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REGISTRATION NO.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR (G) OF THE SECURITIES
EXCHANGE ACT OF 1934
COGNIZANT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 06-145069
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
200 NYALA FARMS 06897
WESTPORT, CONNECTICUT (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(203) 222-4200
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
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Common Stock, par value $.01 per share New York Stock Exchange
</TABLE>
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
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ITEM 1. BUSINESS.
The information required by this item is contained under the sections
"Cognizant Business", "Cognizant Management's Discussion and Analysis of
Financial Condition and Results of Operations" and in the Cognizant Corporation
Financial Statements of the Information Statement dated October , 1996
included herewith as Exhibit 2.1 (the "Information Statement") and such sections
are incorporated herein by reference.
ITEM 2. FINANCIAL INFORMATION.
The information required by this item is contained under the sections
"Cognizant Selected Financial Data" and "Cognizant Management's Discussion and
Analysis of Financial Condition and Results of Operations" of the Information
Statement and such sections are incorporated herein by reference.
ITEM 3. PROPERTIES.
The information required by this item is contained under the section
"Cognizant Business -- Properties" of the Information Statement and such section
is incorporated herein by reference.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item is contained under the section
"Cognizant Security Ownership by Certain Beneficial Owners and Management" of
the Information Statement and such section is incorporated herein by reference.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS.
The information required by this item is contained under the sections
"Cognizant Management and Executive Compensation -- Cognizant Board of
Directors" and "-- Cognizant Executive Officers" of the Information Statement
and such sections are incorporated herein by reference.
ITEM 6. EXECUTIVE COMPENSATION.
The information required by this item is contained under the section
"Cognizant Management and Executive Compensation" of the Information Statement
and such section is incorporated herein by reference.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item is contained under the section
"Relationship Among D&B, Cognizant and ACNielsen After the Distribution" of the
Information Statement and such section is incorporated herein by reference.
ITEM 8. LEGAL PROCEEDINGS.
The information required by this item is contained under the section
"Cognizant Business -- Legal Proceedings" of the Information Statement and such
section is incorporated herein by reference.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
The information required by this item is contained under the sections "The
Distribution -- Listing and Trading of Cognizant Common Stock and ACNielsen
Common Stock", "Relationship Among D&B, Cognizant and ACNielsen After the
Distribution -- Employee Benefits Agreement", "Dividend Policy", "Cognizant
Management and Executive Compensation" and "Description of Cognizant Capital
Stock" of the Information Statement and such sections are incorporated herein by
reference.
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ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
On January 3, 1996, as part of its original incorporation, the Registrant
issued 100 shares of its common stock, for a total consideration of $1.00, to
The Dun & Bradstreet Corporation, which is and will be the Registrant's sole
stockholder until the Distribution Date as defined and described in the section
"The Distribution" of the Information Statement, and such section is
incorporated herein by reference. Subsequent to the Distribution, The Dun &
Bradstreet Corporation will hold no capital stock of the Registrant.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
The information required by this item is contained under the section
"Description of Cognizant Capital Stock" of the Information Statement and such
section is incorporated herein by reference, except for the information under
the caption "Cognizant Rights Plan", which is not incorporated by reference
herein as the Cognizant preferred share purchase rights and shares of Series A
Junior Participating Preferred Stock described under such caption will be
registered separately on a Registration Statement on Form 8-A.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The information required by this item is contained under the section
"Description of Cognizant Capital Stock -- Indemnification and Limitation of
Liability for Directors and Officers" of the Information Statement and such
section is incorporated herein by reference.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is identified in the section "Index
to Financial Statements -- Cognizant Corporation" and is contained in the
section "Financial Statements -- Cognizant Corporation" of the Information
Statement and such sections are incorporated herein by reference.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL MATTERS.
None.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
The information required by this item is contained in (i) the "Index to
Financial Statements" on page F-1 of the Information Statement and such
information is incorporated herein by reference, and (ii) Schedule II-
"Valuation and Qualifying Accounts" to this Registration Statement.
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(b) Exhibits
The following documents are filed as exhibits hereto:
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<CAPTION>
EXHIBIT
NO. DESCRIPTION
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2.1 Information Statement dated as of October , 1996
3.1 Form of Restated Certificate of Incorporation of Cognizant Corporation
3.2 Form of Amended and Restated By-laws of Cognizant Corporation
4.1 Specimen Common Stock certificate
10.1 Form of Distribution Agreement among The Dun & Bradstreet Corporation, Cognizant
Corporation and ACNielsen Corporation
10.2 Form of Tax Allocation Agreement among The Dun & Bradstreet Corporation, Cognizant
Corporation and ACNielsen Corporation
10.3 Form of Employee Benefits Agreement among The Dun & Bradstreet Corporation, Cognizant
Corporation and ACNielsen Corporation
10.4 Form of Intellectual Property Agreement between and among The Dun & Bradstreet
Corporation, Cognizant Corporation and ACNielsen Corporation
10.5 Form of Shared Transaction Services Agreement among The Dun & Bradstreet Corporation,
Cognizant Corporation and ACNielsen Corporation
10.6 Form of Data Services Agreement among The Dun & Bradstreet Corporation, Cognizant
Corporation and ACNielsen Corporation
10.7 Form of Transition Services Agreement among The Dun & Bradstreet Corporation,
Cognizant Corporation and ACNielsen Corporation
10.8 Form of TAM Master Agreement between Cognizant Corporation and ACNielsen Corporation
10.9 Form of Indemnity and Joint Defense Agreement among The Dun & Bradstreet Corporation,
Cognizant Corporation and ACNielsen Corporation
21 List of Subsidiaries of Cognizant Corporation
27 Financial Data Schedule of Cognizant Corporation
99.1 Chairman's Letter to Stockholders of The Dun & Bradstreet Corporation
99.2 Form of Rights Agreement between Cognizant Corporation and First Chicago Trust
Company of New York, as Rights Agent
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
COGNIZANT CORPORATION
By: /s/ STEPHEN BOATTI
------------------------------------
Name: Stephen Boatti
Title: Vice President
Date: October 7, 1996
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder of Cognizant Corporation:
Our report on the combined financial statements of Cognizant Corporation (a
wholly-owned subsidiary of The Dun & Bradstreet Corporation), as defined in the
notes to the combined financial statements, as of December 31, 1995 and 1994,
and for each of the three years in the period ended December 31, 1995, is
included in this Form 10 on page F-2 of the Information Statement. In connection
with our audits of such financial statements, we have also audited the related
financial statement schedule set forth on page 7 of this Form 10.
In our opinion, the financial statement schedule referred to above when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Stamford, Connecticut
September 16, 1996
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SCHEDULE II
COGNIZANT CORPORATION
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, 1993
(DOLLAR AMOUNTS IN THOUSANDS)
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COL. C
COL. B ---------- COL. E
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BALANCE ADDITIONS COL. D BALANCE
BEGINNING CHARGED TO ------------- AT END
COL. A OF PERIOD OPERATIONS DEDUCTIONS(A) OF PERIOD
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Allowance for doubtful accounts:
For the Year Ended December 31, 1995............... $10,839 $3,310 $ 2,703 $ 11,446
======= ====== ====== =======
For the Year Ended December 31, 1994............... $ 7,641 $3,951 $ 753 $ 10,839
======= ====== ====== =======
For the Year Ended December 31, 1993............... $ 4,875 $3,124 $ 358 $ 7,641
======= ====== ====== =======
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Note:
(a) Represents primarily the charge-off of uncollectible accounts for which a
reserve was provided.
7
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EXHIBIT INDEX
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EXHIBIT
NO. DESCRIPTION PAGE
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2.1 Information Statement dated as of October , 1996
3.1 Form of Restated Certificate of Incorporation of Cognizant Corporation
3.2 Form of Amended and Restated By-laws of Cognizant Corporation
4.1 Specimen Common Stock certificate
10.1 Form of Distribution Agreement among The Dun & Bradstreet Corporation,
Cognizant Corporation and ACNielsen Corporation
10.2 Form of Tax Allocation Agreement among The Dun & Bradstreet Corporation,
Cognizant Corporation and ACNielsen Corporation
10.3 Form of Employee Benefits Agreement among The Dun & Bradstreet Corporation,
Cognizant Corporation and ACNielsen Corporation
10.4 Form of Intellectual Property Agreement between and among The Dun & Bradstreet
Corporation, Cognizant Corporation and ACNielsen Corporation
10.5 Form of Shared Transaction Services Agreement among The Dun & Bradstreet
Corporation, Cognizant Corporation and ACNielsen Corporation
10.6 Form of Data Services Agreement among The Dun & Bradstreet Corporation,
Cognizant Corporation and ACNielsen Corporation
10.7 Form of Transition Services Agreement among The Dun & Bradstreet Corporation,
Cognizant Corporation and ACNielsen Corporation
10.8 Form of TAM Master Agreement between Cognizant Corporation and ACNielsen
Corporation
10.9 Form of Indemnity and Joint Defense Agreement among The Dun & Bradstreet
Corporation, Cognizant Corporation and ACNielsen Corporation
21 List of Subsidiaries of Cognizant Corporation
27 Financial Data Schedule of Cognizant Corporation
99.1 Chairman's Letter to Stockholders of The Dun & Bradstreet Corporation
99.2 Form of Rights Agreement between Cognizant Corporation and First Chicago Trust
Company of New York, as Rights Agent
</TABLE>
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT.
REGISTRATION STATEMENTS ON FORM 10 RELATING TO THESE SECURITIES HAVE BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THIS PRELIMINARY
INFORMATION STATEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY OF THESE SECURITIES.
SUBJECT TO COMPLETION OR AMENDMENT, DATED OCTOBER 7, 1996
INFORMATION STATEMENT
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COGNIZANT CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
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ACNIELSEN CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
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This Information Statement is being furnished in connection with the
distribution (the "Distribution") to holders of common stock, par value $1.00
per share (the "D&B Common Stock"), of The Dun & Bradstreet Corporation ("D&B")
of (i) all outstanding shares of common stock, par value $.01 per share (the
"Cognizant Common Stock"), of Cognizant Corporation ("Cognizant") and (ii) all
outstanding shares of common stock, par value $.01 per share (the "ACNielsen
Common Stock"), of ACNielsen Corporation ("ACNielsen"). As of November , 1996,
D&B will have transferred to Cognizant all or substantially all of those
businesses comprising the Cognizant Business (as defined below) and will have
transferred to ACNielsen all or substantially all of those businesses comprising
the ACNielsen Business (as defined below). See "Cognizant Business" and
"ACNielsen Business".
Shares of Cognizant Common Stock and ACNielsen Common Stock will be
distributed to holders of D&B Common Stock of record as of the close of business
on October , 1996 (the "Record Date"). Each such holder will receive one share
of Cognizant Common Stock for every share of D&B Common Stock held on the Record
Date and one share of ACNielsen Common Stock for every three shares of D&B
Common Stock held on the Record Date. Share certificates representing shares of
Cognizant and ACNielsen will be mailed on November , 1996 or as promptly as
practicable thereafter. No consideration will be paid by D&B's stockholders for
shares of the Cognizant Common Stock or the ACNielsen Common Stock. There is no
current trading market for the Cognizant Common Stock or the ACNielsen Common
Stock, although a "when-issued" market is expected to develop prior to the
Distribution. Application has been made for listing of the shares of each of the
Cognizant Common Stock and the ACNielsen Common Stock on the New York Stock
Exchange under the symbols "CZT" and "ART", respectively. See "The
Distribution -- Listing and Trading of Cognizant Common Stock and ACNielsen
Common Stock."
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FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
RECIPIENTS OF THE COGNIZANT COMMON STOCK AND THE ACNIELSEN
COMMON STOCK, SEE "CERTAIN CONSIDERATIONS".
---------------------
NO STOCKHOLDER APPROVAL OF THE DISTRIBUTION IS REQUIRED OR SOUGHT.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT
TO SEND US A PROXY.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS INFORMATION STATEMENT.
THIS INFORMATION STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES.
Stockholders of D&B with inquiries related to the Distribution should
contact First Chicago Trust Company of New York, telephone (201) 324-1225, the
Distribution Agent for the Distribution.
The date of this Information Statement is , 1996.
