefits (whether or not insured), with
respect to current or former employees after
retirement or other termination of service (other
than coverage mandated by applicable law
or benefits, the full cost of which is borne by the
current or former employee) other than individual
arrangements the amounts of which are not material.
(vi) As of the date of this Agreement,
neither HFS nor any of its subsidiaries is a party
to any collective bargaining or other labor union
contract applicable to persons employed by HFS or
any of its subsidiaries and no collective bargaining
agreement is being negotiated by HFS or any of its
subsidiaries. As of the date of this Agreement,
there is no labor dispute, strike or work stoppage
against HFS or any of its subsidiaries pending or,
to the knowledge of HFS, threatened which may
interfere with the respective business activities of
HFS or any of its subsidiaries, except where such
dispute, strike or work stoppage individually or in
the aggregate would not have a material adverse
effect on HFS. As of the date of this Agreement, to
the knowledge of HFS, none of HFS, any of its
subsidiaries or any of their respective
representatives or employees has committed any
material unfair labor practice in connection with
the operation of the respective businesses of HFS or
any of its subsidiaries, and there is no material
charge or complaint against HFS or any of its
subsidiaries by the National Labor Relations Board
or any comparable governmental agency pending or
threatened in writing.
(vii) No employee of HFS will be
entitled to any material payment, additional
benefits or any acceleration of the time of payment
or vesting of any benefits under any HFS Benefit
Plan as a result of the transactions contemplated by
this Agreement (either alone or in conjunction with
any other event such as a termination of
employment), except that all HFS Employee Stock
Options will vest as of the Effective Time as a
result of the Merger.
(k) Taxes. (i) Each of HFS and its
subsidiaries has filed all material tax returns and
reports required to be filed by it and all such
returns and reports are complete and correct in all
material respects, or requests for extensions to
file such returns or reports have been timely filed,
granted and have not expired, except to the extent
that such failures to file, to be complete or
correct or to have extensions granted that remain in
effect individually or in the aggregate would not
have a material adverse effect on HFS. HFS and each
of its subsidiaries has paid (or HFS has paid on its
behalf) all taxes (as defined herein) shown as due
on such returns, and the most recent financial
statements contained in the HFS Filed SEC Documents
reflect an adequate reserve in accordance with GAAP
for all taxes payable by HFS and its subsidiaries
for all taxable periods and portions thereof accrued
through the date of such financial statements.
(ii) No deficiencies for any taxes have
been proposed, asserted or assessed against HFS or
any of its subsidiaries that are not adequately
reserved for, except for deficiencies that
individually or in the aggregate would not have a
material adverse effect on HFS. No federal income
tax returns of HFS and each of its subsidiaries
consolidated in such returns have closed by virtue
of the applicable statute of limitations.
(iii) Neither HFS nor any of its
subsidiaries has taken any action or knows of any
fact, agreement, plan or other circumstance that is
reasonably likely to prevent the Merger from
qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
(iv) As used in this Agreement, "taxes"
shall include all (x) federal, state, local or
foreign income, property, sales, excise and other
taxes or similar governmental charges, including any
interest, penalties or additions with respect
thereto, (y) liability for the payment of any
amounts of the type described in (x) as a result of
being a member of an affiliated, consolidated,
combined or unitary group, and (z) liability for the
payment of any amounts as a result of being party to
any tax sharing agreement or as a result of any
express or implied obligation to indemnify any other
person with respect to the payment of any amounts of
the type described in clause (x) or (y).
(l) Voting Requirements. The affirmative vote
at the HFS Stockholders Meeting (the "HFS Stockholder
Approval") of (i) the holders of a majority of all
outstanding shares of HFS Common Stock to adopt this
Agreement is the only vote of the holders of any class or
series of HFS's capital stock necessary to approve and
adopt this Agreement and the transactions contemplated
hereby, including the Merger and (ii) the holders of a
majority of all shares of HFS Common Stock casting votes
is the only vote of the holders of any class or series of
HFS's capital stock necessary to approve the New CUC
Stock Plan (as defined in Section 5.17(e)).
(m) State Takeover Statutes. The Board of
Directors of HFS has approved this Agreement and the
transactions contemplated hereby and, assuming the
accuracy of CUC's representation and warranty contained
in Section 3.2(q), such approval constitutes approval of
the Merger and the other transactions contemplated hereby
by the HFS Board of Directors under the provisions of
Section 203 of the DGCL such that Section 203 of the DGCL
does not apply to this Agreement and the transactions
contemplated hereby. To the knowledge of HFS, no other
state takeover statute is applicable to the Merger or the
other transactions contemplated hereby.
(n) Accounting Matters. To its knowledge,
neither HFS nor any of its affiliates (as such term is
used in Section 5.11) has taken or agreed to take any
action that would prevent the business combination to be
effected by the Merger from being accounted for as a
pooling of interests and HFS has no reason to believe
that the Merger will not qualify for "pooling of
interests" accounting.
(o) Brokers. No broker, investment banker,
financial advisor or other person other than Bear Xxxxxxx
& Co. Inc. ("Bear Xxxxxxx"), the fees and expenses of
which will be paid by HFS, is entitled to any broker's,
finder's, financial advisor's or other similar fee or
commission in connection with the transactions
contemplated by this Agreement based upon arrangements
made by or on behalf of HFS. HFS has furnished to CUC
true and complete copies of all agreements under which
any such fees or expenses are payable and all
indemnification and other agreements related to the
engagement of the persons to whom such fees are payable.
(p) Opinion of Financial Advisor. HFS has
received the opinion of Bear Xxxxxxx dated the date of
this Agreement, to the effect that, as of such date, the
Exchange Ratio for the conversion of HFS Common Stock
into CUC Common Stock is fair from a financial point of
view to holders of shares of HFS Common Stock (other than
CUC and its affiliates), a signed copy of which opinion
has been delivered to CUC, it being understood and agreed
by CUC that such opinion is for the benefit of the Board
of Directors of HFS and may not be relied upon by CUC,
its affiliates or any of their respective stockholders.
(q) Ownership of CUC Common Stock. As of the
date hereof, neither HFS nor, to its knowledge without
independent investigation, any of its affiliates, (i)
beneficially owns (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, or (ii) is party
to any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of, in
each case, shares of capital stock of CUC.
(r) Intellectual Property. HFS and its
subsidiaries own or have a valid license to use all
trademarks, service marks, trade names, patents and
copyrights (including any registrations or applications
for registration of any of the foregoing) (collectively,
the "HFS Intellectual Property") necessary to carry on
its business substantially as currently conducted except
for such HFS Intellectual Property the failure of which
to own or validly license individually or in the
aggregate would not have a material adverse effect on
HFS. Neither HFS nor any such subsidiary has received
any notice of infringement of or conflict with, and, to
HFS's knowledge, there are no infringements of or
conflicts (i) with the rights of others with respect to
the use of, or (ii) by others with respect to, any HFS
Intellectual Property that individually or in the
aggregate, in either such case, would have a material
adverse effect on HFS.
(s) Certain Contracts. Except as set forth in
the HFS Filed SEC Documents, neither HFS nor any of its
subsidiaries is a party to or bound by (i) any "material
contract" (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC), (ii) any non-competition
agreement or any other agreement or obligation which
purports to limit in any material respect the manner in
which, or the localities in which, all or any material
portion of the business of HFS and its subsidiaries
(including, for purposes of this Section 3.1(s), CUC and
its subsidiaries, assuming the Merger has taken place),
taken as a whole, is or would be conducted, or (iii) any
contract or other agreement which would prohibit or
materially delay the consummation of the Merger or any of
the transactions contemplated by this Agreement (all
contracts of the type described in clauses (i) and (ii)
being referred to herein as "HFS Material Contracts").
Each HFS Material Contract is valid and binding on HFS
(or, to the extent an HFS subsidiary is a party, such
subsidiary) and is in full force and effect, and HFS and
each HFS subsidiary have in all material respects
performed all obligations required to be performed by
them to date under each HFS Material Contract, except
where such noncompliance, individually or in the
aggregate, would not have a material adverse effect on
HFS. Neither HFS nor any HFS subsidiary knows of, or has
received notice of, any violation or default under (nor,
to the knowledge of HFS, does there exist any condition
which with the passage of time or the giving of notice or
both would result in such a violation or default under)
any HFS Material Contract.
SECTION 3.2. Representations and Warranties of
CUC. Except as disclosed in the CUC Filed SEC Documents
(as defined in Section 3.2(g)) or as set forth on the
Disclosure Schedule delivered by CUC to HFS prior to the
execution of this Agreement (the "CUC Disclosure
Schedule") and making reference to the particular
subsection of this Agreement to which exception is being
taken, CUC represents and warrants to HFS as follows:
(a) Organization, Standing and Corporate
Power. (i) Each of CUC and its subsidiaries is a
corporation or other legal entity duly organized,
validly existing and in good standing (with respect
to jurisdictions which recognize such concept) under
the laws of the jurisdiction in which it is
organized and has the requisite corporate or other
power, as the case may be, and authority to carry on
its business as now being conducted, except, as to
subsidiaries, for those jurisdictions where the
failure to be so organized, existing or in good
standing individually or in the aggregate would not
have a material adverse effect on CUC. Each of CUC
and its subsidiaries is duly qualified or licensed
to do business and is in good standing (with respect
to jurisdictions which recognize such concept) in
each jurisdiction in which the nature of its
business or the ownership, leasing or operation of
its properties makes such qualification or licensing
necessary, except for those jurisdictions where the
failure to be so qualified or licensed or to be in
good standing individually or in the aggregate would
not have a material adverse effect on CUC.
(ii) CUC has delivered to HFS prior to
the execution of this Agreement complete and correct
copies of its certificate of incorporation and by-
laws, as amended to date.
(iii) In all material respects, the
minute books of CUC contain accurate records of all
meetings and accurately reflect all other actions
taken by the stockholders, the Board of Directors
and all committees of the Board of Directors of CUC
since January 1, 1995.
(b) Subsidiaries. Exhibit 21 to CUC's Annual
Report on Form 10-K for the fiscal year ended January 31,
1997 includes all the subsidiaries of CUC which as of the
date of this Agreement are Significant Subsidiaries. All
the outstanding shares of capital stock of, or other
equity interests in, each such Significant Subsidiary
have been validly issued and are fully paid and
nonassessable and are owned directly or indirectly by
CUC, free and clear of all Liens and free of any other
restriction (including any restriction on the right to
vote, sell or otherwise dispose of such capital stock or
other ownership interests).
(c) Capital Structure. The authorized capital
stock of CUC consists of 600,000,000 shares of CUC Common
Stock and 1,000,000 shares of preferred stock, par value
$.01 per share, of CUC ("CUC Preferred Stock"). At the
close of business on May 22, 1997: (i) 409,329,930
shares of CUC Common Stock were issued and outstanding
(including shares of restricted CUC Common Stock); (ii)
6,168,405 shares of CUC Common Stock were held by CUC in
its treasury; (iii) no shares of CUC Preferred Stock were
issued and outstanding; (iv) 62,155,579 shares of CUC
Common Stock were reserved for issuance pursuant to the
CUC 1990 Director Stock Option Plan, the CUC 1992
Directors Stock Option Plan, the CUC 1994 Directors Stock
Option Plan, the CUC 1992 Employee Stock Option Plan, the
CUC 1992 Bonus and Salary Replacement Stock Option Plan,
the CUC 1987 Stock Option Plan, the 1989 Restricted Stock
Plan, the 1994 Employee Stock Purchase Plan, the 1997
Stock Option Plan, certain CUC non-plans options, the
Sierra 1987 Stock Option Plan, the Sierra 1995 Stock
Option Plan and Award Plan, the Knowledge Adventure, Inc.
