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<SEC-DOCUMENT>0000912057-01-505861.txt : 20010402
<SEC-HEADER>0000912057-01-505861.hdr.sgml : 20010402
ACCESSION NUMBER: 0000912057-01-505861
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 13
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010330
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: IMS HEALTH INC
CENTRAL INDEX KEY: 0001058083
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374]
IRS NUMBER: 061506026
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT:
SEC FILE NUMBER: 001-14049
FILM NUMBER: 1587612
BUSINESS ADDRESS:
STREET 1: 200 NYALA FARMS
CITY: WESTPORT
STATE: CT
ZIP: 06880
BUSINESS PHONE: 2032224523
MAIL ADDRESS:
STREET 1: 200 NYALA FARMS ROAD
CITY: WESTPORT
STATE: CT
ZIP: 06880
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>a2041132z10-k405.txt
<DESCRIPTION>10-K
<TEXT>
<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER 001-14049.
IMS HEALTH INCORPORATED
(Exact name of registrant as specified in its charter)
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<S> <C>
DELAWARE 06-1506026
(State of incorporation) (I.R.S. Employer Identification No.)
</TABLE>
<TABLE>
<S> <C>
200 NYALA FARMS, WESTPORT, CONNECTICUT 06880
(Address of principal executive offices) (Zip Code)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 222-4200.
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, par value $.01 per share........ New York Stock Exchange
Preferred Stock Purchase Rights............... New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
As of February 28, 2001, 294,170,502 shares of Common Stock of IMS Health
Incorporated were outstanding and the aggregate market value of such Common
Stock held by nonaffiliates (based upon its closing transaction price on the
Composite Tape on such date) was approximately $7,910 million.
(CONTINUED)
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<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
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PART I
Item 1 --Business Pages 1 to 13, "Financial Review" in the 2000 Annual
Report to Shareholders.
Pages 22 and 23, "Note 1. Basis of Presentation",
Pages 25 to 26, "Note 4. Investment in Gartner
Stock", Pages 27 to 29, "Note 7. Spin-Off of Synavant
Inc.", Pages 30 to 32, "Note 12. Investment in
TriZetto and Disposal of Erisco", Pages 45 to 47,
"Note 23. Operations by Business Segment" and Page
47, "Note 24. Discontinued Operations" to the
Consolidated Financial Statements in the 2000 Annual
Report to Shareholders.
Item 3 --Legal Proceedings Pages 42 to 44, "Note 21. Contingencies", of the
Notes to Consolidated Financial Statements in the
2000 Annual Report to Shareholders.
PART II
Item 5 --Market for the Registrant's Common Page 13, "Financial Review", in the 2000 Annual
Equity and Related Shareholder Matters Report to Shareholders.
Item 6 --Selected Financial Data Page 49, "Five-Year Selected Financial Data", in the
2000 Annual Report to Shareholders.
Item 7 --Management's Discussion and Analysis of Pages 1 to 13, "Financial Review", in the 2000 Annual
Financial Condition and Results of Report to Shareholders.
Operations
Item 7A --Quantitative and Qualitative Disclosure Pages 10 and 11, "Financial Review", and pages 32 and
About Market Risk 33, "Note 14. Financial Instruments", of the Notes to
Consolidated Financial Statements, in the 2000 Annual
Report to Shareholders.
Item 8 --Financial Statements and Supplementary Pages 15 to 49 of the 2000 Annual Report to
Data Shareholders.
PART III
Item 10 --Directors and Executive Officers of the Section entitled "Proposal No. 1: Election of
Registrant Directors" on pages 7 to 9 of the Company's
Definitive Proxy Statement (the "Proxy Statement")
relating to its Annual Meeting of Shareholders to be
held on May 3, 2001.
Item 11 --Executive Compensation Section entitled "Compensation of Executive Officers"
on pages 12 to 30 of the Proxy Statement.
Item 12 --Security Ownership of Certain Beneficial Section entitled "Security Ownership of Management
Owners and Management and Others" on pages 2 to 6 of the Proxy Statement.
Item 13 --Certain Relationships and Related Sections entitled "Certain Transactions" on page 30
Transactions and "Compensation of Executive Officers" on pages 28
and 29 of the Proxy Statement.
</TABLE>
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The Index to Exhibits is located on Pages 27 to 31
<PAGE>
PART I
As used in this report, except where the context indicates otherwise, the
terms "Company" and "IMS Health" mean IMS Health Incorporated and all
subsidiaries consolidated in the financial statements contained or incorporated
by reference herein.
ITEM 1. BUSINESS
IMS Health was incorporated under the laws of the State of Delaware on
February 3, 1998. The Company began operating as an independent publicly-held
company on July 1, 1998 as a result of its spin-off (the "Cognizant Spin-Off")
from Cognizant Corporation ("Cognizant"). Cognizant subsequently changed its
name to Nielsen Media Research, Inc. ("NMR"). (See Note 24 to the Consolidated
Financial Statements in the 2000 Annual Report to Shareholders). Cognizant began
operating as an independent publicly-held company on November 1, 1996 as a
result of its spin-off (the "D&B Spin-Off") from The Dun & Bradstreet
Corporation ("Dun & Bradstreet").
IMS Health is the world's leading provider of information solutions to the
pharmaceutical and healthcare industries. IMS Health operates in approximately
100 countries and its key products include:
- Sales management information to optimize sales force productivity;
- Market research for prescription and over-the-counter pharmaceutical
products; and
- Information Technology ("IT") application development, integration and
management services.
During 2000, IMS Health consisted of:
1. The IMS Segment, a leading global provider of market information, sales
management and decision-support services to the pharmaceutical and
healthcare industries. The IMS Segment is managed on a global business
model, with global leaders for the majority of its critical business
processes.
2. The Cognizant Technology Solutions Segment ("CTS" or "CTS Segment"), which
delivers high quality, cost-effective, full life cycle solutions to complex
software development and maintenance problems that companies face as they
transition to e-business. CTS's solutions include application development
and integration, application management and re-engineering services. The CTS
Segment represents IMS Health's ownership of 11,290,900 shares of the
Class B common stock of Cognizant Technology Solutions Corporation (60.53%
of all classes of Cognizant Technology Solutions Corporation's common shares
outstanding as of December 31, 2000).
3. The Transaction Businesses Segment, which includes:
- Synavant, Inc. ("Synavant"), comprised of the pharmaceutical industry
automated sales and marketing support businesses previously operated by
IMS Health Strategic Technologies Inc., and certain other foreign
subsidiaries of IMS Health; substantially all of IMS Health's interactive
and direct marketing business, including the business of Clark
O'Neill, Inc., which was a wholly-owned subsidiary of IMS Health; and a
majority stake in a foreign joint venture (collectively, the "Synavant
Business"). (See Notes 1 and 7 to the Consolidated Financial Statements in
the 2000 Annual Report to Shareholders).
- Erisco Managed Care Technologies, Inc. ("Erisco"), a leading supplier of
software-based administrative and analytical solutions to the managed care
industry. (See Notes 1 and 12 to the Consolidated Financial Statements in
the 2000 Annual Report to Shareholders).
- Three small non-strategic software companies.
All prior year segment information has been reclassified to conform with the
2000 presentation.
The Company spun-off the Synavant Business on August 31, 2000, by
distributing the common stock of Synavant to IMS Health's shareholders (the
"Synavant Spin-Off"). The Company sold Erisco to The TriZetto Group, Inc.
("TriZetto") and entered into a technology and data strategic alliance with
TriZetto on October 3, 2000. The Company also divested or discontinued the three
small non-strategic software businesses. Accordingly, as of December 31, 2000,
all components of the Transaction Businesses Segment had been either spun-off,
divested, or discontinued.
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In addition to these three segments, the Company has a Corporate unit which
includes Enterprise Associates LLC ("Enterprises"), a venture capital unit
focused on investments in emerging businesses; and an equity interest in
TriZetto, consisting of 12,142,857 shares of TriZetto common stock, equivalent
to 33.2% of all TriZetto common shares outstanding as of December, 31, 2000. The
Company accounts for its interest in TriZetto on an equity basis. (See Note 23
to the Consolidated Financial Statements in the 2000 Annual Report to
Shareholders).
The Synavant Spin-Off and the sale of Erisco, together with the divestitures
or discontinuation of the three small non-strategic software businesses, have
resulted in a company concentrated on IMS Health's core data business of
providing market information and decision support services to the pharmaceutical
industry, together with CTS, Enterprises, and TriZetto. (See "Financial Review"
in the 2000 Annual Report to Shareholders).
On July 26, 1999, the Company completed a spin-off of the majority of its
equity investment in Gartner, Inc. ("Gartner", formerly known as "Gartner Group,
Inc.") to IMS Health shareholders. The Consolidated Financial Statements of the
Company have been reclassified for all periods to reflect the Gartner equity
investment as a discontinued operation. (See Note 4 and Note 24 to the
Consolidated Financial Statements in the 2000 Annual Report to Shareholders).
IMS SEGMENT
The IMS Segment provides sales management and market research information
services to the pharmaceutical and healthcare industries worldwide. IMS provides
information services covering approximately 100 countries and maintains offices
in 74 countries on six continents, with 69% of total 2000 IMS Segment revenue
generated outside the United States.
IMS SERVICES
Sales management services represented 60% of the IMS Segment's worldwide
revenue in 2000. Sales management services include sales territory reports,
prescription tracking reports, and doctor profiling services. Sales management
services are used principally by pharmaceutical manufacturers to measure and
forecast the effectiveness and efficiency of sales representatives and to target
the marketing and sales efforts of a client's sales force. They are also used by
customers to compensate pharmaceutical sales forces.
Sales management services are made available to clients and their sales
representatives and management via hardcopy reports, CD-ROMs, software
application tools, computer on-line services, Web-based access and magnetic
media for use in client computer systems and IMS's customized electronic
workstations. IMS's data delivery systems help clients to maximize efficiency by
aiding in the setting of sales targets and calculation of sales commissions;
giving fast access to sales data and permitting more sophisticated analyses;
improving call reporting; and improving communication between sales management
and their sales forces. In the United States, IMS has several customized
client-server decision support systems that allow a client to store large
amounts of data at its own site and integrate its own internal sales and
marketing data with IMS data and other external data. IMS also provides clients
with customized data warehouse tools and Web-based access capabilities. IMS's
principal sales management services are as follows:
- SALES TERRITORY REPORTING SERVICES. Sales territory reporting is the
principal sales management service offered by IMS to its pharmaceutical
clients. Sales territory reports can be precisely tailored for each
client, and measure the sales of a client's own products and those of
competitors within specified geographical configurations. These reports
are designed to provide marketing and sales managers with a reliable
measurement of each salesperson's activity and effectiveness in his or her
sales territory, and therefore are used by clients, among other things,
for determining sales force compensation. Data reported for multiple
territories are used for applications such as resource allocation,
territory alignment, market analyses and distribution management.
Depending on the particular market, sales territory reports are available
to clients on a weekly, monthly or quarterly basis. In the United States,
sales territory reports from IMS's Drug Distribution Data-TM- ("DDD")
service allow pharmaceutical clients to track the flow of their products
and those of their competitors to various levels of geography and channels
of distribution. The DDD database contains a virtual census of sales of
pharmaceutical products through all distribution channels, including
direct sales by pharmaceutical
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manufacturers and indirect sales through drug wholesalers, mail order
distributors, warehousing chains and other market participants. IMS
provides sales territory reporting services covering 45 countries.
- PRESCRIPTION TRACKING REPORTING SERVICES. Prescription tracking reporting
services are designed to monitor prescription activity and to track the
movement of pharmaceutical products out of pharmacies. Prescription
tracking services are used by pharmaceutical companies to facilitate
product marketing at the prescriber level. In the United States and
Canada, the Xponent-Registered Trademark- service monitors prescription
activity at the retail pharmacy and mail order outlet level, and uses a
patented statistical methodology to project the prescription activity of
nearly one million individual prescribers on a monthly basis. Xponent is
now also available in six European countries. The European Xponent
database is built from prescription data collected from retail pharmacies
and coding centers which are linked to the geographical area in which the
prescription was written, and where permissible under local data privacy
laws, to individual prescribers.
- SELF-MEDICATION SERVICES. These services provide detailed product
movement, market share and pricing information for over-the-counter
personal care, patient care and nutritional products. IMS publishes
self-medication reports covering 34 countries and provides related
services. PharmaTrend-TM-, IMS Health's tracking service for
over-the-counter pharmaceutical products, is available in 12 European
countries
Market research services represented approximately 36% of the IMS Segment's
worldwide revenue in 2000. The principal market research services are
multinational integrated analytical tools, and syndicated pharmaceutical,
medical, hospital, promotional and prescription audits. Market research services
are utilized by clients for various strategic purposes, including analyzing
market shares, therapeutic prescribing trends and price movements at the
national and sub-national levels. The information reported in these services is
generated or derived from data collected primarily from pharmaceutical
manufacturers, pharmaceutical wholesalers, pharmacies, hospitals and doctors.
Market research services are delivered to clients via hardcopy reports, CD-ROMs,
software application tools, computer on-line services, and magnetic media for
use in client computer systems and IMS's customized electronic workstations.
IMS's principal market research services are as follows:
- IMS GLOBAL SERVICES. IMS's Global Services unit provides national level
information services to pharmaceutical clients operating on a
multinational level. Global Services' core service offering, MIDAS-TM-, is
an on-line multinational integrated data analysis tool that harnesses
IMS's worldwide databases and is used by the pharmaceutical industry to
assess and utilize pharmaceutical information and trends in multiple
markets. MIDAS gives clients on-line access to IMS-compiled
pharmaceutical, medical, promotional and chemical data. Using MIDAS,
clients are able to view information from the national databases compiled
by IMS and produce statistical reports in the required format. IMS Global
Services also publishes various in-depth reviews of the worldwide
pharmaceutical marketplace and provides custom market research and
strategic consultancy.
- PHARMACEUTICAL AUDITS. These audits measure the sale of pharmaceutical
products into pharmacies, supplemented in some countries by data collected
from prescribing physicians, retail chains and discount stores. These
audits contain data projected to national estimates, showing product sales
by therapeutic class broken down by package size and dosage form. IMS
publishes pharmaceutical audits covering 100 countries.
- MEDICAL AUDITS. These audits are based on information collected from
panels of practicing physicians and contain projected national estimates
of the number of consultations for each diagnosed disease with details of
the therapy prescribed. These audits also analyze the use physicians make
of individual drugs by listing the diseases for which they are prescribed,
the potential therapeutic action the physician is expecting, other drugs
prescribed at the same time, and estimates of the total number of drugs
used for each disease. IMS publishes medical audits covering 51 countries.
- HOSPITAL AUDITS. These audits contain data projected to national estimates
and show the sale of pharmaceutical products to hospitals by therapeutic
class. Related reports provide audits of laboratory diagnostic supplies,
hospital supplies, and hospital records. IMS publishes hospital audits
covering 43 countries.
- PROMOTIONAL AUDITS. These audits measure pharmaceutical promotion for a
particular market, including sales-force promotion and journal and mail
advertising, based on information received from panels of physicians and
from monitoring medical journals and direct mail. IMS publishes
promotional reports covering 21 countries.
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- PRESCRIPTION AUDITS. These audits analyze the rate at which drugs move out
of the pharmacy and into the hands of the consumer, and measure both what
is prescribed by physicians and what is actually dispensed at the
pharmacy. IMS publishes prescription audits covering 15 countries.
- OTHER MARKET RESEARCH REPORTS. These include managed care reports which
offer an array of information to quantify the effects of managed care on
the pharmaceutical and healthcare industry; personal care reports which
measure the sale of healthcare accessories, wound care and dietetic aids;
and reports on bulk chemical shipments and molecules for R&D. IMS has
developed, in certain countries, disease and treatment information at the
patient level (in which information is not identifiable to any individual
patient) that gives participants in the healthcare industry new insights
into the treatment of diseases. The availability, scope and frequency of
the foregoing reports vary on a country-by-country basis.
The remaining 4% of the IMS Segment's 2000 revenue was derived primarily
through professional consulting, and research and development services. IMS
provides pharmaceutical and other clients with a range of value-added services
that are used (i) to study specific issues and trends in the pharmaceutical
marketplace and the healthcare industry, (ii) to manage sales and marketing,
(iii) to evaluate the effectiveness of marketing programs, (iv) to analyze
components of a product marketing program at any stage of its implementation,
and (v) for consultancy in optimizing strategy, marketing programs and product
commercialization. These services include:
- PROFESSIONAL CONSULTING SERVICES. IMS's professional consulting services
are provided to help clients analyze and evaluate market trends,
strategies and tactics, and to assist in the development and
implementation of customized software applications and data warehouse
tools. In the United States, IMS's professional consulting services
provide a wide range of custom market research, promotion optimization,
promotion effectiveness, managed care and other advanced analytics
services for the pharmaceutical and healthcare marketplace. The
professional services consulting group also helps clients to design
customized decision support systems based on a variety of cutting-edge
technologies, for the purpose of leveraging IMS data more rapidly. Outside
of the United States, consulting services are offered on a
country-by-country basis.
- RESEARCH AND DEVELOPMENT SERVICES. IMS's research and development services
provide clients with information and workstation tools intended to improve
the effectiveness and speed of clinical research and subsequent regulatory
approvals. IMS's regulatory affairs database, IDRAC, covers the European
Union, certain Eastern European countries, Japan and the United States,
and guides users through the drug development and registration process.
IMS DATA SUPPLIERS
Over the past four decades, IMS has developed strong relationships with its
data suppliers in each market in which it operates. As the supply of
pharmaceutical data is critical to IMS's business, IMS devotes significant human
and financial resources to its data collection efforts, and in many cases has
historical connections with the trade associations and professional associations
involved. In the United States, IMS has been designated as a database licensee
by the American Medical Association ("AMA") for use and sublicensing of the
AMA's physician database.
IMS CUSTOMERS
Sales to the pharmaceutical industry accounted for substantially all of the
IMS Segment's revenue in 2000. All major pharmaceutical and biotechnology
companies are customers of IMS, and many of the companies subscribe to reports
and services in several countries. IMS's customer base is broad in scope and
enables it to avoid dependence on any single customer. None of IMS's customers
accounted for more than 10% of the Company's gross revenues in 2000.
IMS COMPETITION
While no competitor provides the geographical reach or breadth of IMS's
services, IMS generally competes in the countries in which it operates with
other information services companies, as well as the in-house capabilities of
its customers. Generally, competition has arisen on a country-by-country basis.
In Europe, certain of IMS's services
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compete with those offered by competitors such as Cegedim in France and Germany,
National Data Corporation in Germany and the United Kingdom, and AzyX Geopharma
in Belgium, Germany and Portugal. In the United States, certain of IMS's sales
management services, including its sales territory and prescription tracking
reports, compete with the services of National Data Corporation. Service,
quality, coverage and speed of delivery of information services and products are
the principal differentiators in IMS's market.
IMS FOREIGN OPERATIONS
As indicated above, IMS and its subsidiaries engage in a significant portion
of their business outside of the United States. IMS provides information
services covering approximately 100 countries and maintains offices in 74
countries on six continents, with 69% of total 2000 revenue generated outside
the United States. IMS's foreign operations are subject to the usual risks
inherent in carrying on business outside of the United States, including
fluctuation in relative currency values, possible nationalization,
expropriation, price controls and other restrictive government actions. IMS
Health believes that the risk of nationalization or expropriation is reduced
because its products are software, services and information, rather than the
production of products that require manufacturing facilities or the use of
natural resources.
IMS INTELLECTUAL PROPERTY
IMS owns and controls a number of trade secrets, confidential information,
trademarks, trade names, copyrights, patents and other intellectual property
rights which, in the aggregate, are of material importance to its business. IMS
owns two significant U.S. patents relating to its Xponent product, U.S. Patent
Nos. 5,420,786 and 5,781,893, each having a remaining life of twelve years. IMS
also has numerous trade secrets relating to data processing that are of material
importance to its business. Management believes that the "IMS" name and related
names, marks and logos are of material importance to IMS. IMS is licensed to use
certain technology and other intellectual property rights owned and controlled
by others, and similarly, other companies are licensed to use certain technology
and other intellectual property rights owned and controlled by IMS. The
technology and other intellectual property rights licensed by IMS are of
importance to its business, although management of IMS believes that IMS's
business, as a whole, is not dependent upon any one intellectual property or
group of such properties.
The names of IMS's and its subsidiaries' products and services referred to
herein are trademarks, service marks, registered trademarks or registered
service marks owned by or licensed to IMS or one of its subsidiaries.
IMS EMPLOYEES
The IMS Segment had approximately 5,000 employees worldwide as of
December 31, 2000. Almost all of these employees are full-time. None of the
Company's U.S. employees is represented by a union. In Austria, Belgium, France,
Germany, Italy, the Netherlands and Spain the Company has Works Councils, which
are a legal requirement in those countries. The Company also has a European
Works Council which is in compliance with European Union requirements.
Management considers its relations with its employees to be good and to have
been maintained in a normal and customary manner.
CTS SEGMENT
The CTS Segment ("CTS") delivers high-quality, cost-effective, full life
cycle solutions to complex software development and maintenance problems that
companies face as they transition to e-business. These services are delivered
through the use of a seamless on-site and offshore consulting project team.
CTS's solutions include application development and integration, application
management, and re-engineering services.
CTS markets and sells its technology consulting services directly through
its professional staff, senior management and sales personnel.
CTS provides professional services to its customers through an integrated
business model. CTS's business model combines a technical and account management
team located on-site at the customer location and eleven development centers
located in India. To support this business model, CTS has recruited and trained
in excess of 2,400
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programmers in India. CTS has also put in place well developed facilities,
technology and communications infrastructure. By basing CTS's technical
operations in India, CTS has access to a large pool of skilled, English-
speaking IT and Internet technology professionals. Such IT and Internet
technology professionals service customers on a cost basis significantly lower
than in developed countries. The main elements of the CTS solution, which CTS
believes differentiates it from other IT service providers, include the
following:
- Established and scalable proprietary processes
- Highly-skilled workforce
- Research and development and competency centers
Because most of CTS's programmers are trained in multiple technologies and
architectures, CTS is able to react to customers' needs and quickly redeploy
programmers to new technologies. To facilitate this ability, CTS has made a
substantial investment in competency centers to leverage its knowledge base
across the company. In addition, through its investment in research and
development activities and the continuing education of technical personnel, CTS
assures that its knowledge base and collective skill set keeps pace with
emerging technologies. The ability to work in new technologies allows CTS to
foster long-term relationships by addressing the needs of both its existing and
new customers.
CTS's extensive facilities, technology and communications infrastructure
facilitates the seamless integration of its on-site and offshore workforces.
This is accomplished by permitting team members in different locations to access
common project information and to work directly on customer projects.
By using the excess capacity of a customer's existing computing facilities
during off-peak hours, CTS's offshore development centers can undertake
additional projects without substantial customer investment in new hardware and
software. In addition, for large projects with short time frames, CTS's offshore
facilities allow for parallel processing of various development phases to
accelerate delivery time.
CTS SERVICES
- APPLICATION DEVELOPMENT AND INTEGRATION. Define requirements, write
specifications and design, develop, test and integrate software across
multiple platforms including internet technologies.
- APPLICATION MANAGEMENT. Support some or all of a customer's applications,
ensuring that systems remain operational and responsive to changing user
requirements, and provide ongoing enhancement as required by the customer.
- RE-ENGINEERING. Modify and test applications to enable systems to function
in new operating environments.
CTS CUSTOMERS
A significant portion of the gross revenues reported by Cognizant Technology
Solutions Corporation ("CTS Corp.") is derived from services performed for IMS
Health, primarily the IMS Segment. IMS Health eliminates these intracompany
revenues in consolidation and excludes them from the reported CTS Segment
results. The following discussion of CTS customers refers to the gross reported
CTS Corp. results.
CTS Corp. provided services to a total of 40, 57 and 90 customers in 1998,
1999 and 2000, respectively. During 1998, 1999 and 2000, CTS Corp.'s top five
customers accounted for 61%, 57% and 40% of total CTS Corp. revenues,
respectively. During 1998, 1999 and 2000, IMS Health and its subsidiaries
accounted for 18%, 17% and 10% of revenues, respectively. The volume of work
performed for specific customers is likely to vary from year to year, and a
significant customer in one year may not use CTS Corp.'s services in a
subsequent year. CTS Corp.'s ten largest customers accounted for, in the
aggregate, approximately 81%, 75% and 59% of CTS Corp.'s revenues in 1998, 1999
and 2000, respectively. In 1998, IMS Health, First Data Corporation and
ACNielsen each accounted for more than 10% of revenue. In 1999, IMS Health and
First Data Corporation each accounted for more than 10% of revenue. In 2000, IMS
Health accounted for more than 10% of revenue. Approximately 44%, 16% and 0% of
CTS Corp.'s revenues were derived from Year 2000 compliance services in 1998,
1999 and 2000, respectively. Application
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development services represented approximately 26%, 32% and 46% of CTS Corp.'s
revenues in 1998, 1999 and 2000, respectively. Application maintenance services
accounted for 21%, 44% and 47% of CTS revenues in 1998, 1999 and 2000,
respectively.
CTS COMPETITION
The IT services market includes a large number of participants, is subject
to rapid change and is intensely competitive. This market includes participants
from a variety of market segments, including:
- systems integration firms;
- contract programming companies;
- application software companies;
- Internet solutions providers;
- the professional services groups of computer equipment companies;
- facilities management and outsourcing companies; and
- "Big Five" accounting firms.
In certain markets in which CTS competes, there are no significant barriers
to entry. Current and potential competitors may introduce new and more
competitive services, make strategic acquisitions or establish cooperative
relationships among themselves or with third parties. As a result, these
competitors increase the ability of their services to address the needs of
customers. Many of CTS's competitors have significantly greater financial,
technical and marketing resources and greater name recognition than CTS. The
principal competitive factors affecting the markets for CTS's services include:
performance and reliability; quality of technical support, training and
services; responsiveness to customer needs; reputation, experience and financial
stability; and competitive pricing of services.
CTS competes by offering: a well-developed recruiting, training and
retention model; a successful service and delivery model; an excellent referral
base; continual investment in process improvement and knowledge capture;
investment in research and development; and continued focus on responsiveness to
customer needs, quality of services, competitive prices, project management
capabilities and technical expertise.
In order to be successful in the future, CTS must continue to respond
promptly and effectively to technological change and competitors' innovations.
There can be no assurance that CTS will be able to compete successfully against
current and future competitors. CTS's failure to successfully compete could have
a material adverse effect upon its business, results of operations and financial
condition.
CTS INTELLECTUAL PROPERTY
CTS's consulting business includes the co-development, with the customer, of
software applications and other technology deliverables. These include written
specifications and documentation in connection with specific customer
engagements. CTS's future success depends in part on its ability to protect its
intellectual property rights. CTS presently holds no patents or registered
copyrights. CTS relies upon a combination of copyright and trade secret laws,
non-disclosure and other contractual arrangements and various security measures
to protect its intellectual property rights. India is a member of the Berne
Convention, and has agreed to recognize protections on copyrights conferred
under the laws of foreign countries, including the laws of the United States.
CTS believes that laws, rules, regulations and treaties in effect in the United
States and India are adequate to protect it from misappropriation or
unauthorized use of the CTS's copyrights. However, there can be no assurance
that such laws will not change and, in particular, that the laws of India will
not change in ways that may prevent or restrict the transfer of software
components, libraries and toolsets from India to the United States. There can be
no assurance that the steps taken by CTS to protect its intellectual property
rights will be adequate to deter misappropriation of any of CTS's intellectual
property, or that CTS will be able to detect unauthorized use and take
appropriate steps to enforce CTS's rights.
Pursuant to the License Agreement between CTS and IMS Health, all rights to
the "Cognizant" name and certain related trade and service marks were
transferred to CTS in July, 1998.
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CTS EMPLOYEES
At December 31, 2000, CTS employed approximately 631 persons on a full-time
basis in its North American headquarters and satellite offices and on-site North
American customer locations. CTS also employed approximately 117 persons on a
full-time basis in its European satellite office and on-site European customer
locations and approximately 2,416 persons on a full-time basis in its offshore
software development centers in India. None of CTS's employees is subject to a
collective bargaining arrangement. CTS considers its relations with employees to
be good.
TRANSACTION BUSINESSES SEGMENT
SYNAVANT
Synavant was spun off from IMS Health on August 31, 2000. (See Note 7 to the
Consolidated Financial Statements in the 2000 Annual Report to Shareholders).
The following reflects the business up to the date of the Synavant Spin-Off:
PHARMACEUTICAL RELATIONSHIP MANAGEMENT
Synavant provides sales and marketing effectiveness applications which can
be integrated with client-critical databases to provide customer and business
insights. Synavant configures solutions for clients' sales and marketing teams,
which include, among other things, supporting desktop, laptop, handheld PC, and
paper systems, linked to client companies' databases as required. More than
40,000 pharmaceutical sales and marketing representatives and executives
worldwide rely on Synavant's solutions to make critical decisions on a daily
basis. Synavant's solutions increase pharmaceutical sales-force performance and
productivity by providing access to up-to-the-minute profiling, targeting,
activity reporting, team selling and sample management information.
In response to the unique demands of the pharmaceutical industry's customer
relationship management ("CRM") systems, Synavant created an advanced approach
to CRM adapted specifically for the pharmaceutical industry, which it calls
Pharmaceutical Relationship Management ("PRM").
SYNAVANT PHARMACEUTICAL RELATIONSHIP MANAGEMENT PRODUCTS AND SERVICES
Cornerstone-TM- is a flexible, Windows-based, PRM system used by
pharmaceutical field sales representatives, district managers and headquarters
executives to access mission-critical sales and marketing, contact and territory
information via desktop, laptop or handheld PC's. Cornerstone's applications
include managing business opportunities and projects such as product launch
programs and formulary placement opportunities. Cornerstone can quickly generate
standard and customized reports, such as weekly activity summary reports,
division reports and product launch reports. It also provides fast updating of
customer activities. Cornerstone's MarketViews allows access to pharmaceutical
databases, which can be configured to deliver customized sales summaries by
territory, district and physician.
Premiere(SM) is a Windows-based, PRM system similar to Cornerstone with a
substantial user base in Europe, Brazil, Canada and Asia/Pacific. Core data can
be drawn from various sources and tailored by country, region, department or
individual user. Its unique application generators and builders are used to
customize and modify the system to a company's specific requirements quickly and
without the need for re-programming. Sales and marketing professionals at every
level of an organization can use Premiere to develop marketing strategies,
allocate and coordinate sales and marketing resources, track competitive
activity, and plan, monitor and evaluate sales and marketing activity. Up-to-the
minute integration to pharmaceutical sales forces and marketing by Premiere
enables faster and better informed sales and marketing decisions, enhancing
return-on-investment in pharmaceutical relationship activities.
Based upon the number of world-wide installations referenced below, Synavant
is a market leader in applications for a variety of hand-held PC ("HPC") devices
that offer greater portability in developed markets and a low-cost entry
strategy into sales-force activity management in emerging markets. Over 10,000
HPC device users are customers of Synavant's applications. Synavant's latest HPC
product, PhasTrak Standalone Handheld Solution, combines the power
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and robustness of the Cornerstone backend system with the speed and agility of a
hand-held device. PhasTrak is a standalone solution that helps sales
representatives improve call quality. Its relational database integrates sales
information with call information, giving representatives a clearer, more
powerful view of each account at the point of contact. PhasTrak also provides
complete electronic sample signature capture as part of a total Prescription
Drug Marketing Act compliance solution. PhasTrak is powered by Windows CE and is
available for HPC size units. If contracted by the customer, Synavant will sell
the HPC device as part of the total customer solution.
Synavant also provides services from Pharbase(SM), the industry-leading
(based upon number of licensed customers) reference medical database used in
pharmaceutical sales and marketing in the following countries: United Kingdom,
France, Italy, the Netherlands, Spain, Canada, Belgium, Luxembourg, Austria,
Australia, Germany and the Philippines. Pharbase(SM) is a syndicated database
which is updated and validated daily by a team of operators in each country,
providing a level of accuracy that cannot be achieved by in-house databases. The
extensive customer and industry information within Pharbase underpins all sales
and marketing activities and can be integrated with other internal, external or
third-party information to create an information solution tailored to the
individual needs of each customer. Insights from such information help improve
sales and marketing productivity by enhancing sales and marketing targeting and
customer relationship management activities.
Synavant provides advanced Business Intelligence solutions, Analyzer and
PharmaLyst, that work with integrated PRM databases and prescriber-level data to
give field and head office managers new, actionable insights into their
business. Through the use of these systems, customers can identify trends and
exceptions in call activity, benchmark sales and marketing performance by
product, market, or physician specialty, compare territory performance, track
call activity and sales and marketing by prescriber segment, and measure the
impact of promotions, sample activities, or other initiatives.
Through its strategic alliance with Siebel Systems, Inc. ("Siebel"),
Synavant will offer the Siebel products as part of the PRM solution offering.
While the sale and support of Cornerstone, Premiere and Phastrak products will
continue to be offered (see below), it is the intent of Synavant to ultimately
migrate its current customer base to Siebel products as appropriate to customer
needs. (See Note 6 to the Consolidated Financial Statements in the 2000 Annual
Report to Shareholders).
Synavant also offers an extensive suite of consulting, support, training,
and systems management services as part of the overall solution represented by
PRM. Synavant offers its customers total systems support, becoming an extension
of its customers' own IT support services. These services include help desk,
educational, implementation, PC staging and delivery, repair,
telecommunications, and complete systems outsourcing services.
Synavant Professional Services serves as an adjunct to the pharmaceutical
company's field support services for business operations and provides project
management, new hire training, field systems rollout, and analytical and
reporting services based on daily operational data to improve field force
operational efficiency and effectiveness. Synavant also provides data
integration management, integrating data from sales and marketing, IMS Health,
and client databases to provide advanced decision support and reporting for its
customers.
SYNAVANT INTERACTIVE MARKETING SERVICES
Synavant's interactive marketing services include prescription and OTC
sample distribution to physicians, pharmaceutical field sales force support
services, publication circulation management, direct mail, telemarketing
projects utilizing its staff of physicians and other healthcare professionals,
product recall and return goods services and other customized promotion
programs. In support of its sampling services, Synavant maintains a 180,000
square foot facility that meets the strict requirements of the FDA for storage
and repackaging of prescription drugs. Synavant maintains licenses and
registrations where required and distributes patient starter samples to
physicians throughout the United States. Direct mail marketing services are also
provided across Europe and in Canada and Australia. In the United States,
Synavant has been designated as a database licensee by the American Medical
Association ("AMA") for use and sublicensing of the AMA's physician database.
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Through an arrangement with the Company, Synavant has instant access to the
leading (based on the number of sales representatives that use it as a targeting
tool) physician prescribing database, Xponent-TM-. This access enables Synavant
to provide unique services to its clients that set the standard for targeting of
marketing programs to the physician's community.
SYNAVANT FOREIGN OPERATIONS
As indicated above, Synavant and its subsidiaries engage in a significant
portion of their business outside of the United States. Synavant's foreign
operations are subject to the usual risks inherent in carrying on business
outside of the United States, including fluctuation in relative currency values,
possible nationalization, expropriation, price controls and other restrictive
government actions. Synavant believes that the risk of nationalization or
expropriation is reduced because its products are software, services and
information, rather than the production of products that require manufacturing
facilities or the use of natural resources.
INTELLECTUAL PROPERTY
Synavant owns and controls a number of trade secrets, confidential
information, trademarks, trade names, copyrights, and other intellectual
property rights which, in the aggregate, are of material importance to its
business. Management believes that the "Synavant" name and related names, marks
and logos are of material importance to Synavant. Synavant is licensed to use
certain technology and other intellectual property rights owned and controlled
by others, and similarly, other companies are licensed to use certain technology
and other intellectual property rights owned and controlled by Synavant. The
names of Synavant's and its subsidiaries' products and services referred to
herein are trademarks, service marks, registered trademarks or registered
service marks owned by or licensed to Synavant or one of its subsidiaries.
CUSTOMERS
Sales to the pharmaceutical industry accounted for substantially all of
Synavant's revenue in 2000. Substantially all major pharmaceutical companies are
customers of Synavant, and many of the companies use Synavant's products and
subscribe to its services in several countries. Synavant's customer base is
broad in scope and enables it to avoid dependence on any single customer. None
of Synavant's customers accounted for more than 10% of its gross revenues in
2000, 1999 or 1998.
COMPETITION
Synavant has competition from other automated sales support technology
companies that offer sales force automation solutions and enterprise-wide
solutions in some of the countries in which it operates, as well as competition
from the in-house capabilities of its customers. Synavant also faces competition
from many vendors that market and sell sales force automation solutions in the
consumer packaged goods industry. In addition, Synavant competes with various
companies that provide support and Interactive Marketing services similar to its
services. Generally, competition has arisen on a country-by-country basis. For
example, in the United States, certain Synavant products and services, including
its Cornerstone product and Siebel products, compete with the products and
services of Dendrite International Inc. ("Dendrite"), and in Europe, certain
Synavant products and services, including its Premiere product and Siebel
products, compete with the products and services of Cegedim, as well as
Dendrite. Quality, completeness and speed of delivery of information services
and products are the principal methods of competition in Synavant's market.
SYNAVANT EMPLOYEES
As of August 31, 2000, Synavant had approximately 1,400 employees in
approximately 20 countries. Of these, approximately 500 are located in the
United States, and none of these are represented by labor unions. In the
Netherlands, Italy, Belgium and Germany, Synavant has Works Councils, which are
a legal requirement in those countries. Synavant has also established a European
Works Council as required under European Union regulations.
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Synavant believes that, generally, relations with its employees are good and
have been maintained in a normal and customary manner.
ERISCO
Erisco was sold to TriZetto on October 3, 2000. (See Note 12 to the
Consolidated Financial Statements in the 2000 Annual Report to Shareholders).
From October 4, 2000 the results of Erisco have been included in the results of
TriZetto.
Erisco is a leading provider of application software and services to the
healthcare industry, and has been for more than two decades. Erisco's legacy
system solutions, ClaimFacts-Registered Trademark- and
GroupFacts-Registered Trademark-, were designed to help indemnity insurance
carriers, third party administrators and self-administered corporations manage
the administration of group health and life insurance products.
Erisco's primary offering is Facets-Registered Trademark-, a client/server
system which integrates advanced technology with clinical information to help
managed care organizations ("MCOs") provide high-quality, cost-effective
solutions in their marketplace. Primary markets include health maintenance
organizations, preferred provider organizations, Blue Cross/Blue Shield
organizations, managed-indemnity carriers and specialized MCOs.
Erisco also extends its Facets business solution through a service bureau
offering for low-volume customers, and through alliances with strategic partners
for systems integration and implementation consulting.
Within the high-growth managed care industry, Erisco competes with other
information systems vendors including Computer Sciences Corporation, Health
Systems Design and Quality Care Solutions, Inc. Competition is principally based
on company reputation, system functionality and technology, and ease of use and
service. Essentially all of Erisco's revenue in 2000, 1999 and 1998 was
generated in the United States. Erisco had approximately 327 employees as of
October 3, 2000.
CORPORATE
IMS Health currently maintains its corporate center in Westport,
Connecticut. Other components of the Corporate unit are:
ENTERPRISES
Enterprises invests in venture capital funds that invest in emerging
businesses, with an emphasis on information technology and the healthcare
information industry. It has invested as a limited partner in Information
Partners Capital Fund, Information Associates, L.P. and Information Associates
II, L.P., all of which are venture capital limited partnerships. Enterprises
also has a limited number of direct investments.
TRIZETTO
The Company owns 12,142,857 of the common shares of TriZetto, which it
received as consideration for the sale of Erisco to TriZetto on October 3, 2000.
IMS's ownership interest in TriZetto represented 33.2% of the outstanding shares
of TriZetto as of December 31, 2000.
TriZetto is an information technology and services company focused on the
healthcare industry. The company hosts and licenses software and provides
e-business platforms, serving approximately 600 customers with more than
90 million enrollees. TriZetto's application service provider (ASP) unit hosts a
broad selection of applications from multiple vendors for a predictable monthly
fee. All of TriZetto's ASP offerings are configured for use over the Internet.
TriZetto's HealthWeb-Registered Trademark- technology allows all healthcare
participants--health plans, providers, employers and members--to exchange
information and conduct business over the Internet. HealthEWare-TM-, the
software engines unit, develops and licenses premium Erisco and Resource
Information Management Systems, Inc. ("RIMS") applications for payers and
benefits administrators.
IMS accounts for its ownership interest in TriZetto under the equity method.
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RELATIONSHIPS BETWEEN IMS HEALTH AND SYNAVANT, IMS HEALTH
AND NMR AND AMONG IMS HEALTH, DUN & BRADSTREET AND ACNIELSEN
SYNAVANT SPIN-OFF (2000)
Prior to the Synavant Spin-Off, IMS Health and Synavant entered into certain
agreements governing their relationship subsequent to the Synavant Spin-Off and
providing for the allocation of certain liabilities and obligations arising from
periods prior to the Synavant Spin-Off, including those obligations and
liabilities that arose in connection with the D&B Spin-Off. The following
descriptions summarize certain terms of such agreements, but are qualified by
reference to the texts of such agreements, which are incorporated by reference
to the Exhibits to this Form 10-K.
SYNAVANT DISTRIBUTION AGREEMENT. IMS Health and Synavant entered into a
Distribution Agreement (the "Synavant Distribution Agreement"), providing for,
among other things, certain corporate transactions required to effect the
Synavant Spin-Off and other arrangements between IMS Health and Synavant
subsequent to the Distribution. In particular, the Synavant Distribution
Agreement defines the assets, liabilities and contractual relationships which
were allocated to and assumed by Synavant and those that remained with IMS
Health. This included IMS Health's agreement to indemnify Synavant with respect
to certain contingent liabilities and to provide credit support to Synavant
through August 31, 2001.
In addition to the Distribution Agreement, IMS Health and Synavant also
entered into other agreements governing the relationship between IMS Health and
Synavant. These include two Data Rights Agreements, a Tax Allocation Agreement
and an Employee Benefits Agreement, each of which is described below, as well as
a Data and Telecommunications Service Agreement, certain sublease arrangements,
a Corporate Services Agreement, Shared Transaction Services Agreements, an
Information Service Agreement and certain credit support arrangements. After the
date of the Synavant Spin-Off (the "Synavant Spin-Off Date"), there were
individuals on the Boards of Directors of IMS Health and Synavant who were also
serving on the Board of Directors of the other company.
SYNAVANT DATA RIGHTS AGREEMENTS. Pursuant to the Xponent Data License
Agreement, IMS Health granted to Synavant a non-transferable and non-exclusive
license to use IMS Health's Xponent data solely for the purpose of
(i) selecting a list of doctors to whom its healthcare company clients can send
proprietary materials, (ii) providing its single source sampling products to
pharmaceutical clients, (iii) providing data to publishers of journals or other
media for the purpose of determining advertising, and (iv) selecting doctors to
whom its pharmaceutical clients can send certain drug samples. Pursuant to the
Pharbase Cross License Agreement, Synavant granted to IMS Health a worldwide,
perpetual, non-transferable and non-exclusive license to use all Synavant data
(including Pharbase) in order to (i) update its prescriber databases,
(ii) update its sales, prescription and market research databases, and
(iii) create derivative works from such databases in connection with the
delivery of services to its clients. IMS Health granted to Synavant a
non-transferable and non-exclusive license to certain IMS Health data to be used
solely to update its Pharbase database. Both parties agreed not to use certain
data in products delivered to certain competitors of the other party.
SYNAVANT TAX ALLOCATION AGREEMENT. IMS Health and Synavant entered into a
Tax Allocation Agreement under which IMS Health agreed to pay any taxes, or
receive any refunds or credits of taxes, shown as due on a U.S. federal, state
or local income or franchise tax return for a taxable period beginning prior to
August 31, 2000, the Synavant Spin-Off Date (including the current taxable
period to the extent such taxes, refunds or credits are attributable to the
portion of such taxable period up to and including Synavant Spin-Off Date). All
taxes other than U.S. federal, state and local income and franchise taxes will
be the responsibility of Synavant if they are attributable to the Synavant
Business and of IMS Health if they are attributable to all other businesses of
IMS Health (the "IMS Health Business"). For taxable periods beginning on or
after Synavant Spin-Off Date (and the portion of the current taxable period
beginning after Synavant Spin-Off Date), Synavant and IMS Health agreed to be
responsible for their own taxes.