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TABLE OF CONTENTS
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PAGE
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INFORMATION STATEMENT SUMMARY.......................................................... 1
CERTAIN CONSIDERATIONS................................................................. 8
THE DISTRIBUTION....................................................................... 13
RELATIONSHIP AMONG D&B, COGNIZANT AND ACNIELSEN AFTER THE DISTRIBUTION................. 16
DIVIDEND POLICY........................................................................ 23
COGNIZANT CAPITALIZATION............................................................... 24
COGNIZANT SELECTED FINANCIAL DATA...................................................... 26
COGNIZANT MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS........................................................................... 27
ACNIELSEN CAPITALIZATION............................................................... 34
ACNIELSEN SELECTED FINANCIAL DATA...................................................... 35
ACNIELSEN MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS........................................................................... 36
COGNIZANT BUSINESS..................................................................... 43
ACNIELSEN BUSINESS..................................................................... 52
COGNIZANT MANAGEMENT AND EXECUTIVE COMPENSATION........................................ 59
COGNIZANT SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............... 66
ACNIELSEN MANAGEMENT AND EXECUTIVE COMPENSATION........................................ 67
ACNIELSEN SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............... 75
DESCRIPTION OF COGNIZANT CAPITAL STOCK................................................. 77
DESCRIPTION OF ACNIELSEN CAPITAL STOCK................................................. 83
AVAILABLE INFORMATION.................................................................. 90
REPORTS OF COGNIZANT AND ACNIELSEN..................................................... 90
INDEX TO FINANCIAL STATEMENTS.......................................................... F-1
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INFORMATION STATEMENT SUMMARY
The following is a summary of certain information contained in this
Information Statement. This summary is included for convenience only and should
not be considered complete. This summary is qualified in its entirety by the
more detailed information and financial statements contained elsewhere in this
Information Statement. Certain capitalized terms used in this summary are
defined elsewhere in this Information Statement. This Information Statement
contains forward-looking statements which involve risks and uncertainties. In
particular, the actual results of Cognizant and ACNielsen, the trading multiples
of Cognizant Common Stock and the degree to which Cognizant's and ACNielsen's
business strategies are implemented may differ significantly from the results,
trading multiples, and proposed implementation discussed in the forward-looking
statements. Factors that might cause such differences include, but are not
limited to, those discussed in "Certain Considerations".
BUSINESSES OF COGNIZANT AND ACNIELSEN
Cognizant.................. Cognizant Corporation is a newly created Delaware
corporation, the businesses of which will focus on
information systems and services for high-growth
emerging markets in healthcare, high-tech and
media, operating in approximately 100 countries
with over 10,000 employees worldwide. Cognizant's
businesses will include those of I.M.S.
International, Inc. ("IMS"), the leading global
supplier of information and decision-support
services to the pharmaceutical and healthcare
industries; Nielsen Media Research, Inc., ("Nielsen
Media Research"), the leader in U.S. and Canadian
audience measurement for electronic media; Gartner
Group, Inc. ("Gartner Group"), in which Cognizant
has approximately a 51% interest, the leading
independent provider of research and analysis of
the computer hardware, software, communications and
related technology industries; Pilot Software, Inc.
("Pilot"), a leading provider of client/server
decision support solutions for medium and
large-scale enterprises; Erisco, Inc. ("Erisco"), a
leading supplier of information systems for managed
care organizations; Dun & Bradstreet-Satyam
Software Private Limited ("Satyam Software"), in
which Cognizant has a 76% interest, a software
development company based in India; Dun &
Bradstreet HealthCare Information, Inc. ("DBHC"),
which provides information and analytic support
services focusing on healthcare providers; D&B
Technology Asia K.K. ("DBTA"), which provides
financial application software products and
services to the Japanese market; and Cognizant
Enterprises, Inc. ("Enterprises"), which invests in
emerging and established businesses in the
information industry (collectively, the "Cognizant
Business").
Robert E. Weissman is currently Chairman and Chief
Executive Officer of D&B and Chairman and Chief
Executive Officer of Cognizant. Mr. Weissman will
resign from his positions at D&B effective upon the
Distribution. The directors of Cognizant will
consist of certain persons who are currently
directors of D&B and certain persons who are not
currently directors of D&B. See "Cognizant
Management and Executive Compensation -- Cognizant
Board of Directors". In addition to Mr. Weissman,
the other executive officers of Cognizant will be
drawn from the current management of D&B. See
"Cognizant Management and Executive
Compensation -- Cognizant Executive Officers".
ACNielsen.................. ACNielsen Corporation is a newly formed Delaware
corporation. ACNielsen is a global leader in
delivering marketing research, information and
analysis to the consumer products and service
industries.
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ACNielsen services are offered in over 90 countries
around the globe. Employing over 17,000 full-time
equivalent employees worldwide, ACNielsen provides
its customers with marketing research, information
and analysis for understanding and making critical
decisions about their products and their markets.
Outside the United States and Canada, ACNielsen
conducts media measurement and related businesses.
The ACNielsen businesses described above are
referred to hereinafter, collectively, as the
"ACNielsen Business".
Nicholas L. Trivisonno is currently Executive Vice
President-Finance and Chief Financial Officer of
D&B and Chairman and Chief Executive Officer of
ACNielsen. Mr. Trivisonno will resign from his
positions at D&B effective upon the Distribution.
The directors of ACNielsen will consist of one
person who is currently a director of D&B and
certain persons who are not currently directors of
D&B. See "ACNielsen Management and Executive
Compensation -- ACNielsen Board of Directors". In
addition to Mr. Trivisonno, most of the other
executive officers of ACNielsen will be drawn from
the current management of D&B and A. C. Nielsen
Company which, after the Distribution, will be the
primary U.S. operating subsidiary of ACNielsen. See
"ACNielsen Management and Executive
Compensation -- ACNielsen Executive Officers".
THE DISTRIBUTION
Shares to be Distributed... The Distribution will be made to holders of record
on the Record Date of issued and outstanding shares
of D&B Common Stock. Based on the shares of
D&B Common Stock outstanding as of , 1996
[the dividend declaration date], the Distribution
would consist of shares of Cognizant Common
Stock and shares of ACNielsen Common Stock.
Each holder of D&B Common Stock on the Record Date
will receive as a dividend one share of Cognizant
Common Stock for every share of D&B Common Stock
held and one share of ACNielsen Common Stock for
every three shares of D&B Common Stock held.
The Board of Directors of Cognizant has adopted a
stockholder rights plan. Certificates evidencing
shares of Cognizant Common Stock issued in the
Distribution will therefore represent the same
number of Cognizant Rights (as defined below)
issued under the Cognizant Rights Plan. The Board
of Directors of ACNielsen has also adopted a
stockholder rights plan. Certificates evidencing
shares of ACNielsen Common Stock issued in the
Distribution will therefore represent the same
number of ACNielsen Rights (as defined below)
issued under the ACNielsen Rights Plan. See
"Description of Cognizant Capital
Stock -- Cognizant Rights Plan" and "Description of
ACNielsen Capital Stock -- ACNielsen Rights Plan".
Unless the context otherwise requires, references
herein to the Cognizant Common Stock include the
related Cognizant Rights, and references herein to
the ACNielsen Common Stock include the related
ACNielsen Rights.
D&B stockholders will not have to make any payment
or surrender or exchange shares of D&B Common Stock
in order to receive their pro
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rata share of the Distribution. No vote of holders
of D&B Common Stock is required or sought in
connection with the Distribution.
Fractional Share
Interests.................. Fractional shares of ACNielsen Common Stock will
not be distributed. Fractional shares of ACNielsen
Common Stock will be aggregated and sold in the
public market by the Distribution Agent, and the
aggregate net cash proceeds will be distributed
ratably to those stockholders otherwise entitled to
such fractional interests. See "The Distribution --
Manner of Effecting the Distribution".
Record Date................ The Record Date is October , 1996. In order to be
entitled to receive shares of Cognizant Common
Stock and ACNielsen Common Stock in the
Distribution, holders of shares of D&B Common Stock
must be such as of the close of business on the
Record Date.
Distribution Date.......... The "Distribution Date" is presently expected to be
on or about November , 1996.
Distribution Agent......... First Chicago Trust Company of New York will be the
Distribution Agent (the "Distribution Agent") for
the Distribution.
Federal Income Tax
Consequences of the
Distribution............. D&B has received a ruling from the Internal Revenue
Service to the effect that the Distribution will be
tax-free for Federal income tax purposes, except to
the extent that cash is received for fractional
shares of ACNielsen Common Stock. D&B stockholders
will apportion their tax basis in D&B Common Stock
held immediately before the Distribution among such
D&B Common Stock, and Cognizant Common Stock and
ACNielsen Common Stock received in the
Distribution, based on the relative fair market
values of the D&B Common Stock, the Cognizant
Common Stock and the ACNielsen Common Stock as of
the Distribution Date. D&B will provide appropriate
information to each holder of record of D&B Common
Stock as of the Record Date concerning the basis
allocation. See "The Distribution -- Federal Income
Tax Consequences of the Distribution".
Stock Exchange Listings.... There is not currently a public market for either
the Cognizant Common Stock or the ACNielsen Common
Stock. Application has been made to list the
Cognizant Common Stock and the ACNielsen Common
Stock on the New York Stock Exchange ("NYSE") under
the symbols "CZT" and "ART", respectively. It is
presently anticipated that Cognizant Common Stock
and ACNielsen Common Stock will be approved for
listing on the NYSE prior to the Distribution Date,
and trading is expected to commence on a
"when-issued" basis prior to the Distribution. On
the first NYSE trading day following the
Distribution Date, "when-issued" trading in respect
of each of the Cognizant Common Stock and the
ACNielsen Common Stock will end and "regular-way"
trading will begin. See "The
Distribution -- Listing and Trading of Cognizant
Common Stock and ACNielsen Common Stock".
Limited Relationships Among
D&B, Cognizant and
ACNielsen After the
Distribution............. After the Distribution, none of D&B, Cognizant or
ACNielsen will have any ownership interest in the
others, except as set forth under "Relation-
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ship Among D&B, Cognizant and ACNielsen After the
Distribution -- Distribution Agreement", and each
of D&B, Cognizant and ACNielsen will be an
independent public company. D&B, Cognizant and
ACNielsen will enter into certain agreements
governing their relationships subsequent to the
Distribution and providing for the allocation of
tax, employee benefits and certain other
liabilities and obligations arising from periods
prior to the Distribution, including contingent
liabilities relating to certain litigation. In
addition, there will be individuals on the Boards
of Directors of D&B, Cognizant and ACNielsen who
will also serve on the Board of Directors of one
but not both of the other companies. See
"Relationship Among D&B, Cognizant and ACNielsen
After the Distribution".
Dividend Policies.......... The payment and level of cash dividends by
Cognizant and ACNielsen after the Distribution will
be subject to the discretion of the Cognizant Board
of Directors and the ACNielsen Board of Directors,
respectively. It is anticipated that Cognizant will
initially pay quarterly cash dividends in the range
of 5% to 8% of net earnings and that ACNielsen will
not initially pay any dividends. Dividend decisions
will be based on, and affected by, a number of
factors, including the respective operating results
and financial requirements of Cognizant and
ACNielsen on a stand-alone basis. See "Dividend
Policy".
Antitakeover Provisions.... The Restated Certificate of Incorporation and
Amended and Restated By-laws of each of Cognizant
and ACNielsen contain provisions that may have the
effect of discouraging an acquisition of control of
Cognizant or ACNielsen, respectively, not approved
by their respective Boards of Directors. Such
provisions may also have the effect of discouraging
third parties from making proposals involving an
acquisition or change of control of Cognizant or
ACNielsen, although such proposals, if made, might
be considered desirable by a majority of the
stockholders of Cognizant or ACNielsen, as the case
may be. Such provisions could further have the
effect of making it more difficult for third
parties to cause the replacement of the Boards of
Directors of Cognizant or ACNielsen. These
provisions have been designed to enable each of
Cognizant and ACNielsen to develop its businesses
and foster its long-term growth without disruptions
caused by the threat of a takeover not deemed by
its Board of Directors to be in the best interests
of the applicable company and its stockholders.
Certain provisions of the Distribution Agreement to
be entered into among D&B, Cognizant and ACNielsen
may also have the effect of discouraging third
parties from making proposals involving an
acquisition or change of control of Cognizant or
ACNielsen. See "Relationship Among D&B, Cognizant
and ACNielsen After the Distribution -- Tax Sharing
Agreement".
Each of Cognizant and ACNielsen has adopted a
stockholder rights plan. These stockholder rights
plans are designed to protect stockholders in the
event of an unsolicited offer and other takeover
tactics which, in the opinion of the relevant Board
of Directors, could impair its ability to represent
stockholder interests. The provisions of these
stockholder rights plans may render an unsolicited
takeover of Cognizant or ACNielsen, as applicable,
more difficult or less likely to occur or might
prevent such a takeover. See "Description of
Cognizant Capital Stock-- Cognizant
4
<PAGE> 7
Rights Plan" and "Description of ACNielsen Capital
Stock -- ACNielsen Rights Plan".
Each of Cognizant and ACNielsen will be subject to
provisions of Delaware corporate law which may
restrict certain business combination transactions.
See "Description of Cognizant Capital
Stock -- Delaware General Corporation Law" and
"Description of ACNielsen Capital Stock -- Delaware
General Corporation Law".
See also "Description of Cognizant Capital
Stock -- Provisions of Cognizant Restated
Certificate of Incorporation and Amended and
Restated By-laws Affecting Change in Control", and
"Description of ACNielsen Capital
Stock -- Provisions of ACNielsen Restated
Certificate of Incorporation and Amended and
Restated By-laws Affecting Change in Control".