1993 Stock Option Plan (and related non-plan options),
the Papyrus Design Group, Inc. 1992 Stock Option Plan and
the Entertainment Publications, Inc. 1988 Nonqualified
Stock Option Plan, complete and correct copies of which
have been delivered to HFS (such plans, collectively, the
"CUC Stock Plans"); and (v) 21,705,925 shares of CUC
Common Stock were reserved for issuance upon conversion
of the 6-1/2% Convertible Subordinated Notes due 2001 of
Sierra On-Line, Inc. and the CUC 3% Convertible
Subordinated Notes due February 15, 2002 (including all
of the foregoing in this clause (v) and all convertible
securities listed in Section 3.2(c) of the CUC Disclosure
Schedule, the "CUC Convertible Securities"). Section
3.2(c) of the CUC Disclosure Schedule sets forth a
complete and correct list, as of May 22, 1997, of the
number of shares of CUC Common Stock subject to employee
stock options or other rights to purchase or receive CUC
Common Stock granted under the CUC Stock Plans
(collectively, "CUC Employee Stock Options"), the dates
of grant and exercise prices thereof. All outstanding
shares of capital stock of CUC are, and all shares which
may be issued pursuant to this Agreement or otherwise
will be, when issued, duly authorized, validly issued,
fully paid and nonassessable and not subject to
preemptive rights. Except as set forth in this Section
3.2(c) and except for changes since May 22, 1997
resulting from the issuance of shares of CUC Common Stock
pursuant to the CUC Employee Stock Options, the CUC
Convertible Securities or as permitted by Section
4.1(b)(i)(y) and 4.1(b)(ii), (x) there are not issued,
reserved for issuance or outstanding (A) any shares of
capital stock or other voting securities of CUC, (B) any
securities of CUC or any CUC subsidiary convertible into
or exchangeable or exercisable for shares of capital
stock or voting securities of CUC, (C) any warrants,
calls, options or other rights to acquire from CUC or any
CUC subsidiary, and any obligation of CUC or any CUC
subsidiary to issue, any capital stock, voting securities
or securities convertible into or exchangeable or
exercisable for capital stock or voting securities of
CUC, and (y) there are no outstanding obligations of CUC
or any CUC subsidiary to repurchase, redeem or otherwise
acquire any such securities or to issue, deliver or sell,
or cause to be issued, delivered or sold, any such
securities. There are no outstanding (A) securities of
CUC or any CUC subsidiary convertible into or
exchangeable or exercisable for shares of capital stock
or other voting securities or ownership interests in any
CUC subsidiary, (B) warrants, calls, options or other
rights to acquire from CUC or any CUC subsidiary, and any
obligation of CUC or any CUC subsidiary to issue, any
capital stock, voting securities or other ownership
interests in, or any securities convertible into or
exchangeable or exercisable for any capital stock, voting
securities or ownership interests in, any CUC subsidiary
or (C) obligations of CUC or any CUC subsidiary to
repurchase, redeem or otherwise acquire any such
outstanding securities of CUC subsidiaries or to issue,
deliver or sell, or cause to be issued, delivered or
sold, any such securities. Neither CUC nor any CUC
subsidiary is a party to any agreement restricting the
transfer of, relating to the voting of, requiring
registration of, or granting any preemptive or, except as
provided by the terms of the CUC Employee Stock Options
and the CUC Convertible Securities, antidilutive rights
with respect to, any securities of the type referred to
in the two preceding sentences. Other than the CUC
subsidiaries, CUC does not directly or indirectly
beneficially own any securities or other beneficial
ownership interests in any other entity except for non-
controlling investments made in the ordinary course of
business in entities which are not individually or in the
aggregate material to CUC and its subsidiaries as a
whole.
(d) Authority; Noncontravention. CUC has all
requisite corporate power and authority to enter into
this Agreement and, subject to the CUC Stockholder
Approval (as defined in Section 3.2(l)), to consummate
the transactions contemplated by this Agreement. The
execution and delivery of this Agreement by CUC and the
consummation by CUC of the transactions contemplated by
this Agreement have been duly authorized by all necessary
corporate action on the part of CUC, subject, in the case
of the Merger and the issuance of CUC Common Stock in
connection with the Merger, to the CUC Stockholder
Approval. This Agreement has been duly executed and
delivered by CUC and, assuming the due authorization,
execution and delivery by HFS, constitutes the legal,
valid and binding obligations of CUC, enforceable against
CUC in accordance with its terms. The execution and
delivery of this Agreement do not, and the consummation
of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will
not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of
a benefit under, or result in the creation of any Lien
upon any of the properties or assets of CUC or any of its
subsidiaries under, (i) the certificate of incorporation
or by-laws of CUC or the comparable organizational
documents of any of its subsidiaries, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease
or other agreement, instrument, permit, concession,
franchise, license or similar authorization applicable to
CUC or any of its subsidiaries or their respective
properties or assets or (iii) subject to the governmental
filings and other matters referred to in the following
sentence, any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to CUC or any of
its subsidiaries or their respective properties or
assets, other than, in the case of clauses (ii) and
(iii), any such conflicts, violations, defaults, rights,
losses or Liens that individually or in the aggregate
would not (x) have a material adverse effect on CUC or
(y) reasonably be expected to impair the ability of CUC
to perform its obligations under this Agreement. No
consent, approval, order or authorization of, action by,
or in respect of, or registration, declaration or filing
with, any Governmental Entity is required by or with
respect to CUC or any of its subsidiaries in connection
with the execution and delivery of this Agreement by CUC
or the consummation by CUC of the transactions
contemplated by this Agreement, except for (1) the filing
of a pre-merger notification and report form by CUC under
the HSR Act; (2) the filing with the SEC of (A) the Joint
Proxy Statement relating to the CUC Stockholders Meeting,
(B) the Form S-4 and (C) such reports under Section
13(a), 13(d), 15(d) or 16(a) of the Exchange Act as may
be required in connection with this Agreement and the
transactions contemplated by this Agreement; (3) the
filing of the Certificate of Merger with the Secretary of
State of Delaware and appropriate documents with the
relevant authorities of other states in which CUC is
qualified to do business and such filings with
Governmental Entities to satisfy the applicable
requirements of state securities or "blue sky" laws; (4)
such filings with and approvals of the NYSE to permit the
shares of CUC Common Stock that are to be issued in the
Merger and under the HFS Stock Plans to be listed on the
NYSE; and (5) such consents, approvals, orders or
authorizations the failure of which to be made or
obtained individually or in the aggregate would not (x)
have a material adverse effect on CUC or (y) reasonably
be expected to impair the ability of CUC to perform its
obligations under this Agreement.
(e) SEC Documents; Undisclosed Liabilities.
CUC has filed all required registration statements,
prospectuses, reports, schedules, forms, statements and
other documents (including exhibits and all other
information incorporated therein) with the SEC since
December 31, 1994 (the "CUC SEC Documents"). As of their
respective dates, the CUC SEC Documents complied in all
material respects with the requirements of the Securities
Act or the Exchange Act, as the case may be, and the
rules and regulations of the SEC promulgated thereunder
applicable to such CUC SEC Documents, and none of the CUC
SEC Documents when filed contained any untrue statement
of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to
make the statements therein, in light of the
circumstances under which they were made, not misleading.
The financial statements of CUC included in the CUC SEC
Documents comply as to form, as of their respective dates
of filing with the SEC, in all material respects with
applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto,
have been prepared in accordance with GAAP (except, in
the case of unaudited statements, as permitted by Form
10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes
thereto) and fairly present the consolidated financial
position of CUC and its consolidated subsidiaries as of
the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal
year-end audit adjustments and except that, in the case
of financial statements included therein which were later
restated to account for one or more business combinations
accounted for as poolings-of-interest, such original
financial statements do not reflect such restatements).
Except (i) as reflected in such financial statements or
in the notes thereto or (ii) for liabilities incurred in
connection with this Agreement or the transactions
contemplated hereby, neither CUC nor any of its
subsidiaries has any liabilities or obligations of any
nature which, individually or in the aggregate, would
have a material adverse effect on CUC.
(f) Information Supplied. None of the
information supplied or to be supplied by CUC
specifically for inclusion or incorporation by reference
in (i) the Form S-4 will, at the time the Form S-4
becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary
to make the statements therein not misleading or (ii) the
Joint Proxy Statement will, at the date it is first
mailed to CUC's stockholders or at the time of the CUC
Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required
to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under
which they are made, not misleading. The Form S-4 and
the Joint Proxy Statement will comply as to form in all
material respects with the requirements of the Securities
Act and the Exchange Act and the rules and regulations
thereunder, except that no representation or warranty is
made by CUC with respect to statements made or
incorporated by reference therein based on information
supplied by HFS specifically for inclusion or
incorporation by reference in the Form S-4 or the Joint
Proxy Statement.
(g) Absence of Certain Changes or Events.
Except for liabilities incurred in connection with this
Agreement or the transactions contemplated hereby, and
except as permitted by Section 4.1(b), since January 31,
1997, CUC and its subsidiaries have conducted their
business only in the ordinary course or as disclosed in
any CUC SEC Document filed since such date and prior to
the date hereof, and there has not been (i) any material
adverse change in CUC, (ii) any declaration, setting
aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any
of CUC's capital stock, (iii) any split, combination or
reclassification of any of CUC's capital stock or any
issuance or the authorization of any issuance of any
other securities in respect of, in lieu of or in
substitution for shares of CUC's capital stock, except
for issuances of CUC Common Stock upon conversion or
redemption of CUC Convertible Securities or the exercise
of CUC Employee Stock Options, in each case, awarded
prior to the date hereof in accordance with their present
terms or issued pursuant to Section 4.1(b), (iv)(A) any
granting by CUC or any of its subsidiaries to any current
or former director, executive officer or other key
employee of CUC or its subsidiaries of any increase in
compensation, bonus or other benefits, except for normal
increases as a result of promotions, normal increases of
base pay in the ordinary course of business or as was
required under any employment agreements in effect as of
January 31, 1997, (B) any granting by CUC or any of its
subsidiaries to any such current or former director,
executive officer or key employee of any increase in
severance or termination pay, or (C) any entry by CUC or
any of its subsidiaries into, or any amendment of, any
employment, deferred compensation consulting, severance,
termination or indemnification agreement with any such
current or former director, executive officer or key
employee, (v) except insofar as may have been disclosed
in CUC SEC Documents filed and publicly available prior
to the date of this Agreement (as amended to the date
hereof, the "CUC Filed SEC Documents") or required by a
change in GAAP, any change in accounting methods,
principles or practices by CUC materially affecting its
assets, liabilities or business, (vi) except insofar as
may have been disclosed in the CUC Filed SEC Documents,
any tax election that individually or in the aggregate
would have a material adverse effect on CUC or any of its
tax attributes or any settlement or compromise of any
material income tax liability or (vii) any action taken
by CUC or any of the CUC subsidiaries during the period
from January 31, 1997 through the date of this Agreement
that, if taken during the period from the date of this
Agreement through the Effective Time would constitute a
breach of Section 4.1(b).
(h) Compliance with Applicable Laws;
Litigation. (i) CUC, its subsidiaries and
employees hold all permits, licenses, variances,
exemptions, orders, registrations and approvals of
all Governmental Entities which are required for the
operation of the businesses of CUC and its
subsidiaries (the "CUC Permits") except where the
failure to have any such CUC Permits individually or
in the aggregate would not have a material adverse
effect on CUC. CUC and its subsidiaries are in
compliance with the terms of the CUC Permits and all
applicable statutes, laws, ordinances, rules and
regulations, except where the failure so to comply
individually or in the aggregate would not have a
material adverse effect on CUC. As of the date of
this Agreement, except as disclosed in the CUC Filed
SEC Documents, no action, demand, requirement or
investigation by any Governmental Entity and no
suit, action or proceeding by any person, in each
case with respect to CUC or any of its subsidiaries
or any of their respective properties, is pending
or, to the knowledge of CUC, threatened, other than,
in each case, those the outcome of which
individually or in the aggregate would not (A) have
a material adverse effect on CUC or (B) reasonably
be expected to impair the ability of CUC to perform
its obligations under this Agreement or prevent or
materially delay the consummation of any of the
transactions contemplated by this Agreement.
(ii) Neither CUC nor any CUC subsidiary
is subject to any outstanding order, injunction or
decree which has had or, insofar as can be
reasonably foreseen, individually or in the
aggregate will have a material adverse effect on
CUC.
(i) Absence of Changes in Benefit Plans. CUC
has delivered to HFS true and complete copies of (i) all
severance and employment agreements of CUC with
directors, executive officers or key employees, (ii) all
severance programs and policies of each of CUC and each
CUC subsidiary, and (iii) all plans or arrangements of
CUC and each CUC subsidiary relating to its employees
which contain change in control provisions. Since
January 31, 1997, there has not been any adoption or
amendment in any material respect by CUC or any of its
subsidiaries of any collective bargaining agreement or
any material bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock, retirement,
vacation, severance, disability, death benefit,
hospitalization, medical or other plan, arrangement or
understanding providing benefits to any current or former
employee, officer or director of CUC or any of its wholly
owned subsidiaries (collectively, the "CUC Benefit
Plans"), or any material change in any actuarial or other
assumption used to calculate funding obligations with
respect to any CUC pension plans, or any material change
in the manner in which contributions to any CUC pension
plans are made or the basis on which such contributions
are determined. Since January 1, 1996, none of CUC nor
any CUC subsidiary has amended any CUC Employee Stock
Options or any CUC Stock Plans to accelerate the vesting
of, or release restrictions on, awards thereunder, or to
provide for such acceleration in the event of a change in
control.
(j) ERISA Compliance. (i) With respect to
the CUC Benefit Plans, no event has occurred and, to
the knowledge of CUC, there exists no condition or
set of circumstances, in connection with which CUC
or any of its subsidiaries could be subject to any
liability that individually or in the aggregate
would have a material adverse affect on CUC under
ERISA, the Code or any other applicable law.
(ii) Each CUC Benefit Plan has been
administered in accordance with its terms, except
for any failures so to administer any CUC Benefit
Plan that individually or in the aggregate would not
have a material adverse effect on CUC. CUC, its
subsidiaries and all the CUC Benefit Plans have been
operated, and are, in compliance with the applicable
provisions of ERISA, the Code and all other
applicable laws and the terms of all applicable
collective bargaining agreements, except for any
failures to be in such compliance that individually
or in the aggregate would not have a material
adverse effect on CUC. Each CUC Benefit Plan that
is intended to be qualified under Section 401(a) or
401(k) of the Code has received a favorable
determination letter from the IRS that it is so
qualified and each trust established in connection
with any CUC Benefit Plan that is intended to be
exempt from federal income taxation under Section
501(a) of the Code has received a determination
letter from the IRS that such trust is so exempt.
To the knowledge of CUC, no fact or event has
occurred since the date of any determination letter
from the IRS which is reasonably likely to affect
adversely the qualified status of any such CUC
Benefit Plan or the exempt status of any such trust.