SYNAVANT EMPLOYEE BENEFITS AGREEMENT. IMS Health and Synavant entered into
an Employee Benefits Agreement which allocated responsibility with respect to
certain employee benefit plans and other employment-related matters on and after
August 1, 2000. Among other things, the Synavant Employee Benefits Agreement
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requires IMS Health to continue to sponsor its current qualified and
non-qualified defined benefit pension plans, qualified and non-qualified defined
contribution savings plans and welfare plans for the benefit of employees and
former employees of the IMS Health Business. IMS Health will retain all assets
and liabilities relating to its defined benefit plans, including those relating
to benefits accrued by Synavant employees through July 31, 2000. As of
August 1, 2000, Synavant shall maintain qualified and non-qualified defined
contribution savings plans and welfare plans for the benefit of current and
former employees of the Synavant Business. With respect to equity based plans,
all awards were adjusted or converted so that IMS Health employee awards and
Synavant employee awards related solely to their respective company stock and so
that the value of the awards were preserved.
COGNIZANT SPIN-OFF (1998)
Prior to the Cognizant Spin-Off, IMS Health and Cognizant (now NMR) entered
into certain agreements governing their relationship subsequent to the Cognizant
Spin-Off and providing for the allocation of certain liabilities and obligations
arising from periods prior to the Cognizant Spin-Off, including those
obligations and liabilities that arose in connection with the D&B Spin-Off. The
following descriptions summarize certain terms of such agreements, but are
qualified by reference to the texts of such agreements, which are incorporated
by reference to the Exhibits to this Form 10-K.
COGNIZANT DISTRIBUTION AGREEMENT. NMR and IMS Health entered into a
Distribution Agreement (the "Cognizant Distribution Agreement") providing for,
among other things, assumption of liabilities and cross indemnities designed to
allocate generally, effective as of the date of the Cognizant Spin-Off,
financial responsibility for (i) the liabilities arising out of or in connection
with Cognizant's businesses (i.e. NMR) and certain other specified liabilities
to NMR and (ii) all other liabilities to IMS Health. Pursuant to the terms of
the Distribution Agreement (the "D&B Distribution Agreement") among Cognizant,
Dun & Bradstreet and ACNielsen Corporation ("ACNielsen"), as a condition to the
Cognizant Spin-Off, IMS Health and NMR were required to and did undertake to be
jointly and severally liable to Dun & Bradstreet and ACNielsen for any Cognizant
liabilities arising thereunder. The Cognizant Distribution Agreement allocates
between IMS Health and NMR the financial responsibility for such liabilities,
including contingent liabilities related to certain prior business transactions
and certain liabilities to Dun & Bradstreet that may arise in connection with
the D&B Spin-Off. (See Note 21 to the Consolidated Financial Statements in the
2000 Annual Report to Shareholders).
COGNIZANT TAX ALLOCATION AGREEMENT. NMR and IMS Health entered into a Tax
Allocation Agreement under which IMS Health agreed to pay any taxes, or receive
any refunds or credits of taxes, shown as due on a U.S. federal, state or local
income or franchise tax return for a taxable period beginning prior to the date
of the Cognizant Spin-Off. Any subsequent adjustment of such taxes will be
allocated to IMS Health if such adjustment relates to IMS Health's business and
to NMR if such adjustment relates to the NMR business, except that any
adjustment of such taxes attributable to tax items or positions initially
determined by NMR's corporate office will be allocated to IMS Health. All taxes
other than U.S. federal, state and local income and franchise taxes will be the
responsibility of IMS Health if they are attributable to IMS Health's business
and of NMR if they are attributable to NMR's business. For taxable periods
beginning on or after the date of the Cognizant Spin-Off, IMS Health and NMR
will be responsible for their own taxes.
D&B SPIN-OFF (1996)
Prior to the D&B Spin-Off, Dun & Bradstreet, Cognizant and ACNielsen entered
into certain agreements governing their relationship subsequent to the D&B
Spin-Off and providing for certain liabilities and obligations arising from
periods prior to the D&B Spin-Off. The following descriptions summarize certain
terms of certain of those agreements, but are qualified by reference to the
texts of such agreements, which are incorporated by reference to the Exhibits to
this Form 10-K.
D&B DISTRIBUTION AGREEMENT. Dun & Bradstreet, Cognizant and ACNielsen
entered into the D&B Distribution Agreement providing for, among other things,
assumptions of liabilities and cross indemnities designed generally to allocate
to Dun & Bradstreet, effective as of November 1, 1996 (the "D&B Spin-Off Date"),
financial responsibility
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for all liabilities of Dun & Bradstreet, except for certain liabilities arising
out of or in connection with the businesses that became part of Cognizant or
ACNielsen as a result of the D&B Spin-Off. Similarly, the D&B Distribution
Agreement provided for the allocation generally to Dun & Bradstreet of the
financial responsibility for the liabilities arising out of or in connection
with then-former businesses, including those formerly conducted by or associated
with Cognizant or ACNielsen, provided that liabilities related to certain prior
business transactions were allocated to Cognizant if such liabilities exceed
certain specified amounts. (See Note 21 to the Consolidated Financial Statements
in the 2000 Annual Report to Shareholders).
D&B TAX ALLOCATION AGREEMENT. Dun & Bradstreet, Cognizant and ACNielsen
entered into a Tax Allocation Agreement (the "1996 Tax Allocation Agreement").
Except as otherwise provided in the D&B Distribution Agreement, the D&B Tax
Allocation Agreement provided, among other things, that Dun & Bradstreet must
pay Dun & Bradstreet's entire consolidated tax liability for the tax years that
Cognizant and ACNielsen were included in Dun & Bradstreet's consolidated Federal
income tax return. For periods prior to the D&B Spin-Off, Dun & Bradstreet is
generally liable for state and local taxes measured by income or imposed in lieu
of income taxes. The D&B Tax Allocation Agreement allocated liability to Dun &
Bradstreet, Cognizant and ACNielsen for their respective shares of other state
and local taxes, as well as any foreign taxes attributable to periods prior to
the D&B Spin-Off.
INDEMNITY AND JOINT DEFENSE AGREEMENT ("IJDA"). Under the IJDA, ACNielsen
assumed exclusive liability for the Information Resources Litigation, discussed
in Note 21 to the Consolidated Financial Statements in the 2000 Annual Report to
Shareholders, up to a specified amount (the "ACN Maximum Amount"), which is to
be calculated at the time such liabilities, if any, become payable, and that
Cognizant and Dun & Bradstreet will share liability equally for any amounts in
excess of the ACN Maximum Amount. The ACN Maximum Amount will be determined by
an investment banking firm as the maximum amount which ACNielsen is able to pay
after giving effect to (i) any plan submitted by such investment bank which is
designed to maximize the claims-paying ability of ACNielsen without impairing
the investment banking firm's ability to deliver a viability opinion (but which
will not require any action requiring shareholder approval) and (ii) payment of
related fees and expenses. For these purposes, financial viability means the
ability of ACNielsen, after giving effect to such plan, the payment of related
fees and expenses and the payment of the ACN Maximum Amount, to pay its debts as
they become due and to finance the current and anticipated operating and capital
requirements of its business, as reconstituted by such plan, for two years from
the date any such plan is expected to be implemented.
FACTORS THAT MAY AFFECT FUTURE RESULTS
From time to time, information and statements provided by the Company may
contain "forward-looking statements" as defined by the Private Securities
Litigation Reform Act of 1995. The Company cautions shareholders and investors
that actual results may differ materially from those projected or suggested in
any forward-looking statement as a result of a wide variety of factors,
including but not limited to the factors set forth below and under the caption
"Forward Looking Statements" in the Company's 2000 Annual Report to
Shareholders, which is incorporated herein by reference:
- Results could be affected by the costs and other effects of litigation and
other contingencies involving the Company. In particular, management of
the Company is unable to predict at this time the final outcome of the
Information Resources Litigation, the Matters before the European
Commission and the D&B Tax Matters described in Note 21 to the
Consolidated Financial Statements in the 2000 Annual Report to
Shareholders, or whether the resolution of these matters could materially
affect the Company's results of operations, cash flows or financial
position.
- The Company operates globally, deriving 54% of its $1,424,359 in revenue
from non-U.S. operations. As a result, fluctuations in the value of
foreign currencies relative to the U.S. dollar may increase the volatility
of U.S. dollar-denominated operating results. Emerging markets currencies
tend to be considerably less stable than in established markets, which may
further contribute to volatility in operating results. In addition, the
Company is subject to the usual risks inherent in carrying on business in
certain countries outside the United
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States, including possible nationalization, expropriation, price controls
or other restrictive government actions. Management believes that the risk
of nationalization or expropriation is reduced because its basic service
is the delivery of information, rather than the production of products
which require manufacturing facilities or use of natural resources.
- The Company competes in businesses which demand or sell sophisticated
information systems, software and other technology, including the
technology utilized to deliver products and services. The types of systems
which the Company's businesses require or sell can be expected to be
subject to refinements, some of which may be major, as such systems and
underlying technologies are upgraded or advanced or new technologies are
introduced. There can be no guarantee that as various systems and
technologies become outdated, the Company will be able to replace them, to
replace them as quickly as the Company's competition or develop and market
new and better products and services and technology in the future on time
and on a cost-effective basis. Further there can be no guarantee regarding
the degree and rate which customers will adopt new technologies or
products that may result in the Company not achieving the benefits that
might have been anticipated from such new technologies or products.
- Currently, the Company's assets include a majority interest in CTS
consisting of 11,290,900 shares of CTS Class B common stock, (representing
60.53% of the outstanding shares of all classes of CTS common stock at
December 31, 2000); an equity investment in Gartner (which at
December 31, 2000 consisted of 6,597,262 shares of Gartner Class A common
stock representing 7.6% of the outstanding shares of all classes of
Gartner common stock); and an equity investment in TriZetto consisting of
12,142,857 shares of TriZetto common stock, which represented 33.2% of the
outstanding shares of TriZetto common stock; as well as, directly or
through its investment in various limited partnerships, shares of various
other companies, both public and private. In addition, the Company may
decide, or in the case of certain venture capital investments may be
obligated, to make future investments. Variations will occur in the market
value of the Company's securities, and such variations may have an impact
on the trading price of the Company's Common Stock. The results of
operations of CTS, Gartner and TriZetto may be subject to the various
factors described in their respective reports filed with the SEC from time
to time. Declines in the values of the Company's CTS, Gartner and TriZetto
investments, which the Company determines to be other than temporary, will
have an impact on the Company's operating results in the period in which
such determination is made.
- A number of countries in which the Company operates have enacted
regulations limiting the prices pharmaceutical companies may charge for
drugs. The Company believes that such cost containment measures will cause
pharmaceutical companies to seek more effective means of marketing their
products (which will benefit the Company in the medium and long term).
However, such governmental regulation may cause pharmaceutical companies
to revise or reduce their marketing programs in the near term.
- Certain of the data services provided by the Company relate to the
diagnosis and treatment of disease, including prescription data. The use
of anonymized patient-specific information is anticipated to be an
increasingly important tool in the design, development and marketing of
pharmaceuticals. Recently, there have been a number of regulatory and
legislative initiatives in the area of medical privacy at the federal,
state and foreign government levels. Most of these initiatives seek to
place restrictions on the use and disclosure of patient-identifiable
information without consent and, in some cases, seek to extend
restrictions to non-patient-identifiable information or the process of
anonymizing data. In addition, there are initiatives that seek to restrict
access to this information to non-commercial uses. To protect privacy, no
individual patient is identified in any IMS database so that many of these
initiatives would not apply to the Company's business. However, there can
be no assurance that these initiatives or future initiatives would not
adversely affect the Company's ability to generate or assemble data or to
develop or market current or future products or services.
- An important aspect of the Company's business strategy has in the past
been growth through acquisitions or joint ventures, and, although the
Company expects to continue to pursue acquisitions and joint ventures,
there can be no assurance that management of the Company will be able to
identify and consummate acquisitions or joint ventures on satisfactory
terms. Furthermore, every acquisition or joint venture will entail some
degree of
15
<PAGE>
uncertainty and risk, and even if consummated, may not produce the
operating results or increases in value over time which were expected at
the time of acquisition or joint venture.
- Each of the Company's businesses is subject to significant or potential
competition, which is likely to intensify in the future.
- The Company's results could be adversely affected by general or specific
weakening of economic conditions, including weak economic conditions in
the pharmaceutical, healthcare, information technology or other industries
in which the Company's customers operate.
The names of the Company's products used in this report are trademarks or
registered trademarks of IMS Health Incorporated or one of its subsidiaries.
16
<PAGE>
ITEM 2. PROPERTIES
The principal properties of the Company as at December 31, 2000 are set
forth below.
The executive offices of IMS Health Incorporated are located at 200 Nyala
Farms, Westport, Connecticut in a leased property.
Property of the Company is geographically distributed to meet sales and
operating requirements worldwide. The properties of the Company are generally
considered to be both suitable and adequate to meet current operating
requirements and virtually all space is being utilized.
IMS SEGMENT
Owned properties located within the United States include three facilities.
The properties are located in Totowa, New Jersey, and Plymouth Meeting and West
Norriton, Pennsylvania.
Owned properties located outside the United States include: one property in
each of Buenos Aires, Argentina; Crows Nest, Australia; Brussels, Belgium;
Santiago, Chile; Lisbon, Portugal; Caracas, Venezuela; and London, Stanmore and
Pinner, England.
The operations of the IMS Segment are also conducted from seven leased
offices located throughout the United States and eighty-four non-United States
locations.
CTS SEGMENT
Headquartered in Teaneck, New Jersey, operations are conducted from eight
leased office locations in the United States and fifteen non-United States
locations.
ITEM 3. LEGAL PROCEEDINGS
Reference is made to "Note 21. Contingencies" of the Notes to the
Consolidated Financial Statements on pages 42 to 44 of the 2000 Annual Report to
Shareholders, which is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
17
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT*
Officers are appointed by the Board of Directors to hold office until their
respective successors are chosen and qualified. Listed below are the executive
officers of the registrant at March 15, 2001 and brief summaries of their
business experience during the past five years.
<TABLE>
<CAPTION>
NAME TITLE AGE
- ---- ----- --------
<S> <C> <C>
David M. Thomas................................ Chairman and Chief Executive Officer** 51
Gilles Pajot................................... Executive Vice President** 51
Gary W. Noon................................... President, IMS Health North America 47
James C. Malone................................ Chief Financial Officer 52
Robert H. Steinfeld............................ Senior Vice President, General Counsel and 47
Corporate Secretary
Matthew L. Friedman............................ Vice President and Treasurer 43
Wendy J. Timmins............................... Vice President, Controller 38
</TABLE>
- ------------------------
* Set forth as a separate item pursuant to Items 401(b) and (e) of
Regulation S-K.
** Member of the Board of Directors.
Mr. Thomas was appointed Chairman and Chief Executive Officer of IMS Health
in November, 2000. Prior to that, he was Senior Vice President/Group Executive
at IBM, responsible for the global Personal Systems Group, from January, 1998 to
September, 2000. Mr. Thomas also was a member of the IBM Corporate Executive
Committee, which oversees all IBM operations worldwide. Joining IBM in 1972,
Mr. Thomas held progressively responsible executive positions at the company,
including General Manager, IBM North America from October, 1995 to January,
1996, and General Manager, Global Industries from January, 1996 to January,
1998.
Mr. Pajot was appointed Executive Vice President of IMS Health in November,
2000. He joined the Company as president of IMS Health Europe Region in
December, 1997. Previously, Mr. Pajot worked for 20 years with Pharmacia &
Upjohn and its predecessor company, serving as Senior Vice President at
Pharmacia from July, 1997 to December, 1997, with responsibility for global
restructuring initiatives following the 1995 merger of Pharmacia and Upjohn.
From November, 1995 to July, 1997, he was Senior Vice President,
President-Market Region Europe, responsible for the planning phase of global
integration of the two companies. Prior to that, he served as Executive Vice
President, Worldwide Pharmacia AB from September, 1994 to November, 1995.
Mr. Noon was appointed President of IMS Health North America in November,
2000. Previously, he was Vice President, Global Marketing for Pfizer/Warner
Lambert, a position he held since September, 1999. Mr. Noon was Founder and
Managing Director of U.K.-based Practice Resource Systems (PRS) from April, 1996
to September, 1999, where he developed a clinical information system to
integrate data across physician, pharmacy and hospital settings. From 1991 to
1995, Mr. Noon held a series of progressively responsible executive positions at
GlaxoWellcome, including UK Integration Executive for the International
Business & Commercial Development Task Force from March, 1995 to October, 1995
and Regional Director, Wellcome Pharmaceutical U.K. and Northern Europe from
November, 1994 to March, 1995.
Mr. Malone was appointed Chief Financial Officer in April, 2000, having
served as Acting CFO since December, 1999. He had been named Senior Vice
President--Finance and Controller of IMS Health in July, 1998. Prior to that,
Mr. Malone served as Senior Vice President--Finance and Controller of Cognizant
Corporation from December, 1996 to July, 1998 and Vice President--Finance and
Controller from September, 1996 to December, 1996. From February, 1995 to
December, 1996, he was Assistant Vice President and Leader--North American
Shared Transaction Services Center for Cognizant Corporation.
Mr. Steinfeld was appointed Senior Vice President, General Counsel and
Corporate Secretary in November, 2000. He was appointed Vice President, Taxes in
April, 1998, and named Senior Vice President, Tax and Corporate Development in
October, 2000. Mr. Steinfeld joined Cognizant Corporation in February, 1997 as
Director of Taxes. Previously, he was Vice President, Taxation at Ultramar
Corporation, a multinational petroleum refining and
18
<PAGE>
marketing company, from September, 1993 to February, 1997. From 1991 to 1993, he
served as Vice President, Taxes, at GAF Corporation and its publicly traded
subsidiary, International Specialty Products, Inc. Prior to that, Mr. Steinfeld
was a Partner and Chairman of the Tax Department at the law firm of Webster &
Sheffield.
Mr. Friedman was appointed Vice President and Treasurer of the Company in
February, 1999, having served as Interim Treasurer since July, 1998. Previously,
he was Assistant Treasurer of Cognizant Corporation from May, 1996 to June,
1998. Prior to that, he served as Director--International Finance for Dun &
Bradstreet from December, 1994 to May, 1996.
Ms. Timmins was named Vice President, Controller of the Company in October,
2000, having served as Director, Financial Planning and Analysis since October,
1998. Prior to that, she was Controller of Walsh International Inc., a developer
of salesforce automation systems that was acquired by IMS Health in 1998.
Ms. Timmins was named to that position in June, 1996. From May, 1994 to June,
1996, she was Senior Financial Analyst of Walsh International and Source
Informatics.
19
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Information in response to this Item is set forth under Dividends and Common
Stock Information in the "Financial Review" on pages 12 and 13 in the 2000
Annual Report to Shareholders, which information is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data required by this Item is incorporated herein by
reference to the information relating to the years 1996 through 2000 set forth
in the "Five-Year Selected Financial Data" on page 49 in the 2000 Annual Report
to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information in response to this Item is set forth in the "Financial Review"
on pages 1 to 13 in the 2000 Annual Report to Shareholders, which information is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Information in response to this Item is set forth under Market Risk in the
"Financial Review" on pages 10 and 11 and in "Note 14. Financial Instruments" of
Notes to Consolidated Financial Statements on pages 32 and 33 in the 2000 Annual
Report to Shareholders, which information is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Consolidated Financial Statements and Schedule under Item 14 on
page 24.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
20
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information in response to this Item is incorporated herein by reference to
the section entitled "Election of Directors" on pages 7 to 9 of the Company's
Definitive Proxy Statement (the "Proxy Statement") relating to its Annual
Meeting of Shareholders to be held on May 3, 2001, except that "Executive
Officers of the Registrant" on pages 18 and 19 of this report responds to Items
401(b) and (e) of Regulation S-K with respect to the Company's executive
officers.
ITEM 11. EXECUTIVE COMPENSATION
Information in response to this Item is incorporated herein by reference to
the section entitled "Compensation of Executive Officers" on pages 12 to 30 of
the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information in response to this Item is incorporated herein by reference to
the section entitled "Security Ownership of Management and Others" on pages 2 to
6 of the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information in response to this Item is incorporated herein by reference to
the sections entitled "Certain Transactions" on page 30, and "Compensation of
Executive Officers" on pages 28 and 29, of the Proxy Statement.
21
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this report.
(1) Consolidated Financial Statements.
See Index to Consolidated Financial Statements and Schedule on page 24.
(2) Consolidated Financial Statement Schedule.
See Index to Consolidated Financial Statements and Schedule on page 24.
(3) Other Financial Information.
Five-year Selected Financial Data. See Index to Consolidated Financial
Statements and Schedule on page 24.
(b) Reports on Form 8-K.
A report on Form 8-K was filed on October 18, 2000 to present under Item 2,
Acquisition or Disposition of Assets, a description of the closing of the
Company's disposition of Erisco Managed Care Technologies, Inc. ("Erisco")
to The TriZetto Group, Inc., and under Item 7, Financial Statements, Pro
Forma Financial Information and Exhibits, Pro Forma Financial Information
regarding the disposition of Erisco.
(c) Exhibits.
See Index to Exhibits on pages 27 to 31, which indicates which Exhibits are
management contracts or compensatory plans required to be filed as Exhibits.
Only responsive information appearing on pages 1 to 49 to Exhibit 13 is
incorporated herein by reference, and no other information appearing in
Exhibit 13 is or shall be deemed to be filed as part of this Form 10-K.
(d) Financial Statement Schedule.
See Index to Consolidated Financial Statements and Schedule on page 24.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C> <C>
IMS HEALTH INCORPORATED
(Registrant)
By: /s/ DAVID M. THOMAS
---------------------------------------------------
David M. Thomas
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
</TABLE>
Date: March 30, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<C> <S>
/s/ DAVID M. THOMAS /s/ ROBERT J. LANIGAN
- ------------------------------------------------- -------------------------------------------------
(David M. Thomas, (Robert J. Lanigan, Director)
Chairman, Chief Executive Officer and Director)
(principal executive officer)
/s/ JAMES C. MALONE /s/ H. EUGENE LOCKHART
- ------------------------------------------------- -------------------------------------------------
(James C. Malone, Chief Financial Officer) (H. Eugene Lockhart, Director)
(principal financial officer)
/s/ WENDY J. TIMMINS /s/ GILLES PAJOT
- ------------------------------------------------- -------------------------------------------------
(Wendy J. Timmins, Vice President, Controller) (Gilles Pajot, Executive Vice President and
(principal accounting officer) Director)
/s/ CLIFFORD L. ALEXANDER /s/ M. BERNARD PUCKETT
- ------------------------------------------------- -------------------------------------------------
(Clifford L. Alexander, Jr., Director) (M. Bernard Puckett, Director)
/s/ JOHN P. IMLAY /s/ WILLIAM C. VAN FAASEN
- ------------------------------------------------- -------------------------------------------------
(John P. Imlay, Jr., Director) (William C. Van Faasen, Director)
/s/ ROBERT KAMERSCHEN
- -------------------------------------------------
(Robert Kamerschen, Director)
</TABLE>
Date: March 30, 2001
23
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
FINANCIAL STATEMENTS:
The Company's consolidated financial statements, the notes thereto and the
related report thereon of PricewaterhouseCoopers LLP, independent accountants,
as of December 31, 2000 and 1999 and for the years ended December 31, 2000,
1999, and 1998, appearing on pages 15 to 47 of the 2000 Annual Report to
Shareholders, are incorporated by reference into this Annual Report on
Form 10-K (see below). The additional financial data indicated below should be
read in conjunction with such consolidated financial statements.
<TABLE>
<CAPTION>
PAGE
-----------------------------------
2000 ANNUAL
REPORT TO
FORM 10-K SHAREHOLDERS
-------------------- ------------
<S> <C> <C>
Statement of Management's Responsibility for Financial Exhibit 13 Pg 14 14
Statements................................................
Report of Independent Accountants........................... Exhibit 13 Pg 14 14
As of December 31, 2000 and 1999:
Consolidated Statements of Financial Position............. Exhibit 13 Pg 16 16
For the years ended December 31, 2000, 1999 and 1998:
Consolidated Statements of Income......................... Exhibit 13 Pg 15 15
Consolidated Statements of Cash Flows..................... Exhibit 13 Pg 17-18 17-18
Consolidated Statements of Shareholders' Equity........... Exhibit 13 Pg 19-21 19-21
Notes to Consolidated Financial Statements.................. Exhibit 13 Pg 22-47 22-47
Other Financial Information:
Quarterly Financial Data (Unaudited) for the years ended Exhibit 13 Pg 48 48
December 31, 2000 and 1999................................
Management's Discussion and Analysis of Financial Condition Exhibit 13 Pg 1-13 1-13
and Results of Operations.................................
Business Segments is included in "Notes to Consolidated
Financial Statements"
Five-Year Selected Financial Data (Unaudited)............... Exhibit 13 Pg 49 49
SCHEDULE:
Report of Independent Accountants on Financial Statement Pg 25 --
Schedule..................................................
II. Valuation and Qualifying Accounts for the years ended Pg 26 --
December 31, 2000, 1999 and 1998..........................
OTHER:
IMS Health Incorporated and Subsidiaries.................. Exhibit 21 Pg 32-34 --
</TABLE>
Schedules other than the one listed above are omitted as not required or
inapplicable or because the required information is provided in the consolidated
financial statements, including the notes thereto.
24
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of IMS Health Incorporated:
Our audits of the consolidated financial statements referred to in our
report dated February 16, 2001, appearing in the 2000 Annual Report to
Shareholders of IMS Health Incorporated (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the financial statement schedule listed in the index
under Item 14(a)(2) of this Form 10-K. In our opinion, this financial statement
schedule presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.
PricewaterhouseCoopers LLP
New York, New York
February 16, 2001
25
<PAGE>
IMS HEALTH INCORPORATED AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- ------------------------------------------------ ------------ ----------------------- ---------- ----------
ADDITIONS
-----------------------
BALANCE CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
For the Year Ended December 31, 2000.......... $ 7,625 $ 3,378 $(1,601)(e) $ 1,386(b) $ 8,016
For the Year Ended December 31, 1999.......... $11,246 $ 108 $ 2,035 $ 5,764(b) $ 7,625
For the Year Ended December 31, 1998.......... $ 4,236 $ 1,828 $ 5,562(a) $ 380(b) $11,246
Valuation Allowance Deferred Income Taxes:
For the Year Ended December 31, 2000.......... $23,325 $ 2,493(c) $ 0 $14,100(d) $11,718
For the Year Ended December 31, 1999.......... $21,239 $10,270 $ 0 $ 8,184 $23,325
For the Year Ended December 31, 1998.......... $21,826 $ 4,948 $ 0 $ 5,535 $21,239
</TABLE>
- ------------------------
NOTE:
(a) Includes the allowance for doubtful accounts related to the Walsh and PMSI
businesses acquired in 1998.
(b) The charge-off of uncollectible accounts for which a reserve was provided in
prior periods.
(c) Valuation allowances on assets related to additional NOLs created in 2000
where, based on available evidence, it is more likely than not that such
assets will not be realized.
(d) Includes valuation allowances related to the net operating losses ("NOLs")
of Erisco and the Synavant Business, $204 and $2,276, respectively; the
recognition of the benefit of certain NOLs due to the implementation of
global tax planning strategies ($10,072) and the expiration and true-up of
certain NOLs ($1,548).
(e) Includes the allowance for doubtful accounts transferred to Synavant and
Erisco in 2000.
26
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
REGULATION
S-K EXHIBIT
NUMBER DESCRIPTION
- -------------- -----------
<S> <C> <C>
3 Articles of Incorporation and By-laws
.1 Restated Certificate of Incorporation of IMS Health
Incorporated dated May 29, 1998 (incorporated by reference
to Exhibit 3.1 to Registrant's Registration Statement on
Form 10 filed on June 12, 1998).
.2 Certificate of Amendment of Restated Certificate of
Incorporation of IMS Health Incorporated dated March 22,
1999 (incorporated by reference to Exhibit 3.2 to
Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999 filed on May 17, 1999).
.3 Amended and Restated By-laws of IMS Health Incorporated
(incorporated by reference to Exhibit 3.2 to Registrant's
Registration Statement on Form 10 filed on June 12, 1998).
4 Instruments Defining Rights of Security Holders
.1 Rights Agreement dated as of June 15, 1998 between IMS
Health Incorporated and First Chicago Trust Company of New
York (incorporated by reference to Exhibit 10.20 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998 filed on March 1, 1999).
.2 Amendment No. 1 to the Rights Agreement dated as of
March 28, 2000 between IMS Health Incorporated and First
Chicago Trust Company of New York (incorporated by reference
to Exhibit 4.1 to Registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 2000 filed on May 15, 2000).
.3 Amendment No. 2 to the Rights Agreement dated as of
July 18, 2000 between IMS Health Incorporated and First
Chicago Trust Company of New York (incorporated by reference
to Exhibit 4.1 to Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 2000 filed on
November 13, 2000).
10 Material Contracts
.1 Distribution Agreement between Cognizant Corporation and IMS
Health Incorporated, dated as of June 30, 1998
(incorporated by reference to the Exhibit 10.1 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998 filed on March 1, 1999).
.2 Tax Allocation Agreement between Cognizant Corporation and
IMS Health Incorporated, dated as of June 30, 1998
(incorporated by reference to the Exhibit 10.2 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998 filed on March 1, 1999).
.3 Employee Benefits Agreement between Cognizant Corporation
and IMS Health Incorporated, dated as of June 30, 1998
(incorporated by reference to the Exhibit 10.3 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998 filed on March 1, 1999).
.4 Amended and Restated Transition Services Agreement among The
Dun & Bradstreet Corporation, The New Dun & Bradstreet
Corporation, Cognizant Corporation, IMS Health Incorporated,
ACNielsen Corporation and Gartner, Inc. (p.k.a. Gartner
Group Inc.), dated as of June 30, 1998 (incorporated by
reference to the Exhibit 10.4 to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1998 filed on
March 1, 1999).
.5 1998 IMS Health Incorporated Non-Employee Directors' Stock
Incentive Plan, as amended on July 25, 2000 and restated to
reflect such amendment (incorporated by reference to Exhibit
10.2 to the Registrant's Registration Statement on Form S-8
filed on January 16, 2001).*
.6 1998 IMS Health Incorporated Non-Employee Directors'
Deferred Compensation Plan, as adopted effective July 1,
1998 (incorporated by reference to the Exhibit 10.6 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998 filed on March 1, 1999). *
.7 1998 IMS Health Incorporated Employees' Stock Incentive Plan
(As amended and restated effective July 25, 2000). +*
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
REGULATION
S-K EXHIBIT
NUMBER DESCRIPTION
- -------------- -----------
<S> <C> <C>
.8 1998 IMS Health Incorporated Replacement Plan for Certain
Employees Holding Cognizant Corporation Equity-Based Awards,
as adopted effective July 1, 1998 (incorporated by reference
to the Exhibit 10.8 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1998 filed on March 1,
1999).*
.9 1998 IMS Health Incorporated Replacement Plan for Certain
Non-Employee Directors Holding Cognizant Corporation
Equity-Based Awards, as adopted effective July 1, 1998
(incorporated by reference to the Exhibit 10.9 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998 filed on March 1, 1999).*
.10 Form of Non-Employee Directors' Stock Option Agreement
(incorporated by reference to the Exhibit 10.10 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998 filed on March 1, 1999).*
.11 Form of Non-Employee Directors' Restricted Stock Agreement
(incorporated by reference to the Exhibit 10.11 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998 filed on March 1, 1999).*
.12 Form of Restricted Stock Unit Agreements (incorporated by
reference to the Exhibit 10.12 to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1998 filed on
March 1, 1999).*
.13 Form of Stock Option Agreement (incorporated by reference to
the Exhibit 10.13 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1998 filed on March 1,
1999).*
.14 Form of Purchased Option Agreement (incorporated by
reference to the Exhibit 10.14 to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1998 filed on
March 1, 1999).*
.15 Forms of Change-in-Control Agreement for Certain Executives
of IMS Health Incorporated (incorporated by reference to the
Exhibit 10.15 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1998 filed on March 1, 1999).*
.16 IMS Health Incorporated Employee Protection Plan, as adopted
effective December 1, 1998 (incorporated by reference to the
Exhibit 10.16 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1998 filed on March 1, 1999).*
.17 IMS Health Incorporated Executive Annual Incentive Plan, as
adopted effective July 1, 1998 (incorporated by reference to
the Exhibit 10.17 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1998 filed on March 1,
1999).*
.18 IMS Health Incorporated Supplemental Executive Retirement
Plan (As amended and restated effective December 19, 2000).
+*
.19 IMS Health Incorporated Retirement Excess Plan, as adopted
effective July 1, 1998 (incorporated by reference to the
Exhibit 10.19 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1998 filed on March 1, 1999).*
.20 IMS Health Incorporated Savings Equalization Plan, as
adopted effective July 1, 1998 (incorporated by reference to
Exhibit 10.21 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1998 filed on March 1, 1999).*
.21 Amended and Restated Employment Agreement by and between IMS
Health Incorporated and Robert E. Weissman, dated as of
January 1, 2000 (incorporated by reference to Exhibit 10.22
to Registrant's Annual Report on Form 10-K for the year
ended December 31, 2000 filed on March 17, 2000).*
.22 Amended and Restated Employment Agreement by and between IMS
Health Incorporated and Victoria R. Fash, dated as of
January 1, 2000 (incorporated by reference to Exhibit 10.23
to Registrant's Annual Report on Form 10-K for the year
ended December 31, 2000 filed on March 17, 2000).*
.23 Undertaking of IMS Health Incorporated, dated June 30, 1998
(incorporated by reference to the Exhibit 10.25 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998 filed on March 1, 1999).
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
REGULATION
S-K EXHIBIT
NUMBER DESCRIPTION
- -------------- -----------
<S> <C> <C>
.23.1 Distribution Agreement among R.H. Donnelley Corporation
(p.k.a. The Dun & Bradstreet Corporation), Cognizant
Corporation and ACNielsen Corporation, dated as of
October 28, 1996 (incorporated by reference to Exhibit 10(x)
to the Annual Report on Form 10-K of R.H. Donnelley
Corporation (p.k.a. The Dun & Bradstreet Corporation) for
the year ended December 31, 1996 filed on March 27, 1997).
.23.2 Tax Allocation Agreement among R.H. Donnelley Corporation
(p.k.a. The Dun & Bradstreet Corporation), Cognizant
Corporation and ACNielsen Corporation, dated as of
October 28, 1996 (incorporated by reference to Exhibit 10(y)
to the Annual Report on Form 10-K of R.H. Donnelley
Corporation (p.k.a. The Dun & Bradstreet Corporation) for
the year ended December 31, 1996 filed on March 27, 1997).
.23.3 Employee Benefits Agreement among R.H. Donnelley Corporation
(p.k.a. The Dun & Bradstreet Corporation), Cognizant
Corporation and ACNielsen Corporation, dated as of
October 28, 1996 (incorporated by reference to Exhibit 10(z)
to the Annual Report on Form 10-K of R.H. Donnelley
Corporation (p.k.a. The Dun & Bradstreet Corporation) for
the year ended December 31, 1996 filed on March 27, 1997).
.23.4 Indemnity and Joint Defense Agreement among R.H. Donnelley
Corporation (p.k.a. The Dun & Bradstreet Corporation),
Cognizant Corporation and ACNielsen Corporation, dated as of
October 28, 1996 (incorporated by reference to Exhibit
10(aa) to the Annual Report on Form 10-K of R.H. Donnelley
Corporation (p.k.a. The Dun & Bradstreet Corporation) for
the year ended December 31, 1996 filed on March 27, 1997).
.24 Distribution Agreement between IMS Health Incorporated and
Gartner, Inc., (p.k.a. Gartner Group Inc.) dated as of
June 17, 1999 (incorporated by reference to Exhibit 10.1 to
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999 filed on August 10, 1999).
.25 Agreement and Plan of Merger among Gartner, Inc., (p.k.a.
Gartner Group Inc.) IMS Health Incorporated and GRGI, Inc.
dated as of June 17, 1999 (incorporated by reference to
Exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1999 filed on August 10,
1999).
.26 IMS Health Incorporated Executive Deferred Compensation
Plan, dated July 20, 1999 (incorporated by reference to
Exhibit 10.4.1 to Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999 filed on
November 15, 1999).*
.26.1 Selected portions of the Prospectus Supplement, dated
September 27, 1999 setting forth certain terms and
conditions of the Executive Deferred Compensation Plan for
U.S. employees (incorporated by reference to Exhibit 10.4.2
to Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999 filed on November 15,
1999).*
.26.2 Selected portions of the Private Placement Memorandum, dated
September 27, 1999 setting forth certain terms and
conditions of the Executive Deferred Compensation Plan for
U.S. employees (incorporated by reference to Exhibit 10.4.3
to Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999 filed on November 15,
1999).*
.27 First Amendment to the IMS Health Incorporated Retirement
Excess Plan, dated September 1, 1999 (incorporated by
reference to Exhibit 10.7 to Registrant's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1999 filed
on November 15, 1999).*
.28 First Amendment to the IMS Health Incorporated Savings
Equalization Plan, dated September 1, 1999 (incorporated by
reference to Exhibit 10.8 to Registrant's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1999 filed
on November 15, 1999).*
.29 Second Amendment to the IMS Health Incorporated Savings
Equalization Plan, dated October 1, 1999 (incorporated by
reference to Exhibit 10.31 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 2000 filed on
March 17, 2000).*
.30 Second Amendment to the IMS Health Incorporate Retirement
Excess Plan, dated October 1, 1999 (incorporated by
reference to Exhibit 10.32 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 2000 filed on
March 17, 2000).*
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
REGULATION
S-K EXHIBIT
NUMBER DESCRIPTION
- -------------- -----------
<S> <C> <C>
.31 IMS Health European Deferred Compensation Plan, dated
December 1, 1999 (incorporated by reference to Exhibit 10.31
to Registrant's Annual Report on Form 10-K for the year
ended December 31, 2000 filed on March 17, 2000).*
32 Agreement and Plan of Reorganization, dated as of May 16,
2000, by and among The TriZetto Group, Inc., Elbejay
Acquisition Corp., IMS Health Incorporated and Erisco
Managed Care Technologies, Inc. (incorporated by reference
to Exhibit 2.1 to the Registrant's Current Report on Form
8-K, filed May 17, 2000).
.33 Stockholder Agreement, dated as of October 2, 2000, by and
between The TriZetto Group, Inc. and IMS Health Incorporated
(incorporated by reference to Exhibit C to the Registrant's
Schedule 13D/A2 filed October 6, 2000).
.34 Registration Rights Agreement, dated as of October 2, 2000,
by and between The TriZetto Group, Inc. and IMS Health
Incorporated (incorporated by reference to Exhibit D to the
Registrant's Schedule 13D/A2 filed October 6, 2000).
.35 Distribution Agreement between IMS Health Incorporated and
Synavant Inc., dated August 31, 2000 (incorporated by
reference to Exhibit 2.1 to the Registrant's Current Report
on Form 8-K filed September 15, 2000).
.36 Xponent Data License Agreement between IMS Health
Incorporated and Synavant Inc. dated August 31, 2000
(incorporated by reference to Exhibit 2.2 to the
Registrant's Current Report on Form 8-K filed September 15,
2000).
.37 Cross License Agreement between IMS Health Incorporated and
Synavant Inc. dated August 31, 2000 (incorporated by
reference to Exhibit 2.3 to the Registrant's Current Report
on Form 8-K filed September 15, 2000).
.38 Tax Allocation Agreement between IMS Health Incorporated and
Synavant Inc. dated August 31, 2000 (incorporated by
reference to Exhibit 2.4 to the Registrant's Current Report
on Form 8-K filed September 15, 2000).
.39 Employee Benefits Agreement between IMS Health Incorporated
and Synavant Inc. dated August 31, 2000 (incorporated by
reference to Exhibit 2.5 to the Registrant's Current Report
on Form 8-K filed September 15, 2000).
.40 Credit Support Letter, dated July 25, 2000, between IMS
Health Incorporated and Synavant Inc. (incorporated by
reference to Exhibit 2.11 to the Registrant's Current Report
on Form 8-K filed September 15, 2000).
.41 IMS Health Incorporated U.S. Retirement Plan (As amended and
restated effective December 19, 2000).+*
.42 Amended and Restated Amendment dated as of January 15, 2001
to the Amended and Restated Employment Agreement by and
between IMS Health Incorporated and Robert E. Weissman,
dated as of January 1, 2000.+*
.43 Amended and Restated Amendment dated as of January 15, 2001
to the Amended and Restated Employment Agreement by and
between IMS Health Incorporated and Victoria R. Fash, dated
as of January 1, 2000.+*
.44 Amended and Restated Employment Agreement by and between IMS
Health Incorporated and David M. Thomas effective as of
November 14, 2000.+*
.45 Employment Agreement by and between IMS Health Incorporated
and Gilles Pajot effective as of November 14, 2000.+*
.46 Employment Agreement by and between IMS Health Incorporated
and James C. Malone effective as of November 14, 2000.+*
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
REGULATION
S-K EXHIBIT
NUMBER DESCRIPTION
- -------------- -----------
<S> <C> <C>
.47 Employment Agreement by and between IMS Health Incorporated
and Robert H. Steinfeld effective as of November 14, 2000.+*
13 2000 Annual Report to Shareholders.
21 List of Active Subsidiaries as of December 31, 2000.
23 Consent of Independent Accountants.
</TABLE>
- --------------------------
+ Filed herewith
* Management contract or compensatory plan or arrangement
31
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.7
<SEQUENCE>2
<FILENAME>a2041132zex-10_7.txt
<DESCRIPTION>EXHIBIT 10.7
<TEXT>
<PAGE>
Exhibit 10.7
1998 IMS HEALTH INCORPORATED
EMPLOYEES' STOCK INCENTIVE PLAN
(As amended and restated effective July 25, 2000)
1. PURPOSE OF THE PLAN
The purpose of the Plan is to aid the Company and its Subsidiaries
in securing and retaining employees of outstanding ability and to motivate such
employees to exert their best efforts on behalf of the Company and its
Subsidiaries by providing incentives through the granting of Awards. The Company
expects that it will benefit from the added interest which such employees will
have in the welfare of the Company as a result of their proprietary interest in
the Company's success.
2. DEFINITIONS
The following capitalized terms used in the Plan have the respective
meanings set forth in this Section:
(a) ACT: The Securities Exchange Act of 1934, as amended, or any
successor thereto.
(b) ANNUAL LIMIT: The limitation on the amount of certain Awards
intended to qualify as "performance-based compensation" that
may be granted to a given Participant each year.
(c) AWARD: An Option, Stock Appreciation Right or Other
Stock-Based Award granted pursuant to the Plan.
(d) BENEFICIAL OWNER: As such term is defined in Rule 13d-3 under
the Act (or any successor rule thereto).
(e) BOARD: The Board of Directors of the Company.