Certain Considerations..... Stockholders should carefully consider the matters
discussed under the section entitled "Certain
Considerations" in this Information Statement.
* * *
This Information Statement is being furnished by D&B solely to provide
information to stockholders of D&B who will receive Cognizant Common Stock and
ACNielsen Common Stock in the Distribution. It is not, and is not to be
construed as, an inducement or encouragement to buy or sell any securities of
D&B, Cognizant or ACNielsen. The information contained in this Information
Statement is believed by D&B, Cognizant and ACNielsen to be accurate with
respect to D&B, Cognizant and ACNielsen, respectively, as of the date set forth
on the cover. Changes may occur after that date, and neither D&B, Cognizant nor
ACNielsen will update the information except in the normal course of their
respective public disclosure practices.
5
<PAGE> 8
COGNIZANT
SUMMARY FINANCIAL DATA
The following table summarizes certain selected combined financial data of
Cognizant which has been derived from the Combined Financial Statements of
Cognizant for the five years ended December 31, 1995, and the six months ended
June 30, 1996 and 1995. The historical financial statements of Cognizant
contained in this Information Statement are presented as if Cognizant were a
separate entity for all periods presented. The information set forth below
should be read in conjunction with the information set forth under "Cognizant
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Cognizant's Combined Financial Statements and the Notes thereto
included in this Information Statement. The following information is qualified
in its entirety by the information and financial statements appearing elsewhere
in this Information Statement.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------------ ------------------------------------------------------
1996 1995 1995(1)(2) 1994(2) 1993(2) 1992 1991
----------- ----------- ---------- ------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
($ IN MILLIONS, EXCEPT PER SHARE DATA)
INCOME STATEMENT DATA:
Operating Revenue............. $ 786 $ 710 $1,542 $1,257 $1,039 $ 910 $ 915
Income before cumulative
effect of changes in
accounting principles....... $ 76 $ 63 $ 89 $ 146 $ 109 $ 87 $ 84
PRO FORMA UNAUDITED EARNINGS
PER SHARE OF COMMON
STOCK(3).................... $ 0.45 $ 0.52
BALANCE SHEET DATA:
Total Assets.................. $ 1,475 $ 1,454 $1,442 $1,331 $1,159 $ 894 $ 745
Long-term Debt................ $ 6 $ 11 $ 10 $ 15 $ 5 $ 6 $ 8
</TABLE>
- ---------------
(1) Income before cumulative effect of changes in accounting principles in 1995
includes a non-recurring pre-tax charge in the fourth quarter of $90
million ($50 million after-tax) for costs principally associated with asset
impairments, software write-offs and contractual obligations that have no
future economic benefit.
(2) Income before cumulative effect of changes in accounting principles includes
restructuring expense of $13 million, $8 million and $46 million pre-tax,
in 1995, 1994 and 1993, respectively. Also included in income before
cumulative effect of changes in accounting principles are non-operating
gains from dispositions of $15 million and $21 million pre-tax, in 1995 and
1994, respectively and a non-operating gain from sale of Gartner Group
stock of $21 million pre-tax in 1993.
(3) The computation of pro forma earnings per share for the periods ended June
30, 1996 and December 31, 1995 is based on the average number of shares of
D&B Common Stock outstanding during the respective periods, reflecting the
one for one Distribution ratio.
6
<PAGE> 9
ACNIELSEN
SUMMARY FINANCIAL DATA
The following table summarizes certain selected combined financial data of
ACNielsen which has been derived from the Combined Financial Statements of
ACNielsen for the five years ended December 31, 1995, and the six months ended
June 30, 1996 and 1995. The historical financial statements of ACNielsen
contained in this Information Statement are presented as if ACNielsen were a
separate entity for all periods presented. The information set forth below
should be read in conjunction with the information set forth under "ACNielsen
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and ACNielsen's Combined Financial Statements and the Notes thereto
included in this Information Statement. The following information is qualified
in its entirety by the information and financial statements appearing elsewhere
in this Information Statement.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------------ ---------------------------------------------------
1996 1995 1995(1) 1994(2) 1993(2) 1992 1991
----------- ----------- ------- ------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
($ IN MILLIONS, EXCEPT PER SHARE DATA)
INCOME STATEMENT DATA:
Operating Revenue............... $ 644 $ 611 $1,281 $1,092 $1,045 $ 1,117 $ 1,020
(Loss) Income before cumulative
effect of changes in
accounting principles......... $ (17) $ (37) $ (231 ) $ (65 ) $ (55 ) $ 47 $ 46
PRO FORMA UNAUDITED LOSS PER
SHARE OF COMMON STOCK(3)...... $ (0.31) $(4.09 )
BALANCE SHEET DATA:
Total Assets.................... $ 947 $ 1,052 $ 970 $ 980 $ 845 $ 922 $ 1,385
Long-term Debt.................. $ 7 $ 13 $ 6 $ 9 $ 4 $ 10 $ 12
</TABLE>
- ---------------
(1) (Loss) Income before cumulative effect of changes in accounting principles
in 1995 includes a non-recurring pre-tax charge in the fourth quarter of
$152 million ($141 million after-tax) for costs principally associated with
asset impairments, software write-offs and contractual obligations that
have no future economic benefit.
(2) (Loss) Income before cumulative effect of changes in accounting principles
includes restructuring expense of $9 million and $60 million pre-tax, in
1994 and 1993, respectively.
(3) The computation of pro forma loss per share for the periods ended June 30,
1996 and December 31, 1995 is based on the average number of shares of D&B
Common Stock outstanding during the respective periods, adjusted for the
one for three Distribution ratio.
7
<PAGE> 10
CERTAIN CONSIDERATIONS
CONSIDERATIONS RELEVANT TO COGNIZANT AND ACNIELSEN
Absence of Prior Trading Market for the Cognizant Common Stock and ACNielsen
Common Stock
Prior to the date hereof, there has not been any established trading market
for Cognizant Common Stock or ACNielsen Common Stock. Application has been made
to list the Cognizant Common Stock and ACNielsen Common Stock on the NYSE under
the symbols "CZT" and "ART", respectively. It is presently anticipated that
Cognizant Common Stock and ACNielsen Common Stock will be approved for listing
on the NYSE prior to the Distribution Date, and trading is expected to commence
on a "when-issued" basis prior to the Distribution. See "The
Distribution -- Listing and Trading of Cognizant Common Stock and ACNielsen
Common Stock".
Changes in Trading Prices of Cognizant Common Stock and ACNielsen Common Stock
There can be no assurance as to the prices at which the Cognizant Common
Stock and ACNielsen Common Stock will trade before, on or after the Distribution
Date. Until each of the Cognizant Common Stock and ACNielsen Common Stock is
fully distributed and an orderly market develops in the Cognizant Common Stock
and ACNielsen Common Stock, the respective price at which each such stock trades
may fluctuate significantly and may be lower or higher than the respective price
that would be expected for a fully distributed issue. Prices for each of the
Cognizant Common Stock and ACNielsen Common Stock will be determined in the
marketplace and may be influenced by many factors, including (i) the depth and
liquidity of the market for Cognizant Common Stock and ACNielsen Common Stock,
as applicable, (ii) developments affecting the respective businesses of
Cognizant and ACNielsen generally and the impact of those factors referred to
below in particular, (iii) investor perception of Cognizant and ACNielsen, as
the case may be, and (iv) general economic and market conditions.
Potential Taxation
D&B has received a ruling from the Internal Revenue Service to the effect
that, among other things, the Distribution will qualify as a tax-free spinoff
under Section 355 of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code").
The Internal Revenue Service ruling is based on certain factual
representations and assumptions made by D&B. If such factual representations and
assumptions were incorrect in a material respect, such ruling could become
invalid. D&B is not aware of any facts or circumstances which would cause such
representations and assumptions to be incorrect. Each of D&B, Cognizant and
ACNielsen has agreed in the Distribution Agreement to certain restrictions on
its future actions to provide further assurances that Section 355 of the
Internal Revenue Code will apply to the Distribution. See "Relationship Among
D&B, Cognizant and ACNielsen After the Distribution".
If the Distribution were not to qualify under Section 355 of the Internal
Revenue Code, then, in general, a corporate tax (which would be very
substantial) would be payable by the consolidated group, of which D&B is the
common parent. In addition, under the consolidated return rules, each member of
the consolidated group (including Cognizant and ACNielsen) is jointly and
severally liable for such tax liability. If the Distribution occurred and it
were not to qualify under Section 355 of the Internal Revenue Code, the
resulting tax liability would have a material adverse effect on the financial
position, results of operations and cash flows of each of D&B, Cognizant and
ACNielsen. D&B estimates that the aggregate shared tax liability in this regard
of D&B, Cognizant and ACNielsen would be in the range of approximately $1.5 to
$2.0 billion. See "The Distribution -- Federal Income Tax Consequences of the
Distribution".
D&B has sought ruling letters from the Internal Revenue Service as to the
Federal income tax consequences of certain restructurings which were or are to
be effected by D&B prior to the Distribution. If these ruling letters are not
received by October , 1996 [the dividend declaration date], D&B expects to
receive unqualified opinions of counsel as to some but not all of the issues
raised in the ruling requests. Any tax
8
<PAGE> 11
liabilities which may ultimately arise in connection with the international
restructurings which are the subject of ruling requests will be shared equally
by Cognizant and D&B and are not expected to be material to Cognizant or D&B.
Non-United States Operations
Approximately 46% of Cognizant's 1995 revenues were generated by non-U.S.
operations and approximately 80% of ACNielsen's 1995 revenues were generated by
non-U.S. operations. As a result, fluctuations in the value of foreign
currencies relative to the U.S. dollar could increase the volatility of U.S.
dollar-denominated operating results. The non-U.S. operations of Cognizant and
ACNielsen are also subject to other risks inherent in carrying on business in
countries outside the United States, including possible nationalization,
expropriation, price controls and/or other restrictive government actions.
Management of each of Cognizant and ACNielsen believes that the risks of
nationalization or expropriation are negligible.
Certain Antitakeover Provisions
The Restated Certificate of Incorporation and Amended and Restated By-laws
of each of Cognizant and ACNielsen contain provisions that may have the effect
of discouraging an acquisition of control of Cognizant or ACNielsen,
respectively, not approved by their respective Boards of Directors. Such
provisions may also have the effect of discouraging third parties from making
proposals involving an acquisition or change of control of Cognizant or
ACNielsen, although such proposals, if made, might be considered desirable by a
majority of the stockholders of Cognizant or ACNielsen, as the case may be. Such
provisions could further have the effect of making it more difficult for third
parties to cause the replacement of the Board of Directors of Cognizant or
ACNielsen. These provisions have been designed to enable each of Cognizant and
ACNielsen to develop its businesses and foster its long-term growth without
disruptions caused by the threat of a takeover not deemed by its Board of
Directors to be in the best interests of the applicable company and its
stockholders. Certain provisions of the Distribution Agreement entered into
among D&B, Cognizant and ACNielsen may also have the effect of discouraging
third parties from making proposals involving an acquisition or change of
control of D&B, Cognizant or ACNielsen. See "Relationship Among D&B, Cognizant
and ACNielsen After the Distribution -- Distribution Agreement".
Each of Cognizant and ACNielsen has adopted a stockholder rights plan.
These stockholder rights plans are designed to protect stockholders in the event
of an unsolicited offer and other takeover tactics which, in the opinion of the
relevant Board of Directors, could impair its ability to represent stockholder
interests. The provisions of these stockholder rights plans may render an
unsolicited takeover of Cognizant or ACNielsen, as applicable, more difficult or
less likely to occur or might prevent such a takeover. See "Description of
Cognizant Capital Stock -- Cognizant Rights Plan" and "Description of ACNielsen
Capital Stock -- ACNielsen Rights Plan".
Each of Cognizant and ACNielsen will be subject to provisions of Delaware
corporate law which may restrict certain business combination transactions. See
"Description of Cognizant Capital Stock -- Delaware General Corporation Law" and
"Description of ACNielsen Capital Stock -- Delaware General Corporation Law".
CONSIDERATIONS RELEVANT TO COGNIZANT
Acquisitions
Although an important aspect of Cognizant's business strategy is growth
through acquisitions, there can be no assurance that management of Cognizant
will be able to identify and consummate acquisitions on satisfactory terms.
Furthermore, every acquisition 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.
9
<PAGE> 12
Technology
Cognizant intends to compete in businesses which demand or sell
sophisticated information systems, software and other technology. The types of
systems which Cognizant's businesses will require or sell can be expected to be
subject to refinements as such systems and underlying technologies are upgraded
and advanced, and there can be no guarantee that as various systems and
technologies become outdated, Cognizant will be able to replace them, to replace
them as quickly as Cognizant's competition or to develop and market new and
better products and services in the future on a cost-effective basis.