(iii) Neither CUC nor any of its
subsidiaries has incurred any unsatisfied liability
under Title IV of ERISA (other than liability for
premiums to the Pension Benefit Guaranty Corporation
arising in the ordinary course). No CUC Benefit
Plan has incurred an "accumulated funding
deficiency" (within the meaning of Section 302 of
ERISA or Section 412 of the Code) whether or not
waived. To the knowledge of CUC, there are not any
facts or circumstances that would materially change
the funded status of any CUC Benefit Plan that is a
"defined benefit" plan (as defined in Section 3(35)
of ERISA) since the date of the most recent
actuarial report for such plan. No CUC Benefit Plan
is a "multiemployer plan" within the meaning of
Section 3(37) of ERISA.
(iv) No CUC Benefit Plan is subject to
Title IV of ERISA.
(v) No CUC Benefit Plan provides
medical benefits (whether or not insured), with
respect to current or former employees after
retirement or other termination of service (other
than coverage mandated by applicable law
or benefits, the full cost of which is borne by the
current or former employee) other than individual
arrangements the amounts of which are not material.
(vi) As of the date of this Agreement,
neither CUC nor any of its subsidiaries is a party
to any collective bargaining or other labor union
contract applicable to persons employed by CUC or
any of its subsidiaries and no collective bargaining
agreement is being negotiated by CUC or any of its
subsidiaries. As of the date of this Agreement,
there is no labor dispute, strike or work stoppage
against CUC or any of its subsidiaries pending or,
to the knowledge of CUC, threatened which may
interfere with the respective business activities of
CUC or any of its subsidiaries, except where such
dispute, strike or work stoppage individually or in
the aggregate would not have a material adverse
effect on CUC. As of the date of this Agreement, to
the knowledge of CUC, none of CUC, any of its
subsidiaries or any of their respective
representatives or employees has committed any
material unfair labor practice in connection with
the operation of the respective businesses of CUC or
any of its subsidiaries, and there is no material
charge or complaint against CUC or any of its
subsidiaries by the National Labor Relations Board
or any comparable governmental agency pending or
threatened in writing.
(vii) No employee of CUC will be
entitled to any material payment, additional
benefits or any acceleration of the time of payment
or vesting of any benefits under any CUC Benefit
Plan as a result of the transactions contemplated by
this Agreement (either alone or in conjunction with
any other event such as a termination of
employment), except that CUC Employee Stock Options
and shares of restricted stock under the 1992 Bonus
and Salary Replacement Stock Option Plan, the 1989
Restricted Stock Plan, the 1994 Directors Stock
Option Plan, the Sierra 1995 Stock Option Plan, the
Papyrus Design Group, Inc. 1992 Stock Option Plan
and the Knowledge Adventure, Inc. 1993 Stock Option
Plan will vest as of the Effective Time as a result
of the Merger.
(k) Taxes. (i) Each of CUC and its
subsidiaries has filed all material tax returns and
reports required to be filed by it and all such
returns and reports are complete and correct in all
material respects, or requests for extensions to
file such returns or reports have been timely filed,
granted and have not expired, except to the extent
that such failures to file, to be complete or
correct or to have extensions granted that remain in
effect individually or in the aggregate would not
have a material adverse effect on CUC. CUC and each
of its subsidiaries has paid (or CUC has paid on its
behalf) all taxes shown as due on such returns, and
the most recent financial statements contained in
the CUC Filed SEC Documents reflect an adequate
reserve in accordance with GAAP for all taxes
payable by CUC and its subsidiaries for all taxable
periods and portions thereof accrued through the
date of such financial statements.
(ii) No deficiencies for any taxes have
been proposed, asserted or assessed against CUC or
any of its subsidiaries that are not adequately
reserved for, except for deficiencies that
individually or in the aggregate would not have a
material adverse effect on CUC. The federal income
tax returns of CUC and each of its subsidiaries
consolidated in such returns for tax years through
1989 have closed by virtue of the applicable statute
of limitations.
(iii) Neither CUC nor any of its
subsidiaries has taken any action or knows of any
fact, agreement, plan or other circumstance that is
reasonably likely to prevent the Merger from
qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
(l) Voting Requirements. The affirmative vote
at the CUC Stockholders Meeting (the "CUC Stockholder
Approval") of (i) the holders of a majority of all
outstanding shares of CUC Common Stock is the only vote
of the holders of any class or series of CUC's capital
stock necessary to approve and adopt this Agreement and
the transactions contemplated hereby, including the
Merger, the issuance of the CUC Common Stock pursuant to
the Merger and the Certificate Amendment, and (ii) the
holders of a majority of all shares of CUC Common Stock
casting votes is the only vote of the holders of any
class or series of CUC's capital stock necessary to
approve (A) in accordance with the applicable rules of
the NYSE, the,issuance of CUC Common Stock pursuant to
the Merger, and (B) the New CUC Stock Plan.
(m) State Takeover Statutes; Certificate of
Incorporation. The Board of Directors of CUC (including
the Disinterested Directors thereof (as defined in
Article 10 of CUC's Certificate of Incorporation)) has
unanimously approved this Agreement, the transactions
contemplated hereby, the assumption of the Adjusted
Options, the issuance of the options to purchase shares
of CUC Common Stock granted pursuant to Section 5.17 and
the issuance of the shares of CUC Common Stock upon
exercise of such Adjusted Options and other options and,
assuming the accuracy of HFS's representation and
warranty contained in Section 3.1(q), such approval
constitutes approval of the Merger and the other
transactions contemplated hereby by the CUC Board of
Directors under the provisions of Section 203 of the DGCL
and constitutes approval of the Merger, the other
transactions contemplated hereby, the assumption of the
Adjusted Options, the issuance of the options to purchase
shares of CUC Common Stock granted pursuant to Section
5.17 and the issuance of the shares of CUC Common Stock
upon exercise of the Adjusted Options and other options
under the provisions of CUC's Certificate of
Incorporation such that Section 203 and the provision of
Section 10 of CUC's Certificate of Incorporation do not
apply to this Agreement, the transactions contemplated
hereby, the assumption of the Adjusted Options, the
issuance of the options to purchase shares of CUC Common
Stock granted pursuant to Section 5.17 and the issuance
of the shares of CUC Common Stock upon exercise of the
Adjusted Options and other options. To the knowledge of
CUC, no state takeover statute other than Section 203 of
the DGCL (which has been rendered inapplicable) is
applicable to the Merger or the other transactions
contemplated hereby.
(n) Accounting Matters. To its knowledge,
neither CUC nor any of its affiliates (as such term is
used in Section 5.11) has taken or agreed to take any
action that would prevent the business combination to be
effected by the Merger from being accounted for as a
pooling of interests and CUC has no reason to believe
that the Merger will not qualify for "pooling of
interest" accounting.
(o) Brokers. No broker, investment banker,
financial advisor or other person, other than Xxxxxxx,
Sachs & Co. ("Xxxxxxx Xxxxx"), the fees and expenses of
which will be paid by CUC, is entitled to any broker's,
finder's, financial advisor's or other similar fee or
commission in connection with the transactions
contemplated by this Agreement based upon arrangements
made by or on behalf of CUC. CUC has furnished to HFS
true and complete copies of all agreements under which
any such fees or expenses are payable and all
indemnification and other agreements related to the
engagement of the persons to whom such fees are payable.
(p) Opinion of Financial Advisor. CUC has
received the opinion of Xxxxxxx Xxxxx, dated the date of
this Agreement, to the effect that, as of such date, the
Exchange Ratio for the conversion of HFS Common Stock
into CUC Common Stock is fair to CUC, a signed copy of
which opinion has been delivered to HFS, it being
understood and agreed by HFS that such opinion is for the
benefit of the Board of Directors of CUC and may not be
relied upon by HFS, its affiliates or any of their
respective stockholders.
(q) Ownership of HFS Common Stock. As of the
date hereof, neither CUC nor, to its knowledge without
independent investigation, any of its affiliates, (i)
beneficially owns (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, or (ii) is party
to any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of, in
each case, shares of capital stock of HFS.
(r) Intellectual Property. CUC and its
subsidiaries own or have a valid license to use all
trademarks, service marks, trade names, patents and
copyrights (including any registrations or applications
for registration of any of the foregoing) (collectively,
the "CUC Intellectual Property") necessary to carry on
its business substantially as currently conducted, except
for such CUC Intellectual Property the failure of which
to own or validly license individually or in the
aggregate would not have a material adverse effect on
CUC. Neither CUC nor any such subsidiary has received
any notice of infringement of or conflict with, and, to
CUC's knowledge, there are no infringements of or
conflicts (i) with the rights of others with respect to
the use of, or (ii) by others with respect to, any CUC
Intellectual Property that individually or in the
aggregate, in either such case, would have a material
adverse effect on CUC.
(s) Certain Contracts. Except as set forth in
the CUC Filed SEC Documents, neither CUC nor any of its
subsidiaries is a party to or bound by (i) any "material
contract" (as such term is defined in item 601(b)(10) of
Regulation S-K of the SEC), (ii) any non-competition
agreement or any other agreement or obligation which
purports to limit in any material respect the manner in
which, or the localities in which, all or any material
portion of the business of CUC and its subsidiaries
(including HFS and its subsidiaries, assuming the Merger
had taken place), taken as a whole, is or would be
conducted, or (iii) any contract or other agreement which
would prohibit or materially delay the consummation of
the Merger or any of the transactions contemplated by
this Agreement (all contracts of the type described in
clauses (i) and (ii) being referred to herein as "CUC
Material Contracts"). Each CUC Material Contract is
valid and binding on CUC (or, to the extent a CUC
subsidiary is a party, such subsidiary) and is in full
force and effect, and CUC and each CUC subsidiary have in
all material respects performed all obligations required
to be performed by them to date under each CUC Material
Contract, except where such noncompliance, individually
or in the aggregate, would not have a material adverse
effect on CUC. Neither CUC nor any CUC subsidiary knows
of, or has received notice of, any violation or default
under (nor, to the knowledge of CUC, does there exist any
condition which with the passage of time or the giving of
notice or both would result in such a violation or
default under) any CUC Material Contract.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1. Conduct of Business. (a)
Conduct of Business by HFS. Except as set forth in
Section 4.1(a) of the HFS Disclosure Schedule, as
otherwise expressly contemplated by this Agreement or as
consented to by CUC in writing, such consent not to be
unreasonably withheld or delayed, during the period from
the date of this Agreement to the Effective Time, HFS
shall, and shall cause its subsidiaries to, carry on
their respective businesses in the ordinary course
consistent with past practice and in compliance in all
material respects with all applicable laws and
regulations and, to the extent consistent therewith, use
all reasonable efforts to preserve intact their current
business organizations, use reasonable efforts to keep
available the services of their current officers and
other key employees and preserve their relationships with
those persons having business dealings with them to the
end that their goodwill and ongoing businesses shall be
unimpaired at the Effective Time. Without limiting the
generality of the foregoing (but subject to the above
exceptions), during the period from the date of this
Agreement to the Effective Time, HFS shall not, and shall
not permit any of its subsidiaries to:
(i) other than dividends and
distributions by a direct or indirect wholly owned
subsidiary of HFS to its parent, or by a subsidiary
that is partially owned by HFS or any of its
subsidiaries, provided that HFS or any such
subsidiary receives or is to receive its
proportionate share thereof, (x) declare, set aside
or pay any dividends on, make any other
distributions in respect of, or enter into any
agreement with respect to the voting of, any of its
capital stock, (y) split, combine or reclassify any
of its capital stock or issue or authorize the
issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital
stock, except for issuances of HFS Common Stock upon
conversion of HFS Convertible Securities or upon the
exercise of HFS Employee Stock Options, in each
case, outstanding as of the date hereof in
accordance with their present terms, including
cashless exercise, or issued pursuant to Section
4.1(a)(ii) or (z) purchase, redeem or otherwise
acquire any shares of capital stock of HFS or any of
its subsidiaries or any other securities thereof or
any rights, warrants or options to acquire any such
shares or other securities (except, in the case of
clause (z), for (A) the repurchase of up to 30,000
shares of HFS Common Stock as long as such
repurchases are made after consultation with CUC and
in compliance with Section 5.15 and (B) the deemed
acceptance of shares upon cashless exercise of HFS
Employee Stock Options, or in connection with
withholding obligations relating thereto);
(ii) issue, deliver, sell, pledge or
otherwise encumber or subject to any Lien any shares
of its capital stock, any other voting securities or
any securities convertible into, or any rights,
warrants or options to acquire, any such shares,
voting securities or convertible securities (other
than (x) the issuance of HFS capital stock or
warrants to purchase HFS capital stock in connection
with any acquisition permitted by Section 4.1(a)(iv)
and in compliance with Section 5.15, (y) the
issuance of HFS Common Stock upon conversion of HFS
Convertible Securities in accordance with their
present terms at the option of the holders thereof,
and (z) the issuance of HFS Common Stock upon the
exercise of HFS Employee Stock Options, in each
case, outstanding as of the date hereof in
accordance with their present terms or the issuance
of HFS Employee Stock Options (and shares of HFS
Common Stock upon the exercise thereof) granted
after the date hereof in the ordinary course of
business consistent with past practice (1) for new
employees (so long as such additional amount of HFS
Common Stock subject to HFS Employee Stock Options
issued to new employees does not exceed 416,130
shares of HFS Common Stock in the aggregate) or (2)
in connection with employee promotions;
(iii) amend its certificate of
incorporation, by-laws or other comparable
organizational documents;
(iv) acquire or agree to acquire by
merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any
other manner, any business or any person, except for
acquisitions within the scope of or related to HFS's
or CUC's existing businesses in which the aggregate
consideration is less than $1.5 billion in any
single acquisition or series of related acquisitions
and less than $2.0 billion in the aggregate for all
such acquisitions, in each case which would not
materially delay or impair the ability of HFS to
perform its obligations under this Agreement and
which is reasonably expected to be accretive to
HFS's earnings within 12 months following
consummation (for purposes of this Section
4.1(a)(iv), "aggregate consideration" shall equal
the sum of (A)(1) the amount of cash paid, and (2)
the value of any shares of HFS Common Stock (valued
at the closing price of the HFS Common Stock on the
NYSE on the day prior to announcement of such
acquisition) delivered, and (3) the fair market
value of any non-cash or non-HFS Common Stock
consideration (as determined by the HFS Board of
Directors in good faith as of the day prior to
announcement of such acquisition) delivered to the
seller or its security holders in connection with
such acquisition, and (B) the amount of liabilities
directly or indirectly assumed by HFS or its
subsidiaries or retired or defeased in connection
with such acquisition, including contingent
liabilities to the extent they can be estimated by
the HFS Board of Directors in good faith as of the
day prior to the announcement of such acquisition);
(v) subject to compliance with Section
5.15, sell, lease, license, mortgage or otherwise
encumber or subject to any Lien or otherwise dispose
of any of its properties or assets (including
securitizations), other than (A) in the ordinary
course of business consistent with past practice or
(B) up to $50 million of such assets, in the
aggregate;
(vi) take any action that would cause
the representations and warranties set forth in
Section 3.1(g) (with each reference therein to
"ordinary course of business" being deemed for
purposes of this Section 4.1(a)(vi) to be
immediately followed by "consistent with past
practice") to no longer be true and correct;
(vii) incur any indebtedness for
borrowed money or issue any debt securities or
assume, guarantee or endorse, or otherwise as an
accommodation become responsible for the obligations
of any person for borrowed money, except for
indebtedness which does not cause a change in the
ratings of HFS's rated debt securities by Standard &
Poor's Ratings Services and by Xxxxx'x Investor
Service, Inc. from those in effect as of the date
hereof; or
(viii) authorize, or commit or agree to
take, any of the foregoing actions;
provided that the limitations set forth in this Section
4.1(a) (other than clause (iii)) shall not apply to any
transaction between HFS and any wholly owned subsidiary
or between any wholly owned subsidiaries of HFS.
