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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000912057-02-010789.txt : 20020415
<SEC-HEADER>0000912057-02-010789.hdr.sgml : 20020415
ACCESSION NUMBER: 0000912057-02-010789
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 11
CONFORMED PERIOD OF REPORT: 20011231
FILED AS OF DATE: 20020321
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-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-14049
FILM NUMBER: 02580410
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-K
<SEQUENCE>1
<FILENAME>a2068479z10-k.txt
<DESCRIPTION>FORM 10-K
<TEXT>
<Page>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
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/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
OR
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/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 001-14049
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IMS HEALTH INCORPORATED
(Exact name of registrant as specified in its charter)
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<S> <C>
DELAWARE 06-1506026
(State of incorporation) (IRS Employer Identification No.)
1499 POST ROAD, FAIRFIELD, CONNECTICUT 06430
(Address of principal executive offices) (Zip Code)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 319-4700
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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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
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
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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 March 1, 2002, 290,910,303 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 $5,881 million. This value was
calculated by excluding all shares held by directors and executive officers of
the Registrant but the Registrant does not concede that all such persons are
"affiliates" of the Registrant for purposes of federal securities laws.
(CONTINUED)
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DOCUMENTS INCORPORATED BY REFERENCE
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PART I
Item 1 --Business "Management's Discussion and Analysis of Results of
Operations and Financial Position" in the 2001 Annual
Report to Shareholders.
"Note 1. Basis of Presentation," "Note 4.
Discontinued Operations--Investment in Gartner
Stock," "Note 5. Acquisitions and Dispositions,"
"Note 7. Spin-Off of Synavant," "Note 12. Investments
in Equity Investees' and Subsidiaries," "Note 16.
Employee Stock Plans," "Note 21. Contingencies" and
"Note 23. Operations by Business Segment" to the
Consolidated Financial Statements in the 2001 Annual
Report to Shareholders.
Item 3 --Legal Proceedings "Note 21. Contingencies" to the Consolidated
Financial Statements in the 2001 Annual Report to
Shareholders.
PART II
Item 5 -- Market for the Registrant's Common "Management's Discussion and Analysis of Results of
Equity and Related Shareholder Matters Operations and Financial Position" in the 2001 Annual
Report to Shareholders.
Item 6 --Selected Financial Data "Five-Year Selected Financial Data" in the 2001
Annual Report to Shareholders.
Item 7 -- Management's Discussion and Analysis of "Management's Discussion and Analysis of Results of
Financial Condition and Results of Operations and Financial Position" in the 2001 Annual
Operations Report to Shareholders.
Item 7A -- Quantitative and Qualitative Disclosure "Management's Discussion and Analysis of Results of
About Market Risk Operations and Financial Position" and "Note 14.
Financial Instruments" to the Consolidated Financial
Statements in the 2001 Annual Report to Shareholders.
Item 8 -- Financial Statements and Supplementary Consolidated Financial Statements and Notes thereto
Data in the 2001 Annual Report to Shareholders.
PART III
Item 10 -- Directors and Executive Officers of the Section entitled "Proposal No. 1: Election of
Registrant Directors" in the Company's Definitive Proxy
Statement (the "Proxy Statement") relating to its
Annual Meeting of Shareholders to be held on May 3,
2002.
Item 11 --Executive Compensation Section entitled "Compensation of Executive Officers"
in the Proxy Statement.
Item 12 -- Security Ownership of Certain Section entitled "Security Ownership of Management
Beneficial Owners and Management and Others" in the Proxy Statement.
Item 13 -- Certain Relationships and Related Not applicable.
Transactions
</Table>
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The Index to Exhibits is located on Pages 24 to 28
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PART I
As used in this report, except where the context indicates otherwise, the
terms "Company" and "IMS" mean IMS Health Incorporated and all subsidiaries
consolidated in the financial statements contained or incorporated by reference
herein.
ITEM 1. BUSINESS
IMS 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"). Notwithstanding the legal form of the
Cognizant Spin-Off, IMS was deemed the "accounting successor" to Cognizant.
Immediately following the Cognizant Spin-Off, Cognizant changed its name to
Nielsen Media Research, Inc. ("NMR").
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
corporation now known as "R.H. Donnelley Corporation" and previously known as
"The Dun & Bradstreet Corporation" ("Donnelley").
The corporate and financial characteristics of IMS have developed, in part,
as a result of the D&B Spin-Off, the Cognizant Spin-Off and IMS's spin-off of
Synavant, Inc. ("Synavant") in 2000, as well as IMS's relationships with the
other parties to those transactions. The terms of those relationships are
briefly described at the end of this Item 1 under the heading "Relationships
between IMS and Synavant, IMS and NMR and among IMS, Donnelley and ACNielsen."
IMS operates in more than 100 countries and consists of the following
business segments:
- The IMS Segment is a leading global provider of market information, sales
management and decision-support services to the pharmaceutical and
healthcare industries. Its key products include sales management
information to optimize sales force productivity, marketing effectiveness
research for prescription and over-the-counter pharmaceutical products,
consulting and other services. The IMS Segment is managed on a global
business model with global leaders for the majority of its critical
business processes. In addition, the IMS Segment includes IMS's venture
capital unit, Enterprise Associates, LLC ("Enterprises"), which is focused
on investments in emerging businesses and IMS's 26.8% equity interest in
The TriZetto Group, Inc. ("TriZetto").
- The Cognizant Technology Solutions Corporation ("CTS") Segment delivers
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 primary service offerings include
application development and integration, application management and
re-engineering services. CTS is a publicly-traded corporation, with its
Class A common stock traded on the Nasdaq National Market. At
December 31, 2001, IMS owned 11,290,900 shares of CTS's Class B common
stock, which represented 58.3% of the total outstanding stock of CTS and
93.3% of the combined voting power of CTS's outstanding common stock. IMS
accounts for CTS as a consolidated subsidiary.
During the years ended December 31, 2000 and 1999, IMS also included:
- The Transaction Businesses Segment, which consisted of: (a) Synavant,
which serves the pharmaceutical industry by developing and selling
pharmaceutical relationship management solutions that support sales and
marketing decision-making; (b) Erisco Managed Care Technologies, Inc.
("Erisco"), a leading supplier of software-based administrative and
analytical solutions to the managed care industry; and (c) three small
non-strategic software businesses. IMS spun off the Synavant business on
August 31, 2000 (the "Synavant Spin-Off") and sold Erisco to TriZetto and
entered into a strategic alliance with TriZetto on October 3, 2000. IMS
also divested or discontinued the other small non-strategic software
businesses.
Additional information regarding the Transaction Businesses Segment is
contained in the "Management's Discussion and Analysis of Results of Operations
and Financial Position" section, and in Note 23 to the Consolidated Financial
Statements, of the 2001 Annual Report to Shareholders.
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On July 26, 1999, IMS completed a spin-off of the majority of its equity
investment in Gartner, Inc. ("Gartner", formerly known as "Gartner
Group, Inc.") to IMS shareholders (the "Gartner Spin-Off"). The Consolidated
Financial Statements of IMS have been reclassified for all periods presented to
reflect the Gartner equity investment as a discontinued operation. During the
third quarter of 2001, IMS sold its remaining investment in Gartner.
Segment financial information, including financial information about
domestic and foreign generated revenue, is included in Note 23 to the
Consolidated Financial Statements in the 2001 Annual Report to Shareholders.
Additional information regarding changes to and the development of the
business of IMS is contained in the "Management's Discussion and Analysis of
Results of Operations and Financial Position" section, and in Notes 1, 4, 5, 7,
12, 16, 21 and 23 to the Consolidated Financial Statements, of the 2001 Annual
Report to Shareholders.
IMS SEGMENT
The IMS Segment provides sales management and market research information
services to the pharmaceutical and healthcare industries worldwide. The IMS
Segment provides information services covering more than 100 countries and
maintains offices in 76 countries on six continents, with 60% of total 2001 IMS
Segment revenue generated outside the United States. 2001 IMS Segment revenue
represented 88% of total consolidated revenue.
IMS SERVICES
Sales management services represented 62% of the IMS Segment's worldwide
revenue in 2001. Sales management services include sales territory reports,
prescription tracking reports and self-medication 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 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'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. XPLORER WEB-TM-, a web-based platform, enables decision
makers easy and immediate measurement of activity by integrating unique
sets of IMS customer-level prescription and sales intelligence, along with
the client's proprietary segmentation, call plan, promotional activity and
territory sales goals. IMS's sales territory reporting services cover 51
countries and are used for applications such as sales-force compensation,
resource allocation, territory alignment, market analyses and distribution
management. Reports are available to clients with a variety of frequencies
such as: on a weekly, monthly and quarterly basis. In the United States,
sales territory reports from IMS's DDD-TM- service allow pharmaceutical
clients to track the flow of sales for their products and those of their
competitors to various levels of geography and channels of distribution.
The DDD database contains data on sales of pharmaceutical products through
all distribution channels, including direct sales by pharmaceutical
manufacturers and indirect sales through drug wholesalers, mail service
distributors, warehousing chains and other specialty distributors.
In Japan, the IMS Segment offers WEEKLY GP PHARMA-TM-, which tracks sales of
pharmaceuticals sold through pharmaceutical wholesalers to general practitioners
and by pharmacies in Japan.
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- PRESCRIPTION TRACKING REPORTING SERVICES. Prescription tracking reporting
services are designed to monitor prescription activity and to track the
movement of pharmaceutical products out of retail channels. Prescription
tracking services are used by pharmaceutical companies to facilitate
product marketing at the prescriber level. In the United States, the
XPONENT-Registered Trademark- service monitors prescription activity from
retail pharmacies, long-term care and mail service pharmacies using a
patented statistical methodology to project the prescription activity of
nearly 1.2 million individual prescribers on a monthly basis. XPONENT is
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. The IMS Segment also offers
EarlyView-Registered Trademark-, a sales optimization solution, providing
weekly prescriber-level activity, prescribing and competitive trends and
alerts for client's key prescribers directly to clients' sales
representatives electronically.
- 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. The IMS Segment
publishes self-medication reports covering 24 countries and provides
related services. PHARMATREND-TM-, the IMS Segment's tracking service for
over-the-counter pharmaceutical products, is available in 12 European
countries.
Market research services represented approximately 35% of the IMS Segment's
worldwide revenue in 2001. 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 the IMS Segment's customized electronic
workstations. The IMS Segment's principal market research services are as
follows:
- 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 more than 90 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 39 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 22 countries.
- 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 21 countries.
- MIDAS-Registered Trademark- SERVICES. MIDAS 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
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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 format required by the
client. MIDAS is available in 79 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; Market Research Publications
including the Pharmaceutical World Review; 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 3% of the IMS Segment's 2001 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. The IMS Segment'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, the IMS Segment'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 the IMS Segment data more
rapidly. Outside of the United States, consulting services are offered on
a country-by-country basis.
IMS DATA SUPPLIERS
Over the past four decades, the IMS Segment has developed strong
relationships with its data suppliers in each market in which it operates. As
the supply of pharmaceutical data is critical to the IMS Segment'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 2001. All major pharmaceutical and biotechnology
companies are customers of the IMS Segment, and many of the companies subscribe
to reports and services in several countries. The IMS Segment's customer base is
broad in scope and enables it to avoid dependence on any single customer. None
of the IMS Segment's customers accounted for more than 10% of the Company's
gross revenues in 2001.
IMS COMPETITION
While no competitor provides the geographical reach or breadth of the IMS
Segment's services, the IMS Segment 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 the IMS Segment's services
compete with those offered by competitors such as Taylor Nelson in the United
Kingdom, Cegedim in France, Germany and the United Kingdom, National Data
Corporation in Germany and the United Kingdom, and AzyX Geopharma in Belgium,
Germany, Poland and Portugal. In the United States, certain of
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IMS's sales management services, including its sales territory and prescription
tracking reports, compete with the offerings of various companies, particularly
National Data Corporation. Also, various companies compete with the IMS Segment
in the United States with respect to the IMS Segment's market research services.
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, the IMS Segment and its subsidiaries engage in a
significant portion of their business outside of the United States. The IMS
Segment provides information services covering more than 100 countries and
maintains offices in 76 countries on six continents, with 60% of total 2001
revenue and a significant portion of its operating income generated outside the
United States. The IMS Segment'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
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
The IMS Segment 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. The IMS Segment 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. The IMS Segment 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 5,428 employees worldwide as of
December 31, 2001. Almost all of these employees are full-time. None of the
Company's U.S. employees are 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 a requirement under European Union laws.
Management considers its relations with its employees to be good and to have
been maintained in a normal and customary manner.
CORPORATE
IMS currently maintains its corporate center in Fairfield, Connecticut.
Other components of the IMS Segment 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 26.8% of
the outstanding shares of TriZetto as of December 31, 2001. TriZetto is a
publicly-traded information technology and services company focused on the
healthcare industry. TriZetto delivers proprietary and third-
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party software on a licensed or hosted basis, as well as outsourcing and
consulting services. TriZetto's target markets include health plans,
benefits administrators and physician groups, according to publicly
available information. As of December 31, 2001, TriZetto served
approximately 540 customers representing more than 110 million health plan
lives. TriZetto offers five categories of complementary products and
services: hosted solutions, business services, enterprise software,
e-business solutions and consulting services. Its hosted solutions provide
proprietary enterprise software as well as third party applications on a
monthly subscription fee basis. TriZetto also offers business services
such as claims and enrollment processing and information technology
department outsourcing. TriZetto's enterprise software offering include
its Facets-Registered Trademark- and QicLink-TM- applications and its
e-business solutions include its HealthWeb-Registered Trademark- Internet
platform. In addition, TriZetto provides consulting services, including
information technology assessment, software development and implementation
services. IMS accounts for its ownership interest in TriZetto under the
equity method.
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 IT 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. 2001 CTS Segment revenue (net of inter
segment sales) represented 11.9% of total consolidated revenue.
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
a current staff of approximately 2,650 programmers in India. CTS has also put in
place a 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. To facilitate a
cost-effective, on-time delivery of high-quality projects integrating an
on-site and offshore team, CTS has developed proprietary methodologies.
Such methodologies are encapsulated in CTS's QVIEW software engineering
process, which is available to all on-site and offshore programmers. CTS
utilizes this ISO 9000 certified process to define and implement projects
from the design, development and deployment stages through to ongoing
application maintenance. For most projects, QVIEW is used to make an
extensive front-end assessment. This assessment allows CTS to define the
scope and risks of the project and subdivide the project into smaller
phases with frequent deliverables and feedback from customers. CTS also
utilizes its QVIEW process to detect, mitigate and correct possible
quality defects and to establish appropriate contingencies for each
project.
- HIGHLY-SKILLED WORKFORCE. CTS has placed significant emphasis on
recruiting and training its workforce of highly skilled professionals.
Such professionals must be versed in CTS's processes and methodologies,
particularly the QVIEW software engineering process. CTS has over 240
project managers and senior technical personnel on its worldwide staff,
many of whom have significant work experience in the United States and
Europe. CTS maintains programs and personnel, including an extensive
campus recruiting program in India, to hire and train the best available
technical professionals in both legacy systems and emerging technologies.
CTS provides five months of combined classroom and on-the-job training to
new hires. CTS provides additional training each year to continually
enhance the business practices, tools, technology and consulting skills of
its professional staff.
- RESEARCH AND DEVELOPMENT AND COMPETENCY CENTERS. CTS has project
experience and expertise across multiple architectures and technologies,
and makes a substantial on-going investment in competency centers and
research and development to keep abreast of the latest technology
developments. Most of CTS's programmers are trained in multiple
technologies and architectures. As a result, CTS is able to react to
customers' needs and quickly redeploy programmers to new technologies.
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- WELL-DEVELOPED INFRASTRUCTURE. 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 to provide ongoing enhancement as required by the
customer.
- RE-ENGINEERING. Modify and test applications to enable systems to function
in new operating environments.
CTS uses its QVIEW software engineering process, its on-site and offshore
delivery model and well-developed facilities, technology and communications
infrastructure to deliver these services. For each of these services, CTS
utilizes its QVIEW proprietary processes and methodologies to define the
execution and delivery of the projects.
CTS markets and sells its services directly through its professional staff,
senior management and sales personnel.
CTS CUSTOMERS
A significant portion of the gross revenues reported by Cognizant Technology
Solutions Corporation is derived from services performed for IMS. IMS eliminates
these intercompany revenues in consolidation and excludes them from the reported
CTS Segment results. The following discussion of CTS customers refers to the
gross reported CTS results.
CTS provides services through time and material ("T&M") and fixed bid
contracts. The volume of work CTS performs for specific customers is likely to
vary from year to year, and a significant customer in one year may not use CTS's
services in a subsequent year. In 1999, IMS and First Data Corporation each
accounted for more than 10.0% of CTS's revenue. In 2001 and 2000, IMS accounted
for more than 10.0% of CTS's revenue. Presented below is additional information
about CTS's customers.
<Table>
<Caption>
2001 2000 1999
-------- -------- --------
<S> <C> <C> <C>
Number of customers......................................... 100 90 57
Percent of revenues from top five customers................. 34.7% 39.5% 57.3%
Percent of revenues from top ten customers.................. 53.0% 59.1% 75.3%
Percent of revenues from IMS and current subsidiaries....... 10.6% 10.4% 16.7%
Application development services as a percent of revenues... 42.9% 46.1% 32.3%
Application maintenance services as a percent of revenues... 51.8% 47.0% 44.0%
Fixed bid contracts as a percent of revenues................ 23.9% 15.1% 15.0%
Year 2000 compliance services as a percentage of revenues... 0.0% 0.4% 15.6%
</Table>
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;
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- 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 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, all rights to the
"Cognizant" name and certain related trade and service marks were transferred to
CTS in July, 1998.
CTS EMPLOYEES
At December 31, 2001, CTS employed approximately 855 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 110 persons on a
full-time basis in its European satellite offices and on-site European customer
locations and approximately 2,960 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.
For additional information regarding CTS, see CTS's Annual Report on
Form 10-K for the year ended December 31, 2001 and its other filings with the
Securities and Exchange Commission.
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RELATIONSHIPS BETWEEN IMS AND SYNAVANT, IMS AND NMR AND AMONG IMS,
DONNELLEY AND ACNIELSEN
SYNAVANT SPIN-OFF
Prior to the Synavant Spin-Off, IMS 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 the most significant 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 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 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 each of Synavant and IMS, with the effect that financial
responsibility for (i) the liabilities arising out of or in connection with
Synavant's businesses and certain other specified liabilities generally were
allocated to Synavant and (ii) all other liabilities generally were allocated to
IMS. Pursuant to the terms of the Distribution Agreement (the "D&B Distribution
Agreement") among Cognizant, Donnelley and ACNielsen Corporation ("ACNielsen"),
as a condition to the Synavant Spin-Off, Synavant was required to and did
undertake to be jointly and severally liable to Donnelley and ACNielsen for any
Cognizant liabilities arising thereunder. Further, the terms of the Distribution
Agreement (the "Cognizant Distribution Agreement") between NMR and IMS, as a
condition to the Synavant Spin-Off, Synavant was required to and did undertake
to be jointly and severally liable to NMR for any IMS liabilities arising
thereunder. The Synavant Distribution Agreement allocates between IMS and
Synavant the financial responsibility for such liabilities arising under the D&B
Distribution Agreement and the Cognizant Distribution Agreement, including
contingent liabilities related to certain prior business transactions and
certain on-going litigation. (See Notes 7 and 21 to the Consolidated Financial
Statements in the 2001 Annual Report to Shareholders).
In addition to the Synavant Distribution Agreement, IMS and Synavant also
entered into other agreements governing the relationship between IMS and
Synavant. These include two Data Rights Agreements and a Tax Allocation
Agreement, each of which is described below, as well as an Employee Benefits
Agreement, 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 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 granted to Synavant a non-transferable and non-exclusive license
to use IMS'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 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 granted to
Synavant a non-transferable and non-exclusive license to certain IMS 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 and Synavant entered into a Tax
Allocation Agreement under which IMS 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. All taxes other than U.S. federal,
state and local income and franchise taxes will be the responsibility of
Synavant if
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they are attributable to the Synavant business and of IMS if they are
attributable to all other businesses of IMS. For taxable periods beginning on or
after Synavant Spin-Off Date, Synavant and IMS agreed to be responsible for
their own taxes.
COGNIZANT SPIN-OFF (1998)
Prior to the Cognizant Spin-Off, IMS 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 the most significant 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.
COGNIZANT DISTRIBUTION AGREEMENT. NMR and IMS entered into 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. Pursuant to the terms of the D&B Distribution Agreement
among Cognizant, Donnelley and ACNielsen, as a condition to the Cognizant
Spin-Off, IMS and NMR were required to and did undertake to be jointly and
severally liable to Donnelley and ACNielsen for any Cognizant liabilities
arising thereunder. The Cognizant Distribution Agreement allocates between IMS
and NMR the financial responsibility for such liabilities, including contingent
liabilities related to certain prior business transactions and certain on-going
litigation. (See Note 21 to the Consolidated Financial Statements in the 2001
Annual Report to Shareholders).
COGNIZANT TAX ALLOCATION AGREEMENT. NMR and IMS entered into a Tax
Allocation Agreement under which IMS 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 if such adjustment relates to IMS'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. All taxes other than U.S. federal, state and
local income and franchise taxes will be the responsibility of IMS if they are
attributable to IMS'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 and NMR will be responsible for their own taxes.
D&B SPIN-OFF (1996)
Prior to the D&B Spin-Off, Donnelley, 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 the
most significant 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. Donnelley, 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 Donnelley,
effective as of November 1, 1996, financial responsibility for all liabilities
of Donnelley, 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 Donnelley 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 2001 Annual Report
to Shareholders).
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D&B TAX ALLOCATION AGREEMENT. Donnelley, 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 Donnelley must pay Donnelley's
entire consolidated tax liability for the tax years that Cognizant and ACNielsen
were included in Donnelley's consolidated Federal income tax return. For periods
prior to the D&B Spin-Off, Donnelley 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 Donnelley, 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 2001 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 Donnelley 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. On February 19, 2001,
ACNielsen announced that it merged with VNU N.V. Pursuant to the Indemnity and
Joint Defense Agreement, VNU is to be included with ACNielsen for purposes of
determining the ACN Maximum Amount.
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 2001 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 Donnelley Tax Matters described in Note 21 to the
Consolidated Financial Statements in the 2001 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 $1,332,923 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 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
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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, which
represents 58.3% of the outstanding shares of all classes of CTS common
stock (93.3% of the combined voting power of CTS's outstanding common
stock) at December 31, 2001; and an equity investment in TriZetto
consisting of 12,142,857 shares of TriZetto common stock, which
represented 26.8% of the outstanding shares of TriZetto common stock at
December 31, 2001, as well as, directly or through its investment in
various limited partnerships, shares of various other companies, both
public and private. 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 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 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, which may
in turn reduce the demand for certain of the Company's products and
services.
- 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 (except in the
limited circumstances where the advance express written consent of the
patient has been obtained) 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.
- The Company is directly subject to certain restrictions on the collection
and use of data. Laws relating to the collection and use of data are
evolving, as are contractual rights relating to such data. There can be no
assurance that contractual restrictions, legislation or regulations will
not, now or in the future, directly or indirectly restrict the analysis or
dissemination of the type of information the Company gathers and therefore
materially adversely affect its operations.
- Suppliers of data may increase restrictions on the use of the data by the
Company, or refuse to license the data to the Company. There can be no
assurance that data suppliers will not impose additional contractual
restrictions on the Company's use or access to data, or refuse to provide
data, now or in the future, in a manner which could have a material
adverse affect on the business of the Company or its operating results.
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- The Company relies on a combination of trade secret, patent, copyright and
trademark laws, contractual provisions, policies, practices, and technical
measures to protect its proprietary rights in its products, services,
databases and technologies. There can be no assurance that these
protections will be adequate, or that the Company will adequately employ
each and every one of these protections, or that the Company's competitors
will not develop products, services, databases or technologies that are
substantially equivalent or superior to the Company's products, services,
databases or technologies. Although the Company believes that its
products, services, databases, technologies and related proprietary rights
do not infringe upon the proprietary rights of third parties, there can be
no assurance that third parties will not assert infringement claims
against the Company in the future. Additionally, the Company may find it
necessary to initiate litigation to protect the Company's trade secrets,
to enforce its patent, copyright and trademark rights, and to determine
the scope and validity of the proprietary rights of others. These types of
litigation can be costly and time consuming.
- The future success of the Company depends upon the contributions of its
employees, including senior management and key personnel. The future
success of the Company also depends on its continuing ability to attract
and retain highly qualified technical and managerial personnel.
Competition for such personnel is intense. Any difficulties with the
foregoing could have a material adverse affect on the business of the
Company or its operating results.