Volatility
Management expects that the market will characterize Cognizant Common Stock
as an information systems and services stock, which category of stock has
historically experienced relatively greater price volatility than broader market
indices.
Gartner Group, Inc.
The Cognizant Business includes Cognizant's ownership of approximately 51%
of the outstanding shares of Gartner Group, a publicly traded provider of
research and analysis of the computer hardware, software, communications and
related technology industries. Gartner Group's common stock has historically
traded at higher multiples than market averages and has generally experienced
greater price volatility than the market as a whole. It can be expected that
variations in the market value of the Gartner Group shares held by Cognizant
will have an impact on the trading prices of Cognizant Common Stock. In
addition, to the extent that Gartner Group issues additional shares of its own
common stock, Cognizant would have to purchase Gartner Group shares in the open
market in order to maintain a majority position. Cognizant might have to effect
such purchases even if Gartner Group shares were trading at relatively high
multiples. There can be no assurance that Cognizant will maintain its majority
position in Gartner Group.
Gartner Group's future success will depend in large measure upon the
continued contributions of its senior management team, professional analysts and
experienced sales personnel. Accordingly, Gartner Group's future operating
results will be largely dependent upon its ability to retain the services of
these individuals and to attract additional qualified personnel. Gartner Group
experiences intense competition for professional personnel with, among others,
producers of information technology products, management consulting firms and
financial services companies. Many of these firms have substantially greater
financial resources than Gartner Group to attract and compensate qualified
personnel. The loss of the services of key management and professional personnel
could have a material adverse effect on Gartner Group's business.
Litigation
On July 29, 1996, Information Resources, Inc. ("IRI") filed a complaint in
the United States District Court for the Southern District of New York, naming
as defendants D&B, A.C. Nielsen Company and IMS (the "IRI Action"). The
complaint alleges, among other things, various violations of the antitrust laws
and damages in excess of $350 million, which amount IRI has asked to be trebled
under the antitrust laws. IRI also seeks punitive damages in an unspecified
amount. In connection with such action, D&B, ACNielsen and Cognizant will enter
into an Indemnity and Joint Defense Agreement (the "Indemnity and Joint Defense
Agreement") pursuant to which ACNielsen will agree to be responsible for any
potential liabilities which may ultimately be incurred by D&B or Cognizant as a
result of such action, up to a maximum amount to be determined by an independent
investment bank if and when any such liabilities are incurred. The determination
of such maximum amount will be based on ACNielsen's ability to satisfy such
liabilities and remain financially viable, subject to certain assumptions and
limitations. However, Cognizant and D&B will agree that to the extent that
ACNielsen is unable to satisfy any such liabilities in full and remain
financially viable, Cognizant and D&B will each be responsible for 50% of the
difference between the amount, if any, which may be payable as a result of such
litigation and the maximum amount which ACNielsen is then able to pay as
determined by such investment bank. See "Considerations Relevant to
ACNielsen -- Litigation", below, and "Relationship Among D&B, Cognizant and
ACNeilsen After the Distribution -- Indemnity and Joint Defense Agreement".
Management of Cognizant is unable to predict at this time the final outcome of
the IRI
10
<PAGE> 13
Action or whether the resolution of such matter could materially affect
Cognizant's results of operations, cash flows or financial position.
CONSIDERATIONS RELEVANT TO ACNIELSEN
Recent Losses
ACNielsen incurred net losses of approximately $17.5 million in the six
months ended June 30, 1996, $230.9 million in 1995 (including an after-tax
non-recurring charge of $141.3 million and an after-tax provision for
postemployment benefits of $24.2 million), $65.1 million in 1994 and $174.7
million in 1993 (including a net restructuring charge of $56.0 million after tax
and the cumulative effect of changes in accounting principles of $119.5 million
after tax). Accordingly, a significant turnaround must be accomplished in the
United States and in Europe. To effectuate this turnaround, ACNielsen will need
to be able to respond to changes in its markets, including rapid technological
change, increasing global competition, rising costs and declining margins.
Management has developed a turnaround strategy which involves reengineering
ACNielsen's business fundamentals in five key ways: significantly improving
profitability, targeting profitable growth opportunities, further streamlining
operations, redefining its business model and enhancing its investment returns.
However, no assurance can be given that such strategy can be successfully
implemented or that, if implemented, further initiatives will not be necessary
to return ACNielsen to profitability or to sustain such profitability.
Technology
ACNielsen competes in businesses which demand sophisticated information
systems, software and other technology. The types of systems which ACNielsen's
businesses will require can be expected to be subject to refinements as such
systems and underlying technologies are upgraded and advanced, and there can be
no guarantee that as various systems and technologies become outdated, ACNielsen
will be able to replace them, to replace them as quickly as ACNielsen's
competition or to develop and market new and better products and services in the
future on a cost-effective basis.
Global Competition
ACNielsen has numerous competitors in its various lines of business
throughout the world. Some are large companies with diverse product and service
lines; others have more limited product and service offerings. Competition comes
from companies specializing in marketing research; the in-house research
departments of manufacturers and advertising agencies; retailers selling
information directly or through brokers; information management and software
companies; and consulting and accounting firms. IRI is ACNielsen's principal
competitor in the United States. IRI and other firms also participate in the
global marketing research area, where competition is intensifying.
Access to Capital as an Independent Company
Since its acquisition by D&B, ACNielsen has relied on D&B for various
financial and administrative services as well as funding. Except as contemplated
by certain of the agreements described below, after the Distribution, D&B will
not provide ACNielsen with further financial and administrative support
services. In addition, to the extent that ACNielsen may need additional funding
to finance its operations and capital expenditures, no assurance can be given
that ACNielsen will be able to access the capital markets or otherwise obtain
necessary financing in the future, or that any such financing can be obtained in
a timely and commercially favorable manner, particularly if ACNielsen is unable
to successfully implement its turnaround strategy.
Litigation
As set forth above, on July 29, 1996, IRI filed a complaint in the United
States District Court for the Southern District of New York, naming as
defendants D&B, A.C. Nielsen Company and IMS.
11
<PAGE> 14
The complaint alleges various violations of United States antitrust law:
(1) a violation of Section 1 of the Sherman Act through an alleged practice of
tying A.C. Nielsen Company services in different countries or of A.C. Nielsen
Company and IMS services; (2) a violation of Section 1 of the Sherman Act
through alleged unreasonable restraints of trade consisting of the contracts
described above and through alleged long-term agreements with multi-national
customers; (3) a violation of Section 2 of the Sherman Act for monopolization
and attempted monopolization of export markets through alleged exclusive data
acquisition agreements with retailers in foreign countries, the contracts with
customers described above, and other means; (4) a violation of Section 2 of the
Sherman Act for attempted monopolization of the United States market through the
alleged exclusive data agreements described above, predatory pricing, and other
means; and (5) a violation of Section 2 of the Sherman Act for an alleged use of
market power in export markets to gain an unfair competitive advantage in the
United States.
The complaint also alleges two claims of tortious interference with
contract and tortious interference with a prospective business relationship.
These claims relate to the acquisition by defendants of Survey Research Group
Limited ("SRG"). IRI alleges that SRG violated an alleged agreement with IRI
when it agreed to be acquired by defendants and that defendants induced SRG to
breach that agreement.
IRI's complaint alleges damages in excess of $350 million, which amount IRI
has asked to be trebled under the antitrust laws. IRI also seeks punitive
damages in an unspecified amount.
In connection with such action, D&B, ACNielsen and Cognizant will enter
into the Indemnity and Joint Defense Agreement pursuant to which they will agree
(i) to certain arrangements allocating potential liabilities ("IRI Liabilities")
that may arise out of or in connection with the IRI Action and (ii) to conduct a
joint defense of such action. In particular, the Indemnity and Joint Defense
Agreement will provide that ACNielsen will assume exclusive liability for IRI
Liabilities up to a maximum amount to be determined at the time such
liabilities, if any, become payable (the "ACN Maximum Amount"), and that
Cognizant and D&B 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 stockholder 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 any such plan, for two years
from the date such plan is expected to be implemented. See "Relationship Among
D&B, Cognizant and ACNielsen -- Indemnity and Joint Defense Agreement".
Directorate General IV of the Commission of the European Union (the
"Commission") is currently investigating ACNielsen for the possible violation of
European Union competition law. In May 1996, the Commission issued a Statement
of Objections with respect to certain of ACNielsen's practices in Europe,
including discounting and other sales practices. ACNielsen has submitted its
response to the Commission's Statement of Objections. Following the review of
such submission and a hearing at which representatives of European Union member
states will participate, the Commission may uphold ACNielsen's position and
dismiss the complaint or adopt a decision prohibiting any of the practices
identified in the Statement of Objections and imposing substantial fines.
Management of ACNielsen is unable to predict at this time the final outcome
of either the IRI Action or the Commission's investigation or whether the
resolution of either matter could materially affect ACNielsen's results of
operations, cash flows or financial position.
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<PAGE> 15
THE DISTRIBUTION
INTRODUCTION
On January 9, 1996, the Board of Directors of D&B approved in principle a
plan to distribute the Cognizant Common Stock and the ACNielsen Common Stock to
all holders of outstanding D&B Common Stock. On October , 1996, the D&B Board
of Directors formally approved the Distribution and declared a dividend payable
to each holder of record at the close of business on the Record Date, of one
share of Cognizant Common Stock for every one share of D&B Common Stock held by
such holder on the Record Date and one share of ACNielsen Common Stock for every
three shares of D&B Common Stock held by such holder on the Record Date.
D&B has received a tax ruling from the U.S. Internal Revenue Service that
the receipt by D&B stockholders of the Cognizant Common Stock and the ACNielsen
Common Stock in the Distribution will be generally tax-free to such stockholders
and D&B for Federal income tax purposes. On or before the Distribution Date, D&B
will deliver all of the outstanding shares of Cognizant Common Stock and
ACNielsen Common Stock to the Distribution Agent for transfer and distribution
to the holders of record of D&B Common Stock on the Record Date. The
Distribution will be made or about November , 1996.
Questions relating to the Distribution prior to the Distribution Date or
relating to transfers of Cognizant Common Stock and the ACNielsen Common Stock
after the Distribution Date should be directed to: First Chicago Trust Company
of New York, P.O. Box 2500, Jersey City, New Jersey 07303-2500, telephone (201)
324-1225.
REASONS FOR THE DISTRIBUTION
The Board of Directors of D&B believes that the Distribution is in the best
interests of D&B and D&B's stockholders and that the separation of Cognizant and
ACNielsen from D&B will provide each of D&B, Cognizant and ACNielsen with
greater managerial, operational and financial flexibility to respond to changing
market conditions in their different business environments. The discussion of
the reasons for the Distribution set forth herein includes forward-looking
statements that are based upon numerous assumptions with respect to the trading
characteristics of the Cognizant and ACNielsen Common Stock, the ability of
Cognizant's management to identify and consummate acquisitions, the ability of
ACNielsen's management to successfully implement a program to return to and
sustain profitability and other factors which may be beyond the control of
either company's management. Many of such factors are discussed above under the
caption "Certain Considerations".
Facilitate Growth of Cognizant. Cognizant intends to pursue acquisition
and growth opportunities in its business areas. Such acquisitions and growth
could be pursuant to transactions in which Cognizant Common Stock is offered in
exchange for the stock of the target, or could be pursuant to cash acquisitions
financed through the sale of capital stock of Cognizant. In either event,
management of D&B believes that the Distribution will facilitate such
acquisition and growth strategy because management of D&B believes that the
Cognizant Common Stock will generally trade at higher price-earnings multiples
than those at which D&B Common Stock has historically traded. Such higher
multiples would make such stock a more attractive acquisition currency for
Cognizant to deliver, and, to the extent such stock is perceived to be a
high-growth stock, a generally more attractive investment opportunity for the
typical seller of a business in Cognizant's industries.
Management Considerations. At present, the financial information services
businesses of D&B (which are to remain with D&B after the Distribution), the
healthcare information, technology and U.S. and Canadian media measurement
businesses of D&B (which are to be transferred to Cognizant) and the marketing
information services businesses and non-U.S and non-Canadian media measurement
businesses of D&B (which are to be transferred to ACNielsen) are conducted as
separate operating groups under the direction of D&B. The Distribution should be
beneficial to each of D&B's three operating groups, because it will enable the
management of each group to design and advance corporate policies and strategies
that are
13
<PAGE> 16
based primarily on the business characteristics of the group and to concentrate
its financial resources wholly on its own operations.
The Distribution will also permit each of D&B, Cognizant and ACNielsen to
design incentive compensation programs that relate more directly to its own
business characteristics and performance.
Investor Understanding. Investors should be able to evaluate better the
financial performance of each of D&B, Cognizant and ACNielsen and their
respective strategies, thereby enhancing the likelihood that each will achieve
appropriate market valuation.