(b) Conduct of Business by CUC. Except as set
forth in Section 4.1(b) of the CUC Disclosure Schedule,
as otherwise expressly contemplated by this Agreement or
as consented to by HFS in writing, such consent not to be
unreasonably withheld or delayed, during the period from
the date of this Agreement to the Effective Time, CUC
shall, and shall cause its subsidiaries to, carry on
their respective businesses in the ordinary course
consistent with past practice and in compliance in all
material respects with all applicable laws and
regulations and, to the extent consistent therewith, use
all reasonable efforts to preserve intact their current
business organizations, use reasonable efforts to keep
available the services of their current officers and
other key employees and preserve their relationships with
those persons having business dealings with them to the
end that their goodwill and ongoing businesses shall be
unimpaired at the Effective Time. Without limiting the
generality of the foregoing (but subject to the above
exceptions), during the period from the date of this
Agreement to the Effective Time, CUC shall not, and shall
not permit any of its subsidiaries to:
(i) other than dividends and
distributions by a direct or indirect wholly owned
subsidiary of CUC to its parent, or by a subsidiary
that is partially owned by CUC or any of its
subsidiaries, provided that CUC or any such
subsidiary receives or is to receive its
proportionate share thereof, (x) declare, set aside
or pay any dividends on, make any other
distributions in respect of, or enter into any
agreement with respect to the voting of, any of its
capital stock, (y) split, combine or reclassify any
of its capital stock or issue or authorize the
issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital
stock, except for issuances of CUC Common Stock upon
conversion or redemption of CUC Convertible
Securities or upon the exercise of CUC Employee
Stock Options, in each case, outstanding as of the
date hereof in accordance with their present terms,
including cashless exercise, or issued pursuant to
Section 4.1(b)(ii) or (z) purchase, redeem or
otherwise acquire any shares of capital stock of CUC
or any of its subsidiaries or any other securities
thereof or any rights, warrants or options to
acquire any such shares or other securities (except,
in the case of clause (z), for (A) the repurchase of
up to 30,000 shares of CUC Common Stock as long as
such repurchases are made after consultation with
HFS and in compliance with Section 5.15 and (B) the
deemed acceptance of shares upon cashless exercise
of CUC Employee Stock Options, or in connection with
withholding obligations relating thereto);
(ii) issue, deliver, sell, pledge or
otherwise encumber or subject to any Lien any shares
of its capital stock, any other voting securities or
any securities convertible into, or any rights,
warrants or options to acquire, any such shares,
voting securities or convertible securities (other
than (x) the issuance of CUC capital stock or
warrants to acquire CUC capital stock in connection
with any acquisition permitted by Section 4.1(b)(iv)
and in compliance with Section 5.15, (y) the
issuance of CUC Common Stock upon conversion or
redemption of CUC Convertible Securities in
accordance with their present terms at the option of
the holders thereof, and (z) the issuance of CUC
Common Stock upon the exercise of CUC Employee Stock
Options, in each case, outstanding as of the date
hereof in accordance with their present terms or the
issuance of CUC Employee Stock Options (and shares
of CUC Common Stock upon the exercise thereof)
granted after the date hereof in the ordinary course
of business consistent with past practice (1) for
new employees (so long as such additional amount of
CUC Common Stock subject to CUC Employee Stock
Options issued to new employees does not exceed
1,000,000 shares of CUC Common Stock in the
aggregate) or (2) in connection with employee
promotions;
(iii) except as contemplated hereby,
amend its certificate of incorporation, by-laws or
other comparable organizational documents;
(iv) acquire or agree to acquire by
merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any
other manner, any business or any person, except for
acquisitions within the scope of or related to CUC's
or HFS's existing businesses in which the aggregate
consideration is less than $1.5 billion in any
single acquisition or series of related acquisitions
and less than $2.0 billion in the aggregate for all
such acquisitions, in each case which would not
materially delay or impair the ability of CUC to
perform its obligations under this Agreement and
which is reasonably expected to be accretive to
CUC's earnings within 12 months following
consummation (for purposes of this Section
4.1(b)(iv), "aggregate consideration" shall equal
the sum of (A)(1) the amount of cash paid, and (2)
the value of any shares of CUC Common Stock (valued
at the closing price of the CUC Common Stock on the
NYSE on the day prior to announcement of such
acquisition) delivered, and (3) the fair market
value of any non-cash or non-CUC Common Stock
consideration (as determined by the CUC Board of
Directors in good faith as of the day prior to
announcement of such acquisition) delivered to the
seller or its security holders in connection with
such acquisition, and (B) the amount of liabilities
directly or indirectly assumed by CUC or its
subsidiaries or retired or defeased in connection
with such acquisition, including contingent
liabilities to the extent they can be estimated by
the CUC Board of Directors in good faith as of the
day prior to the announcement of such acquisition);
(v) subject to compliance with Section
5.15, sell, lease, license, mortgage or otherwise
encumber or subject to any Lien or otherwise dispose
of any of its properties or assets (including
securitizations), other than (A) in the ordinary
course of business consistent with past practice (B)
up to $50 million of such assets, in the aggregate;
(vi) take any action that would cause
the representations and warranties set forth in
Section 3.2(g) (with each reference therein to
ordinary course of business, being deemed for
purposes of this Section 4.1(b)(vi) to be
immediately followed by "consistent with past
practice") to no longer be true and correct;
(vii) incur any indebtedness for
borrowed money or issue any debt securities or
assume, guarantee or endorse, or otherwise as an
accommodation become responsible for the obligations
of any person for borrowed money, except for
indebtedness which does not cause a change in the
ratings of CUC's rated debt securities by Standard &
Poor's Ratings Services and by Xxxxx'x Investor
Service, Inc. from those in effect as of the date
hereof; or
(viii) authorize, or commit or agree to
take, any of the foregoing actions;
provided that the limitations set forth in this Section
4.1(b) (other than clause (iii)) shall not apply to any
transaction between CUC and any wholly owned subsidiary
or between any wholly owned subsidiaries of CUC.
(c) Other Actions. Except as required by law,
HFS and CUC shall not, and shall not permit any of their
respective subsidiaries to, voluntarily take any action
that would, or that could reasonably be expected to,
result in (i) any of the representations and warranties
of such party set forth in this Agreement that are
qualified as to materiality becoming untrue at the
Effective Time, except as provided in the proviso in
Section 6.2(a) or Section 6.3(a), (ii) any of such
representations and warranties that are not so qualified
becoming untrue in any material respect at the Effective
Time, except as provided in the proviso in Section 6.2(a)
or Section 6.3(a), or (iii) any of the conditions to the
Merger set forth in Article VI not being satisfied.
(d) Advice of Changes. HFS and CUC shall
promptly advise the other party orally and in writing to
the extent it has knowledge of (i) any representation or
warranty made by it contained in this Agreement that is
qualified as to materiality becoming untrue or inaccurate
in any respect or any such representation or warranty
that is not so qualified becoming untrue or inaccurate in
any material respect, (ii) the failure by it to comply in
any material respect with or satisfy in any material
respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement and
(iii) any change or event having, or which, insofar as
can reasonably be foreseen, could reasonably be expected
to have a material adverse effect on such party or on the
truth of their respective representations and warranties
or the ability of the conditions set forth in Article VI
to be satisfied; provided, however, that no such
notification shall affect the representations,
warranties, covenants or agreements of the parties (or
remedies with respect thereto) or the conditions to the
obligations of the parties under this Agreement.
SECTION 4.2. No Solicitation by HFS. (a) HFS
shall not, nor shall it permit any of its subsidiaries
to, nor shall it authorize or permit any of its
directors, officers or employees or any investment
banker, financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries
to, directly or indirectly through another person, (i)
solicit, initiate or encourage (including by way of
furnishing information), or take any other action
designed to facilitate, any inquiries or the making of
any proposal which constitutes any HFS Takeover Proposal
(as defined below) or (ii) participate in any discussions
or negotiations regarding any HFS Takeover Proposal;
provided, however, that if the Board of Directors of HFS
determines in good faith, based on the advice of outside
counsel, that it is necessary to do so in order to act in
a manner consistent with its fiduciary duties to HFS's
stockholders under applicable law, HFS may, in response
to an HFS Superior Proposal (as defined in Section
4.2(b)) which was not solicited by it, which did not
otherwise result from a breach of this Section 4.2(a) and
which is made or received prior to the obtaining of the
HFS Stockholder Approval, and subject to providing prior
written notice of its decision to take such action to CUC
and compliance with Section 4.2(c), (x) furnish
information with respect to HFS and its subsidiaries to
any person making an HFS Superior Proposal pursuant to a
customary confidentiality agreement (as determined by HFS
based on the advice of its outside counsel, the terms of
which are no more favorable to such person than the
Confidentiality Agreement (as defined herein)) and (y)
participate in discussions or negotiations regarding such
HFS Superior Proposal. For purposes of this Agreement,
"HFS Takeover Proposal" means any inquiry, proposal or
offer from any person relating to any direct or indirect
acquisition or purchase of a business that constitutes
50% or more of the net revenues, net income or the assets
of HFS and its subsidiaries, taken as a whole, or 25% or
more of any class of equity securities of HFS, any tender
offer or exchange offer that if consummated would result
in any person beneficially owning 25% or more of any
class of equity securities of HFS, or any merger,
consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving
HFS or the HFS Common Stock (or any HFS subsidiary whose
business constitutes 50% or more of the net revenues, net
income or the assets of HFS and its subsidiaries, taken
as whole), other than the transactions contemplated by
this Agreement.
(b) Except as expressly permitted by this
Section 4.2, neither the Board of Directors of HFS nor
any committee thereof shall (i) withdraw or modify, or
propose publicly to withdraw or modify, in a manner
adverse to CUC, the approval or recommendation by such
Board of Directors or such committee of the Merger or
this Agreement, (ii) approve or recommend, or propose
publicly to approve or recommend, any HFS Takeover
Proposal, or (iii) cause HFS to enter into any letter of
intent, agreement in principle, acquisition agreement or
other similar agreement (each, an "HFS Acquisition
Agreement") related to any HFS Takeover Proposal.
Notwithstanding the foregoing, at any time prior to the
obtaining of the HFS Stockholder Approval, the Board of
Directors of HFS, to the extent that it determines in
good faith, based upon the advice of outside counsel,
that it is necessary to do so in order to act in a manner
consistent with its fiduciary duties to HFS's
stockholders under applicable law, may (subject to this
and the following sentences) terminate this Agreement
solely in order to concurrently enter into an HFS
Acquisition Agreement with respect to any HFS Superior
Proposal, but only at a time that is after the fifth
business day following CUC's receipt of written notice
advising CUC that the Board of Directors of HFS is
prepared to accept an HFS Superior Proposal, specifying
the material terms and conditions of such HFS Superior
Proposal and identifying the person making such HFS
Superior Proposal. For purposes of this Agreement, an
"HFS Superior Proposal" means any proposal made by a
third party to acquire, directly or indirectly, including
pursuant to a tender offer, exchange offer, merger,
consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction, for
consideration consisting of cash and/or securities, more
than 50% of the combined voting power of the shares of
HFS Common Stock then outstanding or all or substantially
all the assets of HFS and otherwise on terms which the
Board of Directors of HFS determines in its good faith
judgment (based on the advice of a financial advisor of
nationally recognized reputation) to be more favorable to
HFS's stockholders than the Merger and for which
financing, to the extent required, is then committed or
which, in the good faith judgment of the Board of
Directors of HFS based on the advice of its financial
advisor, is reasonably capable of being obtained by such
third party.
