Avis Budget Group: SEC Filing

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Filed Pursuant to Rule 424(b)(4)
Registration No. 333-13537

16,500,000 SHARES
[LOGO]
CUC INTERNATIONAL INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)

-------------------

Of the 16,500,000 shares of Common Stock being offered, 13,200,000 shares
are being offered hereby in the United States and 3,300,000 shares are being
offered in a concurrent international offering outside the United States. The
public offering price and the aggregate underwriting discount per share will be
identical for both offerings. See "Underwriting".

All of the shares of Common Stock offered hereby are being sold by the
Selling Stockholders. See "Selling Stockholders". The Company will not receive
any of the proceeds from the sale of the shares offered.

The last reported sale price of the Common Stock, which is listed under the
symbol "CU", on the New York Stock Exchange, Inc. Composite Tape on October 29,
1996 was $24.375 per share. See "Price Range of Common Stock and Dividend
Policy".
Unless otherwise indicated, all information included in this Prospectus has
been adjusted for the three-for-two split of the Common Stock effected on
October 21, 1996, and further assumes that the Underwriters' over-allotment
options will not be exercised.

------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

-------------------

PROCEEDS TO
PUBLIC UNDERWRITING SELLING
OFFERING PRICE DISCOUNT(1) STOCKHOLDERS(2)
---------------------------------------------------------------------------------

Per Share......................................... $24.25 $0.80 $23.45
Total(3).......................................... $400,125,000 $13,200,000 $386,925,000

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(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.

(2) Before deducting estimated expenses of $300,000 payable by the Company and
$20,000 payable by the Selling Stockholders.

(3) Certain of the Selling Stockholders have granted to the U.S. Underwriters an
option exercisable on or before November 12, 1996 to purchase up to an
additional 1,980,000 shares at the public offering price per share, less the
underwriting discount, solely to cover over-allotments. Additionally,
certain of the Selling Stockholders have granted to the International
Underwriters an option exercisable on or before November 12, 1996 to
purchase up to an additional 495,000 shares at the public offering price per
share, less the underwriting discount, solely to cover over-allotments. If
such options are exercised in full, the total initial public offering price,
underwriting discount, and proceeds to the Selling Stockholders will be
$460,143,750, $15,180,000 and $444,963,750 respectively. See "Underwriting".

-------------------

The shares offered hereby are offered severally by the U.S. Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that certificates
for the shares will be ready for delivery in New York, New York, on or about
November 4, 1996, against payment therefor in immediately available funds.

GOLDMAN, SACHS & CO. MORGAN STANLEY & CO.
INCORPORATED

BEAR, STEARNS & CO. INC.

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

SMITH BARNEY INC.
----------------

THE DATE OF THIS PROSPECTUS IS OCTOBER 29, 1996.

AVAILABLE INFORMATION

CUC International Inc. (the "Company" or "CUC") is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith files reports, proxy
statements and other information with the United States Securities and Exchange
Commission (the "Commission"). The reports, proxy statements and other
information filed by the Company with the Commission may be inspected and copied
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following Regional Offices of
the Commission: New York Regional Office, 7 World Trade Center, Suite 1300, New
York, New York 10048; and Chicago Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661, and at the Commission's Web site at
(http://www.sec.gov). Copies of such material also may be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, material filed by the
Company may be inspected at the offices of the New York Stock Exchange, Inc.
(the "NYSE") at 20 Broad Street, New York, New York 10005, on which the shares
of the common stock, par value $.01 per share, of the Company (the "Common
Stock") are listed.

The Prospectus constitutes a part of a Registration Statement on Form S-3
filed by the Company with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"). This Prospectus omits certain of the information
contained in the Registration Statement, and reference is hereby made to the
Registration Statement and to the exhibits relating thereto for further
information with respect to the Company and the Common Stock. Any statements
contained herein concerning the provisions of any document are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission. Each such statement is qualified in its entirety by such reference.
------------------------

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NYSE OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents (and the amendments thereto) filed by the Company
(File No. 1-10308) with the Commission pursuant to the Exchange Act are
incorporated herein by reference and are made a part hereof:

(i) The Company's Annual Report on Form 10-K for its fiscal year ended
January 31, 1996, filed with the Commission on April 26, 1996 (the "CUC
10-K");

(ii) The Company's Quarterly Report on Form 10-Q for its fiscal quarter
ended April 30, 1996, filed with the Commission on June 14, 1996;

(iii) The Company's Quarterly Report on Form 10-Q for its fiscal quarter
ended July 31, 1996, filed with the Commission on September 16, 1996;

(iv) The Company's Current Reports on Form 8-K, filed with the
Commission on February 21, 1996, February 22, 1996, March 12, 1996, April
22, 1996, August 5, 1996, August 14, 1996, September 17, 1996, September 19,
1996, September 26, 1996, October 7, 1996 and October 28, 1996; and

(v) The description of the Common Stock contained in the Company's
Registration Statements on Form 8-A, filed with the Commission on July 27,
1984 and August 15, 1989, including any amendment or report filed for the
purposes of updating such description.

All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of the offering made hereby shall be deemed to be incorporated
herein by reference and to be a part hereof on and from the date of filing of
such documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference in this Prospectus shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or incorporated herein by reference or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.

Copies of all documents incorporated by reference, other than exhibits to
such documents (unless such exhibits are specifically incorporated by reference
into such documents), will be provided without charge to each person, including
any beneficial owner, to whom a copy of this Prospectus has been delivered upon
the written or oral request of such person. Requests for such copies should be
directed to the Company, 707 Summer Street, Stamford, Connecticut 06901,
Attention: Secretary, telephone: (203) 324-9261.

------------------------

THE COMPANY

GENERAL

The Company is a leading technology-driven, membership-based consumer
services company that provides more than 62.5 million customers worldwide with
access to home shopping, travel, insurance, automobile, dining, home
improvement, lifestyle club, checking account enhancement and discount coupon
programs. Together with leading banks, retailers, oil companies, credit unions,
charitable organizations and other institutions, the Company offers significant
cost savings and convenience shopping for a wide array of high-quality consumer
goods and services.

The Company's goal is to be the leading consumer services content provider
as well as to broaden its membership base through untapped distribution
channels, global expansion and the interactive marketplace. Management believes
that the Company is uniquely positioned to lead in the expanding interactive
marketplace by combining its existing direct marketing expertise with exciting
new electronic media. The Company recently completed the acquisitions of two
interactive media companies: Davidson & Associates, Inc. ("Davidson") and Sierra
On-Line, Inc. ("Sierra"). See "--Recent Developments". These acquisitions will
enable the Company to offer content in several additional major areas of
consumer spending and, more importantly, to enhance its existing product
offerings in the electronic marketplace. Management believes the creative
development teams of Davidson and Sierra will enable the Company to design an
Internet World Wide Web site (or "Web site") that will integrate the Company's
current service offerings with creative and attractive entertainment features.
The Web site will be an important marketing tool in the Company's effort to
maximize consumer use of its interactive services.

MEMBERSHIP-BASED CONSUMER SERVICES. The Company's core business is
providing consumer services through individual, wholesale and discount
program memberships ("memberships"). Individual memberships, whereby members
pay directly for services and the Company pays the associated marketing
costs, include Shoppers Advantage-Registered Trademark-, Travelers
Advantage-Registered Trademark-, AutoVantage-Registered Trademark- and
insurance products. Individual membership fees generally range between $10
and $250 per year. Wholesale memberships include enhancement packages sold
through banks and credit unions, and insurance products sold through credit
unions, for which the Company acts as a third-party administrator. The fees
for these memberships generally range between $6 and $50 per year. Discount
Program memberships, which are sold primarily through fundraising
institutions, merchant-sponsored or general advertising, include the
Entertainment-Registered Trademark- and Gold C-Registered Trademark- coupon
book programs. Fees for these memberships generally range from $10 to $50
per year.

DISTRIBUTION CHANNELS. The Company markets its memberships through a
variety of distribution channels. The Company reaches consumers through
financial institutions or other organizations (by direct marketing or direct
sales force), merchant-sponsored or general advertising, and fundraising
institutions such as schools and charitable organizations.

The table below illustrates the Company's principal membership services and
the distribution channels through which such services are currently offered:

CUC'S SERVICES AND DISTRIBUTION CHANNELS

DISTRIBUTION CHANNELS
------------------------------------------------------------------------------------------------------------------

SMALL NEW
LARGE BANKS CREDIT AIRLINES INTER- CHARITIES/ VACATION NEW HOUSE-
SERVICES BANKS RETAIL OIL & S&LS UNIONS & HOTELS ACTIVE CLUBS SCHOOLS DIRECT OWNERS CHANNELS TV HOLDS
----- ------ --- ------ ------ -------- ------ ---------- ------- ------ -------- -------- --- ------
Shopping........ * * * * * * T T *
Dining.......... * * * * * * T
Auto............ * * * * * * * T T T
Travel.......... * * * * * * * * * T T
Home............ * * * *
Health.......... * T *
Privacy......... * * * * T
Lifestyle....... *
Entertainment/ * * T * * * T T *
Coupons....... *
Credit Card * * *
Protection.... *
Enhancements.... * * * *
Financial T
Services...... *
Buyers.......... * * * *
New Services.... T T T T T T
Interactive * T * * T
Media.........

- ------------------------

* = Currently Available

T = Testing

INTERACTIVE MEDIA. As discussed below under "--Recent Developments",
the Company recently completed the acquisitions of Davidson and Sierra.