MANNER OF EFFECTING THE DISTRIBUTION
The Distribution will be made on the Distribution Date to stockholders of
record of D&B at the close of business on the Record Date. Based on the
shares of D&B Common Stock outstanding as of October , 1996 [the dividend
declaration date], the Distribution would consist of shares of
Cognizant Common Stock and shares of ACNielsen Common Stock. Prior to
the Distribution Date, D&B will deliver all outstanding shares of Cognizant
Common Stock and ACNielsen Common Stock to the Distribution Agent for
distribution. The Distribution Agent will mail, on or about the Distribution
Date, certificates representing the shares of Cognizant Common Stock and
ACNielsen Common Stock to D&B stockholders of record on the Record Date. D&B
stockholders will not be required to pay for shares of Cognizant Common Stock or
ACNielsen Common Stock received in the Distribution, or to surrender or exchange
shares of D&B Common Stock in order to receive shares of Cognizant Common Stock
and ACNielsen Common Stock. No vote of D&B stockholders is required or sought in
connection with the Distribution.
No certificates or scrip representing fractional shares of ACNielsen Common
Stock will be issued to D&B stockholders as part of the Distribution. In lieu of
receiving fractional shares of ACNielsen Common Stock, each holder of D&B Common
Stock who would otherwise be entitled to receive a fractional share will receive
cash for such fractional interests. The Distribution Agent will, as soon as
practicable after the Distribution Date, aggregate and sell all such fractional
interests on the NYSE at then prevailing market prices and distribute the
aggregate proceeds (net of brokerage fees) ratably to D&B stockholders otherwise
entitled to such fractional interests. See "Federal Income Tax Consequences of
the Distribution" below for a discussion of the Federal income tax treatment of
fractional share interests.
IN ORDER TO BE ENTITLED TO RECEIVE SHARES OF COGNIZANT COMMON STOCK OR
ACNIELSEN COMMON STOCK IN THE DISTRIBUTION, D&B STOCKHOLDERS MUST BE
STOCKHOLDERS AT THE CLOSE OF BUSINESS ON THE RECORD DATE, OCTOBER , 1996.
The Board of Directors of Cognizant has adopted a stockholder rights plan.
Certificates evidencing shares of Cognizant Common Stock issued in the
Distribution will therefore represent the same number of Cognizant Rights issued
under the Cognizant Rights Plan. The Board of Directors of ACNielsen has adopted
a stockholder rights plan. Certificates evidencing shares of ACNielsen Common
Stock issued in the Distribution will therefore represent the same number of
ACNielsen Rights issued under the ACNielsen Rights Plan. See "Description of
Cognizant Capital Stock -- Cognizant Rights Plan" and "Description of ACNielsen
Capital Stock -- ACNielsen Rights Plan". Unless the context otherwise requires,
references herein to the Cognizant Common Stock include the related Cognizant
Rights, and references herein to the ACNielsen Common Stock include the related
ACNielsen Rights.
FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION
D&B has received a ruling letter from the Internal Revenue Service to the
effect that, among other things, the Distribution will qualify as a tax-free
spinoff under Section 355 of the Internal Revenue Code. Under Section 355 of the
Internal Revenue Code, in general:
1. Holders of D&B Common Stock will not recognize any income, gain or
loss as a result of the Distribution except that holders of D&B Common
Stock that receive cash in lieu of fractional shares of
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ACNielsen Common Stock will recognize gain or loss equal to the difference
between such cash and the tax basis allocated to such fractional shares.
Any such gain or loss will constitute capital gain or loss if such
fractional shares would have been held as a capital asset on the
Distribution Date.
2. Holders of D&B Common Stock will apportion the tax basis of their
D&B Common Stock among such D&B Common Stock and any Cognizant Common Stock
and ACNielsen Common Stock (including fractional shares of ACNielsen Common
Stock) received by such holder in the Distribution in proportion to the
relative fair market values of such stock on the Distribution Date. D&B
will provide appropriate information to each holder of record of D&B Common
Stock as of the Record Date concerning the basis allocation.
3. The holding period for the Cognizant Common Stock and ACNielsen
Common Stock received in the Distribution by holders of D&B Common Stock
will include the period during which such holder held the D&B Common Stock
with respect to which the Distribution was made, provided that such D&B
Common Stock is held as a capital asset by such holder on the Distribution
Date.
4. The Distribution will not be treated as a taxable disposition of
Cognizant or ACNielsen by D&B.
Current Treasury regulations require each holder of D&B Common Stock who
receives Cognizant Common Stock or ACNielsen Common Stock pursuant to the
Distribution to attach to his or her Federal income tax return for the year in
which the Distribution occurs a detailed statement setting forth such data as
may be appropriate in order to show the applicability of Section 355 of the
Internal Revenue Code to the Distribution. D&B will convey the appropriate
information to each holder of record of D&B Common Stock as of the Record Date.
The Internal Revenue Service ruling is based on certain factual
representations and assumptions made by D&B. If such factual representations and
assumptions were incorrect in a material respect, such ruling could become
invalid. D&B is not aware of any facts or circumstances which would cause such
representations and assumptions to be incorrect. Each of D&B, Cognizant and
ACNielsen has agreed to certain restrictions on its future actions to provide
further assurances that Section 355 of the Internal Revenue Code will apply to
the Distribution. See "Relationship Among D&B, Cognizant and ACNielsen After the
Distribution". If the Distribution were not to qualify under Section 355 of the
Internal Revenue Code, then, in general, a corporate tax (which, as noted below,
would be very substantial) would be payable by the consolidated group, of which
D&B is the common parent, based upon the difference between (x) the fair market
value of the Cognizant Common Stock and the ACNielsen Common Stock and (y) the
adjusted basis of such Cognizant Common Stock and ACNielsen Common Stock. In
addition, under the consolidated return rules, each member of the consolidated
group (including Cognizant and ACNielsen) is jointly and severally liable for
such tax liability. If the Distribution occurred and it were not to qualify
under Section 355 of the Internal Revenue Code, the resulting tax liability
would have a material adverse effect on the financial position, results of
operations and cash flows of each of D&B, Cognizant and ACNielsen. D&B estimates
that the aggregate shared tax liability in this regard of D&B, Cognizant and
ACNielsen would be in the range of approximately $1.5 to $2.0 billion.
Furthermore, if the Distribution were not to qualify as a tax-free spinoff,
each D&B stockholder receiving shares of Cognizant Common Stock and ACNielsen
Common Stock in the Distribution would be treated as if such stockholder had
received a taxable distribution in an amount equal to the fair market value of
Cognizant Common Stock and ACNielsen Common Stock received, which would result
in (y) a dividend to the extent of such stockholder's pro rata share of D&B's
current and accumulated earnings and profits and (z) a reduction in such
stockholder's basis in D&B Common Stock to the extent the amount received
exceeds such stockholder's share of earnings and profits and a capital gain to
the extent the amount received exceeds the stockholder's basis.
D&B has sought ruling letters from the Internal Revenue Service as to the
Federal income tax consequences of certain restructurings which were or are to
be effected by D&B prior to the Distribution. If these ruling letters are not
received by October , 1996 [the dividend declaration date], D&B expects to
receive unqualified opinions of counsel as to some but not all of the issues
raised in the ruling requests. Any tax liabilities which may ultimately arise in
connection with the international restructurings which are the subject
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of ruling requests will be shared equally by Cognizant and D&B and are not
expected to be material to Cognizant or D&B.
The foregoing summary of the anticipated Federal income tax consequences of
the Distribution is for general information only. D&B STOCKHOLDERS SHOULD
CONSULT THEIR OWN ADVISERS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE
DISTRIBUTION, INCLUDING THE APPLICATION AND EFFECT OF FOREIGN, STATE AND LOCAL
TAX LAWS.
LISTING AND TRADING OF COGNIZANT COMMON STOCK AND ACNIELSEN COMMON STOCK
Prior to the date hereof, there has not been any established trading market
for Cognizant Common Stock or ACNielsen Common Stock. Application has been made
to list the Cognizant Common Stock and ACNielsen Common Stock on the NYSE under
the symbols "CZT" and "ART", respectively. It is presently anticipated that
Cognizant Common Stock and ACNielsen Common Stock will be approved for listing
on the NYSE prior to the Distribution Date, and trading is expected to commence
on a "when-issued" basis at least two days prior to the Record Date. On the
first NYSE trading day following the Distribution Date, "when-issued" trading in
respect of each of the Cognizant Common Stock and the ACNielsen Common Stock
will end and "regular-way" trading will begin.
There can be no assurance as to the prices at which the Cognizant Common
Stock and ACNielsen Common Stock will trade before, on or after the Distribution
Date. Until each of the Cognizant Common Stock and ACNielsen Common Stock is
fully distributed and an orderly market develops in the Cognizant Common Stock
and ACNielsen Common Stock, the respective price at which each such stock trades
may fluctuate significantly and may be lower or higher than the respective price
that would be expected for a fully distributed issue. Prices for each of the
Cognizant Common Stock and ACNielsen Common Stock will be determined in the
marketplace and may be influenced by many factors, including (i) the depth and
liquidity of the market for Cognizant Common Stock and ACNielsen Common Stock,
as applicable, (ii) developments affecting the respective businesses of
Cognizant and ACNielsen generally and the impact of the factors referred to in
"Certain Considerations" above, in particular, (iii) investor perception of
Cognizant and ACNielsen, as the case may be, and (iv) general economic and
market conditions.
Shares of Cognizant Common Stock and ACNielsen Common Stock distributed to
D&B stockholders will be freely transferable, except for shares of Cognizant
Common Stock received by persons who may be deemed to be "affiliates" of
Cognizant under the Securities Act of 1933, as amended (the "Securities Act"),
and shares of ACNielsen Common Stock received by persons who may be deemed to be
"affiliates" of ACNielsen under the Securities Act. Persons who may be deemed to
be affiliates of Cognizant or ACNielsen after the Distribution generally include
individuals or entities that control, are controlled by, or are under common
control with, Cognizant or ACNielsen, as applicable, and may include certain
officers and directors of Cognizant or ACNielsen, as applicable, as well as
principal stockholders of Cognizant or ACNielsen, as applicable. Persons who are
affiliates of Cognizant will be permitted to sell their shares of Cognizant
Common Stock only pursuant to an effective registration statement under the
Securities Act or an exemption from the registration requirements of the
Securities Act, such as the exemption afforded by Section 4(1) of the Securities
Act or Rule 144 thereunder. Similarly, persons who are affiliates of ACNielsen
will be permitted to sell their shares of ACNielsen Common Stock only pursuant
to an effective registration statement under the Securities Act or an exemption
from the registration requirements of the Securities Act, such as the exemption
afforded by Section 4(1) of the Securities Act or Rule 144 thereunder.
RELATIONSHIP AMONG D&B,
COGNIZANT AND ACNIELSEN AFTER THE DISTRIBUTION
Cognizant is wholly owned by D&B, and the results of operations of entities
that are or will be its subsidiaries have been included in D&B's consolidated
financial results. After the Distribution, D&B will not have any ownership
interest in Cognizant, and Cognizant will be an independent public company.
Furthermore, except as described below, all contractual relationships existing
prior to the Distribution between D&B and Cognizant will be terminated except
for contracts specifically set forth in a schedule to the Distribution
Agreement.
ACNielsen is also wholly owned by D&B, and the results of operations of
entities that are or will be its subsidiaries have been included in D&B's
consolidated financial results. After the Distribution, D&B will not
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have any ownership interest in ACNielsen, and ACNielsen will be an independent
public company. Furthermore, except as described below, all contractual
relationships existing prior to the Distribution between D&B and ACNielsen will
be terminated except for contracts specifically set forth in a schedule to the
Distribution Agreement.
After the Distribution, except as described below, neither Cognizant nor
ACNielsen will have any ownership interest in the other. In addition, except as
described below, all contractual relationships existing prior to the
Distribution between Cognizant and ACNielsen will be terminated except for
contracts specifically set forth in a schedule to the Distribution Agreement.
Prior to the Distribution, D&B, Cognizant and ACNielsen will enter into
certain agreements, described below, governing their relationship subsequent to
the Distribution and providing for the allocation of tax, employee benefits and
certain other liabilities and obligations arising from periods prior to the
Distribution. Copies of the forms of such agreements have been filed as exhibits
to the Registration Statements of each of Cognizant and ACNielsen in respect of
the registration of the Cognizant Common Stock and the ACNielsen Common Stock
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In
addition, D&B will file a Current Report on Form 8-K in connection with the
Distribution, and the agreements will be filed as exhibits to such Report. Such
agreements may be amended by D&B prior to the Distribution Date. In addition,
there will be individuals on the Boards of Directors of D&B, Cognizant and
ACNielsen who will also serve on the Board of Directors of one but not both of
the other companies. See "Cognizant Management and Executive
Compensation -- Board of Directors" and "ACNielsen Management and Executive
Compensation -- Board of Directors".