- An important aspect of the Company's business strategy in the past has
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 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.
- 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.
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ITEM 2. PROPERTIES
The principal properties of the Company as at December 31, 2001 are set
forth below.
The executive offices of the Company are located at 1499 Post Road,
Fairfield, Connecticut in a leased property (approximately 15,000 square feet).
Property of the Company is geographically distributed to meet sales and
operating requirements worldwide. The properties and equipment 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 (approximately 130,000 square
feet), and Plymouth Meeting (approximately 212,000 square feet) and West
Norriton, Pennsylvania (approximately 17,000 square feet).
Owned properties located outside the United States include: one property in
each of Buenos Aires, Argentina (approximately 12,000 square feet); Brussels,
Belgium (25,000 square feet); Santiago, Chile (approximate 4,000 square feet);
Lisbon, Portugal (approximately 10,000 square feet); Caracas, Venezuela
(approximately 4,000 square feet); and London (approximately 102,000 square
feet) and Pinner, England (approximately 26,000 square feet).
The operations of the IMS Segment are also conducted from nine leased
offices located throughout the United States and ninety-six leased offices in
non-United States locations.
IMS owns or leases a variety of computers and other equipment for its
operational needs. The Company continues to upgrade and expand its computers and
related equipment in order to increase efficiency, enhance reliability and
provide the necessary base for business expansion.
CTS SEGMENT
Headquartered in Teaneck, New Jersey, operations are conducted from seven
leased office locations in the United States (aggregating approximately 49,000
square feet) and fourteen non-United States locations (aggregating approximately
373,000 square feet), which are primarily located in India.
ITEM 3. LEGAL PROCEEDINGS
Reference is made to "Note 21. Contingencies" of the Notes to the
Consolidated Financial Statements on pages 43 to 47 of the 2001 Annual Report to
Shareholders, which is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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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 IMS at March 15, 2002 and brief summaries of their business
experience during the past five years.
<Table>
<Caption>
NAME TITLE AGE
- ---- ----- --------
<S> <C> <C>
David M. Thomas................. Chairman, Chief Executive Officer and President** 52
Gilles V. J. Pajot.............. Executive Vice President and President, IMS European 52
Region**
Gary W. Noon.................... President, IMS U.S. 48
Nancy E. Cooper................. Senior Vice President and Chief Financial Officer 48
Robert H. Steinfeld............. Senior Vice President, General Counsel and Corporate 48
Secretary
John R. Walsh................... Vice President, Investor Relations and Acting Treasurer 47
Leslye G. Katz.................. Vice President and Controller 47
Murray L. Aitken................ Senior Vice President, IMS Global Consulting and Services 43
</Table>
- ------------------------
* Set forth as a separate item pursuant to Item 401(b) of the Securities and
Exchange Commission's Regulation S-K.
** Member of the Board of Directors.
Mr. Thomas was appointed Chairman, Chief Executive Officer and President of
IMS 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 in November, 2000.
He joined the Company as President of IMS 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 & Upjohn 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 of Pharmacia & Upjohn's Europe,
Middle East and Africa Region. 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 U.S. 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.
Ms. Cooper was appointed Chief Financial Officer of IMS in December, 2001.
Prior to that, she served as Chief Financial Officer at Reciprocal, Inc., a
leading digital distribution infrastructure enabler, from July, 2000 to October,
2001. From September, 1998 to July, 2000, Ms. Cooper was Chief Financial Officer
of Pitney Bowes Credit Corporation. She served as a Partner at General Atlantic
Partners, a private equity firm focused on software and investments, from
January to July, 1998. Prior to that, she spent 22 years at IBM in various
positions of increasing responsibility, including Director of Financial
Management Systems, Pricing and Financial Planning from 1982 to 1992, and
Controller and Treasurer and Financial Director at IBM Credit Corporation from
September, 1992 to January, 1995, Assistant Controller of IBM in 1996 and Chief
Financial Officer of IBM Global Industries in 1997.
15
<Page>
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. From September, 1993 to February, 1997, he was Vice
President, Taxation at Ultramar Corporation, a multinational petroleum refining
and marketing company. 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. Walsh was appointed Vice President, Investor Relations in July, 1998 and
Acting Treasurer in November 2001. Previously, he was Director-Finance of
Cognizant Corporation from April, 1997 to June, 1998. Prior to that he served in
various capacities in Finance for MCI Communications Corporation from April,
1985 to April, 1997.
Ms. Katz was appointed Vice President and Controller of IMS in October,
2001. Prior to that, Ms. Katz served as Vice President and Chief Financial
Officer of American Lawyer Media, Inc., a legal journalism and information
company, from September, 1998 to July, 2001. She was Vice President and
Treasurer of Cognizant Corporation from August, 1996 to August, 1998. Ms. Katz
held a number of senior financial management posts at Donnelley (then known as
"The Dun & Bradstreet Corporation") from 1980 to 1996, including Senior Vice
President and Chief Financial Officer of Reuben H. Donnelley from September,
1992 to July, 1996.
Mr. Aitken was appointed Senior Vice President of Global Consulting and
Services for IMS in June, 2001. Prior to that, he was a Principal in McKinsey &
Co.'s Pharmaceutical and Medical Products Practice from July, 1997 to June,
2001. Joining McKinsey in 1987, he held progressively responsible positions with
the firm in its Los Angeles and Seoul, South Korea operations, and was named a
Principal and Partner in December, 1994.
16
<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 IMS Health Common
Stock Information in the "Management's Discussion and Analysis of Results of
Operations and Financial Position" on page 14 of the 2001 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 1997 through 2001 set forth
in the "Five-Year Selected Financial Data" on page 51 of the 2001 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 "Management's
Discussion and Analysis of Results of Operations and Financial Position" on
pages 1 to 14 of the 2001 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
"Management's Discussion and Analysis of Results of Operations and Financial
Position" on pages 10 and 11 and in "Note 14. Financial Instruments" of Notes to
Consolidated Financial Statements on pages 34 and 35 of the 2001 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 19.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
17
<Page>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information in response to this Item will be set forth in the section
entitled "Proposal No. 1: Election of Directors" in the Company's Definitive
Proxy Statement (the "2002 Proxy Statement") relating to its Annual Meeting of
Shareholders to be held on May 3, 2002, which information is incorporated herein
by reference, except that "Executive Officers of the Registrant" on pages 15 and
16 of this report responds to Items 401(b) and (e) of the Securities and
Exchange Commission's Regulation S-K with respect to the Company's executive
officers.
ITEM 11. EXECUTIVE COMPENSATION
Information in response to this Item will be set forth in the section
entitled "Compensation of Executive Officers" in the Company's 2002 Proxy
Statement, which information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information in response to this Item will be set forth in the section
entitled "Security Ownership of Management and Others" in the Company's 2002
Proxy Statement, which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
18
<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 21.
(2) Consolidated Financial Statement Schedule.
See Index to Consolidated Financial Statements and Schedule on page 21.
(3) Other Financial Information.
Five-year Selected Financial Data. See Index to Consolidated Financial
Statements and Schedule on page 21.
(b) Reports on Form 8-K.
A report on Form 8-K was filed on October 24, 2001 to present under Item 5,
Other Events, disclosure of the appointment of Nancy E. Cooper as the
Company's new Chief Financial Officer.
(c) Exhibits.
See Index to Exhibits on pages 24 to 28, which indicates which Exhibits are
management contracts or compensatory plans required to be filed as Exhibits.
Only responsive information appearing on pages 1 through 51 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 21.
19
<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, CHIEF EXECUTIVE OFFICER AND PRESIDENT
</Table>
Date: March 20, 2002
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/ JOHN P. IMLAY, JR.
- ------------------------------------------------- -------------------------------------------------
(David M. Thomas, (John P. Imlay, Jr., Director)
Chairman, Chief Executive Officer, President and
Director) (principal executive officer)
/s/ NANCY E. COOPER /s/ ROBERT J. KAMERSCHEN
- ------------------------------------------------- -------------------------------------------------
(Nancy E. Cooper, Senior Vice President (Robert J. Kamerschen, Director)
and Chief Financial Officer)
(principal financial officer)
/s/ LESLYE G. KATZ /s/ ROBERT J. LANIGAN
- ------------------------------------------------- -------------------------------------------------
(Leslye G. Katz, Vice President, Controller) (Robert J. Lanigan, Director)
(principal accounting officer)
/s/ CLIFFORD L. ALEXANDER, JR. /s/ H. EUGENE LOCKHART
- ------------------------------------------------- -------------------------------------------------
(Clifford L. Alexander, Jr., Director) (H. Eugene Lockhart, Director)
/s/ CONSTANTINE L. CLEMENTE /s/ GILLES V. J. PAJOT
- ------------------------------------------------- -------------------------------------------------
(Constantine L. Clemente, Director) (Gilles V. J. Pajot, Executive Vice President
and Director)
/s/ KATHRYNE E. GIUSTI /s/ BERNARD PUCKETT
- ------------------------------------------------- -------------------------------------------------
(Kathryne E. Giusti, Director) (Bernard Puckett, Director)
/s/ WILLIAM C. VAN FAASEN
- -------------------------------------------------
(William C. Van Faasen, Director)
</Table>
Date: March 20, 2002
20
<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, 2001 and 2000 and for the years ended December 31, 2001,
2000, and 1999, appearing on pages 15 to 49 of the 2001 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
-------------------------------------------------
2001 ANNUAL
REPORT TO
FORM 10-K SHAREHOLDERS
----------------------- -----------------------
<S> <C> <C>
Statement of Management's Responsibility for Financial
Statements................................................ 15
Report of Independent Accountants........................... 15
As of December 31, 2001 and 2000:
Consolidated Statements of Financial Position............. 16
For the years ended December 31, 2001, 2000 and 1999:
Consolidated Statements of Income......................... 17
Consolidated Statements of Cash Flows..................... 18-19
Consolidated Statements of Shareholders' Equity........... 20-22
Notes to Consolidated Financial Statements.................. 23-49
Other Financial Information:
Quarterly Financial Data (Unaudited) for the years ended
December 31, 2001 and 2000................................ 50
Management's Discussion and Analysis of Results of
Operations and Financial Position......................... 1-14
Business Segments is included in "Notes to Consolidated
Financial Statements"
Five-Year Selected Financial Data (Unaudited)............... 51
SCHEDULE:
Report of Independent Accountants on Financial Statement
Schedule.................................................. 22
II. Valuation and Qualifying Accounts for the years ended
December 31, 2001, 2000, and 1999......................... 23
OTHER:
IMS Health Incorporated and Subsidiaries (Exhibit 21)..... 29-31
</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.
21
<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 11, 2002, appearing in the 2001 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 11, 2002
22
<Page>
IMS HEALTH INCORPORATED AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(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, 2001........ $ 8,016 $ 3,930 $ 0 $ 2,686(a) $ 9,260
======= ======= ======= ======= =======
For the Year Ended December 31, 2000........ $ 7,625 $ 3,378 $(1,601)(d) $ 1,386(a) $ 8,016
======= ======= ======= ======= =======
For the Year Ended December 31, 1999........ $11,246 $ 108 $ 2,035 $ 5,764(a) $ 7,625
======= ======= ======= ======= =======
Valuation allowance deferred income taxes:
For the Year Ended December 31, 2001........ $11,718 $ 1,683(b) $ 0 $ 199 $13,202
======= ======= ======= ======= =======
For the Year Ended December 31, 2000........ $23,325 $ 2,493(b) $ 0 $14,100(c) $11,718
======= ======= ======= ======= =======
For the Year Ended December 31, 1999........ $21,239 $10,270 $ 0 $ 8,184 $23,325
======= ======= ======= ======= =======
</Table>
- ------------------------
NOTE:
(a) The charge-off of uncollectible accounts for which a reserve was provided in
prior periods.
(b) Valuation allowances on assets related to additional NOLs created during the
year where, based on available evidence, it is more likely than not that
such assets will not be realized.
(c) 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).
(d) Includes the allowance for doubtful accounts transferred to Synavant and
Erisco in 2000.
23
<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 amended and restated through
December 18, 2001).*+
.7 1998 IMS Health Incorporated Employees' Stock Incentive Plan
(As amended and restated effective October 16, 2001).*+
</Table>
24
<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.*+
.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 April 17, 2001).*+
.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).
.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).
</Table>
25
<Page>
<Table>
<Caption>
REGULATION
S-K EXHIBIT
NUMBER DESCRIPTION
- -------------- -----------
<S> <C> <C>
.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).*
.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).*
</Table>
26
<Page>
<Table>
<Caption>
REGULATION
S-K EXHIBIT
NUMBER DESCRIPTION
- -------------- -----------
<S> <C> <C>
.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. Executive Retirement Plan (As
amended and restated effective April 17, 2001).*+
.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 (incorporated by reference to
Exhibit 10.42 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 2000 filed on March 30, 2001).*
.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 (incorporated by reference to
Exhibit 10.43 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 2000 filed on March 30, 2001).*
.44 Amended and Restated Employment Agreement by and between IMS
Health Incorporated and David M. Thomas effective as of
November 14, 2000 (incorporated by reference to
Exhibit 10.44 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 2000 filed on March 30, 2001).*
.45 Employment Agreement by and between IMS Health Incorporated
and Gilles Pajot effective as of November 14, 2000
(incorporated by reference to Exhibit 10.45 to Registrant's
Annual Report on Form 10-K for the year ended December 31,
2000 filed on March 30, 2001).*
.46 Employment Agreement by and between IMS Health Incorporated
and James C. Malone effective as of November 14, 2000
(incorporated by reference to Exhibit 10.46 to Registrant's
Annual Report on Form 10-K for the year ended December 31,
2000 filed on March 30, 2001).*
</Table>
27
<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
(incorporated by reference to Exhibit 10.47 to Registrant's
Annual Report on Form 10-K for the year ended December 31,
2000 filed on March 30, 2001).*
.48 1998 IMS Health Incorporated Employee Stock Purchase Plan
(As amended and restated as of December 19, 2000).*+
.49 IMS Health Incorporated 2000 Stock Incentive Plan
(incorporated by reference to Exhibit 10.1 to the
Registrant's Current Report of Form S-8 filed January 16,
2001).*
.50 IMS Health Incorporated Long-Term Incentive Program
(incorporated by reference to Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10Q for the quarter
ending June 30, 2001).*
.51 Rules of The IMS Health Incorporated 2001 Inland Revenue
Approved Sub-Plan For United Kingdom Employees Adopted by
the Company on October 16, 2001.+
13 2001 Annual Report to Shareholders.+
21 List of Active Subsidiaries as of December 31, 2001.+
23 Consent of Independent Accountants.+
</Table>
- --------------------------
* Management contract or compensatory plan or arrangement
+ Filed herewith
28
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.6
<SEQUENCE>3
<FILENAME>a2068479zex-10_6.txt
<DESCRIPTION>EXHIBIT 10.6
<TEXT>
<Page>
Exhibit 10.6
1998 IMS HEALTH INCORPORATED
NON-EMPLOYEE DIRECTORS' DEFERRED COMPENSATION PLAN
AS AMENDED AND RESTATED THROUGH DECEMBER 18, 2001
1. PURPOSE OF THE PLAN
The purpose of the Plan is to enhance the Company's ability to attract
and retain talented individuals to serve as members of the Board and to promote
a greater alignment of interests between non-employee directors and the
shareholders of the Company.
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 Deferral Amount: As such term is defined in Section 5(a) of
the Plan.
(c) Award: A Deferred Share Unit, Stock Option or Deferred Cash 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:
(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) 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
<Page>
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; or
(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.
(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.
(k) Deferred Cash: A bookkeeping entry credited in accordance with an
election made by a Participant pursuant to Section 5 of the Plan.
(l) Deferred Share Unit: A bookkeeping entry, equivalent in value to
one Share, credited in accordance with an election made by a Participant
pursuant to Section 5 of the Plan.
(m) Determination Date: As such term is defined in Section 6 of the
Plan.
(n) Effective Date: The date on which the Plan takes effect, as defined
pursuant to Section 13 of the Plan.
(o) Election Date: The date on which a Participant files an election
with the Secretary of the Company pursuant to Section 5 of the Plan.
(p) Fair Market Value: 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 National Association of Securities Dealers
Automated Quotation 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 National Association
of Securities Dealers Automated Quotation System on such date, then the
immediately preceding date on which sales of the Shares have been so reported or
quoted shall be used.
(q) First Trading Date: The first date on which the Shares are traded
regular way on the principal national securities exchange on which such Shares
are listed or admitted to trading.
(r) Participant: Any director of the Company who is not an employee of
the Company or any Subsidiary of the Company (i) as of any Election Date and
(ii) during any years of service covered by the election made on such Election
Date.
(s) Person: As such term is used for purposes of Section 13(d) or 14(d)
of the Act (or any successor section thereto).
(t) Plan: The 1998 IMS Health Incorporated Non-Employee Directors'
Deferred Compensation Plan, as amended and restated.
(u) Plan Interest Rate: The rate of interest per annum, as determined
from time to time by the
<Page>
Company's Chief Financial Officer, in effect and applicable to Deferred Cash for
a given year or other period specified by the Chief Financial Officer. The Chief
Financial Officer will base the Plan Interest Rate upon the prime interest
rate(s) then generally in effect, or upon such other prevailing interest rates
or other factors deemed relevant by the Chief Financial Officer in his or her
sole discretion, and will announce the Plan Interest Rate in advance of the
period in which it will be in effect.
(v) Shares: Shares of common stock, par value $0.01 per Share, of the
Company.
(w) Spinoff Date: The date on which the Shares that are owned by
Cognizant are distributed to the holders of record of shares of Cognizant.
(x) Stock Option: A non-qualified stock option granted in accordance
with an election made by a Participant pursuant to Section 5 of the Plan.
(y) Stock Option Value: The value assigned to a Stock Option to
purchase one share, for purposes of determining the number of Shares to be
subject to a Stock Option granted in lieu of payment of an Annual Deferral
Amount (or specified portion thereof) under Section 5(c). The Stock Option Value
shall be determined from time to time by the Committee, based on a reasonable
valuation methodology selected by the Committee, and shall remain in effect
until changed by the Committee. Initially and until changed by the Committee,
the Stock Option Value shall be deemed to be one-third of the Fair market Value
of one Share on the date the Stock Option is granted.
(z) Subsidiary: A subsidiary corporation, as defined in Section 424(f)
of the Code (or any successor section thereto).
3. ADMINISTRATION
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 "non-employee directors" within the meaning of Rule 16b-3
under the Act (or any successor rule 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
foregoing notwithstanding, the Board may exercise any power or perform any
function of the Committee, in which case any applicable reference to "Committee"
herein shall be deemed to refer to the Board.
4. ELIGIBILITY
All Participants shall be eligible to participate under this Plan.
5. VOLUNTARY DEFERRAL OF CASH COMPENSATION
A Participant may voluntarily elect to defer his or her cash
compensation (including, but not limited to, annual retainer, board meeting
fees, committee meeting fees and committee chairman fees) in the following
manner:
(a) METHOD OF ELECTION. In order to make a voluntary election pursuant
to the Plan, the Participant must complete and deliver to the Secretary of the
Company a written election, not later than 30 days after the date on which he or
she commences service as a director of the Company or, in subsequent years, not
later than the anniversary of the normal commencement date for such director's
term (or such other deadline as may be specified by the Company, provided that
such deadline shall be established so as to ensure effective tax deferral by the
Participant), designating (i) the portion of his or her cash compensation for a
year of service as a director that is to be deferred (the "Annual Deferral
<Page>
Amount") and (ii) the portion of the Annual Deferral Amount that is to be
deferred into (A) Deferred Share Units and/or (B) Stock Options and/or (C)
Deferred Cash. Such an election shall only be effective with respect to (i) the
annual retainer and (ii) any other fees earned after the date of the election.
Such election shall remain effective for all future years of service unless the
Participant makes a new valid election in a subsequent year.
(b) DEFERRED SHARE UNITS. If a Participant elects to defer his or her
Annual Deferral Amount into Deferred Share Units, such Participant will have
Deferred Share Units credited (as of each date on which his or her cash
compensation would otherwise have been paid) to a Deferred Share Unit account
maintained for him or her on the books of the Company. The number of Deferred
Share Units (including fractional Deferred Share Units) to be credited shall be
determined by dividing (i) the amount of cash compensation to be deferred into
Deferred Share Units by (ii) the Fair Market Value of one Share on the date
credited. Deferred Share Units shall be credited with dividend equivalents when
dividends are paid on Shares, and such dividend equivalents shall be converted
into additional Deferred Share Units based on the Fair Market Value of Shares on
the date credited. Notwithstanding anything to the contrary in this Section
5(b), the Fair Market Value of one Share on any date prior to the First Trading
Date shall be the Fair Market Value of one Share on the First Trading Date.
(c) STOCK OPTIONS. If a Participant elects to defer his or her Annual
Deferral Amount into Stock Options, such Participant will receive a grant of a
Stock Option as of each date on which his or her cash compensation would
otherwise have been paid. The number of Shares purchasable under the Option
(rounded to the nearest whole Share) will be determined by dividing (i) the
amount of cash compensation to be deferred into Stock Options by (ii) the Stock
Option Value then in effect. The Stock Option (i) will have an exercise price
per Share equal to 100% of the Fair Market Value of a Share at the date of
grant, (ii) will have a stated expiration date of seven years after the date of
grant, (iii) will be non-forfeitable, and (iv) will become exercisable on the
first anniversary of the date of grant. The foregoing notwithstanding, the Stock
Option will become exercisable immediately prior to a Change in Control or in
the event of the termination of the Participant's service as a director due to
death or disability.
(d) DEFERRED CASH. If a Participant makes a voluntary election to defer
his or her Annual Deferral Amount into Deferred Cash, such Participant will have
Deferred Cash credited, as of each date on which his or her cash compensation
would otherwise have been paid, to a Deferred Cash account maintained for him or
her on the books of the Company. The amount of Deferred Cash to be credited
shall equal the amount of cash compensation to be deferred into Deferred Cash. A
Participant's account shall be credited with additional Deferred Cash equal to
the amount of notional interest earned on the account, assuming that such
interest is earned at the Plan Interest Rate and compounded on an annual basis.
6. TERMINATION OF BOARD SERVICE
No later than the first business day of the calendar year immediately
following the date on which a Participant terminates service with the Company
(the "Determination Date"), the Participant shall receive (a) a lump sum payment
in Shares equal in number to the Deferred Share Units credited to the
Participant's Deferred Share Unit account (provided, however, that any
fractional Shares shall be paid in cash based on the Fair Market Value of a
Share as of the Determination Date) and (b) a lump sum payment in cash equal to
the Deferred Cash credited to the Participant's Deferred Cash account.
7. NONTRANSFERABILITY OF AWARDS AND RIGHTS UNDER THE PLAN
Awards and related rights under the Plan 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, Awards shall be payable
only to or exercisable only by such Participant. Deferred Share Units and
Deferred Cash payable after the death of a Participant may be paid to the
legatees, personal representatives or distributees of the Participant, and a
Stock Option may be transferred to and thereafter exercised by the legatees,
personal representatives or distributees of the Participant after the
Participant's death. The foregoing notwithstanding, the Committee may permit a
transfer of Stock Options in connection with the Participant's estate planning,
subject to such terms and conditions as the Committee may specify.
<Page>
8. UNFUNDED PLAN
Unless otherwise determined by the Committee, the Plan shall be
unfunded. To the extent any individual holds any rights by virtue of an Award
granted under the Plan, such rights (unless otherwise determined by the
Committee) shall be no greater than the rights of an unsecured general creditor
of the Company.
9. ADJUSTMENTS UPON CERTAIN EVENTS
Notwithstanding any other provisions in the Plan to the contrary, the
following provisions shall apply to Awards.
(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 or other corporate exchange, or any distribution to
stockholders of Shares other than regular cash dividends, 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 any Deferred Share
Units or Stock Options granted under the Plan.
(b) CHANGE IN CONTROL. 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
Awards (including, without limitation, (i) the acceleration of Awards (not
otherwise vested or exercisable upon the Change in Control), (ii) the payment of
a cash amount in exchange for the cancellation of Awards 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.
10. 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.
11. AMENDMENTS OR TERMINATION
The Board may amend, alter or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would impair the rights of any
Participant under any Awards theretofore granted without such Participant's
consent.
12. CHOICE OF 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 the
State of New York.
13. EFFECTIVENESS OF THE PLAN
The Plan shall be effective as of the Spinoff Date.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.7
<SEQUENCE>4
<FILENAME>a2068479zex-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 October 16, 2001)
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) of the
<Page>
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.
(t) PERSON: As such term is used for purposes of Section 13(d) or
14(d) of the Act (or any successor section thereto).