(c) In addition to the obligations of HFS set
forth in paragraphs (a) and (b) of this Section 4.2, HFS
shall immediately advise CUC orally and in writing of any
request for information or of any HFS Takeover Proposal,
the material terms and conditions of such request or HFS
Takeover Proposal and the identity of the person making
such request or HFS Takeover Proposal. HFS will keep CUC
reasonably informed of the status and details (including
amendments or proposed amendments) of any such request or
HFS Takeover Proposal.
(d) Nothing contained in this Section 4.2
shall prohibit HFS from taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or from making any
disclosure to HFS's stockholders if, in the good faith
judgment of the Board of Directors of HFS, after
consultation with outside counsel, failure so to disclose
would be inconsistent with its obligations under
applicable law; provided, however, that neither HFS nor
its Board of Directors nor any committee thereof shall
withdraw or modify, or propose publicly to withdraw or
modify, its position with respect to this Agreement or
the Merger or approve or recommend, or propose publicly
to approve or recommend, an HFS Takeover Proposal.
SECTION 4.3. No Solicitation by CUC. (a) CUC
shall not, nor shall it permit any of its subsidiaries
to, nor shall it authorize or permit any of its
directors, officers or employees or any investment
banker, financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries
to, directly or indirectly through another person, (i)
solicit, initiate or encourage (including by way of
furnishing information), or take any other action
designed to facilitate, any inquiries or the making of
any proposal which constitutes any CUC Takeover Proposal
(as defined below) or (ii) participate in any discussions
or negotiations regarding any CUC Takeover Proposal;
provided, however, that if the Board of Directors of CUC
determines in good faith, based on the advice of outside
counsel, that it is necessary to do so in order to act in
a manner consistent with its fiduciary duties to CUC's
stockholders under applicable law, CUC may, in response
to a CUC Superior Proposal (as defined in Section 4.3(b))
which was not solicited by it, which did not otherwise
result from a breach of this Section 4.3(a) and which is
made or received prior to the obtaining of the CUC
Stockholder Approval, and subject to providing prior
written notice of its decision to take such action to HFS
and compliance with Section 4.3(c) (x) furnish
information with respect to CUC and its subsidiaries to
any person making a CUC Superior Proposal pursuant to a
customary confidentiality agreement (as determined by CUC
based on the advice of its outside counsel, the terms of
which are no more favorable to such person than the
Confidentiality Agreement) and (y) participate in
discussions or negotiations regarding such CUC Superior
Proposal. For purposes of this Agreement, "CUC Takeover
Proposal" means any inquiry, proposal or offer from any
person relating to any direct or indirect acquisition or
purchase of a business that constitutes 50% or more of
the net revenues, net income or the assets of CUC and its
subsidiaries, taken as a whole, or 25% or more of any
class of equity securities of CUC, any tender offer or
exchange offer that if consummated would result in any
person beneficially owning 25% or more of any class of
equity securities of CUC, or any merger, consolidation,
business combination, recapitalization, liquidation,
dissolution or similar transaction involving CUC or the
CUC Common Stock (or any CUC subsidiary whose business
constitutes 50% or more of the net revenues, net income
or the assets of CUC and its subsidiaries, taken as a
whole), other than the transactions contemplated by this
Agreement.
(b) Except as expressly permitted by this
Section 4.3, neither the Board of Directors of CUC nor
any committee thereof shall (i) withdraw or modify, or
propose publicly to withdraw or modify, in a manner
adverse to HFS, the approval or recommendation by such
Board of Directors or such committee of the Merger, this
Agreement or the issuance of CUC Common Stock in
connection with the Merger, (ii) approve or recommend, or
propose publicly to approve or recommend, any CUC
Takeover Proposal, or (iii) cause CUC to enter into any
letter of intent, agreement in principle, acquisition
agreement or other similar agreement (each, a "CUC
Acquisition Agreement") related to any CUC Takeover
Proposal. Notwithstanding the foregoing, at any time
prior to the obtaining of the CUC Stockholder Approval,
the Board of Directors of CUC, to the extent that it
determines in good faith, based upon the advice of
outside counsel, that it is necessary to do so in order
to act in a manner consistent with its fiduciary duties
to CUC's stockholders under applicable law, may (subject
to this and the following sentences) terminate this
Agreement solely in order to concurrently enter into any
CUC Acquisition Agreement with respect to any CUC
Superior Proposal, but only at a time that is after the
fifth business day following HFS's receipt of written
notice advising HFS that the Board of Directors of CUC is
prepared to accept a CUC Superior Proposal, specifying
the material terms and conditions of such CUC Superior
Proposal and identifying the person making such CUC
Superior Proposal. For purposes of this Agreement, a
"CUC Superior Proposal" means any proposal made by a
third party to acquire, directly or indirectly, including
pursuant to a tender offer, exchange offer, merger,
consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction, for
consideration consisting of cash and/or securities, more
than 50% of the combined voting power of the shares of
CUC Common Stock then outstanding or all or substantially
all the assets of CUC and otherwise on terms which the
Board of Directors of CUC determines in its good faith
judgment (based on the advice of a financial advisor of
nationally recognized reputation) to be more favorable to
CUC's stockholders than the Merger and for which
financing, to the extent required, is then committed or
which, in the good faith judgment of the Board of
Directors of CUC based on the advice of its financial
advisor, is reasonably capable of being obtained by such
third party.
(c) In addition to the obligations of CUC set
forth in paragraphs (a) and (b) of this Section 4.3, CUC
shall immediately advise HFS orally and in writing of any
request for information or of any CUC Takeover Proposal,
the material terms and conditions of such request or CUC
Takeover Proposal and the identity of the person making
such request or CUC Takeover Proposal. CUC will keep HFS
reasonably informed of the status and details (including
amendments or proposed amendments) of any such request or
CUC Takeover Proposal.
(d) Nothing contained in this Section 4.3
shall prohibit CUC from taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or from making any
disclosure to CUC's stockholders if, in the good faith
judgment of the Board of Directors of CUC, after
consultation with outside counsel, failure so to disclose
would be inconsistent with its obligations under
applicable law; provided, however, that neither CUC nor
its Board of Directors nor any committee thereof shall
withdraw or modify, or propose publicly to withdraw or
modify, its position with respect to this Agreement, the
Merger, the issuance of CUC Common Stock in connection
with the Merger, or approve or recommend, or propose
publicly to approve or recommend, a CUC Takeover
Proposal.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1. Preparation of the Form S-4 and
the Joint Proxy Statement; Stockholders Meetings. (a)
As soon as practicable following the date of this
Agreement, HFS and CUC shall prepare and file with the
SEC the Joint Proxy Statement and CUC shall prepare and
file with the SEC the Form S-4, in which the Joint Proxy
Statement will be included as a prospectus. Each of HFS
and CUC shall use best efforts to have the Form S-4
declared effective under the Securities Act as promptly
as practicable after such filing. HFS will use all best
efforts to cause the Joint Proxy Statement to be mailed
to HFS's stockholders, and CUC will use all best efforts
to cause the Joint Proxy Statement to be mailed to CUC's
stockholders, in each case as promptly as practicable
after the Form S-4 is declared effective under the
Securities Act. CUC shall also take any action (other
than qualifying to do business in any jurisdiction in
which it is not now so qualified or to file a general
consent to service of process) required to be taken under
any applicable state securities laws in connection with
the issuance of CUC Common Stock in the Merger and the
approval of the Certificate Amendment and HFS shall
furnish all information concerning HFS and the holders of
HFS Common Stock as may be reasonably requested in
connection with any such action. No filing of, or
amendment or supplement to, the Form S-4 or the Joint
Proxy Statement will be made by CUC without providing HFS
the opportunity to review and comment thereon. CUC will
advise HFS, promptly after it receives notice thereof, of
the time when the Form S-4 has become effective or any
supplement or amendment has been filed, the issuance of
any stop order, the suspension of the qualification of
the CUC Common Stock issuable in connection with the
Merger for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Joint Proxy
Statement or the Form S-4 or comments thereon and
responses thereto or requests by the SEC for additional
information. If at any time prior to the Effective Time
any information relating to HFS or CUC, or any of their
respective affiliates, officers or directors, should be
discovered by HFS or CUC which should be set forth in an
amendment or supplement to any of the Form S-4 or the
Joint Proxy Statement, so that any of such documents
would not include any misstatement of a material fact or
omit to state any material fact necessary to make the
statements therein, in light of the circumstances under
which they were made, not misleading, the party which
discovers such information shall promptly notify the
other parties hereto and an appropriate amendment or
supplement describing such information shall be promptly
filed with the SEC and, to the extent required by law,
disseminated to the stockholders of HFS and CUC.
(b) HFS shall, as promptly as practicable
after the Form S-4 is declared effective under the
Securities Act, duly call, give notice of, convene and
hold a meeting of its stockholders (the "HFS Stockholders
Meeting") in accordance with the DGCL for the purpose of
obtaining the HFS Stockholder Approval and, subject to
its rights to terminate this Agreement pursuant to
Section 4.2(b), shall, through its Board of Directors,
recommend to its stockholders the approval and adoption
of this Agreement, the Merger, the New CUC Stock Plan and
the other transactions contemplated hereby. Without
limiting the generality of the foregoing but subject to
its rights to terminate this Agreement pursuant to
Section 4.2(b), HFS agrees that its obligations pursuant
to the first sentence of this Section 5.1(b) shall not be
affected by the commencement, public proposal, public
disclosure or communication to HFS of any HFS Takeover
Proposal.
(c) CUC shall, as promptly as practicable
after the Form S-4 is declared effective under the
Securities Act, duly call, give notice of, convene and
hold a meeting of its stockholders (the "CUC Stockholders
Meeting") in accordance with the DGCL for the purpose of
obtaining the CUC Stockholder Approval and, subject to
its rights to terminate this Agreement pursuant to
Section 4.3(b), shall, through its Board of Directors,
recommend to its stockholders the approval and adoption
of this Agreement, the Merger, the Certificate Amendment,
the New CUC Stock Plan and the other transactions
contemplated hereby. Without limiting the generality of
the foregoing but subject to its rights to terminate this
Agreement pursuant to Section 4.3(b), CUC agrees that its
obligations pursuant to the first sentence of this
Section 5.1(c) shall not be affected by the commencement,
public proposal, public disclosure or communication to
CUC of any CUC Takeover Proposal.
(d) CUC and HFS will use best efforts to hold
the HFS Stockholders Meeting and the CUC Stockholders
Meeting on the same date and as soon as reasonably
practicable after the date hereof.
SECTION 5.2. Letters of HFS's Accountants.
(a) HFS shall use best efforts to cause to be delivered
to CUC two letters from HFS's independent accountants,
one dated a date within two business days before the date
on which the Form S-4 shall become effective and one
dated a date within two business days before the Closing
Date, each addressed to CUC, in form and substance
reasonably satisfactory to CUC and customary in scope and
substance for comfort letters delivered by independent
public accountants in connection with registration
statements similar to the Form S-4.
(b) HFS shall use best efforts to cause to be
delivered to CUC and CUC's accountants a letter from
HFS's independent accountants addressed to CUC and HFS,
dated as of the date the Form S-4 is declared effective
and as of the Closing Date, stating that accounting for
the Merger as a pooling of interests under Opinion 16 of
the Accounting Principles Board and applicable SEC rules
and regulations is appropriate if the Merger is closed
and consummated as contemplated by this Agreement.
SECTION 5.3. Letters of CUC's Accountants. (a)
CUC shall use best efforts to cause to be delivered to
HFS two letters from CUC's independent accountants, one
dated a date within two business days before the date on
which the Form S-4 shall become effective and one dated a
date within two business days before the Closing Date,
each addressed to HFS, in form and substance reasonably
satisfactory to HFS and customary in scope and substance
for comfort letters delivered by independent public
accountants in connection with registration statements
similar to the Form S-4.
(b) CUC shall use best efforts to cause to be
delivered to HFS and HFS's accountants a letter from
CUC's independent accountants, addressed to HFS and CUC,
dated as of the date the Form S-4 is declared effective
and as of the Closing Date, stating that accounting for
the Merger as a pooling of interests under Opinion 16 of
the Accounting Principles Board and applicable SEC rules
and regulations is appropriate if the Merger is closed
and consummated as contemplated by this Agreement.
SECTION 5.4. Access to Information;
Confidentiality. Subject to the Confidentiality
Agreement dated May 9, 1997, between CUC and HFS (the
"Confidentiality Agreement"), and subject to restrictions
contained in confidentiality agreements to which such
party is subject (which such party will use its best
efforts to have waived) and applicable law, each of HFS
and CUC shall, and shall cause each of its respective
subsidiaries to, afford to the other party and to the
officers, employees, accountants, counsel, financial
advisors and other representatives of such other party,
reasonable access during normal business hours during the
period prior to the Effective Time to all their
respective properties, books, contracts, commitments,
personnel and records and, during such period, each of
HFS and CUC shall, and shall cause each of its respective
subsidiaries to, furnish promptly to the other party (a)
a copy of each report, schedule, registration statement
and other document filed by it during such period
pursuant to the requirements of federal or state
securities laws and (b) all other information concerning
its business, properties and personnel as such other
party may reasonably request. No review pursuant to this
Section 5.4 shall affect any representation or warranty
given by the other party hereto. Each of HFS and CUC
will hold, and will cause its respective officers,
employees, accountants, counsel, financial advisors and
other representatives and affiliates to hold, any
nonpublic information in accordance with the terms of the
Confidentiality Agreement.