The following description summarizes certain terms of such agreements, but
is qualified by reference to the texts of such agreements, which are
incorporated herein by reference.
DISTRIBUTION AGREEMENT
D&B, Cognizant and ACNielsen will enter into the Distribution Agreement
providing for, among other things, certain corporate transactions required to
effect the Distribution and other arrangements among D&B, Cognizant and
ACNielsen subsequent to the Distribution.
In particular, the Distribution Agreement defines the assets and
liabilities which are being allocated to and assumed by Cognizant and those
which are being allocated to and assumed by ACNielsen. The Distribution
Agreement also defines what constitutes the "Cognizant Business" and what
constitutes the "ACNielsen Business".
Pursuant to the Distribution Agreement, D&B is obligated to transfer or
cause to be transferred all its right, title and interest in the assets
comprising the Cognizant Business to Cognizant and all its right, title and
interest in the assets comprising the ACNielsen Business to ACNielsen; Cognizant
is obligated to transfer or cause to be transferred all its right, title and
interest in the assets comprising the D&B business to D&B and all its right,
title and interest in the assets comprising the ACNielsen Business to ACNielsen;
and ACNielsen is obligated to transfer or cause to be transferred all its right,
title and interest in the assets comprising the D&B business to D&B and all its
right, title and interest in the assets comprising the Cognizant Business to
Cognizant. All assets are being transferred without any representation or
warranty, "as is-where is", and the relevant transferee bears the risk that any
necessary consent to transfer is not obtained. Each party also agrees to
exercise its respective commercially reasonable efforts promptly to obtain any
necessary consents and approvals and to take such actions as may be reasonably
necessary or desirable to carry out the purposes of the Distribution Agreement
and the other agreements summarized below.
The Distribution Agreement provides for, among other things, assumptions of
liabilities and cross indemnities designed to allocate generally, effective as
of the Distribution Date, financial responsibility for the liabilities arising
out of or in connection with (i) the businesses conducted by IMS, Nielsen Media
Research, Gartner Group, Pilot, Erisco, Satyam Software, DBHC, DBTA and
Enterprises to Cognizant, (ii) the businesses conducted by A.C. Nielsen Company,
other than those conducted by Nielsen Media Research, to ACNielsen and (iii) all
other liabilities to D&B. For a discussion of such businesses, see "Cognizant
Business" and "ACNielsen Business". The Distribution Agreement provides for the
allocation generally of the financial responsibility for the liabilities arising
out of or in connection with former businesses, including those
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formerly conducted by or associated with Cognizant or ACNielsen, to D&B. The
Distribution Agreement allocates to Cognizant liabilities related to certain
prior business transactions if such liabilities exceed certain specified
amounts.
The Distribution Agreement sets out agreements of the parties in connection
with the Distribution relating to certain specified business transactions by or
among Cognizant, D&B and ACNielsen. In particular, IMS America, Ltd. ("IMSA"),
which is becoming an indirect subsidiary of Cognizant in connection with the
Distribution, will withdraw from a limited partnership (the "Partnership")
formed by IMSA, a subsidiary of D&B and an unaffiliated investor. In connection
with such withdrawal, IMSA will receive from the Partnership, among other
things, 800,000 shares of D&B Common Stock which were previously acquired by the
Partnership in transactions on the NYSE and a warrant to purchase three million
shares of D&B Common Stock (the "Warrant"). IMSA will receive shares of
Cognizant Common Stock and ACNielsen Common Stock in the Distribution. Pursuant
to the Distribution Agreement, Cognizant will be prohibited from selling, or
permitting IMSA or any other subsidiary from selling, to any third party, any of
the D&B Common Stock acquired from the Partnership, the Warrant, any D&B Common
Stock acquired upon exercise of the Warrant or any of the ACNielsen Common Stock
acquired in the Distribution, but Cognizant will be entitled to put such
securities back to the respective issuers thereof at any time at a price
calculated to be the then current market value thereof. Shares of Cognizant
Common Stock received by IMSA in the Distribution will become treasury shares of
Cognizant.
The Distribution Agreement provides that inter-company receivables,
payables and loans existing as of September 30, 1996 and arising thereafter are
to be settled or paid in the ordinary course in a manner consistent with the
payment or settlement of similar accounts arising from transactions with third
parties. In addition, the Distribution Agreement provides that immediately prior
to the Distribution, D&B will transfer $12.7 million in cash to ACNielsen and
will transfer $229.6 million to Cognizant, in each case, as a contribution of
capital, provided, however, that if the businesses known as D&B Software
Services, NCH Promotional Services and/or American Credit Indemnity are not sold
by D&B prior to November 1, 1996, then the $229.6 million to be transferred to
Cognizant will be reduced by the amount of cash proceeds expected to be received
upon the sale of the business or businesses not sold. In the event any such
business is sold after November 1, Cognizant will be entitled to receive the
amount of cash proceeds received upon such sale. In the event that the aggregate
cash consideration received by D&B upon the disposition of such businesses
differs from the aggregate expected amount, the Distribution Agreement provides
that D&B and Cognizant shall share equally in any excess or shortfall.
No party will have any liability to any other party for inaccurate
forecasts or arising out of any pre-Distribution arrangement, course of dealing
or understanding (other than the Distribution Agreement or the other agreements
as described below) unless such arrangement, course of dealing or understanding
is specifically set forth on a schedule to the Distribution Agreement.
The Distribution Agreement includes provisions governing the administration
of certain insurance programs and the procedures for making claims. The
Distribution Agreement also allocates the right to proceeds and the obligation
to incur deductibles under certain insurance policies.
In the event that any transfers contemplated by the Distribution Agreement
are not effected on or prior to the Distribution Date, the parties will be
required to cooperate to effect such transfers as promptly as practicable
following the Distribution Date, and pending any such transfers, to hold any
asset not so transferred in trust for the use and benefit of the party entitled
thereto (at the expense of the party entitled thereto), and to retain any
liability not so transferred for the account of the party by whom such liability
is to be assumed.
The Distribution Agreement provides that neither D&B, Cognizant nor
ACNielsen will take any action that would jeopardize the intended tax
consequences of the Distribution. Specifically, each of D&B, Cognizant and
ACNielsen agree to maintain its status as a company engaged in the active
conduct of a trade or business, as defined in Section 355(b) of the Internal
Revenue Code, until the second anniversary of the Distribution
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Date. Neither D&B, Cognizant nor ACNielsen expects this limitation to inhibit
its financing or other activities or its ability to respond to unanticipated
developments. As part of the request for a ruling that the Distribution will be
tax free for Federal income tax purposes, each of D&B, Cognizant and ACNielsen
has represented to the Internal Revenue Service that, subject to certain
exceptions, it has no plan or intent to liquidate, merge or sell all or
substantially all of its assets. As a result, neither D&B, Cognizant nor
ACNielsen may initiate any action leading to a change of control, and in the
case of a change of control, the foregoing representations, and the ruling based
thereon, could be called into question. As a result, the acquisition of control
of each of D&B, Cognizant and ACNielsen prior to the second anniversary may be
more difficult or less likely to occur because of the potential substantial
contractual damages associated with a breach of such provisions of the
Distribution Agreement.
Under the Distribution Agreement, each of D&B, Cognizant and ACNielsen
agrees to provide to the other parties, subject to certain conditions, access to
certain corporate records and information and to provide certain services on
such terms as are set forth in a Transition Services Agreement among such
parties.
The Distribution Agreement also provides that, except as otherwise set
forth therein or in any other agreement, all costs or expenses incurred on or
prior to the Distribution Date in connection with the Distribution will be
charged to and paid by D&B. D&B agrees to be liable for any claims based upon
actual or alleged misstatements or omissions in the Registration Statements on
Form 10 filed with the Securities and Exchange Commission by each of Cognizant
and ACNielsen. Except as set forth in the Distribution Agreement or any related
agreement, each party shall bear its own costs and expenses incurred after the
Distribution Date.
TAX ALLOCATION AGREEMENT
D&B, Cognizant and ACNielsen will enter into a Tax Allocation Agreement to
the effect that D&B will pay its entire consolidated tax liability for the tax
years that Cognizant and ACNielsen were included in D&B's consolidated Federal
income tax return. For periods prior to the Distribution Date, D&B will
generally be liable for state and local taxes measured by income or imposed in
lieu of income taxes. The Tax Allocation Agreement allocates liability to D&B,
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
Distribution Date, as well as certain other matters.
EMPLOYEE BENEFITS AGREEMENT
D&B, Cognizant and ACNielsen will enter into an Employee Benefits Agreement
(the "Employee Benefits Agreement"), which allocates responsibility for certain
employee benefits matters on and after the Distribution Date.
The Employee Benefits Agreement provides that Cognizant and ACNielsen will
adopt new defined benefit pension plans for their employees and that D&B will
continue to sponsor its current plan for the benefit of its employees as well as
former employees who terminated employment on or prior to the Distribution Date.
Assets and liabilities of the current D&B pension plan that are attributable to
Cognizant and ACNielsen employees will be transferred to the new Cognizant and
ACNielsen plans, respectively.
In addition, Cognizant and ACNielsen will adopt new savings plans for their
employees, and D&B will continue to sponsor its savings plan for the benefit of
its employees as well as former employees who terminated employment on or prior
to the Distribution Date. Cognizant and ACNielsen employees will be given the
right to elect to keep their balances in the D&B savings plan, receive a
lump-sum payment of their balances or transfer their balances to the new
Cognizant and ACNielsen plans, respectively.
D&B will be required to retain the liability for all benefits under D&B's
nonqualified supplemental pension plans that were vested prior to the
Distribution Date, but Cognizant and ACNielsen will guarantee payment of these
benefits to their respective employees in the event that D&B is unable to
satisfy its obligations.
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The Employee Benefits Agreement also provides that D&B will continue to
sponsor its welfare plans for its employees as well as all former employees who
retired or became disabled on or prior to the Distribution Date. As of the
Distribution Date, Cognizant and ACNielsen will adopt welfare plans for the
benefit of their employees. Cognizant and ACNielsen will provide retiree welfare
benefits to their continuing employees who would have been eligible to receive
these benefits from D&B had they retired on or prior to the Distribution Date.
If Cognizant or ACNielsen fails to provide any retiree welfare benefits, D&B
will provide such continuing employees with the same level of retiree welfare
benefits that it provides to its retirees generally.
D&B, Cognizant and ACNielsen will each generally retain the severance
liabilities of their respective employees who terminated employment prior to the
Distribution Date.
With respect to equity-based plans, the Employee Benefits Agreement
provides that unexercised D&B stock options held by D&B employees, retirees and
disabled employees as of the Distribution Date will be adjusted to reflect the
Distribution. Specifically, the exercise price per share of an adjusted D&B
stock option will be determined by multiplying the exercise price per share of
an unexercised D&B stock option by a fraction, the numerator of which is the
average of the Daily Average Trading Prices (as defined below) per share of D&B
Common Stock for the five consecutive trading days starting on the first date on
which D&B Common Stock is traded ex-dividend, and the denominator of which is
the average of the Daily Average Trading Prices per share of D&B Common Stock
for the five consecutive trading days immediately preceding the first date on
which D&B Common Stock is traded ex-dividend. The number of shares of D&B Common
Stock covered by the adjusted stock option will be determined by (i) multiplying
the number of shares of D&B Common Stock covered by the unexercised D&B stock
option by a fraction, the numerator of which is the average of the Daily Average
Trading Prices per share of D&B Common Stock for the five consecutive trading
days immediately preceding the first date on which D&B Common Stock is traded
ex-dividend, and the denominator of which is the average of the Daily Average
Trading Prices per share of D&B Common Stock for the five consecutive trading
days starting on the first date on which D&B Common Stock is traded ex-dividend,
and (ii) rounding down the result to a whole number of shares. The Daily Average
Trading Price of a given stock on a given day means the average of the high and
low trading prices for such stock on such date.
Unexercised D&B stock options held by Cognizant employees as of the
Distribution Date will be converted into options that are exercisable into
shares of Cognizant Common Stock. Specifically, each unexercised D&B stock
option held by a Cognizant employee will be cancelled, and such individual will
receive a replacement stock option exercisable into shares of Cognizant Common
Stock. The exercise price per share of a replacement stock option will be
determined by multiplying the exercise price per share of the cancelled D&B
stock option by a fraction, the numerator of which is the average of the Daily
Average Trading Prices per share of Cognizant Common Stock for the five
consecutive trading days starting on the first date on which Cognizant Common
Stock is traded regular way, and the denominator of which is the average of the
Daily Average Trading Prices per share of D&B Common Stock for the five
consecutive trading days immediately preceding the first date on which D&B
Common Stock is traded ex-dividend. The number of shares of Cognizant Common
Stock covered by the replacement stock option will be determined by (i)
multiplying the number of shares of D&B Common Stock covered by the cancelled
D&B stock option by a fraction, the numerator of which is the average of the
Daily Average Trading Prices per share of D&B Common Stock for the five
consecutive trading days immediately preceding the first date on which D&B
Common Stock is traded ex-dividend, and the denominator of which is the average
of the Daily Average Trading Prices per share of Cognizant Common Stock for the
five consecutive trading days starting on the first date on which Cognizant
Common Stock is traded regular way, and (ii) rounding down the result to a whole
number of shares. Except as otherwise provided in the applicable plans, all
other terms of the replacement stock options will remain substantially identical
to the terms of the cancelled D&B stock options. The issuance of the replacement
stock options will not result in a compensation charge to Cognizant.