3
<Page>
(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 29,783,765 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 (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
<Page>
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. The Committee may delegate to
officers of the Company, or committees thereof, the authority to grant awards to
the fullest extent permitted by Section 157 and other applicable provisions of
the Delaware General Corporation Law, subject to such rules as the Committee may
specify. In furtherance of this delegation of authority, if the chief executive
officer of the Company is a member of the Board, the chief executive officer
shall have the authority to grant Awards of up to an aggregate of 50,000 Shares
(or such other amount as may be specified by the Committee) 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 delegated authority under this Section 4(a).
(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 determine, in its sole discretion, the number
of Shares to be covered by the Awards granted to each Participant.
5
<Page>
6. LIMITATIONS
(a) In addition to any per-Participant limitation on the number of
shares to be subject to awards that may be applicable under the 1998 ESIP or
2000 SIP or may otherwise be specified by this Committee, the maximum number of
options or other awards that may be granted by all officers to whom authority
has been delegated shall be 1 million shares in any one fiscal year under each
such Plan plus the number of shares specifically approved for awards to be
granted under delegated authority in that year, as specified in separate
resolutions from time to time adopted by this Committee.
(b) Only employees of the Corporation or a subsidiary of the
Corporation may be granted awards pursuant to delegated authority, and other
limitations on the persons to whom awards may be granted shall apply as
specified by the Plan or the Committee. For this purpose, however, a person who,
at the time of commencement of employment will become a director or executive
officer of the Corporation and who will be granted awards at that time shall not
be deemed to be subject to Section 16 for purposes of the delegation of
authority under Section 4(a) of the 1998 ESIP.
(c) Subject to the limitations specified in the Plans and any
resolutions of the Committee, the officers to whom authority to grant awards
under the Plans is delegated may determine the persons to receive the awards,
the type of awards, the number of awards, and the date of grant of the awards.
Such officers shall exercise no discretion over other terms of the awards. The
exercise price of any option granted pursuant to delegated authority shall be
100% of Fair Market Value of the underlying shares at the date of grant, unless
otherwise determined by this Committee. No cash consideration shall be payable
for the grant or exercise of any restricted stock units or similar awards,
except to the extent required by law or as otherwise determined by this
Committee. Vesting terms, forfeiture terms, expiration dates, and other terms
and conditions of any option or award granted pursuant to delegated authority
shall be as specified in the applicable Plan and the form of option or award
agreement in current use under the applicable Plan for an employee of the same
employment or compensation level, unless otherwise determined by the Committee.
(d) No grant of restricted stock may be made pursuant to delegated
authority (restricted stock units may be granted, however).
(e) No officer to whom authority has been delegated may participate
in the grant of an option or award to himself or herself.
(f) All other applicable limitations on delegated authority under
Section 157(c) and other provisions of the DGCL shall apply to officers acting
pursuant to delegated authority under the Plans.
(g) 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
6
<Page>
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.
(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
7
<Page>
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 or specify post-termination exercise periods longer than 90 days,
but not extending past the Option's stated expriation date, provided that this
authority shall not apply if such Participant is terminated from employment for
"cause" (as such term is defined by the Committee in its sole discretion) by the
Company.
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
8
<Page>
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.
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
9
<Page>
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 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.
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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 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.
11
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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 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
12
<Page>
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.
13
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.15
<SEQUENCE>5
<FILENAME>a2068479zex-10_15.txt
<DESCRIPTION>EXHIBIT 10.15
<TEXT>
<Page>
EXHIBIT 10.15
[IMS HEALTH LETTERHEAD]
TIER-2
CHANGE-IN-CONTROL AGREEMENT
FOR CERTAIN EXECUTIVES
OF IMS HEALTH INCORPORATED
Date
PERSONAL AND CONFIDENTIAL
[First_Name][Last_Name]
[Job_Title]
[Company]
Dear [First_Name][Last_Name]:
IMS Health Incorporated (the "Company") considers it essential to the best
interests of its stockholders to foster the continued employment of key
management personnel. In this connection, the Board of Directors of the Company
(the "Board") recognizes that the possibility of a change in ownership or
control of the Company may result in the departure or distraction of such
personnel to the detriment of the Company and its stockholders. As you are a
skilled and dedicated executive with important management responsibilities and
talents, the Company believes that its best interests will be served if you are
encouraged to remain with the Company.
The Company has determined that your ability to perform your
responsibilities and utilize your talents for the benefit of the Company, and
the Company's ability to retain you as an employee, will be significantly
enhanced if you are provided with fair and reasonable protection from the risks
of a change in ownership or control of the Company. Accordingly, in order to
induce you to remain in the employ of the Company, you and the Company agree as
follows:
1. TERM OF AGREEMENT.
(a) GENERALLY. Except as provided in Section 1(b) hereof, (i) this
Agreement shall be effective as of__________ and shall continue in effect
through December 31, 2003, and (ii) commencing on January 1, 2004, and each
January 1 thereafter, this Agreement shall be automatically extended for one
additional year unless, not later than September 30th of the preceding year,
either party to this Agreement gives notice to the other that the Agreement
shall not be extended under this Section 1(a); PROVIDED, HOWEVER, that no such
notice by the Company shall be effective if a Change in Control or Potential
Change in Control (both as defined herein) shall have occurred prior to the date
of such notice.
(b) UPON A CHANGE IN CONTROL. If a Change in Control shall have
occurred at any time during the period in which this Agreement is effective,
this Agreement shall continue in effect for (i) the remainder of the month in
which the Change in Control occurred and (ii) a term of 24 months beyond the
month in which such Change in Control occurred (such entire period hereinafter
referred to as the "Protected Period").
<Page>
2. CHANGE IN CONTROL; POTENTIAL CHANGE IN CONTROL.
(a) 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;
(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 (2)(a)(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.
(b) A "Potential Change in Control" shall be deemed to have occurred
if:
(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.
(c) EMPLOYEE COVENANTS. You agree that, subject to the terms and
conditions of this Agreement, in the event of a Potential Change in Control, you
will remain in the employ of the
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Company until the earliest of (i) a date which is 180 days from the occurrence
of such Potential Change in Control, (ii) the termination of your employment by
reason of Disability (as defined herein) or (iii) the date on which you first
become entitled under this Agreement to receive the benefits provided in Section
3(b) hereof.
(d) COMPANY COVENANT REGARDING POTENTIAL CHANGE IN CONTROL. In the
event of a Potential 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 and a subsequent termination of your employment under Section
3(b). 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.
3. TERMINATION.
(a) TERMINATION BY THE COMPANY FOR CAUSE, BY YOU WITHOUT GOOD
REASON, OR BY REASON OF DEATH OR DISABILITY. If during the Protected Period your
employment by the Company is terminated by the Company for Cause, by you without
Good Reason, or because of your death or Disability, the Company shall be
relieved of its obligation to make any payments to you other than (i) its
payment of amounts otherwise accrued and owing but not yet paid and (ii) any
amounts payable under then-existing employee benefit programs at the time such
amounts are due.
(b) TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY YOU FOR GOOD
REASON. If during the Protected Period your employment by the Company is
terminated by the Company without cause or by you for Good Reason, you shall be
entitled to the compensation and benefits described in this Section 3(b). If
your employment by the Company is terminated prior to a Change in Control at the
request of a Person engaging in a transaction or series of transactions that
would result in a Change in Control, the Protected Period shall commence upon
the subsequent occurrence of a Change in Control, your actual termination shall
be deemed a termination occurring during the Protected Period and covered by
this Section 3(b), your Date of Termination shall be deemed to have occurred
immediately following the Change in Control, and Notice of Termination shall be
deemed to have been given by the Company immediately prior to your actual
termination. Your continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstances constituting Good Reason
hereunder. The compensation and benefits provided under this Section 3(b) are as
follows:
(i) The Company shall pay you your full base salary through
the Date of Termination at the rate in effect at the time Notice of Termination
is given, no later than the fifth day following the Date of Termination, and you
shall receive all other amounts to which you are entitled under any compensation
or benefit plan of the Company, at the time such payments are due.
(ii) At the time specified in Section 3(d) hereof, the Company
shall pay you, in lieu of any further salary, bonus or severance payments for
periods subsequent to the Date of Termination, a lump sum amount in cash equal
to three times the sum of:
(A) the greater of (I) your annual base salary in effect immediately
prior to the Change in Control of the Company or (II) your annual base salary in
effect at the time Notice of Termination is given; and
(B) the greater of (I) your annual target bonus for the year in
which the Change in Control occurs or, (II) if no such target bonus has yet been
determined for such year, your annual target bonus actually earned by you in the
year immediately preceding the year in which the Change in Control occurs.
(iii) At the time specified in Section 3(d) hereof, the
Company shall pay to you, in lieu of amounts which may otherwise be payable to
you under any bonus plan (a "Bonus
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Plan"), an amount in cash equal to (A) your annual target bonus for the year in
which the Change in Control occurs, multiplied by a fraction, (I) the numerator
of which equals the number of full or partial days in such annual performance
period during which you were employed by the Company and (II) the denominator of
which is 365, and (B) the entire target bonus opportunity with respect to each
performance period in progress under all other Bonus Plans in effect at the time
of termination. Notwithstanding the foregoing, this Section 3(b)(iii) shall not
apply with respect to any amounts which may otherwise be payable to you under
the Company's Senior Executive Incentive Plan or any other Bonus Plan of the
Company that applies primarily to "covered employees" within the meaning of
Section 162(m) of the Code.
(iv) The Company shall provide you with a cash allowance, at
the time specified in Section 3(d) hereof, for outplacement and job search
activities (including, but not limited to, office and secretarial expenses) in
the amount of 20% of your annual base salary and annual target bonus taken into
account under Section 3(b)(ii) hereof, PROVIDED THAT (A) such cash allowance
shall not exceed $100,000 and (B) such cash allowance shall apply only to those
costs or obligations that are incurred by you during the 36-month period
following your termination of employment.
(v) For a 36-month period following your termination of
employment, the Company shall arrange to provide you with life and health
insurance benefits no less favorable than those which you were receiving
immediately prior to the Notice of Termination. Notwithstanding the foregoing,
any benefit described in the preceding sentence shall constitute secondary
coverage with respect to any life and health insurance benefits actually
received by you in connection with any subsequent employment (or
self-employment) during the 36-month period following your termination.
(vi) Starting at age 55, you shall receive retiree medical and
life benefits from the Company. Such benefits shall be no less favorable than
the benefits that you would have received had you, at the time Notice of
Termination is given, both (A) attained age 55 and (B) retired from the Company.
Notwithstanding the foregoing, any benefit described in the preceding sentence
shall constitute secondary coverage with respect to retiree medical and life
benefits actually received by you in connection with any subsequent employment
(or self-employment) following your termination.
(c) EXCISE TAX. In the event you become entitled to any amounts
payable in connection with a 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 you at the time specified in Section 3(d)
hereof an additional amount (the "Gross-Up Payment") such that the net amount
retained by you, 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 this Section 3(c), shall be equal to the Total
Payments. For purposes of determining whether any of the Severance Payments will
be subject to the Excise Tax and the amount of such Excise Tax: (i) any other
payments or benefits received or to be received by you in connection with a
Change in Control or your 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 you 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;
(ii) the amount of the Total Payments which shall be treated as subject to the
Excise Tax shall be equal to the lesser of (A) the total amount of the Total
Payments and (B) the amount of excess parachute payments within the meaning of
Section 280G(b)(1) of the Code (after applying
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Section 3(c)(i) hereof); and (iii) the value of any non-cash benefits or any
deferred payments or benefit shall be determined by a nationally-recognized
accounting firm selected by you in accordance with the principles of Sections
280G(d)(3) and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, you 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 your 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 your employment, you 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 you 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 your 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.
(d) TIME OF PAYMENT. The payments provided for in Sections 3(b)(ii),
3(b)(iii) and 3(c) hereof shall be made not later than the fifteenth day
following the Date of Termination; PROVIDED, HOWEVER, that if the amount of such
payments cannot be finally determined on or before such day, the Company shall
pay to you 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 Termination. In the event that
the amount of the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the Company to you,
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). The
payments provided in Section 3(b)(iv) hereof shall be made not later than the
fifteenth day following the submission of each receipt to the Company evidencing
costs or obligations incurred by you in connection with outplacement counseling
and job search activities.
(e) NOTICE. During the Protected Period, any purported termination
of your employment by the Company or by you shall be communicated by written
Notice of Termination to the other party hereto.
(f) CERTAIN DEFINITIONS. Except as otherwise indicated in this
Agreement, all definitions in this Section 3(f) shall be applicable during the
Protected Period only.
(i) DISABILITY. "Disability" shall mean your absence from the
full-time performance of your duties with the Company for six consecutive months
as a result of your incapacity due to physical or mental illness or disability,
and within 30 days after written Notice of Termination is thereafter given you
shall not have returned to the full-time performance of your duties.
(ii) CAUSE. "Cause" shall mean termination on account of (A)
the willful and continued failure by you to substantially perform your duties
with the Company (other than any such failure resulting from your incapacity due
to physical or mental illness or disability or any failure after the issuance of
a Notice of Termination by you 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 you by the Board,
which demand specifically identifies the manner in which the Board believes that
you have not substantially performed your duties or (B) the willful engaging by
you in conduct which is demonstrably and materially injurious to the
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Company, monetarily or otherwise. No act, or failure to act, on your part
shall be deemed "willful" unless done, or omitted to be done, by you not in
good faith and without reasonable belief that your action or omission was in
the best interest of the Company. Notwithstanding the foregoing, you shall
not be deemed to have been terminated for Cause unless and until there shall
have been delivered to you a copy of the resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) off the entire
membership of the Board at a meeting of the Board (after reasonable notice to
you and an opportunity for you, together with your counsel, to be heard
before the Board) finding that, in the good faith opinion of the Board, you
were guilty of conduct set forth above in this Section 3(f)(ii) and
specifying the particulars thereof in detail.
(iii) GOOD REASON. "Good Reason" shall mean, without your
express written consent, the occurrence upon or after a Change in Control of any
of the following circumstances unless, in the case of Sections 3(f)(iii)(A),
(E), (F) or (G) 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 you of any duties inconsistent with the
position in the Company that you held immediately prior to the Change in
Control, or an adverse alteration in the nature or status of your
responsibilities or the conditions of your employment from those in effect
immediately prior to such Change in Control;
(B) a reduction by the Company in your annual base salary, any
target bonus or perquisites as in effect immediately prior to the Change in
Control or as the same may be increased from time to time 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;
(C) the relocation of the principle place of your employment to a
location more than 50 miles from the location of such place of employment on the
date of this Agreement; except for required travel on the Company's business to
an extent substantially consistent with your business travel obligations prior
to the Change in Control;
(D) the failure by the Company to pay to you any portion of your
compensation or to pay to you 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 you participated immediately prior to the
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 your 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 your participation
relative to other participants, as existed at the time of the Change in Control;
(F) the failure of the Company to obtain a satisfactory agreement
from any successor to assume and agree to perform this Agreement, as
contemplated in Section 6 hereof; or
(G) any purported termination of your employment that is not
effected pursuant to a Notice of Termination satisfying the requirements of
Section 3(f)(iv) hereof (and, if applicable, the requirements of Section
3(f)(ii) hereof), which purported termination shall not be effective for
purposes of this Agreement.
(iv) NOTICE OF TERMINATION. "Notice of Termination" shall mean
notice indicating the specific termination provision in this Agreement relied
upon and setting forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of your employment under the provision so
indicated.
(v) DATE OF TERMINATION. "Date of Termination" shall mean (A)
if your employment is terminated for Disability, 30 days after Notice of
Termination is given (provided that
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you shall not have returned to the full-time performance of your duties during
such 30-day period) or (B) if your employment is terminated for any other
reason, the date specified in the Notice of Termination (which, in the case of a
termination for Cause, shall not be less than 30 days from the date such Notice
of Termination is given and, in the case of a termination for Good Reason, shall
not be less than 15 nor more than 60 days from the date such Notice of
Termination is given).
4. MITIGATION. Except as provided in Section 3(b)(v) and (vi) hereof, you
shall not be required to mitigate the amount of payment provided for under this
Agreement by seeking other employment or otherwise, nor shall the amount of
payment or benefit provided for under this Agreement be reduced by any
compensation earned by you as the result of employment by another employer, by
retirement benefits, by offset against any amount claimed to be owed by you to
the Company, or otherwise.
5. COSTS OF PROCEEDINGS. The Company shall pay all costs and expenses,
including all attorneys' fees and disbursements, of the Company and, at least
monthly, you in connection with any legal proceedings, whether or not instituted
by the Company or you, relating to the interpretation or enforcement of any
provision of this Agreement; PROVIDED THAT if you instituted the proceeding and
a finding (no longer subject to appeal) is entered that you instituted the
proceeding in bad faith, you shall pay all of your costs and expenses, including
attorneys' fees and disbursements. The Company shall pay prejudgment interest on
any money judgment obtained by you as a result of such proceeding, calculated at
the prime rate of The Chase Manhattan Bank as in effect from time to time from
the date that payment should have been made to you under this Agreement.
6. SUCCESSORS; BINDING AGREEMENT.
(a) 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 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.
(b) This Agreement shall inure to the benefit of and be enforceable
by you and your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. In the event of your
death, all amounts otherwise payable to you hereunder shall, unless otherwise
provided herein, be paid in accordance with the terms of this Agreement to your
devisee, legatee or other designee or, if there is no such designee, to your
estate.
7. NOTICE. Notices and all other communications provided for in this
Agreement shall be in writing and shall be deemed to have been duly given when
(a) personally delivered or (b) mailed by United States certified or registered
mail, return receipt requested, postage prepaid, addressed to the respective
addresses set forth on the first page of this Agreement; PROVIDED THAT all
notice to the Company shall be directed to the attention of the Board with a
copy to the General Counsel of the Company, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon receipt.
8. MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by you and such officer as may be designated by the Board. No
waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the time or at any prior or subsequent
time. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New York without regard
to its conflicts of law principles. All references to sections of the Exchange
Act or the Code shall be deemed also to refer to any successor provisions to
such
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sections. Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law. The
obligations of the Company under this Agreement shall survive the expiration of
this Agreement to the extent necessary to give effect to this Agreement.
9. VALIDITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
10. 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.
11. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and during
the term of this Agreement supersedes the provisions of all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or representative
of any party hereof with respect to the subject matter contained herein. No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not expressly set forth in this Agreement. Notwithstanding anything to the
contrary in this Agreement, the procedural provisions of this Agreement shall
apply to all benefits payable as a result of a Change in Control (or other
change in control) under any employee benefit plan, agreement, program, policy
or arrangement of the Company.
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If this letter sets forth our agreement on the subject matter hereof, kindly
sign and return to the Company the enclosed copy of this letter, which will then
constitute our agreement on this subject.
IMS HEALTH INCORPORATED
By: _______________________________________
Chairman and Chief Executive Officer
Agreed to this ____________________ day
of ____________________________, 2001.
- -----------------------------------
[First_Name][Last_Name]
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[IMS HEALTH LETTERHEAD]
TIER 3
CHANGE-IN-CONTROL AGREEMENT
FOR CERTAIN EXECUTIVES
OF IMS HEALTH INCORPORATED
Date
PERSONAL AND CONFIDENTIAL
[First_Name][Last_Name]
[Job_Title]
[Company]
Dear [First_Name][Last_Name]:
IMS Health Incorporated (the "Company") considers it essential to the best
interests of its stockholders to foster the continued employment of key
management personnel. In this connection, the Board of Directors of the Company
(the "Board") recognizes that the possibility of a change in ownership or
control of the Company may result in the departure or distraction of such
personnel to the detriment of the Company and its stockholders. As you are a
skilled and dedicated executive with important management responsibilities and
talents, the Company believes that its best interests will be served if you are
encouraged to remain with the Company.
The Company has determined that your ability to perform your
responsibilities and utilize your talents for the benefit of the Company, and
the Company's ability to retain you as an employee, will be significantly
enhanced if you are provided with fair and reasonable protection from the risks
of a change in ownership or control of the Company. Accordingly, in order to
induce you to remain in the employ of the Company, you and the Company agree as
follows:
1. TERM OF AGREEMENT.
(a) GENERALLY. Except as provided in Section 1(b) hereof, (i) this
Agreement shall be effective as of__________ and shall continue in effect
through December 31, 2003, and (ii) commencing on January 1, 2004, and each
January 1 thereafter, this Agreement shall be automatically extended for one
additional year unless, not later than September 30th of the preceding year,
either party to this Agreement gives notice to the other that the Agreement
shall not be extended under this Section 1(a); PROVIDED, HOWEVER, that no such
notice by the Company shall be effective if a Change in Control or Potential
Change in Control (both as defined herein) shall have occurred prior to the date
of such notice.
(b) UPON A CHANGE IN CONTROL. If a Change in Control shall have
occurred at any time during the period in which this Agreement is effective,
this Agreement shall continue in effect for (i) the remainder of the month in
which the Change in Control occurred and (ii) a term of 24 months beyond the
month in which such Change in Control occurred (such entire period hereinafter
referred to as the "Protected Period").
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2. CHANGE IN CONTROL; POTENTIAL CHANGE IN CONTROL.
(a) 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;
(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 (2)(a)(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.
(b) A "Potential Change in Control" shall be deemed to have occurred
if:
(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.
(c) EMPLOYEE COVENANTS. You agree that, subject to the terms and
conditions of this Agreement, in the event of a Potential Change in Control, you
will remain in the employ of the
2
<Page>
Company until the earliest of (i) a date which is 180 days from the occurrence
of such Potential Change in Control, (ii) the termination of your employment by
reason of Disability (as defined herein) or (iii) the date on which you first
become entitled under this Agreement to receive the benefits provided in Section
3(b) hereof.
(d) COMPANY COVENANT REGARDING POTENTIAL CHANGE IN CONTROL. In the
event of a Potential 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 and a subsequent termination of your employment under Section
3(b). 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.
3. TERMINATION.
(a) TERMINATION BY THE COMPANY FOR CAUSE, BY YOU WITHOUT GOOD
REASON, OR BY REASON OF DEATH OR DISABILITY. If during the Protected Period your
employment by the Company is terminated by the Company for Cause, by you without
Good Reason, or because of your death or Disability, the Company shall be
relieved of its obligation to make any payments to you other than (i) its
payment of amounts otherwise accrued and owing but not yet paid and (ii) any
amounts payable under then-existing employee benefit programs at the time such
amounts are due.
(b) TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY YOU FOR GOOD
REASON. If during the Protected Period your employment by the Company is
terminated by the Company without cause or by you for Good Reason, you shall be
entitled to the compensation and benefits described in this Section 3(b). If
your employment by the Company is terminated prior to a Change in Control at the
request of a Person engaging in a transaction or series of transactions that
would result in a Change in Control, the Protected Period shall commence upon
the subsequent occurrence of a Change in Control, your actual termination shall
be deemed a termination occurring during the Protected Period and covered by
this Section 3(b), your Date of Termination shall be deemed to have occurred
immediately following the Change in Control, and Notice of Termination shall be
deemed to have been given by the Company immediately prior to your actual
termination. Your continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstances constituting Good Reason
hereunder. The compensation and benefits provided under this Section 3(b) are as
follows:
(i) The Company shall pay you your full base salary through
the Date of Termination at the rate in effect at the time Notice of Termination
is given, no later than the fifth day following the Date of Termination, and you
shall receive all other amounts to which you are entitled under any compensation
or benefit plan of the Company, at the time such payments are due.
(ii) At the time specified in Section 3(d) hereof, the Company
shall pay you, in lieu of any further salary, bonus or severance payments for
periods subsequent to the Date of Termination, a lump sum amount in cash equal
to two times the sum of:
(A) the greater of (I) your annual base salary in effect immediately
prior to the Change in Control of the Company or (II) your annual base salary in
effect at the time Notice of Termination is given; and
(B) the greater of (I) your annual target bonus for the year in
which the Change in Control occurs or, (II) if no such target bonus has yet been
determined for such year, your annual target bonus actually earned by you in the
year immediately preceding the year in which the Change in Control occurs.
(iii) At the time specified in Section 3(d) hereof, the
Company shall pay to you, in lieu of amounts which may otherwise be payable to
you under any bonus plan (a "Bonus
3
<Page>
Plan"), an amount in cash equal to (A) your annual target bonus for the year in
which the Change in Control occurs, multiplied by a fraction, (I) the numerator
of which equals the number of full or partial days in such annual performance
period during which you were employed by the Company and (II) the denominator of
which is 365, and (B) the entire target bonus opportunity with respect to each
performance period in progress under all other Bonus Plans in effect at the time
of termination. Notwithstanding the foregoing, this Section 3(b)(iii) shall not
apply with respect to any amounts which may otherwise be payable to you under
the Company's Senior Executive Incentive Plan or any other Bonus Plan of the
Company that applies primarily to "covered employees" within the meaning of
Section 162(m) of the Code.