Davidson and Sierra develop, publish, manufacture and distribute
high-quality educational/ entertainment (or "edutainment") and personal
productivity (or "how to") interactive multimedia products for home and
school use. These products incorporate characters, themes, sound, graphics,
music and speech in ways that the Company believes are engaging to the user,
and are designed for multimedia PC's, including CD-ROM-based PC systems, and
selected emerging platforms. Davidson's and Sierra's products are offered
through a variety of distribution channels, including specialty retailers,
mass merchandisers, discounters and schools.

GROWTH STRATEGY

Management anticipates that the Company's continued growth will derive from:

- BUILDING ITS CORE BUSINESS. Management intends to access new distribution
channels, develop new services and enhance existing services. For example,
the Company recently introduced its "Transfer Plus" program through which
its services are cross-marketed to customers of other providers that offer
products and services which complement those offered by the Company. Using
this new distribution channel, a hotel chain, for example, can "transfer"
a customer who has made a hotel reservation by telephone to a marketing
representative of the Company who, in turn, markets CUC's discount travel
services to that consumer. Examples of new and enhanced

services recently introduced by the Company include the Gardening Club
(through which consumers gain access to a variety of gardening information
and purchasing discounts) and Entertainment Gold (an enhanced version of
the Company's traditional Entertainment product).

- ACQUIRING COMPLEMENTARY BUSINESSES. The Company has completed multiple
acquisitions in recent years. Management intends to continue to
aggressively pursue the Company's expansion through the selective
acquisition of complementary businesses. Such acquisitions enable the
Company to offer additional services (such as the hunting, fishing,
gardening and other lifestyle club memberships offered by North American
Outdoor Group, Inc. ("NAOG")) and acquire new distribution channels (such
as the "new mover" distribution channel acquired through the Company's
acquisitions of Welcome Wagon International, Inc. ("Welcome Wagon") and
Getko Group Inc.). More recently, the Company acquired Ideon Group, Inc.,
which strengthened the Company's existing credit card registration and
loss notification services. See "--Recent Developments".

- EXPANDING INTERNATIONALLY. The Company plans to continue the rapid
expansion of its business outside of the United States. In Europe, for
example, five major European banks currently participate in the Company's
enhancement business (representing access to more than 15 million
consumers) and the Company has continued to develop relationships with
other major European financial institutions, and to market additional
services to these institutions. The Company is also expanding in Japan and
other Asian countries.

- DEVELOPING INTERACTIVE MEDIA CHANNELS. Management believes that the
ability to deliver its services via interactive multimedia channels (e.g.,
the Internet, consumer online services, interactive television and other
emerging channels) represents a significant opportunity. Members who
access the Company's services by interactive media channels renew
memberships at higher rates and are less costly to service than those
members who access by telephone. Management endeavors to position the
Company's services to make them accessible through a wide range of
interactive media. Management plans to create a single, all-encompassing
Web site that will enable consumers to access the Company's consumer
services. Management anticipates that the Davidson and Sierra creative
teams will enable the Company to develop a Web site that combines its
transaction-based consumer service offerings with the entertainment
features necessary to attract consumers.

RECENT DEVELOPMENTS

DAVIDSON ACQUISITION. On July 24, 1996, the Company acquired all of the
outstanding capital stock of Davidson for a purchase price of approximately $1.0
billion (the "Davidson Acquisition"). Pursuant to the Davidson Acquisition,
approximately 45.1 million shares of Common Stock were issued to the former
holders of Davidson common stock, including approximately 32.7 million shares of
Common Stock issued to the Selling Stockholders. See "Selling Stockholders". The
Davidson Acquisition was accounted for as a pooling-of-interests. See "The
Company--Interactive Media".

SIERRA ACQUISITION. In addition, on July 24, 1996, the Company acquired all
of the outstanding capital stock of Sierra for a purchase price of approximately
$858.0 million (the "Sierra Acquisition"). Pursuant to the Sierra Acquisition,
approximately 38.4 million shares of Common Stock were issued to the former
holders of Sierra common stock. The Sierra Acquisition was accounted for as a
pooling-of-interests. See "The Company--Interactive Media".

IDEON ACQUISITION. On August 7, 1996, the Company acquired all of the
outstanding capital stock of Ideon Group, Inc. ("Ideon") for a purchase price of
approximately $393.0 million (the "Ideon Acquisition"). Pursuant to the Ideon
Acquisition, approximately 16.6 million shares of Common Stock were issued to
the former holders of Ideon common stock. The Ideon Acquisition was accounted
for as a pooling-of-interests. Ideon is a holding company with three principal
business units: SafeCard Services,

Incorporated ("SafeCard"), Wright Express Corporation ("Wright Express") and
National Leisure Group, Inc. ("NLG"). SafeCard, which is the largest subsidiary
of Ideon, is a provider of credit card enhancement and continuity products and
services. Wright Express is a provider of information processing, information
management and financial services to commercial car, van and truck fleets in the
United States. NLG is a provider of vacation travel packages and cruises
directly to consumers in association with established retailers and warehouse
clubs throughout New England, New York and New Jersey and with credit card
issuers and travel club members nationwide.

The Company's executive offices are located at 707 Summer Street, Stamford,
Connecticut 06901, and its telephone number is (203) 324-9261.

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company as of July 31, 1996 which has been adjusted to give effect to (i) the
Company's three-for-two stock split effected on October 21, 1996 for holders of
record of Common Stock on October 7, 1996 and (ii) the Ideon Acquisition(A). The
Company will not receive any proceeds from the sale of the Common Stock offered
hereby.

ADJUSTED
JULY 31, 1996
--------------

(IN THOUSANDS)
Short-term debt
Revolving credit facility................................................................................... $ 31,452
Bank term loans............................................................................................. 1,382
--------------
Total short-term debt................................................................................... $ 32,834
--------------
--------------
Long-term debt (excluding current installments)
Bank term loans............................................................................................. $ 4,654
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Total long-term debt.................................................................................... 4,654
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Convertible debt.............................................................................................. 23,428
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Shareholders' equity
Common stock--par value $.01 per share; authorized 600 million shares; issued 397,926,730 shares............ 3,979
Additional paid-in capital.................................................................................. 552,956
Retained earnings........................................................................................... 687,058
Treasury stock, at cost, 5,968,642 shares................................................................... (52,291)
Deferred compensation....................................................................................... (30,485)
Unrealized loss on marketable securities.................................................................... (41)
Foreign currency translation................................................................................ (2,678)
--------------
Total shareholders' equity.............................................................................. 1,158,498
--------------
Total capitalization.................................................................................... $1,186,580
--------------
--------------

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(A) For a discussion of certain costs and expenses associated with the Ideon
Acquisition, see Note (e) to "Selected Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources; Inflation; Seasonality".

USE OF PROCEEDS

The Company will not receive any proceeds from the sale of the Common Stock
being offered hereby. See "Selling Stockholders".

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The Company's Common Stock is traded on the NYSE under the symbol "CU". The
following table sets forth high and low closing sale prices for the Common Stock
as reported on the NYSE Composite Transactions for the periods indicated,
adjusted to give effect to the Company's three-for-two stock split effected on
October 21, 1996 for holders of record of Common Stock on October 7, 1996:

COMMON
STOCK
PRICE
RANGE
----------
FISCAL YEAR ENDED: HIGH LOW
---- ---

JANUARY 1995
First Quarter...................................................................................................... $14.583 $12.000
Second Quarter..................................................................................................... 13.583 11.417
Third Quarter...................................................................................................... 15.417 13.583
Fourth Quarter..................................................................................................... 16.083 12.750

JANUARY 1996
First Quarter...................................................................................................... 18.083 15.417
Second Quarter..................................................................................................... 20.750 16.333
Third Quarter...................................................................................................... 24.250 19.917
Fourth Quarter..................................................................................................... 25.333 20.000

FISCAL YEAR ENDING: HIGH LOW
---- ---

JANUARY 1997
First Quarter...................................................................................................... $26.083 $18.667
Second Quarter..................................................................................................... 26.250 21.250
Third Quarter (through October 29, 1996)........................................................................... 27.328 21.922

The last reported sale price of the Common Stock on the NYSE Composite Tape
on October 29, 1996 was $24.375 per share.

The Company has not paid any dividends with respect to the Common Stock
since inception, other than an extraordinary dividend of cash and convertible
subordinated debentures distributed to shareholders in connection with a
recapitalization of the Company effected in fiscal year 1990.

SELECTED FINANCIAL DATA

The following selected financial data are derived from the supplemental
consolidated financial statements of the Company and the related notes thereto
(the "Supplemental Consolidated Financial Statements") included in the Company's
Current Report on Form 8-K filed with the Commission on September 17, 1996 (the
"September 17, 1996 Form 8-K"). This data should be read in conjunction with the
Consolidated Financial Statements and the Supplemental Consolidated Financial
Statements, and the related notes thereto, incorporated herein by reference to
the CUC 10-K and to the September 17, 1996 Form 8-K, and Management's Discussion
and Analysis of Financial Condition and Results of Operations, included
elsewhere in this Prospectus.