Unexercised D&B stock options held by ACNielsen employees as of the
Distribution Date will be converted into options that are exercisable into
shares of ACNielsen Common Stock. Specifically, each unexercised D&B stock
option held by an ACNielsen employee will be cancelled, and such individual will
receive a replacement stock option exercisable into shares of ACNielsen Common
Stock. The exercise price
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per share of a replacement stock option will be determined by multiplying the
exercise price per share of the cancelled D&B stock option by a fraction, the
numerator of which is the average of the Daily Average Trading Prices per share
of ACNielsen Common Stock for the five consecutive trading days starting on the
first date on which ACNielsen Common Stock is traded regular way, and the
denominator of which is the average of the Daily Average Trading Prices per
share of D&B Common Stock for the five consecutive trading days immediately
preceding the first date on which D&B Common Stock is traded ex-dividend. The
number of shares of ACNielsen Common Stock covered by the replacement stock
option will be determined by (i) multiplying the number of shares of D&B Common
Stock covered by the cancelled D&B stock option by a fraction, the numerator of
which is the average of the Daily Average Trading Prices per share of D&B Common
Stock for the five consecutive trading days immediately preceding the first date
on which D&B Common Stock is traded ex-dividend, and the denominator of which is
the average of the Daily Average Trading Prices per share of ACNielsen Common
Stock for the five consecutive trading days starting on the first date on which
ACNielsen Common Stock is traded regular way, and (ii) rounding down the result
to a whole number of shares. Except as otherwise provided in the applicable
plans, all other terms of the replacement stock options will remain
substantially identical to the terms of the cancelled D&B stock options. The
issuance of the replacement stock options will not result in a compensation
charge to ACNielsen.
All limited stock appreciation rights will be adjusted or converted in
substantially the same manner as the unexercised D&B stock options. See
"Cognizant Management and Executive Compensation -- Option Grants on D&B Common
Stock to Cognizant Executives in Last Fiscal Year" and "ACNielsen Management and
Executive Compensation -- Option Grants on D&B Common Stock to Executives in
Last Fiscal Year."
The Employee Benefits Agreement also provides that D&B will generally
retain all employee benefit litigation liabilities that are asserted prior to
the Distribution Date (but not such liabilities that relate to the transferred
retirement and savings plan assets of Cognizant or ACNielsen employees). As of
the Distribution Date, Cognizant and ACNielsen employees will generally cease
participation in D&B employee benefit plans, and Cognizant and ACNielsen will
generally recognize, among other things, their respective employees' past
service with D&B under their respective employee benefit plans. Special
provisions apply to certain D&B employees who are eligible to retire (but who do
not in fact retire) from D&B prior to the Distribution Date. Except as
specifically provided therein, nothing in the Employee Benefits Agreement
restricts D&B's, Cognizant's or ACNielsen's ability to amend or terminate any of
their respective employee benefit plans after the Distribution Date.
INDEMNITY AND JOINT DEFENSE AGREEMENT
D&B, Cognizant and ACNielsen will enter into the Indemnity and Joint
Defense Agreement pursuant to which they will agree (i) to certain arrangements
allocating potential IRI Liabilities that may arise out of or in connection with
the IRI Action and (ii) to conduct a joint defense of such action.
In particular, the Indemnity and Joint Defense Agreement will provide that
ACNielsen will assume exclusive liability for IRI Liabilities up to the ACN
Maximum Amount, which is to be calculated at the time such liabilities, if any,
become payable, and that Cognizant and D&B 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 stockholder 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.
In addition, ACNielsen will agree to certain restrictions on payments of
dividends and share repurchases above specified levels. ACNielsen will also
agree not to engage in mergers, acquisitions or dispositions, including joint
venture investments, if, after giving effect to any such transaction, ACNielsen
would be unable to meet a specified fixed charge coverage ratio, and, if any
such transaction involves aggregate consideration in
21
<PAGE> 24
excess of $50 million, then ACNielsen will also be required to receive and to
cause to be delivered to Cognizant and D&B an investment banker's fairness
opinion.
The Indemnity and Joint Defense Agreement also sets forth certain
provisions governing the defense of the IRI Action pursuant to which the parties
agree to be represented by the same counsel. Legal expenses are to be shared
equally by the three parties.
TAM MASTER AGREEMENT
Cognizant and ACNielsen will enter into the TAM Master Agreement (the "TAM
Master Agreement") relating to the conduct of the television audience
measurement business (the "TAM Business").
The TAM Master Agreement, together with certain ancillary trademark and
technology licensing agreements (together with the TAM Master Agreement, the
"TAM Agreement"), provides that Cognizant or a newly established entity will
license to ACNielsen a nonexclusive right to use certain trademarks, including
the "Nielsen Media" name, in connection with the TAM Business outside the United
States and Canada for five years. Cognizant will also license to ACNielsen a
nonexclusive right to use specified technology in Australia, Ireland and India
in connection with the TAM Business for five years or such longer period as is
required to fulfill contractual obligations existing on the Distribution Date.
In the event that prior to the third anniversary of the Distribution Date,
ACNielsen determines to sell all or substantially all of its assets or the
assets of the TAM Business (as defined in the TAM Master Agreement), or
ACNielsen takes action to be acquired or is acquired by a third party, Cognizant
will have the right to require ACNielsen to sell all of ACNielsen's TAM Business
to Cognizant at the book value thereof (as calculated in accordance with the TAM
Master Agreement) plus certain transfer costs. In addition, in the event that
prior to the third anniversary of the Distribution Date, ACNielsen determines to
sell all or substantially all of its TAM Business in a particular country,
Cognizant will have the right to require ACNielsen to sell such business to
Cognizant at the book value thereof (as calculated in accordance with the TAM
Master Agreement) plus certain transfer costs.
INTELLECTUAL PROPERTY AGREEMENT
D&B, Cognizant and ACNielsen will enter into an Intellectual Property
Agreement (the "IP Agreement") which provides for the allocation and recognition
by and among these companies of rights under patents, copyrights, software,
technology, trade secrets and certain other intellectual property owned by D&B,
Cognizant or ACNielsen and their respective subsidiaries as of the Distribution
Date. The IP Agreement also contains various provisions governing the future use
of certain trademarks owned by ACNielsen prior to the Distribution Date,
including limitations upon both Cognizant's and ACNielsen's use of the "Nielsen"
name, standing alone or as part of a name describing any new product or service
to be offered. See "Cognizant Business -- Intellectual Property" and "ACNielsen
Business -- Intellectual Property."
SHARED TRANSACTION SERVICES AGREEMENTS
D&B, Cognizant and ACNielsen will enter into Shared Transaction Services
Agreements providing for the orderly continuation, for a transitional period
after the Distribution Date, of certain of the shared transaction and other
services (such as payroll, accounts payable, general accounting and computer
processing and support) currently being provided at one or more of the shared
transaction services centers located in the United States, United Kingdom,
Canada, France, Germany and Italy.
DATA SERVICES AGREEMENTS
D&B, Cognizant and ACNielsen will enter into Data Services Agreements
providing for the orderly continuation, for a transitional period after the
Distribution Date, of certain specified computer processing and related services
to be provided by one party to another.
22
<PAGE> 25
TRANSITION SERVICES AGREEMENT
D&B, Cognizant and ACNielsen will enter into a Transition Services
Agreement pursuant to which the respective parties have agreed to certain basic
terms governing the provision by one party to another of specified
administrative or other support services for a transitional period after the
Distribution Date.
OVERLAPPING DIRECTORS
After the Distribution Date, there will be individuals on the Boards of
Directors of D&B, Cognizant and ACNielsen who will also serve on the Board of
Directors of one of the other companies. Clifford L. Alexander, Jr., Robert J.
Lanigan and James R. Peterson will serve on the Boards of Directors of D&B and
Cognizant. John R. Meyer will serve on the Boards of Directors of D&B and
ACNielsen. See "Cognizant Management and Executive Compensation -- Cognizant
Board of Directors" and "ACNielsen Management and Executive
Compensation -- ACNielsen Board of Directors".
DIVIDEND POLICY
COGNIZANT
The payment and level of cash dividends by Cognizant after the Distribution
will be subject to the discretion of the Board of Directors of Cognizant.
Although it is anticipated that Cognizant will initially declare quarterly
dividends in the range of 5% to 8% of net earnings, dividend decisions will be
based on, and affected by, a number of factors, including the operating results
and financial requirements of Cognizant on a stand-alone basis.
ACNIELSEN
The payment and level of cash dividends by ACNielsen after the Distribution
will be subject to the discretion of the Board of Directors of ACNielsen and to
the restrictions imposed by the Indemnity and Joint Defense Agreement. ACNielsen
currently intends to retain future earnings for the development of its business
and does not anticipate paying cash dividends in the near future. Future
dividend decisions will be based on, and affected by, a number of factors,
including the operating results and financial requirements of ACNielsen on a
stand-alone basis. There can be no assurance that any dividends will be declared
or paid.
23
<PAGE> 26
COGNIZANT CAPITALIZATION
The following table sets forth the combined capitalization of Cognizant as
of June 30, 1996 on a historical basis, forecasted at November 1, 1996 (the
anticipated Distribution Date), and at November 1, 1996 as adjusted to give
effect to the Distribution and the transactions contemplated thereby. The
following data is qualified in its entirety by the financial statements of
Cognizant and other information contained elsewhere in this Information
Statement. See "Certain Considerations".
<TABLE>
<CAPTION>
(UNAUDITED)
------------------------------------------------------------
FORECASTED AT FORECASTED AT
JUNE 30, 1996 NOVEMBER 1, 1996 NOVEMBER 1, 1996
ACTUAL BEFORE DISTRIBUTION AFTER DISTRIBUTION(1)
-------------- ------------------- ---------------------
($'S IN MILLIONS)
<S> <C> <C> <C>
Cash and Cash Equivalents..................................... $184.1 $ 225.0 $ 454.6
============ =============== =================
Marketable Securities -- held to maturity..................... $ 60.7 $ 60.7 $ 60.7
============ =============== =================
Equity Marketable Securities -- available for sale............ -- -- $ 29.2
============ =============== =================
Notes Payable................................................. $ -- $ -- $ 55.0
Long-term Debt................................................ 6.2 10.5 10.5
Divisional Equity:
Foreign Currency Translation................................ (2.2) (2.2) (2.2)
Other Divisional Equity..................................... 629.9 666.4 --
Preferred Stock, par value $.01 per share,
authorized -- 10,000,000 shares:
outstanding -- none....................................... -- -- --
Series Common Stock, par value $.01 per share,
authorized -- 10,000,000 shares:
outstanding -- none....................................... -- -- --
Common Stock, par value $.01 per share,
authorized -- 400,000,000 shares:
issued -- 170,890,834..................................... -- -- 1.7
Capital in Excess of Par Value................................ -- -- 823.5
Treasury Stock -- 800,000 shares.............................. -- -- (24.0)
------- ------- -------
Total Equity......................................... 627.7 664.2 799.0
------- ------- -------
Total Capitalization................................. $633.9 $ 674.7 $ 864.5
============ =============== =================
</TABLE>
- ---------------
(1) Assumes transfer by D&B to Cognizant of $229.6 million in cash, the
acquisition by Cognizant of $29.2 million of equity marketable securities as
more fully described in the Information Statement and the assumption by
Cognizant of $69 million in liabilities related to certain prior business
transactions in accordance with the Distribution Agreement and $55 million
of short-term debt.
SUMMARY OF SIGNIFICANT CAPITALIZATION FORECAST ASSUMPTIONS
The financial forecast of the capitalization of Cognizant at November 1,
1996 is based on Cognizant management's forecasts and assumptions concerning
events and circumstances which are expected to occur subsequent to June 30, 1996
but prior to and including November 1, 1996 (the anticipated Distribution Date),
including future results of operations and other events. Significant assumptions
of events between June 30, 1996 and November 1, 1996, include the following:
- Cognizant operating income for the four months ended October 31, 1996
of approximately $93 million.
- Increase in D&B's cash and cash equivalents of approximately $369
million, primarily reflecting operating cash flows for the four months
ended October 31, 1996 and proceeds from divestitures, less dividend
payments by D&B totalling $43 million for the four months ended October
31, 1996. Dividends of $111 million were paid by D&B in the comparable
period of 1995.