(iv) The Company shall provide you with a cash allowance, at
the time specified in Section 3(d) hereof, for outplacement and job search
activities (including, but not limited to, office and secretarial expenses) in
the amount of 20% of your annual base salary and annual target bonus taken into
account under Section 3(b)(ii) hereof, PROVIDED THAT (A) such cash allowance
shall not exceed $100,000 and (B) such cash allowance shall apply only to those
costs or obligations that are incurred by you during the 36-month period
following your termination of employment.
(v) For a 24-month period following your termination of
employment, the Company shall arrange to provide you with life and health
insurance benefits no less favorable than those which you were receiving
immediately prior to the Notice of Termination. Notwithstanding the foregoing,
any benefit described in the preceding sentence shall constitute secondary
coverage with respect to any life and health insurance benefits actually
received by you in connection with any subsequent employment (or
self-employment) during the 24-month period following your termination.
(vi) Starting at age 55, you shall receive retiree medical and
life benefits from the Company. Such benefits shall be no less favorable than
the benefits that you would have received had you, at the time Notice of
Termination is given, both (A) attained age 55 and (B) retired from the Company.
Notwithstanding the foregoing, any benefit described in the preceding sentence
shall constitute secondary coverage with respect to retiree medical and life
benefits actually received by you in connection with any subsequent employment
(or self-employment) following your termination.
(c) EXCISE TAX. In the event you become entitled to any amounts
payable in connection with a 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 you at the time specified in Section 3(d)
hereof an additional amount (the "Gross-Up Payment") such that the net amount
retained by you, 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 this Section 3(c), shall be equal to the Total
Payments. For purposes of determining whether any of the Severance Payments will
be subject to the Excise Tax and the amount of such Excise Tax: (i) any other
payments or benefits received or to be received by you in connection with a
Change in Control or your 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 you 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;
(ii) the amount of the Total Payments which shall be treated as subject to the
Excise Tax shall be equal to the lesser of (A) the total amount of the Total
Payments and (B) the amount of excess parachute payments within the meaning of
Section 280G(b)(1) of the Code (after applying
4
<Page>
Section 3(c)(i) hereof); and (iii) the value of any non-cash benefits or any
deferred payments or benefit shall be determined by a nationally-recognized
accounting firm selected by you in accordance with the principles of Sections
280G(d)(3) and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, you 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 your 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 your employment, you 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 you 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 your 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.
(d) TIME OF PAYMENT. The payments provided for in Sections 3(b)(ii),
3(b)(iii) and 3(c) hereof shall be made not later than the fifteenth day
following the Date of Termination; PROVIDED, HOWEVER, that if the amount of such
payments cannot be finally determined on or before such day, the Company shall
pay to you 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 Termination. In the event that
the amount of the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the Company to you,
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). The
payments provided in Section 3(b)(iv) hereof shall be made not later than the
fifteenth day following the submission of each receipt to the Company evidencing
costs or obligations incurred by you in connection with outplacement counseling
and job search activities.
(e) NOTICE. During the Protected Period, any purported termination
of your employment by the Company or by you shall be communicated by written
Notice of Termination to the other party hereto.
(f) CERTAIN DEFINITIONS. Except as otherwise indicated in this
Agreement, all definitions in this Section 3(f) shall be applicable during the
Protected Period only.
(i) DISABILITY. "Disability" shall mean your absence from the
full-time performance of your duties with the Company for six consecutive months
as a result of your incapacity due to physical or mental illness or disability,
and within 30 days after written Notice of Termination is thereafter given you
shall not have returned to the full-time performance of your duties.
(ii) CAUSE. "Cause" shall mean termination on account of (A)
the willful and continued failure by you to substantially perform your duties
with the Company (other than any such failure resulting from your incapacity due
to physical or mental illness or disability or any failure after the issuance of
a Notice of Termination by you 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 you by the Board,
which demand specifically identifies the manner in which the Board believes that
you have not substantially performed your duties or (B) the willful engaging by
you in conduct which is demonstrably and materially injurious to the
5
<Page>
Company, monetarily or otherwise. No act, or failure to act, on your part shall
be deemed "willful" unless done, or omitted to be done, by you not in good faith
and without reasonable belief that your action or omission was in the best
interest of the Company. Notwithstanding the foregoing, you shall not be deemed
to have been terminated for Cause unless and until there shall have been
delivered to you a copy of the resolution duly adopted by the affirmative vote
of not less than three-quarters (3/4) off the entire membership of the Board at
a meeting of the Board (after reasonable notice to you and an opportunity for
you, together with your counsel, to be heard before the Board) finding that, in
the good faith opinion of the Board, you were guilty of conduct set forth above
in this Section 3(f)(ii) and specifying the particulars thereof in detail.
(iii) GOOD REASON. "Good Reason" shall mean, without your
express written consent, the occurrence upon or after a Change in Control of any
of the following circumstances unless, in the case of Sections 3(f)(iii)(A),
(E), (F) or (G) 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 you of any duties inconsistent with the
position in the Company that you held immediately prior to the Change in
Control, or an adverse alteration in the nature or status of your
responsibilities or the conditions of your employment from those in effect
immediately prior to such Change in Control;
(B) a reduction by the Company in your annual base salary, any
target bonus or perquisites as in effect immediately prior to the Change in
Control or as the same may be increased from time to time 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;
(C) the relocation of the principle place of your employment to a
location more than 50 miles from the location of such place of employment on the
date of this Agreement; except for required travel on the Company's business to
an extent substantially consistent with your business travel obligations prior
to the Change in Control;
(D) the failure by the Company to pay to you any portion of your
compensation or to pay to you 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 you participated immediately prior to the
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 your 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 your participation
relative to other participants, as existed at the time of the Change in Control;
(F) the failure of the Company to obtain a satisfactory agreement
from any successor to assume and agree to perform this Agreement, as
contemplated in Section 6 hereof; or
(G) any purported termination of your employment that is not
effected pursuant to a Notice of Termination satisfying the requirements of
Section 3(f)(iv) hereof (and, if applicable, the requirements of Section
3(f)(ii) hereof), which purported termination shall not be effective for
purposes of this Agreement.
(iv) NOTICE OF TERMINATION. "Notice of Termination" shall mean
notice indicating the specific termination provision in this Agreement relied
upon and setting forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of your employment under the provision so
indicated.
(v) DATE OF TERMINATION. "Date of Termination" shall mean (A)
if your employment is terminated for Disability, 30 days after Notice of
Termination is given (provided that
6
<Page>
you shall not have returned to the full-time performance of your duties during
such 30-day period) or (B) if your employment is terminated for any other
reason, the date specified in the Notice of Termination (which, in the case of a
termination for Cause, shall not be less than 30 days from the date such Notice
of Termination is given and, in the case of a termination for Good Reason, shall
not be less than 15 nor more than 60 days from the date such Notice of
Termination is given).
4. MITIGATION. Except as provided in Section 3(b)(v) and (vi) hereof, you
shall not be required to mitigate the amount of payment provided for under this
Agreement by seeking other employment or otherwise, nor shall the amount of
payment or benefit provided for under this Agreement be reduced by any
compensation earned by you as the result of employment by another employer, by
retirement benefits, by offset against any amount claimed to be owed by you to
the Company, or otherwise.
5. COSTS OF PROCEEDINGS. The Company shall pay all costs and expenses,
including all attorneys' fees and disbursements, of the Company and, at least
monthly, you in connection with any legal proceedings, whether or not instituted
by the Company or you, relating to the interpretation or enforcement of any
provision of this Agreement; PROVIDED THAT if you instituted the proceeding and
a finding (no longer subject to appeal) is entered that you instituted the
proceeding in bad faith, you shall pay all of your costs and expenses, including
attorneys' fees and disbursements. The Company shall pay prejudgment interest on
any money judgment obtained by you as a result of such proceeding, calculated at
the prime rate of The Chase Manhattan Bank as in effect from time to time from
the date that payment should have been made to you under this Agreement.
6. SUCCESSORS; BINDING AGREEMENT.
(a) 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 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.
(b) This Agreement shall inure to the benefit of and be enforceable
by you and your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. In the event of your
death, all amounts otherwise payable to you hereunder shall, unless otherwise
provided herein, be paid in accordance with the terms of this Agreement to your
devisee, legatee or other designee or, if there is no such designee, to your
estate.
7. NOTICE. Notices and all other communications provided for in this
Agreement shall be in writing and shall be deemed to have been duly given when
(a) personally delivered or (b) mailed by United States certified or registered
mail, return receipt requested, postage prepaid, addressed to the respective
addresses set forth on the first page of this Agreement; PROVIDED THAT all
notice to the Company shall be directed to the attention of the Board with a
copy to the General Counsel of the Company, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon receipt.
8. MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by you and such officer as may be designated by the Board. No
waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the time or at any prior or subsequent
time. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New York without regard
to its conflicts of law principles. All references to sections of the Exchange
Act or the Code shall be deemed also to refer to any successor provisions to
such
7
<Page>
sections. Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law. The
obligations of the Company under this Agreement shall survive the expiration of
this Agreement to the extent necessary to give effect to this Agreement.
9. VALIDITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
10. 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.
11. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and during
the term of this Agreement supersedes the provisions of all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or representative
of any party hereof with respect to the subject matter contained herein. No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not expressly set forth in this Agreement. Notwithstanding anything to the
contrary in this Agreement, the procedural provisions of this Agreement shall
apply to all benefits payable as a result of a Change in Control (or other
change in control) under any employee benefit plan, agreement, program, policy
or arrangement of the Company.
8
<Page>
If this letter sets forth our agreement on the subject matter hereof, kindly
sign and return to the Company the enclosed copy of this letter, which will then
constitute our agreement on this subject.
IMS HEALTH INCORPORATED
By: _____________________________________
Chairman and Chief Executive Officer
Agreed to this ____________________ day
of ____________________________, 2001.
- -----------------------------------
[First_Name][Last_Name]
9
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.18
<SEQUENCE>6
<FILENAME>a2068479zex-10_18.txt
<DESCRIPTION>EXHIBIT 10.18
<TEXT>
<Page>
EXHIBIT 10.18
IMS HEALTH INCORPORATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
As Amended and Restated Effective April 17, 2001
<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".....................................................3
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"....................................7
1.12 "Code"...........................................................7
1.13 "Company"........................................................7
1.14 "Compensation"...................................................7
1.15 "Covered Earnings"...............................................7
1.16 "Deferred Vested Benefit"........................................7
1.17 "Disability" or "Disabled".......................................8
1.18 "Disability Benefits"............................................8
1.19 "Effective Date".................................................8
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".......................................11
1.26 "Plan"..........................................................12
-i-
<Page>
TABLE OF CONTENTS
(CONTINUED)
PAGE
1.27 "Potential Change in Control"...................................12
1.28 "Predecessor to this Plan"......................................12
1.29 "Retirement"....................................................12
1.30 "Retirement Benefits"...........................................13
1.31 "Service".......................................................13
1.32 "Surviving Spouse"..............................................14
1.33 "Surviving Spouse's Benefits"...................................14
1.34 "Vested Former Member"..........................................14
1.35 "Plan Administrator"............................................14
SECTION 2 - PARTICIPATION.................................................15
2.1 Commencement of Participation...................................15
2.2 Termination of Participation....................................15
SECTION 3 - AMOUNT AND FORM OF BENEFITS...................................15
3.1 Retirement Benefits.............................................15
3.2 Deferred Vested Benefit.........................................17
3.3 Form of Payment.................................................19
3.4 Lump Sum Election...............................................21
3.5 Cessation of Benefits...........................................22
3.6 Notification of Cessation of Benefits...........................24
3.7 Repayment of Benefits Paid as Lump Sum..........................24
3.8 Change in Control...............................................25
SECTION 4 - DISABILITY BENEFITS...........................................27
4.1 Disability Benefits.............................................27
SECTION 5 - SURVIVING SPOUSE'S BENEFITS...................................28
5.1 Death Prior to Benefit Commencement.............................28
5.2 Death On or After Benefit Commencement..........................28
5.3 Commencement of Surviving Spouse's Benefit......................28
5.4 Lump Sum Payment................................................29
-ii-
<Page>
TABLE OF CONTENTS
(CONTINUED)
PAGE
5.5 Reduction.......................................................30
SECTION 6 - PLAN ADMINISTRATOR............................................30
6.1 Duties and Authority............................................30
6.2 Claims Procedure................................................30
SECTION 7 - MISCELLANEOUS.................................................31
7.1 Amendment; Termination..........................................31
7.2 No Employment Rights............................................32
7.3 Payout in Discretion of the Plan Administrator..................32
7.4 Unfunded Status.................................................32
7.5 Arbitration.....................................................33
7.6 No Alienation...................................................33
7.7 Withholding.....................................................34
7.8 Governing Law...................................................34
7.9 Successors......................................................34
7.10 Integration.....................................................34
-iii-
<Page>
IMS HEALTH INCORPORATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
As Amended and Restated Effective April 17, 2001
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 April 17, 2001.
The provisions of this amendment and restatement of the Plan shall apply to
Members of the Plan who have not retired or terminated employment with the
Company as of April 17, 2001. The rights to benefits, if any, of any Former
Member or Vested Former Member who retired or otherwise terminated employment
before April 17, 2001, together with the amount of such benefits, shall continue
to be governed by the provisions of the Plan in effect as of the date of such
retirement or termination of employment.
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)
<Page>
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.
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.
-2-
<Page>
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.
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
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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 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
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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;
(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
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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 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.
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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 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
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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 April 17, 2001.
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:
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(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 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
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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.
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
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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 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).
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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, or "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 "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
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or Disability (i) after reaching age 55 and completing five 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 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
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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.
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).
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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 Retirement Benefit described in Section 3.1(b)
hereof, payable in the form specified in Section 3.3.
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(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 of the Basic Plan Benefit payable in the form of an
annual life annuity as of such date, regardless of whether
such date precedes the earliest possible payment 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 of the Other Retirement Income payable in the form of an
annual life annuity as of such date, regardless of whether
such date
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precedes the earliest possible payment 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, or, if the annual benefit payable under
the Predecessor to this Plan becomes payable after the
Member's or Vested Former Member's Retirement, the Actuarial
Equivalent Value of the annual benefit payable under the
Predecessor to this Plan, expressed in the form of an annual
life annuity, payable as of such date, regardless of whether
such date precedes the earliest possible payment date under
the terms of the Predecessor to this Plan.
3.2 DEFERRED VESTED BENEFIT.
(a) ELIGIBILITY. 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
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be an annual benefit equal to the difference between (i) and the sum
of (ii), (iii), and (iv), 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
(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 of the Basic Plan
Benefit payable in the form of an annual life annuity as of
such date, regardless of whether such date precedes the
earliest possible payment 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 of the Other
Retirement Income payable in the form of an annual life
annuity as of such date, regardless of whether such date
precedes the earliest
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possible payment 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 his or her Deferred Vested Benefit commences,
expressed in the form of an annual life annuity, or, if the
annual benefit payable under the Predecessor to this Plan
becomes payable after the Member's or Vested Former Member's
Deferred Vested Benefit commences, the Actuarial Equivalent
Value of the annual benefit payable under the Predecessor to
this Plan, expressed in the form of an annual life annuity,
payable as of such date, regardless of whether such date
precedes the earliest possible payment date under the terms of
the Predecessor to this Plan.
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
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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 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.
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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 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.
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(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-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:
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(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, or 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 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
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(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.
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
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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, 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 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. Notwithstanding the provisions of Section 3.3
of this Plan to the contrary, payment of the Actuarial
Equivalent Value of such benefits shall be made
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<Page>
in the form provided in Section 3.3 commencing on the first
day of the calendar month coinciding with or next following
such Member's termination of employment; provided, however,
that such Actuarial Equivalent Value shall be determined by
crediting such Member with three additional years of age and
on the assumption that unreduced benefits are payable upon the
Member's attainment of age 55. Moreover, for purposes of
determining the Actuarial Equivalent Value of such benefits
payable in the form of a lump sum, the interest and mortality
factors specified in Section 3.4(a) shall apply. In addition,
in the event that a Member's Service shall have been limited
pursuant to Section 1.31(iii) to disregard Service prior to
such Member's participation in the Plan, such limitation shall
be eliminated in the event of such Member's termination of
employment at or within two years following a Change in
Control as provided above in this subsection (i).
(ii) 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
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<Page>
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.
(iii) 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.
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<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 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 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
-28-
<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.
-29-
<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
-30-
<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
-31-
<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
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<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.
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<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.
-34-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.41
<SEQUENCE>7
<FILENAME>a2068479zex-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 April 17, 2001
<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"........................................................7
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".................................................8
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".......................................11
1.26 "Plan"..........................................................11
1.27 "Potential Change in Control"...................................11
-i-
<Page>
TABLE OF CONTENTS
(CONTINUED)
PAGE
1.28 "Retire" or "Retirement".......................................12
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"............................................14
SECTION 2 - PARTICIPATION................................................14
2.1 Commencement of Participation...................................14
2.2 Termination of Participation....................................14
SECTION 3 - AMOUNT AND FORM OF BENEFITS..................................15
3.1 Retirement Benefits.............................................15
3.2 Deferred Vested Benefit.........................................16
3.3 Form of Payment.................................................18
3.4 Lump Sum Election...............................................20
3.5 Cessation of Benefits...........................................21
3.6 Notification of Cessation of Benefits...........................23
3.7 Repayment of Benefits Paid as Lump Sum..........................23
3.8 Change in Control...............................................24
SECTION 4 - DISABILITY BENEFITS..........................................26
4.1 Disability Benefits.............................................26
(a) Eligibility...............................................26
(b) Amount....................................................26
SECTION 5 - SURVIVING SPOUSE'S BENEFITS..................................27
5.1 Death Prior to Benefit Commencement.............................27
5.2 Death On or After Benefit Commencement..........................27
5.3 Commencement of Surviving Spouse's Benefit......................27
5.4 Lump Sum Payment................................................28
5.5 Reduction.......................................................29
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<Page>
TABLE OF CONTENTS
(CONTINUED)
PAGE
SECTION 6 - PLAN ADMINISTRATOR...........................................29
6.1 Duties and Authority............................................29
6.2 Claims Procedure................................................29
SECTION 7 - MISCELLANEOUS................................................30
7.1 Amendment; Termination..........................................30
7.2 No Employment Rights............................................31
7.3 Payout in Discretion of the Plan Administrator..................31
7.4 Unfunded Status.................................................31
7.5 Arbitration.....................................................32
7.6 No Alienation...................................................32
7.7 Withholding.....................................................33
7.8 Governing Law...................................................33
7.9 Successors......................................................33
7.10 Integration.....................................................33
-iii-
<Page>
IMS HEALTH INCORPORATED
U.S. EXECUTIVE RETIREMENT PLAN
As Amended and Restated Effective April 17, 2001
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 April 17, 2001.
The provisions of this amendment and restatement of the Plan shall apply to
Members of the Plan who have not retired or terminated employment with the
Company as of April 17, 2001. The rights to benefits, if any, of any Former
Member or Vested Former Member who retired or otherwise terminated employment
before April 17, 2001, together with the amount of such benefits, shall continue
to be governed by the provisions of the Plan in effect as of the date of such
retirement or termination of employment.
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.
<Page>
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 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
-3-
<Page>
(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 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
-4-
<Page>
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;
(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;
-5-
<Page>
(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 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.
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<Page>
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 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.
-7-
<Page>
1.19 "EFFECTIVE DATE" shall mean July 25, 2000. The effective date of this
amendment and restatement of the Plan shall mean April 17, 2001.
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 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
-8-
<Page>
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 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;
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(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.
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).
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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).
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;
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(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 and completing one year 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.
1.29 "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
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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.
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
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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. 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.
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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>
(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;
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(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 of the Basic Plan Benefit payable in the form of an
annual life annuity as of such date, regardless of whether
such date precedes the earliest possible payment 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 of the Other Retirement Income payable in the form of an
annual life annuity as of such date, regardless of whether
such date precedes the earliest possible payment date under
the terms of the appropriate retirement arrangement.
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
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"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:
(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
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Benefit becomes payable after the Member's or Vested Former
Member's Deferred Vested Benefit commences, the Actuarial
Equivalent Value of the Basic Plan Benefit payable in the form
of an annual life annuity as of such date, regardless of
whether such date precedes the earliest possible payment 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 of the Other
Retirement Income payable in the form of an annual life
annuity as of such date, regardless of whether such date
precedes the earliest possible payment date under the terms of
the appropriate retirement arrangement.
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
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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 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.
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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 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.
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(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-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:
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(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, or 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 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
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(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.
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
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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, 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 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. Notwithstanding the provisions of Section
3.3 of this Plan to the contrary, payment of the Actuarial
Equivalent Value of such benefits shall
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be made in the form provided in Section 3.3 commencing on the
first day of the calendar month coinciding with or next
following such Member's termination of employment; provided,
however, that such Actuarial Equivalent Value shall be
determined by crediting such Member with three additional
years of age and on the assumption that unreduced benefits are
payable upon the Member's attainment of age 55. Moreover, for
purposes of determining the Actuarial Equivalent Value of such
benefits payable in the form of a lump sum, the interest and
mortality factors specified in Section 3.4(a) shall apply. In
addition, in the event that a Member's Service shall have been
limited pursuant to Section 1.30(iii) to disregard Service
prior to such Member's participation in the Plan, such
limitation shall be eliminated in the event of such Member's
termination of employment at or within two years following a
Change in Control as provided above in this subsection (i).
(ii) 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
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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.
(iii) 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.
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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
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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
-30-
<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
-31-
<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.
-32-
<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.
-33-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.48
<SEQUENCE>8
<FILENAME>a2068479zex-10_48.txt
<DESCRIPTION>EXHIBIT 10.48
<TEXT>
<Page>
EXHIBIT 10.48
1998 IMS HEALTH INCORPORATED
EMPLOYEE STOCK PURCHASE PLAN
(Amended and Restated as of December 19, 2000)
1. PURPOSE OF THE PLAN
The purpose of the Plan is to give eligible employees of the Company and
its Subsidiaries the ability to share in IMS Health's future success. 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
increased equity 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) BENEFICIAL OWNER: As such term is defined in Rule 13d-3 under the
Act (or any successor rule thereto).
(c) BOARD: The Board of Directors of the Company.
(d) CHANGE IN CONTROL: The occurrence of any of the following events:
(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(d)(i), (iii) or (iv) 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
1
<Page>
(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; or
(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.
(e) CODE: The Internal Revenue Code of 1986, as amended, or any
successor thereto.
(f) COMMITTEE: The Compensation and Benefits Committee of the Board.
(g) COMPANY: IMS Health Incorporated, a Delaware corporation.
(h) COMPENSATION: Base salary, annual bonuses, commissions, overtime and
shift pay, in each case prior to reductions for pre-tax
contributions made to a plan or salary reduction contributions to a
plan excludable from income under Section 125 of the Code.
Notwithstanding the foregoing, Compensation shall exclude severance
pay (including, without limitation, severance pay under The IMS
Health Incorporated Employee Protection Plan), stay-on bonuses,
long-term bonuses, retirement income, change-in-control payments,
contingent payments, income derived from stock options, stock
appreciation rights and other equity-based compensation and other
forms of special remuneration.
2
<Page>
(i) DISABILITY: Inability to engage in any substantial gainful activity
by reason of a medically determinable physical or mental impairment
which constitutes a permanent and total disability, as defined in
Section 22(e)(3) of the Code (or any successor section thereto). 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.
(j) DISTRIBUTION: [Reserved].
(k) DISQUALIFYING DISPOSITION: As such term is defined in Section 10(f)
of the Plan.
(l) EFFECTIVE DATE: The date on which the Plan takes effect, as defined
pursuant to Section 22 of the Plan.
(m) FAIR MARKET VALUE: On a given date, the arithmetic average 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 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 average of the per Share closing bid price and per Share
closing asked price on such date as quoted on the National
Association of Securities Dealers Automated Quotation 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 National Association of Securities Dealers Automated
Quotation 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) MAXIMUM SHARE AMOUNT: Subject to Section 423 of the Code, the
maximum number of Shares that a Participant may purchase on any
given Purchase Date, as determined by the Committee in its sole
discretion.
(o) OFFERING DATE: The first date of an Offering Period.
(p) OFFERING PERIOD: An offering period described in Section 5 of the
Plan.
(q) OPTION: A stock option granted pursuant to Section 8 of the Plan.
3
<Page>
(r) PARTICIPANT: An individual who is eligible to participate in the
Plan pursuant to Section 6 of the Plan.
(s) PARTICIPATING SUBSIDIARY: A Subsidiary of the Company that is
selected to participate in the Plan by the Committee in its sole
discretion.
(t) PAYROLL DEDUCTION ACCOUNT: An account to which payroll deductions of
Participants are credited under Section 10(c) of the Plan.