(f) CHANGE IN CONTROL: The occurrence of any of the following
events after Effective Date:
(i) any Person (other than the Company, any trustee or
other fiduciary holding securities under an employee
benefit plan of the Company, or any company owned,
directly or indirectly, by the stockholders of the
Company in substantially the same proportions as
their ownership of stock of the Company), becomes the
Beneficial Owner, directly or indirectly, of
securities of the Company representing 20% or more of
the combined voting power of the Company's
then-outstanding securities;
(ii) during any period of twenty-four months (not including
any period prior to the Effective Date), individuals who
at the beginning of such period constitute the Board,
and any new director (other than (A) a director
nominated by a Person who has entered into an agreement
with the Company to effect a transaction described in
Sections 2(f) (i), (iii) or (iv)
<PAGE>
of the Plan, (B) a director nominated by any Person
(including the Company) who publicly announces an
intention to take or to consider taking actions
(including, but not limited to, an actual or threatened
proxy contest) which if consummated would constitute a
Change in Control or (C) a director nominated by any
Person who is the Beneficial Owner, directly or
indirectly, of securities of the Company representing
10% or more of the combined voting power of the
Company's securities) whose election by the Board or
nomination for election by the Company's stockholders
was approved in advance by a vote of at least two-thirds
(2/3) of the directors then still in office who either
were directors at the beginning of the period or whose
election or nomination for election was previously so
approved, cease for any reason to constitute at least a
majority thereof;
(iii) the stockholders of the Company approve any transaction
or series of transactions under which the Company is
merged or consolidated with any other company, other
than a merger or consolidation (A) which would result in
the voting securities of the Company outstanding
immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted
into voting securities of the surviving entity) more
than 66 2/3% of the combined voting power of the voting
securities of the Company or such surviving entity
outstanding immediately after such merger or
consolidation and (B) after which no Person holds 20% or
more of the combined voting power of the
then-outstanding securities of the Company or such
surviving entity;
(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for
the sale or disposition by the Company of all or
substantially all of the Company's assets; or
(v) the Board determines that a Change in Control shall be
deemed to have occurred for purposes of the Plan,
provided that the Board may impose limitations on the
effects of a Change in Control on any Award or otherwise
if the Change in Control has occurred under this Section
2(f)(v) and not under other subsections of this Section
2(f).
(g) CODE: The Internal Revenue Code of 1986, as amended, or any
successor thereto.
(h) COGNIZANT: Cognizant Corporation, a Delaware corporation.
(i) COMMITTEE: The Compensation and Benefits Committee of the
Board.
(j) COMPANY: IMS Health Incorporated, a Delaware corporation.
2
<PAGE>
(k) DISABILITY: Inability of a Participant to perform the services
for the Company and its Subsidiaries required by his or her
employment with the Company due to any medically determinable
physical and/or mental incapacity or disability which is
permanent. The determination whether a Participant has
suffered a Disability shall be made by the Committee based
upon such evidence as it deems necessary and appropriate. A
Participant shall not be considered disabled unless he or she
furnishes such medical or other evidence of the existence of
the Disability as the Committee, in its sole discretion, may
require.
(l) EFFECTIVE DATE: The date on which the Plan takes effect, as
defined pursuant to Section 17 of the Plan.
(m) FAIR MARKET VALUE: With respect to Shares, unless otherwise
determined by the Committee, on a given date, the arithmetic
mean of the high and low prices of the Shares as reported on
such date on the Composite Tape of the principal national
securities exchange on which such Shares are listed or
admitted to trading, or, if no Composite Tape exists for such
national securities exchange on such date, then on the
principal national securities exchange on which such Shares
are listed or admitted to trading, or, if the Shares are not
listed or admitted on a national securities exchange, the
arithmetic mean of the per Share closing bid price and per
Share closing asked price on such date as quoted on the Nasdaq
System (or such market in which such prices are regularly
quoted), or, if there is no market on which the Shares are
regularly quoted, the Fair Market Value shall be the value
established by the Committee in good faith. If no sale of
Shares shall have been reported on such Composite Tape or such
national securities exchange on such date or quoted on the
Nasdaq System on such date, then the immediately preceding
date on which sales of the Shares have been so reported or
quoted shall be used.
(n) LSAR: A limited stock appreciation right granted pursuant to
Section 8(d) of the Plan.
(o) OTHER STOCK-BASED AWARDS: Awards granted pursuant to Section 9
of the Plan.
(p) OPTION: A stock option granted pursuant to Section 7 of the
Plan.
(q) OPTION PRICE: The purchase price per Share of an Option, as
determined pursuant to Section 7(a) of the Plan.
(r) PARTICIPANT: An individual who is selected by the Committee to
participate in the Plan pursuant to Section 5 of the Plan.
(s) PERFORMANCE-BASED AWARDS: Certain Other Stock-Based Awards
granted pursuant to Section 9(b) of the Plan.
3
<PAGE>
(t) PERSON: As such term is used for purposes of Section 13(d) or
14(d) of the Act (or any successor section thereto).
(u) PLAN: The 1998 IMS Health Incorporated Employees' Stock
Incentive Plan.
(v) RETIREMENT: Termination of employment with the Company or a
Subsidiary after such Participant has attained age 65 or age
55 and five years of service with the Company. The foregoing
notwithstanding, the term "Retirement" shall mean any
termination of employment with the prior written consent of
the Committee that the termination be treated as a Retirement.
(w) SHARES: Shares of common stock, par value $0.01 per Share, of
the Company.
(x) SPINOFF DATE: The date on which the Shares that are owned by
Cognizant are distributed to the holders of record of shares
of Cognizant.
(y) STOCK APPRECIATION RIGHT: A stock appreciation right granted
pursuant to Section 8 of the Plan.
(z) SUBSIDIARY: A subsidiary corporation, as defined in Section
424(f) of the Code (or any successor section thereto).
3. SHARES SUBJECT TO THE PLAN
(a) AGGREGATE SHARE LIMITATIONS. Subject to adjustment as provided
in Section 10(a), the total number of Shares which may be issued and/or
delivered under the Plan is 13,000,000 plus the number of Shares reserved for
awards under the IMS Health Incorporated Replacement Plan for Certain Employees
Holding Cognizant Corporation Equity-Based Awards (the "Replacement Plan") that
are not in fact issued or delivered in connection with such awards; provided
however, that in no event may more than 1,000,000 shares be issued as restricted
stock or similar Awards. The Shares may consist, in whole or in part, of
authorized and unissued Shares or treasury Shares. Shares subject to an Award
under the Plan that is canceled, expired, forfeited, settled in cash, or
otherwise terminated without a delivery of Shares to the Participant (or a
Beneficiary), including the number of Shares withheld or surrendered in payment
of any exercise or purchase price of an Award or taxes relating to an Award,
will become available for Awards under the Plan, and Shares shall be counted as
issued or delivered under the Replacement Plan in a manner consistent with the
counting of Shares under this Section 3. In addition, in the case of any Award
granted in substitution for awards of a company or business acquired by the
Company or a Subsidiary, Shares issued or issuable in connection with such
substitute Award shall not be counted against the number of Shares reserved
under the Plan, but shall be deemed to be available under the Plan by virtue of
the Company's assumption of the plan or arrangement of the acquired company or
business.
(b) ANNUAL PER-PERSON LIMITATIONS. In each calendar year during any
part of which the Plan is in effect, a Participant may be granted Awards under
each of Section 7, Section 8, and Section 9(b) relating to up to the
Participant's Annual Limit
4
<PAGE>
(such Annual Limit to apply separately to each Section). A Participant's Annual
Limit, in any year during any part of which the Participant is then eligible
under the Plan, shall equal 1,000,000 shares plus the amount of the
Participant's unused Annual Limit as of the close of the previous year, subject
to adjustment as provided in Section 10(a).
4. ADMINISTRATION
(a) The Plan shall be administered by the Committee, which may
delegate its duties and powers in whole or in part to any subcommittee thereof
consisting solely of at least two individuals who are each "non-employee
directors" within the meaning of Rule 16b-3 under the Act (or any successor rule
thereto) and "outside directors" within the meaning of Section 162(m) of the
Code (or any successor section thereto). The Committee is authorized to
interpret the Plan, to establish, amend and rescind any rules and regulations
relating to the Plan, and to make any other determinations that it deems
necessary or desirable for the administration of the Plan. The Committee may
correct any defect or supply any omission or reconcile any inconsistency in the
Plan in the manner and to the extent the Committee deems necessary or desirable.
Any decision of the Committee in the interpretation and administration of the
Plan, as described herein, shall lie within its sole and absolute discretion and
shall be final, conclusive and binding on all parties concerned (including, but
not limited to, Participants and their beneficiaries or successors). The
Committee shall require payment of any amount it may determine to be necessary
to withhold for minimum statutory withholding requirements for federal, state,
local or other taxes as a result of the exercise or settlement of an Award.
Unless the Committee specifies otherwise, the Participant may elect to pay a
portion or all of such withholding taxes by (a) delivery in shares or (b) having
shares withheld by the Company from any shares that would have otherwise been
received by the Participant. No authority to withhold shares is conferred under
the Plan to the extent that, solely due to such authority, an Award would be
accounted for as a "variable" award under APB 25. The Committee may, in its
discretion, grant Awards either alone or in addition to, in tandem with, or in
substitution or exchange for, any other Award or any award granted under another
plan of the Company, any subsidiary, or any business entity to be acquired by
the Company or a subsidiary, or any other right of a Participant to receive
payment from the Company or any subsidiary. If the chief executive officer of
the Company is a member of the Board, the Board by specific resolution may
constitute such chief executive officer as a committee of one which shall have
the authority to grant Awards of up to an aggregate of 50,000 Shares in each
calendar year to each Participant who is not subject to the rules promulgated
under Section 16 of the Act (or any successor section thereto); PROVIDED,
HOWEVER, that such chief executive officer shall notify the Committee of any
such grants made pursuant to this Section 4.
(b) Without the prior approval of the Company's stockholders,
Options granted under the Plan will not be repriced, replaced or regranted
through cancellation, or by lowering the Option exercise price of a previously
granted Option.
5. ELIGIBILITY
Employees (but not members of the Committee or any person who serves
only as a director) of the Company and its Subsidiaries are eligible to be
granted Awards. In addition, any person who has been offered employment by the
Company or a Subsidiary is eligible to be granted Awards, provided that no such
person may receive any payment or exercise any right relating to an Award until
such person has commenced such employment. Participants shall be selected from
time to time by the Committee, in its sole discretion, from among those
eligible, and the Committee shall
5
<PAGE>
determine, in its sole discretion, the number of Shares to be covered by the
Awards granted to each Participant.
6. LIMITATIONS
No Award may be granted under the Plan after the tenth anniversary
of the Effective Date, but Awards theretofore granted may extend beyond that
date.
7. TERMS AND CONDITIONS OF OPTIONS
Options granted under the Plan shall be, as determined by the
Committee, non-qualified, incentive or other stock options for federal income
tax purposes, as evidenced by the related Award agreements, and shall be subject
to the foregoing and the following terms and conditions and to such other terms
and conditions, not inconsistent therewith, as the Committee shall determine:
(a) OPTION PRICE. The Option Price per Share shall be determined by
the Committee, but shall not be less than 100% of the Fair Market Value of the
Shares on the date an Option is granted. The Committee may require the
Participant to pay a portion of the Option Price at the time of grant of the
option, with the remainder of the Option Price payable upon exercise of the
Option. Such prepayment of the Option Price shall be non-refundable except to
the extent set forth in a Participant's original option agreement.
(b) EXERCISABILITY. Options granted under the Plan shall be
exercisable at such time and upon such terms and conditions as may be determined
by the Committee, but in no event shall an Option be exercisable more than ten
years after the date it is granted.
(c) EXERCISE OF OPTIONS. Except as otherwise provided in the Plan or
in an Award agreement, an Option may be exercised for all, or from time to time
any part, of the Shares for which it is then exercisable. For purposes of
Section 7 of the Plan, the exercise date of an Option shall be the later of the
date a notice of exercise is received by the Company and, if applicable, (A) the
date payment is received by the Company pursuant to clauses (i), (ii) or (iii)
in the following sentence, or (B) the date of sale by a broker of all or a
portion of the Shares being purchased pursuant to clause (iv) in the following
sentence. Unless otherwise determined by the Committee, the Option Price for the
Shares as to which an Option is exercised shall be paid to the Company in full
not later than the time of exercise at the election of the Participant (i) in
cash, (ii) in Shares having a Fair Market Value equal to the aggregate unpaid
Option Price for the Shares being purchased and satisfying such other
requirements as may be imposed by the Committee, (iii) partly in cash and partly
in such Shares, or (iv) through the delivery of irrevocable instructions to a
broker to deliver promptly to the Company an amount equal to the aggregate
Option Price for the Shares being purchased. The Award agreement shall, unless
otherwise provided by the Committee, permit the Participant to elect, subject to
such terms and conditions as the Committee shall determine, to have the number
of Shares deliverable to the Participant as a result of the exercise reduced by
a number sufficient to pay the amount the Company determines to be necessary to
withhold for federal, state, local or other taxes as a result of the exercise of
the Option. No Participant shall have any rights to dividends or other rights of
a stockholder with respect to Shares subject to an Option until the Participant
has given written notice of exercise of the Option, paid in full for such Shares
and, if applicable, has satisfied any other conditions imposed by the Committee
pursuant to the Plan.
6
<PAGE>
(d) RESTRICTIONS ON SHARES ISSUED UPON EXERCISE; OTHER CONDITIONS.
If and to the extent so determined by the Committee, Shares issued upon exercise
of an Option may be subject to limitations on transferability, risks of
forfeiture, deferral of delivery, or such other terms and conditions as the
Committee may impose, subject to Section 14(b). Such terms and conditions may
include required forfeiture of Options or gains realized upon exercise thereof,
for a specified period after exercise, in the event the Participant fails to
comply with conditions relating to non-competition, non-disclosure,
non-solicitation or non-interference with employees, suppliers, or customers,
and non-disparagement and other conditions specified by the Committee.
(e) EXERCISABILITY UPON TERMINATION OF EMPLOYMENT BY DEATH OR
DISABILITY. If a Participant's employment with the Company and its Subsidiaries
terminates by reason by death or Disability after the date of grant of an
Option, (i) the unexercised portion of such Option shall immediately vest in
full (i.e., become non-forfeitable) and (ii) such portion may thereafter be
exercised during the shorter of (A) the remaining stated term of the Option or
(B) five years after the date of death or Disability.
(f) EXERCISABILITY UPON TERMINATION OF EMPLOYMENT BY RETIREMENT. If
a Participant's employment with the Company and its Subsidiaries terminates by
reason of Retirement after the date of grant of an Option, the Participant's
unexercised Option may thereafter be exercised only during the period ending at
the earlier of five years after such Retirement or the stated expiration date of
such Option (the "Post-Retirement Exercise Period"), provided that such Option
shall be exercisable during such Post-Retirement Exercise Period only to the
extent such Option was exercisable at the time of such Retirement. The foregoing
notwithstanding, (i) the Committee may, in its sole discretion, accelerate the
vesting of the unvested portion of such Option held by a Participant upon such
Participant's Retirement, in which case such Option shall not be forfeited as
provided herein but thereafter shall become exercisable to the extent and at
such times as such portion of the Option would have become both vested and
exercisable during the Post-Retirement Exercise Period had the Participant's
employment not been terminated, unless the Committee specifies otherwise; and
(ii), if a Participant dies within a period of five years after such Retirement,
the Participant's unexercised Option (to the extent not previously forfeited)
may thereafter be exercised during the shorter of (i) the remaining stated term
of the Option or (ii) the period that is the longer of (A) five years after the
date of such termination of employment or (B) one year after the date of death.
(g) EFFECT OF OTHER TERMINATION OF EMPLOYMENT. If a Participant's
employment with the Company and its Subsidiaries terminates for any reason other
than death, Disability or Retirement after the date of grant of an Option as
described above, the Participant's unexercised Option may thereafter be
exercised during the period ending 90 days after the date of such termination of
employment, but only to the extent such Option was exercisable at the time of
such termination of employment, and in no event may such Option be exercised
after its stated expiration date. The foregoing notwithstanding, the Committee
may, in its sole discretion, accelerate the vesting of unvested Options held by
a Participant if such Participant is terminated from employment without "cause"
(as such term is defined by the Committee in its sole discretion) by the
Company.
7
<PAGE>
8. TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS
(a) GRANTS. The Committee also may grant (i) a Stock Appreciation
Right independent of an Option or (ii) a Stock Appreciation Right in connection
with an Option, or a portion thereof. A Stock Appreciation Right granted
pursuant to clause (ii) of the preceding sentence (A) may be granted at the time
the related Option is granted or at any time prior to the exercise or
cancellation of the related Option, (B) shall cover the same Shares covered by
an Option (or such lesser number of Shares as the Committee may determine) and
(C) shall be subject to the same terms and conditions as such Option except for
such additional limitations as are contemplated by this Section 8 (or such
additional limitations as may be included in an Award agreement).
(b) TERMS. The exercise price per Share of a Stock Appreciation
Right shall be an amount determined by the Committee but in no event shall such
amount be less than the greater of (i) the Fair Market Value of a Share on the
date the Stock Appreciation Right is granted or, in the case of a Stock
Appreciation Right granted in conjunction with an Option, or a portion thereof,
the Option Price of the related Option and (ii) an amount permitted by
applicable laws, rules, by-laws or policies of regulatory authorities or stock
exchanges. Each Stock Appreciation Right granted independent of an Option shall
entitle a Participant upon exercise to an amount equal to (i) the excess of (A)
the Fair Market Value on the exercise date of one Share over (B) the exercise
price per Share, times (ii) the number of Shares covered by the Stock
Appreciation Right. Each Stock Appreciation Right granted in conjunction with an
Option, or a portion thereof, shall entitle a Participant to surrender to the
Company the unexercised Option, or any portion thereof, and to receive from the
Company in exchange therefor an amount equal to (i) the excess of (A) the Fair
Market Value on the exercise date of one Share over (B) the Option Price per
Share, times (ii) the number of Shares covered by the Option, or portion
thereof, which is surrendered. The date a notice of exercise is received by the
Company shall be the exercise date. Payment shall be made in Shares or in cash,
or partly in Shares and partly in cash, valued at such Fair Market Value, all as
shall be determined by the Committee. Stock Appreciation Rights may be exercised
from time to time upon actual receipt by the Company of written notice of
exercise stating the number of Shares subject to an exercisable Option with
respect to which the Stock Appreciation Right is being exercised. No fractional
Shares will be issued in payment for Stock Appreciation Rights, but instead cash
will be paid for a fraction or, if the Committee should so determine, the number
of Shares will be rounded downward to the next whole Share.
(c) LIMITATIONS. The Committee may impose, in its discretion, such
conditions upon the exercisability or transferability of Stock Appreciation
Rights as it may deem fit.
(d) LIMITED STOCK APPRECIATION RIGHTS. The Committee may grant LSARs
that are exercisable upon the occurrence of specified contingent events. Such
LSARs may provide for a different method of determining appreciation, may
specify that payment will be made only in cash and may provide that any related
Awards are not exercisable while such LSARs are exercisable. Unless the context
otherwise requires, whenever the term "Stock Appreciation Right" is used in the
Plan, such term shall include LSARs.
8
<PAGE>
9. OTHER STOCK-BASED AWARDS
(a) GENERALLY. The Committee, in its sole discretion, may grant
Awards of Shares, Awards of restricted Shares and Awards that are valued in
whole or in part by reference to, or are otherwise based on the Fair Market
Value of, Shares ("Other Stock-Based Awards"). Such Other Stock-Based Awards
shall be in such form, and dependent on such conditions, as the Committee shall
determine, including, without limitation, the right to receive one or more
Shares (or the equivalent cash value of such Shares) as an outright bonus or
upon the completion of a specified period of service, the occurrence of an event
and/or the attainment of performance objectives. Other Stock-Based Awards may be
granted alone or in addition to any other Awards granted under the Plan. Subject
to the provisions of the Plan, the Committee shall determine to whom and when
Other Stock-Based Awards will be made, the number of Shares to be awarded under
(or otherwise related to) such Other Stock-Based Awards; whether such Other
Stock-Based Awards shall be settled in cash, Shares or a combination of cash and
Shares; and all other terms and conditions of such Awards (including, without
limitation, the vesting provisions thereof). Cash awards, as an element of or
supplement to any other Award under the Plan, may also be granted pursuant to
this Section 9(a). In addition, the Committee is authorized to grant dividend
equivalents to a Participant, entitling the Participant to receive cash, Shares,
other Awards, or other property equal in value to dividends paid with respect to
a specified number of Shares, or other periodic payments. Dividend equivalents
may be awarded on a free-standing basis or in connection with another Award. The
Committee may provide that Dividend Equivalents shall be paid or distributed
when accrued or shall be deemed to have been reinvested in additional Shares,
Awards, or other investment vehicles, subject to such restrictions on
transferability and risks of forfeiture as the Committee may specify.
(b) PERFORMANCE-BASED AWARDS. Notwithstanding anything to the
contrary herein, certain Other Stock-Based Awards granted under this Section 9
may be granted in a manner which is deductible by the Company without limitation
under Section 162(m) of the Code (or any successor section thereto)
("Performance-Based Awards"). A Participant's Performance-Based Award shall be
determined based on the attainment of written performance goals approved by the
Committee for a performance period established by the Committee (i) while the
outcome for that performance period is substantially uncertain and (ii) no more
than 90 days after the commencement of the performance period to which the
performance goal relates or, if less, the number of days which is equal to 25
percent of the relevant performance period. The performance goals, which must be
objective, shall be based upon one or more of the following criteria: (i)
consolidated earnings before or after taxes (including earnings before interest,
taxes, depreciation and amortization); (ii) net income; (iii) operating income;
(iv) earnings per share; (v) book value per share; (vi) return on stockholders'
equity; (vii) expense management; (viii) return on investment; (ix) improvements
in capital structure; (x) profitability of an identifiable business unit or
product; (xi) maintenance or improvement of profit margins; (xii) stock price;
(xiii) market share; (xiv) revenues or sales; (xv) costs; (xvi) cash flow;
(xvii) working capital; (xviii) economic value added; (xix) return on assets;
(xx) total stockholder return (stock price appreciation plus dividends and
distributions); (xxi) operating management goals; (xxii) and execution of
pre-approved corporate strategy. The foregoing criteria may relate to the
Company, one or more of its Subsidiaries or one or more of its divisions or
units, or any combination of the foregoing, and may be applied on an absolute
basis and/or be relative to one or more peer group companies or indices, or any
combination thereof, all as the Committee shall determine. In addition, to the
degree consistent with Section 162(m) of the Code (or any successor section
thereto), the performance goals may be calculated without regard to
extraordinary items. In the case of a Performance-Based Award which is not
valued in a way in which the limitation set forth in the final sentence of
Section 3 would operate as an
9
<PAGE>
effective limitation satisfying Treasury Regulation 1.162-27(e)(4), the maximum
amount of a Performance-Based Award to any Participant with respect to
performance in a single fiscal year of the Company shall be $5,000,000. The
Committee shall determine whether, with respect to a performance period, the
applicable performance goals have been met with respect to a given Participant
and, if they have, to so certify and ascertain the amount of the applicable
Performance-Based Award. No Performance-Based Awards will be paid for such
performance period until such certification is made by the Committee. The amount
of the Performance-Based Award actually paid to a given Participant may be less
than the amount determined by the applicable performance goal formula, at the
discretion of the Committee. The amount of the Performance-Based Award
determined by the Committee for a performance period shall be paid to the
Participant at such time as determined by the Committee in its sole discretion
after the end of such performance period; provided, HOWEVER, that a Participant
may, if and to the extent permitted by the Committee and consistent with the
provisions of Section 162(m) of the Code, elect to defer payment of a
Performance-Based Award.
10. ADJUSTMENTS UPON CERTAIN EVENTS
Notwithstanding any other provisions in the Plan to the contrary,
the following provisions shall apply to all Awards granted under the Plan:
(a) GENERALLY. In the event of any change in the outstanding Shares
after the Effective Date by reason of any Share dividend or split,
reorganization, recapitalization, merger, consolidation, spin-off, combination
or exchange of Shares of other corporate exchange, or any large, special, and
non-recurring distribution to Stockholders, the Committee in its sole discretion
and without liability to any person may make such substitution or adjustment, if
any, as it deems to be equitable, as to (i) the number or kind of Shares or
other securities issued or reserved for issuance pursuant to the Plan or
pursuant to outstanding Awards, (ii) the Option Price, (iii) the number and kind
of Shares by which annual per-person Award limitations are measured under
Section 3 hereof and/or (iv) any other affected terms of such Awards (including
making provision for the payment of cash, other Awards or other property in
respect of any outstanding Award). In addition, the Committee is authorized to
make adjustments in the terms and conditions of, and the criteria included in,
Awards in recognition of unusual or nonrecurring events (including, without
limitation, events described in the preceding sentence, as well as acquisitions
and dispositions of businesses and assets) affecting the Company, any subsidiary
or any business unit, or the financial statements of the Company or any
subsidiary, or in response to changes in applicable laws, regulations,
accounting principles, tax rates and regulations or business conditions or in
view of the Committee's assessment of the business strategy of the Company, any
subsidiary or business unit thereof, performance of comparable organizations,
economic and business conditions, personal performance of a Participant, and any
other circumstances deemed relevant; provided that no such adjustment shall be
authorized to be made if and to the extent that such authority or the making of
such adjustment would cause Options, Stock Appreciation Rights, or Performance
Awards granted under Section 9(b) hereof intended to qualify as
"performance-based compensation" under Code Section 162(m) and regulations
thereunder to otherwise fail to so qualify.
(b) CHANGE IN CONTROL. Except as otherwise provided in an Award
agreement, in the event of a Change in Control, the Committee in its sole
discretion and without liability to any person may take such actions, if any, as
it deems necessary or desirable with respect to any Award (including, without
limitation, (i) the acceleration of an Award, (ii) the payment of a cash amount
in exchange for the cancellation of an
10
<PAGE>
Award and/or (iii) the requiring of the issuance of substitute Awards that will
substantially preserve the value, rights and benefits of any affected Awards
previously granted hereunder) as of the date of the consummation of the Change
in Control.
11. NO RIGHT TO EMPLOYMENT
The granting of an Award under the Plan shall impose no obligation
on the Company or any Subsidiary to continue the employment of a Participant and
shall not lessen or affect the Company's or Subsidiary's right to terminate the
employment of such Participant.
12. SUCCESSORS AND ASSIGNS
The Plan shall be binding on all successors and assigns of the
Company and a Participant, including without limitation, the estate of such
Participant and the executor, administrator or trustee of such estate, or any
receiver or trustee in bankruptcy or representative of the Participant's
creditors.
13. NONTRANSFERABILITY OF AWARDS
An Award shall not be transferable or assignable by the Participant
otherwise than by will or by the laws of descent and distribution. During the
lifetime of a Participant, an Award shall be exercisable only by such
Participant. An Award exercisable after the death of a Participant may be
exercised by the legatees, personal representatives or distributees of the
Participant. Notwithstanding anything to the contrary herein, the Committee, in
its sole discretion, shall have the authority to waive this Section 13 (or any
part thereof) to the extent that this Section 13 (or any part thereof) is not
required under the rules promulgated under any law, rule or regulation
applicable to the Company.
14. AMENDMENTS OR TERMINATION
(a) CHANGES TO THE PLAN. The Board may amend, alter or discontinue
the Plan, except that (i) any amendment or alteration shall be subject to the
approval of the Company's stockholders at or before the next annual meeting of
stockholders for which the record date is after the date of such Board action if
(x) such stockholder approval is required by any federal or state law or
regulation or the rules of any stock exchange or automated quotation system on
which the Shares may then be listed or quoted, and the Board may otherwise, in
its discretion, determine to submit amendments or alterations to stockholders
for approval or (y) such amendment or alteration would materially increase the
number of shares reserved for the purposes of the Plan, materially broaden the
employees or class of employees eligible to receive Awards under the Plan or
materially increase benefits accruing to employees participating in the Plan;
(ii) without the consent of a Participant, no amendment or alteration shall
materially impair any of the Participant's rights under an Award theretofore
granted to such Participant; and (iii) the Committee may amend or alter the Plan
in such manner as it deems necessary to permit the granting of Awards meeting
requirements of the Code or other applicable laws. Notwithstanding anything to
the contrary herein, the Board may not amend, alter or discontinue the
provisions relating to Section 10(b) of the Plan after the occurrence of a
Change in Control.
(b) CHANGES TO OUTSTANDING AWARDS. The Committee may waive any
conditions or rights under, or amend, alter, suspend, discontinue, or terminate
any Award
11
<PAGE>
theretofore granted and any Award agreement relating thereto, except as
otherwise provided in the Plan and except that the Committee may not amend or
alter an Award theretofore granted if such action would result in an Award
having terms that would not have been authorized or permitted for a new grant or
Award under the Plan; provided that, without the consent of an affected
Participant, no such Committee action may materially and adversely affect the
rights of such Participant under such Award. Other provisions of the Plan
notwithstanding, if any right under this Plan would cause a transaction to be
ineligible for pooling of interest accounting that would, but for the right
hereunder, be eligible for such accounting treatment, the Committee may modify
or adjust the right so that pooling of interest accounting shall be available,
including the substitution of Shares having a Fair Market Value equal to the
cash otherwise payable hereunder for the right which caused the transaction to
be ineligible for pooling of interest accounting.
15. INTERNATIONAL PARTICIPANTS
With respect to Participants who reside or work outside the United
States of America and either who are not (and who are not expected to be)
"covered employees" within the meaning of Section 162(m) of the Code or who are
granted Awards not intended to qualify as "performance-based compensation" under
Section 162(m), the Committee may, in its sole discretion, amend the terms of
the Plan or Awards with respect to such Participants in order to conform such
terms with local laws, regulations, or customs or otherwise to meet the
objectives of the Plan, and may, where appropriate, establish one or more
sub-plans to reflect such amended provisions.
16. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board nor any submission of
the Plan, specific Plan terms, or amendments thereto to a vote of stockholders
of the Company shall be construed as creating any limitations on the power of
the Board to adopt such other compensatory arrangements as it may deem
desirable, including, without limitation, the granting of awards otherwise than
under the Plan, and such other arrangements may be either applicable generally
or only in specific cases.
17. CHOICE OF LAW
The Plan shall be governed by and construed in accordance with the
laws of the State of New York.
18. EFFECTIVENESS OF THE PLAN
The Plan shall be effective as of the Spinoff Date.
12
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.18
<SEQUENCE>3
<FILENAME>a2041132zex-10_18.txt
<DESCRIPTION>EXHIBIT 10.18
<TEXT>
<PAGE>
EXHIBIT 10.18
IMS HEALTH INCORPORATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
As Amended and Restated Effective December 19, 2000
<PAGE>
TABLE OF CONTENTS
PAGE
INTRODUCTION.................................................................1
SECTION 1 - DEFINITIONS...................................................1
1.1 "Actuarial Equivalent Value".....................................1
1.2 "Affiliated Employer"............................................2
1.3 "Average Final Compensation".....................................2
1.4 "Basic Disability Plan"..........................................2
1.5 "Basic Disability Plan Benefit"..................................2
1.6 "Basic Plan".....................................................2
1.7 "Basic Plan Benefit".............................................3
1.8 "Board"..........................................................3
1.9 "Cause"..........................................................3
1.10 "Change in Control".............................................4
1.11 "Change in Control Agreement"....................................6
1.12 "Code"...........................................................6
1.13 "Company"........................................................6
1.14 "Compensation"...................................................7
1.15 "Covered Earnings"...............................................7
1.16 "Deferred Vested Benefit"........................................7
1.17 "Disability" or "Disabled".......................................7
1.18 "Disability Benefits"............................................7
1.19 "Effective Date".................................................7
1.20 "Former Member"..................................................8
1.21 "Good Reason"....................................................8
1.22 "Lump Sum Election".............................................10
1.23 "Member"........................................................10
1.24 "Other Disability Income".......................................10
1.25 "Other Retirement Income".......................................10
1.26 "Plan"..........................................................11
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<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
1.27 "Potential Change in Control"...................................11
1.28 "Predecessor to this Plan"......................................12
1.29 "Retirement"....................................................12
1.30 "Retirement Benefits"...........................................12
1.31 "Service".......................................................12
1.32 "Surviving Spouse"..............................................13
1.33 "Surviving Spouse's Benefits"...................................13
1.34 "Vested Former Member"..........................................13
1.35 "Plan Administrator"............................................14
SECTION 2 - PARTICIPATION................................................14
2.1 Commencement of Participation...................................14
2.2 Termination of Participation....................................14
SECTION 3 - AMOUNT AND FORM OF BENEFITS..................................14
3.1 Retirement Benefits.............................................14
3.2 Deferred Vested Benefit.........................................16
3.3 Form of Payment.................................................18
3.4 Lump Sum Election...............................................19
3.5 Cessation of Benefits...........................................21
3.6 Notification of Cessation of Benefits...........................22
3.7 Repayment of Benefits Paid as Lump Sum..........................23
3.8 Change in Control...............................................23
SECTION 4 - DISABILITY BENEFITS..........................................25
4.1 Disability Benefits.............................................25
SECTION 5 - SURVIVING SPOUSE'S BENEFITS..................................26
5.1 Death Prior to Benefit Commencement.............................26
5.2 Death On or After Benefit Commencement..........................26
5.3 Commencement of Surviving Spouse's Benefit......................26
5.4 Lump Sum Payment................................................27
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<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
5.5 Reduction.......................................................28
SECTION 6 - PLAN ADMINISTRATOR...........................................28
6.1 Duties and Authority............................................28
6.2 Claims Procedure................................................28
SECTION 7 - MISCELLANEOUS................................................29
7.1 Amendment; Termination..........................................29
7.2 No Employment Rights............................................30
7.3 Payout in Discretion of the Plan Administrator..................30
7.4 Unfunded Status.................................................30
7.5 Arbitration.....................................................31
7.6 No Alienation...................................................31
7.7 Withholding.....................................................32
7.8 Governing Law...................................................32
7.9 Successors......................................................32
7.10 Integration.....................................................32
-iii-
<PAGE>
IMS HEALTH INCORPORATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
As Amended and Restated Effective December 19, 2000
INTRODUCTION
Effective as of July 1, 1998, the IMS Health Incorporated Supplemental Executive
Retirement Plan (the "Plan") was established to provide a means of ensuring the
payment of a competitive level of retirement income and disability and survivor
benefits, and thereby attract, retain and motivate a select group of executives
of IMS Health Incorporated and its affiliated employers. This document
represents a complete restatement of the Plan effective as of December 19, 2000.
SECTION 1 - DEFINITIONS
1.1 "ACTUARIAL EQUIVALENT VALUE" shall mean a benefit of equivalent value
computed on the basis of the 1983 Group Annuity Mortality Table and
interest equal to the yield on 30-year Treasury Bonds as of the last
business day of the Plan Year prior to the year in which the relevant
calculation occurs; provided, however, that for purposes of determining
the Actuarial Equivalent Value of the amount described in Section 1.25(a)
for Members or Vested Former Members who participated in the Predecessor
to this Plan, the foregoing assumptions or the assumptions used in the
Predecessor to this Plan shall be used, whichever produces the greater
benefit for the Member or the Vested Former Member.
1.2 "AFFILIATED EMPLOYER" shall mean an entity affiliated with the Company.
<PAGE>
1.3 "AVERAGE FINAL COMPENSATION" shall mean a Member's average annual
Compensation during the five consecutive 12-month periods in the last ten
consecutive 12-month periods of his or her Service (or during the total
number of consecutive 12-month periods if fewer than five), immediately
prior to the month following the Member's termination of employment with
the Company or an Affiliated Employer or, if earlier, removal from
participation under this Plan, affording the highest such Average Final
Compensation. If actual monthly Compensation for any month during the
120-month computational period is unavailable, Compensation for such month
shall be determined by dividing the Member's annual rate of base pay in
the month preceding such unavailable month by 12.
1.4 "BASIC DISABILITY PLAN" shall mean as to any Member the long-term
disability plan of the Company or an Affiliated Employer pursuant to which
long-term disability benefits are payable to such Member.
1.5 "BASIC DISABILITY PLAN BENEFIT" shall mean the amount of benefits payable
to a Member from the Basic Disability Plan.
1.6 "BASIC PLAN" shall mean as to any Member or Vested Former Member the
defined benefit pension plan of the Company or an Affiliated Employer
intended to meet the requirements of Code Section 401(a) pursuant to which
retirement benefits are payable to such Member or Vested Former Member or
to the Surviving Spouse or designated beneficiary of a deceased Member or
Vested Former Member.
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<PAGE>
1.7 "BASIC PLAN BENEFIT" shall mean the amount of benefits payable from the
Basic Plan to a Member or Vested Former Member.
1.8 "BOARD" shall mean the Board of Directors of IMS Health Incorporated,
except that any action authorized to be taken by the Board hereunder may
also be taken by a duly authorized committee of the Board or its duly
authorized delegees.
1.9 "CAUSE". A Member shall not be deemed to have been terminated for
"Cause" under this Plan unless such Member shall have been terminated
for "Cause" under the terms of such Member's employment agreement with
the Company, if any. If no such employment agreement containing a
definition of "Cause" shall be in effect, for purposes of this Plan
"Cause" shall mean a Member's:
(a) willful and continued failure to substantially perform his or her
duties (other than any such failure resulting from incapacity due to
physical or mental illness or Disability or any failure after the
issuance of a notice of termination by the Member for Good Reason)
which failure is demonstrably and materially damaging to the
financial condition or reputation of the Company and/or its
Affiliated Employers, and which failure continues more than 48 hours
after a written demand for substantial performance is delivered to
the Member by the Board, which demand specifically identifies the
manner in which the Board believes that the Member has not
substantially performed his or her duties; or
(b) the willful engaging by the Member in conduct which is demonstrably
and materially injurious to the Company, monetarily or otherwise.
-3-
<PAGE>
No act, or failure to act, on the part of the Member shall be deemed
"willful" unless done, or omitted to be done, by the Member not in
good faith and without reasonable belief that his or her action or
omission was in the best interest of the Company. Notwithstanding
the foregoing, the Member shall not be deemed to have been
terminated for Cause unless and until there shall have been
delivered to the Member a copy of the resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the entire
membership of the Board at a meeting of the Board (after reasonable
notice to the Member and an opportunity for the Member, together
with the Member's counsel, to be heard before the Board) finding
that, in the good faith opinion of the Board, the Member was guilty
of conduct set forth above in this definition and specifying the
particulars thereof in detail.
1.10 "CHANGE IN CONTROL". If a "Change in Control" shall have occurred or
shall be deemed to have occurred under the terms of a Member's or Vested
Former Member's Change in Control Agreement or employment agreement with
the Company, if any, a "Change in Control" shall be deemed to have
occurred under this Plan, otherwise a "Change in Control" shall be
deemed to have occurred if:
(a) any "Person" as such term is used for purposes of Sections 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of the
Company, or any company owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company), becomes the "Beneficial
Owner" (as defined in Rule 13d-3 of the Exchange Act), directly or
indirectly, of securities of the
-4-
<PAGE>
Company representing 20% or more of the combined voting power of the
Company's then outstanding securities;
(b) during any period of 24 months (not including any period prior to
the Effective Date), individuals who at the beginning of such period
constitute the Board, and any new director (other than (i) a
director nominated by a Person who has entered into an agreement
with the Company to effect a transaction described in Sections
1.10(a), (c), or (d) hereof, (ii) a director nominated by any Person
(including the Company) who publicly announces an intention to take
or to consider taking actions (including, but not limited to, an
actual or threatened proxy contest) which if consummated would
constitute a Change in Control, or (iii) a director nominated by any
Person who is the Beneficial Owner, directly or indirectly, of
securities of the Company representing 10% or more of the combined
voting power of the Company's securities) whose election by the
Board or nomination for election by the Company's stockholders was
approved in advance by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election
was previously so approved, cease for any reason to constitute at
least a majority thereof;
(c) the stockholders of the Company approve any transaction or series of
transactions under which the Company is merged or consolidated with
any other company, other than a merger or consolidation (i) which
would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent
-5-
<PAGE>
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 66 2/3% of the
combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, and (ii) after which no "Person" holds 20% or more of
the combined voting power of the then outstanding securities of the
Company or such surviving entity;
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets; or
(e) the Board adopts a resolution to the effect that, for purposes of
this Plan, a Change in Control has occurred.
1.11 "CHANGE IN CONTROL AGREEMENT" shall mean any written agreement in effect
between any Member or Former Member or Vested Former Member and the
Company or an Affiliated Employer pursuant to which benefits may be
payable to such Member or Former Member or Vested Former Member in
connection with a Change in Control.
1.12 "CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
1.13 "COMPANY" shall mean IMS Health Incorporated.
-6-
<PAGE>
1.14 "COMPENSATION" shall mean base salary, annual bonuses, commissions,
overtime and shift pay, in each case prior to reductions for elective
contributions under Sections 401(k) and 125 of the Code and deferred
compensation under any nonqualified deferred compensation plan.
Notwithstanding the foregoing, Compensation shall exclude severance pay
(including, without limitation, severance pay under the Company's Employee
Protection Plan), stay-on bonuses, long-term bonuses, retirement income,
change-in-control payments, contingent payments, amounts paid under this
Plan (other than Disability Benefits) or any other retirement plan or
deferred compensation plan, income derived from stock options, stock
appreciation rights and other equity-based compensation and other forms of
special remuneration.
1.15 "COVERED EARNINGS" shall mean a Member's Compensation in the 12 months
immediately preceding the onset of the Member's Disability.
1.16 "DEFERRED VESTED BENEFIT" shall mean the benefits described in Section
3.2(b) hereof
1.17 "DISABILITY" OR "DISABLED" shall mean disability or disabled for purposes
of the Basic Disability Plan.
1.18 "DISABILITY BENEFITS" shall mean the benefits provided as described in
Section 4.1(b) hereof.
1.19 "EFFECTIVE DATE" shall mean July 1, 1998. The effective date of this
amendment and restatement of the Plan shall mean December 19, 2000.
-7-
<PAGE>
1.20 "FORMER MEMBER" shall mean (i) a Member whose employment with the Company
or an Affiliated Employer terminates before he or she has completed five
or more years of Service, or (ii) a Member who was removed from
participation in the Plan, in accordance with Section 2.2 hereof, before
he or she has completed five or more years of Service.
1.21 "GOOD REASON". If a Member shall have terminated employment for
"Good Reason" under the terms of such Member's Change in Control Agreement
or employment agreement with the Company, if any, such Member shall be
deemed to have terminated employment for "Good Reason" under this Plan,
otherwise "Good Reason" shall mean, without the Member's express written
consent, the occurrence of any of the following circumstances unless, in
the case of subsections (a), (b), (c) or (d) hereof, such circumstances
are fully corrected prior to the date of termination specified in the
notice of termination given in respect thereof:
(a) the assignment to the Member of any duties inconsistent with the
Member's position in the Company, or an adverse alteration in the
nature or status of the Member's responsibilities or the conditions
of the Member's employment;
(b) a reduction by the Company in the Member's annual base salary,
target bonus or perquisites except for across-the-board perquisite
reductions similarly affecting all senior executives of the Company
and all senior executives of any Person, as such term is used for
purposes of Sections 13(d) or 14(d) of the Securities Exchange Act
of 1934, as amended, in control of the Company;
(c) the relocation of the principal place of the Member's employment to
a location more than 50 miles from the location of such place of
employment; for this
-8-
<PAGE>
purpose, required travel on the Company's business will not
constitute a relocation so long as the extent of such travel is
substantially consistent with the Member's customary business travel
obligations;
(d) the failure by the Company to pay to the Member any portion of the
Member's compensation or to pay to the Member any portion of an
installment of deferred compensation under any deferred compensation
program of the Company within seven days of the date such
compensation is due;
(e) the failure by the Company to continue in effect any material
compensation or benefit plan in which the Member participated unless
an equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan, or the
failure by the Company to continue the Member's participation
therein (or in such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amounts of benefits
provided and the level of the Member's participation relative to
other participants;
(f) the failure of the Company to obtain a satisfactory agreement from
any successor to the Company to fully assume the Company's
obligations and to perform under this Plan, as contemplated in
Section 7.9 hereof;
(g) with respect to any Member who is a party to a Change in Control
Agreement, any purported termination of such Member's employment
that is not effected
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pursuant to the notice provisions, if any, in such Member's Change
in Control Agreement.
1.22 "LUMP SUM ELECTION" shall mean an election to receive all or portion of
the benefits payable hereunder in a lump sum pursuant to Section 3.4
hereof.
1.23 "MEMBER" shall mean an employee of the Company or an Affiliated Employer
who becomes a participant in the Plan pursuant to Section 2, but excludes
any Former Member or Vested Former Member.