(IN THOUSANDS, EXCEPT FOR PER COMMON SHARE DATA)
------------------------------------------------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JULY 31,
---------------------------------------------------------------- ----------------------
1996(B) 1995(L) 1994 1993(M) 1992 1996 1995
---------- ---------- ---------- ---------- -------- ---------- --------
(UNAUDITED)

INCOME STATEMENT DATA (A)
Total revenues................... $1,935,232 $1,554,611 $1,278,664 $1,043,311 $904,052 $1,071,223 $896,707
Income from continuing operations
before income taxes............ 235,312(C) 256,931(F) 198,319 117,434 100,896(G) 161,341(E) 60,514(K)
Income from continuing
operations..................... 144,975(C) 162,057(F) 124,705 80,239 70,479(G) 92,582(E) 35,936(K)
Income per common share from
continuing operations(D)....... $ .37(C) $ .43(F) $ .34 $ .24 $ .24(G) $ .23(E) $ .09(K)
Cash dividends per common
share(I)....................... $ .01 $ .01 $ .01 $ .01 $ .01 $ .01 $ .01
---------- ---------- ---------- ---------- -------- ---------- --------
---------- ---------- ---------- ---------- -------- ---------- --------
Weighted average number of common
and dilutive common equivalent
shares outstanding(D).......... 392,208 379,263 365,915 340,712 288,162 399,267 388,674
---------- ---------- ---------- ---------- -------- ---------- --------
---------- ---------- ---------- ---------- -------- ---------- --------
BALANCE SHEET DATA(A)
Total assets..................... $2,068,196 $1,772,122 $1,199,805 $1,032,269 $814,961 $2,137,452
Long-term obligations(H)......... 6,481 22,872 24,235 30,091 16,336 6,036
Zero coupon convertible notes.... 14,410 15,046 22,176 37,295 69,228 --
Convertible debt................. 23,389 34,634 -- -- -- 23,428
Stockholders' equity............. 1,002,523(J) 826,083 558,181 389,461 235,675 1,158,498(E)
Working capital.................. 759,271 523,996 298,230 147,475 167,394 868,367

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(A) During the six months ended July 31, 1996, the Company acquired Davidson
and Sierra, and in August 1996 the Company acquired Ideon. These
acquisitions were accounted for in accordance with the pooling-of-interests
method. Accordingly, all financial data has been restated for all prior
periods to include Davidson, Sierra and Ideon. See "The Company--Recent
Developments".

(B) During the fiscal year ended January 31, 1996, the Company acquired Welcome
Wagon, CUC Europe Limited, and Credit Card Sentinel, and Ideon acquired NLG.
These acquisitions were accounted for in accordance with the purchase method
and, accordingly, have been included in the Company's results of operations
from the respective dates of acquisition. The results of operations of these
acquired entities for the periods prior to their acquisition were not
significant to the historical financial statements of the Company.

(C) Includes provision for costs incurred in connection with the acquisition of
Advance Ross Corporation ("Advance Ross"). The charge aggregated $5.2
million ($4.2 million or $.01 per common share after-tax effect). Also
during fiscal 1996, Ideon recorded pre-tax charges of $43.8 million related
to the abandonment of certain new product development efforts and the
restructuring of its SafeCard division and its corporate infrastructure.

(D) Adjusted to give effect to the three-for-two stock split effected on
October 21, 1996 for holders of record of Common Stock on October 7, 1996.

(E) Includes provision for costs incurred in connection with the acquisitions
of Davidson and Sierra. The charge aggregated $28.6 million ($25.1 million
or $.06 per common share after-tax effect). All costs related to the Ideon
Acquisition have not been reflected in the Supplemental Consolidated
Financial Statements, but will be reflected in the Company's consolidated
statement of income during the period the Ideon Acquisition is completed.
Such costs are non-recurring and include integration and transaction costs
as well as costs relating to certain outstanding litigation matters (see
Note 6 to the Supplemental Consolidated Financial Statements as of and for
the six months ended July 31, 1996), giving consideration to the Company's
intended approach to these matters, which are estimated by Management to
approximate $125.0 million ($80.0 million after tax effect). See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources; Inflation; Seasonality".

(F) During fiscal 1995, Ideon recorded a pre-tax charge of $7.9 million for
various severance agreements and a lease termination in connection with a
reorganization of its operations and senior management team.

(G) Includes provision for costs incurred in connection with the integration of
the operations of the Company and Entertainment Publishing Corp. (acquired
during fiscal 1992 in a transaction accounted for in accordance with the
pooling-of-interests method) and costs of professional fees and other
expenses related to the merger with Entertainment Publishing Corp. The
charge aggregated $20.7 million ($15 million or $.05 per common share
after-tax effect). Also includes a gain from the sale of an unconsolidated
affiliate of Advance Ross. The gain aggregated $11.7 million ($7 million or
$.02 per common share after-tax effect). In addition, includes a pre-tax
charge of $17.5 million in connection with Ideon's relocation of an
operations center.

(H) Includes current portion of long-term debt of $1.4 million, $9 million,
$6.3 million, $3.4 million, $1.2 million and $1.4 million at January 31,
1996, 1995, 1994, 1993, 1992 and July 31, 1996, respectively. Excludes $15.4
million, $11.8 million, $5.5 million, $23.2 million, $26.7 million and $31.5
million of amounts due under revolving credit facilities at January 31,
1996, 1995, 1994, 1993, 1992 and July 31, 1996, respectively, and $6 million
due at January 31, 1993 under a note payable issued in connection with the
acquisition of Sally Foster Gift Wrap, LP ("Sally Foster").

(I) Represents cash dividends paid to Ideon common stockholders. No Common
Stock cash dividends have been paid or declared during the five years ended
January 31, 1996 and the six-month periods ended July 31, 1996 and 1995.
However, an insignificant amount of cash dividends were paid in respect of
the NAOG common stock for the fiscal years ended January 31, 1994, 1993 and
1992.

(J) Effective January 1, 1995, Ideon changed its fiscal year end from October
31 to December 31 (the "Ideon Transition Period"). The Ideon Transition
Period has been excluded from the accompanying supplemental consolidated
statement of income. Ideon's revenues and net loss for the Ideon Transition
Period were $34.7 million and $(49.9) million, respectively. The net loss
for the Ideon Transition Period was principally the result of a $65.5
million one-time, non-cash, pretax charge recorded in connection with a
change in accounting for deferred membership acquisition costs.

(K) Includes Ideon pre-tax charges of $34.2 million related to the abandonment
of certain new product development efforts and the restructuring of its
SafeCard division and its corporate infrastructure. Also includes marketing
and operational costs incurred for Ideon products abandoned of $47 million.

(L) During the fiscal year ended January 31, 1995, the Company acquired Essex
Corporation ("Essex") and subsidiaries and Ideon acquired Wright Express.
These acquisitions were accounted for in accordance with the purchase method
and, accordingly, have been included in the Company's results of operations
from the respective dates of acquisition. The results of operations of these
acquired entities for the periods prior to their acquisition were not
significant to the historical financial statements of the Company.

(M) During the fiscal year ended January 31, 1993, the Company acquired
Leaguestar plc and Sally Foster. These acquisitions were accounted for in
accordance with the purchase method and, accordingly, have been included in
the Company's results of operations from the respective dates of
acquisition. The results of operations of these acquired entities for the
periods prior to their acquisition were not significant to the historical
financial statements of the Company.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

On September 17, 1996, the Company published in the September 17, 1996 Form
8-K the Supplemental Consolidated Financial Statements giving retroactive effect
to consummation of each of the Davidson Acquisition, the Sierra Acquisition and
the Ideon Acquisition using the pooling-of-interests method of accounting as if
each of such acquired corporations and the Company had operated as one since
inception. The Supplemental Consolidated Financial Statements will constitute
the primary historical consolidated financial statements of the Company upon the
publication of Company financial statements, on or about December 15, 1996, that
include the respective dates of consummation of the Davidson Acquisition (July
24, 1996), the Sierra Acquisition (July 24, 1996) and the Ideon Acquisition
(August 7, 1996).

SIX MONTHS ENDED JULY 31, 1996 VS. SIX MONTHS ENDED JULY 31, 1995

The Company's overall membership base continues to grow at a rapid rate
(from 51.2 million members at July 31, 1995 to 62.3 million members at July 31,
1996), which is the largest contributing factor to the 20% increase in
membership revenues (from $786.7 million for the six months ended July 31, 1995
to $942.2 million for the six months ended July 31, 1996). While the overall
membership base increased by approximately 2.7 million members during the six
months ended July 31, 1996, the average annual fee collected for the Company's
membership services increased by 1%. The Company divides its memberships into
three categories: individual, wholesale and discount program memberships.
Individual memberships consist of members that pay directly for the services and
the Company pays for the marketing costs to solicit the members primarily using
direct marketing techniques. Wholesale memberships include members that pay
directly for the services to their sponsor and the Company does not pay for the
marketing costs to solicit the members. Discount program memberships are
generally marketed through a direct sales force, participating merchant or
general advertising and the related fees are either paid directly by the member
or the local retailer. All of these categories share various aspects of the
Company's marketing and operating resources.

Compared to the previous year's first six months, individual, wholesale and
discount program memberships grew by 9%, 20% and 61%, respectively, including
members which came from acquisitions completed during fiscal 1996 (members
obtained through acquisitions being hereafter referred to as "Acquired
Members"). Discount program memberships have experienced the largest increase
from Acquired Members, principally from Advance Ross, acquired in fiscal 1996,
which provides local discounts to consumers. For the six months ended July 31,
1996, individual, wholesale and discount coupon program memberships represented
68%, 12% and 20%, respectively, of membership revenues. The Company maintains a
flexible marketing plan so that it is not dependent on any one service for the
future growth of the total membership base.