(u) PERSON: As such term is used for purposes of Section 13(d) or 14(d)
of the Act (or any successor section thereto).
(v) PLAN: The 1998 IMS Health Incorporated Employee Stock Purchase Plan
(as amended and restated as of December 19, 2000).
(w) PLAN BROKER: A stock brokerage or other financial services firm
designated by the Committee in its sole discretion.
(x) PURCHASE DATE: The last date of an Offering Period.
(y) PURCHASE PRICE: The purchase price per Share, as determined pursuant
to Section 9 of the Plan.
(z) RETIREMENT: Termination of employment with the Company or a
Subsidiary after such Participant has attained age 55 and five years
of service with the Company; or, with the prior written consent of
the Committee that such termination be treated as a Retirement
hereunder, termination of employment under other circumstances.
(aa) SHARES: Shares of common stock, par value $0.01 per Share, of the
Company.
(bb) SUBSIDIARY: A subsidiary corporation, as defined in Section 424(f)
of the Code (or any successor section thereto).
3. SHARES SUBJECT TO THE PLAN
The total number of Shares which may be issued under the Plan is
3,000,000. The Shares may consist, in whole or in part, of unissued
Shares, treasury Shares or Shares purchased on the open market. The
issuance of Shares pursuant to the Plan shall reduce the total number of
Shares available under the Plan.
4
<Page>
4. ADMINISTRATION OF THE PLAN
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). 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). Subject to Section 16 of the Act or other
applicable law, the Committee may delegate its duties and powers under the
Plan to such individuals as it designates in its sole discretion.
5. OFFERING PERIODS
Offering Periods shall be of six-months duration and shall commence on
January 1 and July 1 of each year. Notwithstanding the foregoing, the
Committee may change the duration of any Offering Period in its sole
discretion.
6. ELIGIBILITY
Any individual who is an employee of the Company or of a Participating
Subsidiary is eligible to participate in the Plan, except for the
following employees:
(a) employees whose customary employment is twenty (20) hours or less
per week within the meaning of Section 423(b)(4)(B) of the Code,
(b) employees whose customary employment is for not more than five (5)
months in any calendar year within the meaning of Section
423(b)(4)(C) of the Code; and
(c) employees who, if granted an option would immediately thereafter own
stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the employer
corporation or of its parent or Subsidiary corporation within the
meaning of Section 423(b)(3) of the Code. For purposes of this
Section 6(c) of the Plan, the rules of Section 424(d) of the Code
shall apply in determining stock ownership of
5
<Page>
an individual, and stock which the employee may purchase under
outstanding options shall be treated as stock owned by the employee.
7. PARTICIPATION IN THE PLAN
The Committee shall set forth procedures pursuant to which Participants my
elect to participate in a given Offering Period under the Plan. Once a
Participant elects to participate in an Offering Period, such employee
shall automatically participate in all subsequent Offering Periods, unless
the employee (a) makes a new election or (b) withdraws from an Offering
Period or from the Plan pursuant to Section 11 of the Plan.
8. GRANT OF OPTION ON ENROLLMENT
Each Participant who elects to participate in a given Offering Period
shall be granted (as of the Offering Date) an Option to purchase (as of
the Purchase Date) a number of Shares equal to the lesser of (i) the
Maximum Share Amount or (ii) the number determined by dividing the amount
accumulated in such employee's payroll deduction account during such
Offering Period by the Purchase Price.
9. PURCHASE PRICE
The Purchase Price at which a Share will be sold for a given Offering
Period, as of the Purchase Date, shall be eighty-five percent (85%) of the
lesser of:
(a) the Fair Market Value of a Share on the Offering Date; or
(b) the Fair Market Value of a Share on the Purchase Date.
10. PAYMENT OF PURCHASE PRICE; CHANGES IN PAYROLL DEDUCTIONS; ISSUANCE OF
SHARES
Subject to Sections 11 and 12 of the Plan:
(a) Payroll deductions shall be made on each day that Participants are
paid during an Offering Period with respect to all Participants who
elect to participate in such Offering Period. The deductions shall
be made as a percentage of the Participant's Compensation in one
percent (1%) increments, from one percent (1%) to twenty percent
(20%) of such Participant's Compensation, as elected by the
Participant; provided however, that no Participant shall be
permitted to purchase Shares under
6
<Page>
this Plan (or under any other "employee stock purchase plan" within
the meaning of Section 423(b) of the Code, of the Company or any of
its Subsidiaries) with an aggregate Fair Market Value (as determined
as of each Offering Date) in excess of $21,250 for any one calendar
year within the meaning of Section 423(b)(8) of the Code. For a
given Offering Period, payroll deductions shall commence on the
Offering Date and shall end on the related Purchase Date, unless
sooner altered or terminated as provided in the Plan.
(b) A Participant shall not change the rate of payroll deductions once
an Offering Period has commenced. The Committee shall specify
procedures by which a Participant may increase or decrease the rate
of payroll deductions for subsequent Offering Periods.
(c) All payroll deductions made with respect to a Participant shall be
credited to his or her Payroll Deduction Account under the Plan and
shall be deposited with the general funds of the Company, and no
interest shall accrue on the amounts credited to such Payroll
Deduction Accounts. All payroll deductions received or held by the
Company may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll
deductions. A Participant may not make any separate cash payment
into his or her Payroll Deduction Account, and payment for Shares
purchased under the Plan may not be made in any form other than by
payroll deduction.
(d) On each Purchase Date, the Company shall apply all funds then in the
Participant's Payroll Deduction Account to purchase Shares (in whole
and/or fractional Shares, as the case may be) pursuant to the Option
granted on the Offering Date. In the event that the number of Shares
to be purchased by all Participants in one Offering Period exceeds
the number or Shares then available for issuance under the Plan, (i)
the Company shall make a pro rata allocation of the remaining Shares
in as uniform a manner as shall be practicable and as the Committee
shall determine to be equitable and (ii) all funds not used to
purchase Shares on the Purchase Date shall be returned, without
interest, to the Participant.
(e) As soon as practicable following the end of each Offering Period,
the number of Shares purchased by each Participant shall be
deposited into an account established in the Participant's name with
the Plan Broker. Unless otherwise permitted by the Committee in its
sole discretion, dividends that are declared on the Shares held in
such account shall be reinvested in whole or fractional Shares.
(f) Once the holding period set forth in Section 423(a) of the Code has
been satisfied with respect to a Participant's Shares, the
Participant may (i)
7
<Page>
keep his or her shares in the account established in the
Participant's name with the Plan Broker, (ii) transfer his or her
Shares to another brokerage account of Participant's choosing or
(iii) request in writing that a stock certificate be issued to him
or her with respect to the whole Shares in his or her Plan Broker
account and that any fractional Shares remaining in such account be
paid in cash to him or her. The Committee may require, in its sole
discretion, that the Participant bear the cost of transferring such
Shares or issuing certificates for such Shares. Any Participant who
engages in a "Disqualifying Disposition" of his or her Shares within
the meaning of Section 421(b) of the Code shall notify the Company
of such Disqualifying Disposition in accordance with Section 20 of
the Plan.
(g) The Participant shall have no interest or voting right in the Shares
covered by his or her Option until such Option is exercised.
11. WITHDRAWAL
Each Participant may withdraw from an Offering Period or from the Plan
under such terms and conditions as are established by the Committee in its
sole discretion. Upon a Participant's withdrawal from an Offering Period
or from the Plan, all accumulated payroll deductions in the Payroll
Deduction Account shall be returned, without interest, to such
Participant, and he or she shall not be entitled to any Shares on the
Purchase Date or thereafter with respect to the Offering Period in effect
at the time of such withdrawal. Such Participant shall be permitted to
participate in subsequent Offering periods pursuant to such terms and
conditions established by the Committee in its sole discretion.
12. TERMINATION OF EMPLOYMENT
A Participant shall cease to participate in the Plan upon his or her
termination of employment for any reason (including, but not limited to,
Retirement, death or Disability). In such event, all payroll deductions
credited to the Participant's Payroll Deduction Account shall be returned,
without interest, to such Participant or to his or her designated
beneficiary, as the case may be, and such Participant or beneficiary shall
have no future rights in any unexercised Options under the Plan.
13. ADJUSTMENTS UPON CERTAIN EVENTS
Notwithstanding any other provisions in the Plan to the contrary, the
following provisions shall apply to all Options granted under the Plan:
8
<Page>
(a) GENERALLY. In the event of any change in the outstanding Shares by
reason of any Share dividend or split, reorganization,
recapitalization, merger, consolidation, spin-off, combination or
exchange of Shares or other corporate exchange, or any distribution
to stockholders of Shares other than regular cash dividends, 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,
(ii) the Purchase Price and/or (iii) any other affected terms of
such Options.
(b) CHANGE IN CONTROL. 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 Option as of the date of the consummation of the
Change in Control.
14. NONTRANSFERABILITY
No Options granted under the Plan shall be transferable or assignable by
the Participant otherwise than by will or by the laws of descent and
distribution.
15. NO RIGHT TO EMPLOYMENT
The granting of an Option 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.
16. SECTION 423 OF THE CODE
The Plan is intended to qualify as an "employee stock purchase plan"
within the meaning of Section 423 of the Code or any successor section
thereto. Accordingly, all Participants shall have the same rights and
privileges under the Plan, subject to any exceptions that are permitted
under Section 423(b)(5) of the Code. Any provision of the Plan that is
inconsistent with Section 423 of the Code or any successor provision
shall, without further act or amendment, be reformed to comply with the
requirements of Section 423. This Section 16 shall take precedence over
all other provisions in the Plan.
9
<Page>
17. AMENDMENT OR TERMINATION OF THE PLAN
The Plan shall continue until the earliest to occur of the following: (a)
termination of the Plan by the Board, (b) issuance of all of the Shares
reserved for issuance under the Plan, (c) June 30, 2008 or (d) failure to
satisfy the conditions of Section 22 of the Plan. The Board may amend,
alter or discontinue the Plan, but no amendment, alteration or
discontinuation shall be made which, (a) without the approval of the
stockholders of the Company, would (except as is provided in Section 13 of
the Plan), increase the total number of Shares reserved for the purposes
of the Plan or (b) without the consent of a Participant, would impair any
of the rights or obligations under any Option theretofore granted to such
Participant under the Plan; PROVIDED, HOWEVER, that the Committee may
amend the Plan in such manner as it deems necessary to permit the granting
of Options meeting the requirements of the Code or other applicable laws.
18. TAX WITHHOLDING
The Participant's employer shall have the right to withhold from such
Participant such withholding taxes as may be required by federal, state,
local or other law, or to otherwise require the Participant to pay such
withholding taxes.
19. INTERNATIONAL PARTICIPANTS
With respect to Participants who reside or work outside the United States
of America, 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 to the requirements of local law.
20. NOTICES
All notices and other communications hereunder shall be in writing and
hand delivered or mailed by registered or certified mail (return receipt
requested) or sent by any means of electronic message transmission with
delivery confirmed (by voice or otherwise) to the parties at the following
addresses (or at such other addresses for a party as shall be specified by
like notice) and will be deemed given on the date on which such notice is
received:
IMS HEALTH Shared Business Services
861 Marcon Boulevard
Allentown, PA 18109
Fax (610) 231- 8221
Phone (610) 231- 8220
e-mail address: payroll@imshealth.com
10
<Page>
21. CHOICE OF 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
the State of New York.
22. EFFECTIVENESS OF THE PLAN
The Plan shall become effective on the date on which it is adopted by the
Board (the "Effective Date"); provided, however, that the Plan must be
approved within twelve (12) months after the Effective Date by the
stockholders of the Company. The Company may commence payroll deductions
on behalf of Participants pursuant to the Plan prior to such stockholder
approval; provided, however, that the use of such payroll deductions to
purchase Shares pursuant to the exercise of Options hereunder is
contingent upon stockholder approval of the Plan. If stockholder approval
of the Plan is not obtained prior to the first Purchase Date, the Plan
shall terminate and all amounts withheld through payroll deduction or held
in a Participant's Payroll Deduction Account shall be returned to such
Participant, without interest.
11
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.51
<SEQUENCE>9
<FILENAME>a2068479zex-10_51.txt
<DESCRIPTION>EXHIBIT 10.51
<TEXT>
<Page>
EXHIBIT 10.51
RULES
OF
THE IMS HEALTH INCORPORATED
2001 INLAND REVENUE APPROVED SUB-PLAN FOR
UNITED KINGDOM EMPLOYEES
Adopted by the Company on: 16 October 2001
Approved by the Inland Revenue on: 22 October 2001
Inland Revenue reference no: X22069/IDA
PRICEWATERHOUSECOOPERS
HARMAN HOUSE, 1 GEORGE STREET,
UXBRIDGE, MIDDLESEX UB8 1QQ
TEL: 01895 273333
FAX: 01895 274777
REF: AM/CAM/5061
<Page>
SCHEDULE
RULES OF THE IMS HEALTH INCORPORATED 2001
INLAND REVENUE APPROVED SUB-PLAN FOR
UNITED KINGDOM EMPLOYEES
1. GENERAL
This schedule to the IMS Health Incorporated 2000 Stock Incentive Plan
("the Plan") sets out the rules of The IMS Health Incorporated 2001 Inland
Revenue Approved Sub-Plan for United Kingdom employees ("the Sub-Plan").
2. ESTABLISHMENT OF SUB-PLAN
IMS Health Incorporated ("the Company") has established the Sub-Plan under
Section 14 of the Plan, which authorises the Company to establish
sub-plans to the Plan(1).
3. PURPOSE OF SUB-PLAN
The purpose of the Sub-Plan is to enable the grant to, and subsequent
exercise by, certain employees and certain directors in the United
Kingdom, on a tax favoured basis, of options to acquire shares in the
Company under the Plan.
4. INLAND REVENUE APPROVAL OF SUB-PLAN
The Sub-Plan is intended to be approved by the Inland Revenue under
Schedule 9 to ICTA 1988.
5. RULES OF SUB-PLAN
The rules of the Plan, in their present form and as amended from time to
time, shall, with the modifications set out in this schedule, form the
rules of the Sub-Plan. In the event of any conflict between the rules of
the Plan and this schedule, the schedule shall prevail.
6. RELATIONSHIP OF SUB-PLAN TO PLAN
The Sub-Plan shall form part of the Plan and not a separate and
independent plan.
7. INTERPRETATION
In the Sub-Plan, unless the context otherwise requires, the following
words and expressions have the following meanings:
1
<Page>
ACQUIRING COMPANY a company which obtains Control of the Company
in the circumstances referred to in rule 26;
APPROVAL DATE the date on which the Sub-Plan is approved by
the Inland Revenue under Schedule 9 to ICTA
1988;
ASSOCIATED COMPANY The meaning given to that expression by section
187(2) of ICTA 1988;(2)
CLOSE COMPANY The meaning given to that expression by
section 414 of, and paragraph 8 of Schedule 9
to, ICTA 1988;(3)
CONSORTIUM the meaning given to that word by section 187(7)
of ICTA 1988;(4)
CONTROL the meaning given to that word by section 840 of
ICTA 1988 and "Controlled" shall be construed
accordingly;(5)
DATE OF GRANT the date on which an Option is granted
to an Eligible Employee determined by the
Committee or its delegate in accordance with
Section 6 of the Plan;
ELIGIBLE EMPLOYEE an individual who falls within Section 5 of the
Plan and who is an employee of the Company or a
company participating in the Sub-Plan as
described in rule 8 and who does not have at the
Date of Grant of an Option, and has not had
during the preceding twelve months, a Material
Interest in a Close Company which is the Company
or a company which has Control of the Company or
a member of a Consortium which owns the Company;
EXPIRATION DATE the date on which an Option will ordinarily
lapse if not exercised;
ICTA 1988 the Income and Corporation Taxes Act 1988;
INLAND REVENUE the UK Board of Inland Revenue;
MARKET VALUE notwithstanding Section 2(k) of the Plan,
(a) in the case of an Option granted under the
Sub Plan:
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(i) if at the relevant time the Shares are
listed on the New York Stock Exchange(6)
the mean between the highest and lowest
reported sale prices of a Share on the
New York Stock Exchange as reported on
the Composite Tape for the Date of Grant
of the Option;
(ii) if paragraph (i) does not apply, the
market value of a Share as determined in
accordance with Part VIII of the
Taxation of Chargeable Gains Act 1992(7)
and agreed in advance with the Inland
Revenue Shares Valuation Division on the
Date of Grant of the Option or such
earlier date or dates (not being more
than thirty days before the Date of
Grant) as may be agreed with the Inland
Revenue;
(b) in the case of an option granted under
any other share option scheme, the market
value of an ordinary share in the capital of
the Company determined under the rules of
such scheme for the purpose of the grant of
the option;
MATERIAL INTEREST the meaning given to that expression by section
187(3) of ICTA 1988;(8)
NEW OPTION an option granted by way of exchange under rule
26.1;
NEW SHARES the shares subject to a New Option referred to
in rule 26.1;
OPTION a subsisting right to acquire Shares granted
under the Sub-Plan;
ORDINARY SHARE CAPITAL the meaning given to that expression by section
832(1) of ICTA 1988;
PARTICIPANT an employee who holds an Option or, where the
context permits, his legal personal
representatives; and
STOCK OPTION AGREEMENT a written agreement between the Company and a
Participant evidencing the terms and conditions
of an individual Option grant.
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Each Stock Option Agreement shall be subject to
the terms and conditions of the Sub-Plan; and
SUBSIDIARY the meaning given to that word in section 736 of
the Companies Act 1985.
In this schedule, unless the context otherwise requires:
words and expressions not defined above have the same meanings as
are given to them in the Plan;
the rule headings are inserted for ease of reference only and do not
affect their interpretation;
a reference to a rule is a reference to a rule in this schedule;
the singular includes the plural and vice-versa and the masculine
includes the feminine; and
a reference to a statutory provision is a reference to a United
Kingdom statutory provision and includes any statutory modification,
amendment or re-enactment thereof.
8. COMPANIES PARTICIPATING IN SUB-PLAN
The companies participating in the Sub-Plan shall be the Company and any
company Controlled by the Company which has been nominated by the Company
to participate in the Sub-Plan.
9. SHARES USED IN SUB-PLAN
The Shares shall form part of the Ordinary Share Capital of the Company
and shall at all times comply with the requirements of paragraphs 10 to 14
of Schedule 9 to ICTA 1988. (9)
10. GRANT OF OPTIONS
An Option shall be granted under and subject to the rules of the Plan as
modified by this schedule.
11. IDENTIFICATION OF OPTIONS
A Stock Option Agreement issued in respect of an Option shall expressly
state that it is issued in respect of an Option. An option which is not so
identified shall not constitute an Option.
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12. CONTENTS OF STOCK OPTION AGREEMENT
A Stock Option Agreement issued in respect of an Option shall be issued to
the Participant as soon as practicable after the Date of Grant and shall
state:
that it is issued in respect of an Option;
the Date of Grant of the Option;
the number of Shares subject to the Option;
the Option Price under the Option;
the Expiration Date of an Option;
any performance target or other condition imposed on the exercise
of the Option;
the date(s) on which the Option will ordinarily become exercisable;
and
the date(s) on which the Option will become exercisable in the event
of a Change in Control under Section 9(b)(i) of the Plan.
13. EARLIEST DATE FOR GRANT OF OPTIONS
An Option may not be granted earlier than the Approval Date.
14. PERSONS TO WHOM OPTIONS MAY BE GRANTED
An Option may not be granted to an individual who is not an Eligible
Employee at the Date of Grant.
15. OPTIONS NON TRANSFERABLE
Notwithstanding Section 12 of the Plan, an Option shall be personal to the
Eligible Employee to whom it is granted and, subject to rule 25, shall not
be capable of being transferred, charged or otherwise alienated and shall
lapse immediately if the Participant purports to transfer, charge or
otherwise alienate the Option.
16. LIMIT ON NUMBER OF SHARES PLACED UNDER OPTION UNDER SUB-PLAN
For the avoidance of doubt, Shares placed under Option under the Sub-Plan
shall be taken into account for the purpose of Section 3 of the Plan.
17. INLAND REVENUE LIMIT ((POUND)30,000)
An Option may not be granted to an Eligible Employee if the result of
granting the Option would be that the aggregate Market Value of the shares
subject to all outstanding options granted to him under the Sub-Plan or
any other share option scheme established by the Company or an Associated
Company and
5
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approved by the Inland Revenue under Schedule 9 to ICTA 1988 (other than a
savings related share option scheme) would exceed sterling (pound)30,000
or such other limit as may from time to time be specified in paragraph 28
of Schedule 9 to ICTA 1988.(10) For this purpose, the United Kingdom
sterling equivalent of the Market Value of a share on any day shall be
determined by taking the spot sterling/US dollar exchange rate for that
day as shown in the Financial Times. If the grant of an Option would
otherwise cause the limit in this rule 17 to be exceeded, it shall take
effect as the grant of an Option under the Sub-Plan over the highest
number of Shares which does not cause the limit to be exceeded.
18. OPTION PRICE UNDER OPTIONS
Notwithstanding Section 6(a) of the Plan, the amount payable per Share on
the exercise of an Option shall not be less than the Market Value of a
Share on the Date of Grant and shall be stated on the Date of Grant.
19. PERFORMANCE TARGET OR OTHER CONDITION IMPOSED ON EXERCISE OF AN OPTION
Any performance target or other condition imposed on the exercise of an
Option under Section 6(b) of the Plan shall be:
19.1 objective;
19.2 such that, once satisfied, the exercise of the Option is not
subject to the discretion of any person; and
19.3 stated on the Date of Grant.
If an event occurs as a result of which the Plan Administrator considers
that a performance target or other condition imposed on the exercise of an
Option is no longer appropriate and substitutes, varies or waives under
Sections 9(a) or 13(b) of the Plan the performance target or condition,
such substitution, variation or waiver shall:
19.4 be reasonable in the circumstances; and
19.5 produce a fairer measure of performance and be neither materially
more nor less difficult to satisfy.
20. EXERCISE OF OPTIONS BY LEAVERS
20.1 Notwithstanding Section 6(e) of the Plan, if a Participant ceases to be
employed by the Company and its Subsidiaries before the Expiration Date of
his Option by reason of Disability, he shall be entitled to exercise his
Options in full at any time during the period ending on the earlier of:
20.1.1 five years after the date of Disability or
20.1.2 the Expiration Date of the Option
and thereafter his Options, to the extent unexercised, shall lapse.
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20.2 Notwithstanding Section 6(f) of the Plan, if a Participant ceases to be
employed by the Company and its Subsidiaries before the Expiration Date of
the Option by reason of Retirement, he shall be entitled to exercise his
Options to the extent exercisable (unvested Options will be forfeited) at
the time of such Retirement at any time during the period ending on the
earlier of:
20.2.2 the Expiration Date of the Option, or
20.2.3 the later of:
20.2.3.1 five years after the date of Retirement; and
20.2.3.2 12 months from the date of his death
and thereafter his Options, to the extent unexercised, shall lapse.
20.3 Notwithstanding Section 6(g) of the Plan, if a Participant ceases to be
employed by the Company and its Subsidiaries for any reason other than
those referred to in rules 20.1, 20.2 and 25, or by reason of his injury
or redundancy the Committee may, at its discretion, allow him to exercise
his Options to the extent exercisable at the time his employment ceases at
any time during the period ending 90 days after the date of cessation of
his employment. If not exercised, his Options shall immediately lapse.
21. LATEST DATE FOR EXERCISE OF OPTIONS
Subject to rule 25, an Option may not be exercised more than ten years
after the Date of Grant and to the extent not so exercised by that time
the Option shall lapse immediately.
22. MATERIAL INTEREST
An Option may not be exercised if the Participant then has, or has had
within the preceding twelve months, a Material Interest in a Close Company
which is the Company or which is a company which has Control of the
Company or which is a member of a Consortium which owns the Company.
23. MANNER OF PAYMENT FOR SHARES ON EXERCISE OF OPTIONS
The amount due on the exercise of an Option shall be paid in cash or by
cheque or banker's draft and may be paid out of funds provided to the
Participant on loan by a bank, broker or other person. Notwithstanding
Sections 6(c)(ii) and 6(c)(iii) of the Plan, the amount may not be paid by
the transfer to the Company of Shares or any other shares or securities.
The date of exercise of an Option shall be the date on which the Company
receives the amount due on the exercise of the Option.