1.24 "OTHER DISABILITY INCOME" shall mean (i) the disability insurance benefit
that the Member is entitled to receive under the Federal Social Security
Act while he or she is receiving the Basic Disability Plan Benefit and
(ii) the disability income payable to a Member from any supplemental
executive disability plan of the Company or any Affiliated Employer or
from any other contract, agreement or other arrangement with the Company
or an Affiliated Employer (excluding any Basic Disability Plan).
1.25 "OTHER RETIREMENT INCOME" shall mean:
(a) the Social Security retirement benefit that the Member or Former
Member is entitled to receive under the Federal Social Security Act,
assuming that for years prior to the Member's employment with the
Company and for years following the Member's termination of
employment with the Company until the Member attains
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age 62, the Member earned compensation so as to accrue the maximum
Social Security benefits, and
(b) the retirement income payable to a Member or Vested Former Member
from any `excess benefit plan' as that term is defined in Section
3(36) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), any plan described in Section 201(2) of ERISA,
and any other contract, agreement or other arrangement providing a
defined pension benefit or defined contribution retirement benefit,
in any case, maintained or entered into with the Company or an
Affiliated Employer (excluding this Plan, any Basic Plan, any
defined contribution plan intended to meet the requirements of Code
Section 401(a) and any elective plan of deferred compensation).
1.26 "PLAN" shall mean the IMS Health Incorporated Supplemental Executive
Retirement Plan, as embodied herein, and any amendments thereto.
1.27 "POTENTIAL CHANGE IN CONTROL". If a "Potential Change in Control" shall
have occurred or shall be deemed to have occurred under the terms of a
Member's Change in Control Agreement or employment agreement with the
Company, if any, a "Potential Change in Control" shall be deemed to have
occurred under this Plan, otherwise a "Potential Change in Control"
shall be deemed to have occurred if:
(a) the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control;
(b) any Person (including the Company), as defined in Section 1.10(a)
hereof, publicly announces an intention to take or to consider
taking actions which if consummated would constitute a Change in
Control; or
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(c) the Board adopts a resolution to the effect that, for purposes of
this Plan, a Potential Change in Control has occurred.
1.28 "PREDECESSOR TO THIS PLAN" shall mean the Supplemental Executive Benefit
Plan of The Dun & Bradstreet Corporation, as amended as of December 21,
1994.
1.29 "RETIREMENT" shall mean the termination of a Member's or Vested Former
Member's employment with the Company or an Affiliated Employer other than
by reason of death or Disability (i) after reaching age 55 and completing
ten years of Service, or (ii) immediately following the cessation of the
payment of Disability Benefits under the Plan to such Member or Vested
Former Member while he or she is Disabled. In determining whether age 55
has been attained under clause (i) of this definition, there shall be
included as years of age the number of additional years credited as "age"
for purposes of the Plan to the Member or Vested Former Member under a
then-effective employment agreement between the Company and such person.
1.30 "RETIREMENT BENEFITS" shall mean the benefits described in Section 3.1(b)
hereof.
1.31 "SERVICE" shall mean a Member's service defined as Vesting Service in the
Basic Plan, which is taken into account for vesting purposes thereunder
(including any such service prior to the date such individual becomes a
Member but not including any such service after participation hereunder
terminates), except that (i) Service will also include service while the
Member is receiving Disability Benefits under this Plan; (ii) if a Member
was employed by a company acquired by the Company or an Affiliated
Employer after the
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Effective Date, such Member's service with that company prior to the date
of acquisition will not constitute Service hereunder; (iii) upon
commencement of participation hereunder in accordance with Section 2.1
hereof, the CEO (as defined in such section) may limit any service
otherwise to constitute Service hereunder with respect to periods prior to
the date of participation in the Plan; and (iv) no service of a Former
Member or Vested Former Member during any period after removal from
participation under Section 2.2 shall constitute Service for purposes of
the Plan. The foregoing notwithstanding, there shall be included as
Service under the Plan the number of additional years (or other additional
period) credited as "service" for purposes of the Plan to the Member or
Former Member or Vested Former Member under an employment agreement
between the Company or an Affiliated Employer and such person in effect at
the time of such person's termination of employment.
1.32 "SURVIVING SPOUSE" shall mean the spouse of a deceased Member or Vested
Former Member to whom such Member or Vested Former Member is married under
applicable state law immediately preceding such Member or Vested Former
Member's death.
1.33 "SURVIVING SPOUSE'S BENEFITS" shall mean the benefits described in Section
5 hereof.
1.34 "VESTED FORMER MEMBER" shall mean (i) a Member whose employment with the
Company or an Affiliated Employer terminates on or after the date on which
he or she has completed five or more years of Service, or (ii) a Member
who was removed from participation in the Plan, in accordance with Section
2.2 hereof, on or after the date on which he or she has completed five or
more years of Service.
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1.35 "PLAN ADMINISTRATOR" shall mean the Company, except that any action
authorized to be taken by the Plan Administrator hereunder may also be
taken by any committee or person(s) duly authorized by the Board or the
duly authorized delegees of such duly authorized committee or person(s).
SECTION 2 - PARTICIPATION
2.1 COMMENCEMENT OF PARTICIPATION. The Chief Executive Officer ("CEO") of the
Company and such other key executives of the Corporation and its
Affiliated Employers as are designated by the CEO in writing and approved
by the Plan Administrator shall participate in the Plan as of a date
determined by the CEO.
2.2 TERMINATION OF PARTICIPATION. A Member's participation in the Plan shall
terminate upon termination of his or her employment with the Company or
any Affiliated Employer. Prior to termination of employment, a Member may
be removed, upon written notice by the CEO as approved by the Plan
Administrator, from further participation in the Plan. As of the date of
termination or removal, no further benefits shall accrue to such
individual hereunder.
SECTION 3 - AMOUNT AND FORM OF BENEFITS
3.1 RETIREMENT BENEFITS.
(a) ELIGIBILITY. Upon the Retirement of a Member or Vested Former Member
from the Company or an Affiliated Employer, he or she shall be
entitled to the
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Retirement Benefit described in Section 3.1(b) hereof, payable in
the form specified in Section 3.3.
(b) AMOUNT. The Retirement Benefit of a Member or Vested Former Member
shall be an annual benefit equal to the difference between (i) and
the sum of (ii), (iii), (iv) and (v) where:
(i) is 5% of his or her Average Final Compensation multiplied by
the number of his or her years of Service not in excess of ten
years, plus 2% of such Average Final Compensation multiplied
by the number of his or her years of Service over ten but not
in excess of 15 years;
(ii) is the Basic Plan Benefit payable to the Member or Vested
Former Member as of the date of his or her Retirement
expressed in the form of an annual life annuity, or, if the
Basic Plan Benefit becomes payable after the Member's or
Vested Former Member's Retirement, the Actuarial Equivalent
Value as of such date of the Basic Plan Benefit that would
become payable in the form of an annual life annuity starting
on the earliest possible date under the terms of the Basic
Plan;
(iii) is the Other Retirement Income payable to the Member or Vested
Former Member as of the date of his or her Retirement
expressed in the form of an annual life annuity, or, if the
Other Retirement Income becomes payable after the Member's or
Vested Former Member's Retirement, the Actuarial
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Equivalent Value as of such date of the Other Retirement
Income that would become payable in the form of an annual life
annuity starting on the earliest possible date under the terms
of the appropriate retirement arrangement; and
(iv) is the annual benefit payable to the Member or Vested Former
Member under the terms of the Predecessor to this Plan as of
the date of his or her Retirement, expressed in the form of an
annual life annuity.
3.2 DEFERRED VESTED BENEFIT.
(a) ELIGIBILITY.
(i) Each Member and Vested Former Member who has completed five or
more years of Service and whose employment with the Company or
an Affiliated Employer terminates prior to Retirement, for a
reason other than Cause, death or Disability shall be entitled
to the Deferred Vested Benefit described in Section 3.2(b)
hereof, payable in the form specified in Section 3.3.
(b) AMOUNT. The Deferred Vested Benefit of a Member or Vested Former
Member who terminates and who meets the eligibility requirements of
Section 3.2(a) shall be an annual benefit equal to the difference
between (i) and the sum of (ii), (iii), and (iv), where:
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(i) is 5% of his or her Average Final Compensation, multiplied by
the number of his or her years of Service not in excess of ten
(10), plus 2% of such Average Final Compensation multiplied by
the number of his or her years of Service over ten but not in
excess of 15 years;
(ii) is the Basic Plan Benefit payable to the Member or Vested
Former Member as of the date his or her Deferred Vested
Benefit commences expressed in the form of an annual life
annuity, or, if the Basic Plan Benefit becomes payable after
the Member's or Vested Former Member's Deferred Vested Benefit
commences, the Actuarial Equivalent Value as of such date of
the Basic Plan Benefit that would become payable in the form
of an annual life annuity starting on the earliest possible
date under the terms of the Basic Plan;
(iii) is the Other Retirement Income payable to the Member or Vested
Former Member as of the date his or her Deferred Vested
Benefit commences expressed in the form of an annual life
annuity, or, if the Other Retirement Income becomes payable
after the Member's or Vested Former Member's Deferred Vested
Benefit commences, the Actuarial Equivalent Value as of such
date of the Other Retirement Income that would become payable
in the form of an annual life annuity starting on the earliest
possible date under the terms of the appropriate retirement
arrangement; and
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(iv) is the annual benefit payable to the Member or Vested Former
Member under the terms of the Predecessor to this Plan as of
the date his or her Deferred Vested Benefit commences,
expressed in the form of an annual life annuity.
3.3 FORM OF PAYMENT.
(a) Except as provided under Section 3.3(b) or Section 3.3(c), the
Retirement Benefit or Deferred Vested Benefit under this Plan, as
the case may be, shall be payable in monthly installments in the
form of a straight life annuity and without regard to any optional
form of benefits elected under the Basic Plan. Payments shall
commence on the first day of the calendar month coinciding with or
next following (i) the Member's or Vested Former Member's
Retirement, in the case of Retirement Benefits or (ii) the later of
the date the Member or Vested Former Member attains age 55 or
terminates employment, in the case of Deferred Vested Benefits.
(b) If a Member or Vested Former Member has made a Lump Sum Election
pursuant to Section 3.4 and such Lump Sum Election becomes effective
(i) prior to the date of such Member's or Vested Former Member's
Retirement or termination of employment with the Company or an
Affiliated Employer and (ii) while he or she was still a Member, the
Retirement Benefit, or Deferred Vested Benefit under this Plan, as
the case may be, shall be payable in the form or combination of
forms of payment elected pursuant to such Lump Sum Election under
Section 3.4 and
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without regard to any optional form of benefits elected under the
Basic Plan. Any portion of the benefits hereunder payable in a lump
sum shall be paid within 60 days following (i) the Member's or
Vested Former Member's Retirement, in the case of Retirement
Benefits or (ii) the later of the date the Member or Vested Former
Member attains age 55 or terminates employment, in the case of
Deferred Vested Benefits.
(c) Notwithstanding any Lump Sum Election made (or not made) under
Section 3.3, if the lump sum value, determined in the same manner as
provided under Section 3.4(a), of a Member's or Vested Former
Member's Retirement, or Deferred Vested Benefit is $10,000 or less
at the time such benefit is payable under this Plan, such benefit
shall be payable as a lump sum.
3.4 LUMP SUM ELECTION.
(a) A Member or Vested Former Member may elect to receive all, none, or
a specified portion, as provided in Section 3.4(c), of his or her
Retirement Benefit or Deferred Vested Benefit under the Plan as a
lump sum and to receive any balance of such benefit in the form of
an annuity; provided that any such Lump Sum Election shall be
effective for purposes of this Plan only if the conditions of
Section 3.4(b) are satisfied. A Member or Vested Former Member may
elect a payment form different than the payment form previously
elected by him or her under this Section 3.4(a) by filing a revised
election form; provided that any such new election shall be
effective only if the conditions of Section 3.4(b) are satisfied
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with respect to such new election. Any prior Lump Sum Election made
by a Member that has satisfied the conditions of Section 3.4(b)
shall remain effective for purposes of the Plan until such Member
has made a new election satisfying the conditions of Section 3.4(b).
The amount of any portion of a Member's or a Vested Former Member's
Retirement Benefit or Deferred Vested Benefit payable as a lump sum
under this Section 3.4 shall equal the present value of such portion
of the benefit, and such present value shall be determined (i) based
on a discount rate equal to 85% of the average of the 15-year
non-callable U.S. Treasury bond yields as of the close of business
on the last business day of each of the three months immediately
preceding the date the annuity value is determined and (ii) using
the 1983 Group Annuity Mortality Table.
(b) A Member's Election under Section 3.4(a) becomes effective only if
all of the following conditions are satisfied: (i) such Member
remains in the employment of the Company or an Affiliated Employer,
as the case may be, for the full 12 calendar months immediately
following the date of such election (the "Election Date"), except in
the case of death or Disability of such Member (in which case
Section 3.4 (d) shall apply) and (ii) such Member complies with the
administrative procedures set forth by the Plan Administrator with
respect to the making of a Lump Sum Election.
(c) A Member making an election under Section 3.4(a) may specify the
portion of his Retirement or Deferred Vested Benefit under the Plan
to be received in a lump sum as follows: 0%, 25%, 50%, 75%, or 100%.
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(d) In the event a Member who has made an Election pursuant to Section
3.4(a) dies or becomes Disabled while employed by the Company or an
Affiliated Employer and such death or total and permanent Disability
occurs during the 12 calendar-month period immediately following the
Election Date, the condition under Section 3.4(b)(i) shall be deemed
satisfied with respect to such Member.
3.5 CESSATION OF BENEFITS. Subject to Section 3.8 hereof, no benefits or no
further benefits, as the case may be, shall be paid to a Member, Vested
Former Member or Surviving Spouse if the Member or Vested Former Member
has:
(a) become a stockholder (unless such stock is listed on a national
securities exchange or traded on a daily basis in the
over-the-counter market and the Member's or Vested Former Member's
ownership interest is not in excess of 2% of the company whose
shares are being purchased), employee, officer, director or
consultant of or to a company, or a member or an employee of or a
consultant to a partnership or any other business or firm, which
competes with any of the businesses identified in the Company's
Employee Protection Plan, such Member or Vested Former Member
accepts any form of compensation from such competing entity;
(b) been discharged from employment with the Company or any Affiliated
Employer for Cause;
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(c) failed to retain in confidence any and all confidential information
concerning the Company or any Affiliated Employer and its respective
business which was known or became known to the Member or Vested
Former Member, except as otherwise required by law and except
information (i) ascertainable or obtained from public information,
(ii) received by the Member or Vested Former Member at any time
after the Member's or Vested Former Member's employment by the
Company or any Affiliated Employer terminated, from a third party
not employed by or otherwise affiliated with the Company or any
Affiliated Employer, or (iii) which was or became known to the
public by any means other than a breach of this Section 3.5; or
(d) made disparaging comments about the Company or any Affiliated
Employer in any communications, written or oral, with any
individual, company, government body or agency or any other entity
whatsoever. For purposes hereof, "disparage" shall mean any
communication, including, but not limited to, any statements,
actions or insinuations, made either directly or through a third
party, that would tend to lessen the standing or stature of the
Company or any Affiliated Employer in the eyes of a customer, a
prospective customer, a shareholder or a prospective shareholder.
3.6 NOTIFICATION OF CESSATION OF BENEFITS. Subject to Section 3.8 hereof, in
any case described in Section 3.5, the Member, Vested Former Member or
Surviving Spouse shall be given prior written notice that no benefits or
no further benefits, as the case may be, will be paid to such Member,
Vested Former Member or Surviving Spouse. Such written
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notice shall specify the particular act(s), or failures to act, and the
basis on which the decision to cease paying his or her benefits has been
made.
3.7 REPAYMENT OF BENEFITS PAID AS LUMP SUM.
(a) Subject to Section 3.8 hereof, a Member or Vested Former Member who
receives in a lump sum any portion of his or her Retirement Benefit
or Deferred Vested Benefit pursuant to a Lump Sum Election, shall
receive such lump sum portion of such Retirement Benefit or Deferred
Vested Benefit subject to the condition that if such Member or
Vested Former Member engages in any of the acts described in Section
3.5(a), then such Member or Vested Former Member shall, within 60
days after written notice by the Company, repay to the Company the
amount described in Section 3.7(b).
(b) The amount described in this Section shall equal the amount of the
Member's or Vested Former Member's lump sum benefit paid under this
Plan to which such Member or Vested Former Member would not have
been entitled, if such lump sum benefit had instead been payable in
the form of an annuity under this Plan and such annuity payments
were subject to the provisions of Section 3.5.
3.8 CHANGE IN CONTROL.
(a) Anything in this Plan to the contrary notwithstanding:
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(i) Any Member whose employment with the Company or an Affiliated
Employer is involuntarily terminated by the Company or an
Affiliated Employer at or within two years following a Change
in Control for a reason other than Cause or whose employment
is voluntarily terminated by the Member with Good Reason at or
within two years following a Change in Control shall be deemed
to have completed five years of service for purposes of
Section 3.2(a) hereof and any such Member as well as any
Member who Retires at or within two years following a Change
in Control shall be credited with three additional years of
Service for purposes of calculating the benefits payable under
Sections 3.1(b) or 3.2(b) hereof, as the case may be.
(ii) The benefits payable to any Member whose employment is
terminated at or within two years following a Change in
Control as provided in subsection (ii) above shall be paid in
accordance with Section 3.3 hereof.
(iii) In the event of a Potential Change in Control or Change in
Control, the Company shall, not later than 15 days thereafter,
have established one or more so-called "rabbi" trusts and
shall deposit therein cash in an amount sufficient to provide
for full payment of all potential benefits payable under the
Plan at or following a Change in Control. Such rabbi trust(s)
shall be irrevocable and shall provide that the Company may
not, directly or indirectly, use or recover any assets of the
trust(s) until such time as all obligations which potentially
could arise hereunder have been settled and
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paid in full, subject only to the claims of creditors of the
Company in the event of insolvency or bankruptcy of the
Company; provided, however, that if no Change in Control has
occurred within two years after such Potential Change in
Control, such rabbi trust(s) shall at the end of such two-year
period become revocable and may thereafter be revoked by the
Company.
(iv) the provisions of Sections 3.5 through 3.7 shall be of no
force or effect with respect to Members who Retire or
terminate employment within a two-year period following a
Change in Control.
SECTION 4 - DISABILITY BENEFITS
4.1 DISABILITY BENEFITS.
(a) ELIGIBILITY. A Member who is enrolled for the maximum disability
insurance coverage available under the Basic Disability Plan and who
has become Disabled shall be entitled to the Disability Benefit
described in Section 4.1(b).
(b) AMOUNT. The Disability Benefit of a Member entitled thereto shall be
an annual benefit payable in monthly installments under this Plan
during the same period as disability benefits are actually paid by
the Basic Disability Plan, in an amount equal to 60% of the Member's
Covered Earnings, offset by the Member's (i) Basic Disability Plan
Benefit, (ii) Basic Plan Benefit, if the Basic Disability Plan
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Benefit does not already include an offset for such Basic Plan
Benefit, and (iii) Other Disability Income.
SECTION 5 - SURVIVING SPOUSE'S BENEFITS
5.1 DEATH PRIOR TO BENEFIT COMMENCEMENT. Upon the death of a Member or Vested
Former Member, prior to the commencement of his or her Retirement Benefit
or Deferred Vested Benefit hereunder, any such Member shall be deemed to
have completed five years of Service for purposes of Section 3.2(a) and
his or her Surviving Spouse will be entitled to a Surviving Spouse's
Benefit under this Plan equal to 50% of the Retirement or Deferred Vested
Benefit that would have been provided from the Plan had the Member or
Vested Member retired from or terminated employment with the Company or an
Affiliated Employer on the date of death.
5.2 DEATH ON OR AFTER BENEFIT COMMENCEMENT. Upon the death of a Vested Former
Member while he or she is receiving Retirement or Deferred Vested
Benefits, his or her Surviving Spouse shall receive a Surviving Spouse's
Benefit equal to 50% of the Benefit he or she was receiving at the time of
death. Notwithstanding the foregoing, no benefit shall be payable under
this Section 5.2 to the extent a Retirement Benefit or Deferred Vested
Benefit was previously paid to a Member or Vested Former Member in the
form of a lump sum.
5.3 COMMENCEMENT OF SURVIVING SPOUSE'S BENEFIT. Except as provided in Section
5.4, the Surviving Spouse's Benefit provided under Sections 5.1 or 5.2
will be payable monthly, commencing on the first day of the month
coincident with or next following the date of
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the Member's or Vested Former Member's death, or if the Member or Vested
Former Member had not attained age 55, on the date such Member or Vested
Former Member would have attained age 55 had he or she lived. Such
benefits shall continue until the first day of the month in which the
Surviving Spouse dies.
5.4 LUMP SUM PAYMENT.
(a) If a Member or a Vested Former Member made an Election under Section
3.4 but such Member or Vested Former Member died prior to such lump
sum payment, the Surviving Spouse's Benefit payable under Section
5.1 hereof will be payable in the form or combination of forms of
payment so elected by such Member or Vested Former Member pursuant
to such Lump Sum Election. The amount of any lump sum payment under
the Plan shall be determined using the actuarial assumptions set
forth in Section 3.4(a).
(b) If the lump sum value, determined in the same manner as provided
under Section 3.4(a), of a Surviving Spouse's Benefit is $10,000 or
less at the time such Surviving Spouse's Benefit is payable under
this Plan, such benefit shall be payable as a lump sum.
(c) Any Surviving Spouse's Benefit which is payable as a lump sum shall
be paid within 60 days after the date when any portion of such
benefit payable in annuity form commences or would commence if any
portion of such Surviving Spouse's Benefit were payable as an
annuity as set forth in Section 5.3.
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5.5 REDUCTION. Notwithstanding the foregoing provisions of Section 5, the
amount of a Surviving Spouse's Benefit shall be reduced by one percentage
point for each year (where a half year or more is treated as a full year)
in excess of ten years that the age of the Member or Vested Former Member
exceeds the age of the Surviving Spouse.
SECTION 6 - PLAN ADMINISTRATOR
6.1 DUTIES AND AUTHORITY. The Plan Administrator shall be responsible for the
administration of the Plan and may delegate to any management committee,
employee, director or agent its responsibility to perform any act
hereunder, including, without limitation, those matters involving the
exercise of discretion; provided, that such delegation shall be subject to
revocation at any time at the Plan Administrator's discretion. The Plan
Administrator shall have the sole discretion to determine all questions
arising in connection with the Plan, to interpret the provisions of the
Plan and to construe all of its terms, to adopt, amend, and rescind rules
and regulations for the administration of the Plan, and generally to
conduct and administer the Plan and to make all determinations in
connection with the Plan as may be necessary or advisable. All such
actions of the Plan Administrator shall be conclusive and binding upon all
Members, Former Members, Vested Former Members, Surviving Spouses and
other persons.
6.2 CLAIMS PROCEDURE. A Member, Former Member or Vested Former Member or his
or her authorized representative shall have 60 days after receipt of
written notification of denial of a claim for benefits under the Plan to
request a review of the denial by making written
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request to the Plan Administrator and may review pertinent documents and
submit issues and comments in writing within such 60-day period.
Not later than 60 days after receipt of the request for review, the Plan
Administrator shall render and furnish to the claimant a written decision,
which shall make specific references to pertinent Plan provisions on which
it is based. If special circumstances require an extension of time for
processing, the decision shall be rendered as soon as possible, but not
later than 120 days after receipt of the request for review, provided that
written notice and explanation of the delay are given to the claimant
prior to commencement of the extension. Such decision by the Plan
Administrator shall not be subject to further review. If a decision on
review is not furnished to a claimant within the specified time period,
the claim shall be deemed to have been denied on review.
SECTION 7 - MISCELLANEOUS
7.1 AMENDMENT; TERMINATION. The Board of Directors of the Company, may, in its
sole discretion, terminate, suspend or amend this Plan at any time or from
time to time, in whole or in part; provided, however, that no termination,
suspension or amendment of the Plan may adversely affect (a) a Member's or
Vested Former Member's benefit under the Plan to which he or she is
entitled hereunder, or, (b) a Vested Former Member's right or the right of
a Surviving Spouse to receive or to continue to receive a benefit in
accordance with the Plan, such benefits or rights as in effect on the date
immediately preceding the date of such termination, suspension or
amendment. Notwithstanding the foregoing, the Employee Benefits Committee
of the Company may amend the Plan
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without the approval of the Board of Directors of the Company with respect
to amendments that such Committee determines do not have a significant
effect on the cost of the Plan.
7.2 NO EMPLOYMENT RIGHTS. Nothing contained herein will confer upon any
Member, Former Member or Vested Former Member the right to be retained in
the service of the Company or any Affiliated Employee, nor will it
interfere with the right of the Company or any Affiliated Employer to
discharge or otherwise deal with Members, Former Members or Vested Former
Members with respect to matters of employment.
7.3 PAYOUT IN DISCRETION OF THE PLAN ADMINISTRATOR. Notwithstanding anything
herein to the contrary, at any time following the termination of service
of the Member or Vested Former Member, the Plan Administrator may
authorize, under uniform rules applicable to all Members, Vested Former
Members and Surviving Spouses under the Plan, a lump sum distribution of a
Member's, Vested Former Member's and/or Surviving Spouse's Retirement
Benefit or Surviving Spouse's Benefit under the Plan in an amount equal to
the Actuarial Equivalent Value of such Retirement Benefit or Surviving
Spouse's Benefit, in full satisfaction of all present and future Plan
liability with respect to such Member, Vested Former Member and/or
Surviving Spouse, if the amount of such present value is less than
$250,000. Such lump sum distribution may be made without the consent of
the Member, Vested Former Member or Surviving Spouse.
7.4 UNFUNDED STATUS. Members and Vested Former Members shall have the status
of general unsecured creditors of the Company, and this Plan constitutes a
mere promise by the
-30-
<PAGE>
Company to make benefit payments at the time or times required hereunder.
It is the intention of the Company that this Plan be unfunded for tax
purposes and for purposes of Title I of ERISA and any trust created by the
Company and any assets held by such trust to assist the Company in meeting
its obligations under the Plan shall meet the requirements necessary to
retain such unfunded status.
7.5 ARBITRATION. Any dispute or controversy arising under or in connection
with the Plan shall be settled exclusively by arbitration in New York, New
York in accordance with the rules of the American Arbitration Association
in effect at the time of such arbitration. The Company shall pay the
entire costs of any proceeding brought by a Member, Vested Former Member,
Former Member, or Surviving Spouse hereunder, including the fees and
expenses of counsel and pension experts engaged by such person, and such
expenses shall be reimbursed promptly upon evidence that such expenses
have been incurred without awaiting the outcome of the proceedings;
provided however, that such costs and expenses shall be repaid to the
Company by the recipient of same if it is finally determined by the
arbitrators that the position taken by such person was entirely without
merit. Failure of such person to prevail in any dispute or controversy
shall not be the sole basis on which such determination shall be made.
7.6 NO ALIENATION. A Member's or Vested Former Member's right to benefit
payments under the Plan shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment or garnishment by creditors or such Member or Vested Former
Member or his or her Surviving Spouse.
-31-
<PAGE>
7.7 WITHHOLDING. The Company may withhold from any benefit under the Plan an
amount sufficient to satisfy its tax withholding obligations.
7.8 GOVERNING LAW. The Plan shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts made and to
be performed in such state to the extent not preempted by federal law.
7.9 SUCCESSORS. The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
expressly assume and agree to perform the obligations of the Company under
this Plan in the same manner and to the same extent that the Company would
have been required to perform such obligations if no such succession had
taken place and such assumption shall be an express condition to the
consummation of any such purchase, merger, consolidation or other
transaction.
7.10 INTEGRATION. In the event of any conflict or ambiguity between this
Plan and the terms of any employment agreement between a Member and the
Company or any Change in Control Agreement between a Member and the
Company (this Plan and any such employment agreement or Change in Control
Agreement being collectively referred to herein as the "arrangements"),
such conflict or ambiguity shall be resolved in accordance with the terms
of that arrangement which are most beneficial to the Member; provided,
however, that no such resolution of any such conflict or ambiguity shall
operate to cause the Member to receive duplicate payments or benefits
under the arrangements.
-32-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this document to be executed by
its officer effective December 19, 2000.
IMS Health Incorporated
By: /s/ Robert H. Steinfeld
-----------------------
Its: SENIOR VICE PRESIDENT, GENERAL COUNSEL AND
CORPORATE SECRETARY
Date: DECEMBER 19, 2000
-33-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.41
<SEQUENCE>4
<FILENAME>a2041132zex-10_41.txt
<DESCRIPTION>EXHIBIT 10.41
<TEXT>
<PAGE>
Exhibit 10.41
IMS HEALTH INCORPORATED
U.S. EXECUTIVE RETIREMENT PLAN
As Amended and Restated Effective December 19, 2000
<PAGE>
TABLE OF CONTENTS
PAGE
INTRODUCTION.................................................................1
SECTION 1 - DEFINITIONS...................................................1
1.1 "Actuarial Equivalent Value".....................................1
1.2 "Affiliated Employer"............................................1
1.3 "Average Final Compensation".....................................1
1.4 "Basic Disability Plan"..........................................2
1.5 "Basic Disability Plan Benefit"..................................2
1.6 "Basic Plan".....................................................2
1.7 "Basic Plan Benefit".............................................2
1.8 "Board"..........................................................3
1.9 "Cause"..........................................................3
1.10 "Change in Control"..............................................4
1.11 "Change in Control Agreement"....................................6
1.12 "Code"...........................................................6
1.13 "Company"........................................................6
1.14 "Compensation"...................................................6
1.15 "Covered Earnings"...............................................7
1.16 "Deferred Vested Benefit"........................................7
1.17 "Disability" or "Disabled".......................................7
1.18 "Disability Benefits"............................................7
1.19 "Effective Date".................................................7
1.20 "Former Member"..................................................7
1.21 "Good Reason"....................................................8
1.22 "Lump Sum Election".............................................10
1.23 "Member"........................................................10
1.24 "Other Disability Income".......................................10
1.25 "Other Retirement Income".......................................10
1.26 "Plan"..........................................................11
1.27 "Potential Change in Control"...................................11
-i-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
1.28 "Retire" or "Retirement"........................................11
1.29 "Retirement Benefits"...........................................12
1.30 "Service".......................................................12
1.31 "Surviving Spouse"..............................................13
1.32 "Surviving Spouse's Benefits"...................................13
1.33 "Vested Former Member"..........................................13
1.34 "Plan Administrator"............................................13
SECTION 2 - PARTICIPATION................................................13
2.1 Commencement of Participation...................................13
2.2 Termination of Participation....................................13
SECTION 3 - AMOUNT AND FORM OF BENEFITS..................................14
3.1 Retirement Benefits.............................................14
3.2 Deferred Vested Benefit.........................................16
3.3 Form of Payment.................................................18
3.4 Lump Sum Election...............................................19
3.5 Cessation of Benefits...........................................21
3.6 Notification of Cessation of Benefits...........................22
3.7 Repayment of Benefits Paid as Lump Sum..........................23
3.8 Change in Control...............................................23
SECTION 4 - DISABILITY BENEFITS..........................................25
4.1 Disability Benefits.............................................25
(a) Eligibility...............................................25
(b) Amount....................................................25
SECTION 5 - SURVIVING SPOUSE'S BENEFITS..................................26
5.1 Death Prior to Benefit Commencement.............................26
5.2 Death On or After Benefit Commencement..........................26
5.3 Commencement of Surviving Spouse's Benefit......................26
5.4 Lump Sum Payment................................................27
5.5 Reduction.......................................................28
-ii-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
SECTION 6 - PLAN ADMINISTRATOR...........................................28
6.1 Duties and Authority............................................28
6.2 Claims Procedure................................................28
SECTION 7 - MISCELLANEOUS................................................29
7.1 Amendment; Termination..........................................29
7.2 No Employment Rights............................................30
7.3 Payout in Discretion of the Plan Administrator..................30
7.4 Unfunded Status.................................................30
7.5 Arbitration.....................................................31
7.6 No Alienation...................................................31
7.7 Withholding.....................................................32
7.8 Governing Law...................................................32
7.9 Successors......................................................32
7.10 Integration.....................................................32
-iii-
<PAGE>
IMS HEALTH INCORPORATED
U.S. EXECUTIVE RETIREMENT PLAN
As Amended and Restated Effective December 19, 2000
INTRODUCTION
Effective as of July 25, 2000, the IMS Health Incorporated U.S. Executive
Retirement Plan (the "Plan") was established to provide a means of ensuring the
payment of a competitive level of retirement income and disability and survivor
benefits, and thereby attract, retain and motivate a select group of executives
of IMS Health Incorporated and its affiliated employers. This document
represents a complete restatement of the Plan effective as of December 19, 2000.
SECTION 1 - DEFINITIONS
1.1 "ACTUARIAL EQUIVALENT VALUE" shall mean a benefit of equivalent value
computed on the basis of the 1983 Group Annuity Mortality Table and
interest equal to the yield on 30-year Treasury Bonds as of the last
business day of the Plan Year prior to the year in which the relevant
calculation occurs.
1.2 "AFFILIATED EMPLOYER" shall mean an entity affiliated with the Company.
1.3 "AVERAGE FINAL COMPENSATION" shall mean a Member's average annual
Compensation during the five consecutive 12-month periods in the last ten
consecutive 12-month periods of his or her Service (or during the total
number of consecutive 12-month periods if fewer than five), immediately
prior to the month following the Member's termination
<PAGE>
of employment with the Company or an Affiliated Employer or, if earlier, removal
from participation under this Plan, affording the highest such Average Final
Compensation. If actual monthly Compensation for any month during the 120-month
computational period is unavailable, Compensation for such month shall be
determined by dividing the Member's annual rate of base pay in the month
preceding such unavailable month by 12.
1.4 "BASIC DISABILITY PLAN" shall mean as to any Member the long-term
disability plan of the Company or an Affiliated Employer pursuant to which
long-term disability benefits are payable to such Member.
1.5 "BASIC DISABILITY PLAN BENEFIT" shall mean the amount of benefits payable
to a Member from the Basic Disability Plan.
1.6 "BASIC PLAN" shall mean as to any Member or Vested Former Member the
defined benefit pension plan of the Company or an Affiliated Employer
intended to meet the requirements of Code Section 401(a) pursuant to which
retirement benefits are payable to such Member or Vested Former Member or
to the Surviving Spouse or designated beneficiary of a deceased Member or
Vested Former Member.
1.7 "BASIC PLAN BENEFIT" shall mean the amount of benefits payable from the
Basic Plan to a Member or Vested Former Member.
-2-
<PAGE>
1.8 "BOARD" shall mean the Board of Directors of IMS Health Incorporated,
except that any action authorized to be taken by the Board hereunder may
also be taken by a duly authorized committee of the Board or its duly
authorized delegees.
1.9 "CAUSE". A Member shall not be deemed to have been terminated for
"Cause" under this Plan unless such Member shall have been terminated
for "Cause" under the terms of such Member's employment agreement with
the Company, if any. If no such employment agreement containing a
definition of "Cause" shall be in effect, for purposes or this Plan
"Cause" shall mean a Member's:
(a) willful and continued failure to substantially perform his or her
duties (other than any such failure resulting from incapacity due to
physical or mental illness or Disability or any failure after the
issuance of a notice of termination by the Member for Good Reason)
which failure is demonstrably and materially damaging to the
financial condition or reputation of the Company and/or its
Affiliated Employers, and which failure continues more than 48 hours
after a written demand for substantial performance is delivered to
the Member by the Board, which demand specifically identifies the
manner in which the Board believes that the Member has not
substantially performed his or her duties; or
(b) the willful engaging by the Member in conduct which is demonstrably
and materially injurious to the Company, monetarily or otherwise.
No act, or failure to act, on the part of the Member shall be deemed
"willful" unless done, or omitted to be done, by the Member not in good
faith and without reasonable belief that his or her action or omission was
in the best interest of the Company. Notwithstanding
-3-
<PAGE>
the foregoing, the Member shall not be deemed to have been terminated for
Cause unless and until there shall have been delivered to the Member a
copy of the resolution duly adopted by the affirmative vote of not less
than three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board (after reasonable notice to the Member and an
opportunity for the Member, together with the Member's counsel, to be
heard before the Board) finding that, in the good faith opinion of the
Board, the Member was guilty of conduct set forth above in this definition
and specifying the particulars thereof in detail.
1.10 "CHANGE IN CONTROL". If a "Change in Control" shall have occurred or
shall be deemed to have occurred under the terms of a Member's or
Vested Former Member's Change in Control Agreement or employment
agreement with the Company, if any, a "Change in Control" shall be
deemed to have occurred under this Plan, otherwise a "Change in
Control" shall be deemed to have occurred if:
(a) any "Person" as such term is used for purposes of Sections 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of the
Company, or any company owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company), becomes the "Beneficial
Owner" (as defined in Rule 13d-3 of the Exchange Act), directly or
indirectly, of securities of the Company representing 20% or more of
the combined voting power of the Company's then outstanding
securities;
-4-
<PAGE>
(b) during any period of 24 months (not including any period prior to
the Effective Date), individuals who at the beginning of such period
constitute the Board, and any new director (other than (i) a
director nominated by a Person who has entered into an agreement
with the Company to effect a transaction described in Sections
1.10(a), (c), or (d) hereof, (ii) a director nominated by any Person
(including the Company) who publicly announces an intention to take
or to consider taking actions (including, but not limited to, an
actual or threatened proxy contest) which if consummated would
constitute a Change in Control, or (iii) a director nominated by any
Person who is the Beneficial Owner, directly or indirectly, of
securities of the Company representing 10% or more of the combined
voting power of the Company's securities) whose election by the
Board or nomination for election by the Company's stockholders was
approved in advance by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election
was previously so approved, cease for any reason to constitute at
least a majority thereof;
(c) the stockholders of the Company approve any transaction or series of
transactions under which the Company is merged or consolidated with
any other company, other than a merger or consolidation (i) which
would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities
of the surviving entity) more than 66 2/3% of the combined voting
power of the voting securities of the Company or such surviving
entity outstanding
-5-
<PAGE>
immediately after such merger or consolidation, and (ii) after which
no "Person" holds 20% or more of the combined voting power of the
then outstanding securities of the Company or such surviving entity;
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets; or
(e) the Board adopts a resolution to the effect that, for purposes of
this Plan, a Change in Control has occurred.
1.11 "CHANGE IN CONTROL AGREEMENT" shall mean any written agreement in effect
between any Member or Former Member or Vested Former Member and the
Company or an Affiliated Employer pursuant to which benefits may be
payable to such Member or Former Member or Vested Former Member in
connection with a Change in Control.
1.12 "CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
1.13 "COMPANY" shall mean IMS Health Incorporated.
1.14 "COMPENSATION" shall mean base salary, annual bonuses, commissions,
overtime and shift pay, in each case prior to reductions for elective
contributions under Sections 401(k) and 125 of the Code and deferred
compensation under any nonqualified deferred compensation plan.
Notwithstanding the foregoing, Compensation shall exclude
-6-
<PAGE>
severance pay (including, without limitation, severance pay under the
Company's Employee Protection Plan), stay-on bonuses, long-term bonuses,
retirement income, change-in-control payments, contingent payments,
amounts paid under this Plan (other than Disability Benefits) or any other
retirement plan or deferred compensation plan, income derived from stock
options, stock appreciation rights and other equity-based compensation and
other forms of special remuneration.
1.15 "COVERED EARNINGS" shall mean a Member's Compensation in the 12 months
immediately preceding the onset of the Member's Disability.
1.16 "DEFERRED VESTED BENEFIT" shall mean the benefits described in Section
3.2(b) hereof.
1.17 "DISABILITY" OR "DISABLED" shall mean disability or disabled for purposes
of the Basic Disability Plan.
1.18 "DISABILITY BENEFITS" shall mean the benefits provided as described in
Section 4.1(b) hereof.
1.19 "EFFECTIVE DATE" shall mean July 25, 2000. The effective date of this
amendment and restatement of the Plan shall mean December 19, 2000.
1.20 "FORMER MEMBER" shall mean (i) a Member whose employment with the Company
or an Affiliated Employer terminates with a Vested Percentage equal to 0%,
or (ii) a Member
-7-
<PAGE>
who was removed from participation in the Plan, in accordance with Section
2.2 hereof, with a Vested Percentage equal to 0%.
1.21 "GOOD REASON". If a Member shall have terminated employment for
"Good Reason" under the terms of such Member's Change in Control
Agreement or employment agreement with the Company, if any, such
Member shall be deemed to have terminated employment for "Good Reason"
under this Plan, otherwise, "Good Reason" shall mean, without the
Member's express written consent, the occurrence of any of the following
circumstances unless, in the case of subsections (a), (b), (c) or (d)
hereof, such circumstances are fully corrected prior to the date of
termination specified in the notice of termination given in respect
thereof:
(a) the assignment to the Member of any duties inconsistent with the
Member's position in the Company, or an adverse alteration in the
nature or status of the Member's responsibilities or the conditions
of the Member's employment;
(b) a reduction by the Company in the Member's annual base salary,
target bonus or perquisites except for across-the-board perquisite
reductions similarly affecting all senior executives of the Company
and all senior executives of any Person, as such term is used for
purposes of Sections 13(d) or 14(d) of the Securities Exchange Act
of 1934, as amended, in control of the Company;
(c) the relocation of the principal place of the Member's employment to
a location more than 50 miles from the location of such place of
employment; for this purpose, required travel on the Company's
business will not constitute a
-8-
<PAGE>
relocation so long as the extent of such travel is substantially
consistent with the Member's customary business travel obligations;
(d) the failure by the Company to pay to the Member any portion of the
Member's compensation or to pay to the Member any portion of an
installment of deferred compensation under any deferred compensation
program of the Company within seven days of the date such
compensation is due;
(e) the failure by the Company to continue in effect any material
compensation or benefit plan in which the Member participated unless
an equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan, or the
failure by the Company to continue the Member's participation
therein (or in such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amounts of benefits
provided and the level of the Member's participation relative to
other participants;
(f) the failure of the Company to obtain a satisfactory agreement from
any successor to the Company to fully assume the Company's
obligations and to perform under this Plan, as contemplated in
Section 7.9 hereof;
(g) with respect to any Member who is a party to a Change in Control
Agreement, any purported termination of such Member's employment
that is not effected pursuant to the notice provisions, if any, in
such Member's Change in Control Agreement.
-9-
<PAGE>
1.22 "LUMP SUM ELECTION" shall mean an election to receive all or portion of
the benefits payable hereunder in a lump sum pursuant to Section 3.4
hereof.
1.23 "MEMBER" shall mean an employee of the Company or an Affiliated Employer
who becomes a participant in the Plan pursuant to Section 2, but excludes
any Former Member or Vested Former Member.
1.24 "OTHER DISABILITY INCOME" shall mean (i) the disability insurance benefit
that the Member is entitled to receive under the Federal Social Security
Act while he or she is receiving the Basic Disability Plan Benefit and
(ii) the disability income payable to a Member from any supplemental
executive disability plan of the Company or any Affiliated Employer or
from any other contract, agreement or other arrangement with the Company
or an Affiliated Employer (excluding any Basic Disability Plan).
1.25 "OTHER RETIREMENT INCOME" shall mean the retirement income payable to a
Member or Vested Former Member from any `excess benefit plan' as that term
is defined in Section 3(36) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), any plan described in Section 201(2) of
ERISA, and any other contract, agreement or other arrangement providing a
defined pension benefit or defined contribution retirement benefit, in any
case, maintained or entered into with the Company or an Affiliated
Employer (excluding this Plan, any Basic Plan, any defined contribution
plan intended to meet the requirements of Code Section 401(a) and any
elective plan of deferred compensation).
-10-
<PAGE>
1.26 "PLAN"shall mean the IMS Health Incorporated U.S. Executive Retirement
Plan, as embodied herein, and any amendments thereto.
1.27 "POTENTIAL CHANGE IN CONTROL". If a "Potential Change in Control" shall
have occurred or shall be deemed to have occurred under the terms of a
Member's Change in Control Agreement or employment agreement with the
Company, if any, a "Potential Change in Control" shall be deemed to have
occurred under this Plan, otherwise a "Potential Change in Control" shall
be deemed to have occurred if:
(a) the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control;
(b) any Person (including the Company), as defined in Section 1.10(a)
hereof, publicly announces an intention to take or to consider
taking actions which if consummated would constitute a Change in
Control; or
(c) the Board adopts a resolution to the effect that, for purposes of
this Plan, a Potential Change in Control has occurred.