Software revenues increased 17% from $110 million for the six months ended
July 31, 1995 to $129.1 million for the six months ended July 31, 1996.
Distribution revenue, which typically has low operating margins, decreased to
$25.7 million from $41.7 million. The Company's software operations continue to
focus on the growth of selling titles through retailers. Excluding distribution
revenue, core software revenue grew by 57%. Contributing to the strong software
revenue growth in fiscal 1997 is the availability of a larger number of titles
as well as the significant increase in the installed base of CD-ROM personal
computers.

As the Company's membership services continue to mature, a greater
percentage of the total individual membership base is in its renewal years. This
results in increased profit margins for the Company due to the significant
decrease in certain marketing costs incurred on renewing members. Improved
response rates for new members also favorably impact profit margins. As a
result, operating income before interest, amortization of restricted stock
compensation, costs related to products abandoned and restructuring, gain on
sale of and equity in loss from ImagiNation Network, and income taxes

("EBIT") increased from $135.9 million to $185.9 million, and EBIT margins
improved from 15.2% to 17.4%.

Operating costs increased 18% (from $277.6 million to $326.3 million). The
major components of the Company's membership operating costs continue to be
personnel, telephone, computer processing and participant insurance premiums(the
cost of obtaining insurance coverage for members). The major components of the
Company's software operating costs are material costs, manufacturing labor and
overhead, royalties paid to developers and affiliated label publishers and
research and development costs related to designing, developing and testing new
software products. The increase in overall operating costs is due principally to
the variable nature of many of these costs and, therefore, the additional costs
incurred to support the growth in the membership base and software sales.
Historically, the Company has seen a direct correlation between providing a high
level of service to its members and improved retention.

Marketing costs remained constant as a percentage of revenue (39%). This is
due primarily to maintained per member acquisition costs and an increase in
renewing members. Membership acquisition costs incurred increased 18% (from $263
million to $310.4 million) as a result of the increased marketing effort which
resulted in an increased number of new members acquired. Marketing costs include
the amortization of membership acquisition costs and other marketing costs,
which consist primarily of membership communications and sales expenses.
Amortization of membership acquisition costs increased by 17% (from $272.4
million to $319.5 million). Other marketing costs increased by 23% (from $77.6
million to $95.2 million). These increases resulted primarily from the costs of
servicing a larger membership base and expenses incurred when selling and
marketing a larger number of software titles. The marketing functions for the
Company's consumer services are combined for its various services and,
accordingly, there are no significant changes in marketing costs by service.

The Company routinely reviews all renewal rates and has not seen any
material change over the last year in the average renewal rate. Renewal rates
are calculated by dividing the total number of renewing members not requesting a
refund during their renewal year by the total members up for renewal.

General and administrative costs decreased as a percentage of revenue (from
15% to 13%). This is the result of the Company's ongoing ability to control
overhead. Interest income, net, decreased from $5.8 million to $4.1 million
primarily due to cash used to fund acquisitions during fiscal 1996 and the first
six months of fiscal 1997.

Included in costs related to products abandoned and restructuring for the
six months ended July 31, 1995, are special charges totaling $34.2 million,
related to the abandonment of certain new product developmental efforts and the
related impairment of certain assets and the restructuring of the SafeCard
division of Ideon and the Ideon corporate infrastructure. The charge of $34.2
million was composed of accrued liabilities of $25.6 million and asset
impairments of $8.6 million. Also included in costs related to products
abandoned and restructuring are marketing and operational costs of $47 million
incurred for Ideon products abandoned.

Merger costs are non-recurring and are comprised primarily of transaction
costs, professional fees and integration costs associated with the Davidson
Acquisition and the Sierra Acquisition.

MEMBERSHIP INFORMATION

The following table sets forth the approximate number of members and net
additions for the respective periods:

NET NEW MEMBER
NUMBER OF ADDITIONS
PERIOD MEMBERS FOR THE PERIOD
- ---------------------------------------------------------------------------------------------------- ---------- --------------

Six Months Ended July 31, 1996...................................................................... 62,315,000 2,665,000
Year Ended January 31, 1996......................................................................... 59,650,000 12,750,000*
Six Months Ended July 31, 1995...................................................................... 51,165,000 4,265,000**
Year Ended January 31, 1995......................................................................... 46,900,000 3,820,000
Quarter Ended July 31, 1996......................................................................... 62,315,000 1,440,000
Quarter Ended July 31, 1995......................................................................... 51,165,000 1,290,000

- ------------------------

* Includes approximately 8,000,000 Acquired Members.

** Includes approximately 2,100,000 Acquired Members.

The membership acquisition costs incurred to obtain a new member, for
memberships other than coupon book memberships, generally approximate the
initial membership fee. Initial membership fees for coupon book memberships
generally exceed the membership acquisition costs incurred to obtain a new
member.

Membership cancellations processed by certain of the Company's clients
report membership information only on a net basis. Accordingly, the Company does
not receive actual numbers of gross additions and gross cancellations for
certain types of memberships. In calculating the number of members, the Company
has deducted its best estimate of cancellations which may occur during the trial
membership periods offered in its marketing programs. Typically these periods
range from one to three months.

LIQUIDITY AND CAPITAL RESOURCES; INFLATION; SEASONALITY

Funds for the Company's operations and acquisitions have been provided
through cash flow from operations. The Company also is party to a credit
agreement, dated March 26, 1996, with certain banks signatory thereto; The Chase
Manhattan Bank, N.A., Bank of Montreal, Morgan Guaranty Trust Company of New
York and The Sakura Bank, Limited, as Co-Agents; and The Chase Manhattan Bank,
N.A., as Administrative Agent (the "Credit Agreement"). The Credit Agreement
provides for a $500 million revolving credit facility with a variety of
different types of loans available thereunder. The Credit Agreement contains
certain customary restrictive covenants including, without limitation, financial
covenants and restrictions on certain corporate transactions, and also contains
various event of default provisions including, without limitation, defaults
arising from certain changes in control of the Company. The amount of borrowings
available to the Company under the Credit Agreement was $500 million at July 31,
1996, as there were no borrowings under the Credit Agreement at that date. The
Credit Agreement is scheduled to expire on March 26, 2001.

In February 1996, Wright Express entered into a revolving credit facility
agreement which has an available line of $75 million of which $50 million may be
used to finance working capital requirements and for general corporate purposes
and $25 million of which may be used for acquisition financing. This facility
expires on December 1, 1998.

In fiscal 1996, Sierra entered into an unsecured bank line of credit that
provides for borrowings of up to $10 million, expiring on August 31, 1996. The
line contains covenants requiring Sierra to maintain certain financial ratios
and minimum balances of cash and cash equivalents. There have been no borrowings
by Sierra under this line of credit to date. This line of credit expired August
31, 1996.

All costs related to the Ideon Acquisition have not been reflected in the
Company's Supplemental Consolidated Financial Statements but will be reflected
in the Company's consolidated statement of income during the period the Ideon
Acquisition is completed. Such costs are non-recurring and include integration
and transaction costs as well as costs relating to certain outstanding
litigation matters (see Note 6 to the Supplemental Consolidated Financial
Statements as of and for the six months ended July 31, 1996), giving
consideration to the Company's intended approach to these matters, which are
estimated by the Company's management to approximate $125.0 million ($80.0
million after tax effect). Most of the reserve is related to these outstanding
litigation matters. In determining such portion, the Company estimated the cost
of settling these litigation matters. In estimating such cost, the Company
considered potential liabilities related to these matters and the estimated cost
of prosecuting and defending them (including out-of-pocket costs, such as
attorneys' fees, and the cost to the Company of having its management involved
in numerous complex litigation matters). The Company is unable at this time to
determine the estimated timing of the future cash outflows with respect to this
liability. Although the Company has attempted to estimate the amounts that will
be required to settle these litigation matters, there can be no assurance that
the actual aggregate amount of such settlements will not exceed the amount of
the reserve to be accrued.

The Company invested approximately $33 million in acquisitions, net of cash
acquired, during the six months ended July 31, 1996. These acquisitions have
been fully integrated into the Company's operations. The Company is not aware of
any trends, demands or uncertainties that will have a material effect on the
Company's liquidity. The Company anticipates that cash flow from operations and
borrowings under the Credit Agreement will be sufficient to achieve its current
long-term objectives.

The Company does not anticipate any material capital expenditures for the
next year. Total capital expenditures were $24 million for the six months ended
July 31, 1996.

The Company intends to continue to review potential acquisitions that it
believes would enhance the Company's growth and profitability. Any acquisitions
paid for in cash will initially be financed through excess cash flow from
operations and the Credit Agreement. However, depending on the financing
necessary to complete a particular acquisition, additional funding may be
required.

To date, the overall impact of inflation on the Company has not been
material. Except for the cash receipts from the sale of coupon book memberships,
the Company's membership business is generally not seasonal. Most cash receipts
from these coupon book memberships are received in the fourth quarter and, to a
lesser extent, in the first and the third quarters of each fiscal year. As is
typical in the consumer software industry, the Company's software business is
highly seasonal. Net revenues and operating income are highest during the third
and fourth quarters and are lowest in the first and second quarters. This
seasonal pattern is due primarily to the increased demand for the Company's
software products during the year-end holiday season.