7
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24. ISSUE OR TRANSFER OF SHARES ON EXERCISE OF OPTIONS
24.1 Notwithstanding Sections 6(c) and 17 of the Plan and subject only to
compliance by the Participant with the rules of the Sub-Plan and to any
delay necessary to complete or obtain:
24.1.1 the listing of the Shares on any stock exchange on which Shares
are then listed; and
24.1.2 such registration or other qualification of the Shares under any
applicable law, rule or regulation as the Company determines is
necessary or desirable
the Company shall, as soon as reasonably practicable and in any event not
later than thirty days after the date of exercise of an Option, issue or
transfer to the Participant, or procure the issue or transfer to the
Participant of, the number of Shares specified in the notice of exercise
and shall deliver to the Participant, or procure the delivery to the
Participant of, a Share Certificate in respect of such Shares or shall
procure the electronic transfer of such shares to an account of the
Participant.
24.2 The exercise shall be considered only conditional, until the Participant
has made provision for the payment or withholding of any taxes required to
be withheld in accordance with the applicable law of any foreign
jurisdiction in respect of the exercise of the Option or the receipt of
the Shares.
25. DEATH OF PARTICIPANT
Notwithstanding Section 6(e) of the Plan and rule 20, if a Participant
dies before the Expiration Date of the Option, his personal
representatives shall be entitled to exercise his Options in full at any
time during the twelve month period following his death even if the Option
would have otherwise expired. If not so exercised, the Options shall lapse
immediately.
26. CHANGE IN CONTROL OF COMPANY
26.1 EXCHANGE OF OPTIONS
If a company ("Acquiring Company") obtains Control of the Company as a
result of making:
26.1.1 a general offer to acquire the whole of the issued ordinary share
capital of the Company which is made on a condition such that if
it is satisfied the person making the offer will have Control of
the Company; or
26.1.2 a general offer to acquire all the shares in the Company of the
same class as the Shares
a Participant may, at any time during the period set out in rule 26.2, by
agreement with the Acquiring Company, release his Option in whole or in
part
8
<Page>
in consideration of the grant to him of a new option ("New Option") which
is equivalent to the Option but which relates to shares ("New Shares") in:
26.1.3 the Acquiring Company;
26.1.4 a company which has Control of the Acquiring Company; or
26.1.5 a company which either is, or has Control of, a company which is
a member of a Consortium which owns either the Acquiring Company
or a company having Control of the Acquiring Company.
26.2 PERIOD ALLOWED FOR EXCHANGE OF OPTIONS
The period referred to in rule 26.1 is the period of six months beginning
with the time when the person making the offer has obtained Control of the
Company and any condition subject to which the offer is made has been
satisfied.
26.3 MEANING OF "EQUIVALENT"
The New Option shall not be regarded for the purpose of this rule 26 as
equivalent to the Option unless:
26.3.1 the New Shares satisfy the conditions in paragraphs 10 to 14 of
Schedule 9 to ICTA 1988; and
26.3.2 save for any performance target or other condition imposed on the
exercise of the Option, the New Option will be exercisable in the
same manner as the Option and subject to the provisions of the
Sub-Plan as it had effect immediately before the release of the
Option; and
26.3.3 the total market value, immediately before the release of the
Option, of the Shares which were subject to the Option is equal
to the total market value, immediately after the grant of the New
Option, of the New Shares (market value being determined for this
purpose in accordance with Part VIII of the Taxation of
Chargeable Gains Act 1992); and
26.3.4 the total amount payable by the Participant for the acquisition
of the New Shares under the New Option is equal to the total
amount that would have been payable by the Participant for the
acquisition of the Shares under the Option.
26.4 DATE OF GRANT OF NEW OPTION
The date of grant of the New Option shall be deemed to be the same as the
Date of Grant of the Option.
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26.5 APPLICATION OF SUB-PLAN TO NEW OPTION
In the application of the Sub-Plan to the New Option, where appropriate,
references to "Company" and "Shares" shall be read as if they were
references to the company to whose shares the New Option relates and the
New Shares, respectively, save that in the definition of "Committee" the
reference to "Board" shall be read as if it were a reference to the Board
of IMS Health Incorporated.
26.6 DISAPPLICATION OF SECTION 9 OF THE PLAN
References in Section 9(b)(iii) of the Plan to substitution of Options
with comparable awards, shall be disapplied for the purposes of the
Sub-Plan to the extent that such substitution does not satisfy the
requirements of Paragraph 15 of Schedule 9 to ICTA 1988.
If an exchange of Options in accordance with this rule 26 is not possible,
and a substitution under Section 9(b) of the Plan does not satisfy the
requirements of paragraph 15 of Schedule 9 to ICTA 1988, the Option shall
lapse on the termination of the corporate existence of the Company in
connection with the Control transaction.
27. RIGHTS ATTACHING TO SHARES ISSUED ON EXERCISE OF OPTIONS
Notwithstanding Section 6(d) of the Plan, all Shares issued on the
exercise of an Option shall, as to any voting, dividend, transfer and
other rights, including those arising on a liquidation of the Company,
rank equally in all respects and as one class with the shares of the same
class in issue at the date of such exercise save as regards any rights
attaching to such shares by reference to a record date prior to the date
of such exercise.
28. AMENDMENT OF SUB-PLAN
Notwithstanding Sections 4(a) and 13(a) of the Plan, no amendment of the
Sub-Plan, whether taking the form of an amendment of the Plan or this
schedule, shall take effect until it has been approved by the Inland
Revenue.
29. ADJUSTMENT OF OPTIONS
Notwithstanding Sections 4(c), 9(a) and 13(b) of the Plan, any adjustment
of an Option:
29.1 shall not be made unless the adjustment is permitted pursuant to
paragraph 29(7) of Schedule 9 to ICTA 1988; and
29.2 shall not take effect until it has been approved by the Inland
Revenue.
30. EXERCISE OF DISCRETION BY COMMITTEE
In exercising any discretion which it may have under the Sub-Plan, the
Committee shall act fairly and reasonably.
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31. DISAPPLICATION OF CERTAIN PROVISIONS OF PLAN
The provisions of the Plan dealing with:
Stock Appreciation Rights;
LSARs; and/or
Other Stock-Based Awards
shall not form part of, and no such rights may be granted under, the
Sub-Plan.
The following sections of the Plan shall be disapplied for the purposes of
the Sub-Plan:
the words "with the exception of certain non-US jurisdictions" in
Section 6(b);
the sentence in Section 6(c) "Unless otherwise provided by the
Committee, the participant may 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 or other
taxes as a result of the exercise of the Option.";
Section 6(d);
Sections 9(a)(iii) and 9(b)(ii) relating to the payment of cash on
cancellation of Options; and
Sections 16(a) and 16(b) relating to the payment of taxes in Shares
or by the withholding of Shares that would have otherwise been
received by the Participant.
- --------
(1) The Company is the "grantor" as defined in paragraph 1 of Schedule 9 to ICTA
1988 because it has established the Sub-Plan. In most cases, it will also be the
Company which grants options under the Sub-Plan, although this is not a
requirement of UK tax legislation.
(2) A company is treated as another's "associated company" at a given time if,
at that time or at any other time within one year previously, one of the two has
control of the other, or both are under the control of the same person or
persons. A person is taken to have control of a company if he exercises, or is
able to exercise or is entitled to acquire, direct or indirect control over the
Company's affairs and, in particular, if he possesses or is entitled to acquire
the greater part of the Company's issued share capital or the voting power in
the company. UK tax legislation contains two definitions of control: the
definition of control here is different from that in paragraph 5 below.
(3) A close company is a company which is under the control (as defined in
paragraph 5 below) of five or fewer participators (eg shareholders) or of any
number of participators who are directors. There are attributed to a
participator all the rights and powers (eg shares, voting power) of, inter alia,
a company which he controls or of an "associate" (eg relative) of his.
Ordinarily, a company is excluded from being a close company if it is non UK
resident or 35% of the voting power in the company is held by
11
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- --------------------------------------------------------------------------------
the public and its shares have been listed, and the subject of dealings, on a
recognised stock exchange within the preceding 12 months. However, for the
purpose of the material interest test (see paragraph 8 below), this exclusion
does not apply with the result that the normal definition of a "close company"
is extended.
(4) A company is a member of a consortium owning another company if it is one of
a number of companies which between them beneficially own not less than
three-quarters of the other company's ordinary share capital and each of which
beneficially owns not less than one-twentieth of that capital.
(5) Control means the power of a person to secure:
(a) by means of the holding of shares or the possession of voting power in or
in relation to that or any other body corporate; or
(b) by virtue of any powers conferred by the articles of association or other
document regulating that or any other body corporate
that the affairs of the first-mentioned body corporate are conducted in
accordance with the wishes of that person.
(6) The expression "recognised stock exchange" is defined in section 841 of ICTA
1988. "Recognised stock exchange" means the London Stock Exchange Limited and
any stock exchange outside the UK which has been designated by the Inland
Revenue as a recognised stock exchange. This includes, inter alia, the New York
Stock Exchange, NASDAQ and any exchange registered with the US Securities and
Exchange Commission as a national securities exchange. However, clearance is
required from the Shares Valuation Division before the NASDAQ price may be used
to determine the market price of a NASDAQ listed share.
(7) Market value in this context means the price which the shares used in the
scheme might reasonably be expected to fetch on a sale in the open market
(section 272 Taxation of Chargeable Gains Act 1992 ("TCGA 1992"). In making this
determination, it is assumed that there is available to any prospective
purchaser of the shares all the information which a prudent prospective
purchaser of the shares might reasonably require if he were proposing to
purchase the shares from a willing vendor by private treaty and at arm's length.
(8) A person has a material interest in a company if he, either on his own or
with one or more associates, or if any associate of his with or without such
other associates:
(a) is the beneficial owner of, or able, directly or through the medium of
other companies, or by any other indirect means to control, more than 10
per cent of the ordinary share capital of the company; or
(b) where the company is a close company, possesses, or is entitled to
acquire, such rights as would, in the event of the winding-up of the
company or in any other circumstances, give an entitlement to receive more
than 10 per cent of the assets which would then be available for
distribution among the participators.
(9) The shares used in the scheme must be:
(a) ordinary shares;
(b) fully paid up;
(c) not redeemable; and
(d) save for certain limited exceptions, not subject to any restrictions which
do not apply to all shares of the same class.
12
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- --------------------------------------------------------------------------------
The shares used in the scheme must be:
(a) of a class listed on a recognised stock exchange; or
(b) shares in a company which is not under the control of another company; or
(c) shares in a company which is under the control of another company (other
than a company which is, or would if resident in the UK be, a close
company) whose shares are listed on a recognised stock exchange.
The shares used in the scheme form part of the ordinary share capital of:
(a) the grantor (ie the company which has established the scheme); or
(b) a company which has control of the grantor; or
(c) a company which either is, or has control of, a company which is a member
of a consortium owning either the grantor or a company having control of
the grantor.
Where the company whose shares are to be used in a scheme has more than one
class of ordinary share, the majority of the issued shares of the same class as
those which are to be used must be either employee control shares (see below)
or:
(a) must not be held by persons (including trustees holding shares on behalf
of such persons) who acquired their shares in pursuance of a right
conferred on them or opportunity offered to them as directors or employees
of any company, and not in pursuance of an offer to the public; and
(b) if the shares are not listed on a recognised stock exchange and the
company is under the control of another company whose shares are so
listed, must not be held by companies which have control of the company
whose shares are in question or of which that company is an associated
company.
Shares are employee control shares if:
(a) the persons holding them are, by virtue of their holding of shares of that
class, together able to control the company; and
(b) those persons are, or have been, employees or directors of the company or
of another company which is under the control of the company.
(10) UK tax legislation imposes a limit (currently (pound)30,000) on the "value"
of the outstanding options which may be held by an individual participant in an
Inland Revenue approved executive share option scheme. The (pound)30,000 limit
is calculated by reference to the market value of the shares at the date of
grant of the relevant option and is not recalculated for any changes in the
share value during the life of the option. When an option is exercised, the
shares in respect of which the option is exercised drop out of the account for
the purpose of the (pound)30,000 limit, this creating scope for the grant of an
option over further shares to the same individual.
13
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>10
<FILENAME>a2068479zex-13.txt
<DESCRIPTION>EXHIBIT 13
<TEXT>
<Page>
IMS HEALTH INCORPORATED
--------------------------------
2001 ANNUAL REPORT TO SHAREHOLDERS
[LOGO]
<Page>
IMS HEALTH INCORPORATED
2001 ANNUAL REPORT TO SHAREHOLDERS
TABLE OF CONTENTS
<Table>
<S> <C>
Management's Discussion and Analysis of Results of
Operations and Financial Position......................... 1-14
Statement of Management's Responsibility for Financial
Statements................................................ 15
Report of Independent Accountants........................... 15
Consolidated Financial Statements........................... 16-22
Notes to Consolidated Financial Statements.................. 23-49
Quarterly Financial Data.................................... 50
Five-Year Selected Financial Data........................... 51
</Table>
<Page>
IMS HEALTH INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
POSITION
AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA
- --------------------------------------------------------------------------------
IMS Health Incorporated ("IMS" or the "Company") is a leading global
provider of information solutions to the pharmaceutical and healthcare
industries. IMS operates in more than 100 countries and consists of the
following business segments:
- The IMS Segment is a leading global provider of market information, sales
management and decision-support services to the pharmaceutical and
healthcare industries. Its key products include sales management
information to optimize sales force productivity, marketing effectiveness
research for prescription and over-the-counter pharmaceutical products,
consulting and other services. The IMS Segment is managed on a global
business model with global leaders for the majority of its critical
business processes. In addition, the IMS Segment includes IMS's venture
capital unit, Enterprise Associates, LLC ("Enterprises"), which is focused
on investments in emerging businesses and IMS's 26.8% equity interest in
The TriZetto Group, Inc. ("TriZetto").
- The Cognizant Technology Solutions Corporation ("CTS") Segment delivers
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 primary service offerings include
application development and integration, application management and
re-engineering services. CTS is a publicly traded corporation on the
NASDAQ national market. IMS owned 58.3% of the common shares outstanding
(93.3% of the outstanding voting power) as of December 31, 2001 and 60.5%
as of December 31, 2000. IMS accounts for CTS as a consolidated
subsidiary.
During the years ended December 31, 2000 and 1999, IMS also included:
- The Transaction Businesses Segment, which consisted of:
(a) Synavant, Inc. ("Synavant"), which serves the pharmaceutical industry
by developing and selling pharmaceutical relationship management solutions
that support sales and marketing decision-making; (b) Erisco Managed Care
Technologies, Inc. ("Erisco"), a leading supplier of software-based
administrative and analytical solutions to the managed care industry; and
(c) three small non-strategic software businesses. IMS spun off the
Synavant business on August 31, 2000 (the "Synavant Spin-Off") and sold
Erisco to TriZetto and entered into a strategic alliance with TriZetto on
October 3, 2000. IMS also divested or discontinued the other small
non-strategic software businesses.
On July 26, 1999, IMS completed a spin-off of the majority of its equity
investment in Gartner, Inc. ("Gartner," formerly known as "Gartner
Group, Inc.") to IMS shareholders (the "Gartner Spin-Off"). The Consolidated
Financial Statements of IMS have been reclassified for all periods presented to
reflect the Gartner equity investment as a discontinued operation. During the
third quarter of 2001, IMS sold its remaining investment in Gartner.
The above changes to the business are more fully discussed in Notes 1, 4, 5,
7, 12, 16 and 23 to the Consolidated Financial Statements.
YEAR-ENDED DECEMBER 31, 2001 COMPARED WITH YEAR-ENDED DECEMBER 31, 2000
OPERATING RESULTS
Revenue in 2001 decreased 6.4% to $1,332,923 from $1,424,359 in 2000.
Excluding the $170,385 revenue from the Transaction Businesses Segment, which
was divested in 2000, and excluding the $51,362 adverse impact of a generally
stronger U.S. dollar in 2001 revenue grew 10.6%. This growth resulted primarily
from the success of new products in the IMS Segment, and by robust demand for
CTS's services, partially offset by a slowdown in non-contracted spending in the
IMS Segment.
IMS's operating costs include data processing costs, the costs of data
collection and production, and costs attributable to personnel involved in
production, data management and the processing and delivery of IMS's services.
IMS's operating costs in 2001 were $494,411, compared with $549,259 in 2000, a
decrease of 10.0%. Excluding the $86,179 of operating costs associated with
Transaction Businesses Segment and certain technology acceleration costs in 2000
of $15,240, operating costs grew 10.4%, principally driven by CTS (29.0%
growth), as well as higher data collection and production costs in the IMS
Segment to support revenue growth.
Selling and administrative expenses consist primarily of the costs
attributable to sales, marketing, client service and administration, including
personnel, promotion, communications, management, finance, and occupancy. IMS's
selling and administrative expenses declined 17.3% to $344,100 in 2001 from
$416,006 in 2000. Excluding the Transaction Businesses Segment and certain legal
fees, selling and administrative
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expenses grew at only 3.0%, reflecting the results of cost reduction actions
initiated in the fourth quarter of 2000.
Depreciation and amortization expense declined 24.8%, to $69,178 in 2001
from $92,000 in 2000. Excluding the Transaction Businesses Segment, depreciation
and amortization expense remained relatively constant at $69,178 in 2001
compared with $69,645 in the previous year.
During 2001, IMS undertook a Competitive Fitness Program to assess the
worldwide costs of the IMS Segment and to identify actions to improve cost
efficiencies. All functional areas were examined, including sales, marketing,
client service, data collection, production, and management and administration.
In the fourth quarter, after completing its assessment, IMS recorded Severance,
Impairment and Other Charges of $94,616 primarily in connection with the actions
identified by this project. These actions include a worldwide reduction in
headcount of more than six hundred employees, the closing of certain facilities,
the write-off of certain abandoned software and other assets and the termination
of certain contractual relationships. See Note 8 to the Consolidated Financial
Statements.
During the fourth quarter of 2001, IMS terminated negotiations to dispose of
one of its product lines and decided to retain and continue operating it. In
connection with this terminated transaction, IMS recorded Terminated Transaction
Costs of $6,457, relating primarily to legal and accounting services.
In 2000, in connection with the Synavant Spin-Off, IMS incurred $37,626 of
costs. These costs include $8,813 for expenses related to reductions in the
administrative workforce resulting from consolidation following the Synavant
Spin-Off. Additionally, a data processing agreement with a third party for
$5,200 was no longer used by IMS as a result of IMS's determination to
streamline its operations to focus on its core business and a further data
enhancement contract for $3,600 was similarly no longer used. The remaining
Synavant Spin-Off charges related primarily to legal, professional and other
direct incremental costs.
In addition, in connection with the Siebel alliance, more fully described in
Note 6 to the Consolidated Financial Statements, Synavant assessed the
impairment of its computer software (including acquired technology), goodwill
and other intangible assets and change in intangible asset lives. As a result of
this transaction, Synavant recorded an impairment charge of $115,453 in the
third quarter of 2000, comprised of $14,553 on computer software and $100,900 on
goodwill. IMS recorded this impairment loss because the Siebel alliance was
signed prior to the Synavant Spin-Off. This impairment was recorded in the
Transaction Businesses Segment.
During 2000 IMS assessed its cost structure, directed towards streamlining
its administrative infrastructure costs, leveraging marketing and sales efforts
following the creation of a global key account management program, harmonizing
global production activities, global development, human resources and
communications. In connection with the actions taken to streamline operations,
IMS incurred charges for the impairment of certain assets as well as severance
costs. IMS recorded a Severance, Impairment and Other Charge of $45,689 during
the fourth quarter of 2000, which is more fully described in Note 8 to the
Consolidated Financial Statements.
In the fourth quarter of 2000, IMS incurred a charge of $31,133 relating to
changes in executive management. Of this charge, approximately $23,000 related
to Victoria R. Fash (previously President and Chief Executive Officer) and
Robert E. Weissman (previously Chairman) arising principally from the
acceleration or enhancement of previously existing employee benefits
obligations, including stock options and pensions. This charge also included the
forgiveness of the balance, including accrued interest, due of $3,084 on a loan
made to Ms. Fash during the year, plus an accompanying tax liability of $2,580.
See Note 9 to the Consolidated Financial Statements. The remaining accrual at
December 31, 2001 amounted to approximately $13,400, primarily relating to
long-term pension benefits.
Operating Income in 2001 increased 136.3%, to $324,161 compared with
$137,193 in the prior year, primarily due to the prior year's Transaction
Businesses Segment loss of $171,450. Excluding the Transaction Businesses
Segment, as well as the Severance, Impairment and Other Charges in both years of
$94,616 and $45,689 in 2001 and 2000 respectively, the Terminated Transaction
Costs in 2001 of $6,457, the Executive Management Transition Charge in 2000 of
$31,133, certain technology acceleration costs in 2000 of $15,240, and certain
legal fees of $2,336 and $4,069 in 2001 and 2000 respectively, operating income
grew 5.6%, to $427,570 in 2001 compared with $404,774 in the prior year.
Excluding the unfavorable impact of a generally stronger U.S. dollar in 2001,
operating income grew 14.4%. This was due to the revenue growth in the IMS and
CTS Segments, and to IMS's continuing ability to leverage its resources.
Net interest expense was $9,006 in 2001 and $13,308 in 2000. The decrease of
$4,302 resulted primarily from interest income of $2,755 recorded on the Nielsen
Media Research receivable (see Note 21 to the
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Consolidated Financial Statements) and higher average cash balances during 2001.
The Loss on Gartner Investment amounted to $84,880 in 2001. During the third
quarter of 2001, IMS decided to sell, and by August 29, 2001 completed the sale
of 1,555 shares of Class A common stock of Gartner, Inc. ("Gartner Shares") to
Gartner and its remaining holdings to several institutional investors. IMS
received aggregate proceeds of $65,207, or $9.88 per share, from these sales.
IMS's cost basis in these shares was $77,743, or $11.78 per share. These sales
divested IMS of its remaining equity interest in Gartner. They resulted in a
pre-tax realized loss of $12,536 ($8,146, net of applicable taxes), which was
recorded in two different lines in the Consolidated Statements of Income:
(1) Income from Discontinued Operations, net of $72,344 ($47,025 net of
applicable taxes), to reflect the difference between the fair market value at
the date of the Gartner Spin-Off (July 26, 1999) and the book value of those
shares; (2) a loss from dispositions in continuing operations of $84,880, which
was recorded as Loss on Gartner Investment, to reflect the difference between
the fair market value at the date of the Gartner Spin-Off and the disposal
proceeds. In 2000, IMS recorded a similar loss of $6,896 to reflect the loss on
shares contributed to Synavant as part of the Synavant Spin-Off as well as a
loss on warrants which expired on December 1, 2000. A loss was recognized since
the shares and warrants had a lower market value at the date of the Synavant
Spin-Off or expiration date compared with the value at the date of the Gartner
Spin-Off (July 26, 1999). These transactions resulted in gains within income
from discontinued operations in 2000 of $4,692 net of applicable taxes.
Gains (Losses) from Investments, net amounted to a net loss of $27,642 in
2001, compared to a net gain of $78,139 in the prior year. The 2001 loss is due
primarily to net write-downs of investments within IMS securities portfolios of
$30,213, an impairment loss of $1,955 on CTS's investment in Questra Corporation
in recognition of an other-than-temporary decline in value, partially offset by
a $1,990 gain on the sale of IDRAC Holdings Inc. ("IDRAC"), a non-strategic
property that provides information on pharmaceutical product registrations. The
investment write-down related mainly to a refinement in IMS's estimation
approach for the assessment of other than temporary declines in value of the
venture capital investments. See Notes 5 and 13 to the Consolidated Financial
Statements. Gains in the prior year were due primarily to the sale of
investments in American Cellular, Verisign Inc., Mercator Software Inc., Viant
Corporation, Aspect Development Inc., I2 Technologies, and the partial sale of
IMS's investment in e-Credit, net of selling expenses.
In 2000, IMS recorded a Gain on Sale of Erisco of $84,530 as a result of the
sale of its Erisco business in exchange for an equity interest in TriZetto. See
Note 12 to the Consolidated Financial Statements.
Gain (Loss) on Issuance of Investees' Stock, net resulted in a loss of
$1,490 in 2001 compared with a gain of $9,029 in the prior year, in accordance
with Staff Accounting Bulletin ("SAB") No. 51, "Accounting for Sales of Stock by
a Subsidiary." The net loss in 2001 resulted from a loss on the issuance of
stock by TriZetto of $6,679 primarily in connection with acquisitions, a
secondary offering and stock option exercises, offset by a gain on the issuance
of stock by CTS of $5,189 primarily in connection with stock option exercises
and employee stock purchases. The $9,029 gain in the prior year resulted from
the issuance of stock by TriZetto for an acquisition. As a result of stock
issuances by CTS and TriZetto, IMS's ownership interest in CTS declined from
60.5% to 58.3% and the Company's ownership interest in TriZetto was diluted from
33.2% to 26.8% from December 31, 2000 to December 31, 2001.