1.28 "RETIRE" OR "RETIREMENT" shall mean the termination of a Member's or
Vested Former Member's employment with the Company or an Affiliated
Employer other than by reason of death or Disability (i) after reaching
age 55, completing ten years of Service and with a Vested Percentage
greater than 0%, or (ii) immediately following the cessation of the
payment of Disability Benefits under the Plan to such Member or Vested
Former Member while he or she is Disabled. In determining whether age 55
has been attained under clause (i) of this definition, there shall be
included as years of age the number of additional years credited as "age"
for purposes of the Plan to the Member or Vested
-11-
<PAGE>
Former Member under a then-effective employment agreement between the
Company and such person.
1.29 "RETIREMENT BENEFITS" shall mean the benefits described in Section 3.1(b)
hereof.
1.30 "SERVICE" shall mean a Member's service defined as Vesting Service in the
Basic Plan, which is taken into account for vesting purposes thereunder
(including any such service prior to the date such individual becomes a
Member but not including any such service after participation hereunder
terminates), except that (i) Service will also include service while the
Member is receiving Disability Benefits under this Plan; (ii) if a Member
was employed by a company acquired by the Company or an Affiliated
Employer after the Effective Date, such Member's service with that company
prior to the date of acquisition will not constitute Service hereunder;
(iii) upon commencement of participation hereunder in accordance with
Section 2.1 hereof, the CEO (as defined in such section) may limit any
service otherwise to constitute Service hereunder with respect to periods
prior to the date of participation in the Plan; and (iv) no service of a
Former Member or Vested Former Member during any period after removal from
participation under Section 2.2 shall constitute Service for purposes of
the Plan. The foregoing notwithstanding, there shall be included as
Service under the Plan the number of additional years (or other additional
period) credited as "service" for purposes of the Plan to the Member or
Former Member or Vested Former Member under an employment agreement
between the Company or an Affiliated Employer and such person in effect at
the time of such person's termination of employment.
-12-
<PAGE>
1.31 "SURVIVING SPOUSE" shall mean the spouse of a deceased Member or Vested
Former Member to whom such Member or Vested Former Member is married under
applicable state law immediately preceding such Member or Vested Former
Member's death.
1.32 "SURVIVING SPOUSE'S BENEFITS" shall mean the benefits described in Section
5 hereof.
1.33 "VESTED FORMER MEMBER" shall mean (i) a Member whose employment with the
Company or an Affiliated Employer terminates on or after the date on which
his or her Vested Percentage is greater than 0%, or (ii) a Member who was
removed from participation in the Plan, in accordance with Section 2.2
hereof, on or after the date on which his or her Vested Percentage is
greater than 0%.
1.34 "PLAN ADMINISTRATOR" shall mean the Company, except that any action
authorized to be taken by the Plan Administrator hereunder may also be
taken by any committee or person(s) duly authorized by the Board or the
duly authorized delegees of such duly authorized committee or person(s).
SECTION 2 - PARTICIPATION
2.1 COMMENCEMENT OF PARTICIPATION. Such key executives of the Corporation and
its Affiliated Employers as are designated by the CEO in writing and
approved by the Plan Administrator shall participate in the Plan as of a
date determined by the CEO.
2.2 TERMINATION OF PARTICIPATION. A Member's participation in the Plan shall
terminate upon termination of his or her employment with the Company or
any Affiliated Employer.
-13-
<PAGE>
Prior to termination of employment, a Member may be removed, upon written
notice by the CEO as approved by the Plan Administrator, from further
participation in the Plan. As of the date of termination or removal, no
further benefits shall accrue to such individual hereunder.
SECTION 3 - AMOUNT AND FORM OF BENEFITS
3.1 RETIREMENT BENEFITS.
(a) ELIGIBILITY. Upon the Retirement of a Member or Vested Former Member
from the Company or an Affiliated Employer, he or she shall be
entitled to receive a percentage (the "Vested Percentage") of the
Retirement Benefit described in Section 3.1(b) hereof, payable in
the form specified in Section 3.3. Notwithstanding the provisions of
Section 1.30 of the Plan to the contrary, solely for the purpose of
determining the Vested Percentage under the following schedule,
Service shall exclude any such service prior to the date the
individual becomes a Member, except to the extent otherwise
determined by the Chief Executive Officer of the Company, in his or
her sole discretion.
<TABLE>
<CAPTION>
If the Member's Service is: The Vested Percentage is:
--------------------------- -------------------------
<S> <C>
Less than 1 year 0%
At least 1 but less than 2 years 33%
At least 2 but less than 3 years 67%
3 or more years 100%
</TABLE>
-14-
<PAGE>
(b) AMOUNT. The Retirement Benefit of a Member or Vested Former Member
shall be an annual benefit equal to the difference between (i) and
the sum of (ii) and (iii), where:
(i) is 1.67% of his or her Average Final Compensation multiplied
by the number of his or her years of Service not in excess of
36 years;
(ii) is the Basic Plan Benefit payable to the Member or Vested
Former Member as of the date of his or her Retirement
expressed in the form of an annual life annuity, or, if the
Basic Plan Benefit becomes payable after the Member's or
Vested Former Member's Retirement, the Actuarial Equivalent
Value as of such date of the Basic Plan Benefit that would
become payable in the form of an annual life annuity starting
on the earliest possible date under the terms of the Basic
Plan;
(iii) is the Other Retirement Income payable to the Member or Vested
Former Member as of the date of his or her Retirement
expressed in the form of an annual life annuity, or, if the
Other Retirement Income becomes payable after the Member's or
Vested Former Member's Retirement, the Actuarial Equivalent
Value as of such date of the Other Retirement Income that
would become payable in the form of an annual life annuity
starting on the earliest possible date under the terms of the
appropriate retirement arrangement.
-15-
<PAGE>
3.2 DEFERRED VESTED BENEFIT.
(a) ELIGIBILITY.
Each Member and Vested Former Member who has a Vested Percentage (as
defined below) greater than 0% and whose employment with the Company
or an Affiliated Employer terminates prior to Retirement, for a
reason other than Cause, death or Disability, shall be entitled to
receive a percentage (the "Vested Percentage") of the Deferred
Vested Benefit described in Section 3.2(b) hereof, payable in the
form specified in Section 3.3. Notwithstanding the provisions of
Section 1.30 of the Plan to the contrary, solely for the purpose of
determining the Vested Percentage under the following schedule,
Service shall exclude any such service prior to the date the
individual becomes a Member, except to the extent otherwise
determined by the Chief Executive Officer of the Company, in his or
her sole discretion.
<TABLE>
<CAPTION>
If the Member's Service is: The Vested Percentage is:
--------------------------- -------------------------
<S> <C>
Less than 1 year 0%
At least 1 but less than 2 years 33%
At least 2 but less than 3 years 67%
3 or more years 100%
</TABLE>
(b) AMOUNT. The Deferred Vested Benefit of a Member or Vested Former
Member who terminates and who meets the eligibility requirements of
Section 3.2(a) shall be an annual benefit equal to the difference
between (i) and the sum of (ii) and (iii), where:
-16-
<PAGE>
(i) is 1.67% of his or her Average Final Compensation multiplied
by the number of his or her years of Service not in excess of
36;
(ii) is the Basic Plan Benefit payable to the Member or Vested
Former Member as of the date his or her Deferred Vested
Benefit commences expressed in the form of an annual life
annuity, or, if the Basic Plan Benefit becomes payable after
the Member's or Vested Former Member's Deferred Vested Benefit
commences, the Actuarial Equivalent Value as of such date of
the Basic Plan Benefit that would become payable in the form
of an annual life annuity starting on the earliest possible
date under the terms of the Basic Plan;
(iii) is the Other Retirement Income payable to the Member or Vested
Former Member as of the date his or her Deferred Vested
Benefit commences expressed in the form of an annual life
annuity, or, if the Other Retirement Income becomes payable
after the Member's or Vested Former Member's Deferred Vested
Benefit commences, the Actuarial Equivalent Value as of such
date of the Other Retirement Income that would become payable
in the form of an annual life annuity starting on the earliest
possible date under the terms of the appropriate retirement
arrangement.
-17-
<PAGE>
3.3 FORM OF PAYMENT.
(a) Except as provided under Section 3.3(b) or Section 3.3(c), the
Retirement Benefit or Deferred Vested Benefit under this Plan, as
the case may be, shall be payable in monthly installments in the
form of a straight life annuity and without regard to any optional
form of benefits elected under the Basic Plan. Payments shall
commence on the first day of the calendar month coinciding with or
next following (i) the Member's or Vested Former Member's
Retirement, in the case of Retirement Benefits or (ii) the later of
the date the Member or Vested Former Member attains age 55 or
terminates employment, in the case of Deferred Vested Benefits.
(b) If a Member or Vested Former Member has made a Lump Sum Election
pursuant to Section 3.4 and such Lump Sum Election becomes effective
(i) prior to the date of such Member's or Vested Former Member's
Retirement or termination of employment with the Company or an
Affiliated Employer and (ii) while he or she was still a Member, the
Retirement Benefit, or Deferred Vested Benefit under this Plan, as
the case may be, shall be payable in the form or combination of
forms of payment elected pursuant to such Lump Sum Election under
Section 3.4 and without regard to any optional form of benefits
elected under the Basic Plan. Any portion of the benefits hereunder
payable in a lump sum shall be paid within 60 days following (i) the
Member's or Vested Former Member's Retirement, in the case of
Retirement Benefits or (ii) the later of the date the Member or
Vested
-18-
<PAGE>
Former Member attains age 55 or terminates employment, in the case
of Deferred Vested Benefits.
(c) Notwithstanding any Lump Sum Election made (or not made) under
Section 3.3, if the lump sum value, determined in the same manner as
provided under Section 3.4(a), of a Member's or Vested Former
Member's Retirement, or Deferred Vested Benefit is $10,000 or less
at the time such benefit is payable under this Plan, such benefit
shall be payable as a lump sum.
3.4 LUMP SUM ELECTION.
(a) A Member or Vested Former Member may elect to receive all, none, or
a specified portion, as provided in Section 3.4(c), of his or her
Retirement Benefit or Deferred Vested Benefit under the Plan as a
lump sum and to receive any balance of such benefit in the form of
an annuity; provided that any such Lump Sum Election shall be
effective for purposes of this Plan only if the conditions of
Section 3.4(b) are satisfied. A Member or Vested Former Member may
elect a payment form different than the payment form previously
elected by him or her under this Section 3.4(a) by filing a revised
election form; provided that any such new election shall be
effective only if the conditions of Section 3.4(b) are satisfied
with respect to such new election. Any prior Lump Sum Election made
by a Member that has satisfied the conditions of Section 3.4(b)
shall remain effective for purposes of the Plan until such Member
has made a new election satisfying the conditions of Section 3.4(b).
The amount of any portion of a Member's or a
-19-
<PAGE>
Vested Former Member's Retirement Benefit or Deferred Vested Benefit
payable as a lump sum under this Section 3.4 shall equal the present
value of such portion of the benefit, and such present value shall
be determined (i) based on a discount rate equal to 85% of the
average of the 15-year non-callable U.S. Treasury bond yields as of
the close of business on the last business day of each of the three
months immediately preceding the date the annuity value is
determined and (ii) using the 1983 Group Annuity Mortality Table.
(b) A Member's Election under Section 3.4(a) becomes effective only if
all of the following conditions are satisfied: (i) such Member
remains in the employment of the Company or an Affiliated Employer,
as the case may be, for the full 12 calendar months immediately
following the date of such election (the "Election Date"), except in
the case of death or Disability of such Member (in which case
Section 3.4 (d) shall apply) and (ii) such Member complies with the
administrative procedures set forth by the Plan Administrator with
respect to the making of a Lump Sum Election.
(c) A Member making an election under Section 3.4(a) may specify the
portion of his Retirement or Deferred Vested Benefit under the Plan
to be received in a lump sum as follows: 0%, 25%, 50%, 75%, or 100%.
(d) In the event a Member who has made an Election pursuant to Section
3.4(a) dies or becomes Disabled while employed by the Company or an
Affiliated Employer and such death or total and permanent Disability
occurs during the 12 calendar-
-20-
<PAGE>
month period immediately following the Election Date, the condition
under Section 3.4(b)(i) shall be deemed satisfied with respect to
such Member.
3.5 CESSATION OF BENEFITS. Subject to Section 3.8 hereof, no benefits or no
further benefits, as the case may be, shall be paid to a Member, Vested
Former Member or Surviving Spouse if the Member or Vested Former Member
has:
(a) become a stockholder (unless such stock is listed on a national
securities exchange or traded on a daily basis in the
over-the-counter market and the Member's or Vested Former Member's
ownership interest is not in excess of 2% of the company whose
shares are being purchased), employee, officer, director or
consultant of or to a company, or a member or an employee of or a
consultant to a partnership or any other business or firm, which
competes with any of the businesses identified in the Company's
Employee Protection Plan, such Member or Vested Former Member
accepts any form of compensation from such competing entity;
(b) been discharged from employment with the Company or any Affiliated
Employer for Cause;
(c) failed to retain in confidence any and all confidential information
concerning the Company or any Affiliated Employer and its respective
business which was known or became known to the Member or Vested
Former Member, except as otherwise required by law and except
information (i) ascertainable or obtained
-21-
<PAGE>
from public information, (ii) received by the Member or Vested
Former Member at any time after the Member's or Vested Former
Member's employment by the Company or any Affiliated Employer
terminated, from a third party not employed by or otherwise
affiliated with the Company or any Affiliated Employer, or (iii)
which was or became known to the public by any means other than a
breach of this Section 3.5; or
(d) made disparaging comments about the Company or any Affiliated
Employer in any communications, written or oral, with any
individual, company, government body or agency or any other entity
whatsoever. For purposes hereof, "disparage" shall mean any
communication, including, but not limited to, any statements,
actions or insinuations, made either directly or through a third
party, that would tend to lessen the standing or stature of the
Company or any Affiliated Employer in the eyes of a customer, a
prospective customer, a shareholder or a prospective shareholder.
3.6 NOTIFICATION OF CESSATION OF BENEFITS. Subject to Section 3.8 hereof, in
any case described in Section 3.5, the Member, Vested Former Member or
Surviving Spouse shall be given prior written notice that no benefits or
no further benefits, as the case may be, will be paid to such Member,
Vested Former Member or Surviving Spouse. Such written notice shall
specify the particular act(s), or failures to act, and the basis on which
the decision to cease paying his or her benefits has been made.
-22-
<PAGE>
3.7 REPAYMENT OF BENEFITS PAID AS LUMP SUM.
(a) Subject to Section 3.8 hereof, a Member or Vested Former Member who
receives in a lump sum any portion of his or her Retirement Benefit
or Deferred Vested Benefit pursuant to a Lump Sum Election, shall
receive such lump sum portion of such Retirement Benefit or Deferred
Vested Benefit subject to the condition that if such Member or
Vested Former Member engages in any of the acts described in Section
3.5(a), then such Member or Vested Former Member shall, within 60
days after written notice by the Company, repay to the Company the
amount described in Section 3.7(b).
(b) The amount described in this Section shall equal the amount of the
Member's or Vested Former Member's lump sum benefit paid under this
Plan to which such Member or Vested Former Member would not have
been entitled, if such lump sum benefit had instead been payable in
the form of an annuity under this Plan and such annuity payments
were subject to the provisions of Section 3.5.
3.8 CHANGE IN CONTROL.
(a) Anything in this Plan to the contrary notwithstanding:
(i) Any Member who Retires at or within two years following a
Change in Control or whose employment with the Company or an
Affiliated Employer is involuntarily terminated by the Company
or an Affiliated
-23-
<PAGE>
Employer at or within two years following a Change in Control
for a reason other than Cause or whose employment is
voluntarily terminated by the Member with Good Reason at or
within two years following a Change in Control shall be deemed
to have completed three years of Service for purposes of
Sections 3.1(a) and 3.2(a) hereof and shall be credited with
three additional years of Service for purposes of calculating
the benefits payable under Sections 3.1(b) or 3.2(b) hereof,
as the case may be.
(ii) The benefits payable to any Member whose employment is
terminated at or within two years following a Change in
Control as provided in subsection (i) above shall be paid in
accordance with Section 3.3 hereof.
(iii) In the event of a Potential Change in Control or Change in
Control, the Company shall, not later than 15 days thereafter,
have established one or more so-called "rabbi" trusts and
shall deposit therein cash in an amount sufficient to provide
for full payment of all potential benefits payable under the
Plan at or following a Change in Control. Such rabbi trust(s)
shall be irrevocable and shall provide that the Company may
not, directly or indirectly, use or recover any assets of the
trust(s) until such time as all obligations which potentially
could arise hereunder have been settled and paid in full,
subject only to the claims of creditors of the Company in the
event of insolvency or bankruptcy of the Company; provided,
however, that if no Change in Control has occurred within two
years after such
-24-
<PAGE>
Potential Change in Control, such rabbi trust(s) shall at the
end of such two-year period become revocable and may
thereafter be revoked by the Company.
(iv) the provisions of Sections 3.5 through 3.7 shall be of no
force or effect with respect to Members who Retire or
terminate employment within a two-year period following a
Change in Control.
SECTION 4 - DISABILITY BENEFITS
4.1 DISABILITY BENEFITS.
(a) ELIGIBILITY. A Member who is enrolled for the maximum disability
insurance coverage available under the Basic Disability Plan and who
has become Disabled shall be entitled to the Disability Benefit
described in Section 4.1(b).
(b) AMOUNT. The Disability Benefit of a Member entitled thereto shall be
an annual benefit payable in monthly installments under this Plan
during the same period as disability benefits are actually paid by
the Basic Disability Plan, in an amount equal to 60% of the Member's
Covered Earnings, offset by the Member's (i) Basic Disability Plan
Benefit, (ii) Basic Plan Benefit, if the Basic Disability Plan
Benefit does not already include an offset for such Basic Plan
Benefit, and (iii) Other Disability Income.
-25-
<PAGE>
SECTION 5 - SURVIVING SPOUSE'S BENEFITS
5.1 DEATH PRIOR TO BENEFIT COMMENCEMENT. Upon the death of a Member or Vested
Former Member, prior to the commencement of his or her Retirement Benefit
or Deferred Vested Benefit hereunder, any such Member shall be deemed to
have completed three years of Service for purposes of Section 3.1(a) and
Section 3.2(a) and his or her Surviving Spouse will be entitled to a
Surviving Spouse's Benefit under this Plan equal to 50% of the Retirement
or Deferred Vested Benefit that would have been provided from the Plan had
the Member or Vested Member retired from or terminated employment with the
Company or an Affiliated Employer on the date of death.
5.2 DEATH ON OR AFTER BENEFIT COMMENCEMENT. Upon the death of a Vested Former
Member while he or she is receiving Retirement or Deferred Vested
Benefits, his or her Surviving Spouse shall receive a Surviving Spouse's
Benefit equal to 50% of the Benefit he or she was receiving at the time of
death. Notwithstanding the foregoing, no benefit shall be payable under
this Section 5.2 to the extent a Retirement Benefit or Deferred Vested
Benefit was previously paid to a Member or Vested Former Member in the
form of a lump sum.
5.3 COMMENCEMENT OF SURVIVING SPOUSE'S BENEFIT. Except as provided in Section
5.4, the Surviving Spouse's Benefit provided under Sections 5.1 or 5.2
will be payable monthly, commencing on the first day of the month
coincident with or next following the date of the Member's or Vested
Former Member's death or, if the Member or Vested Former Member had not
attained age 55, on the date such Member or Vested Former Member
-26-
<PAGE>
would have attained age 55 had he or she lived. Such benefits
shall continue until the first day of the month in which the
Surviving Spouse dies.
5.4 LUMP SUM PAYMENT.
(a) If a Member or a Vested Former Member made an Election under Section
3.4 but such Member or Vested Former Member died prior to such lump
sum payment, the Surviving Spouse's Benefit payable under Section
5.1 hereof will be payable in the form or combination of forms of
payment so elected by such Member or Vested Former Member pursuant
to such Lump Sum Election. The amount of any lump sum payment under
the Plan shall be determined using the actuarial assumptions set
forth in Section 3.4(a).
(b) If the lump sum value, determined in the same manner as provided
under Section 3.4(a), of a Surviving Spouse's Benefit is $10,000 or
less at the time such Surviving Spouse's Benefit is payable under
this Plan, such benefit shall be payable as a lump sum.
(c) Any Surviving Spouse's Benefit which is payable as a lump sum shall
be paid within 60 days after the date when any portion of such
benefit payable in annuity form commences or would commence if any
portion of such Surviving Spouse's Benefit were payable as an
annuity as set forth in Section 5.3.
-27-
<PAGE>
5.5 REDUCTION. Notwithstanding the foregoing provisions of Section 5, the
amount of a Surviving Spouse's Benefit shall be reduced by one percentage
point for each year (where a half year or more is treated as a full year)
in excess of ten years that the age of the Member or Vested Former Member
exceeds the age of the Surviving Spouse.
SECTION 6 - PLAN ADMINISTRATOR
6.1 DUTIES AND AUTHORITY. The Plan Administrator shall be responsible for the
administration of the Plan and may delegate to any management committee,
employee, director or agent its responsibility to perform any act
hereunder, including, without limitation, those matters involving the
exercise of discretion; provided, that such delegation shall be subject to
revocation at any time at the Plan Administrator's discretion. The Plan
Administrator shall have the sole discretion to determine all questions
arising in connection with the Plan, to interpret the provisions of the
Plan and to construe all of its terms, to adopt, amend, and rescind rules
and regulations for the administration of the Plan, and generally to
conduct and administer the Plan and to make all determinations in
connection with the Plan as may be necessary or advisable. All such
actions of the Plan Administrator shall be conclusive and binding upon all
Members, Former Members, Vested Former Members, Surviving Spouses and
other persons.
6.2 CLAIMS PROCEDURE. A Member, Former Member or Vested Former Member or his
or her authorized representative shall have 60 days after receipt of
written notification of denial of a claim for benefits under the Plan to
request a review of the denial by making written
-28-
<PAGE>
request to the Plan Administrator and may review pertinent documents and
submit issues and comments in writing within such 60-day period.
Not later than 60 days after receipt of the request for review, the Plan
Administrator shall render and furnish to the claimant a written decision,
which shall make specific references to pertinent Plan provisions on which
it is based. If special circumstances require an extension of time for
processing, the decision shall be rendered as soon as possible, but not
later than 120 days after receipt of the request for review, provided that
written notice and explanation of the delay are given to the claimant
prior to commencement of the extension. Such decision by the Plan
Administrator shall not be subject to further review. If a decision on
review is not furnished to a claimant within the specified time period,
the claim shall be deemed to have been denied on review.
SECTION 7 - MISCELLANEOUS
7.1 AMENDMENT; TERMINATION. The Board of Directors of the Company, may, in its
sole discretion, terminate, suspend or amend this Plan at any time or from
time to time, in whole or in part; provided, however, that no termination,
suspension or amendment of the Plan may adversely affect (a) a Member's or
Vested Former Member's benefit under the Plan to which he or she is
entitled hereunder, or, (b) a Vested Former Member's right or the right of
a Surviving Spouse to receive or to continue to receive a benefit in
accordance with the Plan, such benefits or rights as in effect on the date
immediately preceding the date of such termination, suspension or
amendment. Notwithstanding the foregoing, the Employee Benefits Committee
of the Company may amend the Plan
-29-
<PAGE>
without the approval of the Board of Directors of the Company with respect
to amendments that such Committee determines do not have a significant
effect on the cost of the Plan.
7.2 NO EMPLOYMENT RIGHTS. Nothing contained herein will confer upon any
Member, Former Member or Vested Former Member the right to be retained in
the service of the Company or any Affiliated Employee, nor will it
interfere with the right of the Company or any Affiliated Employer to
discharge or otherwise deal with Members, Former Members or Vested Former
Members with respect to matters of employment.
7.3 PAYOUT IN DISCRETION OF THE PLAN ADMINISTRATOR. Notwithstanding anything
herein to the contrary, at any time following the termination of service
of the Member or Vested Former Member, the Plan Administrator may
authorize, under uniform rules applicable to all Members, Vested Former
Members and Surviving Spouses under the Plan, a lump sum distribution of a
Member's, Vested Former Member's and/or Surviving Spouse's Retirement
Benefit or Surviving Spouse's Benefit under the Plan in an amount equal to
the Actuarial Equivalent Value of such Retirement Benefit or Surviving
Spouse's Benefit, in full satisfaction of all present and future Plan
liability with respect to such Member, Vested Former Member and/or
Surviving Spouse, if the amount of such present value is less than
$250,000. Such lump sum distribution may be made without the consent of
the Member, Vested Former Member or Surviving Spouse.
7.4 UNFUNDED STATUS. Members and Vested Former Members shall have the status
of general unsecured creditors of the Company, and this Plan constitutes a
mere promise by the
-30-
<PAGE>
Company to make benefit payments at the time or times required hereunder.
It is the intention of the Company that this Plan be unfunded for tax
purposes and for purposes of Title I of ERISA and any trust created by the
Company and any assets held by such trust to assist the Company in meeting
its obligations under the Plan shall meet the requirements necessary to
retain such unfunded status.
7.5 ARBITRATION. Any dispute or controversy arising under or in connection
with the Plan shall be settled exclusively by arbitration in New York, New
York in accordance with the rules of the American Arbitration Association
in effect at the time of such arbitration. The Company shall pay the
entire costs of any proceeding brought by a Member, Vested Former Member,
Former Member, or Surviving Spouse hereunder, including the fees and
expenses of counsel and pension experts engaged by such person, and such
expenses shall be reimbursed promptly upon evidence that such expenses
have been incurred without awaiting the outcome of the proceedings;
provided however, that such costs and expenses shall be repaid to the
Company by the recipient of same if it is finally determined by the
arbitrators that the position taken by such person was entirely without
merit. Failure of such person to prevail in any dispute or controversy
shall not be the sole basis on which such determination shall be made.
7.6 NO ALIENATION. A Member's or Vested Former Member's right to benefit
payments under the Plan shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment or garnishment by creditors or such Member or Vested Former
Member or his or her Surviving Spouse.
-31-
<PAGE>
7.7 WITHHOLDING. The Company may withhold from any benefit under the Plan an
amount sufficient to satisfy its tax withholding obligations.
7.8 GOVERNING LAW. The Plan shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts made and to
be performed in such state to the extent not preempted by federal law.
7.9 SUCCESSORS. The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
expressly assume and agree to perform the obligations of the Company under
this Plan in the same manner and to the same extent that the Company would
have been required to perform such obligations if no such succession had
taken place and such assumption shall be an express condition to the
consummation of any such purchase, merger, consolidation or other
transaction.
7.10 INTEGRATION. In the event of any conflict or ambiguity between this
Plan and the terms of any employment agreement between a Member and the
Company or any Change in Control Agreement between a Member and the
Company (this Plan and any such employment agreement or Change in
Control Agreement being collectively referred to herein as the
"arrangements"), such conflict or ambiguity shall be resolved in
accordance with the terms of that arrangement which are most beneficial
to the Member; provided, however, that no such resolution of any such
conflict or ambiguity shall operate to cause the Member to receive
duplicate payments or benefits under the arrangements.
-32-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this document to be executed
by its officer effective December 19, 2000.
IMS Health Incorporated
By: /s/ ROBERT H. STEINFELD
---------------------------
Its: SENIOR VICE PRESIDENT, GENERAL COUNSEL
AND CORPORATE SECRETARY
Date: DECEMBER 19, 2000
-33-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.42
<SEQUENCE>5
<FILENAME>a2041132zex-10_42.txt
<DESCRIPTION>EXHIBIT 10.42
<TEXT>
<PAGE>
EXHIBIT 10.42
January 15, 2000
Mr. Robert E. Weissman
IMS HEALTH, Chairman and CEO
200 Nyala Farms
Westport, CT 06880
Dear Bob:
AMENDED AND RESTATED FIRST AMENDMENT dated as of the 15th day of
January, 2001 to the Employment Agreement effective July 1, 1998 (as Amended and
Restated as of January 1, 2000) by and between Robert E. Weissman (the
"Executive") and IMS Health Incorporated (the "Company") (the "Agreement").
W I T N E S S E T H:
WHEREAS, Executive and the Company entered into the Agreement; and
WHEREAS, in order to provide for an orderly transfer of authority
and to also have the benefit of the Executive's experience and knowledge for a
transitional period, the Company on November 14, 2000 entered into a First
Amendment to the Agreement (the
<PAGE>
"First Amendment") pursuant to which, among other things, the Executive ceased
to be Chairman of the Board of the Company but became Vice Chairman and Chairman
of the Executive Committee of the Board and the Company and the Executive agreed
to various changes in the compensation provisions of the Agreement; and
WHEREAS, the Executive and the Company now wish for the Executive's
employment with the Company and membership on the Board to end; and
WHEREAS, the Executive and the Company desire to amend and restate
the First Amendment to, among other things, end that employment and membership.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements of the parties set forth in the Agreement and this
Amended and Restated First Amendment, and of other good and valuable
consideration, the adequacy and receipt of which is acknowledged, the parties
hereto hereby amend and restate the substance of the First Amendment to read in
its entirety as follows:
1. All terms used herein, except as otherwise specifically
defined herein, shall have the same meaning as in the Agreement.
2. Section 3(a) of the Agreement is amended by the addition of
the following sentence at the end thereof, to read as follows:
"Notwithstanding the foregoing, as of the date the Company appoints
a new Chairman of the Board, the Executive shall cease to be
Chairman of the Board of the Company and then, until 11:59, p.m.,
New York City time, on January 15, 2001 (the "Final Employment
Time"), at the discretion of the Board, the Executive shall serve as
Vice Chairman of the Board and Chairman of the Executive Committee
of the Board reporting to the Chairman of the Board; except that
Executive shall be treated for all
<PAGE>
compensation and benefit purposes the same as if he still retained
his title and position of Chairman of the Board. At the Final
Employment Time, the Executive shall cease to be Vice Chairman of
the Board and Chairman of the Executive Committee of the Board (to
the extent he then holds those positions), shall cease to hold any
other position he may hold within the Company and shall resign as a
member of the Board."
3. Section 6(a) of the Agreement is amended by the addition of
the following subsections at the end thereof, to read as follows:
"(v) During the five (5) year period following the date of
Retirement, the Company shall make available to the Executive
secretarial and administrative support services.
(vi) All stock options granted under the IMS Health 1998 Employee
Stock Incentive Plan (excluding all replacement options) and
other equity grants held by the Executive shall fully vest as
of November 14, 2000, with the exception of the August 23,
2000 stock option grant which shall vest as provided in the
original grant. All options referenced in this subsection
shall be exercisable until the end of the respective option
terms provided in the original grants and the options awarded
in the August 23, 2000 grant shall be exercisable in
accordance with the terms of that grant.
(vii) The pro rata annual incentive compensation under Section 4(b)
for the fiscal year 2001 shall be based on the greater of the
actual performance incentive bonus for 1999, the targeted
performance incentive bonus for 2000, or the actual
performance incentive bonus for 2000. The Company will pay the
Executive his performance incentive bonus for fiscal year 2000
at the usual time at which bonuses for fiscal year 2000 are
paid to employees generally, and will pay the Executive his
pro rata performance bonus for fiscal year 2001 at the usual
time at which bonuses for fiscal year 2001 are paid to
employees generally."
4. As amended herein, the Agreement shall remain in full force
and effect.
<PAGE>
IN WITNESS WHEREOF, the Executive and the Company have executed this
Amended and Restated First Amendment as of the day and year first above written.
/s/ Robert E. Weissman
----------------------
Robert E. Weissman
IMS Health Incorporated
By: /s/ Robert H. Steinfeld
-----------------------
Name: Robert H. Steinfeld
Title: Senior Vice President and General Counsel
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.43
<SEQUENCE>6
<FILENAME>a2041132zex-10_43.txt
<DESCRIPTION>EXHIBIT 10.43
<TEXT>
<PAGE>
EXHIBIT 10.43
January 15, 2001
Ms. Victoria R. Fash
IMS HEALTH, President and CEO
200 Nyala Farms
Westport, CT 06880
Dear Vickie:
AMENDED AND RESTATED FIRST AMENDMENT dated as of the 15th day of
January, 2001 to the Employment Agreement effective July 1, 1998 (as Amended and
Restated as of January 1, 2000) by and between Victoria R. Fash (the
"Executive") and IMS Health Incorporated (the "Company") (the "Agreement").
W I T N E S S E T H:
WHEREAS, the Executive and the Company entered into the Agreement;
and
WHEREAS, the Executive has a medical condition requiring surgery
that may disable her thereafter for a substantial period; and
WHEREAS, in order to provide for an orderly transfer of authority
and to also have the benefit of the Executive's experience and knowledge for a
transitional period, the Company on November 14, 2000 entered into a First
Amendment to the Agreement (the "First Amendment") pursuant to which, among
other things, the Executive ceased to be President and Chief Executive Officer
of the Company but became Vice Chairman of the
<PAGE>
Board and the Company and the Executive agreed to various changes in the
compensation provisions of the Agreement; and
WHEREAS, the Executive and the Company now wish for the Executive's
employment with the Company and membership on the Board to end; and
WHEREAS, the Executive and the Company therefore desire to amend and
restate the First Amendment.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements of the parties set forth in the Agreement and this
Amended and Restated First Amendment, and of other good and valuable
consideration, the adequacy and receipt of which is acknowledged, the parties
hereto hereby amend and restate the substance of the First Amendment to read in
its entirety as follows:
1. All terms used herein, except as otherwise specifically
defined herein, shall have the same meaning as in the Agreement.
2. Section 2 of the Agreement is amended by the addition of
the following sentence at the end thereof, to read as follows:
"Notwithstanding the foregoing, the Executive's employment with the
Company shall end at 11:59 p.m., New York City time, on January 15,
2001 (the "Final Employment Time")."
3. Section 3(a) of the Agreement is amended by the
addition of the following sentences at the end thereof, to read
as follows:
"Notwithstanding the foregoing, effective on the Change Date, as
defined below, the Executive shall cease to be President and Chief
Executive Officer of the Company and then, until the Final
Employment Time, at the discretion of the Board, the Executive shall
serve as Vice Chairman of the Board or as an untitled executive
reporting to the Chairman, provided that if the Medical Date, as
defined below, occurs on or after the Change Date, the Executive
shall thereafter be on disability leave (except for providing such
advice and guidance as she is physically capable of providing in her
judgment). During the period until the Final Employment Time, in
whatever capacity or while on disability leave, the Executive shall
be treated for all compensation and benefit purposes the same as if
she still
<PAGE>
retained her title and position of President and Chief Executive
Officer and worked full time. At the Final Employment Time, the
Executive shall cease to be Vice Chairman of the Board, shall cease
to hold any other position she may hold within the Company and shall
resign as a member of the Board. "Change Date" shall be the earlier
of (i) such date as the Company appoints a new Chief Executive
Officer or (ii) the Medical Date. "Medical Date" shall be such date
as the Executive in good faith after consultation with her doctors
determines it is either (x) desirable to have the necessary surgery
promptly or (y) she is unable for physical reasons to work in her
executive capacities and the Executive so notifies the Company."
4. Section 6 of the Agreement is amended by the addition of
the following subsection at the end thereof, to read as follows:
"(e) Special Retirement. Notwithstanding anything else herein to
the contrary, the parties agree that the Executive's termination as
an employee as provided in Section 2 hereof shall be a Special
Retirement and the Executive shall be treated the same as for a
Disability Termination under Section 6(c) hereof except as follows:
(A) The pro rata annual incentive compensation under Section
4(b) for the fiscal year 2001 shall be based on the
greater of the actual performance incentive bonus for
1999, the targeted performance incentive bonus for 2000,
or the actual performance incentive bonus for 2000.
(B) The Company shall, within 5 business days after the
Final Employment Time, pay the Executive $872,536
(I.E., an amount equal to the aggregate amount of
incentive compensation due to the Executive under
Section 4(b) for fiscal years 2000 and 2001 assuming
that the actual performance incentive bonus for 2000
turns out to equal the targeted incentive bonus for
2000). As soon as the Company determines the exact
aggregate amount of incentive compensation due to the
Executive under Section 4(b) for fiscal years 2000
and 2001, the Company shall notify the Executive of
that amount, separately calculated for fiscal years
2000 and 2001. If that amount is more than the
$872,536 amount that the Company paid to the
Executive pursuant to the second preceding sentence,
the Company will pay the difference to the Executive,
and if
<PAGE>
that amount is less than the $872,536 amount that the
Company paid to the Executive pursuant to the second
preceding sentence, the Executive will reimburse the
Company for the difference, in each case without
interest and in each case within 5 business days after
the Company delivers the notice referred to in the
preceding sentence.
(C) All stock options granted under the IMS Health
Incorporated 1998 Employee Stock Incentive Plan
(excluding all replacement options) and other equity
grants held by the Executive shall fully vest as of
the Change Date, with the exception of the August 23,
2000 stock option grant which shall vest as provided
in the original grant. All options referenced in
this subsection shall be exercisable until the end of
the respective option terms provided in the original
grants and the options awarded in the August 23, 2000
grant shall be exercisable in accordance with the
terms of that grant.
(D) The Executive's obligations with respect to the loan
described in Section 5(g) of the Agreement (principal
and interest) shall be forgiven as of the Change
Date, and the Company shall pay the Executive (or
deposit with the appropriate taxing authorities) on
the Change Date an additional amount to cover the
Executive's income tax liability for the forgiveness
of such indebtedness and in such amount that the
Executive will have no after tax cost with regard to
the forgiveness of the loan and such payment and all
documents with regard to such loan shall be deemed
amended accordingly.
(E) Executive shall be treated as of the Final Employment
Time under the Company's Supplemental Executive
Retirement Plan ("SERP"), notwithstanding the terms
thereof, as if she were eligible for "Retirement"
thereunder, shall be credited with fifteen (15) years
of service thereunder, shall be entitled to immediate
commencement of benefits thereunder, and "Average
Final Compensation" shall be deemed to mean the sum
of her base salary as of June 1, 2000 and the higher
of her annual bonus for the 1999 fiscal year or the
2000 fiscal year. The SERP shall be deemed amended
accordingly as it applies to her.
<PAGE>
(F) In addition to such welfare benefits as the Executive
is entitled to under Section 6(c)(vi) of the
Agreement for the period before the Executive reaches
age 65, the Executive shall be entitled to retiree
health benefits after age 65 in accordance with the
Company's retiree health plans as in effect on June
1, 2000. In addition, the Company agrees, at its
sole cost and expense, to provide the Executive after
the Final Employment Time with medical and dental
coverage that shall be comparable to the medical and
dental coverage in effect on June 1, 2000 under the
Company's retiree health benefits plan pursuant to
such insured or other arrangements as the Company may
from time to time put into effect for such purpose.
Any such insured or other arrangement shall not
impose on the Executive any eligibility waiting
period or pre-existing condition exclusion.
(G) During the five (5) year period following such
termination of employment, the Company shall make
available to the Executive secretarial and
administrative support services.
(H) In accordance with standard Company practice, the
Company agrees that it will, at its sole cost and
expense, repatriate the Executive's household goods from
London, England to a place in the United States of the
Executive's choosing.
(I) The Company shall, in addition to its other obligations
under this Agreement, pay $2,884,852 to the Executive
within 5 business days after the Final Employment Time.
5. As amended herein, the Agreement shall remain in full force
and effect.
<PAGE>
IN WITNESS WHEREOF, the Executive and the Company have executed this
Amended and Restated First Amendment as of the day and year first above written.
/s/ Victoria R. Fash
--------------------
Victoria R. Fash
IMS Health Incorporated
By: /s/ Robert H. Steinfeld
-----------------------
Name: Robert H. Steinfeld
Title: Senior Vice President and General Counsel
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.44
<SEQUENCE>7
<FILENAME>a2041132zex-10_44.txt
<DESCRIPTION>EXHIBIT 10.44
<TEXT>
<PAGE>
Exhibit 10.44
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[IMS HEALTH LOGO OMITTED]
Amended and Restated
Employment Agreement for David M. Thomas
<PAGE>
IMS HEALTH, INC.
- --------------------------------------------------------------------------------
Amended and Restated
Employment Agreement for David M. Thomas
- --------------------------------------------------------------------------------
Page
1. Employment................................................................1
2. Term......................................................................1
3. Offices and Duties........................................................2
(a) Generally...........................................................2
(b) Place of Employment.................................................2
(c) Rank of Executive Within Company....................................2
4. Salary and Annual Incentive Compensation..................................3
(a) Base Salary.........................................................3
(b) Annual Incentive Compensation.......................................3
5. Long-Term Compensation, Including Restricted Stock, Stock
Options, and Benefits, Deferred Compensation, and Expense
Reimbursement..........................................................3
(a) Executive Compensation Plans........................................3
(b) Employee and Executive Benefit Plans................................4
(c) Acceleration of Awards Upon a Change in Control.....................6
(d) Deferral of Compensation............................................6
(e) Reimbursement of Expenses...........................................6
(f) Corporate Aircraft..................................................6
(g) Company Registration Obligations....................................6
6. Termination Due to Retirement, Death, or Disability.......................7
(a) Retirement..........................................................7
(b) Death...............................................................8
(c) Disability..........................................................8
(d) Other Terms of Payment Following Retirement, Death, or
Disability.........................................................10
7. Termination of Employment For Reasons Other Than Retirement,
Death, or Disability..................................................10
(a) Termination by the Company for Cause...............................10
(b) Termination by Executive Other Than For Good Reason................11
-i-
<PAGE>
(c) Termination by the Company Without Cause Prior to a Change
in Control.........................................................11
(d) Termination by Executive for Good Reason Prior to a Change
in Control.........................................................14
(e) Termination by the Company Without Cause After a Change in
Control............................................................17
(f) Termination by Executive for Good Reason After a Change in
Control............................................................20
(g) Other Terms Relating to Certain Terminations of Employment.........23
8. Definitions Relating to Termination Events...............................23
(a) "Cause"............................................................23
(b) "Change in Control"................................................24
(c) "Compensation Accrued at Termination"..............................25
(d) "Disability".......................................................26
(e) "Good Reason"......................................................26
(f) "Potential Change in Control"......................................28
(g) "Special SERP Benefit".............................................28
9. Rabbi Trust Obligation Upon Potential Change in Control;
Excise Tax-Related Provisions.........................................29
(a) Rabbi Trust Funded Upon Potential Change in Control................29
(b) Gross-up If Excise Tax Would Apply.................................30
10. Non-Competition and Non-Disclosure; Executive Cooperation;
Non-Disparagement.....................................................32
(a) Non-Competition....................................................32
(b) Non-Disclosure; Ownership of Work..................................32
(c) Cooperation With Regard to Litigation..............................33
(d) Non-Disparagement..................................................33
(e) Release of Employment Claims.......................................33
(f) Forfeiture of Outstanding Options..................................34
(g) Survival...........................................................34
11. Governing Law; Disputes; Arbitration....................................34
(a) Governing Law......................................................34
(b) Reimbursement of Expenses in Enforcing Rights......................35
(c) Arbitration........................................................35
(d) Interest on Unpaid Amounts.........................................35
12. Miscellaneous...........................................................36
(a) Integration........................................................36
(b) Successors; Transferability........................................36
(c) Beneficiaries......................................................36
(d) Notices............................................................37
-ii-
<PAGE>
(e) Reformation........................................................37
(f) Headings...........................................................37
(g) No General Waivers.................................................37
(h) No Obligation To Mitigate..........................................37
(i) Offsets; Withholding...............................................38
(j) Successors and Assigns.............................................38
(k) Counterparts.......................................................38
(l) Due Authority and Execution........................................38
(m) Representations of Executive.......................................38
13. Indemnification.........................................................39
-iii-
<PAGE>
IMS HEALTH, INC.