SECTION 5.5. Best Efforts. (a) Upon the
terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use best efforts
to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including
(i) the obtaining of all necessary actions or nonactions,
waivers, consents and approvals from Governmental
Entities and the making of all necessary registrations
and filings and the taking of all steps as may be
necessary to obtain an approval or waiver from, or to
avoid an action or proceeding by, any Governmental
Entity, (ii) the obtaining of all necessary consents,
approvals or waivers from third parties, (iii) the
defending of any lawsuits or other legal proceedings,
whether judicial or administrative, challenging this
Agreement or the consummation of the transactions
contemplated by this Agreement, including seeking to have
any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed,
and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of,
this Agreement. Nothing set forth in this Section 5.5(a)
will limit or affect actions permitted to be taken
pursuant to Sections 4.2 and 4.3.
(b) In connection with and without limiting
the foregoing, HFS and CUC shall (i) take all action
necessary to ensure that no state takeover statute or
similar statute or regulation is or becomes applicable to
the Merger, this Agreement, or any of the other
transactions contemplated by this Agreement and (ii) if
any state takeover statute or similar statute or
regulation becomes applicable to the Merger, this
Agreement, or any other transaction contemplated by this
Agreement, take all action necessary to ensure that the
Merger and the other transactions contemplated by this
Agreement may be consummated as promptly as practicable
on the terms contemplated by this Agreement and otherwise
to minimize the effect of such statute or regulation on
the Merger and the other transactions contemplated by
this Agreement.
SECTION 5.6. Stock Options. (a) As soon as
practicable following the date of this Agreement, the
Board of Directors of HFS (or, if appropriate, any
committee administering the HFS Stock Plans) shall adopt
such resolutions or take such other actions as may be
required to effect the following:
(i) adjust the terms of all outstanding
HFS Employee Stock Options granted under HFS Stock
Plans, whether vested or unvested, as necessary to
provide that, at the Effective Time, each HFS
Employee Stock Option outstanding immediately prior
to the Effective Time shall be adjusted and
thereafter represent an option to acquire, on the
same terms and conditions as were applicable under
such HFS Employee Stock Option, including vesting as
such may be accelerated at the Effective Time
pursuant to the terms of such HFS Employee Stock
Options in effect as of the date hereof (which
include cashless exercise), the same number of
shares of CUC Common Stock as the holder of such HFS
Employee Stock Option would have been entitled to
receive pursuant to the Merger had such holder
exercised such HFS Employee Stock Option in full
immediately prior to the Effective Time, with any
fractional shares of CUC Common Stock resulting from
such calculation being rounded to the nearest whole
share, at a price per share of CUC Common Stock
equal to (A) the aggregate exercise price for the
shares of HFS Common Stock otherwise purchasable
pursuant to such HFS Employee Stock Option divided
by (B) the aggregate number of shares of CUC Common
Stock deemed purchasable pursuant to such HFS
Employee Stock Option, rounding the exercise price
thus determined down to the nearest whole cent
(each, as so adjusted, an "Adjusted Option"); and
(ii) take such other actions relating
to the HFS Stock Plans as HFS and CUC may agree are
appropriate to give effect to the Merger, including
as provided in Section 5.7.
(b) As soon as practicable after the Effective
Time, CUC shall deliver to the holders of HFS Employee
Stock Options appropriate notices setting forth such
holders' rights pursuant to the respective HFS Stock
Plans and the agreements evidencing the grants of such
HFS Employee Stock Options and that such HFS Employee
Stock Options and agreements shall be assumed by CUC and
shall continue in effect on the same terms and conditions
(subject to the adjustments required by this Section 5.6
after giving effect to the Merger).
(c) A holder of an Adjusted Option may
exercise such Adjusted Option in whole or in part in
accordance with its terms by delivering a properly
executed notice of exercise to CUC, together with the
consideration therefor and the federal withholding tax
information, if any, required in accordance with the
related HFS Stock Plan.
(d) Except as otherwise contemplated by this
Section 5.6 and except to the extent required under the
respective terms of the HFS Employee Stock Options in
effect as of the date hereof, all restrictions or
limitations on transfer and vesting with respect to HFS
Employee Stock Options awarded under the HFS Stock Plans
or any other plan, program or arrangement of HFS or any
of its subsidiaries, to the extent that such restrictions
or limitations shall not have already lapsed, shall
remain in full force and effect with respect to such
options after giving effect to the Merger and the
assumption by CUC as set forth above.
SECTION 5.7. HFS Stock Plans and Certain
Employee Matters. (a) At the Effective Time, by virtue
of the Merger, the HFS Stock Plans shall be assumed by
CUC, with the result that all obligations of HFS under
the HFS Stock Plans, including with respect to awards
outstanding at the Effective Time under each HFS Stock
Plan, shall be obligations of CUC following the Effective
Time. Prior to the Effective Time, CUC shall take all
necessary actions (including, if required to comply with
Section 162(m) or 422 of the Code (and the regulations
thereunder) or applicable law or rule of the NYSE,
obtaining the approval of its stockholders at the CUC
Stockholders Meeting) for the assumption of the HFS Stock
Plans, including the reservation, issuance and listing of
CUC Common Stock in a number at least equal to (x) the
number of shares of CUC Common Stock that will be subject
to Adjusted Options and (y) the product of the Exchange
Ratio and the number of shares of HFS Common Stock
available for future awards under the HFS Stock Plans
immediately prior to the Effective Time. No later than
the Effective Time, CUC shall prepare and file with the
SEC a registration statement on Form S-8 (or another
appropriate form) registering a number of shares of CUC
Common Stock determined in accordance with the preceding
sentence and the unrestricted reoffer and resale of such
shares. Such registration statement shall be kept
effective (and the current status of the prospectus or
prospectuses required thereby shall be maintained) at
least for so long as Adjusted Options remain outstanding
and until such time as the shares of CUC Common Stock
subject to such Adjusted Options are no longer subject to
resale restrictions under the Securities Act.
(b) Following the Effective Time, CUC, as the
Surviving Corporation in the Merger, will honor all
obligations of HFS or its subsidiaries under employment
agreements of HFS or its subsidiaries as amended and/or
restated as contemplated in this Agreement.
SECTION 5.8. Indemnification, Exculpation and
Insurance. (a) CUC agrees to maintain in effect in
accordance with their terms all rights to indemnification
and exculpation from liabilities for acts or omissions
occurring at or prior to the Effective Time now existing
in favor of the current or former directors or officers
of HFS and its subsidiaries as provided in their
respective certificates of incorporation or by-laws (or
comparable organizational documents) and any
indemnification agreements of HFS. In addition, from and
after the Effective Time, directors and officers of HFS
who become directors or officers of CUC will be entitled
to the same indemnity rights and protections as are
afforded to other directors and officers of CUC.
(b) In the event that CUC or any of its
successors or assigns (i) consolidates with or merges
into any other person and is not the continuing or
surviving corporation or entity of such consolidation or
merger or (ii) transfers or conveys all or substantially
all of its properties and assets to any person, then, and
in each such case, proper provision will be made so that
the successors and assigns of CUC assume the obligations
set forth in this Section 5.8.
(c) For seven years after the Effective Time,
CUC shall provide to HFS's current directors and officers
liability insurance covering acts or omissions occurring
prior to the Effective Time with respect to those persons
who are currently covered by HFS's directors' and
officers' liability insurance policy on terms with
respect to such coverage and amount no less favorable
than those of such policy in effect on the date hereof,
provided that in no event shall CUC be required to expend
more than 200% of the current amount expended by HFS to
maintain such coverage.
(d) The provisions of this Section 5.8 (i) are
intended to be for the benefit of, and will be
enforceable by, each indemnified party, his or her heirs
and his or her representatives and (ii) are in addition
to, and not in substitution for, any other rights to
indemnification or contribution that any such person may
have by contract or otherwise.
SECTION 5.9. Fees and Expenses. (a) Except
as provided in this Section 5.9, all fees and expenses
incurred in connection with the Merger, this Agreement,
and the transactions contemplated by this Agreement shall
be paid by the party incurring such fees or expenses,
whether or not the Merger is consummated, except that
each of CUC and HFS shall bear and pay one-half of the
costs and expenses incurred in connection with (1) the
filing, printing and mailing of the Form S-4 and the
Joint Proxy Statement (including SEC filing fees) and (2)
the filings of the pre-merger notification and report
forms under the HSR Act (including filing fees).
(b) In the event that (i) an HFS Takeover
Proposal shall have been made known to HFS or any of its
subsidiaries or has been made directly to its
stockholders generally or any person shall have publicly
announced an intention (whether or not conditional) to
make an HFS Takeover Proposal and thereafter this
Agreement is terminated by either CUC or HFS pursuant to
Section 7.1(b)(i) or (ii), or (ii) this Agreement is
terminated by HFS pursuant to Section 7.1(f), then HFS
shall promptly, but in no event later than two days after
the date of such termination, pay CUC a fee equal to $300
million (the "Termination Fee"), payable by wire transfer
of same day funds; provided, however, that no Termination
Fee shall be payable to CUC pursuant to clause (i) of
this paragraph (b) unless and until within 18 months of
such termination HFS or any of its subsidiaries enters
into any HFS Acquisition Agreement or any transaction
which would be an HFS Takeover Proposal is consummated,
in which event the Termination Fee shall be payable upon
the first to occur of such events. HFS acknowledges that
the agreements contained in this Section 5.9(b) are an
integral part of the transactions contemplated by this
Agreement, and that, without these agreements, CUC would
not enter into this Agreement; accordingly, if HFS fails
promptly to pay the amount due pursuant to this Section
5.9(b), and, in order to obtain such payment, CUC
commences a suit which results in a judgment against HFS
for the fee set forth in this Section 5.9(b), HFS shall
pay to CUC its costs and expenses (including attorneys'
fees and expenses) in connection with such suit, together
with interest on the amount of the fee at the prime rate
of Citibank N.A. in effect on the date such payment was
required to be made.
(c) In the event that (i) a CUC Takeover
Proposal shall have been made known to CUC or any of its
subsidiaries or has been made directly to its
stockholders generally or any person shall have publicly
announced an intention (whether or not conditional) to
make a CUC Takeover Proposal and thereafter this
Agreement is terminated by either CUC or HFS pursuant to
Section 7.1(b)(i) or (iii), or (ii) this Agreement is
terminated by CUC pursuant to Section 7.1(d), then CUC
shall promptly, but in no event later than two days after
the date of such termination, pay HFS the Termination
Fee, payable by wire transfer of same day funds;
provided, however, that no Termination Fee shall be
payable to HFS pursuant to clause (i) of this paragraph
(c) unless and until within 18 months of such termination
CUC or any of its subsidiaries enters into any CUC
Acquisition Agreement or any transaction which would be a
CUC Takeover Proposal is consummated, in which event the
Termination Fee shall be payable upon the first to occur
of such events. CUC acknowledges that the agreements
contained in this Section 5.9(c) are an integral part of
the transactions contemplated by this Agreement, and
that, without these agreements, HFS would not enter into
this Agreement; accordingly, if CUC fails promptly to pay
the amount due pursuant to this Section 5.9(c), and, in
order to obtain such payment, HFS commences a suit which
results in a judgment against CUC for the fee set forth
in this Section 5.9(c), CUC shall pay to HFS its costs
and expenses (including attorneys' fees and expenses) in
connection with such suit, together with interest on the
amount of the fee at the prime rate of Citibank N.A. in
effect on the date such payment was required to be made.
SECTION 5.10. Public Announcements. CUC and
HFS will consult with each other before issuing, and
provide each other the opportunity to review, comment
upon and concur with and use reasonable efforts to agree
on, any press release or other public statements with
respect to the transactions contemplated by this
Agreement, including the Merger, and shall not issue any
such press release or make any such public statement
prior to such consultation, except as either party may
determine is required by applicable law, court process or
by obligations pursuant to any listing agreement with any
national securities exchange. The parties agree that the
initial press release to be issued with respect to the
transactions contemplated by this Agreement shall be in
the form heretofore agreed to by the parties.
SECTION 5.11. Affiliates. (a) As soon as
practicable after the date hereof, HFS shall deliver to
CUC a letter identifying all persons who are, at the time
this Agreement is submitted for adoption by the
stockholders of HFS, "affiliates" of HFS for purposes of
Rule 145 under the Securities Act or for purposes of
qualifying the Merger for pooling of interests accounting
treatment under Opinion 16 of the Accounting Principles
Board and applicable SEC rules and regulations, and such
list shall be updated as necessary to reflect changes
from the date hereof. HFS shall use best efforts to
cause each person identified on such list to deliver to
CUC not less than 30 days prior to the Effective Time, a
written agreement substantially in the form attached as
Exhibit C hereto. CUC shall use best efforts to cause
all persons who are "affiliates" of CUC for purposes of
qualifying the Merger for pooling of interests accounting
treatment under Opinion 16 of the Accounting Principles
Board and applicable SEC rules and regulations to deliver
to HFS not less than 30 days prior to the Effective Time,
a written agreement substantially in the form of the
fourth paragraph of Exhibit C hereto.