Other Expense, net decreased to $17,342 in 2001 from $27,374 in the prior
year. The expense decline was primarily due to net foreign exchange gains of
$4,955 in 2001 compared with net foreign exchange losses of $1,023 in 2000, as
well as a reduction in certain non-recurring legal and professional expenses of
$2,435 in 2001, compared with $8,419 in the prior year.
IMS's 2001 effective tax rate of 20.9% reflects the financial statement
impact of the expiration, without adjustment, on September 30, 2001, of the
statute of limitations on certain previously-reserved-for Donnelley Legacy
transactions (approximately $21,033), and the recognition of additional tax
benefits arising from a 1998 non-U.S. reorganization which gave rise to tax
deductible amortization of non-U.S intangible assets (approximately $14,660),
resulting from the reassessment of the tax benefits from this reorganization
following certain new non-U.S. tax legislation enacted at the end of the first
quarter of 2001. IMS's 2000 effective tax rate of 53.7% reflected principally
the non-deductible U.S. Impairment Charge-Synavant, Spin and Related Costs and
Severance, Impairment and Other Charges (portions of which are non-deductible),
and a reduction in net German deferred tax assets (principally non-U.S.
intangible assets) due to a reduction in the German corporate tax rate from 40%
to 25% ($17,655). These were offset by the recognition of certain German trade
tax benefits on tax deductible amortization of non-U.S. intangible assets
resulting from a favorable German court decision ($19,355), and the recognition
of the tax benefit of certain net operating losses ("NOLs") due to the
implementation of global tax planning strategies
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($10,072). For all periods presented, IMS's effective tax rate was reduced as a
result of global tax planning initiatives. While IMS intends to continue to seek
global tax planning initiatives, there can be no assurance that IMS will be able
to successfully implement such initiatives to reduce or maintain its overall tax
rate.
The TriZetto Equity Loss, net was $6,985 in 2001 and $4,777 in 2000. The
higher loss in 2001 reflects the full-year impact of TriZetto, compared with
only three months in the prior year, partially offset by improved TriZetto
underlying financial results.
Income from Discontinued Operations, net was $47,025 in 2001, compared with
$4,692 in the prior year. The 2001 income resulted from the sale of Gartner
shares in August 2001. The prior-year income reflects a gain on the Gartner
shares contributed to Synavant as part of the Synavant Spin-Off and a gain on
warrants issued prior to the Gartner Spin-Off that expired on December 1, 2000.
These transactions are described above and in Note 4 to the Consolidated
Financial Statements.
RESULTS BY BUSINESS SEGMENT
IMS SEGMENT
IMS Segment revenue increased 3.8% to $1,173,954 in 2001 from $1,131,211 in
2000. Excluding the $51,362 adverse impact of a generally stronger U.S. dollar
in 2001 revenue grew 8.5%. Sales management revenue increased 7.0% (11.0% on a
constant dollar basis, i.e., a basis that eliminates currency rate fluctuations)
to $730,169 due to strong growth in sales management products in North America,
particularly Earlyview, the expansion of Xponent in Europe and the success of
the Weekly Data product in Japan. Market research revenue increased 2.0% (3.0%
constant dollar) to $412,353 (6.5% on a constant dollar basis). Other revenue
includes certain consultancy and other services and decreased 30.1% (22.0%
constant dollar) to $31,432. This decline is primarily due to IMS's exit from
certain small businesses.
IMS Segment operating income was $288,540 in 2001, up 2.1% from $282,514 in
the prior year, as a result of revenue growth as well as cost-containment
actions initiated in the fourth quarter of 2000, in addition to the impact of
the non-recurring expenses discussed above ($103,409 and $96,131 in 2001 and
2000, respectively), partially offset by the unfavorable impact of a generally
stronger U.S. dollar. Excluding these expenses in both years, as well as the
impact of foreign currency movements, IMS Segment operating income grew 12.8%.
CTS SEGMENT
IMS's ownership interest in CTS decreased to 58.3% (representing 93.3% of
the outstanding voting power) at December 31, 2001 from 60.5% at December 31,
2000. This decrease was due to stock option exercises and employee stock
purchases at CTS.
CTS revenue, prior to the elimination of intersegment sales, increased 29.7%
to $177,778 in 2001 from $137,031 in 2000. This increase resulted from higher
application development and integration, application management, reengineering
and other services. CTS operating income increased 36.3% to $35,621 in 2001 from
$26,129 in the prior year. The increase resulted from the revenue growth noted
above, partially offset by the costs of additional technical professionals and
selling and administrative expenses to support the revenue increase.
TRANSACTION BUSINESSES SEGMENT
All of the businesses included in the Transaction Businesses segment were
spun off, divested or discontinued in 2000. Therefore, there are no comparable
operating results in 2001.
RESULTS BY GEOGRAPHIC AREA
Total IMS revenue in the United States declined by 6.1% to $614,108 in 2001
from $653,965 in 2000. The decrease was primarily due to the Transaction
Businesses Segment. Excluding revenue from the Transaction Businesses Segment,
U.S. revenue was $548,329 in 2000 and increased 12.0% in 2001. This increase was
primarily due to new product growth at IMS and robust demand for CTS's services,
partially offset by a slowdown in non-contracted revenue at IMS.
Non-U.S. revenue decreased 6.7% to $718,815 in 2001 from $770,394 in 2000.
Non-U.S. operations include principally Japan, the United Kingdom, Germany,
Italy, France, Australia and other countries within Europe, Latin America and
the Far East. Excluding revenue from the Transaction Businesses Segment,
non-U.S. revenue grew 1.9% in 2001, due to new product growth at IMS in Japan,
Canada, and other countries, partially offset by a slowdown in non-contracted
revenue.
YEAR-ENDED DECEMBER 31, 2000 COMPARED WITH YEAR-ENDED DECEMBER 31, 1999
OPERATING RESULTS
Revenue in 2000 increased 1.9% to $1,424,359 from $1,397,989 in 1999,
primarily due to strong growth in the core business offset by the performance of
the Transaction Businesses Segment. The results of Synavant and Erisco are
included for only eight and nine
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months respectively in 2000 and twelve months in 1999. Included within Synavant,
Strategic Technologies revenue declined in 2000 compared with 1999 for the
periods consolidated. Excluding the Transaction Businesses Segment, revenue
increased 12.9%. This increase reflected constant dollar double-digit revenue
growth at IMS and CTS and is further described in "Results by Business Segment"
below. On a constant dollar basis and excluding the Transaction Businesses
Segment, 2000 revenues increased by 16.4% over 1999.
IMS's operating costs in 2000 were $549,259, compared with $551,099 in 1999,
a decrease of 0.3%. This decrease was due to the fact that the operating costs
for Synavant and Erisco are included for eight and nine months, respectively, in
2000 and twelve months in 1999. During 2000, IMS announced the formation of a
global data processing hub in Plymouth Meeting, Pennsylvania. It is one of the
world's largest computer centers, handling 26 terabytes of data. The hub
provides the technology foundation for IMS's global data processing and new
Internet-based products. During the year, IMS incurred $15,240 of technology
acceleration costs in connection with the development of such products.
Excluding the Transaction Businesses Segment in both years, technology
acceleration costs incurred in 2000, and the impact of Year 2000 remediation
costs in 1999 of $24,558, operating costs increased by 13.1% in 2000. The
operating cost increase was due to an increased number of technical
professionals at CTS to meet the increased demand for services and an increase
in the operating costs of the IMS Segment to support higher revenues and product
launches. Excluding the Transaction Businesses Segment, technology acceleration
costs and the impact of Year 2000 remediation costs discussed above, as a
percentage of revenue, operating costs were relatively flat year-over-year,
demonstrating IMS's operating leverage and ability to grow revenue at a rate
which outpaces cost growth.
IMS's selling and administrative expenses increased by 4.5% to $416,006 in
2000 from $397,924 in 1999. This low rate of increase was due to the inclusion
of selling, general and administrative costs for Synavant and Erisco for eight
and nine months respectively in 2000 versus twelve months in 1999. Excluding the
Transaction Businesses Segment in both years, and certain legal costs of $4,069
incurred in 2000, selling and administrative expenses increased by 8.5%. This
increase in expenses was primarily due to continued investment in CTS sales and
administrative functions and infrastructure. The selling and administrative cost
of the IMS Segment increased by 4.1%, demonstrating IMS's ability to increase
revenue without significantly expanding its existing administrative
infrastructure.
Depreciation and amortization decreased 8.4% to $92,000 in 2000 from
$100,443 in 1999. This reduction was primarily due to the amortization of
goodwill and intangibles of Synavant which was included in 2000 for eight months
and for twelve months in 1999. Excluding the Transaction Businesses Segment,
depreciation and amortization increased by 2.4%.
In 2000, in connection with the Synavant Spin-Off, IMS incurred $37,626 of
costs. These costs included $8,813 for expenses related to reductions in the
administrative workforce resulting from consolidation following the Synavant
Spin-Off. Additionally, a data processing agreement with a third party for
$5,200 was no longer used by IMS as a result of IMS's determination to
streamline its operations to focus on its core business and a further data
enhancement contract for $3,600 was similarly no longer used. The remaining
Synavant Spin-Off charges related primarily to legal, professional and other
direct incremental costs. In 1999 the $9,500 of Spin and Related Costs reflected
direct incremental costs associated with the Gartner Spin-Off.
In addition, in connection with the Siebel Alliance, more fully described in
Note 6 to the Consolidated Financial Statements, Synavant assessed the
impairment of its computer software (including acquired technology), goodwill
and other intangible assets and change in intangible asset lives. As a result of
this transaction, Synavant recorded an Impairment Charge of $115,453 in the
third quarter of 2000, comprised of $14,553 on computer software and $100,900 on
goodwill. IMS recorded this impairment loss because the Siebel alliance was
signed prior to IMS's Synavant Spin-Off. This impairment was recorded in the
Transaction Businesses Segment.
During 2000, IMS assessed its cost structure, directed towards streamlining
its administrative infrastructure costs, leveraging marketing and sales efforts
following the creation of a global key account management program, harmonizing
global production activities, global development, human resources and
communications. In connection with the actions taken to streamline operations,
IMS incurred charges for the impairment of certain assets as well as severance
costs. IMS recorded a Severance, Impairment and Other Charge of $45,689 during
the fourth quarter of 2000. See Note 8 to the Consolidated Financial Statements.
In the fourth quarter of 2000, IMS incurred a charge of $31,133 relating to
changes in executive management. Of this charge, approximately $23,000 related
to Victoria R. Fash (previously President and Chief Executive Officer) and
Robert E. Weissman (previously Chairman) arising principally from the
acceleration or enhancement of previously existing employee benefits
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obligations including stock options and pensions. This charge also included the
forgiveness of the balance, including accrued interest due of $3,084 on a loan
made to Ms. Fash during the year plus an accompanying tax liability of $2,580.
See Note 9 to the Consolidated Financial Statements. The remaining accrual at
December 31, 2001 amounted to approximately $13,400, primarily relating to
long-term pension benefits.
Operating income in 2000 decreased to $137,193 from $339,023 in 1999. This
decline was primarily due to the Synavant impairment charge of $115,453 and Spin
and Related Costs of $37,626 (both of which were included in the Transaction
Businesses Segment), Severance, Impairment and Other Charges of $45,689 and the
Executive Management Transition Charge of $31,133. Adjusting operating income in
both years to exclude the Transaction Businesses Segment, charges in 2000 for
technology acceleration, Severance, Impairment and Other Charges, Executive
Management Transition Costs and certain legal charges and excluding in 1999,
Spin and Related Costs and Year 2000 remediation costs, operating income
increased by 18.6%. Operating income growth outpaced revenue growth primarily
due to IMS's ability to continue to leverage its worldwide resources and improve
operating margins. If the 2000 and 1999 operating margins were adjusted to
exclude the items discussed above, operating margin improved to 32.3% in 2000
from 30.7% in 1999. Operating margin improvements were a result of both
operations and the impact of foreign exchange.
Net interest expense was $13,308 in 2000 versus net interest income of $635
in 1999. This increase in interest expense was due to a higher level of
short-term borrowings to fund IMS's stock repurchase program and the payment of
the Donnelley Legacy Tax Contingency (see Note 21 to the Consolidated Financial
Statements), as well as cash payments to Synavant and Erisco.
The Loss on Gartner Investment reflects a loss on shares contributed to
Synavant and a loss on warrants which expired on December 1, 2000. A loss was
recognized since the shares and warrants had a lower market value at the date of
the Synavant Spin-Off or expiration date compared with the value at the date of
the Gartner Spin-Off (July 26, 1999). These transactions resulted in gains
within income from discontinued operations. The treatment within continuing and
discontinued operations reflects the accounting adopted as of the date of the
Gartner Spin-Off. See Note 4 to the Consolidated Financial Statements.
Gains (Losses) from Investments, net reflected net pre-tax gains of $78,139
in 2000 compared to $25,264 in 1999. The gains were due primarily to the sale of
Enterprise investments, net of selling expenses.
In 2000 the sale of Erisco to TriZetto resulted in a net pre-tax gain of
$84,530. Additionally, due to issuance of stock by TriZetto in connection with
an acquisition in the fourth quarter of 2000, IMS recorded a pre-tax gain of
$9,029.
Other Expense, net increased to $27,374 in 2000 compared to $16,480 in 1999.
This increase was primarily due to non-recurring legal and professional expenses
in 2000, as well as higher minority interest expense relating to the improved
operating results of CTS.
IMS's 2000 effective tax rate of 53.7% reflected principally the
non-deductible U.S. Impairment Charge--Synavant, Spin and Related Costs and
Severance, Impairment and Other Charges (portions of which are non-deductible),
and a reduction in the net German deferred tax assets (principally non-U.S.
intangible assets) due to a reduction in German corporate tax rate from 40% to
25% ($17,655). These are offset by the recognition of certain German trade tax
benefits on tax deductible amortization of non-U.S. intangible assets resulting
from a favorable German court decision ($19,355), and the recognition of the tax
benefit of certain NOL's due to the implementation of global tax planning
strategies ($10,072). The 1999 effective tax rate of 28.1% reflected a
non-deductible one-time Gartner Spin and Related Costs. For all periods
presented, IMS's effective tax rate was reduced as a result of global tax
planning initiatives. For example, to consolidate certain of its international
operations, in 1999 IMS engaged in a non-U.S. reorganization which gave rise to
the recognition of tax deductible amortization of non-U.S. intangible assets.
See Note 17 to the Consolidated Financial Statements. While IMS intends to
continue to seek global tax planning initiatives, there can be no assurance that
IMS will be able to successfully implement such initiatives to reduce or
maintain its overall tax rate.
TriZetto Equity Loss, net was $4,777 in 2000, following the acquisition of a
36.1% share of TriZetto on October 3, 2000.
Income from Discontinued Operations, net was $4,692, compared with $25,695
in 1999. Income from Discontinued Operations, net in 2000 reflects a gain on the
Gartner shares contributed to Synavant as part of the Synavant Spin-Off and a
gain on warrants issued prior to the Gartner Spin-Off that expired on
December 1, 2000. The treatment of the Gartner shares and warrants within
continuing and discontinued operations reflects the accounting adopted as of the
date of the Gartner Spin-Off. See Note 4 to the Consolidated Financial
Statements. Income from Discontinued Operations in 1999 was comprised of Gartner
equity income through July 1999.
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RESULTS BY BUSINESS SEGMENT
IMS SEGMENT
IMS Segment revenue increased 9.1% to $1,131,211 in 2000 from $1,037,025 in
1999. Excluding the impact of foreign currency movements, revenue grew 12.9%.
Sales management revenue increased 13.8% (18.1% on a constant dollar basis) to
$682,149 due to strong growth in sales management products in North America,
particularly Xponent, Xtrend, Earlyview and Sales Territory Products, the
expansion of Xponent in Europe and the success of the Weekly Data product in
Japan. Market research revenue increased 3.0% to $404,091 or 6.5% on a constant
dollar basis. Other revenue decreased 0.8% to $44,971. Other revenue includes
certain consulting and other services. On a constant dollar basis these revenues
grew 0.5%. IMS Segment operating income declined 2.8% in 2000 to $282,514 from
$290,564 in 1999. This decrease in operating income was due to growth in the
core IMS business which was more than offset by a number of one-time charges in
2000, including Severance, Impairment and Other Charges, the Executive
Management Transition Charge and the technology acceleration charge.
Excluding the non-recurring charges in 2000 of $96,131 as well as Year 2000
remediation costs of $24,558 and Gartner Spin-Off costs of $9,500 in 1999
operating income increased by 16.6% to $378,645 in 2000 from $324,622 in 1999.
This strong growth and increasing margins (33.5% in 2000 versus 31.3% in 1999)
reflect operating income growth which outpaced strong revenue growth due
primarily to the segment's ability to leverage its established worldwide
resources, as well as the favorable impact of foreign exchange.
CTS SEGMENT
IMS's ownership interest in CTS decreased to 60.5% (representing 93.9% of
the outstanding voting power) at December 31, 2000 from 61.1% at December 31,
1999. This decrease was due to stock option exercises and employee stock
purchases at CTS.
CTS revenue, prior to the elimination of intersegment sales, increased 54.1%
to $137,031 in 2000 from $88,904 in 1999. CTS operating income increased 57.0%
to $26,129 in 2000 from $16,645 in 1999. The increase resulted primarily from an
increase in application development and integration, application management,
re-engineering and other services partially offset by a decrease in Year 2000
compliance services.
TRANSACTION BUSINESSES SEGMENT
Transaction Businesses Segment revenue decreased 40.6% to $170,385 in 2000
from $286,880 in 1999. This was primarily due to the inclusion of only eight
months of Synavant revenue in 2000 versus twelve months in 1999, and nine months
of Erisco revenues in 2000 versus twelve months in 1999. An increase in Erisco
revenues (software licenses and services) was offset by lower interactive
marketing volumes and lower Synavant software fees.
The Transaction Businesses Segment reported an operating loss in 2000 of
$171,450 compared to operating income of $31,814 in 1999. This was primarily due
to the Synavant impairment charge of $115,453, Spin and Related Costs of $37,626
and the impact of the reduced revenues, explained above, on operating income.
RESULTS BY GEOGRAPHIC AREA
Total IMS revenue in the United States increased by 11.4% to $653,965 in
2000 from $586,826 in 1999. The increase reflected the strong performance of
core business services, new product introductions and strong revenue growth at
CTS through the addition of new customers and transitioning existing customers
from Y2K compliance services. This was partially offset by the spin-off of the
Synavant Business and disposal of Erisco in 2000.
Non-U.S. revenue decreased 5.0% to $770,394 in 2000 from $811,163 in 1999.
Non-U.S. operations include principally Japan, the United Kingdom, Germany,
Italy, France, Australia and other countries within Europe, Latin America and
the Far East. The decrease reflects the inclusion of Synavant revenues for eight
months in 2000 versus twelve months in 1999.
NON-U.S. OPERATING AND MONETARY ASSETS
IMS operates globally, deriving a significant portion of its operating
income 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 operating results. IMS enters into forward foreign currency
contracts to partially offset the effect of currency fluctuations. In 2001,
foreign currency translation decreased U.S. dollar revenue growth by
approximately 4.3%, while the impact on operating income growth was
approximately 8.8%. In 2000, foreign currency translation decreased U.S. dollar
revenue growth by approximately 3.8%, while the impact on operating income
growth was negligible.
Non-U.S. monetary assets are maintained in currencies other than the U.S.
dollar, principally those of the Japanese yen, the Euro and the Swiss franc.
Where monetary assets are held in the functional currency of the local entity,
changes in the value of these currencies relative to the U.S. dollar are charged
or credited to Cumulative Translation Adjustment in the Statements
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of Shareholders' Equity. The effect of exchange rate changes during 2001
decreased the U.S. dollar amount of Cash and Cash Equivalents by $3,555.
LIQUIDITY AND CAPITAL RESOURCES
Cash and Cash Equivalents increased $149,793 during 2001 to $268,386 versus
$118,593 in the prior year. The increase was driven by cash generated from
operating activities of $325,305 offset by cash used in investing and financing
activities of $53,281 and $118,676, respectively and a negative foreign exchange
impact on Cash and Cash Equivalents of $3,555. Cash and Cash Equivalents include
amounts at CTS of $84,977 and $61,976 as of December 31, 2001 and 2000,
respectively. The Company owned 58.3% of the common shares outstanding which
represented 93.3% of the voting power at December 31, 2001. To access these Cash
and Cash Equivalents, the Company would have to require CTS to declare and pay a
dividend. Furthermore, a portion of the dividend would be paid to the Minority
Shareholders of CTS.
Net Cash Provided by Operating Activities increased $155,593 during 2001 to
$325,305 versus $169,712 in the prior year. This increase relates primarily to a
$212,291 payment made to the Internal Revenue Service during 2000 for which
there was no comparable payment in 2001 and the receipt during 2001 of $10,530
from Nielsen Media Research, Inc. These amounts relate to the Donnelley Legacy
tax contingency as more fully described in Note 21 to the Consolidated Financial
Statements. Adjusting for the impact of the payment and receipt as described,
cash from operations would have amounted to $314,775 and $382,003 in 2001 and
2000, respectively, or a net decrease in cash provided of $67,228. The most
significant item causing this decrease relates to approximately $32,300 in cash
payments, in settlement of obligations accrued for during 2000 as part of the
Synavant Spin and Related Cost accrual, the Executive Management Charge and the
2000 Severance, Impairment and Other charge that were previously accrued.
Net cash used in investing activities decreased $36,379 to $53,281 from
$89,660 in the prior year. The decrease is attributable to $65,207 in Gartner
proceeds combined with the fact that 2001 was not impacted by three significant
outlays which occurred during 2000 consisting of $32,012 relating to a cash
payment made to Erisco prior to its disposition, $10,679 in payments made on the
Erisco and TriZetto transaction and $27,343 to fund other investments primarily
in Allscripts and Enterprises, as well as other items amounting to $15,608.
Offsetting these amounts were lower proceeds on sales of investments of $82,385
and higher spending on business acquisitions of $32,085.
Net cash used in financing activities increased $44,757 during 2001 to
$118,676 versus $73,919 in the prior year. The increase in cash used is
primarily related to net repayments on debt during 2001 as compared to net
borrowings during 2000 amounting to an increase in net cash outflows of
$293,495. Offsetting this increase in cash outflows, in 2001 IMS paid $108,529
less cash to repurchase shares under its share repurchase program, received
$119,834 more in proceeds from the exercise of employee stock options and was
not impacted by a $19,438 payment made as a result of the Synavant spin-off in
2000.
Financing activities include cash dividends paid of $0.08 per share annually
($0.02 per quarter), which amounted to $23,641 and $23,686 during 2001 and 2000,
respectively. The payment and level of cash dividends by IMS are subject to the
discretion of the Board of Directors of IMS. Any future dividends will be based
on and affected by a number of factors, including the operating results and the
financial requirements of IMS.
STOCK REPURCHASE PROGRAMS
On July 19, 2000 the Board of Directors authorized a stock repurchase
program to buy up to 40,000 shares of IMS's outstanding common stock. As of
December 31, 2001, 20,577 shares have been acquired under this program at a
total cost of $517,129. During 2001, IMS repurchased 12,124 shares at a total
cost of $310,482.
On October 19, 1999 the Board of Directors authorized a stock repurchase
program to buy up to 16,000 shares of IMS's outstanding common stock. This
program was completed in October 2000 at a total cost of $348,730.
On October 20, 1998 the Board of Directors authorized a share repurchase
program to buy up to 16,000 shares of the Company's outstanding common stock.
This program was completed in October 1999 at a total cost of $478,302.
8
<Page>
OTHER INFORMATION
During the fourth quarter of 2001, IMS completed the assessment of its
Competitive Fitness Program. This program was designed to further streamline
operations, increase productivity, and improve client service. IMS recorded
$94,616 of Severance, Impairment and Other Charges relating to the IMS Segment
during the fourth quarter of 2001 as a component of operating income.
The cash portion of the 2001 charge amounted to $64,205, primarily for
severance payments and contract terminations, with the non-cash portion
accounting for $30,411, composed primarily of asset write-offs. Of the cash
portion, $46,348 is expected to be paid during 2002.
The impact on the 1999 cash flow from the "Calendarization" (see Note 20 to
the Consolidated Financial Statements) was $30,664, which represents cash flow
from the IMS operating units for the month of December 1998.
On July 23, 1999 Gartner paid a cash dividend to its holders of record as of
July 16, 1999. IMS's portion of this dividend was $52,877, net of taxes. On
July 23, 1999, Gartner effected a recapitalization and on July 26, 1999 IMS
distributed approximately 40.7 million Gartner Class B Common Stock to its
shareholders. During the third quarter of 2001, IMS completed the sale of its
remaining interest in Gartner resulting in a net loss of $8,146. See Note 4 to
the Consolidated Financial Statements for a further discussion of the sale of
Gartner shares.