For the six months ended July 31, 1996, the Company's international
businesses represented less than 5% of EBIT. Operating in international markets
involves dealing with sometimes volatile movements in currency exchange rates.
The economic impact of currency exchange rate movements on the Company is
complex because it is linked to variability in real growth, inflation, interest
rates and other factors. Because the Company operates in a mix of membership
services and numerous countries, Management believes currency exposures are
fairly well diversified. To date, currency exposure has not been a significant
competitive factor at the local market operating level. As international
operations continue to expand and the number of cross-border transactions
increases, the Company intends to continue monitoring its currency exposures
closely and take prudent actions as appropriate.

YEAR ENDED JANUARY 31, 1996 VS. YEAR ENDED JANUARY 31, 1995

The Company's overall membership base continues to grow at a rapid rate
(from 47 million members at January 31, 1995 to 59.7 million members at January
31, 1996), which is the largest

contributing factor to the 20% increase in membership revenues (from $1,363.6
million in fiscal 1995 to $1,629.8 million in fiscal 1996). While the overall
membership base increased by 12.7 million members, or 27%, during the year (of
which approximately 8 million members came from acquisitions completed during
the year), the average annual fee charged for the Company's membership services
increased by 3%.

In the 1996 fiscal year, individual, wholesale and discount program
memberships grew by 8%, 19% and 11%, respectively, in addition to the increase
due to Acquired Members. For the year ended January 31, 1996, individual,
wholesale and discount program memberships represented 68%, 12% and 20% of
membership revenues, respectively. Discount program memberships have incurred
the largest increase from Acquired Members. Welcome Wagon, the Getko Group Inc.
and Advance Ross, all acquired in fiscal 1996, are classified in this membership
category as their businesses provide local discounts to consumers. The Company
maintains a flexible marketing plan so that it is not dependent on any one
service for the future growth of the total membership base. The Company
completed a number of acquisitions accounted for under the purchase method of
accounting during fiscal 1996. The total revenues contributed by these
acquisitions are not material to the Company's total reported revenues (see Note
B to the Supplemental Consolidated Financial Statements as of and for the year
ended January 31, 1996).

Software revenues increased 60% to $305.4 million in fiscal 1996 from $191.1
million in fiscal 1995. Contributing to the strong software growth in fiscal
1996 was the release of 63 new titles and an additional 18 titles which were
acquired compared to 34 new products released in fiscal 1995. Also contributing
to the software revenue growth is the significant increase in the installed base
of CD-ROM personal computers as well as increases in affiliated label and
distribution revenues.

As the Company's membership services continue to mature, a greater
percentage of the total individual membership base is in its renewal years. This
results in increased profit margins for the Company due to the significant
decrease in certain marketing costs incurred on renewing members. Improved
response rates for new members also favorably impact profit margins. As a
result, EBIT increased from $239.1 million to $322.7 million and EBIT margins
improved from 15.4% to 16.7%.

Individual membership usage continues to increase, which contributes to
additional service fees and indirectly contributes to the Company's strong
renewal rate. Historically, an increase in overall membership usage has had a
favorable impact on renewal rates. Actual membership cancellations were $376
million, $354 million and $319 million, respectively, for the fiscal years ended
January 31, 1996, 1995 and 1994. This represents 19%, 21% and 22%, respectively,
of the gross membership revenues accrued for all services. The Company records
its deferred revenue net of estimated cancellations which are anticipated in the
Company's marketing programs. The number of cancellations has increased due to
the increased level of marketing efforts, but has decreased as a percentage of
the total number of members.

Operating costs increased 25% (from $474.1 million to $593.5 million). The
major components of the Company's membership operating costs continue to be
personnel, telephone, computer processing and participant insurance premiums
(the cost of obtaining insurance coverage for members). The major components of
the Company's software operating costs are material costs, manufacturing labor
and overhead, royalties paid to developers and affiliated label publishers and
research and development costs related to designing, developing and testing new
software products. The increase in overall operating costs is due principally to
the variable nature of many of these costs and, therefore, the additional costs
incurred to support the growth in the membership base and software sales.
Historically, the Company has seen a direct correlation between providing a high
level of service to its members and improved retention.

Marketing costs decreased as a percentage of revenues, from 40% to 38%. This
decrease is primarily due to improved per member acquisition costs and an
increase in renewing members. Membership acquisition costs incurred increased
19% (from $508.8 million to $605.1 million) as a result of the increased
marketing effort which resulted in an increased number of new members acquired.
Marketing costs include the amortization of membership acquisition costs and
other marketing costs, which primarily consist of membership communications and
sales expenses. Amortization of membership acquisition costs increased by 19%
(from $467 million to $556.5 million). Other marketing costs increased by 20%
(from $151.3 million to $180.9 million). This increase resulted primarily from
the costs of servicing a larger membership base and expenses incurred when
selling and marketing a larger number of software titles. The marketing
functions for the Company's membership services are combined for its various
services and, accordingly, there are no significant changes in marketing costs
by membership service.

The Company routinely reviews all membership renewal rates and has not seen
any material change over the last year in the average renewal rate. Renewal
rates are calculated by dividing the total number of renewing members not
requesting a refund during their renewal year by the total members up for
renewal.

General and administrative costs increased as a percentage of revenues, from
14% to 15%. This is principally due to acquisitions completed during fiscal
1996. Interest income, net, increased from $7.9 million to $9.7 million due to
the reduced level of amortization associated with the Company's restricted stock
and zero coupon convertible notes and the net interest income from the increased
level of cash generated by the Company for investment.

Included in costs related to products abandoned and restructuring for the
year ended January 31, 1996, are special charges totaling $43.8 million, net of
recoveries, related to the abandonment of certain new product developmental
efforts and the related impairment of certain assets and the restructuring of
the SafeCard division of Ideon and the Ideon corporate infrastructure. The
original charge of $45 million was composed of accrued liabilities of $36.2
million and asset impairments of $8.8 million. Also included in costs related to
products abandoned and restructuring are marketing and operational costs
incurred for Ideon products abandoned of $53.2 million.

YEAR ENDED JANUARY 31, 1995 VS. YEAR ENDED JANUARY 31, 1994

The Company's overall membership base continues to grow at a rapid rate
(from 42.9 million members at January 31, 1994 to 47 million members at January
31, 1995), which is the largest contributing factor to the 19% increase in
membership revenues (from $1,143.2 million in fiscal 1994 to $1,363.6 million in
fiscal 1995). While the overall membership base increased by 4.1 million members
before adjustment for Acquired Members resulting from the fiscal 1996
pooling-of-interests transactions, or 10%, during the past year, the average
annual fee charged for the Company's membership services increased by 3%. The
Company divides its memberships into three categories: individual, wholesale and
discount program memberships. All of these categories share various aspects of
the Company's marketing and operating resources. In the 1995 fiscal year,
individual, wholesale and discount program memberships grew by 11%, 6% and 11%,
respectively. For the year ended January 31, 1995, individual, wholesale and
discount program memberships represented 70%, 11% and 19% of membership
revenues, respectively. The Company maintains a flexible marketing plan so that
it is not dependent on any one service for the future growth of the total
membership base. The Company completed an acquisition of Essex, a privately
owned third-party marketer of financial products for banks, and certain other
entities, during fiscal 1995. The total revenues contributed by this acquisition
are not material to the Company's total reported revenues. This acquisition was
accounted for in accordance with the purchase method of accounting and,
accordingly, the results of operations have been included in the consolidated
results of operations from the date of acquisition (see Note B to the
Supplemental Consolidated Financial Statements as of and for the year ended
January 31, 1996).

Software revenues increased 41% to $191.1 million in fiscal 1995 from $135.5
million in fiscal 1994. Contributing to the strong software growth in fiscal
1995 was the release of 34 new titles. Also contributing to the software growth
was the expansion in the installed base of personal computers as well as an
increase in affiliated label revenues.

As the Company's membership services continue to mature, a greater
percentage of the total individual membership base is in its renewal years. This
results in increased profit margins for the Company due to the significant
decrease in certain marketing costs incurred on renewing members. As a result,
EBIT increased from $200.2 million to $239.1 million, however EBIT margins
decreased slightly from 15.7% to 15.4%, due principally to increased software
research and development.

Individual membership usage continues to increase, which contributes to
additional service fees and indirectly contributes to the Company's strong
renewal rate. Historically, an increase in overall membership usage has had a
favorable impact on renewal rates. Actual membership cancellations were $354
million, $319 million and $292 million, respectively, for the fiscal years ended
January 31, 1995, 1994 and 1993. This represents approximately 21%, 22% and 24%
of the gross membership revenues accrued for all services. The Company records
its deferred revenue net of estimated cancellations which are anticipated in the
Company's marketing programs. The number of cancellations has increased due to
the increased level of marketing efforts, but has decreased as a percentage of
the total number of members.

Operating costs increased 29% (from $368.8 million to $474.1 million). The
major components of the Company's membership operating costs continue to be
personnel, telephone, computer processing and participant insurance premiums
(the cost of obtaining insurance coverage for members). The major components of
the Company's software operating costs are material costs, manufacturing labor
and overhead, royalties paid to developers and affiliated label publishers and
research and development costs related to designing, developing and testing new
software products. The increase in overall operating costs is due principally to
the variable nature of many of these costs and, therefore, the additional costs
incurred to support the growth in the membership base and software sales.
Historically, the Company has seen a direct correlation between providing a high
level of service to its members and improved retention.