(b) CUC shall publish no later than 45 days
after the end of the first month after the Effective Time
in which there are at least 30 days of post Merger
combined operations (which month may be the month in
which the Effective Time occurs), combined sales and net
income figures as contemplated by and in accordance with
the terms of SEC Accounting Series Release No. 135.
SECTION 5.12. NYSE Listing. CUC shall use
best efforts to cause the CUC Common Stock issuable under
Article II, upon exercise of Adjusted Options pursuant to
Section 5.6 and upon exercise of the options to purchase
shares of CA Common Stock granted pursuant to Section
5.17 and the shares of restricted CA Common Stock issued
pursuant to Section 5.17 to be approved for listing on
the NYSE, subject to official notice of issuance, as
promptly as practicable after the date hereof, and in any
event prior to the Closing Date.
SECTION 5.13. Stockholder Litigation. Each of
HFS and CUC shall give the other the reasonable
opportunity to participate in the defense of any
stockholder litigation against HFS or CUC, as applicable,
and its directors relating to the transactions
contemplated by this Agreement.
SECTION 5.14. Tax Treatment. Each of CUC and
HFS shall use best efforts to cause the Merger to qualify
as a reorganization under the provisions of Section 368
of the Code and to obtain the opinions of counsel
referred to in Sections 6.2(c) and 6.3(c).
SECTION 5.15. Pooling of Interests. Each of
HFS and CUC shall use best efforts to cause the
transactions contemplated by this Agreement, including
the Merger, to be accounted for as a pooling of interests
under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations, and such accounting
treatment to be accepted by the SEC, and each of HFS and
CUC agrees that it shall take no action that would cause
such accounting treatment not to be obtained.
SECTION 5.16. Standstill Agreements;
Confidentiality Agreements. During the period from the
date of this Agreement through the Effective Time,
neither HFS nor CUC shall terminate, amend, modify or
waive any provision of any confidentiality or standstill
agreement to which it or any of its respective
subsidiaries is a party. During such period, HFS or CUC,
as the case may be, shall enforce, to the fullest extent
permitted under applicable law, the provisions of any
such agreement, including by obtaining injunctions to
prevent any breaches of such agreements and to enforce
specifically the terms and provisions thereof in any
court of the United States of America or of any state
having jurisdiction.
SECTION 5.17. Company Officers; Employment
Contracts; Equity Awards. (a) Pursuant to and in
accordance with the terms hereof and of the amended
and/or restated employment agreements referred to in
Section 5.17(b) (i) at the Effective Time and until
January 1, 2000, Xx. Xxxxxx shall serve as Chairman of
the Board of Directors and Chairman of the Executive
Committee of CUC, and from and after January 1, 2000, Xx.
Xxxxxx shall be President and Chief Executive Officer of
CUC but shall not be Chairman of the Board or Chairman of
the Executive Committee of CUC, and (ii) at the Effective
Time and until January 1, 2000, Xx. Xxxxxxxxx shall serve
as President and Chief Executive Officer of CUC, and from
and after January 1, 2000, Xx. Xxxxxxxxx shall be
Chairman of the Board of Directors and Chairman of the
Executive Committee of CUC but not President and Chief
Executive Officer of CUC. If either of such persons is
unable or unwilling to hold such offices for the period
set forth in his employment agreement, his successor
shall be selected by the Board of Directors of CUC in the
manner set forth in the Restated By-laws.
(b) At or prior to the Effective Time, CUC
agrees to enter into the amended and restated employment
agreements substantially in the forms set forth in
Exhibit 5.17 attached hereto with the CUC officers
identified in Exhibit 5.17, and HFS agrees to enter into
amendments to and/or restatements of the employment
agreements substantially in the forms set forth in
Exhibit 5.17 attached hereto with the HFS officers
identified in Exhibit 5.17.
(c) At the Effective Time, the officers and
key employees of the Surviving Corporation, identified in
Exhibit 5.17, will be granted (i) shares of restricted
CUC Common Stock with an aggregate value of $30 million
(based on the Average XXX Xxxxx), the terms and
conditions with respect to which shall be no less
favorable than the terms and conditions applicable to
restricted stock held by executive officers of CUC as of
the date hereof and (ii) options to acquire an aggregate
of 19,800,000 shares of CUC Common Stock at an exercise
price per share equal to the market value of a share of
CUC Common Stock on the date of grant. All terms and
conditions applicable to such options shall be as
provided in the New CUC Stock Plan, except that the terms
and conditions applicable to the options granted to Xx.
Xxxxxxxxx pursuant to his amended employment agreement
under Section 5.17(b) shall be no less favorable to the
terms and conditions of outstanding options held by Xx.
Xxxxxxxxx as of the date hereof. Stock awards granted
pursuant to this Section 5.17(c) shall be made in such
amounts as identified in Exhibit 5.17 for each
individual. The aggregate amount of options to be
granted pursuant to this Section 5.17(c) is in addition
to the amount of options to acquire shares of CUC Common
Stock granted to Xx. Xxxxxxxxx pursuant to his amended
employment agreement under Section 5.17(b).
(d) Prior to the Effective Time, each of CUC
and HFS agree to adopt a stock option and restricted
stock plan (the "New CUC Stock Plan"), the terms of which
shall be mutually agreed upon by CUC and HFS, pursuant to
which the option and restricted share grants described in
paragraph (c) of this Section 5.17 and in the amended
and/or restated employment agreements referred to in this
5.17 will be made.
SECTION 5.18. Post-Merger Operations.
Following the Effective Time, the combined company shall
maintain a corporate office in New York City, CUC shall
maintain its principal corporate offices in Stamford,
Connecticut and HFS shall maintain its principal
corporate offices in Parsippany, New Jersey.
SECTION 5.19. Conveyance Taxes. CUC and HFS
shall cooperate in the preparation, execution and filing
of all returns, questionnaires, applications or other
documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and
stamp taxes, any transfer, recording, registration and
other fees or any similar taxes which become payable in
connection with the transactions contemplated by this
Agreement that are required or permitted to be filed on
or before the Effective Time. CUC shall pay, and HFS
shall pay, without deduction or withholding from any
amount payable to the holders of HFS Common Stock, any
such taxes or fees imposed by any Governmental Entity
(and any penalties and interest with respect to such
taxes and fees), which become payable in connection with
the transactions contemplated by this Agreement, on
behalf of their respective stockholders.
SECTION 5.20. HFS Convertible Notes. From and
after the date hereof and prior to the Effective Time,
each of CUC or HFS, as applicable, shall take such
actions (including entering into supplemental indentures)
with respect to the notes of HFS issued under (i) the
Indenture between HFS and Bank of America Illinois, dated
October 1, 1994, relating to HFS's 41/2% Convertible Senior
Notes due 1999 and (ii) the Indenture between HFS and
First Trust of Illinois, National Association, dated
February 28, 1996, relating to HFS's 4 % Convertible
Senior Notes due 2003, to implement the provisions of
such Indentures which provide that such notes shall be
convertible into shares of CUC Common Stock and not HFS
Common Stock from and after the Effective Time.
SECTION 5.21. Transition Planning. Xx.
Xxxxxxxxx and Xx. Xxxxxx, as Chairmen of HFS and CUC,
respectively, jointly shall be responsible for
coordinating all aspects of transition planning and
implementation relating to the Merger and the other
transactions contemplated hereby. If either such person
ceases to be Chairman of his respective company for any
reason, such person's successor as Chairman shall assume
his predecessor's responsibilities under this Section
5.21.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1. Conditions to Each Party's
Obligation to Effect the Merger. The respective
obligation of each party to effect the Merger is subject
to the satisfaction or waiver on or prior to the Closing
Date of the following conditions:
(a) Stockholder Approvals. Each of the HFS
Stockholder Approval and the CUC Stockholder Approval
shall have been obtained.
(b) HSR Act. The waiting period (and any
extension thereof) applicable to the Merger under the HSR
Act shall have been terminated or shall have expired.
(c) Governmental and Regulatory Approvals.
Other than the filing provided for under Section 1.3 and
filings pursuant to the HSR Act (which are addressed in
Section 6.1(b)), all consents, approvals and actions of,
filings with and notices to any Governmental Entity
required of HFS, CUC or any of their subsidiaries to
consummate the Merger and the other transactions
contemplated hereby, the failure of which to be obtained
or taken (i) is reasonably expected to have a material
adverse effect on the Surviving Corporation and its
prospective subsidiaries, taken as a whole, or (ii) will
result in a violation of any laws, shall have been
obtained, all in form and substance reasonably
satisfactory to HFS and CUC.
(d) No Injunctions or Restraints. No
judgment, order, decree, statute, law, ordinance, rule or
regulation, entered, enacted, promulgated, enforced or
issued by any court or other Governmental Entity of
competent jurisdiction or other legal restraint or
prohibition (collectively, "Restraints") shall be in
effect (i) preventing the consummation of the Merger, or
(ii) which otherwise is reasonably likely to have a
material adverse effect on HFS or CUC, as applicable;
provided, however, that each of the parties shall have
used its best efforts to prevent the entry of any such
Restraints and to appeal as promptly as possible any such
Restraints that may be entered.
(e) Form S-4. The Form S-4 shall have
become effective under the Securities Act prior to the
mailing of the Joint Proxy Statement by each of HFS and
CUC to their respective stockholders and no stop order or
proceedings seeking a stop order shall be threatened by
the SEC or shall have been initiated by the SEC.
(f) NYSE Listing. The shares of CUC Common
Stock issuable to HFS's stockholders as contemplated by
Article II, the shares of CUC Common Stock issuable upon
exercise of Adjusted Options pursuant to Section 5.6 and
upon exercise of the options to purchase shares of CUC
Common Stock granted pursuant to Section 5.17 and the
shares of restricted CUC Common Stock issued pursuant to
Section 5.17 shall have been approved for listing on the
NYSE, subject to official notice of issuance.
(g) Pooling Letters. CUC and HFS shall have
received letters from each of HFS's independent
accountants and CUC's independent accountants, dated as
of the date the Form S-4 is declared effective and as of
the Closing Date, in each case addressed to CUC and HFS,
stating that accounting for the Merger as a pooling of
interests under Opinion 16 of the Accounting Principles
Board and applicable SEC rules and regulations is
appropriate if the Merger is consummated and closed as
contemplated by this Agreement.
(h) Corporate Governance. CUC shall have
taken all such actions as shall be necessary so that (i)
the Certificate Amendment and By-Laws Amendment shall
become effective not later than the Effective Time; (ii)
the resolutions set forth as part of Exhibit B shall have
been adopted, to be effective upon the Effective Time;
and (iii) at the Effective Time, the composition of the
CUC Board of Directors and the committees of such Board
shall comply with the Restated Certificate, the Restated
By-laws and Exhibit B hereof (assuming HFS has designated
the HFS Directors and CUC has designated the CUC
Directors, in each case as contemplated by Exhibit B).
SECTION 6.2. Conditions to Obligations of CUC.
The obligation of CUC to effect the Merger is further
subject to satisfaction or waiver of the following
conditions:
(a) Representations and Warranties. The
representations and warranties of HFS set forth herein
shall be true and correct both when made and at and as of
the Closing Date, as if made at and as of such time
(except to the extent expressly made as of an earlier
date, in which case as of such date), except where the
failure of such representations and warranties to be so
true and correct (without giving effect to any limitation
as to "materiality" or "material adverse effect" set
forth therein) does not have, and is not likely to have,
individually or in the aggregate, a material adverse
effect on HFS; provided, that the representations and
warranties of HFS set forth in Sections 3.1(i), (j)(iii),
(j)(iv) and (j)(v) and (s) shall nonetheless be deemed
true and correct at and as of the Closing Date regardless
of changes therein caused by an acquisition permitted by
4.1(a)(iv) or by the incurrence of indebtedness permitted
by 4.1(a)(vii), except to the extent that such changes
have, or could reasonably be expected to have, a material
adverse effect on HFS.
(b) Performance of Obligations of HFS. HFS
shall have performed in all material respects all
obligations required to be performed by it under this
Agreement at or prior to the Closing Date.
(c) Tax Opinions. CUC shall have received
from Wachtell, Lipton, Xxxxx & Xxxx, counsel to CUC, on a
date immediately prior to the mailing of the Joint Proxy
Statement and on the Closing Date, opinions, in each case
dated as of such respective dates, to the effect that:
(i) the Merger will constitute a "reorganization" within
the meaning of Section 368(a) of the Code, and CUC and
HFS will each be a party to such reorganization within
the meaning of Section 368(b) of the Code; (ii) no gain
or loss will be recognized by CUC or HFS as a result of
the Merger; (iii) no gain or loss will be recognized by
the stockholders of HFS upon the exchange of their shares
of HFS Common Stock solely for shares of CUC Common Stock
pursuant to the Merger, except with respect to cash, if
any, received in lieu of fractional shares of CUC Common
Stock; (iv) the aggregate tax basis of the shares of CUC
Common Stock received solely in exchange for shares of
HFS Common Stock pursuant to the Merger (including
fractional shares of CUC Common Stock for which cash is
received) will be the same as the aggregate tax basis of
the shares of HFS Common Stock exchanged therefor; and
(v) the holding period for shares of CUC Common Stock
received in exchange for shares of HFS Common Stock
pursuant to the Merger will include the holding period of
the shares of HFS Common Stock exchanged therefor,
provided such shares of HFS Common Stock were held as
capital assets by the stockholder at the Effective Time.