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Amended and Restated
Employment Agreement for David M. Thomas
- --------------------------------------------------------------------------------
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT by and between IMS
HEALTH, INC., a Delaware corporation (the "Company"), and David M. Thomas
("Executive") shall become effective as of November 14, 2000 (the "Effective
Date").
W I T N E S S E T H
WHEREAS, the Company desires to employ Executive as Chairman of the
Board, Chief Executive Officer and President of the Company, and Executive
desires to accept such employment on the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants contained herein, and other good and valuable consideration the
receipt and adequacy of which the Company and Executive each hereby acknowledge,
the Company and Executive hereby agree as follows:
1. EMPLOYMENT.
The Company hereby agrees to employ Executive as its Chairman of
the Board, Chief Executive Officer and President, and Executive hereby agrees
to accept such employment and serve in such capacities, during the Term as
defined in Section 2 (subject to Section 7(c) and 7(e)) and upon the terms
and conditions set forth in this Amended and Restated Employment Agreement
(the "Agreement").
2. TERM.
The term of employment of Executive under this Agreement (the
"Term") shall be the period commencing on the Effective Date and ending on
December 31, 2003 and any period of extension thereof in accordance with this
Section 2, except that the Term will end at a date, prior to the end of such
period or extension thereof, specified in Section 6 or 7 in the event of
termination of Executive's employment. The Term, if not previously ended, shall
be extended automatically without further action by either party by one
additional year (added to the end of the Term) first on December 31, 2003
(extending the Term to December 31, 2004) and on each succeeding December 31
thereafter, unless either party shall have served written notice in accordance
with Section 12(d) upon the other party on or within 90 days before the December
31 extension date electing not to extend the Term further as of that December 31
extension date, in which case employment shall terminate on that December 31 and
the Term shall end at that date, subject to earlier termination of employment
and earlier termination of the Term in accordance with Section 6 or 7. The
foregoing notwithstanding, in the event there occurs a Potential Change in
Control during the period of 180 days prior to the December 31 on which the Term
will terminate as a result of notice given by Executive hereunder, the Term
shall be extended automatically
<PAGE>
at that December 31 by an additional period such that the Term will extend until
the 180th day following such Potential Change in Control.
3. OFFICES AND DUTIES.
The provisions of this Section 3 will apply during the Term, except
as otherwise provided in Section 7(c) and 7(e):
(a) GENERALLY. Executive shall serve as the Chairman of the Board,
Chief Executive Officer and President of the Company and shall be nominated and,
if elected, shall serve as a member of the Board of Directors of the Company
(the "Board") and, for so long as he is serving on the Board, Executive agrees
to serve as a member of any Board committee if the Board shall elect Executive
to such committee. In any and all such capacities, Executive shall report only
to the Board of Directors of the Company. Executive shall have and perform such
duties, responsibilities, and authorities as are customary for the chairman of
the board and chief executive officer of a publicly held corporation of the
size, type, and nature of the Company as they may exist from time to time and
consistent with such position and status, but in no event shall such duties,
responsibilities, and authorities be reduced from those of Executive or his
predecessor at the Effective Date. Executive shall devote his full business time
and attention, and his best efforts, abilities, experience, and talent, to the
positions of Chairman of the Board, Chief Executive Officer and President and
for the businesses of the Company without commitment to other business
endeavors, except that Executive (i) may make personal investments which are not
in conflict with his duties to the Company and manage personal and family
financial and legal affairs, (ii) may serve as a member of the board of
directors of Fortune Brands, Inc. and EZGOV.com.Inc., (iii) undertake public
speaking engagements, and (iv) serve as a director of (or similar position with)
any other business or an educational, charitable, community, civic, religious,
or similar type of organization with the approval of the Board of Directors of
the Company, so long as such activities (i.e., those listed in clauses (i)
through (iv)) do not preclude or render unlawful Executive's employment or
service to the Company or otherwise materially inhibit the performance of
Executive's duties under this Agreement or impair the business of the Company or
its subsidiaries.
(b) PLACE OF EMPLOYMENT. Executive's principal place of employment
shall be at the Company's principal executive offices in Westport, Connecticut.
(c) RANK OF EXECUTIVE WITHIN COMPANY. As Chairman of the Board,
Chief Executive Officer and President of the Company, Executive shall be the
highest-ranking executive of the Company.
-2-
<PAGE>
4. SALARY AND ANNUAL INCENTIVE COMPENSATION.
As partial compensation for the services to be rendered hereunder by
Executive, the Company agrees to pay to Executive during the Term the
compensation set forth in this Section 4.
(a) BASE SALARY. The Company will pay to Executive during the
Term a base salary the annual rate of which in 2000 and 2001 shall be $750,000,
payable commencing at the beginning of the Term in accordance with the Company's
usual payroll practices with respect to senior executives (except to the extent
deferred under Section 5(d)). Executive's annual base salary shall be reviewed
by the Compensation and Benefits Committee of the Board (the "Committee") on
January 1 of each year of the Term, beginning on January 1, 2002, and may be
increased above, but may not be reduced below, the then-current rate of such
base salary. For purposes of this Agreement, "Base Salary" means Executive's
then-current base salary.
(b) ANNUAL INCENTIVE COMPENSATION. The Company will pay to
Executive during the Term annual incentive compensation which shall offer to
Executive an opportunity to earn additional compensation based upon performance
in amounts determined by the Committee in accordance with the applicable plan
and consistent with past practices of the Company; provided, however, that the
annual target incentive opportunity shall be 100% of Base Salary for achievement
of target level performance, with the nature of the performance and the levels
of performance triggering payments of such annual target incentive compensation
for each year to be established after consultation with Executive and
communicated to Executive during the first quarter of such year by the Committee
provided that Executive shall receive an annual incentive payment of no less
than $750,000 for 2001 (with a matching award of Restricted Stock Units ("RSUs")
under the Performance-Based Restricted Stock Program ("PERS Program")). In
addition, the Committee (or the Board) may determine, in its discretion, to
increase Executive's annual target incentive opportunity or provide an
additional annual incentive opportunity, in excess of the annual target
incentive opportunity, payable for performance in excess of or in addition to
the performance required for payment of the annual target incentive amount. Any
annual incentive compensation payable to Executive shall be paid in accordance
with the Company's usual practices with respect to payment of incentive
compensation to senior executives (except to the extent deferred under Section
5(d)).
5. LONG-TERM COMPENSATION, INCLUDING RESTRICTED STOCK, STOCK
OPTIONS, AND BENEFITS, DEFERRED COMPENSATION, AND EXPENSE
REIMBURSEMENT.
(a) EXECUTIVE COMPENSATION PLANS. Executive shall be entitled
during the Term to participate, without discrimination or duplication, in all
executive compensation plans and programs intended for general participation by
senior executives of the Company, as presently in effect or as they may be
modified or added
-3-
<PAGE>
to by the Company from time to time, subject to the eligibility and other
requirements of such plans and programs (provided that for purposes of
eligibility and benefit participation levels under these programs that are not
tax-qualified or otherwise subject to nondiscrimination requirements under the
Internal Revenue Code of 1986, as amended, Executive shall be given full service
credit for service with IBM Corporation ("Past Service Credit") and, with
respect to any other plans and/or programs, Past Service Credit so long as the
tax qualified and/or non-discriminatory status is not jeopardized), including
without limitation any stock option plans, plans under which restricted
stock/restricted stock units, performance-based restricted stock/restricted
stock units ("PERS") or performance-accelerated restricted stock/restricted
stock units ("PARS") may be awarded, other annual and long-term cash and/or
equity incentive plans, and deferred compensation plans.
In furtherance of and not in limitation of the foregoing:
(i) The Company shall grant Executive as of the Effective Date
100,000 RSUs pursuant to and subject to the terms of the
Company's Amended and Restated 1998 Stock Incentive Plan,
effective July 20, 1999, as amended from time to time
("1998 Plan") (the "Initial RSU Grant"). The Initial RSU
Grant shall vest on the first anniversary of the date of
grant (or the earlier termination of Executive without
Cause or for Good Reason).
(ii) The Company shall grant to Executive stock options (the
"Initial Options") to acquire 1,000,000 common shares of the
Company, par value $.01 per share (the "Company Common
Stock"). The Initial Options shall be granted as of the
Effective Date under the 1998 Plan, shall have an exercise
price per share equal to the Fair Market Value (as defined in
the 1998 Plan) of the Company Common Stock on the date of
grant, shall vest and become fully exercisable on the first
anniversary of the date of grant (or the earlier termination
of Executive without Cause or for Good Reason) and shall
provide for an exercise period equal to (x) the remaining
option term of ten years from date of grant for so long as
Executive remains employed or (y) upon Executive's termination
of employment without Cause or for Good Reason, the shorter of
the remaining option term or three years from date of
termination.
(iii) The Initial RSU Grant and Initial Options shall satisfy any
stock ownership guidelines applicable to Executive through
December 31, 2003.
(iv) The Company shall grant Executive as of the first
anniversary of the Effective Date an additional 100,000
RSUs pursuant to and subject to the terms of the 1998 Plan
or such other plan as may be designated by the Committee
(the "2001 RSU Grant"). The 2001 RSU Grant shall vest as
to one-third of the RSUs on each of the first, second and
third anniversary date of grant (or the earlier termination
of Executive without Cause or for Good Reason).
(b) EMPLOYEE AND EXECUTIVE BENEFIT PLANS. Executive shall be
entitled during the Term to participate, without discrimination or duplication,
in all
-4-
<PAGE>
employee and executive benefit plans and programs of the Company, as presently
in effect or as they may be modified or added to by the Company from time to
time, to the extent such plans are available to other senior executives or
employees of the Company, subject to the eligibility and other requirements of
such plans and programs, including without limitation plans providing pensions,
supplemental pensions, supplemental and other retirement benefits, medical
insurance, life insurance, disability insurance, and accidental death or
dismemberment insurance, as well as savings, profit-sharing, and stock ownership
plans, provided that such benefit plans and programs, in the aggregate, shall
provide Executive with benefits and compensation substantially no less favorable
than those provided by the Company to Executive under such plans and programs as
in effect on the Effective Date. Additionally, Executive shall be eligible to
participate in and receive benefits under the Company's Employee Protection Plan
("EPP").
In furtherance of and not in limitation of the foregoing, during the
Term:
(i) Executive will participate as Chairman of the Board, Chief
Executive Officer and President in all executive and employee
vacation and time-off programs; provided that Executive shall
be entitled to a minimum of 25 vacation days annually;
(ii) Executive will be entitled to retirement benefits
substantially no less favorable than those under the defined
benefit pension plans and programs of the Company, including
the IMS Health Incorporated Supplemental Executive Retirement
Plan (the "SERP"), as in effect on the Effective Date (subject
to such enhancement to benefits as are provided hereunder,
including Sections 7(e) and (f)); provided, however, that, the
provisions of the SERP notwithstanding, (A) for vesting
purposes under the SERP, Executive shall be credited with 28
years of "Service," based on his prior employment with IBM
Corporation and (B) Executive shall be entitled to the greater
of (x) the "Retirement Benefit" as determined under the SERP
without modification by this Agreement (other than clause (A)
above) and (y) the "Special SERP Benefit" as defined in
Section 8(g).
Any provision to the contrary contained in this Agreement
notwithstanding, unless Executive is terminated by the Company for "Cause" (as
defined in Section 8(a)) or Executive terminates voluntarily and not for "Good
Reason" (as defined in Section 8(e)), Executive may elect continued
participation after termination of employment in the Company's health and
medical coverage for himself and his spouse and dependent children after such
coverage would otherwise end until such time as Executive becomes eligible for
similar coverage with a subsequent employer or other entity to which Executive
provides services or becomes eligible for Medicare (under rules in effect at the
Effective Date hereof); provided, however, that in the event of such election,
Executive shall pay the Company each year an amount equal to the then-current
annual
-5-
<PAGE>
COBRA premium being paid (or payable) by any other former employee of the
Company, unless otherwise provided under Section 6 or 7.
(c) ACCELERATION OF AWARDS UPON A CHANGE IN CONTROL. In the event
of a Change in Control (as defined in Section 8(b)), or as otherwise provided
for hereunder, all outstanding stock options, restricted stock, and other
equity-based awards then held by Executive shall become vested and exercisable.
(d) DEFERRAL OF COMPENSATION. If the Company has in effect or
adopts any deferral program or arrangement permitting executives to elect to
defer any compensation, Executive will be eligible to participate in such
program on terms no less favorable than the terms of participation of any other
senior executive officer of the Company. Any plan or program of the Company
which provides benefits based on the level of salary, annual incentive, or other
compensation of Executive shall, in determining Executive's benefits, take into
account the amount of salary, annual incentive, or other compensation prior to
any reduction for voluntary contributions made by Executive under any deferral
or similar contributory plan or program of the Company, but shall not treat any
payout or settlement under such a deferral or similar contributory plan or
program to be additional salary, annual incentive, or other compensation for
purposes of determining such benefits, unless otherwise expressly provided under
such plan or program.
(e) REIMBURSEMENT OF EXPENSES. The Company will promptly reimburse
Executive for all reasonable business expenses and disbursements incurred by
Executive in the performance of Executive's duties during the Term in accordance
with the Company's reimbursement policies as in effect from time to time.
(f) CORPORATE AIRCRAFT. Executive and his immediate family shall
be entitled to use Company aircraft for all business and reasonable personal
travel, except that Executive shall use commercial aircraft (first class for
international flights and domestic flights in excess of 2 hours; business class
for all other flights) where use of Company aircraft is not practical. Executive
shall be responsible for the payment of taxes on imputed income attributable to
personal use of Company aircraft, except that, whenever Executive uses Company
aircraft for business purposes and is accompanied by an immediate family member
whose use of Company aircraft results in the imputation of income to Executive,
the Company shall pay Executive additional cash compensation in an amount
sufficient to allow Executive to pay taxes on (i) such additional compensation,
plus (ii) the income imputed to Executive because of such family member's use of
Company aircraft.
(g) COMPANY REGISTRATION OBLIGATIONS. The Company will use its
best efforts to file with the Securities and Exchange Commission and thereafter
maintain the effectiveness of one or more registration statements registering
under the Securities Act of 1933, as amended (the "1933 Act"), the offer and
sale of shares by the Company to Executive pursuant to stock options or other
equity-based awards granted
-6-
<PAGE>
to Executive under Company plans or otherwise or, if shares are acquired by
Executive in a transaction not involving an offer or sale to Executive but
resulting in the acquired shares being "restricted securities" for purposes of
the 1933 Act, registering the reoffer and resale of such shares by Executive.
6. TERMINATION DUE TO RETIREMENT, DEATH, OR DISABILITY.
(a) RETIREMENT. Executive may elect to terminate employment
hereunder by retirement at or after age 60 or at such earlier age as may be
approved by the Board (in either case, "Retirement"). At the time Executive's
employment terminates due to Retirement, the Term will terminate, all
obligations of the Company and Executive under Sections 1 through 5 of this
Agreement will immediately cease except for obligations which expressly continue
after termination of employment due to Retirement, and the Company will pay
Executive, and Executive will be entitled to receive, the following:
(i) Executive's Compensation Accrued at Termination (as defined in
Section 8(c));
(ii) In lieu of any annual incentive compensation under Section
4(b) for the year in which Executive's employment terminated,
an amount equal to the portion of annual incentive
compensation that would have become payable in cash to
Executive (i.e., excluding the portion payable in PERS or in
other non-cash awards) for that year if his employment had not
terminated, based on performance actually achieved in that
year (determined by the Committee following completion of the
performance year), multiplied by a fraction the numerator of
which is the number of days Executive was employed in the year
of termination and the denominator of which is the total
number of days in the year of termination;
(iii) The vesting and exercisability of stock options held by
Executive at termination and all other terms of such options
shall be governed by the plans and programs and the agreements
and other documents pursuant to which such options were
granted (subject to Section 10(f) hereof); and
(iv) All restricted stock and deferred stock awards, including
outstanding PERS awards, all other long-term incentive awards,
and all deferral arrangements under Section 5(d), shall be
governed by the plans and programs under which the awards were
granted or governing the deferral, and all rights under the
SERP and any other benefit plan shall be governed by such
plan, as modified by this Agreement.
-7-
<PAGE>
(b) DEATH. In the event of Executive's death which results in the
termination of Executive's employment, the Term will terminate, all obligations
of the Company and Executive under Sections 1 through 5 of this Agreement will
immediately cease except for obligations which expressly continue after death,
and the Company will pay Executive's beneficiary or estate, and Executive's
beneficiary or estate will be entitled to receive, the following:
(i) Executive's Compensation Accrued at Termination;
(ii) In lieu of any annual incentive compensation under Section
4(b) for the year in which Executive's death occurred, an
amount equal to the portion of annual incentive compensation
that would have become payable in cash to Executive (i.e.,
excluding the portion payable in PERS or in other non-cash
awards) for that year if his employment had not terminated,
based on performance actually achieved in that year
(determined by the Committee following completion of the
performance year), multiplied by a fraction the numerator of
which is the number of days Executive was employed in the year
of his death and the denominator of which is the total number
of days in the year of death;
(iii) The vesting and exercisability of stock options held by
Executive at death and all other terms of such options shall
be governed by the plans and programs and the agreements and
other documents pursuant to which such options were granted;
and
(iv) All restricted stock and deferred stock awards, including
outstanding PERS awards, all other long-term incentive awards,
and all deferral arrangements under Section 5(d), shall be
governed by the plans and programs under which the awards were
granted or governing the deferral, and all rights under the
SERP and any other benefit plan shall be governed by such
plan, as modified by this Agreement.
(c) DISABILITY. The Company may terminate the employment of
Executive hereunder due to the Disability (as defined in Section 8(d)) of
Executive. Such employment shall terminate at the expiration of the 30-day
period referred to in the definition of Disability set forth in Section 8(d),
unless Executive has returned to service and presented to the Company a
certificate of good health prior to such termination as specified in Section
8(d). Upon termination of employment, the Term will terminate, all obligations
of the Company and Executive under Sections 1 through 5 of this Agreement will
immediately cease except for obligations which expressly continue after
termination of employment due to Disability, and the Company will pay Executive,
and Executive will be entitled to receive, the following:
(i) Executive's Compensation Accrued at Termination;
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(ii) In lieu of any annual incentive compensation under Section
4(b) for the year in which Executive's employment terminated,
an amount equal to the portion of annual incentive
compensation that would have become payable in cash to
Executive (i.e., excluding the portion payable in PERS or in
other non-cash awards) for that year if his employment had not
terminated, based on performance actually achieved in that
year (determined by the Committee following completion of the
performance year), multiplied by a fraction the numerator of
which is the number of days Executive was employed in the year
of termination and the denominator of which is the total
number of days in the year of termination;
(iii) The vesting and exercisability of stock options held by
Executive at termination and all other terms of such options
shall be governed by the plans and programs and the agreements
and other documents pursuant to which such options were
granted, as modified by this Agreement;
(iv) Any performance objectives upon which the earning of
performance-based restricted stock and deferred stock awards,
including outstanding PERS awards, and other long-term
incentive awards is conditioned shall be deemed to have been
met at target level at the date of termination, and restricted
stock and deferred stock awards, including outstanding PERS
awards, and other long-term incentive awards (to the extent
then or previously earned, in the case of performance-based
awards) shall become fully vested and non-forfeitable at the
date of such termination, and, in other respects, such awards
shall be governed by the plans and programs and the agreements
and other documents pursuant to which such awards were
granted;
(v) Disability benefits shall be payable in accordance with the
Company's plans, programs and policies (including the SERP) as
modified by this Agreement, and all deferral arrangements
under Section 5(d) will be settled in accordance with the
plans and programs governing the deferral, provided that, if
the Company's payment obligation (determined on a monthly
basis) pursuant to Section 7(c)(ii) hereof (the "Section
7(c)(ii) Payments") would have been greater if Executive's
termination of employment had been treated as a termination by
the Company without Cause, Executive shall be entitled to an
additional monthly payment equal to the difference between the
Section 7(c)(ii) Payments and the monthly payments due
Executive pursuant to this Section 6(c)(v), to the extent of
such excess; and
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(vi) For the period extending from the date of termination due to
Disability until the date Executive reaches age 65, Executive
shall continue to participate in those employee and executive
benefit plans and programs under Section 5(b) to the extent
such plans and programs provide medical insurance, disability
insurance and life insurance benefits (but not other benefits,
such as pension and retirement benefits, provided under
Section 5(b)) in which Executive was participating immediately
prior to termination, the terms of which allow Executive's
continued participation, as if Executive had continued in
employment with the Company during such period or, if the
terms of such plans or programs do not allow Executive's
continued participation, Executive shall be paid a cash
payment equivalent on an after-tax basis to the value of the
additional benefits (of the type described in this Section
6(c)(vi)) Executive would have received under such plans or
programs had Executive continued to be employed during such
period following Executive's termination until age 65, with
such benefits provided by the Company at the same times and in
the same manner as such benefits would have been provided to
Executive under such plans and programs (it being understood
that the value of any insurance-provided benefits will be
based on the premium cost to Executive, which shall not exceed
the highest risk premium charged by a carrier having an
investment grade or better credit rating); provided, however,
that Executive must continue to satisfy the conditions set
forth in Section 10 in order to continue receiving the
benefits provided under this Section 6(c)(vi).
(d) OTHER TERMS OF PAYMENT FOLLOWING RETIREMENT, DEATH, OR
DISABILITY. Nothing in this Section 6 shall limit the benefits payable or
provided in the event Executive's employment terminates due to Retirement,
death, or Disability under the terms of plans or programs of the Company more
favorable to Executive (or his beneficiaries) than the benefits payable or
provided under this Section 6 (except in the case of annual incentives in lieu
of which amounts are paid hereunder), including plans and programs adopted after
the date of this Agreement. Amounts payable under this Section 6 following
Executive's termination of employment, other than those expressly payable
following determination of performance for the year of termination for purposes
of annual incentive compensation or otherwise expressly payable on a deferred
basis, will be paid as promptly as practicable after such termination of
employment.
7. TERMINATION OF EMPLOYMENT FOR REASONS OTHER THAN RETIREMENT,
DEATH, OR DISABILITY.
(a) TERMINATION BY THE COMPANY FOR CAUSE. The Company may
terminate the employment of Executive hereunder for Cause (as defined in Section
8(a)) at any time. At the time Executive's employment is terminated for Cause,
the
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Term will terminate, all obligations of the Company and Executive under Sections
1 through 5 of this Agreement will immediately cease, and the Company will pay
Executive, and Executive will be entitled to receive, the following:
(i) Executive's Compensation Accrued at Termination (as defined in
Section 8(c));
(ii) All stock options, restricted stock and deferred stock awards,
including outstanding PERS awards, and all other long-term
incentive awards will be governed by the terms of the plans
and programs under which the awards were granted, as modified
by this Agreement; and
(iii) All deferral arrangements under Section 5(d) will be settled
in accordance with the plans and programs governing the
deferral, and all rights under the SERP and any other benefit
plan shall be governed by such plan, as modified by this
Agreement.
(b) TERMINATION BY EXECUTIVE OTHER THAN FOR GOOD REASON. Executive
may terminate his employment hereunder voluntarily for reasons other than Good
Reason (as defined in Section 8(e)) at any time. An election by Executive not to
extend the Term pursuant to Section 2 hereof shall be deemed to be a termination
of employment by Executive for reasons other than Good Reason at the date of
expiration of the Term, unless a Change in Control (as defined in Section 8(b))
occurs prior to, and there exists Good Reason at, such date of expiration. At
the time Executive's employment is terminated by Executive other than for Good
Reason the Term will terminate, all obligations of the Company and Executive
under Sections 1 through 5 of this Agreement will immediately cease, and the
Company will pay Executive, and Executive will be entitled to receive, the
following:
(i) Executive's Compensation Accrued at Termination;
(ii) All stock options, restricted stock and deferred stock awards,
including outstanding PERS awards, and all other long-term
incentive awards will be governed by the terms of the plans
and programs under which the awards were granted; and
(iii) All deferral arrangements under Section 5(d) will be settled
in accordance with the plans and programs governing the
deferral, and all rights under the SERP and any other benefit
plan shall be governed by such plan, as modified by this
Agreement.
(c) TERMINATION BY THE COMPANY WITHOUT CAUSE PRIOR TO A CHANGE IN
CONTROL. The Company may terminate the employment of Executive hereunder without
Cause, if at the date of termination no Change in Control or a Potential Change
in Control has occurred, upon at least 90 days' written notice to
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Executive. The foregoing notwithstanding, the Company may elect, by written
notice to Executive, to terminate Executive's positions specified in Sections 1
and 3 and all other obligations of Executive and the Company under Section 3 at
a date earlier than the expiration of such 90-day period, if so specified by the
Company in the written notice, provided that Executive shall be treated as an
employee of the Company (without any assigned duties) for all other purposes of
this Agreement, including for purposes of Sections 4 and 5, from such specified
date until the expiration of such 90-day period. An election by the Company not
to extend the Term pursuant to Section 2 hereof shall be deemed to be a
termination of Executive's employment by the Company without Cause at the date
of expiration of the Term and shall be subject to this Section 7(c) if at the
date of such termination no Change in Control or a Potential Change in Control
has occurred; provided, however, that, if Executive has attained age 65 at such
date of termination, such termination shall be deemed a Retirement of Executive.
At the time Executive's employment is terminated by the Company (i.e., at the
expiration of such notice period), the Term will terminate, all remaining
obligations of the Company and Executive under Sections 1 through 5 of this
Agreement will immediately cease (except as expressly provided below), and the
Company will pay Executive, and Executive will be entitled to receive, the
following:
(i) Executive's Compensation Accrued at Termination;
(ii) Cash in an aggregate amount equal to the sum of (1) two times
the sum of (A) Executive's Base Salary under Section 4(a)
immediately prior to termination plus (B) an amount equal to
the greater of (x) the portion of Executive's annual target
incentive compensation potentially payable in cash to
Executive (i.e., excluding the portion payable in PERS or in
other non-cash awards) for the year of termination or (y) the
portion of Executive's annual incentive compensation that
became payable in cash to Executive (i.e., excluding the
portion payable in PERS or in other non-cash awards) for the
latest year preceding the year of termination based on
performance actually achieved in that latest year (the sum of
(A) and (B) being herein referred to as the "Cash
Compensation") and (2), if the Term would have exceeded two
years at the date of termination, an amount equal to the Cash
Compensation multiplied by a fraction the numerator of which
is the number of days in the remaining Term in excess of 730
and the denominator of which is 365. The amount determined to
be payable under this Section 7(c)(ii) shall be payable in
monthly installments over the 24 months following termination,
without interest, except the Company may elect to accelerate
payment of the remaining balance of such amount and to pay it
as a lump sum, without discount;
(iii) In lieu of any annual incentive compensation under Section
4(b) for the year in which Executive's employment terminated,
an amount
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equal to the portion of Executive's annual target incentive
compensation potentially payable in cash to Executive (i.e.,
excluding the portion payable in PERS or in other non-cash
awards) for the year of termination, multiplied by a fraction
the numerator of which is the number of days Executive was
employed in the year of termination and the denominator of
which is the total number of days in the year of termination;
(iv) Stock options held by Executive at termination, if not then
vested and exercisable, will become fully vested and
exercisable at the date of such termination, and, in other
respects (including the period following termination during
which such options may be exercised), such options shall be
governed by the plans and programs and the agreements and
other documents pursuant to which such options were granted;
(v) Any performance objectives upon which the earning of
performance-based restricted stock and deferred stock awards,
including outstanding PERS awards, and other long-term
incentive awards is conditioned shall be deemed to have been
met at target level at the date of termination, and restricted
stock and deferred stock awards, including outstanding PERS
awards, and other long-term incentive awards (to the extent
then or previously earned, in the case of performance-based
awards) shall become fully vested and non-forfeitable at the
date of such termination, and, in other respects, such awards
shall be governed by the plans and programs and the agreements
and other documents pursuant to which such awards were
granted;
(vi) All deferral arrangements under Section 5(d) will be settled
in accordance with the plans and programs governing the
deferral and all rights under the SERP and any other benefit
plan shall be governed by such plan, as modified by this
Agreement; and
(vii) For a period of two years after such termination (but not
after Executive attains age 65), Executive shall continue
to participate in those employee and executive benefit
plans and programs under Section 5(b) to the extent such
plans and programs provide medical insurance, disability
insurance and life insurance benefits (but not other
benefits, such as pension and retirement benefits, provided
under Section 5(b)) in which Executive was participating
immediately prior to termination, the terms of which allow
Executive's continued participation, as if Executive had
continued in employment with the Company during such
period; provided, however, that such participation shall
terminate, or the benefits
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under such plans and programs shall be reduced, if and to
the extent Executive becomes covered (or is eligible to
become covered) by plans of a subsequent employer or other
entity to which Executive provides services during such
period providing comparable benefits. If the terms of the
Company plans and programs referred to in this Section
7(c)(vii) do not allow Executive's continued participation,
Executive shall be paid a cash payment equivalent on an
after-tax basis to the value of the additional benefits
described in this Section 7(c)(vii) Executive would have
received under such plans or programs had Executive
continued to be employed during such period, with such
benefits provided by the Company at the same times and in
the same manner as such benefits would have been provided
to Executive under such plans and programs (it being
understood that the value of any insurance-provided
benefits will be based on the premium cost to Executive,
which shall not exceed the highest risk premium charged by
a carrier having an investment grade or better credit
rating); provided, however, that Executive must continue to
satisfy the conditions set forth in Section 10 in order to
continue receiving the benefits provided under this Section
7(c)(vii). Executive agrees to promptly notify the Company
of any employment or other arrangement by which Executive
provides services during the benefits-continuation period
and of the nature and extent of benefits for which
Executive becomes eligible during such period which would
reduce or terminate benefits under this Section 7(c)(vii);
and the Company be entitled to recover from Executive any
payments and the fair market value of benefits previously
made or provided to Executive hereunder which would not
have been paid under this Section 7(c)(vii) if the Company
had received adequate prior notice as required by this
sentence.
(d) TERMINATION BY EXECUTIVE FOR GOOD REASON PRIOR TO A CHANGE IN
CONTROL. Executive may terminate his employment hereunder for Good Reason, prior
to a Change in Control, upon 90 days' written notice to the Company; provided,
however, that, if the Company has corrected the basis for such Good Reason
within 30 days after receipt of such notice, Executive may not terminate his
employment for Good Reason with respect to the matters addressed in the written
notice, and therefore Executive's notice of termination will automatically
become null and void. At the time Executive's employment is terminated by
Executive for Good Reason (i.e., at the expiration of such notice period), the
Term will terminate, all obligations of the Company and Executive under Sections
1 through 5 of this Agreement will immediately cease (except as expressly
provided below), and the Company will pay Executive, and Executive will be
entitled to receive, the following:
(i) Executive's Compensation Accrued at Termination;
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(ii) Cash in an aggregate amount equal to the sum of (1) two times
the sum of (A) Executive's Base Salary under Section 4(a)
immediately prior to termination plus (B) an amount equal to
the greater of (x) the portion of Executive's annual target
incentive compensation potentially payable in cash to
Executive (i.e., excluding the portion payable in PERS or in
other non-cash awards) for the year of termination or (y) the
portion of Executive's annual incentive compensation that
became payable in cash to Executive (i.e., excluding the
portion payable in PERS or in other non-cash awards) for the
latest year preceding the year of termination based on
performance actually achieved in that latest year (the sum of
(A) and (B) being herein referred to as the "Cash
Compensation") and (2), if the Term would have exceeded two
years at the date of termination, an amount equal to the Cash
Compensation multiplied by a fraction the numerator of which
is the number of days in the remaining Term in excess of 730
and the denominator of which is 365. The amount determined to
be payable under this Section 7(d)(ii) shall be payable in
monthly installments over the 24 months following termination,
without interest, except the Company may elect to accelerate
payment of the remaining balance of such amount and to pay it
as a lump sum, without discount;
(iii) In lieu of any annual incentive compensation under Section
4(b) for the year in which Executive's employment terminated,
an amount equal to the portion of Executive's annual target
incentive compensation potentially payable in cash to
Executive (i.e., excluding the portion payable in PERS or in
other non-cash awards) for the year of termination, multiplied
by a fraction the numerator of which is the number of days
Executive was employed in the year of termination and the
denominator of which is the total number of days in the year
of termination;
(iv) Stock options held by Executive at termination, if not then
vested and exercisable, will become fully vested and
exercisable at the date of such termination, and, in other
respects (including the period following termination during
which such options may be exercised), such options shall be
governed by the plans and programs and the agreements and
other documents pursuant to which such options were granted;
(v) Any performance objectives upon which the earning of
performance-based restricted stock and deferred stock awards,
including outstanding PERS awards, and other long-term
incentive awards is conditioned shall be deemed to have been
met at target level at the date of termination, and restricted
stock and deferred
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stock awards, including outstanding PERS awards, and other
long-term incentive awards (to the extent then or previously
earned, in the case of performance-based awards) shall become
fully vested and non-forfeitable at the date of such
termination, and, in other respects, such awards shall be
governed by the plans and programs and the agreements and
other documents pursuant to which such awards were granted;
(vi) All deferral arrangements under Section 5(d) will be settled
in accordance with the plans and programs governing the
deferral and all rights under the SERP and any other benefit
plan shall be governed by such plan, as modified by this
Agreement; and
(vii) For a period of two years after such termination (but not
after Executive attains age 65), Executive shall continue to
participate in those employee and executive benefit plans and
programs under Section 5(b) to the extent such plans and
programs provide medical insurance, disability insurance and
life insurance benefits (but not other benefits, such as
pension and retirement benefits, provided under Section 5(b))
in which Executive was participating immediately prior to
termination, the terms of which allow Executive's continued
participation, as if Executive had continued in employment
with the Company during such period; provided, however, that
such participation shall terminate, or the benefits under such
plans and programs shall be reduced, if and to the extent
Executive becomes covered (or is eligible to become covered)
by plans of a subsequent employer or other entity to which
Executive provides services during such period providing
comparable benefits. If the terms of the Company plans and
programs referred to in this Section 7(d)(vii) do not allow
Executive's continued participation, Executive shall be paid a
cash payment equivalent on an after-tax basis to the value of
the additional benefits described in this Section 7(d)(vii)
Executive would have received under such plans or programs had
Executive continued to be employed during such period, with
such benefits provided by the Company at the same times and in
the same manner as such benefits would have been provided to
Executive under such plans and programs (it being understood
that the value of any insurance-provided benefits will be
based on the premium cost to Executive, which shall not exceed
the highest risk premium charged by a carrier having an
investment grade or better credit rating); provided, however,
that Executive must continue to satisfy the conditions set
forth in Section 10 in order to continue receiving the
benefits provided under this Section 7(d)(vii). Executive
agrees to promptly notify the Company of any employment or
other
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arrangement by which Executive provides services during the
benefits-continuation period and of the nature and extent of
benefits for which Executive becomes eligible during such
period which would reduce or terminate benefits under this
Section 7(d)(vii); and the Company shall be entitled to
recover from Executive any payments and the fair market value
of benefits previously made or provided to Executive hereunder
which would not have been paid under this Section 7(d)(vii) if
the Company had received adequate prior notice as required by
this sentence.
If any payment or benefit under this Section 7(d) is based on Base
Salary or other level of compensation or benefits at the time of Executive's
termination and if a reduction in such Base Salary or other level of
compensation or benefit was the basis for Executive's termination for Good
Reason, then the Base Salary or other level of compensation in effect before
such reduction shall be used to calculate payments or benefits under this
Section 7(d).
(e) TERMINATION BY THE COMPANY WITHOUT CAUSE AFTER A CHANGE IN
CONTROL. The Company may terminate the employment of Executive hereunder without
Cause, simultaneously with or within 24 months following a Change in Control,
upon at least 90 days' written notice to Executive. The foregoing
notwithstanding, the Company may elect, by written notice to Executive, to
terminate Executive's positions specified in Sections 1 and 3 and all other
obligations of Executive and the Company under Section 3 at a date earlier than
the expiration of such 90-day notice period, if so specified by the Company in
the written notice, provided that Executive shall be treated as an employee of
the Company (without any assigned duties) for all other purposes of this
Agreement, including for purposes of Sections 4 and 5, from such specified date
until the expiration of such 90-day period. An election by the Company not to
extend the Term pursuant to Section 2 hereof shall be deemed to be a termination
of Executive's employment by the Company without Cause at the date of expiration
of the Term and shall be subject to this Section 7(e) if the date of such
termination coincides with or is after a Change in Control or Potential Change
in Control; provided, however, that, if Executive has attained age 65 at such
date of termination, such termination shall be deemed a Retirement of Executive.
At the time Executive's employment is terminated by the Company (i.e., at the
expiration of such notice period), the Term will terminate, all remaining
obligations of the Company and Executive under Sections 1 through 5 of this
Agreement will immediately cease (except as expressly provided below), and the
Company will pay Executive, and Executive will be entitled to receive, the
following:
(i) Executive's Compensation Accrued at Termination;
(ii) Cash in an aggregate amount equal to three times the sum of
(A) Executive's Base Salary under Section 4(a) immediately
prior to termination plus (B) an amount equal to the greater
of (x)
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the portion of Executive's annual target incentive
compensation potentially payable in cash to Executive (i.e.,
excluding the portion payable in PERS or in other non-cash
awards) for the year of termination or (y) the portion of
Executive's annual incentive compensation that became payable
in cash to Executive (i.e., excluding the portion payable in
PERS or in other non-cash awards) for the latest year
preceding the year of termination based on performance
actually achieved in that latest year. The amount determined
to be payable under this Section 7(e)(ii) shall be paid by the
Company not later than 15 days after Executive's termination;
(iii) In lieu of any annual incentive compensation under Section
4(b) for the year in which Executive's employment terminated,
an amount equal to the portion of Executive's annual target
incentive compensation potentially payable in cash to
Executive (i.e., excluding the portion payable in PERS or in
other non-cash awards) for the year of termination, multiplied
by a fraction the numerator of which is the number of days
Executive was employed in the year of termination and the
denominator of which is the total number of days in the year
of termination;
(iv) Stock options held by Executive at termination, if not then
vested and exercisable, will become fully vested and
exercisable at the date of such termination, and any such
options granted on or after the date hereof shall remain
outstanding and exercisable until the stated expiration date
of the Option as though Executive's employment did not
terminate, and, in other respects, such options shall be
governed by the plans and programs and the agreements and
other documents pursuant to which such options were granted;
(v) Any performance objectives upon which the earning of
performance-based restricted stock and deferred stock awards,
including outstanding PERS awards, and other long-term
incentive awards is conditioned shall be deemed to have been
met at target level at the date of termination, and restricted
stock and deferred stock awards, including outstanding PERS
awards, and other long-term incentive awards (to the extent
then or previously earned, in the case of performance-based
awards) shall become fully vested and non-forfeitable at the
date of such termination, and, in other respects, such awards
shall be governed by the plans and programs and the agreements
and other documents pursuant to which such awards were
granted;
(vi) All deferral arrangements under Section 5(d) will be settled
in accordance with the plans and programs governing the
deferral and
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all rights under the SERP and any other benefit plan shall be
governed by such plan, as modified by this Agreement;
(vii) For purposes of the SERP, Executive will be credited with
additional years of age and/or years of Service (as defined in
the SERP) if and to the extent required so that Executive's
termination will qualify as a "Retirement" within the meaning
of the SERP and so that Executive will be entitled the maximum
"Retirement Benefit" in accordance with Section 3.1 of the
SERP. In addition, the provisions of the SERP notwithstanding,
the term "Average Final Compensation" as used in the SERP
shall mean the greatest of (A) Average Final Compensation as
defined in the SERP, (B) the sum of (x) Executive's Base
Salary plus (y) Executive's annual target incentive
opportunity for the year in which the Change in Control
occurred (if not yet determined, then such opportunity shall
be deemed to equal the greater of the minimum annual target
incentive opportunity that would be required by this Agreement
or the actual annual incentive earned for the year immediately
preceding the year in which the Change in Control occurred),
or (C) $2,000,000; and
(viii) For a period of three years after such termination (but not
after Executive attains age 65), Executive shall continue to
participate in those employee and executive benefit plans and
programs under Section 5(b) to the extent such plans and
programs provide medical insurance, disability insurance and
life insurance benefits (but not other benefits, such as
pension and retirement benefits, provided under Section 5(b))
in which Executive was participating immediately prior to
termination, the terms of which allow Executive's continued
participation, as if Executive had continued in employment
with the Company during such period, and on terms no less
favorable than the terms applicable to Executive before the
Change in Control; provided, however, that such participation
shall terminate, or the benefits under such plans and programs
shall be reduced, if and to the extent Executive becomes
covered (or is eligible to become covered) by plans of a
subsequent employer or other entity to which Executive
provides services during such period providing comparable
benefits. If the terms of the Company plans and programs
referred to in this Section 7(e)(viii) do not allow
Executive's continued participation, Executive shall be paid a
cash payment equivalent on an after-tax basis to the value of
the additional benefits described in this Section 7(e)(viii)
Executive would have received under such plans or programs had
Executive continued to be employed during such period, with
such benefits provided by the Company at the same times and in
the same
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manner as such benefits would have been provided to
Executive under such plans and programs (it being understood
that the value of any insurance-provided benefits will be
based on the premium cost to Executive, which shall not exceed
the highest risk premium charged by a carrier having an
investment grade or better credit rating); provided, however,
that Executive must continue to satisfy the conditions set
forth in Section 10 in order to continue receiving the
benefits provided under this Section 7(e)(viii). Executive
agrees to promptly notify the Company of any employment or
other arrangement by which Executive provides services during
the benefits-continuation period and of the nature and extent
of benefits for which Executive becomes eligible during such
period which would reduce or terminate benefits under this
Section 7(e)(viii); and the Company shall be entitled to
recover from Executive any payments and the fair market value
of benefits previously made or provided to Executive hereunder
which would not have been paid under this Section 7(e)(viii)
if the Company had received adequate prior notice as required
by this sentence.
If any payment or benefit under this Section 7(e) is based on Base
Salary or other level of compensation or benefits at the time of Executive's
termination and if the Company has purported to reduce Base Salary or other
level of compensation or benefits prior to such termination in a manner that
would constitute Good Reason, then the Base Salary or other level of
compensation in effect before such reduction shall be used to calculate payments
or benefits under this Section 7(e).