Marketing costs remained constant as a percentage of revenue (40%). This is
primarily due to improved per member acquisition costs and an increase in
renewing members. Membership acquisition costs incurred increased 11% (from
$457.3 million to $508.8 million). Marketing costs include the amortization of
membership acquisition costs and other marketing costs, which primarily consist
of membership communications and sales expenses.

Amortization of membership acquisition costs increased by 14% (from $409.5
million to $467 million). Other marketing costs increased by 44% (from $105.1
million to $151.3 million). This increase resulted primarily from the costs of
servicing a larger membership base, costs to establish the American Airlines
AAdvantage Dining program and expenses incurred when selling and marketing a
larger number of software titles. The marketing functions for the Company's
membership services are combined for its various services and, accordingly,
there are no significant changes in marketing costs by membership service.

The Company routinely reviews all membership renewal rates and has not seen
any material change over the last year in the average renewal rate. Based on
current information, the Company does not anticipate that the average renewal
rate will change significantly. Renewal rates are calculated by dividing the
total number of renewing members not requesting a refund during their renewal
year by the total members up for renewal.

General and administrative costs decreased as a percentage of revenue, from
15% to 14%. This is the result of the Company's ongoing ability to control
overhead. Interest income, net, increased from $3.2 million to $7.9 million
primarily due to the reduction of the Company's average outstanding loan balance
and the net interest income from the increased level of cash generated by the
Company for investment.

SELLING STOCKHOLDERS

The following table below sets forth information as of October 29, 1996
regarding the "beneficial" ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of Common Stock by each Selling Stockholder and as adjusted to
give effect to the sale of all of the Shares offered hereby. The table assumes
that the Underwriters will not exercise their over-allotment options. See
"Underwriting".

COMMON STOCK
COMMON STOCK TO BE
BENEFICIALLY OWNED BENEFICIALLY OWNED
PRIOR TO THE AFTER THE
OFFERINGS OFFERINGS(1)
------------------- -------------------
COMMON STOCK
SELLING STOCKHOLDERS AND NUMBER TO BE SOLD NUMBER
RELATIONSHIP TO THE COMPANY OF SHARES PERCENT IN THE OFFERINGS OF SHARES PERCENT
- ----------------------------------------------------------------- ---------- ------- ---------------- ---------- -------

Robert M. Davidson............................................... 20,622,550(2) 5.2% 300,000 11,811,650 3.0%
Vice-Chairman of the Board
of Directors of the Company
c/o Davidson & Associates, Inc.
19840 Pioneer Avenue
Torrance, CA 90503

Janice G. Davidson............................................... 20,622,208(3) 5.2% 300,000 11,811,308 3.0%
Director of the Company
c/o Davidson & Associates, Inc.
19840 Pioneer Avenue
Torrance, CA 90503

Robert M. Davidson............................................... 11,475,000(4) 2.9% 7,500,000 3,975,000 1.0%
Charitable Remainder Unitrust
dated March 30, 1995
c/o Robert M. Davidson
Davidson & Associates, Inc.
19840 Pioneer Avenue
Torrance, CA 90503

Janice G. Davidson............................................... 11,475,000(5) 2.9% 7,500,000 3,975,000 1.0%
Charitable Remainder Unitrust
dated March 30, 1995
c/o Janice G. Davidson
Davidson & Associates, Inc.
19840 Pioneer Avenue
Torrance, CA 90503

John R. Davidson................................................. 300,000(6) 0.1% 300,000 0 0%
Charitable Remainder Unitrust
dated October 24, 1996
c/o Robert M. Davidson
Davidson & Associates, Inc.
19840 Pioneer Avenue
Torrance, CA 90503

The Elizabeth Davidson Trust..................................... 2,765,155(7) 0.7% 300,000 2,465,155 0.6%
c/o Robert M. Davidson
Davidson & Associates, Inc.
19840 Pioneer Avenue
Torrance, CA 90503
Emilie A. Davidson............................................... 300,000(8) 0.1% 300,000 0 0%
Charitable Remainder Unitrust
dated October 24, 1996
c/o Robert M. Davidson
Davidson & Associates, Inc.
19840 Pioneer Avenue
Torrance, CA 90503

All Selling Stockholders as a Group.............................. 32,727,494(9) 8.3% 16,500,000 16,227,494 4.1%

- ------------------------------

(1) If the Underwriters' over-allotment options are exercised in full, the
Robert M. Davidson Charitable Remainder Unitrust dated March 30, 1995 and
the Janice G. Davidson Charitable Remainder Unitrust dated March 30, 1995
will each sell an additional 1,237,500 shares in the offering made hereby
and will each beneficially own 2,737,500 (or 0.7%) of the total shares of
Common Stock outstanding.

(2) Robert M. Davidson directly owns 630,286 shares of Common Stock, with
respect to which he has sole voting and dispositive power. Mr. Davidson, as
trustee with sole voting and dispositive power, may be deemed the beneficial
owner of the 11,475,000 shares of Common Stock held in the Robert M.
Davidson Charitable Remainder Unitrust dated March 30, 1995. Mr. Davidson
also serves as a trustee with shared voting and dispositive power of The
Elizabeth Davidson Trust, The Emilie A. Davidson Trust, The John R. Davidson
Trust, the John R. Davidson Charitable Remainder Unitrust dated October 24,
1996 and the Emilie A. Davidson Charitable Remainder Unitrust dated October
24, 1996, which hold 2,765,155; 2,465,155; 2,465,155; 300,000 and 300,000
shares of Common Stock, respectively, and he may be deemed to beneficially
own the shares of Common Stock owned by such trusts. Mr. Davidson also owns
221,799 shares of Common Stock together with his wife, Janice G. Davidson,
with respect to which he shares voting and dispositive power (all of which
shares will be included in the Shares sold in the offering). In the
aggregate, Mr. Davidson may be deemed to beneficially own 20,622,550 shares
of Common Stock, which represents 5.2% of the outstanding Common Stock.

(3) Janice G. Davidson directly owns 629,944 shares of Common Stock, with
respect to which she has sole voting and dispositive power. Mrs. Davidson,
as trustee with sole voting and dispositive power, may be deemed the
beneficial owner of the 11,475,000 shares of Common Stock held in the Janice
G. Davidson Charitable Remainder Unitrust dated March 30, 1995. Mrs.
Davidson also serves as a trustee with shared voting and dispositive power
of The Elizabeth Davidson Trust, The Emilie A. Davidson Trust, The John R.
Davidson Trust, the John R. Davidson Charitable Remainder Unitrust dated
October 24, 1996 and the Emilie A. Davidson Charitable Remainder Unitrust
dated October 24, 1996, which hold 2,765,155; 2,465,155; 2,465,155; 300,000
and 300,000 shares of Common Stock, respectively, and she may be deemed to
beneficially own the shares of Common Stock owned by such trusts. Mrs.
Davidson also owns 221,799 shares of Common Stock together with her husband,
Robert M. Davidson, with respect to which she shares voting and dispositive
power (all of which shares will be included in the Shares sold in the
offering). In the aggregate, Mrs. Davidson may be deemed to beneficially own
20,622,208 shares of Common Stock, which represents 5.2% of the outstanding
Common Stock.

(4) The Robert M. Davidson Charitable Remainder Unitrust dated March 30, 1995
directly beneficially owns 11,475,000 shares of Common Stock, which
represents 2.9% of the outstanding shares of Common Stock. Robert M.
Davidson, as trustee of such trust, has sole power to vote and dispose of
the shares owned by such trust.

(5) The Janice G. Davidson Charitable Remainder Unitrust dated March 30, 1995
directly beneficially owns 11,475,000 shares of Common Stock, which
represents 2.9% of the outstanding shares of Common Stock. Janice G.
Davidson, as trustee of such trust, has sole power to vote and dispose of
the shares owned by such trust.

(6) The John R. Davidson Charitable Remainder Unitrust dated October 24, 1996
directly beneficially owns 300,000 shares of Common Stock, which represents
0.1% of the outstanding shares of Common Stock. Robert M. Davidson and
Janice G. Davidson, as co-trustees of such trust, share voting and
dispositive power of the shares owned by such trust.

(7) The Elizabeth Davidson Trust directly beneficially owns 2,765,155 shares of
Common Stock, which represents 0.7% of the outstanding shares of Common
Stock. Robert M. Davidson and Janice G. Davidson, as co-trustees of such
trust, share voting and dispositive power of the shares owned by such trust.

(8) The Emilie A. Davidson Charitable Remainder Unitrust dated October 24, 1996
directly beneficially owns 300,000 shares of Common Stock, which represents
0.1% of the outstanding shares of Common Stock. Robert M. Davidson and
Janice G. Davidson, as co-trustees of such trust, share voting and
dispositive power of the shares owned by such trust.

(9) The Selling Stockholders may be deemed a "group" for purposes of Section
13(d) under the Exchange Act. The Selling Stockholders in the aggregate
directly beneficially own 32,727,494 shares of Common Stock, which
represents 8.3% of the outstanding Common Stock. Nothing contained herein
shall be deemed an admission as to the existence of a "group" under Section
13(d).

On July 24, 1996, the Company completed the Davidson Acquisition. In
connection therewith, the Company entered into a registration rights agreement
(the "Registration Rights Agreement") with the Selling Stockholders (and, in
certain cases, their predecessors-in-interest), including Robert M. Davidson and
Janice G. Davidson (Mr. and Mrs. Davidson being hereinafter referred to
collectively as the "Davidsons") and the other Selling Stockholders identified
in the table above. As more fully discussed below, the Registration Rights
Agreement entitles the Selling Stockholders to effect the registration of the
shares they received pursuant to the Davidson Acquisition, including those
shares received by the Davidsons in connection with the sale of certain real
property owned by them to a wholly owned subsidiary of the Company.