In rendering such opinions, counsel for CUC shall be
entitled to rely upon representations of officers of CUC,
HFS and stockholders of HFS substantially in the form of
Exhibits D and E hereto.
(d) No Material Adverse Change. At any time
after the date of this Agreement there shall not have
occurred any material adverse change relating to HFS.
SECTION 6.3. Conditions to Obligations of HFS.
The obligation of HFS to effect the Merger is further
subject to satisfaction or waiver of the following
conditions:
(a) Representations and Warranties. The
representations and warranties of CUC set forth herein
shall be true and correct both when made and at and as of
the Closing Date, as if made at and as of such time
(except to the extent expressly made as of an earlier
date, in which case as of such date), except where the
failure of such representations and warranties to be so
true and correct (without giving effect to any limitation
as to "materiality," or "material adverse effect" set
forth therein) does not have, and is not likely to have,
individually or in the aggregate, a material adverse
effect on CUC; provided, that the representations and
warranties of CUC set forth in Sections 3.2(i), (j)(iii),
(j)(iv) and (j)(v) and (s) shall nonetheless be deemed
true and correct at and as of the Closing Date regardless
of changes therein caused by an acquisition permitted by
4.1(b)(iv) or by the incurrence of indebtedness permitted
by 4.1(b)(vii), except to the extent that such changes
have, or could reasonably be expected to have, a material
adverse effect on CUC.
(b) Performance of Obligations of CUC. CUC
shall have performed in all material respects all
obligations required to be performed by it under this
Agreement at or prior to the Closing Date.
(c) Tax Opinions. HFS shall have received
from Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, counsel to
HFS, on a date immediately prior to the mailing of the
Joint Proxy Statement and on the Closing Date, opinions,
in each case dated as of such respective dates, to the
effect that: (i) the Merger will constitute a
"reorganization" within the meaning of Section 368(a) of
the Code, and CUC and HFS will each be a party to such
reorganization within the meaning of Section 368(b) of
the Code; (ii) no gain or loss will be recognized by CUC
or HFS as a result of the Merger; (iii) no gain or loss
will be recognized by the stockholders of HFS upon the
exchange of their shares of HFS Common Stock solely for
shares of CUC Common Stock pursuant to the Merger, except
with respect to cash, if any, received in lieu of
fractional shares of CUC Common Stock; (iv) the aggregate
tax basis of the shares of CUC Common Stock received
solely in exchange for shares of HFS Common Stock
pursuant to the Merger (including fractional shares or
CUC Common Stock for which cash is received) will be the
same as the aggregate tax basis of the shares of HFS
Common Stock exchanged therefor; and (v) the holding
period for shares of CUC Common Stock received in
exchange for shares of HFS Common Stock pursuant to the
Merger will include the holding period of the shares of
HFS Common Stock exchanged therefor, provided such shares
of HFS Common Stock were held as capital assets by the
stockholder at the Effective Time. In rendering such
opinions, counsel for HFS shall be entitled to rely upon
representations of officers of CUC, HFS and stockholders
of HFS substantially in the form of Exhibits D and E
hereto.
(d) No Material Adverse Change. At any time
after the date of this Agreement there shall not have
occurred any material adverse change relating to CUC.
SECTION 6.4. Frustration of Closing
Conditions. Neither CUC nor HFS may rely on the failure
of any condition set forth in Section 6.1, 6.2 or 6.3, as
the case may be, to be satisfied if such failure was
caused by such party's failure to use best efforts to
consummate the Merger and the other transactions
contemplated by this Agreement, as required by and
subject to Section 5.5.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1. Termination. This Agreement may
be terminated at any time prior to the Effective Time,
and (except in the case of 7.1(d) or 7.1(f)) whether
before or after the HFS Stockholder Approval or the CUC
Stockholder Approval:
(a) by mutual written consent of CUC and
HFS;
(b) by either CUC or HFS:
(i) if the Merger shall not have
been consummated by December 31, 1997, provided,
however, that the right to terminate this Agreement
pursuant to this Section 7.1(b)(i) shall not be
available to any party whose failure to perform any
of its obligations under this Agreement results in
the failure of the Merger to be consummated by such
time; provided, however, that this Agreement may be
extended not more than 30 days by either party by
written notice to the other party if the Merger
shall not have been consummated as a direct result
of CUC or HFS having failed to receive all
regulatory approvals required to be obtained with
respect to the Merger.
(ii) if the HFS Stockholder Approval
shall not have been obtained at an HFS Stockholders
Meeting duly convened therefor or at any adjournment
or postponement thereof;
(iii) if the CUC Stockholder Approval
shall not have been obtained at a CUC Stockholders
Meeting duly convened therefor or at any adjournment
or postponement thereof; or
(iv) if any Restraint having any of
the effects set forth in Section 6.1(d) shall be in
effect and shall have become final and
nonappealable; provided, that the party seeking to
terminate this Agreement pursuant to this Section
7.1(b)(iv) shall have used best efforts to prevent
the entry of and to remove such Restraint;
(c) by CUC, if HFS shall have breached or
failed to perform in any material respect any of its
representations, warranties, covenants or other
agreements contained in this Agreement, which breach or
failure to perform (A) would give rise to the failure of
a condition set forth in Section 6.2(a) or (b), and (B)
is incapable of being cured by HFS or is not cured within
45 days of written notice thereof;
(d) prior to receipt of the CUC Stockholder
Approval, by CUC in accordance with Section 4.3(b);
provided that, in order for the termination of this
Agreement pursuant to this paragraph (d) to be deemed
effective, CUC shall have complied with all provisions
contained in Section 4.3, including the notice provisions
therein, and with applicable requirements, including the
payment of the Termination Fee, of Section 5.9;
(e) by HFS, if CUC shall have breached or
failed to perform in any material respect any of its
representations, warranties, covenants or other
agreements contained in this Agreement, which breach or
failure to perform (A) would give rise to the failure of
a condition set forth in Section 6.3(a) or (b), and (B)
is incapable of being cured by CUC or is not cured within
45 days of written notice thereof; or
(f) prior to receipt of the HFS Stockholder
Approval, by HFS in accordance with Section 4.2(b);
provided that, in order for the termination of this
Agreement pursuant to this paragraph (f) to be deemed
effective, HFS shall have complied with all provisions of
Section 4.2, including the notice provisions therein, and
with applicable requirements, including the payment of
the Termination Fee, of Section 5.9.
SECTION 7.2. Effect of Termination. In the
event of termination of this Agreement by either HFS or
CUC as provided in Section 7.1, this Agreement shall
forthwith become void and have no effect, without any
liability or obligation on the part of CUC or HFS, other
than the provisions of Section 3.1(o), Section 3.2(o),
the last sentence of Section 5.4, Section 5.9, this
Section 7.2 and Article VIII, which provisions survive
such termination, and except to the extent that such
termination results from the willful and material breach
by a party of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
SECTION 7.3. Amendment. This Agreement may be
amended by the parties at any time before or after the
HFS Stockholder Approval or the CUC Stockholder Approval;
provided, however, that after any such approval, there
shall not be made any amendment that by law requires
further approval by the stockholders of HFS or CUC
without the further approval of such stockholders. This
Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
SECTION 7.4. Extension; Waiver. At any time
prior to the Effective Time, a party may (a) extend the
time for the performance of any of the obligations or
other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties of the
other parties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c)
subject to the proviso of Section 7.3, waive compliance
by the other party with any of the agreements or
conditions contained in this Agreement. Any agreement on
the part of a party to any such extension or waiver shall
be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party
to this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of
such rights.
SECTION 7.5. Procedure for Termination,
Amendment, Extension or Waiver. A termination of this
Agreement pursuant to Section 7.1, an amendment of this
Agreement pursuant to Section 7.3 or an extension or
waiver pursuant to Section 7.4 shall, in order to be
effective, require, in the case of CUC or HFS, action by
its Board of Directors or, with respect to any amendment
to this Agreement, the duly authorized committee of its
Board of Directors to the extent permitted by law.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1. Nonsurvival of Representations
and Warranties. None of the representations and
warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the
Effective Time. This Section 8.1 shall not limit any
covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 8.2. Notices. All notices, requests,
claims, demands and other communications under this
Agreement shall be in writing and shall be deemed given
if delivered personally, telecopied (which is confirmed)
or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or
at such other address for a party as shall be specified
by like notice):
(a) if to CUC, to
CUC International Inc.
000 Xxxxxx Xxxxxx
X.X. Xxx 00000
Xxxxxxxx, Xxxxxxxxxxx 00000
Telecopy No: (000) 000-0000
Attention: General Counsel
with a copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00 Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxxx Xxxxxxxx
(b) if to HFS, to
HFS Incorporated
0 Xxxxxx Xxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Telecopy No. (000) 000-0000
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxx Xxx
SECTION 8.3. Definitions. For purposes of
this Agreement:
(a) except for purposes of Section 5.11, an
"affiliate" of any person means another person that
directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under
common control with, such first person, where "control"
means the possession, directly or indirectly, of the
power to direct or cause the direction of the management
policies of a person, whether through the ownership of
voting securities, by contract, as trustee or executor,
or otherwise;
(b) "material adverse change" or "material
adverse effect" means, when used in connection with HFS
or CUC, any change, effect, event, occurrence or state of
facts that is, or would reasonably be expected to be,
materially adverse to the business, financial condition
or results of operations of such party and its
subsidiaries taken as a whole; and the terms "material"
and "materially" have correlative meanings;
(c) "person" means an individual,
corporation, partnership, limited liability company,
joint venture, association, trust, unincorporated
organization or other entity;
(d) a "subsidiary" of any person means
another person, an amount of the voting securities, other
voting ownership or voting partnership interests of which
is sufficient to elect at least a majority of its Board
of Directors or other governing body (or, if there are no
such voting interests, 50% or more of the equity
interests of which) is owned directly or indirectly by
such first person and includes, in the case of HFS, all
corporations conducting the car rental operation of Avis
Inc. (referred to as "ARAC" in HFS's Annual Report on
Form 10-K for the year ended December 31, 1996) which
are: Rental Car System Holdings, Inc. and its
subsidiaries (including the corporate operations of Avis,
Inc. and Prime Vehicles Trust, Avis International, Ltd.
and subsidiaries, Avis Enterprises, Inc. and
subsidiaries, Pathfinder Insurance Company and Global
Excess & Reinsurance Ltd.); and
(e) "knowledge" of any person which is not
an individual means the knowledge of such person's
executive officers or senior management of such person's
operating divisions and segments, in each case after
reasonable inquiry.
SECTION 8.4. Interpretation. When a reference
is made in this Agreement to an Article, Section or
Exhibit, such reference shall be to an Article or Section
of, or an Exhibit to, this Agreement unless otherwise
indicated. The table of contents and headings contained
in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation
of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement,
they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein" and
"hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. All
terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document
made or delivered pursuant hereto unless otherwise
defined therein. The definitions contained in this
Agreement are applicable to the singular as well as the
plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such term. Any
agreement, instrument or statute defined or referred to
herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as
from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by
waiver or consent and (in the case of statutes) by
succession of comparable successor statutes and
references to all attachments thereto and instruments
incorporated therein. References to a person are also to
its permitted successors and assigns.
SECTION 8.5. Counterparts. This Agreement may
be executed in one or more counterparts, all of which
shall be considered one and the same agreement and shall
become effective when one or more counterparts have been
signed by each of the parties and delivered to the other
parties.
SECTION 8.6. Entire Agreement; No Third-Party
Beneficiaries. This Agreement (including the documents
and instruments referred to herein) and the
Confidentiality Agreement (a) constitute the entire
agreement, and supersede all prior agreements and
understandings, both written and oral, between the
parties with respect to the subject matter of this
Agreement and (b) except for the provisions of Article
II, Section 5.6 and Section 5.8, are not intended to
confer upon any person other than the parties any rights
or remedies.
SECTION 8.7. Governing Law. This Agreement
shall be governed by, and construed in accordance with,
the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles
of conflict of laws thereof.
SECTION 8.8. Assignment. Neither this
Agreement nor any of the rights, interests or obligations
under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by either of the
parties hereto without the prior written consent of the
other party. Any assignment in violation of the
preceding sentence shall be void. Subject to the
preceding two sentences, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the
parties and their respective successors and assigns.
SECTION 8.9. Consent to Jurisdiction. Each of
the parties hereto (a) consents to submit itself to the
personal jurisdiction of any federal court located in the
State of Delaware or any Delaware state court in the
event any dispute arises out of this Agreement or any of
the transactions contemplated by this Agreement, (b)
agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for
leave from any such court, and (c) agrees that it will
not bring any action relating to this Agreement or any of
the transactions contemplated by this Agreement in any
court other than a federal court sitting in the State of
Delaware or a Delaware state court.
SECTION 8.10. Headings. The headings
contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 8.11. Severability. If any term or
other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and
effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to
the fullest extent permitted by applicable law in an
acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
IN WITNESS WHEREOF, CUC and HFS have caused
this Agreement to be signed by their respective officers
thereunto duly authorized, all as of the date first
written above.
CUC INTERNATIONAL INC.
By /s/ E. Xxxx Xxxxxxx
E. Xxxx Xxxxxxx
President and Chief Operating
Officer
HFS INCORPORATED
By /s/ Xxxxx X. Xxxxxxxxx
Xxxxx X. Xxxxxxxxx
Chairman and Chief Executive
Officer