(f) TERMINATION BY EXECUTIVE FOR GOOD REASON AFTER A CHANGE IN
CONTROL. Executive may terminate his employment hereunder for Good Reason,
simultaneously with or within 24 months following a Change in Control, upon 90
days' written notice to the Company; provided, however, that, if the Company has
corrected the basis for such Good Reason within 30 days after receipt of such
notice, Executive may not terminate his employment for Good Reason, and
therefore Executive's notice of termination will automatically become null and
void. At the time Executive's employment is terminated by Executive for Good
Reason (i.e., at the expiration of such notice period), the Term will terminate,
all obligations of the Company and Executive under Sections 1 through 5 of this
Agreement will immediately cease (except as expressly provided below), and the
Company will pay Executive, and Executive will be entitled to receive, the
following:
(i) Executive's Compensation Accrued at Termination;
(ii) Cash in an aggregate amount equal to three times the sum of
(A) Executive's Base Salary under Section 4(a) immediately
prior to termination plus (B) an amount equal to the greater
of (x) the portion of Executive's annual target incentive
compensation
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potentially payable in cash to Executive (i.e., excluding the
portion payable in PERS or in other non-cash awards) for the
year of termination or (y) the portion of Executive's annual
incentive compensation that became payable in cash to
Executive (i.e., excluding the portion payable in PERS or in
other non-cash awards) for the latest year preceding the year
of termination based on performance actually achieved in that
latest year. The amount determined to be payable under this
Section 7(f)(ii) shall be paid by the Company not later than
15 days after Executive's termination;
(iii) In lieu of any annual incentive compensation under Section
4(b) for the year in which Executive's employment terminated,
an amount equal to the portion of Executive's annual target
incentive compensation potentially payable in cash to
Executive (i.e., excluding the portion payable in PERS or in
other non-cash awards) for the year of termination, multiplied
by a fraction the numerator of which is the number of days
Executive was employed in the year of termination and the
denominator of which is the total number of days in the year
of termination;
(iv) Stock options held by Executive at termination, if not then
vested and exercisable, will become fully vested and
exercisable at the date of such termination, and any such
options granted on or after the date hereof shall remain
outstanding and exercisable until the stated expiration date
of the Option as though Executive's employment did not
terminate, and, in other respects, such options shall be
governed by the plans and programs and the agreements and
other documents pursuant to which such options were granted;
(v) Any performance objectives upon which the earning of
performance-based restricted stock and deferred stock awards,
including outstanding PERS awards, and other long-term
incentive awards is conditioned shall be deemed to have been
met at target level at the date of termination, and restricted
stock and deferred stock awards, including outstanding PERS
awards, and other long-term incentive awards (to the extent
then or previously earned, in the case of performance-based
awards) shall become fully vested and non-forfeitable at the
date of such termination, and, in other respects, such awards
shall be governed by the plans and programs and the agreements
and other documents pursuant to which such awards were
granted;
(vi) All deferral arrangements under Section 5(d) will be settled
in accordance with the plans and programs governing the
deferral and
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all rights under the SERP and any other benefit plan shall be
governed by such plan, as modified by this Agreement;
(vii) For purposes of the SERP, Executive will be credited with
additional years of age and/or years of Service (as defined in
the SERP) if and to the extent required so that Executive's
termination will qualify as a "Retirement" within the meaning
of the SERP and so that Executive will be entitled the maximum
"Retirement Benefit" in accordance with Section 3.1 of the
SERP. In addition, the provisions of the SERP notwithstanding,
the term "Average Final Compensation" as used in the SERP
shall mean the greatest of (A) Average Final Compensation as
defined in the SERP, (B) the sum of (x) Executive's Base
Salary plus (y) Executive's annual target incentive
opportunity for the year in which the Change in Control
occurred (if not yet determined, then such opportunity shall
be deemed to equal the greater of the minimum annual target
incentive opportunity that would be required by this Agreement
or the actual annual incentive earned for the year immediately
preceding the year in which the Change in Control occurred),
or (C) $2,000,000; and
(viii) For a period of three years after such termination (but not
after Executive attains age 65), Executive shall continue to
participate in those employee and executive benefit plans and
programs under Section 5(b) to the extent such plans and
programs provide medical insurance, disability insurance and
life insurance benefits (but not other benefits, such as
pension and retirement benefits, provided under Section 5(b))
in which Executive was participating immediately prior to
termination, the terms of which allow Executive's continued
participation, as if Executive had continued in employment
with the Company during such period, and on terms no less
favorable than the terms applicable to Executive before the
Change in Control; provided, however, that such participation
shall terminate, or the benefits under such plans and programs
shall be reduced, if and to the extent Executive becomes
covered (or is eligible to become covered) by plans of a
subsequent employer or other entity to which Executive
provides services during such period providing comparable
benefits. If the terms of the Company plans and programs
referred to in this Section 7(f)(viii) do not allow
Executive's continued participation, Executive shall be paid a
cash payment equivalent on an after-tax basis to the value of
the additional benefits described in this Section 7(f)(viii)
Executive would have received under such plans or programs had
Executive continued to be employed during such period, with
such benefits provided by the Company at the same times and in
the same
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manner as such benefits would have been provided to Executive
under such plans and programs (it being understood that the
value of any insurance-provided benefits will be based on the
premium cost to Executive, which shall not exceed the highest
risk premium charged by a carrier having an investment grade
or better credit rating); provided, however, that Executive
must continue to satisfy the conditions set forth in Section
10 in order to continue receiving the benefits provided under
this Section 7(f)(viii). Executive agrees to promptly notify
the Company of any employment or other arrangement by which
Executive provides services during the benefits-continuation
period and of the nature and extent of benefits for which
Executive becomes eligible during such period which would
reduce or terminate benefits under this Section 7(f)(viii);
and the Company shall be entitled to recover from Executive
any payments and the fair market value of benefits previously
made or provided to Executive hereunder which would not have
been paid under this Section 7(f)(viii) if the Company had
received adequate prior notice as required by this sentence.
If any payment or benefit under this Section 7(f) is based on Base
Salary or other level of compensation or benefits at the time of Executive's
termination and if a reduction in such Base Salary or other level of
compensation or benefits was the basis for Executive's termination for Good
Reason or would otherwise constitute Good Reason, then the Base Salary or other
level of compensation in effect before such reduction shall be used to calculate
payments or benefits under this Section 7(f).
(g) OTHER TERMS RELATING TO CERTAIN TERMINATIONS OF EMPLOYMENT.
Whether a termination is deemed to be at or following a Change in Control or
Potential Change in Control for purposes of Sections 7(c), (d), (e), or (f) is
determined at the date of termination, regardless of whether the Change in
Control had occurred at the time a notice of termination was given. In the event
Executive's employment terminates for any reason set forth in Section 7(b)
through (f), Executive will be entitled to the benefit of any terms of plans or
agreements applicable to Executive which are more favorable than those specified
in this Section 7 (except in the case of annual incentives in lieu of which
amounts are paid hereunder). Amounts payable under this Section 7 following
Executive's termination of employment, other than those expressly payable on a
deferred basis, will be paid as promptly as practicable after such a termination
of employment, and such amounts payable under Section 7(e) or 7(f) will be paid
in no event later than 15 days after Executive's termination of employment
unless not determinable within such period.
8. DEFINITIONS RELATING TO TERMINATION EVENTS.
(a) "CAUSE". For purposes of this Agreement, "Cause" shall mean
Executive's
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(i) willful and continued failure to substantially perform his
duties hereunder (other than any such failure resulting from
incapacity due to physical or mental illness or disability or
any failure after the issuance of a notice of termination by
Executive for Good Reason) which failure is demonstrably and
materially damaging to the financial condition or reputation
of the Company and/or its subsidiaries, and which failure
continues more than 48 hours after a written demand for
substantial performance is delivered to Executive by the
Board, which demand specifically identifies the manner in
which the Board believes that Executive has not substantially
performed his duties hereunder and the demonstrable and
material damage caused thereby; or
(ii) the willful engaging by Executive in misconduct which is
demonstrably and materially injurious to the Company,
monetarily or otherwise.
No act, or failure to act, on the part of Executive shall be deemed
"willful" unless done, or omitted to be done, by Executive not in good faith and
without reasonable belief that his action or omission was in the best interest
of the Company. Notwithstanding the foregoing, Executive shall not be deemed to
have been terminated for Cause unless and until there shall have been delivered
to Executive a copy of the resolution duly adopted by the affirmative vote of
not less than three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board (after reasonable notice to Executive and an opportunity
for Executive, together with Executive's counsel, to be heard before the Board)
finding that, in the good faith opinion of the Board, Executive was guilty of
conduct set forth above in this definition and specifying the particulars
thereof in detail.
(b) "CHANGE IN CONTROL". For purposes of this Agreement, a "Change
in Control" shall be deemed to have occurred if, during the term of this
Agreement:
(i) any "Person," as such term is used for purposes of Section
13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than the Company, any
trustee or other fiduciary holding securities under an
employee benefit plan of the Company, or any company owned,
directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock
of the Company), becomes the "Beneficial Owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 20% or more of the
combined voting power of the Company's then-outstanding
securities;
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(ii) during any period of twenty-four months (not including any
period prior to the effectiveness of this Agreement),
individuals who at the beginning of such period constitute the
Board, and any new director (other than (A) a director
nominated by a Person who has entered into an agreement with
the Company to effect a transaction described in Sections
(8)(b)(i), (iii) or (iv) hereof, (B) a director nominated by
any Person (including the Company) who publicly announces an
intention to take or to consider taking actions (including,
but not limited to, an actual or threatened proxy contest)
which if consummated would constitute a Change in Control or
(C) a director nominated by any Person who is the Beneficial
Owner, directly or indirectly, of securities of the Company
representing 10% or more of the combined voting power of the
Company's securities) whose election by the Board or
nomination for election by the Company's stockholders was
approved in advance by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors
at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason
to constitute at least a majority thereof;
(iii) the stockholders of the Company approve any transaction or
series of transactions under which the Company is merged or
consolidated with any other company, other than a merger or
consolidation (A) which would result in the voting securities
of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving
entity) more than 66 2/3% of the combined voting power of the
voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation and
(B) after which no Person holds 20% or more of the combined
voting power of the then-outstanding securities of the Company
or such surviving entity;
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets; or
(v) the Board adopts a resolution to the effect that, for purposes
of this Agreement, a Change in Control has occurred.
(c) "COMPENSATION ACCRUED AT TERMINATION". For purposes of this
Agreement, "Compensation Accrued at Termination" means the following:
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(i) The unpaid portion of annual base salary at the rate payable,
in accordance with Section 4(a) hereof, at the date of
Executive's termination of employment, pro rated through such
date of termination, payable in accordance with the Company's
regular pay schedule;
(ii) All earned and unpaid and/or vested, nonforfeitable amounts
owing or accrued at the date of Executive's termination of
employment under any compensation and benefit plans, programs,
and arrangements set forth or referred to in Sections 4(b) and
5(a) and 5(b) hereof (including the guaranteed 2001 bonus and
any earned and vested annual incentive compensation and
long-term incentive award) in which Executive theretofore
participated, payable in accordance with the terms and
conditions of the plans, programs, and arrangements (and
agreements and documents thereunder) pursuant to which such
compensation and benefits were granted or accrued; and
(iii) Reasonable business expenses and disbursements incurred by
Executive prior to Executive's termination of employment, to
be reimbursed to Executive, as authorized under Section 5(e),
in accordance the Company's reimbursement policies as in
effect at the date of such termination.
(d) "DISABILITY". For purposes of this Agreement, "Disability"
means Executive's absence from the full-time performance of Executive's duties
hereunder for six consecutive months as a result of his incapacity due to
physical or mental illness or disability, and, within 30 days after written
notice of termination is thereafter given by the Company, Executive shall have
not returned to the full-time performance of such duties.
(e) "GOOD REASON". For purposes of this Agreement, "Good Reason"
shall mean, without Executive's express written consent, the occurrence of any
of the following circumstances unless, in the case of subsections (i), (iv),
(vi) or (viii) hereof, such circumstances are fully corrected prior to the date
of termination specified in the notice of termination given in respect thereof:
(i) the assignment to Executive of duties inconsistent with
Executive's position and status hereunder, or an alteration,
adverse to Executive, in the nature of Executive's duties,
responsibilities, and authorities, Executive's positions or
the conditions of Executive's employment from those specified
in Section 3 or otherwise hereunder (including the appointment
of a President without Executive's consent) (other than
inadvertent actions which are promptly remedied); for this
purpose, it shall constitute "Good
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Reason" under this subsection (e)(i) if (A) Executive shall be
required to report to and take direction from any person or
body other than the Board of Directors of the Company; and (B)
if Executive shall be removed from the Board, from the office
of Chairman of the Board, or from any Board committee on which
Executive has served during the Term, or there occurs any
failure of Executive to be nominated, elected, reappointed or
reelected as a member of the Board, as Chairman of the Board,
or as a member of any Board committee on which he has served
during the Term, including a failure of the Board or
stockholders to take such actions (notwithstanding their legal
right to do so), except the foregoing shall not constitute
Good Reason if occurring in connection with the termination of
Executive's employment for Cause, Disability, Retirement, as a
result of Executive's death, or as a result of action by or
with the consent of Executive; for purposes of this Section
8(e)(i), references to the Company (and the Board and
stockholders of the Company) refer to the ultimate parent
company (and its board and stockholders) succeeding the
Company following an acquisition in which the corporate
existence of the Company continues, in accordance with Section
12(b);
(ii) (A) a reduction by the Company in Executive's Base Salary, (B)
the setting of Executive's annual target incentive opportunity
or payment of earned annual incentive in amounts less than
specified under or otherwise not in conformity with Section 4
hereof, (C) a change in compensation or benefits not in
conformity with Section 5, or (D) a reduction, after a Change
in Control, in perquisites from the level of such perquisites
as in effect immediately prior to the Change in Control or as
the same may have been increased from time to time after the
Change in Control except for across-the-board perquisite
reductions similarly affecting all senior executives of the
Company and all senior executives of any Person in control of
the Company;
(iii) the relocation of the principal place of Executive's
employment not in conformity with Section 3(b) hereof; for
this purpose, required travel on the Company's business will
not constitute a relocation so long as the extent of such
travel is substantially consistent with Executive's customary
business travel obligations in periods prior to the Effective
Date;
(iv) the failure by the Company to pay to Executive any portion of
Executive's compensation or to pay to Executive any portion of
an installment of deferred compensation under any deferred
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compensation program of the Company within seven days of the
date such compensation is due;
(v) the failure by the Company to continue in effect any material
compensation or benefit plan in which Executive participated
immediately prior to a Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the failure
by the Company to continue Executive's participation therein
(or in such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amounts of
compensation or benefits provided and the level of Executive's
participation relative to other participants, as existed at
the time of the Change in Control;
(vi) the failure of the Company to obtain a satisfactory agreement
from any successor to the Company to fully assume the
Company's obligations and to perform under this Agreement, as
contemplated in Section 12(b) hereof, in a form reasonably
acceptable to Executive;
(vii) any election by the Company not to extend the Term of this
Agreement at the next possible extension date under Section 2
hereof, unless Executive will have attained age 65 at or
before such extension date; or
(viii) any other failure by the Company to perform any material
obligation under, or breach by the Company of any material
provision of, this Agreement.
(f) "POTENTIAL CHANGE IN CONTROL". For purposes of this
Agreement, a "Potential Change in Control" shall be deemed to have occurred if,
during the term of this Agreement:
(i) the Company enters into an agreement, the consummation of
which would result in the occurrence of a Change in Control;
(ii) any Person (including the Company) publicly announces an
intention to take or to consider taking actions which if
consummated would constitute a Change in Control; or (iii) the
Board adopts a resolution to the effect that, for purposes of
this Agreement, a Potential Change in Control has occurred.
(g) "SPECIAL SERP BENEFIT". For purposes of this Agreement,
"Special SERP Benefit" means:
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(i) if Executive's employment terminates after the fifth (5th)
anniversary of the Effective Date, a "Retirement Benefit" as
determined under the SERP but determined by counting as
"Service" for purposes of the SERP Executive's service with
IBM Corporation (aggregating 28 years of service) and by
offsetting the Retirement Benefit so determined under the SERP
by Executive's vested retirement benefits paid or payable to
Executive under any qualified or non-qualified defined benefit
pension plan maintained by IBM Corporation as though such
benefits were a "Basic Plan Benefit" for purposes of the SERP
(and calculated in the form of an annual life annuity as
provided for in Section (3) of the SERP); or
(ii) if Executive's employment terminates prior to the fifth (5th)
anniversary of this Agreement pursuant to any of Sections
7(c), (d), (e) or (f) or Section 6(b) or (c) or the
non-renewal of this Agreement on or after December 31, 2003, a
"Retirement Benefit" as determined pursuant to paragraph (i)
above calculated with the following additional modifications:
first, Executive's "Average Final Compensation" as determined
under the SERP shall be determined using Executive's
"Compensation" (as defined in the SERP) with IBM Corporation;
second, the resulting Retirement Benefit shall be multiplied
by a fraction, the numerator of which is the number of
completed calendar months of Executive's employment with the
Company from the Effective Date to the date of termination and
the denominator of which is sixty (60).
9. RABBI TRUST OBLIGATION UPON POTENTIAL CHANGE IN
CONTROL; EXCISE TAX-RELATED PROVISIONS.
(a) RABBI TRUST FUNDED UPON POTENTIAL CHANGE IN CONTROL. In the
event of a Potential Change in Control or Change in Control, the Company shall,
not later than 15 days thereafter, have established one or more rabbi trusts and
shall deposit therein cash in an amount sufficient to provide for full payment
of all potential obligations of the Company that would arise assuming
consummation of a Change in Control, or has arisen in the case of an actual
Change in Control, and a subsequent termination of Executive's employment under
Section 7(e) or 7(f). Such rabbi trust(s) shall be irrevocable and shall provide
that the Company may not, directly or indirectly, use or recover any assets of
the trust(s) until such time as all obligations which potentially could arise
hereunder have been settled and paid in full, subject only to the claims of
creditors of the Company in the event of insolvency or bankruptcy of the
Company; provided, however, that if no Change in Control has occurred within two
years after such Potential Change in Control, such rabbi trust(s) shall at the
end of such two-year period become revocable and may thereafter be revoked by
the Company.
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(b) GROSS-UP IF EXCISE TAX WOULD APPLY. In the event Executive
becomes entitled to any amounts or benefits payable in connection with a Change
in Control or other change in control (whether or not such amounts are payable
pursuant to this Agreement) (the "Severance Payments"), if any of such Severance
Payments are subject to the tax (the "Excise Tax") imposed by Section 4999 of
the Code (or any similar federal, state or local tax that may hereafter be
imposed), the Company shall pay to Executive at the time specified in Section
9(b)(iii) hereof an additional amount (the "Gross-Up Payment") such that the net
amount retained by Executive, after deduction of any Excise Tax on the Total
Payments (as hereinafter defined) and any federal, state and local income tax
and Excise Tax upon the payment provided for by Section 9(b)(i), shall be equal
to the Total Payments.
(i) For purposes of determining whether any of the Severance
Payments will be subject to the Excise Tax and the amount of
such Excise Tax:
(A) any other payments or benefits received or to be
received by Executive in connection with a Change in
Control or Executive's termination of employment
(whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company,
any Person whose actions result in a Change in Control
or any Person affiliated with the Company or such
Person) (which, together with the Severance Payments,
constitute the "Total Payments") shall be treated as
"parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax,
unless in the opinion of nationally-recognized tax
counsel selected by Executive such other payments or
benefits (in whole or in part) do not constitute
parachute payments, or such excess parachute payments
(in whole or in part) represent reasonable compensation
for services actually rendered within the meaning of
Section 280G(b)(4) of the Code in excess of the base
amount within the meaning of Section 280G(b)(3) of the
Code, or are otherwise not subject to the Excise Tax;
(B) the amount of the Total Payments which shall be
treated as subject to the Excise Tax shall be equal
to the lesser of (x) the total amount of the Total
Payments and (y) the amount of excess parachute
payments within the meaning of Section 280G(b)(1) of
the Code (after applying Section 9(b)(i)(A) hereof);
and
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(C) the value of any non-cash benefits or any deferred
payments or benefit shall be determined by a
nationally-recognized accounting firm selected by
Executive in accordance with the principles of Sections
280G(d)(3) and (4) of the Code.
(ii) For purposes of determining the amount of the Gross-Up
Payment, Executive shall be deemed to pay federal income taxes
at the highest marginal rate of federal income taxation in the
calendar year in which the Gross-Up Payment is to be made and
state and local income taxes at the highest marginal rate of
taxation in the state and locality of Executive's residence on
the Date of Termination, net of the maximum reduction in
federal income taxes which could be obtained from deduction of
such state and local taxes. In the event that the Excise Tax
is subsequently determined to be less than the amount taken
into account hereunder at the time of termination of
Executive's employment, Executive shall repay to the Company
within ten days after the time that the amount of such
reduction in Excise Tax is finally determined the portion of
the Gross-Up Payment attributable to such reduction (plus the
portion of the Gross-Up Payment attributable to the Excise Tax
and federal and state and local income tax imposed on the
Gross-Up Payment being repaid by Executive if such repayment
results in a reduction in Excise Tax and/or federal and state
and local income tax deduction) plus interest on the amount of
such repayment at the rate provided in Section 1274(b)(2)(B)
of the Code. In the event that the Excise Tax is determined to
exceed the amount taken into account hereunder at the time of
the termination of Executive's employment (including by reason
of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company
shall make an additional gross-up payment in respect of such
excess within ten days after the time that the amount of such
excess is finally determined.
(iii) The payments provided for in this Section 9(b) shall be made
not later than the fifteenth day following the date of
Executive's termination of employment; provided, however, that
if the amount of such payments cannot be finally determined on
or before such day, the Company shall pay to Executive on such
day an estimate, as determined in good faith by the Company,
of the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code) as soon as the
amount thereof can be determined but in no event later than
the thirtieth day after the date of Executive's termination of
employment. In the event that the amount of the estimated
payments exceeds the amount subsequently determined
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to have been due, such excess shall constitute a loan by the
Company to Executive, payable on the fifteenth day after the
demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code).
(iv) All determinations under this Section 9(b) shall be made at
the expense of the Company by a nationally recognized public
accounting firm selected by Executive, and such determination
shall be binding upon Executive and the Company.
10. NON-COMPETITION AND NON-DISCLOSURE; EXECUTIVE COOPERATION;
NON-DISPARAGEMENT.
(a) NON-COMPETITION. Without the consent in writing of the Board,
Executive will not, at any time during the Term and for a period of two years
following termination of Executive's employment for any reason, acting alone or
in conjunction with others, directly or indirectly (i) engage (either as owner,
investor, partner, stockholder, employer, employee, consultant, advisor, or
director) in any business in which he has been directly engaged on behalf of the
Company or any affiliate, or has supervised as an executive thereof, during the
last two years prior to such termination, or which was engaged in or planned by
the Company or an affiliate at the time of such termination, in any geographic
area in which such business was conducted or planned to be conducted; (ii)
induce any customers of the Company or any of its affiliates with whom Executive
has had contacts or relationships, directly or indirectly, during and within the
scope of his employment with the Company or any of its affiliates, to curtail or
cancel their business with the Company or any such affiliate; (iii) induce, or
attempt to influence, any employee of the Company or any of its affiliates to
terminate employment; or (iv) solicit, hire or retain as an employee or
independent contractor, or assist any third party in the solicitation, hire, or
retention as an employee or independent contractor, any person who during the
previous 12 months was an employee of the Company or any affiliate; provided,
however, that the limitation contained in clause (i) above shall not apply if
Executive's employment is terminated as a result of a termination by the Company
without Cause following a Change in Control or is terminated by Executive for
Good Reason following a Change in Control; and provided further, that activities
engaged in by or on behalf of the Company are not restricted by this covenant.
The provisions of subparagraphs (i), (ii), (iii), and (iv) above are separate
and distinct commitments independent of each of the other subparagraphs. It is
agreed that the ownership of not more than one percent of the equity securities
of any company having securities listed on an exchange or regularly traded in
the over-the-counter market shall not, of itself, be deemed inconsistent with
clause (i) of this Section 10(a).
(b) NON-DISCLOSURE; OWNERSHIP OF WORK. Executive shall not, at any
time during the Term and thereafter (including following Executive's termination
of employment for any reason), disclose, use, transfer, or sell, except in the
course of
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employment with or other service to the Company, any proprietary information,
secrets, organizational or employee information, or other confidential
information belonging or relating to the Company and its affiliates and
customers so long as such information has not otherwise been disclosed or is not
otherwise in the public domain, except as required by law or pursuant to legal
process. In addition, upon termination of employment for any reason, Executive
will return to the Company or its affiliates all documents and other media
containing information belonging or relating to the Company or its affiliates.
Executive will promptly disclose in writing to the Company all inventions,
discoveries, developments, improvements and innovations (collectively referred
to as "Inventions") that Executive has conceived or made during the Term;
provided, however, that in this context "Inventions" are limited to those which
(i) relate in any manner to the existing or contemplated business or research
activities of the Company and its affiliates; (ii) are suggested by or result
from Executive's work at the Company; or (iii) result from the use of the time,
materials or facilities of the Company and its affiliates. All Inventions will
be the Company's property rather than Executive's. Should the Company request
it, Executive agrees to sign any document that the Company may reasonably
require to establish ownership in any Invention.
(c) COOPERATION WITH REGARD TO LITIGATION. Executive agrees to
cooperate with the Company, during the Term and thereafter (including following
Executive's termination of employment for any reason), by making himself
available to testify on behalf of the Company or any subsidiary or affiliate of
the Company, in any action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, and to assist the Company, or any subsidiary
or affiliate of the Company, in any such action, suit, or proceeding, by
providing information and meeting and consulting with the Board or its
representatives or counsel, or representatives or counsel to the Company, or any
subsidiary or affiliate of the Company, as may be reasonably requested and after
taking into account Executive's post-termination responsibilities and
obligations. The Company agrees to reimburse Executive, on an after-tax basis,
for all expenses actually incurred in connection with his provision of testimony
or assistance.
(d) NON-DISPARAGEMENT. Executive shall not, at any time during the
Term and thereafter make statements or representations, or otherwise
communicate, directly or indirectly, in writing, orally, or otherwise, or take
any action which may, directly or indirectly, disparage or be damaging to the
Company, its subsidiaries or affiliates or their respective officers, directors,
employees, advisors, businesses or reputations, nor shall Executive's successor
in office make any such statements or representations regarding Executive.
Notwithstanding the foregoing, nothing in this Agreement shall preclude
Executive or his successor from making truthful statements that are required by
applicable law, regulation or legal process.
(e) RELEASE OF EMPLOYMENT CLAIMS. Executive agrees, as a condition
to receipt of any termination payments and benefits provided for in Sections 6
and 7 herein (other than Compensation Accrued at Termination) (the "Termination
Benefits"), that he will execute a general release in the standard form employed
by the
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<PAGE>
Company, releasing any and all claims arising out of Executive's employment
(other than enforcement of this Agreement and other than with respect to vested
rights or rights provided for under any benefit plan or arrangement of the
Company).
(f) FORFEITURE OF OUTSTANDING OPTIONS. The provisions of Sections
6 and 7 notwithstanding, if Executive willfully and materially fails to
substantially comply with any restrictive covenant under this Section 10, all
options to purchase Common Stock granted by the Company and then held by
Executive or a transferee of Executive shall be immediately forfeited and
thereupon such options shall be cancelled. Notwithstanding the foregoing,
Executive shall not forfeit any option unless and until there shall have been
delivered to him, within six months after the Board (i) had knowledge of conduct
or an event allegedly constituting grounds for such forfeiture and (ii) had
reason to believe that such conduct or event could be grounds for such
forfeiture, a copy of a resolution duly adopted by a majority affirmative vote
of the membership of the Board (excluding Executive) at a meeting of the Board
called and held for such purpose (after giving Executive reasonable notice
specifying the nature of the grounds for such forfeiture and not less than 30
days to correct the acts or omissions complained of, if correctable, and
affording Executive the opportunity, together with his counsel, to be heard
before the Board) finding that, in the good faith opinion of the Board,
Executive has engaged and continues to engage in conduct set forth in this
Section 10(f) which constitutes grounds for forfeiture of Executive's options;
provided, however, that if any option is exercised after delivery of such notice
and the Board subsequently makes the determination described in this sentence,
Executive shall be required to pay to the Company an amount equal to the
difference between the aggregate value of the shares acquired upon such exercise
at the date of the Board determination and the aggregate exercise price paid by
Executive. Any such forfeiture shall apply to such options notwithstanding any
term or provision of any option agreement. In addition, options granted to
Executive on or after the Effective Date, and gains resulting from the exercise
of such options, shall be subject to forfeiture in accordance with the Company's
standard policies relating to such forfeitures and clawbacks, as such policies
are in effect at the time of grant of such options.
(g) SURVIVAL. The provisions of this Section 10 shall survive the
termination of the Term and any termination or expiration of this Agreement.
11. GOVERNING LAW; DISPUTES; ARBITRATION.
(a) GOVERNING LAW. This Agreement is governed by and is to be
construed, administered, and enforced in accordance with the laws of the State
of Delaware, without regard to conflicts of law principles. If under the
governing law, any portion of this Agreement is at any time deemed to be in
conflict with any applicable statute, rule, regulation, ordinance, or other
principle of law, such portion shall be deemed to be modified or altered to the
extent necessary to conform thereto or, if that is not possible, to be omitted
from this Agreement. The invalidity of any such portion shall not affect the
force, effect, and validity of the remaining portion hereof. If any court
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<PAGE>
determines that any provision of Section 10 is unenforceable because of the
duration or geographic scope of such provision, it is the parties' intent that
such court shall have the power to modify the duration or geographic scope of
such provision, as the case may be, to the extent necessary to render the
provision enforceable and, in its modified form, such provision shall be
enforced.
(b) REIMBURSEMENT OF EXPENSES IN ENFORCING RIGHTS. All reasonable
costs and expenses (including fees and disbursements of counsel) incurred by
Executive in negotiating this Agreement (up to a maximum of $15,000) and
thereafter seeking to interpret this Agreement or enforce rights pursuant to
this Agreement shall be paid on behalf of or reimbursed to Executive promptly by
the Company, whether or not Executive is successful in asserting such rights;
provided, however, that no reimbursement shall be made of such expenses relating
to any unsuccessful assertion of rights if and to the extent that Executive's
assertion of such rights was in bad faith or frivolous, as determined by
arbitrators in accordance with Section 11(c) or a court having jurisdiction over
the matter.
(c) ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Westport CT by three arbitrators in accordance with the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association in
effect at the time of submission to arbitration. Judgment may be entered on the
arbitrators' award in any court having jurisdiction. For purposes of entering
any judgment upon an award rendered by the arbitrators, the Company and
Executive hereby consent to the jurisdiction of any or all of the following
courts: (i) the United States District Court for the District of Connecticut,
(ii) any of the courts of the State of Connecticut, or (iii) any other court
having jurisdiction. The Company and Executive further agree that any service of
process or notice requirements in any such proceeding shall be satisfied if the
rules of such court relating thereto have been substantially satisfied. The
Company and Executive hereby waive, to the fullest extent permitted by
applicable law, any objection which it may now or hereafter have to such
jurisdiction and any defense of inconvenient forum. The Company and Executive
hereby agree that a judgment upon an award rendered by the arbitrators may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Subject to Section 11(b), the Company shall bear all costs and
expenses arising in connection with any arbitration proceeding pursuant to this
Section 11. Notwithstanding any provision in this Section 11, Executive shall be
paid during the pendency of any dispute or controversy arising under or in
connection with this Agreement.
(d) INTEREST ON UNPAID AMOUNTS. Any amount which has become
payable pursuant to the terms of this Agreement or any decision by arbitrators
or judgment by a court of law pursuant to this Section 11 but which has not been
timely paid shall bear interest at the prime rate in effect at the time such
amount first becomes payable, as quoted by the Company's principal bank.
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<PAGE>
12. MISCELLANEOUS.
(a) INTEGRATION. This Agreement cancels and supersedes any and all
prior agreements and understandings between the parties hereto with respect to
the employment of Executive by the Company, any parent or predecessor company,
and the Company's subsidiaries during the Term, except for contracts relating to
compensation under executive compensation and employee benefit plans of the
Company and its subsidiaries. The foregoing notwithstanding, Executive shall not
participate in the Company's Employee Protection Plan unless the aggregate
benefits provided under such plan would exceed the aggregate benefits provided
to Executive under this Agreement upon termination of employment. Executive
shall remain entitled to any right or benefit under a Change-in-Control
Agreement executed by the Company, for so long as such Change-in-Control
Agreement remains in effect, if and to the extent that such right or benefit is
more favorable than a corresponding provision of this Agreement, but no payment
or benefit under the Change-in-Control Agreement shall be made or extended which
duplicates any payment or benefit hereunder. If and to the extent that this
Agreement may provide enhanced benefits to Executive under the SERP which
benefits are not explicitly provided for under the SERP, the SERP shall be
deemed amended by this Agreement (but only insofar as it pertains to Executive).
This Agreement constitutes the entire agreement among the parties with respect
to the matters herein provided, and no modification or waiver of any provision
hereof shall be effective unless in writing and signed by the parties hereto.
Executive shall not be entitled to any payment or benefit under this Agreement
which duplicates a payment or benefit received or receivable by Executive under
such prior agreements and understandings or under any benefit or compensation
plan of the Company.
(b) SUCCESSORS; TRANSFERABILITY. The Company shall require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise, and whether or not the corporate existence of the Company continues)
to all or substantially all of the business and/or assets of the Company to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business and/or assets
as aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise and, in the case of an acquisition of the Company in which the
corporate existence of the Company continues, the ultimate parent company
following such acquisition. Subject to the foregoing, the Company may transfer
and assign this Agreement and the Company's rights and obligations hereunder.
Neither this Agreement nor the rights or obligations hereunder of the parties
hereto shall be transferable or assignable by Executive, except in accordance
with the laws of descent and distribution or as specified in Section 12(c).
(c) BENEFICIARIES. Executive shall be entitled to designate (and
change, to the extent permitted under applicable law) a beneficiary or
beneficiaries to receive any compensation or benefits provided hereunder
following Executive's death.
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<PAGE>
(d) NOTICES. Whenever under this Agreement it becomes necessary to
give notice, such notice shall be in writing, signed by the party or parties
giving or making the same, and shall be served on the person or persons for whom
it is intended or who should be advised or notified, by Federal Express or other
similar overnight service or by certified or registered mail, return receipt
requested, postage prepaid and addressed to such party at the address set forth
below or at such other address as may be designated by such party by like
notice:
If to the Company:
IMS HEALTH, INC.
200 Nyala Farms
Westport, CT 06880
Attention: General Counsel
If to Executive:
David M. Thomas
200 Nyala Farms
Westport, CT 06880
If the parties by mutual agreement supply each other with telecopier
numbers for the purposes of providing notice by facsimile, such notice shall
also be proper notice under this Agreement. In the case of Federal Express or
other similar overnight service, such notice or advice shall be effective when
sent, and, in the cases of certified or registered mail, shall be effective two
days after deposit into the mails by delivery to the U.S. Post Office.
(e) REFORMATION. The invalidity of any portion of this Agreement
shall not deemed to render the remainder of this Agreement invalid.
(f) HEADINGS. The headings of this Agreement are for convenience
of reference only and do not constitute a part hereof.
(g) NO GENERAL WAIVERS. The failure of any party at any time to
require performance by any other party of any provision hereof or to resort to
any remedy provided herein or at law or in equity shall in no way affect the
right of such party to require such performance or to resort to such remedy at
any time thereafter, nor shall the waiver by any party of a breach of any of the
provisions hereof be deemed to be a waiver of any subsequent breach of such
provisions. No such waiver shall be effective unless in writing and signed by
the party against whom such waiver is sought to be enforced.
(h) NO OBLIGATION TO MITIGATE. Executive shall not be required to
seek other employment or otherwise to mitigate Executive's damages upon any
termination of employment; provided, however, that, to the extent Executive
receives
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<PAGE>
from a subsequent employer health or other insurance benefits that are
substantially similar to the benefits referred to in Section 5(b) hereof, any
such benefits to be provided by the Company to Executive following the Term
shall be correspondingly reduced.
(i) OFFSETS; WITHHOLDING. The amounts required to be paid by the
Company to Executive pursuant to this Agreement shall not be subject to offset
other than with respect to any amounts that are owed to the Company by Executive
due to his receipt of funds as a result of his fraudulent activity. The
foregoing and other provisions of this Agreement notwithstanding, all payments
to be made to Executive under this Agreement, including under Sections 6 and 7,
or otherwise by the Company, will be subject to withholding to satisfy required
withholding taxes and other required deductions.
(j) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and shall inure to the benefit of Executive, his heirs, executors,
administrators and beneficiaries, and shall be binding upon and inure to the
benefit of the Company and its successors and assigns.
(k) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
(l) DUE AUTHORITY AND EXECUTION. The execution, delivery and
performance of this Agreement has been duly authorized by the Company and this
Agreement represents the valid, legal and binding obligation of the Company,
enforceable against the Company according to its terms.
(m) REPRESENTATIONS OF EXECUTIVE. Executive represents and
warrants to the Company that he has the legal right to enter into this Agreement
and to perform all of the obligations on his part to be performed hereunder in
accordance with its terms and that he is not a party to any agreement or
understanding, written or oral, which prevents him from entering into this
Agreement or performing all of his obligations hereunder. In the event of a
breach of such representation or warranty on Executive's part or if there is any
other legal impediment which prevents him from entering into this Agreement or
performing all of his obligations hereunder, the Company shall have the right to
terminate this Agreement forthwith in accordance with the same notice and
hearing procedures specified above in respect of a termination by the Company
for Cause pursuant to Section 7(a) and shall have no further obligations to
Executive hereunder. Notwithstanding a termination by the Company under this
Section 12(m), Executive's obligations under Section 10 of this Agreement shall
survive such termination.
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<PAGE>
13. INDEMNIFICATION.
All rights to indemnification by the Company now existing in favor
of Executive as provided in the Company's Certificate of Incorporation or
By-laws or pursuant to other agreements in effect on or immediately prior to the
Effective Date shall continue in full force and effect from the Effective Date
(including all periods after the expiration of the Term), and the Company shall
also advance expenses for which indemnification may be ultimately claimed as
such expenses are incurred to the fullest extent permitted under applicable law,
subject to any requirement that Executive provide an undertaking to repay such
advances if it is ultimately determined that Executive is not entitled to
indemnification; provided, however, that any determination required to be made
with respect to whether Executive's conduct complies with the standards required
to be met as a condition of indemnification or advancement of expenses under
applicable law and the Company's Certificate of Incorporation, By-laws, or other
agreement shall be made by independent counsel mutually acceptable to Executive
and the Company (except to the extent otherwise required by law). After the date
hereof, the Company shall not amend its Certificate of Incorporation or By-laws
or any agreement in any manner which adversely affects the rights of Executive
to indemnification thereunder. Any provision contained herein notwithstanding,
this Agreement shall not limit or reduce any rights of Executive to
indemnification pursuant to applicable law. In addition, the Company will
maintain directors' and officers' liability insurance in effect and covering
acts and omissions of Executive during the Term and for a period of six years
thereafter on terms substantially no less favorable than those in effect on the
Effective Date.
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<PAGE>
IN WITNESS WHEREOF, Executive has hereunto set his hand and the
Company has caused this instrument to be duly executed as of the date first
above written.
/s/ M. Bernard Puckett
------------------------------------
M. Bernard Puckett
EXECUTIVE
/s/ David M. Thomas
------------------------------------
David M. Thomas
IMS HEALTH, INC.
By: /s/ Robert H. Steinfeld
---------------------------------
Name: Robert H. Steinfeld
Title: Senior Vice President,
General Counsel and
Secretary
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.45
<SEQUENCE>8
<FILENAME>a2041132zex-10_45.txt
<DESCRIPTION>EXHIBIT 10.45
<TEXT>
<PAGE>
Exhibit 10.45
- --------------------------------------------------------------------------------
IMS HEALTH [LOGO]
Employment Agreement for Gilles Pajot
- --------------------------------------------------------------------------------
<PAGE>
IMS HEALTH INCORPORATED
- --------------------------------------------------------------------------------
Employment Agreement for Gilles Pajot
- --------------------------------------------------------------------------------
Page
1. Employment............................................................1
2. Term..................................................................1
3. Offices and Duties....................................................1
(a) Generally....................................................2
(b) Place of Employment..........................................2
4. Salary and Annual Incentive Compensation..............................2
(a) Base Salary..................................................2
(b) Annual Incentive Compensation................................2
5. Long Term Compensation, Including Stock Options, Benefits,
Deferred Compensation, and Expense Reimbursement......................3
(a) Executive Compensation Plans.................................3
(b) Employee and Executive Benefit Plans.........................3
(c) Acceleration of Awards Upon a Change in Control..............4
(d) Deferral of Compensation.....................................4
(e) Company Registration Obligations.............................4
(f) Reimbursement of Expenses....................................4
6. Termination Due to Retirement, Death or Disability....................4
(a) Retirement...................................................5
(b) Death........................................................5
(c) Disability...................................................6
(d) Other Terms of Payment Following Retirement, Death
or Disability................................................7
7. Termination of Employment For Reasons Other Than Retirement,
Death, or Disability..................................................7
(a) Termination by the Company for Cause.........................7
(b) Termination by Executive Other Than For
Good Reason..................................................7
(c) Termination by the Company Without Cause Prior to
or More than Two Years After a Change in Control.............8
(d) Termination by Executive for Good Reason Prior
to or More than Two Years After a Change in Control..........9
(e) Termination by the Company Without Cause Within
i
<PAGE>
Two Years After a Change in Control.........................11
(f) Termination by Executive for Good Reason Within Two
Years After a Change in Control.............................13
(g) Other Terms Relating to Certain Terminations of Employment..15
8. Definitions Relating to Termination Events...........................15
(a) "Cause".....................................................15
(b) "Change in Control".........................................15
(c) "Compensation Accrued at Termination".......................16
(d) "Disability"................................................16
(e) "Good Reason................................................16
(f) "Potential Change in Control"...............................18
9. Rabbi Trust Obligation Upon Potential Change in Control; Excise
Tax Related Provisions...............................................18
(a) Rabbi Trust Funded Upon Potential Change in Control.........18
(b) Gross-up If Excise Tax Would Apply..........................18
10. Non-Competition and Non-Disclosure; Executive Cooperation;
Non-Disparagement....................................................20
(a) Non-Competition.............................................20
(b) Non-Disclosure; Ownership of Work...........................20
(c) Cooperation With Regard to Litigation.......................20
(d) Non-Disparagement...........................................21
(e) Release of Employment Claims................................21
(f) Forfeiture of Outstanding Options...........................21
(g) Survival....................................................21
11. Governing Law; Disputes; Arbitration.................................21
(a) Governing Law...............................................21
(b) Reimbursement of Expenses in Enforcing Rights...............22
(c) Arbitration.................................................22
(d) Interest on Unpaid Amounts..................................22
12. Miscellaneous........................................................22
(a) Integration.................................................22
(b) Successors; Transferability.................................23
(c) Beneficiaries...............................................23
(d) Notices.....................................................23
(e) Reformation.................................................23
ii
<PAGE>
(f) Headings....................................................23
(g) No General Waivers..........................................24
(h) No Obligation To Mitigate...................................24
(i) Offsets; Withholding........................................24
(j) Successors and Assigns......................................24
(k) Counterparts................................................24
13. Indemnification......................................................24
iii
<PAGE>
IMS HEALTH INCORPORATED
------------------------------------------------------------------------------
Employment Agreement for Gilles Pajot
- ------------------------------------------------------------------------------
THIS EMPLOYMENT AGREEMENT by and between IMS HEALTH INCORPORATED, a
Delaware corporation (the "Company"), and Gilles Pajot ("Executive") shall
become effective as of November 14, 2000 (the "Effective Date").
WITNESSETH
WHEREAS, Executive has served the Company and its predecessors as an
executive of their subsidiaries since December 16, 1997;
WHEREAS, the Company desires to continue to employ Executive as Executive
Vice President of the Company, and Executive desires to accept such employment
on the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained herein, and other good and valuable consideration the receipt and
adequacy of which the Company and Executive each hereby acknowledge, the Company
and Executive hereby agree as follows:
1. EMPLOYMENT.
The Company hereby agrees to employ Executive as its Executive Vice
President, and Executive hereby agrees to accept such employment and serve in
such capacities, during the Term as defined in Section 2 (subject to Section
7(c)) and upon the terms and conditions set forth in this Employment Agreement
(the "Agreement").
2. TERM.
The term of employment of Executive under this Agreement (the "Term")
shall be the period commencing on the Effective Date and ending on December 31,
2002 and any period of extension thereof in accordance with this Section 2,
except that the Term will end at a date, prior to the end of such period or
extension thereof, specified in Section 6 or 7 in the event of termination of
Executive's employment. The Term, if not previously ended, shall be extended
automatically without further action by either party by one additional year
(added to the end of the Term) first on December 31, 2002 (extending the Term to
December 31, 2003) and on each succeeding December 31 thereafter, unless either
party shall have served written notice in accordance with Section 12(d) upon the
other party on or before the June 30 preceding a December 31 extension date
electing not to extend the Term further as of that December 31 extension date,
in which case employment shall terminate on that December 31 and the Term shall
end at that date, subject to earlier termination of employment and earlier
termination of the Term in accordance with Section 6 or 7. The foregoing
notwithstanding, in the event there occurs a Potential Change in Control during
the period of 180 days prior to the December 31 on which the Term will terminate
as a result of notice given by the Executive or the Company hereunder, the Term
shall be extended automatically at that December 31 by an additional period such
that the Term will extend until the 180th day following such Potential Change in
Control.