REGISTRATION RIGHTS AGREEMENT

DEMAND REGISTRATION. Pursuant to the Registration Rights Agreement, the
Company agreed, among other things, that at any time, and from time to time,
commencing on July 24, 1996 (the "Davidson Effective Date") and ending on July
24, 2002 (such six-year period, the "Davidson Effective Period"), upon the
written request of any of the Selling Stockholders requesting that the Company
effect the registration under the Securities Act of Registrable Securities (as
defined in the Registration Rights Agreement) which, in the aggregate,
constitute at least 2,000,000 shares of Common Stock, the Company will use its
best efforts to register under the Securities Act (a "Demand Registration"), as
expeditiously as may be practicable, the Registrable Securities which the
Company has been requested to register, all to the extent requisite to permit
the disposition of such Registrable Securities in accordance with the methods
intended by the Selling Stockholders; PROVIDED THAT (A) no Selling Stockholder
may exercise a Demand Registration within three months of the effective date of
any registration statement covering equity securities of the Company (other than
on Form S-4 or Form S-8 or any successor or similar registration form) and (B)
the Company will not be required to effect any Demand Registration if the
Company reasonably determines that the sale of the Registrable Securities would
be likely to cause the Davidson Acquisition not to be accounted for as a
"pooling of interests". The Company has filed a registration statement covering
the resale of Common Stock issued by the Company in connection with a certain
acquisition, which registration statement was declared effective by the
Commission on September 18, 1996. The Company, however, has agreed to waive the
condition described in clause (A) above in order to allow the Selling
Stockholders to exercise the Demand Registration to which this offering relates.

In addition to the above restrictions, the Registration Rights Agreement
provides that if the Company has previously effected a Demand Registration, it
is not required to effect a subsequent Demand Registration until a period of at
least 120 days has elapsed from the effective date of the registration statement
used in connection with such previous Demand Registration, and the Company is
not required to effect more than three Demand Registrations during any 36-month
period during the Davidson Effective Period.

Pursuant to the Registration Rights Agreement, the Company also may defer
the filing or effectiveness of any registration statement related to a Demand
Registration for a reasonable period of time not to exceed 90 days after such
request if (A) the Company is, at such time, conducting an underwritten

public offering of Common Stock and is advised by the managing underwriter(s)
that such offering would be adversely affected by such filing or (B) the Company
determines, in its good faith and reasonable judgment, that any such filing or
the offering of any Registrable Securities would materially impede, delay or
interfere with any material proposed financing, offer or sale of securities,
acquisition, corporate reorganization or other significant transaction involving
the Company; PROVIDED, HOWEVER, with respect to clauses (A) and (B) above, that
the Company is not entitled to postpone such filing or effectiveness if, within
the preceding 12 months, it has effected two postponements, and following such
postponements the Registrable Securities to be sold pursuant to the postponed
registration statements were not sold (for any reason); and PROVIDED FURTHER,
that during the period commencing on the Davidson Effective Date and ending 120
days thereafter, the Company may not defer the filing or effectiveness of the
first Demand Registration requested for more than 30 days.

INCIDENTAL ("PIGGYBACK") REGISTRATION. The Company has further agreed that
if at any time it proposes to register shares of Common Stock under the
Securities Act for its own account (other than a registration on Form S-4 or
Form S-8, or any successor or similar registration forms) in a manner that would
permit registration of Registrable Securities for sale to the public under the
Securities Act, it will promptly give written notice to all Selling Stockholders
of its intention to do so and will use its best efforts to include in the
proposed Company registration all Registrable Securities that the Company is
requested in writing to register by the Selling Stockholders.

In connection with the foregoing rights of demand and incidental
registration, the Company has agreed to pay certain registration, printing and
NYSE listing fees and expenses incident thereto and to indemnify the holders of
Registrable Securities against certain liabilities, including liabilities
arising under the Securities Act.

Pursuant to the Underwriting Agreement, the Company, the Selling
Stockholders and the Underwriters severally have agreed to indemnify each other
against certain liabilities, including certain liabilities arising under the
Securities Act. See "Underwriting".

OTHER MATERIAL RELATIONSHIPS OF SELLING STOCKHOLDERS WITH THE COMPANY

DIRECTORSHIPS. Immediately following the Davidson Acquisition, the Company
increased the size of the Company's Board of Directors (the "CUC Board") by
three directors and caused Robert M. Davidson and Janice G. Davidson to be
appointed to the CUC Board to fill two of the vacancies so created, for initial
terms expiring two years and one year, respectively, following the date of the
Company's first annual meeting of shareholders next following February 19, 1996,
and further caused Robert M. Davidson to be elected as a Vice Chairman of the
CUC Board. From and after the Davidson Effective Date, and for so long as the
Selling Stockholders collectively beneficially own (as such term is defined in
Section 13 of the Exchange Act and the rules and regulations thereunder) 25% of
the shares of Common Stock received by them in the Davidson Acquisition, the
Company has agreed to cause at least one of the Davidsons to be included in the
slate of nominees for election to the CUC Board at each annual meeting of
holders of Common Stock and at any special meeting of such holders at which
directors are to be elected (unless one of the Davidsons is then a member of a
director class whose term does not expire at such meeting).

EMPLOYMENT AND NONCOMPETITION AGREEMENTS. In connection with the Davidson
Acquisition, the Davidsons entered into separate employment and noncompetition
agreements with the Company.

Pursuant to his employment agreement with the Company, Mr. Davidson serves
(i) as a Vice Chairman of the CUC Board and as Davidson's Chief Executive
Officer and a director of Davidson and (ii) as a director, Chairman and Chief
Executive Officer of CUC's educational and entertainment software division, and
is responsible for the overall management of Davidson and CUC's educational and
entertainment software division. Pursuant to her employment agreement with the
Company, Mrs. Davidson serves as Davidson's President and as a director of
Davidson, and serves as a director of

CUC's educational and entertainment software division. The term of each of the
Davidsons' employment continues through July 24, 1999, subject to extension or
termination as provided in their agreements. The Davidsons are eligible for
discretionary annual incentive compensation awards and are entitled to
participate in all compensation or employee benefit plans or programs and
receive all benefits and perquisites for which salaried employees of the Company
are eligible under any plan or program now in effect or later established by the
Company for salaried employees generally.

The non-competition agreements with the Davidsons provide that, until July
24, 2001, without the prior written approval by the CUC Board, the Davidsons
must abstain from (i) engaging in competition, or directly or indirectly owning
or holding a proprietary interest in or being employed by, or consulting with or
receiving compensation from, any party which competes in any way or manner with
the business of Davidson or any of its subsidiaries, as such business or
businesses may be conducted from time to time; (ii) soliciting any clients of
Davidson or any of its subsidiaries for any business of Davidson or any of its
subsidiaries or discussing with any employee of CUC or any of its affiliates
information or operations of any business intended to compete with CUC or any of
its affiliates; and (iii) soliciting or inducing any person who is an employee
of Davidson or any of its subsidiaries to terminate any relationship such person
may have with Davidson or any of its subsidiaries. In addition, the Davidsons
have agreed that during such period, they will not directly or indirectly
engage, employ or compensate, or cause or permit any person with whom they may
be affiliated to engage, employ or compensate, any employee of CUC or any of its
affiliates.

REAL PROPERTY AGREEMENT. Pursuant to a certain agreement dated July 23,
1996, the Davidsons sold to a subsidiary of the Company, simultaneously with the
closing of the Davidson Acquisition, certain real property then owned by them
and leased to Davidson. The purchase price was paid by delivery of 221,799
shares of Common Stock, which shares constitute Registrable Securities pursuant
to the Registration Rights Agreement.

UNDERWRITING

Subject to the terms and conditions of the U.S. Underwriting Agreement, the
Selling Stockholders have severally agreed to sell to each of the U.S.
Underwriters named below, and each of such U.S. Underwriters, for whom Goldman,
Sachs & Co., Morgan Stanley & Co. Incorporated, Bear, Stearns & Co. Inc.,
Donaldson, Lufkin & Jenrette Securities Corporation and Smith Barney Inc. are
acting as representatives, has severally agreed to purchase from the Selling
Stockholders, the respective number of shares of Common Stock set forth opposite
its name below:

NUMBER OF SHARES
UNDERWRITER OF COMMON STOCK
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Goldman, Sachs & Co................................................................................. 2,262,000
Morgan Stanley & Co. Incorporated................................................................... 2,262,000
Bear, Stearns & Co. Inc............................................................................. 1,132,000
Donaldson, Lufkin & Jenrette Securities Corporation................................................. 1,132,000
Smith Barney Inc.................................................................................... 1,132,000
Advest, Inc......................................................................................... 363,000
William Blair & Company, L.L.C...................................................................... 363,000
Alex. Brown & Sons Incorporated..................................................................... 495,000
EVEREN Securities, Inc.............................................................................. 495,000
Furman Selz LLC..................................................................................... 363,000
Hambrecht & Quist LLC............................................................................... 495,000
Edward D. Jones & Co., L.P.......................................................................... 363,000
Lehman Brothers Inc................................................................................. 495,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated.................................................. 495,000
Montgomery Securities............................................................................... 495,000
Rauscher Pierce Refsnes, Inc........................................................................ 363,000
Wasserstein Perella Securities, Inc................................................................. 495,000
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Total......................................................................................... 13,200,000
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Under the terms and conditions of the U.S. Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares of Common Stock
offered hereby, if any are taken.