IMS has borrowing arrangements with several international banks to provide
lines of credit up to $525,000 at December 31, 2001. Total borrowings under
these lines were $346,463 and $384,281 at December 31, 2001 and 2000,
respectively. In general, the terms of these lines of credit give IMS the option
to borrow at an interest rate equal to LIBOR plus 37.5 basis points for
short-term lines and LIBOR plus 65 basis points for long-term lines. The
weighted average interest rates for the short-term lines were 2.34% and 7.10% at
December 31, 2001 and 2000, respectively. The weighted average interest rates
for the long-term lines were 2.48% at December 31, 2001. The commitment fee
associated with the unused short-term lines of credit is 22.5 basis points per
year, increasing to 28.75 basis points per year if the facilities are less than
50% utilized. Under the long-term lines the commitment fee is 52.5 basis points
per year. The borrowing arrangements require IMS to comply with certain
financial covenants and at December 31, 2001 and 2000, IMS was in compliance
with all such covenants.
During the fourth quarter of 2001, IMS renegotiated with several banks and
entered into three-year lines of credit for borrowings of up to $175,000.
Borrowings under these three-year facilities are short-term in nature; however,
IMS has the ability and the intent to refinance the short-term borrowings
through December 2004 as they come due. As such, at December 31, 2001, the
Company reclassified $150,000 of its then outstanding debt as long-term debt
pursuant to the provisions of Statement of Financial Accounting Standards
("SFAS') No. 6, "Classification of Short-Term Obligations Expected to be
Refinanced." Borrowings under short-term lines were $196,463 and $384,281 at
December 31, 2001 and 2000, respectively. Borrowings have maturity dates of up
to ninety days from their inception. The borrowings were taken out primarily to
support IMS's share repurchase program and to fund the Donnelley Legacy tax
payment further described in Note 21 to the Consolidated Financial Statements.
Financial Reporting Release No. 61 was recently released by the Securities
and Exchange Commission ("SEC") to require all companies to include a discussion
to address, among other things, liquidity, off-balance sheet arrangements,
contractual obligations and commercial commitments. These matters are addressed
throughout this section and in Notes 5, 11, 12, 13 and 18 to the Consolidated
Financial Statements.
CONTRACTUAL OBLIGATIONS
IMS's contractual obligations include facility leases, agreements to
purchase data and telecommunications services and leases of certain computer and
other equipment. At December 31, 2001, the minimum annual payments under these
agreements and other contracts that have initial or remaining non-cancelable
terms in excess of one year are as listed in the following table:
<Table>
<Caption>
DATA AND COMPUTER
OPERATING TELECOMMUNICATION EQUIPMENT
YEAR LEASES(1) SERVICES(2) LEASES(3) TOTAL
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------
2002 $19,222 $102,676 $17,599 $139,497
2003 17,107 79,557 13,373 110,037
2004 12,607 47,822 7,316 67,745
2005 9,894 37,133 4,252 51,279
2006 8,710 3,160 579 12,449
Thereafter 9,645 2,490 116 12,251
- ----------------------------------------------------------------
Total $77,185 $272,838 $43,235 $393,258
- ----------------------------------------------------------------
</Table>
(1) Rental expense under real estate operating leases for the years 2001, 2000
and 1999 was $17,176, $18,911 and $26,656 respectively.
9
<Page>
(2) Expense for data and telecommunications services for the years 2001, 2000
and 1999 was $96,727, $85,858 and $73,061 respectively.
(3) Rental expense under computer and other equipment leases was $16,790,
$14,348 and $22,248 for 2001, 2000 and 1999, respectively. These leases are
frequently renegotiated or otherwise changed as advancements in computer
technology produce opportunities to lower costs and improve performance.
IMS may also be required to pay up to $36,720 during 2002 to 2004 as
contingent consideration under the terms of one of its 2001 acquisitions. See
Note 5 to the Consolidated Financial Statements.
Commitments also include "Capital Calls" which are required payments
pursuant to the Enterprises agreements. At December 31, 2001 the Company is
obligated to contribute a maximum of $7,000 to meet capital call requirements
over the remaining life of the Enterprises venture capital investments.
IMS believes that its available funds and the cash flows expected to be
generated from operations will be adequate to satisfy its current and planned
operations and needs for at least the next 12 months. IMS's ability to expand
and grow its business in accordance with current plans, to make acquisitions,
repurchase stock and to meet its long-term capital requirements beyond this
12-month period will depend on many factors, including the rate, if any, at
which its cash flow increases, its ability and willingness to accomplish
acquisitions, repurchase treasury stock and the availability to IMS of public
and private debt and equity financing, including its current ability to secure
bank lines of credit. IMS cannot be certain that additional financing, if
required, will be available on terms favorable to it, if at all.
YEAR 2000
External and internal costs totaling $79,299 to address the Year 2000 issue
were expensed as incurred through December 31, 1999, of which $24,558 was
incurred in 1999. These costs were primarily related to repairing software. This
does not include the costs of software and systems that were replaced or
enhanced in the normal course of business.
MARKET RISK
IMS's primary market risks are the impact of foreign exchange fluctuations
on non-dollar-denominated revenue, the impact of price fluctuations on equity
securities and the impact of interest rate fluctuations on interest expense.
IMS transacts business in more than 100 countries and is subject to risks
associated with changing foreign exchange rates. IMS's objective is to reduce
earnings and cash flow volatility associated with foreign exchange rate changes.
Accordingly, IMS enters into foreign currency forward contracts to minimize the
impact of foreign exchange movements on net income and on the value of
non-functional currency assets and liabilities.
It is IMS's policy to enter into foreign currency transactions only to the
extent necessary to meet its objectives as stated above. IMS does not enter into
foreign currency transactions for investment or speculative purposes. At
December 31, 2001, all foreign currency forward contracts had a term of less
than one year. The principal currencies hedged are the Japanese yen, the Euro
and the Swiss franc.
The fair value of IMS's hedging instruments, estimated at $131,591 at
December 31, 2001, is subject to change as a result of potential changes in
foreign exchange rates. IMS assesses its market risk based on changes in foreign
exchange rates utilizing a sensitivity analysis. The sensitivity analysis
measures the potential loss in fair values based on a hypothetical 10% change in
currency rates. The potential loss in fair value for foreign exchange
rate-sensitive instruments, all of which were forward foreign currency
contracts, based on a hypothetical 10% decrease in the value of the U.S. dollar
or, in the case of non-dollar-related instruments, the currency being purchased,
was $9,112 at December 31, 2001. However, the change in the fair value of
foreign exchange rate-sensitive instruments would likely be offset by a change
in the fair value of the asset or liability being hedged. The estimated fair
values of the foreign exchange risk management contracts were determined based
on quoted market prices.
IMS also invests in equity securities and is subject to equity price risk.
These investments are classified as available for sale and consequently, carried
at fair value, with unrealized gains and losses, net of income taxes, reported
as a component of shareholders' equity. IMS does not hedge this market risk
exposure. IMS assesses its market risk based on changes in market prices
utilizing a sensitivity analysis. The sensitivity analysis measures the
potential loss in fair values based on a hypothetical 10% decrease in the market
price of these securities. A 10% decline in the market price of these equity
securities would cause the fair value of the securities to decrease by $2,716 at
December 31, 2001.
IMS also borrows funds and since the interest rate associated with those
borrowings changes over time, IMS is subject to interest rate risk. IMS has not
hedged this exposure. IMS assesses its market risk based on
10
<Page>
changes in interest rates utilizing a sensitivity analysis. The sensitivity
analysis measures the increase in annual interest expense based on a
hypothetical 1% increase in interest rates, which would have amounted to $3,464
at December 31, 2001.
EURO CONVERSION
On January 1, 1999, 11 member countries of the European Union established
fixed conversion rates between their existing currencies and the European
Union's common currency ("Euro"). The transition period for the introduction of
the Euro was between January 1, 1999 and January 1, 2002.
IMS instituted plans for the introduction of the Euro and addressed the
related issues, including the conversion of information technology systems,
recalculating currency risk, recalibrating derivatives and other financial
instruments, continuity of contracts, taxation and accounting records and the
increased price transparency resulting from the use of a single currency in the
eleven participating countries which may affect the ability of some companies to
price products differently in various European markets. IMS believes that
differences in national market size, data collection requirements and specific
product specifications required due to the diverse market information needs in
the healthcare markets of Europe will reduce the potential for price
harmonization in most of IMS's product ranges. The introduction of the Euro did
not have a material adverse effect on IMS's results of operations during 2001 or
2000.
FORWARD-LOOKING STATEMENTS
This 2001 Annual Report to Shareholders, as well as information included in
oral statements or other written statements made or to be made by IMS, contain
statements which, in the opinion of IMS, may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements appear in a number of places in this Annual Report and
include, but are not limited to, all statements relating to plans for future
growth and other business development activities as well as capital
expenditures, financing sources, dividends and the effects of regulation and
competition, Euro conversion and all other statements regarding the intent,
plans, beliefs or expectations of IMS or its directors or officers. Stockholders
are cautioned that such forward-looking statements are not assurances for future
performance or events and involve risks and uncertainties that could cause
actual results and developments to differ materially from those covered in such
forward-looking statements. These risks and uncertainties include, but are not
limited to, risks associated with operating on a global basis, including
fluctuations in the value of foreign currencies relative to the U.S. dollar, and
the ability to successfully hedge such risks; to the extent IMS seeks growth
through acquisitions, alliances or joint ventures, the ability to identify,
consummate and integrate acquisitions, alliances and ventures on satisfactory
terms; the ability to develop new or advanced technologies, systems and products
for their businesses on time and on a cost-effective basis including but not
limited to those that use or are related to the Internet; the ability to
identify and implement cost-containment measures; the ability to successfully
maintain historic effective tax rates and to achieve estimated corporate
overhead levels; competition, particularly in the markets for pharmaceutical
information; regulatory, legislative and enforcement initiatives, particularly
in the area of medical privacy and tax; the ability to timely and
cost-effectively resolve any problems associated with the Euro currency issue,
including the possibility of problems with internal data processing systems; the
ability to obtain future financing on satisfactory terms; deterioration in
economic conditions, particularly in the pharmaceutical, healthcare, or other
industries in which IMS's customers may operate; consolidation in the
pharmaceutical industry and the other industries in which IMS's customers
operate; conditions in the securities markets which may affect the value or
liquidity of portfolio investments and management's estimates of lives of
assets, recoverability of assets, fair market value, estimates and liabilities
and accrued income tax benefits and liabilities and related contingencies;
failure of third parties to convert their information technology systems to the
Euro currency in a timely manner and actions of government agencies and other
third parties with respect to Euro currency issues; and terrorist activity, the
threat of such activity, and responses to and results of such activity and
threats, including but not limited to effects, domestically and/or
internationally, on IMS, its personnel and facilities, its customers and
suppliers, financial markets and general economic conditions. Consequently, all
the forward-looking statements contained in this Annual Report to Shareholders
are qualified by the information contained herein, including, but not limited
to, the information contained under this heading and the Consolidated Financial
Statements and Notes thereto and by the material set forth under the headings
"Business" and "Factors that May Affect Future Results" in IMS's Annual Report
on Form 10-K for the year ended December 31, 2001. IMS is under no obligation to
publicly release any revision to any forward-looking statement contained or
incorporated herein to reflect any future events or occurrences.
CRITICAL ACCOUNTING POLICIES
Financial Reporting Release No. 60, which was recently released by the SEC,
requires all companies to include a discussion of critical accounting policies
or methods used in the preparation of financial statements.
11
<Page>
Note 2 to the Consolidated Financial Statements includes a summary of the
significant accounting policies and methods used in the preparation of IMS's
Consolidated Financial Statements. Following is a brief discussion of the more
significant accounting policies and methods used by IMS.
Management's discussion and analysis of its results of operations and
financial position are based upon its Consolidated Financial Statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of financial statements in
accordance with these principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, revenues
and expenses and the related disclosure of contingent assets and liabilities.
On an ongoing basis, IMS evaluates its estimates. The most significant
estimates relate to the allowance for doubtful accounts, inventories,
investments, depreciation of fixed assets including salvage values, carrying
value of intangible assets and computer software, provision for income taxes and
tax assets and liabilities, reserves for severance, pensions and reserves for
employee benefits, contingencies and litigation. IMS bases its estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results could vary from the
estimates and assumptions used in the preparation of the accompanying financial
statements.
IMS believes the following critical policies affect its more significant
judgments and estimates used in the preparation of its Consolidated Financial
Statements.
REVENUE RECOGNITION. IMS recognizes revenue as earned, which is over the
service period as the information is delivered or related services are
performed. A substantial portion of IMS's revenue is derived from subscription
based services. Advance payments for services and subscriptions are credited to
deferred revenue and reflected in operating revenue over the subscription term,
which is generally one year.
IMS also derives a portion of its revenues from software licenses which is
recognized upon delivery of the software, when persuasive evidence of an
arrangement exists, the related fees are fixed or determinable and collection of
fees is reasonably assured. Revenues from post-contract customer support
(maintenance) are recognized on a straight-line basis over the term of the
arrangement.
Revenues from time and material service agreements are recognized as the
services are provided. Revenues from fixed price service contracts which relate
primarily to CTS are recognized over the contract term based on the percentage
of costs incurred for services provided during the period compared to the total
estimated costs of services to be provided over the entire arrangement.
Anticipated losses on contracts are recognized immediately. Under the terms of
these contracts, all services provided by IMS through the date of cancellation
are due and payable.
GOODWILL. Goodwill represents the excess purchase price over the fair value
of identifiable net assets of businesses acquired. The Company amortizes
goodwill on a straight-line basis over five to forty years. In accordance with
the provisions of SFAS No. 142 goodwill arising on acquisitions completed since
July 1, 2001 is no longer amortized. IMS periodically reviews the recoverability
of goodwill, not identified with impaired long-lived assets, based on estimated
undiscounted future cash flow from operating activities compared with the
carrying value of goodwill and recognizes any impairment on the basis of such
comparison. The recognition and measurement of goodwill impairment is assessed
at the business unit level. Goodwill may become impaired as a result of several
factors such as increased competition and lower demand for the Company's
products and services.
OTHER LONG-LIVED ASSETS. In accordance with the provisions of SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," IMS reviews for the impairment of long-lived assets
and certain identifiable intangibles held and used whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. In general, this statement requires recognition of an impairment
loss when the sum of undiscounted expected future cash flow is less than the
carrying amount of such assets. Accordingly, IMS recognizes impairment losses on
long-lived assets as a result of its review. The measurement for such impairment
loss is then based on the fair value of the asset measured by its discounted
future cash flows or market value, if more readily determinable.
INCOME TAXES. IMS operates in more than 100 countries around the world and
its earnings are taxed at the applicable income tax rate in each of those
countries. IMS provides for income taxes utilizing the asset and liability
method of accounting for income taxes. Under this method, deferred income taxes
are recorded to reflect the tax consequences in future years of differences
between the tax basis of assets and liabilities and their financial reporting
amounts at each balance sheet date, based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable income. If it is determined that it is more likely than not that future
tax benefits associated with a deferred tax asset will not be realized, a
valuation allowance is provided. In the event IMS
12
<Page>
were to determine that it would be able to realize its deferred tax assets in
the future in excess of its net recorded amount, an adjustment to the deferred
tax asset would increase income in the period such determination was made.
Likewise, should IMS determine that it would not be able to realize all or part
of its net deferred tax asset in the future, an adjustment to the deferred tax
asset would be charged to income in the period such determination was made. The
effect on deferred tax assets and liabilities of a change in the tax rates is
recognized in income in the period that includes the enactment date. While IMS
intends to continue to seek global tax planning initiatives, there can be no
assurance that IMS will be able to successfully implement such initiatives to
reduce or maintain its overall tax rate. IMS intends to indefinitely reinvest
the undistributed earnings of non-U.S. subsidiaries other than the Indian
earnings of CTS. CTS management currently intends to repatriate all Indian
earnings to the U.S. and has provided deferred U.S. income taxes on all such
Indian undistributed earnings. Deferred tax liabilities for U.S. federal income
taxes have not been recognized for all other undistributed earnings. If such
earnings are repatriated in the future, or are no longer deemed to be
indefinitely reinvested, applicable taxes will be provided for on such amounts.
It is not currently practicable to determine the amount of applicable taxes. See
Note 17 to the Consolidated Financial Statements.
FOREIGN CURRENCY TRANSLATION. IMS has significant investments in non-U.S.
countries. Therefore, changes in the value of foreign currencies affect IMS's
Consolidated Financial Statements when translated into U.S. dollars. Impacts
associated with foreign currency have been more fully discussed in the section
entitled "Market Risk." For all operations outside the United States of America
where IMS has designated the local currency as the functional currency, assets
and liabilities are translated using end-of-period exchange rates; revenues and
expenses are translated using average rates of exchange. For these countries,
currency translation adjustments are accumulated in a separate component of
Shareholders' Equity whereas transaction gains and losses are recognized in
Other Expense, net. For operations in countries that are considered to be highly
inflationary or where the U.S. dollar is designated as the functional currency,
monetary assets and liabilities are translated using end-of-period exchange
rates, whereas non-monetary accounts are translated using historical exchange
rates, and all translation and transaction adjustments are recognized in Other
Expense, net.
INVESTMENTS. IMS carries direct equity investments in private companies and
interests in venture capital entities in the financial statements at cost. On a
quarterly basis IMS makes periodic estimates of the market value of these
investments and reduces the carrying value of the investments if there is an
other-than-temporary decline in their fair value below cost. IMS evaluates the
recoverability of the underlying securities in each venture capital entity on an
individual basis. If the market price of these equity securities declines by a
significant amount there could be a material impact on IMS's financial
statements.
RECENTLY ISSUED ACCOUNTING STANDARDS
Effective January 1, 2001 IMS adopted SFAS No. 133. "Accounting for
Derivative Instruments and Hedging Activities," as amended. Additional
discussion of IMS's derivative and hedging activities is included in Note 14 to
the Consolidated Financial Statements.
In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, "Business Combinations," and SFAS No. 142 "Goodwill and Other
Intangible Assets." SFAS No. 141 requires the purchase method of accounting to
be used for all business combinations initiated after June 30, 2001 and
establishes specific criteria for the recognition of intangible assets
separately from goodwill. IMS adopted SFAS No. 141 on July 1, 2001 and is not
amortizing goodwill acquired subsequent to June 30, 2001. SFAS No. 142 addresses
the initial recognition and measurement of intangible assets acquired outside of
a business combination and the accounting for goodwill and other intangible
assets subsequent to their acquisition. SFAS No. 142 provides that goodwill and
intangible assets which have indefinite useful lives will not be amortized but
rather will be tested at least annually for impairment. It also provides that
intangible assets that have finite useful lives be amortized. Under the
provisions of SFAS No. 142, any impairment loss identified upon adoption of this
standard is recognized as a cumulative effect of a change in accounting
principle. Any impairment loss incurred subsequent to initial adoption of SFAS
No. 142 is recorded as a charge to current period earnings. IMS will adopt SFAS
No. 142 beginning January 1, 2002 and at that time will stop amortizing goodwill
that resulted from business combinations completed prior to the adoption of SFAS
No. 141. IMS recorded goodwill amortization of $10,316 and $19,120 during 2001
and 2000, respectively. IMS also recorded amortization expense related to equity
method investees of approximately $9,600 and $2,400 in 2001 and 2000,
respectively. IMS has six months from January 1, 2002 to complete the first step
of the transitional goodwill impairment test. IMS is currently evaluating the
financial impact of adoption of SFAS No. 142; however, it does not believe that
there will be a material adverse impact on IMS's financial position, results of
operations or cash flows.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 eliminates the
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requirement for discontinued operations to be measured on a net realizable value
basis and future operating losses to be recognized before they occur. Instead,
it requires that assets held for sale be valued at the lower of carrying amount
or fair value less cost to sell. SFAS 144 extends the reporting requirements for
discontinued operations to certain components of an entity. Under the provisions
of SFAS No. 144, spin-offs and exchanges of similar productive assets are
required to be recorded at the lower of carrying value or fair value and such
assets classified as held and used until they are disposed of. Any resultant
impairment loss is required to be recognized when the asset is disposed of. For
assets that are grouped when an entity is developing estimates of future cash
flows, SFAS No. 144 requires that the remaining useful life of the "primary
asset" be used for the entire group. In addition, SFAS No. 144 permits the use
of a probability-weighted approach in developing estimates of future cash flows
used to test for recoverability and in estimating fair value. IMS will adopt
SFAS No. 144 beginning January 1, 2002 and is currently evaluating the impact of
the adoption; however, IMS does not believe that there will be a material
adverse impact on IMS's financial position, results of operations or cash flows.
DIVIDENDS
The payments and level of cash dividends by IMS are subject to the
discretion of the Board of Directors of IMS. For the years ended December 31,
2001 and 2000, IMS declared quarterly dividends of $0.02 per share, or $0.08 per
share on an annual basis. Any future dividends will be based on, and affected
by, a number of factors, including the operating results and financial
requirements of IMS.
IMS HEALTH COMMON STOCK INFORMATION
IMS's common stock is listed on the New York Stock Exchange (symbol "RX").
The number of shareholders of record and shares outstanding on December 31, 2001
and 2000, were 6,056 and 6,607, respectively (not in thousands; refers to actual
number of shareholders) and 294,088 and 291,342, respectively. Approximately 77%
of IMS's shares are held by institutions. The high and low closing stock price
per share during 2001 were $30.20 and $18.99, respectively. The following table
shows the high and low closing stock price per share during the four quarters of
2001 and 2000:
<Table>
<Caption>
PRICE PER
SHARE($)
-----------------------
2001
-----------------------
HIGH LOW
<S> <C> <C>
- --------------------------------------------------------------
First Quarter 27.33 22.50
Second Quarter 30.20 24.30
Third Quarter 28.50 23.60
Fourth Quarter 27.60 18.99
- --------------------------------------------------------------
Year 30.20 18.99
- --------------------------------------------------------------
</Table>
<Table>
<Caption>
PRICE PER
SHARE($)
-----------------------
2000(1)
-----------------------
HIGH LOW
<S> <C> <C>
- --------------------------------------------------------------
First Quarter 25.86 15.98
Second Quarter 17.56 14.33
Third Quarter 20.75 15.86
Fourth Quarter 28.56 19.94
- --------------------------------------------------------------
Year 28.56 14.33
- --------------------------------------------------------------
</Table>
(1) Share prices for periods prior to the Synavant Spin-Off on August 31, 2000
are adjusted to give effect to the estimated impact of that Spin-Off on IMS
share prices based on the share price of IMS and Synavant immediately prior
and immediately after the Synavant Spin-Off. The 2000 high and low per share
price unadjusted for the Synavant Spin-Off were as follows: $26.50 and
$16.38 in the first quarter and $18.00 and $14.69 in the second quarter,
respectively.
14
<Page>
STATEMENT OF MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
- -------------------------------------------
To the Shareholders of IMS Health Incorporated:
Management is responsible for the preparation of the consolidated financial
statements and related information that are presented in this report. The
consolidated financial statements, which include amounts based on management's
estimates and judgments, have been prepared in conformity with accounting
principles generally accepted in the United States of America. Other financial
information in the report to shareholders is consistent with that in the
consolidated financial statements.
The Company maintains accounting and internal control systems to provide
reasonable assurance at reasonable cost that assets are safeguarded against loss
from unauthorized use or disposition, and that the financial records are
reliable for preparing financial statements and maintaining accountability for
assets. These systems are augmented by written policies, an organizational
structure providing division of responsibilities, careful selection and training
of qualified personnel and a program of internal audits.
The Company engaged PricewaterhouseCoopers LLP, independent accountants, to
audit and render an opinion on the consolidated financial statements in
accordance with auditing standards generally accepted in the United States of
America. These standards include an assessment of the systems of internal
controls and tests of transactions to the extent considered necessary by them to
support their opinion.
The Board of Directors, through its Audit Committee consisting solely of
outside directors of the Company, meets periodically with management, internal
auditors and our independent accountants to ensure that each is meeting its
responsibilities and to discuss matters concerning internal controls and
financial reporting. PricewaterhouseCoopers LLP and the internal auditors each
have full and free access to the Audit Committee.
[LOGO]
David M. Thomas
Chairman, Chief Executive Officer and President
[LOGO]
Nancy E. Cooper
Senior Vice President and Chief Financial Officer
REPORT OF INDEPENDENT
ACCOUNTANTS
- -------------------------------------------
To the Board of Directors and Shareholders of IMS Health Incorporated:
In our opinion, the accompanying consolidated statements of financial
position and the related consolidated statements of income, shareholders' equity
and cash flows present fairly, in all material respects, the financial position
of IMS Health Incorporated and it