3. OFFICES AND DUTIES.
The provisions of this Section 3 will apply during the Term, except as
otherwise provided in Section 7(c) or 7(e):
(a) GENERALLY. Executive shall serve as the Executive Vice President of
the Company and shall be nominated in 2000 and, if elected, shall serve as a
member of the Board of Directors of the Company (the "Board") and, for so long
as he is serving on the Board, Executive agrees to serve as a member of any
Board
<PAGE>
committee if the Board shall elect Executive to such committee. In any and all
such capacities, Executive shall report only to the Chief Executive Officer of
the Company and to the Board. Executive shall have and perform such duties,
responsibilities, and authorities as are customary for an executive vice
president of a publicly held corporation of the size, type, and nature of the
Company as they may exist from time to time and consistent with such position
and status, but in no event shall such duties, responsibilities, and authorities
be reduced from those of Executive at the Effective Date (including those
specified in this Section 3(a)), except with the written consent of Executive.
Executive shall devote his full business time and attention, and his best
efforts, abilities, experience, and talent, to the positions of Executive Vice
President and for the businesses of the Company without commitment to other
business endeavors, except that Executive (i) may make personal investments
which are not in conflict with his duties to the Company and manage personal and
family financial and legal affairs, (ii) may undertake public speaking
engagements, and (iii) may serve as a director of (or similar position with) any
other business or an educational, charitable, community, civic, religious, or
similar type of organization with the approval of the Chief Executive Officer,
so long as such activities (i.e., those listed in clauses (i) through (iii)) do
not preclude or render unlawful Executive's employment or service to the Company
or otherwise materially inhibit the performance of Executive's duties under this
Agreement or materially impair the business of the Company or its subsidiaries.
(b) PLACE OF EMPLOYMENT. Executive's principal place of employment shall
be at the Corporate Offices of the Company which shall be in London, England and
Paris, France.
4. SALARY AND ANNUAL INCENTIVE COMPENSATION.
As partial compensation for the services to be rendered hereunder by
Executive, the Company agrees to pay to Executive during the Term the
compensation set forth in this Section 4.
(a) BASE SALARY. The Company will pay to Executive during the Term a base
salary, the annual rate of which shall be Pounds Sterling 322,907, payable in
cash in substantially equal semi-monthly installments commencing at the
beginning of the Term, and otherwise in accordance with the Company's usual
payroll practices with respect to senior executives (except to the extent
deferred under Section 5(d)). Executive's annual base salary shall be reviewed
by the Compensation and Benefits Committee of the Board (the "Committee") at
least once in each calendar year, and may be increased above, but may not be
reduced below, the then-current rate of such base salary. For purposes of this
Agreement, "Base Salary" means Executive's then-current base salary.
(b) ANNUAL INCENTIVE COMPENSATION. The Company will pay to Executive
during the Term annual incentive compensation which shall offer to Executive an
opportunity to earn additional compensation based upon performance in amounts
determined by the Committee in accordance with the applicable plan and
consistent with past practices of the Company; provided, however, that the
annual incentive opportunity during the Term shall be not less than the greater
of 56% of Base Salary or the annual target incentive opportunity for the prior
year for achievement of target level performance, with the nature of the
performance and the levels of performance triggering payments of such annual
target incentive compensation for each year to be established and communicated
to Executive during the first quarter of such year by the Committee; provided,
further, that annual incentive payable for performance in 2000 shall be based on
the amount of salary actually paid during the year. In addition, the Committee
(or the Board) may determine, in its discretion, to increase the Executive's
annual target incentive opportunity or provide an additional annual incentive
opportunity, in excess of the annual target incentive opportunity, payable for
performance in excess of or in addition to the performance required for payment
of the annual target incentive amount. Any annual incentive compensation payable
to Executive shall be paid in accordance with the Company's usual practices with
respect to payment of incentive compensation to senior executives (except to the
extent deferred under Section 5(d)).
5. LONG-TERM COMPENSATION, INCLUDING STOCK OPTIONS, BENEFITS, DEFERRED
COMPENSATION, AND EXPENSE REIMBURSEMENT
(a) EXECUTIVE COMPENSATION PLANS. Executive shall be entitled during the
Term to participate, without discrimination or duplication, in all executive
compensation plans and programs intended for general participation by senior
executives of the Company, as presently in effect or as they may be modified or
added to by the Company from time to time, subject to the eligibility and other
requirements of such plans and
2
<PAGE>
programs, including without limitation any stock option plans, plans under which
restricted stock/restricted stock units, performance-based restricted
stock/restricted stock units ("PERS") or performance-accelerated restricted
stock/restricted stock units ("PARS") may be awarded, other annual and long-term
cash and/or equity incentive plans, and deferred compensation plans; provided,
however, that such plans and programs, in the aggregate, shall provide Executive
with compensation and incentive award opportunities substantially no less
favorable than those provided by the Company to Executive under such plans and
programs as in effect on the Effective Date.
(b) EMPLOYEE AND EXECUTIVE BENEFIT PLANS. Executive shall be entitled
during the Term to participate, without discrimination or duplication, in all
employee and executive benefit plans and programs of the Company, as presently
in effect or as they may be modified or added to by the Company from time to
time, to the extent such plans are available generally to other senior
executives or employees of the Company, subject to the eligibility and other
requirements of such plans and programs, including without limitation plans
providing pensions, supplemental pensions, supplemental and other retirement
benefits, medical insurance, life insurance, disability insurance, and
accidental death or dismemberment insurance, as well as savings, profit-sharing,
and stock ownership plans; provided, however, that such benefit plans and
programs, in the aggregate, shall provide Executive with benefits and
compensation substantially no less favorable than those provided by the Company
to Executive under such plans and programs as in effect on the Effective Date.
The foregoing notwithstanding, Executive shall not be eligible to participate or
receive benefits under the Company's Employee Protection Plan, and benefits to
Executive under his Change-in-Control Agreement shall be payable only if and to
the extent that such benefits would exceed the corresponding benefits payable
under this Agreement.
In furtherance of and not in limitation of the foregoing, during the Term:
(i) Executive will participate as Executive Vice President in all
executive and employee vacation and time-off programs;
(ii) The Company will provide Executive with coverage as Executive
Vice President with respect to long-term disability insurance and benefits
substantially no less favorable (including any required contributions by
Executive) than such insurance and benefits in effect on the Effective
Date;
(iii) Executive will be covered by Company-paid group and individual
term life insurance providing a death benefit no less than the death
benefit provided under Company-paid insurance in effect at the Effective
Date; provided, however, that, with the consent of Executive, such
insurance may be combined with a supplementary retirement funding vehicle;
(iv) Executive will be entitled to retirement benefits equivalent to
the benefits he would have received under the Pharmacia & Upjohn Global
Officers Pension Plan, as set forth on Exhibit A hereto (the "PUGOPP"),
taking into account all offsets as applicable under the PUGOPP and without
regard to any changes to the PUGOPP implemented by Pharmacia & Upjohn
since Executive became an employee of I.M.S. International, Inc., if he
had remained continuously employed by Pharmacia & Upjohn through the date
of his Termination of Employment with the Company, treating salary paid by
the Company and its subsidiaries as salary and years of service to the
Company and its subsidiaries as years of service for purposes of the
PUGOPP; PROVIDED, HOWEVER, that for purposes of calculating retirement
benefits under the PUGOPP, "average final compensation" shall be
calculated based on compensation paid in respect of the final five full
years of service of Executive preceding his termination of employment by
the Company; PROVIDED FURTHER, that the amount of the Company's
obligations hereunder shall be reduced by the amount of any benefits
actually paid to Executive in respect of the PUGOPP by any third party;
and PROVIDED FURTHER, that, in the event of Executive's termination due to
Disability in accordance with Section 6(c), Executive will receive
benefits (without duplication) not less than the benefits he would have
received had he been a participant in the Company's United States
Executive Retirement Plan credited with years of service equal to his
years of service to the Company from the commencement of his employment;
and PROVIDED FURTHER, that, in the event of termination of Executive's
employment by the Company for Cause, no benefits will be payable to
Executive pursuant to this Section 5(b)(iv); and
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(v) The Company will provide Executive with health and medical
benefits consistent with its policies for other senior executives.
Any provision to the contrary contained in this Agreement notwithstanding,
unless Executive is terminated by the Company for "Cause" (as defined in Section
8(a)) or Executive terminates voluntarily and not for "Good Reason" (as defined
in Section 8(e)), Executive may elect continued participation after termination
of employment in the Company's health and medical coverage for himself and his
spouse and dependent children after such coverage would otherwise end until such
time as Executive becomes eligible for similar coverage with a subsequent
employer or other entity to which Executive provides services or becomes
eligible for Medicare (under rules in effect at the Effective Date hereof);
provided, however, that in the event of such election, Executive shall pay the
Company each year an amount equal to the then-current annual COBRA premium being
paid (or payable) by any other former employee of the Company, unless otherwise
provided under Section 6 or 7.
(c) ACCELERATION OF AWARDS UPON A CHANGE IN CONTROL. In the event of a
Change in Control (as defined in Section 8(b)), all outstanding stock options,
restricted stock, and other equity-based awards then held by Executive shall
become vested and exercisable.
(d) DEFERRAL OF COMPENSATION. If the Company has in effect or adopts any
deferral program or arrangement permitting executives to elect to defer any
compensation, Executive will be eligible to participate in such program on terms
no less favorable than the terms of participation of any other executive officer
of the Company. Any plan or program of the Company which provides benefits based
on the level of salary, annual incentive, or other compensation of Executive
shall, in determining Executive's benefits, take into account the amount of
salary, annual incentive, or other compensation prior to any reduction for
voluntary contributions made by Executive under any deferral or similar
contributory plan or program of the Company (excluding compensation that would
not be taken into account even if not deferred), but shall not treat any payout
or settlement under such a deferral or similar contributory plan or program to
be additional salary, annual incentive, or other compensation for purposes of
determining such benefits, unless otherwise expressly provided under such plan
or program.
(e) COMPANY REGISTRATION OBLIGATIONS. The Company will use its best
efforts to file with the Securities and Exchange Commission and thereafter
maintain the effectiveness of one or more registration statements registering
under the Securities Act of 1933, as amended (the "1933 Act"), the offer and
sale of shares by the Company to Executive pursuant to stock options or other
equity-based awards granted to Executive under Company plans or otherwise or, if
shares are acquired by Executive in a transaction not involving an offer or sale
to Executive but resulting in the acquired shares being "restricted securities"
for purposes of the 1933 Act, registering the reoffer and resale of such shares
by Executive.
(f) REIMBURSEMENT OF EXPENSES. The Company will promptly reimburse
Executive for all reasonable business expenses and disbursements incurred by
Executive in the performance of Executive's duties during the Term in accordance
with the Company's reimbursement policies as in effect from time to time.
6. TERMINATION DUE TO RETIREMENT, DEATH, OR DISABILITY.
(a) RETIREMENT. Executive may elect to terminate employment hereunder by
retirement at or after age 55 or, upon the request of Executive, at such earlier
age as may be approved by the Board (in either case, "Retirement"). At the time
Executive's employment terminates due to Retirement, the Term will terminate,
all obligations of the Company and Executive under Sections 1 through 5 of this
Agreement will immediately cease except for obligations which expressly continue
after termination of employment due to Retirement, and the Company will pay
Executive, and Executive will be entitled to receive, the following:
(i) Executive's Compensation Accrued at Termination (as defined in
Section 8(c));
(ii) In lieu of any annual incentive compensation under Section 4(b)
for the year in which Executive's employment terminated, an amount equal
to the portion of annual incentive compensation that would have become
payable in cash to Executive (i.e., excluding the portion payable in PERS
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or in other non-cash awards) for that year if his employment had not
terminated, based on performance actually achieved in that year
(determined by the Committee following completion of the performance
year), multiplied by a fraction the numerator of which is the number of
days Executive was employed in the year of termination and the denominator
of which is the total number of days in the year of termination;
(iii) The vesting and exercisability of stock options held by
Executive at termination and all other terms of such options shall be
governed by the plans and programs and the agreements and other documents
pursuant to which such options were granted (subject to Section 10(f)
hereof); and
(iv) All restricted stock and deferred stock awards, including
outstanding PERS awards, all other long-term incentive awards, and all
deferral arrangements under Section 5(d), shall be governed by the plans
and programs under which the awards were granted or governing the
deferral, and all rights under any other benefit plan shall be governed by
such plan.
(b) DEATH. In the event of Executive's death which results in the
termination of Executive's employment, the Term will terminate, all obligations
of the Company and Executive under Sections 1 through 5 of this Agreement will
immediately cease except for obligations which expressly continue after death,
and the Company will pay Executive's beneficiary or estate, and Executive's
beneficiary or estate will be entitled to receive, the following:
(i) Executive's Compensation Accrued at Termination;
(ii) In lieu of any annual incentive compensation under Section 4(b)
for the year in which Executive's death occurred, an amount equal to the
portion of annual incentive compensation that would have become payable in
cash to Executive (i.e., excluding the portion payable in PERS or in other
non-cash awards) for that year if his employment had not terminated, based
on performance actually achieved in that year (determined by the Committee
following completion of the performance year), multiplied by a fraction
the numerator of which is the number of days Executive was employed in the
year of his death and the denominator of which is the total number of days
in the year of death;
(iii) The vesting and exercisability of stock options held by
Executive at death and all other terms of such options shall be governed
by the plans and programs and the agreements and other documents pursuant
to which such options were granted; and
(iv) All restricted stock and deferred stock awards, including
outstanding PERS awards, all other long-term incentive awards, and all
deferral arrangements under Section 5(d), shall be governed by the plans
and programs under which the awards were granted or governing the
deferral, and all rights under any other benefit plan shall be governed by
such plan.
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(c) DISABILITY. The Company may terminate the employment of Executive
hereunder due to the Disability (as defined in Section 8(d)) of Executive. Such
employment shall terminate at the expiration of the 30-day period referred to in
the definition of Disability set forth in Section 8(d), unless Executive has
returned to service and presented to the Company a certificate of good health
prior to such termination as specified in Section 8(d). Upon termination of
employment, the Term will terminate, all obligations of the Company and
Executive under Sections 1 through 5 of this Agreement will immediately cease
except for obligations which expressly continue after termination of employment
due to Disability, and the Company will pay Executive, and Executive will be
entitled to receive, the following:
(i) Executive's Compensation Accrued at Termination;
(ii) In lieu of any annual incentive compensation under Section 4(b)
for the year in which Executive's employment terminated, an amount equal
to the portion of annual incentive compensation that would have become
payable in cash to Executive (i.e., excluding the portion payable in PERS
or in other non-cash awards) for that year if his employment had not
terminated, based on performance actually achieved in that year
(determined by the Committee following completion of the performance
year), multiplied by a fraction the numerator of which is the number of
days Executive was employed in the year of termination and the denominator
of which is the total number of days in the year of termination;
(iii) Stock options held by Executive at termination shall be
governed by the plans and programs and the agreements and other documents
pursuant to which such options were granted;
(iv) Any performance objectives upon which the earning of
performance-based restricted stock and deferred stock awards, including
outstanding PERS awards, and other long-term incentive awards is
conditioned shall be deemed to have been met at target level at the date
of termination, and restricted stock and deferred stock awards, including
outstanding PERS awards, and other long-term incentive awards (to the
extent then or previously earned, in the case of performance-based awards)
shall become fully vested and non-forfeitable at the date of such
termination, and, in other respects, such awards shall be governed by the
plans and programs and the agreements and other documents pursuant to
which such awards were granted;
(v) Disability benefits shall be payable in accordance with the
Company's plans, programs and policies, and all deferral arrangements
under Section 5(d) will be settled in accordance with the plans and
programs governing the deferral; and
(vi) For the period extending from the date of termination due to
Disability until the date Executive reaches age 65, Executive shall
continue to participate in those employee and executive benefit plans and
programs under Section 5(b) to the extent such plans and programs provide
medical insurance, disability insurance and life insurance benefits (but
not other benefits, such as pension and retirement benefits, provided
under Section 5(b)) in which Executive was participating immediately prior
to termination, the terms of which allow Executive's continued
participation, as if Executive had continued in employment with the
Company during such period or, if the terms of such plans or programs do
not allow Executive's continued participation, Executive shall be paid a
cash payment equivalent on an after-tax basis to the value of the
additional benefits (of the type described in this Section 6(c)(vi))
Executive would have received under such plans or programs had Executive
continued to be employed during such period following Executive's
termination until age 65, with such benefits provided by the Company at
the same times and in the same manner as such benefits would have been
provided to Executive under such plans and programs (it being understood
that the value of any insurance-provided benefits will be based on the
premium cost to Executive, which shall not exceed the highest risk premium
charged by a carrier having an investment grade or better credit rating).
The foregoing notwithstanding, Executive must continue to satisfy the
conditions set forth in Section 10 in order to continue receiving the
benefits provided under this Section 6(c)(vi).
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(d) OTHER TERMS OF PAYMENT FOLLOWING RETIREMENT, DEATH, OR Disability.
Nothing in this Section 6 shall limit the benefits payable or provided In the
event Executive's employment terminates due to Retirement, death, or Disability
under the terms of plans or programs of the Company more favorable to the
Executive (or his beneficiaries) than the benefits payable or provided under
this Section 6 (except in the case of annual incentives in lieu of which amounts
are paid hereunder), including plans and programs adopted after the date of this
Agreement. Amounts payable under this Section 6 following Executive's
termination of employment, other than those expressly payable following
determination of performance for the year of termination for purposes of annual
incentive compensation or otherwise expressly payable on a deferred basis, will
be paid as promptly as practicable after such termination of employment.
7. TERMINATION OF EMPLOYMENT FOR REASONS OTHER THAN RETIREMENT, DEATH OR
DISABILITY.
(a) TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate the
employment of Executive hereunder for Cause (as defined in Section 8(a)) at any
time. At the time Executive's employment is terminated for Cause, the Term will
terminate, all obligations of the Company and Executive under Sections 1 through
5 of this Agreement will immediately cease except for obligations which
expressly continue after termination of employment by the Company for Cause, and
the Company will pay Executive, and Executive will be entitled to receive, the
following:
(i) Executive's Compensation Accrued at Termination (as defined in
Section 8(c));
(ii) All stock options, restricted stock and deferred stock awards,
including outstanding PERS awards, and all other long-term incentive
awards will be governed by the terms of the plans and programs under which
the awards were granted; and
(iii) All deferral arrangements under Section 5(d) will be settled
in accordance with the plans and programs governing the deferral, and all
rights under any other benefit plan shall be governed by such plan
(subject to Section 5(b)).
(b) TERMINATION BY EXECUTIVE OTHER THAN FOR GOOD REASON. Executive may
terminate his employment hereunder voluntarily for reasons other than Good
Reason (as defined in Section 8(e)) at any time, upon 90 days' written notice to
the Company. An election by Executive not to extend the Term pursuant to Section
2 hereof shall be deemed to be a termination of employment by Executive for
reasons other than Good Reason at the date of expiration of the Term, unless a
Change in Control (as defined in Section 8(b)) occurs prior to, and there exists
Good Reason at, such date of expiration. At the time Executive's employment is
terminated by Executive other than for Good Reason the Term will terminate, all
obligations of the Company and Executive under Sections 1 through 5 of this
Agreement will immediately cease, and the Company will pay Executive, and
Executive will be entitled to receive, the following:
(i) Executive's Compensation Accrued at Termination;
(ii) All stock options, restricted stock and deferred stock awards,
including outstanding PERS awards, and all other long-term incentive
awards will be governed by the terms of the plans and programs under which
the awards were granted; and
(iii) All deferral arrangements under Section 5(d) will be settled
in accordance with the plans and programs governing the deferral, and all
rights under any other benefit plan shall be governed by such plan.
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<PAGE>
(c) TERMINATION BY THE COMPANY WITHOUT CAUSE PRIOR TO OR MORE THAN TWO
YEARS AFTER A CHANGE IN CONTROL. The Company may terminate the employment of
Executive hereunder without Cause, if at the date of termination no Change in
Control has occurred or such date of termination is at least two years after the
most recent Change in Control, upon at least 90 days' written notice to
Executive. The foregoing notwithstanding, the Company may elect, by written
notice to Executive, to terminate Executive's positions specified in Sections 1
and 3 and all other obligations of Executive and the Company under Section 3 at
a date earlier than the expiration of such 90-day period, if so specified by the
Company in the written notice, provided that Executive shall be treated as an
employee of the Company (without any assigned duties) for all other purposes of
this Agreement, including for purposes of Sections 4 and 5, from such specified
date until the expiration of such 90-day period. An election by the Company not
to extend the Term pursuant to Section 2 hereof shall be deemed to be a
termination of Executive's employment by the Company without Cause at the date
of expiration of the Term and shall be subject to this Section 7(c) if at the
date of such termination no Change in Control has occurred or such date of
termination is at least two years after the most recent Change in Control;
provided, however, that, if Executive has attained age 65 at such date of
termination, such termination shall be deemed a Retirement of Executive. At the
time Executive's employment is terminated by the Company (i.e., at the
expiration of such notice period), the Term will terminate, all remaining
obligations of the Company and Executive under Sections 1 through 5 of this
Agreement will immediately cease (except for obligations which continue after
termination of employment as expressly provided herein), and the Company will
pay Executive, and Executive will be entitled to receive, the following:
(i) Executive's Compensation Accrued at Termination;
(ii) Cash in an aggregate amount equal to two times the sum of (A)
Executive's Base Salary under Section 4(a) immediately prior to
termination plus (B) an amount equal to the greater of (x) the portion of
Executive's annual target incentive compensation potentially payable in
cash to Executive (i.e., excluding the portion payable in PERS or in other
non-cash awards) for the year of termination or (y) the portion of
Executive's annual incentive compensation that became payable in cash to
Executive (i.e., excluding the portion payable in PERS or in other
non-cash awards) for the latest year preceding the year of termination
based on performance actually achieved in that latest year. The amount
determined to be payable under this Section 7(c)(ii) shall be payable in
monthly installments over the 24 months following termination, without
interest, except the Company may elect to accelerate payment of the
remaining balance of such amount and to pay it as a lump sum, without
discount;
(iii) In lieu of any annual incentive compensation under Section
4(b) for the year in which Executive's employment terminated, an amount
equal to the portion of Executive's annual target incentive compensation
potentially payable in cash to Executive (i.e., excluding the portion
payable in PERS or in other non-cash awards) for the year of termination,
multiplied by a fraction the numerator of which is the number of days
Executive was employed in the year of termination and the denominator of
which is the total number of days in the year of termination;
(iv) Stock options held by Executive at termination, if not then
vested and exercisable, will become fully vested and exercisable at the
date of such termination, and, in other respects (including the period
following termination during which such options may be exercised), such
options shall be governed by the plans and programs and the agreements and
other documents pursuant to which such options were granted; except stock
options which were outstanding and "in-the-money" at the Effective date,
other than such options which were granted either on February 15, 2000 and
May 25, 2000 (all tranches), shall be governed by the terms of the plans
and agreements governing such options;
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(v) Any performance objectives upon which the earning of
performance-based restricted stock and deferred stock awards, including
outstanding PERS awards, and other long-term incentive awards is
conditioned shall be deemed to have been met at target level at the date
of termination, and restricted stock and deferred stock awards, including
outstanding PERS awards, and other long-term incentive awards (to the
extent then or previously earned, in the case of performance-based awards)
shall become fully vested and non-forfeitable at the date of such
termination, and, in other respects, such awards shall be governed by the
plans and programs and the agreements and other documents pursuant to
which such awards were granted;
(vi) All deferral arrangements under Section 5(d) will be settled in
accordance with the plans and programs governing the deferral;
(vii) All rights under any other benefit plan shall be governed by
such plan (subject to Section 5(b)); and
(viii) For a period of two years after such termination (but not
after Executive attains age 65), Executive shall continue to participate
in those employee and executive benefit plans and programs under Section
5(b) to the extent such plans and programs provide medical insurance,
disability insurance and life insurance benefits (but not other benefits,
such as pension and retirement benefits, provided under Section 5(b)) in
which Executive was participating immediately prior to termination, the
terms of which allow Executive's continued participation, as if Executive
had continued in employment with the Company during such period; provided,
however, that such participation shall terminate, or the benefits under
such plans and programs shall be reduced, if and to the extent Executive
becomes covered (or is eligible to become covered) by plans of a
subsequent employer or other entity to which Executive provides services
during such period providing comparable benefits. If the terms of the
Company plans and programs referred to in this Section 7(c)(viii) do not
allow Executive's continued participation, Executive shall be paid a cash
payment equivalent on an after-tax basis to the value of the additional
benefits described in this Section 7(c)(viii) Executive would have
received under such plans or programs had Executive continued to be
employed during such period, with such benefits provided by the Company at
the same times and in the same manner as such benefits would have been
provided to Executive under such plans and programs (it being understood
that the value of any insurance-provided benefits will be based on the
premium cost to Executive, which shall not exceed the highest risk premium
charged by a carrier having an investment grade or better credit rating);
provided, however, that Executive must continue to satisfy the conditions
set forth in Section 10 in order to continue receiving the benefits
provided under this Section 7(c)(viii). Executive agrees to promptly
notify the Company of any employment or other arrangement by which
Executive provides services during the benefits-continuation period and of
the nature and extent of benefits for which Executive becomes eligible
during such period which would reduce or terminate benefits under this
Section 7(c)(viii); and the Company be entitled to recover from Executive
any payments and the fair market value of benefits previously made or
provided to Executive hereunder which would not have been paid under this
Section 7(c)(viii) if the Company had received adequate prior notice as
required by this sentence.
(d) TERMINATION BY EXECUTIVE FOR GOOD REASON PRIOR TO OR MORE THAN TWO
YEARS AFTER A CHANGE IN CONTROL. Executive may terminate his employment
hereunder for Good Reason, prior to a Change in Control or after the second
anniversary of the most recent Change in Control, upon 90 days' written notice
to the Company; provided, however, that, if the Company has corrected the basis
for such Good Reason within 30 days after receipt of such notice, Executive may
not terminate his employment for Good Reason, and therefore Executive's notice
of termination will automatically become null and void. At the time Executive's
employment is terminated by Executive for Good Reason (i.e., at the expiration
of such notice period), the Term will terminate, all obligations of the Company
and Executive under Sections 1 through 5 of this Agreement will immediately
cease (except for obligations which continue after termination of employment as
expressly provided herein), and the Company will pay Executive, and Executive
will be entitled to receive, the following:
(i) Executive's Compensation Accrued at Termination;
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(ii) Cash in an aggregate amount equal to two times the sum of (A)
Executive's Base Salary under Section 4(a) immediately prior to
termination plus (B) an amount equal to the greater of (x) the portion of
Executive's annual target incentive compensation potentially payable in
cash to Executive (i.e., excluding the portion payable in PERS or in other
non-cash awards) for the year of termination or (y) the portion of
Executive's annual incentive compensation that became payable in cash to
Executive (i.e., excluding the portion payable in PERS or in other
non-cash awards) for the latest year preceding the year of termination
based on performance actually achieved in that latest year. The amount
determined to be payable under this Section 7(d)(ii) shall be payable in
monthly installments over the 24 months following termination, without
interest, except the Company may elect to accelerate payment of the
remaining balance of such amount and to pay it as a lump sum, without
discount;
(iii) In lieu of any annual incentive compensation under Section
4(b) for the year in which Executive's employment terminated, an amount
equal to the portion of Executive's annual target incentive compensation
potentially payable in cash to Executive (i.e., excluding the portion
payable in PERS or in other non-cash awards) for the year of termination,
multiplied by a fraction the numerator of which is the number of days
Executive was employed in the year of termination and the denominator of
which is the total number of days in the year of termination;
(iv) Stock options held by Executive at termination, if not then
vested and exercisable, will become fully vested and exercisable at the
date of such termination, and, in other respects (including the period
following termination during which such options may be exercised), such
options shall be governed by the plans and programs and the agreements and
other documents pursuant to which such options were granted; provided,
however, that (A) stock options which were outstanding and "in-the-money"
at the Effective date, other than such options which were granted either
on February 15, 2000 and May 25, 2000 (all tranches), shall be governed by
the terms of the plans and agreements governing such options, and (B) no
acceleration of vesting and exercisability of any option shall apply under
this Section 7(d)(iv) if Executive's Good Reason is based solely on Good
Reason as defined in Section 8(e)(ix);
(v) Any performance objectives upon which the earning of
performance-based restricted stock and deferred stock awards, including
outstanding PERS awards, and other long-term incentive awards is
conditioned shall be deemed to have been met at target level at the date
of termination, and restricted stock and deferred stock awards, including
outstanding PERS awards, and other long-term incentive awards (to the
extent then or previously earned, in the case of performance-based awards)
shall become fully vested and non-forfeitable at the date of such
termination, except the foregoing provisions of this Section 7(d)(v) shall
not apply if Executive's Good Reason is based solely on Good Reason as
defined in Section 8(e)(ix); and, in other respects, such awards shall be
governed by the plans and programs and the agreements and other documents
pursuant to which such awards were granted;
(vi) All deferral arrangements under Section 5(d) will be settled in
accordance with the plans and programs governing the deferral;
(vii) All rights under any other benefit plan shall be governed by
such plan (subject to Section 5(b)); and
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(viii) For a period of two years after such termination (but not
after Executive attains age 65), Executive shall continue to participate
in those employee and executive benefit plans and programs under Section
5(b) to the extent such plans and programs provide medical insurance,
disability insurance and life insurance benefits (but not other benefits,
such as pension and retirement benefits, provided under Section 5(b)) in
which Executive was participating immediately prior to termination, the
terms of which allow Executive's continued participation, as if Executive
had continued in employment with the Company during such period; provided,
however, that such participation shall terminate, or the benefits under
such plans and programs shall be reduced, if and to the extent Executive
becomes covered (or is eligible to become covered) by plans of a
subsequent employer or other entity to which Executive provides services
during such period providing comparable benefits. If the terms of the
Company plans and programs referred to in this Section 7(d)(viii) do not
allow Executive's continued participation, Executive shall be paid a cash
payment equivalent on an after-tax basis to the value of the additional
benefits described in this Section 7(d)(viii) Executive would have
received under such plans or programs had Executive continued to be
employed during such period, with such benefits provided by the Company at
the same times and in the same manner as such benefits would have been
provided to Executive under such plans and programs (it being understood
that the value of any insurance-provided benefits will be based on the
premium cost to Executive, which shall not exceed the highest risk premium
charged by a carrier having an investment grade or better credit rating);
provided, however, that Executive must continue to satisfy the conditions
set forth in Section 10 in order to continue receiving the benefits
provided under this Section 7(d)(viii). Executive agrees to promptly
notify the Company of any employment or other arrangement by which
Executive provides services during the benefits-continuation period and of
the nature and extent of benefits for which Executive becomes eligible
during such period which would reduce or terminate benefits under this
Section 7(d)(viii); and the Company shall be entitled to recover from
Executive any payments and the fair market value of benefits previously
made or provided to Executive hereunder which would not have been paid
under this Section 7(d)(viii) if the Company had received adequate prior
notice as required by this sentence.
If any payment or benefit under this Section 7(d) is based on Base Salary or
other level of compensation or benefits at the time of Executive's termination
and if a reduction in such Base Salary or other level of compensation or benefit
was the basis for Executive's termination for Good Reason, then the Base Salary
or other level of compensation in effect before such reduction shall be used to
calculate payments or benefits under this Section 7(d).
(e) TERMINATION BY THE COMPANY WITHOUT CAUSE WITHIN TWO YEARS AFTER A
CHANGE IN CONTROL. The Company may terminate the employment of Executive
hereunder without Cause, simultaneously with or within two years after a Change
in Control, upon at least 90 days' written notice to Executive. The foregoing
notwithstanding, the Company may elect, by written notice to Executive, to
terminate Executive's positions specified in Sections 1 and 3 and all other
obligations of Executive and the Company under Section 3 at a date earlier than
the expiration of such 90-day notice period, if so specified by the Company in
the written notice, provided that Executive shall be treated as an employee of
the Company (without any assigned duties) for all other purposes of this
Agreement, including for purposes of Sections 4 and 5, from such specified date
until the expiration of such 90-day period. An election by the Company not to
extend the Term pursuant to Section 2 hereof shall be deemed to be a termination
of Executive's employment by the Company without Cause at the date of expiration
of the Term and shall be subject to this Section 7(e) if the date of such
termination coincides with or is within two years after a Change in Control;
provided, however, that, if Executive has attained age 65 at such date of
termination, such termination shall be deemed a Retirement of Executive. At the
time Executive's employment is terminated by the Company (i.e., at the
expiration of such notice period), the Term will terminate, all remaining
obligations of the Company and Executive under Sections 1 through 5 of this
Agreement will immediately cease (except for obligations which continue after
termination of employment as expressly provided herein), and the Company will
pay Executive, and Executive will be entitled to receive, the following:
(i) Executive's Compensation Accrued at Termination;
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(ii) Cash in an aggregate amount equal to three times the sum of (A)
Executive's Base Salary under Section 4(a) immediately prior to
termination plus (B) an amount equal to the greater of (x) the portion of
Executive's annual target incentive compensation potentially payable in
cash to Executive (i.e., excluding the portion payable in PERS or in other
non-cash awards) for the year of termination or (y) the portion of
Executive's annual incentive compensation that became payable in cash to
Executive (i.e., excluding the portion payable in PERS or in other
non-cash awards) for the latest year preceding the year of termination
based on performance actually achieved in that latest year. The amount
determined to be payable under this Section 7(e)(ii) shall be paid by the
Company not later than 15 days after Executive's termination;
(iii) In lieu of any annual incentive compensation under Section
4(b) for the year in which Executive's employment terminated, an amount
equal to the portion of Executive's annual target incentive compensation
potentially payable in cash to Executive (i.e., excluding the portion
payable in PERS or in other non-cash awards) for the year of termination,
multiplied by a fraction the numerator of which is the number of days
Executive was employed in the year of termination and the denominator of
which is the total number of days in the year of termination;
(iv) Stock options held by Executive at termination, if not then
vested and exercisable, will become fully vested and exercisable at the
date of such termination, and any such options granted on or after the
date hereof shall remain outstanding and exercisable until the stated
expiration date of the Option as though Executive's employment did not
terminate, and, in other respects, such options shall be governed by the
plans and programs and the agreements and other documents pursuant to
which such options were granted;
(v) Any performance objectives upon which the earning of
performance-based restricted stock and deferred stock awards, including
outstanding PERS awards, and other long-term incentive awards is
conditioned shall be deemed to have been met at target level at the date
of termination, and restricted stock and deferred stock awards, including
outstanding PERS awards, and other long-term incentive awards (to the
extent then or previously earned, in the case of performance-based awards)
shall become fully vested and non-forfeitable at the date of such
termination, and, in other respects, such awards shall be governed by the
plans and programs and the agreements and other documents pursuant to
which such awards were granted;
(vi) All deferral arrangements under Section 5(d) will be settled in
accordance with the plans and programs governing the deferral;
(vii) All rights under any other benefit plan shall be governed by
such plan (subject to Section 5(b)); and
(viii) For a period of three years after such termination (but not
after Executive attains age 65), Executive shall continue to participate
in those employee and executive benefit plans and programs under Section
5(b) to the extent such plans and programs provide medical insurance,
disability insurance and life insurance benefits (but not other benefits,
such as pension and retirement benefits, provided under Section 5(b)) in
which Executive was participating immediately prior to termination, the
terms of which allow Executive's continued participation, as if Executive
had continued in employment with the Company during such period; provided,
however, that such participation shall terminate, or the benefits under
such plans and programs shall be reduced, if and to the extent Executive
becomes covered (or is eligible to become covered) by plans of a
subsequent employer or other entity to which Executive provides services
during such period providing comparable benefits. If the terms of the
Company plans and programs referred to in this Section 7(e)(viii) do not
allow Executive's continued participation, Executive shall be paid a cash
payment equivalent on an after-tax basis to the value of the additional
benefits described in this Section 7(e)(viii) Executive would have
received under such plans or programs had Executive continued to be
employed during such period, with such benefits provided by the Company at
the same times and in the same manner as such benefits would have been
provided to Executive under such plans and programs (it being understood
that the value of any insurance-provided benefits will be based on the
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premium cost to Executive, which shall not exceed the highest risk premium
charged by a carrier having an investment grade or better credit rating);
provided, however, that Executive must continue to satisfy the conditions
set forth in Section 10 in order to continue receiving the benefits
provided under this Section 7(e)(viii). Executive agrees to promptly
notify the Company of any employment or other arrangement by which
Executive provides services during the benefits-continuation period and of
the nature and extent of benefits for which Executive becomes eligible
during such period which would reduce or terminate benefits under this
Section 7(e)(viii); and the Company shall be entitled to recover from
Executive any payments and the fair market value of benefits previously
made or provided to Executive hereunder which would not have been paid
under this Section 7(e)(viii) if the Company had received adequate prior
notice as required by this sentence.
(f) TERMINATION BY EXECUTIVE FOR GOOD REASON WITHIN TWO YEARS AFTER A
CHANGE IN CONTROL. Executive may terminate his employment hereunder for Good
Reason, simultaneously with or within two years after a Change in Control, upon
90 days' written notice to the Company; provided, however, that, if the Company
has corrected the basis for such Good Reason within 30 days after receipt of
such notice, Executive may not terminate his employment for Good Reason, and
therefore Executive's notice of termination will automatically become null and
void. At the time Executive's employment is terminated by Executive for Good
Reason (i.e., at the expiration of such notice period), the Term will terminate,
all obligations of the Company and Executive under Sections 1 through 5 of this
Agreement will immediately cease (except for obligations which continue after
termination of employment as expressly provided herein), and the Company will
pay Executive, and Executive will be entitled to receive, the following:
(i) Executive's Compensation Accrued at Termination;
(ii) Cash in an aggregate amount equal to three times the sum of (A)
Executive's Base Salary under Section 4(a) immediately prior to
termination plus (B) an amount equal to the greater of (x) the portion of
Executive's annual target incentive compensation potentially payable in
cash to Executive (i.e., excluding the portion payable in PERS or in other
non-cash awards) for the year of termination or (y) the portion of
Executive's annual incentive compensation that became payable in cash to
Executive (i.e., excluding the portion payable in PERS or in other
non-cash awards) for the latest year preceding the year of termination
based on performance actually achieved in that latest year. The amount
determined to be payable under this Section 7(f)(ii) shall be paid by the
Company not later than 15 days after Executive's termination;
(iii) In lieu of any annual incentive compensation under Section
4(b) for the year in which Executive's employment terminated, an amount
equal to the portion of Executive's annual target incentive compensation
potentially payable in cash to Executive (i.e., excluding the portion
payable in PERS or in other non-cash awards) for the year of termination,
multiplied by a fraction the numerator of which is the number of days
Executive was employed in the year of termination and the denominator of
which is the total number of days in the year of termination;
(iv) Stock options held by Executive at termination, if not then
vested and exercisable, will become fully vested and exercisable at the
date of such termination, and any such options granted on or after the
date hereof shall remain outstanding and exercisable until the stated
expiration date of the Option as though Executive's employment did not
terminate, and, in other respects, such options shall be governed by the
plans and programs and the agreements and other documents pursuant to
which such options were granted;
(v) Any performance objectives upon which the earning of
performance-based restricted stock and deferred stock awards, including
outstanding PERS awards, and other long-term incentive awards is
conditioned shall be deemed to have been met at target level at the date
of termination, and restricted stock and deferred stock awards, including
outstanding PERS awards, and other long-term incentive awards (to the
extent then or previously earned, in the case of performance-based awards)
shall become fully vested and non-forfeitable at the date of such
termination, and, in other respects, such awards shall be governed by the
plans and programs and the agreements and other documents pursuant to
which such awards were granted;
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(vi) All deferral arrangements under Section 5(d) will be settled in
accordance with the plans and programs governing the deferral;
(vii) All rights under any other benefit plan shall be governed by
such plan (subject to Section 5(b)); and
(viii) For a period of three years after such termination (but not
after Executive attains age 65), Executive shall continue to participate
in those employee and executive benefit plans and programs under Section
5(b) to the extent such plans and programs provide medical insurance,
disability insurance and life insurance benefits (but not other benefits,
such as pension and retirement benefits, provided under Section 5(b)) in
which Executive was participating immediately prior to termination, the
terms of which allow Executive's continued participation, as if Executive
had continued in employment with the Company during such period; provided,
however, that such participation shall terminate, or the benefits under
such plans and programs shall be reduced, if and to the extent Executive
becomes covered (or is eligible to become covered) by plans of a
subsequent employer or other entity to which Executive provides services
during such period providing comparable benefits. If the terms of the
Company plans and programs referred to in this Section 7(f)(viii) do not
allow Executive's continued participation, Executive shall be paid a cash
payment equivalent on an after-tax basis to the value of the additional
benefits described in this Section 7(f)(viii) Executive would have
received under such plans or programs had Executive continued to be
employed during such period, with such benefits provided by the Company at
the same times and in the same manner as such benefits would have been
provided to Executive under such plans and programs (it being understood
that the value of any insurance-provided benefits will be based on the
premium cost to Executive, which shall not exceed the highest risk premium
charged by a carrier having an investment grade or better credit rating);
provided, however, that Executive must continue to satisfy the conditions
set forth in Section 10 in order to continue receiving the benefits
provided under this Section 7(f)(viii). Executive agrees to promptly
notify the Company of any employment or other arrangement by which
Executive provides services during the benefits-continuation period and of
the nature and extent of benefits for which Executive becomes eligible
during such period which would reduce or terminate benefits under this
Section 7(f)(viii); and the Company shall be entitled to recover from
Executive any payments and the fair market value of benefits previously
made or provided to Executive hereunder which would not have been paid
under this Section 7(f)(viii) if the Company had received adequate prior
notice as required by this sentence.
If any payment or benefit under this Section 7(f) is based on Base Salary or
other level of compensation or benefits at the time of Executive's termination
and if a reduction in such Base Salary or other level of compensation or benefit
was the basis for Executive's termination for Good Reason, then the Base Salary
or other level of compensation in effect before such reduction shall be used to
calculate payments or benefits under this Section 7(f).
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(g) OTHER TERMS RELATING TO CERTAIN TERMINATIONS OF EMPLOYMENT. Whether a
termination is deemed to be at or within two years after a Change in Control for
purposes of Sections 7(c), (d), (e), or (f) is determined at the date of
termination, regardless of whether the Change in Control had occurred at the
time a notice of termination was given. In the event Executive's employment
terminates for any reason set forth in Section 7(b) through (f), Executive will
be entitled to the benefit of any terms of plans or agreements applicable to
Executive which are more favorable than those specified in this Section 7
(except in the case of annual incentives in lieu of which amounts are paid
hereunder). Amounts payable under this Section 7 following Executive's
termination of employment, other than those expressly payable on a deferred
basis, will be paid as promptly as practicable after such a termination of
employment, and such amounts payable under Section 7(e) or 7(f) will be paid in
no event later than 15 days after Executive's termination of employment unless
not determinable within such period.
8. DEFINITIONS RELATING TO TERMINATION EVENTS.
(a) "CAUSE." For purposes of this Agreement, "Cause" shall mean
Executive's
(i) willful and continued failure to substantially perform his
duties hereunder (other than any such failure resulting from incapacity
due to physical or mental illness or disability or any failure after the
issuance of a notice of termination by Executive for Good Reason) which
failure is demonstrably and materially damaging to the financial condition
or reputation of the Company and/or its subsidiaries, and which failure
continues more than 48 hours after a written demand for substantial
performance is delivered to Executive by the Board, which demand
specifically identifies the manner in which the Board believes that
Executive has not substantially performed his duties hereunder and the
demonstrable and material damage caused thereby; or
(ii) the willful engaging by Executive in conduct which is
demonstrably and materially injurious to the Company, monetarily or
otherwise.
No act, or failure to act, on the part of Executive shall be deemed "willful"
unless done, or omitted to be done, by Executive not in good faith and without
reasonable belief that his action or omission was in the best interest of the
Company. Notwithstanding the foregoing, Executive shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
Executive a copy of the resolution duly adopted by the affirmative vote of not
less than three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board (after reasonable notice to Executive and an opportunity
for Executive, together with Executive's counsel, to be heard before the Board)
finding that, in the good faith opinion of the Board, Executive was guilty of
conduct set forth above in this definition and specifying the particulars
thereof in detail.
(b) "CHANGE IN CONTROL." For pu