The U.S. Underwriters propose to offer the shares of Common Stock in part
directly to the public at the public offering price set forth on the cover page
of this Prospectus, and in part to certain securities dealers at such price less
a concession of $0.44 per share. The U.S. Underwriters may allow, and such
dealers may reallow, a concession not in excess of $0.10 per share to certain
brokers and dealers. After the shares of Common Stock are released for sale to
the public, the offering price and other selling terms may from time to time be
varied by the representatives.

The Company and the Selling Stockholders have entered into an underwriting
agreement (the "International Underwriting Agreement") with the underwriters of
the international offering (the "International Underwriters") providing for the
concurrent offer and sale of 3,300,000 shares of Common Stock in an offering
conducted outside the United States. The offering price and aggregate
underwriting discounts and commissions per share for the two offerings are
identical. The closing of the offering made hereby is a condition to the closing
of the international offering, and vice versa. The representatives of the
International Underwriters are Goldman Sachs International, Morgan Stanley & Co.
International Limited, Bear, Stearns International Limited, Donaldson, Lufkin &
Jenrette Securities Corporation and Smith Barney Inc.

Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of the
U.S. Underwriters named herein has agreed

that, as a part of the distribution of the shares offered hereby and subject to
certain exceptions, it will offer, sell or deliver the shares of Common Stock,
directly or indirectly, only in the United States (including the States and the
District of Columbia), its territories, its possessions and other areas subject
to its jurisdiction (collectively the "United States") and to U.S. persons,
which term shall mean, for purposes hereof: (a) any individual who is a resident
of the United States or (b) any corporation, partnership or other entity
organized in or under the laws of the United States or any political subdivision
thereof and whose office most directly involved with the purchase is located in
the United States. Each of the International Underwriters has agreed pursuant to
the Agreement Between that, as a part of the distribution of the shares of
Common Stock offered as a part of the international offering, and subject to
certain exceptions, it will (i) not, directly or indirectly, offer, sell or
deliver shares of Common Stock (a) in the United States or to any U.S. persons
or (b) to any person whom it believes intends to reoffer, resell or deliver the
shares in the United States or to any U.S. persons, and (ii) cause any dealer to
whom it may sell such shares at any concession to agree to observe a similar
restriction.

Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall be
the public offering price, less an amount not greater than the selling
concession.

Certain of the Selling Stockholders have granted the U.S. Underwriters an
option exercisable on or before November 12, 1996 for the purchase of up to an
aggregate of 1,980,000 additional shares of Common Stock, solely to cover
over-allotments, if any. If the U.S. Underwriters exercise such over-allotment
option, the U.S. Underwriters have severally agreed, subject to certain
conditions, to purchase approximately the same percentage thereof that the
number of shares to be purchased by each of them, as shown in the foregoing
table, bears to the total number of shares of Common Stock offered hereby. In
addition, certain of the Selling Stockholders have granted the International
Underwriters a similar option exercisable for up to an aggregate of 495,000
additional shares of Common Stock.

The Company and the Selling Stockholders have agreed that, during the period
beginning on the date of this Prospectus and continuing to and including the
date 90 days after the date of this Prospectus, they will not offer, sell,
contract to sell or otherwise dispose of any securities of the Company (other
than pursuant to employee stock option and purchase plans existing, or on the
conversion or exchange of convertible or exchangeable securities outstanding, on
the date of this Prospectus, or shares in connection with the acquisition by the
Company of the business, assets or capital stock of another company or pursuant
to a purchase, business combination or merger agreement, pursuant to which, in
any single transaction, not more than 25,000,000 shares of Common Stock are
issued or exchanged) which are substantially similar to the shares of Common
Stock or which are convertible into or exchangeable for securities which are
substantially similar to the shares of Common Stock, without the prior written
consent of the representatives, except for shares of Common Stock offered in
connection with the concurrent U.S. and international offerings.

The Company and the Selling Stockholders have agreed to indemnify the U.S.
Underwriters and the International Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933.

This Prospectus may be used by underwriters and dealers in connection with
offers and sales of the Common Stock, including shares initially sold in the
international offering, to persons located in the United States.

Goldman, Sachs & Co. has provided various investment banking and financial
advisory services for the Company, in respect of which it has received certain
fees.

Smith Barney Inc. has provided various investment banking and financial
advisory services for Davidson & Associates, Inc., in respect of which it has
received certain fees.

The U.S. Underwriters and the International Underwriters have agreed to
reimburse certain Selling Stockholders for certain expenses incurred by them in
connection with the offering.

VALIDITY OF COMMON STOCK

The validity of the shares offered hereby will be passed upon for the
Company by Weil, Gotshal & Manges LLP, New York, New York, and for the
Underwriters by Sullivan & Cromwell, New York, New York.

EXPERTS

The consolidated financial statements and schedule of the Company appearing
in the CUC 10-K have been audited by Ernst & Young LLP, independent auditors, as
set forth in their report thereon included therein and incorporated herein by
reference which, as to the years 1995 and 1994, are based in part on the report
of Deloitte & Touche LLP, independent auditors. The Supplemental Consolidated
Financial Statements of the Company included in its Current Report on Form 8-K
dated July 24, 1996 have also been audited by Ernst & Young LLP, as set forth in
their report included therein and incorporated herein by reference which, as to
the years 1996, 1995 and 1994, are based in part on the reports of Deloitte &
Touche LLP, KPMG Peat Marwick LLP and Price Waterhouse LLP, independent
auditors. The financial statements and schedule and the Supplemental
Consolidated Financial Statements referred to above are incorporated herein by
reference in reliance upon such reports given upon the authority of such firms
as experts in accounting and auditing.

With respect to the unaudited condensed consolidated interim financial
information for the three-month periods ended April 30, 1996 and April 30, 1995,
and the three-month periods and the six-month periods ended July 31, 1996 and
July 31, 1995, incorporated by reference in this Prospectus, Ernst & Young LLP
have reported that they have applied limited procedures in accordance with
professional standards for a review of such information. However, their separate
report, included in the Company's Quarterly Reports on Form 10-Q for the
quarters ended April 30, 1996 and July 31, 1996, incorporated herein by
reference, state that they did not audit and they do not express an opinion on
that interim financial information. Accordingly, the degree of reliance on their
report on such information should be restricted considering the limited nature
of the review procedures applied. The independent auditors are not subject to
the liability provisions of Section 11 of the Securities Act for their report on
the unaudited interim financial information because that report is not a
"report" or a "part" of the Registration Statement prepared or certified by the
auditors within the meaning of Sections 7 and 11 of the Securities Act.

The consolidated financial statements and the Supplemental Consolidated
Financial Statements included in the CUC 10-K and the Company's Current Report
on Form 8-K filed on September 17, 1996, respectively, and the unaudited
condensed consolidated interim financial information included in the Company's
Quarterly Reports referred to above have not been adjusted to give effect to the
three-for-two stock split effected on October 21, 1996 (see Note d to "Selected
Financial Data").

The consolidated financial statements of Ideon as of December 31, 1995 and
1994 and as of October 31, 1994 and for the year ended December 31, 1995, the
two months ended December 31, 1994 and each of the two years in the period ended
October 31, 1994, incorporated in this Prospectus by reference to the Company's
Current Report on Form 8-K filed with the Commission on September 17, 1996, have
been so incorporated in reliance upon the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.

The consolidated financial statements and related financial statement
schedules of Davidson, incorporated in this Prospectus by reference to the
Company's Current Report on Form 8-K filed with the Commission on September 17,
1996, have been audited by KPMG Peat Marwick LLP, independent auditors, as
stated in their report which is incorporated herein by reference, and have been
so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.

The consolidated financial statements and related financial statement
schedule of Sierra, incorporated in this Prospectus by reference to the
Company's Current Report on Form 8-K filed with the Commission on September 17,
1996, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report which is incorporated herein by reference, and has been
so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.

As stated in their report dated September 11, 1996 on the consolidated
financial statements and the related financial statement schedule of Advance
Ross, which report is incorporated herein by reference to the September 17, 1996
Form 8-K, the consolidated financial statements and the related financial
statement schedule of Advance Ross have been audited by Deloitte & Touche LLP,
independent auditors, such report of such firm having been given upon their
authority as experts in accounting and auditing.

- --------------------------------------------------------------------------------
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

------------------------

TABLE OF CONTENTS

PAGE
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Available Information................................................................................................... 2
Incorporation of Certain Documents by Reference......................................................................... 3
The Company............................................................................................................. 4
Capitalization.......................................................................................................... 8
Use of Proceeds......................................................................................................... 9
Price Range of Common Stock and Dividend Policy......................................................................... 9
Selected Financial Data................................................................................................. 10
Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 12
Selling Stockholders.................................................................................................... 19
Underwriting............................................................................................................ 24
Validity of Common Stock................................................................................................ 26
Experts................................................................................................................. 26

16,500,000 SHARES

CUC INTERNATIONAL INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)

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[LOGO]

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GOLDMAN, SACHS & CO.

MORGAN STANLEY & CO.
INCORPORATED

BEAR, STEARNS & CO. INC.

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

SMITH BARNEY INC.

REPRESENTATIVES OF THE UNDERWRITERS

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