Businesses to be divested (D&B Software, NCH Promotional Services and
American Credit Indemnity) are expected to be divested by November 1, 1996 for
$290 million in cash plus certain non-cash consideration. If cash proceeds
differ from the expected amount, D&B and Cognizant will share equally in the
excess or shortfall. If any of the businesses are not sold by November 1, 1996,
Cognizant will not receive those proceeds, (i.e., the $229.6 million cash
transfer at November 1, 1996 will be reduced) until the businesses are sold,
subject to the sharing agreement described in the preceding sentence.
These forecasts and assumptions do not represent an all-inclusive list of
those events or transactions expected to occur prior to the Distribution which
will affect the capitalization of Cognizant; however, in Cognizant management's
judgment, the above assumptions and forecasts are the most significant. There
have been no changes in accounting principles included in this capitalization
forecast.
24
<PAGE> 27
LIMITATIONS ON FORECASTED FINANCIAL INFORMATION
The assumptions and estimates underlying the forecasted data and
information in this Information Statement are inherently uncertain and, although
considered reasonable by management of Cognizant, are subject to significant
business, economic and competitive uncertainties, many of which are beyond the
control of Cognizant. Accordingly, there can be no assurance that the forecasted
financial results will be realized. In fact, actual results in the future
usually will differ from the forecasted financial results, and the differences
may be material. Cognizant does not intend to update any forecasted financial
data or information contained in this Information Statement, and the absence of
any such update should not be construed as an indication that management of
Cognizant continues to believe the forecasted data or information contained in
this Information Statement is reasonable. Cognizant's independent accountants
have not examined, compiled, or applied any agreed-upon procedures to these
forecasts, and accordingly assume no responsibility for these forecasts.
25
<PAGE> 28
COGNIZANT SELECTED FINANCIAL DATA
The following data is qualified in its entirety by the financial statements
of Cognizant and other information contained elsewhere in this Information
Statement. The financial data as of December 31, 1995 and 1994, and for the
years ended December 31, 1995, 1994 and 1993, has been derived from the audited
financial statements of Cognizant contained elsewhere in this Information
Statement. The financial data as of June 30, 1996 and 1995, and December 31,
1992 and 1991, for the six months ended June 30, 1996 and 1995, and for the
years ended December 31, 1992 and 1991, are unaudited. The historical financial
statements of Cognizant contained in this Information Statement are presented as
if Cognizant were a separate entity for all periods presented. The following
financial data should be read in conjunction with the information set forth
under "Cognizant Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Cognizant's Combined Financial Statements and Notes
thereto appearing elsewhere in this Information Statement.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------------
------------------------ 1995(1)(2) 1994(2) 1993(2) 1992 1991
1995 ---------- ------- ------- ----------- -----------
-----------
(UNAUDITED) (UNAUDITED)
(UNAUDITED)
1996
-----------
(UNAUDITED) ($ IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating Revenue......... $ 786 $ 710 $1,542 $1,257 $1,039 $ 910 $ 915
Income before cumulative
effect of changes in
accounting principles... $ 76 $ 63 $ 89 $ 146 $ 109 $ 87 $ 84
PRO FORMA UNAUDITED
EARNINGS PER SHARE OF
COMMON STOCK(3)......... $ 0.45 $ 0.52
BALANCE SHEET DATA:
Total Assets.............. $ 1,475 $ 1,454 $1,442 $1,331 $1,159 $ 894 $ 745
Long-term Debt............ $ 6 $ 11 $ 10 $ 15 $ 5 $ 6 $ 8
</TABLE>
- ---------------
(1) Income before cumulative effect of changes in accounting principles in 1995
includes a non-recurring pre-tax charge in the fourth quarter of $90
million ($50 million after-tax) for costs principally associated with asset
impairments, software write-offs and contractual obligations that have no
future economic benefit.
(2) Income before cumulative effect of changes in accounting principles includes
restructuring expense of $13 million, $8 million and $46 million pre-tax,
in 1995, 1994 and 1993, respectively. Also included in income before
cumulative effect of changes in accounting principles are non-operating
gains from dispositions of $15 million and $21 million pre-tax, in 1995 and
1994, respectively and a non-operating gain from sale of Gartner Group
stock of $21 million pre-tax in 1993.
(3) The computation of pro forma earnings per share for the periods ended June
30, 1996 and December 31, 1995 is based on the average number of shares of
D&B Common Stock outstanding during the respective periods, reflecting the
one for one Distribution ratio.
26
<PAGE> 29
COGNIZANT MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis of financial condition and results of
operations is prepared as if Cognizant were a separate entity for all periods
discussed. This discussion should be read in conjunction with the Cognizant
Combined Financial Statements and Notes thereto included elsewhere in this
Information Statement.
OVERVIEW
Cognizant is currently a wholly-owned subsidiary of D&B. The combined
financial statements of Cognizant, which are discussed below, reflect the
results of operations, financial position and cash flows of the businesses to be
transferred to Cognizant from D&B in the Distribution. As a result, the combined
financial statements have been prepared using D&B's historical basis in the
assets and liabilities and historical results of operations related to
Cognizant's businesses except for accounting for income taxes. (See Note 2 to
Cognizant's Combined Financial Statements.)
The combined financial statements reflect effective tax rates of Cognizant
on a separate company basis. These rates do not reflect the benefit of D&B's
global tax planning actions which have historically resulted in lower
consolidated tax rates. Cognizant expects to initiate global tax-planning
strategies in the future to minimize its effective tax rate.
Additionally, the combined financial statements include allocations of
certain D&B Corporate headquarters assets (including prepaid pension assets) and
liabilities (including pension and postretirement benefits), and expenses
(including cash management, legal, accounting, tax, employee benefits, insurance
services, data services and other D&B corporate overhead) relating to
Cognizant's businesses that will be transferred from D&B.
Management believes these allocations are reasonable. However, the
financial information included herein may not necessarily reflect the combined
financial position, results of operations, and cash flows of Cognizant in the
future or what they would have been had Cognizant been a separate entity during
the periods presented.
D&B uses a centralized cash management system to finance its operations.
Cash deposits from most of Cognizant's businesses are transferred to D&B on a
daily basis and D&B funds Cognizant's disbursement bank accounts as required.
Cash and cash equivalents reflected in the combined financial statements
represent balances of certain foreign entities and of Gartner Group (which does
not participate in the cash management system). No interest has been charged on
these transactions with D&B.
For purposes of governing certain of the ongoing relationships among
Cognizant, D&B and ACNielsen after the Distribution and to provide for orderly
transition, Cognizant, D&B and ACNielsen will enter into various agreements
including a Distribution Agreement, Tax Allocation Agreement, Employee Benefits
Agreement, Indemnity and Joint Defense Agreement, TAM Master Agreement,
Intellectual Property Agreement, Shared Transaction Services Agreements, Data
Services Agreement and Transition Services Agreement. Summaries of these
agreements are set forth elsewhere in this Information Statement.
FINANCIAL REVIEW
(Dollar amounts in thousands)
Six Months Ended June 30, 1996 Compared with Six Months Ended June 30, 1995
Cognizant's net income for the six months ended June 30, 1996 increased
20.6 % to $76,152 from $63,143 in the comparable period of the prior year.
Revenue in the first half of 1996 increased 10.7% to $785,722 from $709,749
in the first half of 1995. Revenue growth was held down by the one-time impact
in 1995 of conforming fiscal quarters between Cognizant and Gartner Group.
Excluding the one-time impact in 1995, revenue growth was 13.3%, reflecting
27
<PAGE> 30
excellent growth at Gartner Group, principally from the introduction of new
products and delivery options; strong revenue performance at IMS; and
double-digit revenue growth at Nielsen Media Research, driven by revenue growth
from new products and services and the continued impact of new broadcast and
cable network subscribers.
Operating income in the first half of 1996 increased 22.6% to $140,890 from
$114,907 in the first half of 1995. Operating income growth outpaced revenue
growth primarily due to Gartner Group's continued trend of taking advantage of
economies of scale and leveraging its resources.
Non-operating income/(expense)-net in the first half of 1996 was ($4,903)
compared with non-operating income/(expense)-net of $577 in the first half of
1995. The decrease in non-operating income/(expense)-net in 1996 was due
principally to higher minority interest expense related to Gartner Group.
Cognizant's first-half effective tax rate was 44.0%, compared with the
first-half 1995 effective tax rate of 45.3% computed on a separate-company
basis. Accordingly, the tax rates do not reflect the impact of D&B's global
tax-planning actions, which have historically yielded lower effective tax rates.
Net cash provided by operating activities totaled $142,093 in the first
half of 1996 compared with $131,361 for the comparable period in 1995. The
increase of $10,732 primarily reflected an increase in business operating
results ($13,009), an increase in deferred revenue ($4,573), and a reduced level
of restructuring payments (a reduction of $8,784), partially offset by higher
non-US income taxes paid, net of refunds ($9,197), and payments related to the
1995 non-recurring charge ($8,073).
Net cash used in investing activities totaled $64,649 in the first half of
1996 compared with $40,146 for the comparable period in 1995. The increase of
$24,503 is principally due to net purchases of marketable securities, offset, in
part, by lower additions to computer software.
Net cash used in/(provided by) financing activities totaled $48,709 for the
first half of 1996 compared with $4,400 for the comparable period in 1995. The
increase in cash usage of $44,309 primarily reflected higher cash remittances to
D&B in connection with D&B's centralized cash management system.
Year-ended December 31, 1995 Compared with Year-ended December 31, 1994
Cognizant's net income in 1995 was $88,881 compared with $146,405 in 1994.
The net income decline was primarily due to a non-recurring after-tax charge of
$49,268 in 1995 for costs principally associated with asset impairments,
software write-offs and contractual obligations that have no future economic
benefit, and an incremental 1995 after-tax charge of $17,778 for postemployment
benefits expense. Results for 1995 also include an increase in after-tax
restructuring expense of $2,260, lower after-tax gains on dispositions of
$4,525, and a higher effective tax rate in 1995, as compared with 1994. (See
INCOME TAXES). Excluding the above-mentioned 1995 after-tax charges and the
restructuring expenses and disposition gains for both years, 1995 net income was
$154,656, compared with $138,349 in 1994.
Revenue increased 22.7% in 1995 to $1,542,340 from $1,257,415 in 1994,
driven by excellent revenue growth at Gartner Group and strong revenue
performances at IMS and Nielsen Media Research. Excluding the impact of a weaker
U.S. dollar, revenue growth was 19.2%.
1995 operating income was $154,677 compared with $226,635 in 1994. The
decline in 1995 operating income primarily reflected the aforementioned 1995
non-recurring charge of $90,070, the 1995 incremental provision for
postemployment benefits expense of $32,500, and an increase in restructuring
expense in 1995 as compared with 1994. Excluding the 1995 charges mentioned
above, the impact of a weaker dollar, and restructuring expenses in 1995 and
1994, 1995 operating income increased by 17.7% to $276,082 from $234,592.
During 1995 Cognizant recorded a $12,800 restructuring provision primarily
to write off software for product lines that were discontinued at Sales
Technologies, a division of IMS. (See Note 4 to Cognizant's Combined Financial
Statements.)
Cognizant's 1995 operating costs and selling and administrative expenses
were $1,242,331 compared with $911,074 in 1994. The increase in operating costs
and selling and administrative expenses is primarily due to
28
<PAGE> 31
the 1995 non-recurring charge of $90,070, the 1995 incremental provision for
postemployment benefits expense of $32,500, and the effect of a weaker dollar in
1995, as compared with 1994. Excluding the impact of these items, 1995 operating
costs and selling and administrative expenses increased 19.7% in 1995 compared
with 1994, reflecting Cognizant's increased spending in new revenue growth
initiatives which contributed to overall excellent revenue growth of 19.2% in
1995.
Cognizant's 1995 operating margin was 10.0% compared with 18.0% in 1994.
The decline in operating margin reflects the 1995 non-recurring charge, the 1995
incremental provision for postemployment benefits expense, and higher
restructuring expense in 1995, as compared with 1994, discussed above. Excluding
these 1995 charges, and restructuring expense in 1995 and 1994, operating margin
was 18.8% for 1995 compared with 18.7% for 1994.
Non-operating income was $7,880 in 1995 compared with $18,853 in 1994. The
decrease was due principally to higher minority interest expense related to
Gartner Group, and lower disposition gains, offset in part by increased interest
income.
The following discusses results by business segments and geographical area:
Marketing Information Services had an 18.2% increase in 1995 revenue
to $1,204,701 from $1,019,160 in 1994. Excluding the impact of a weaker
U.S. dollar, revenue growth for the segment was 14.2%, reflecting Nielsen
Media Research's entrance into new metered markets and growth in Canada;
new product introductions at IMS and modest revenue growth at DBTA and
DBHC. IMS had 1995 revenue of $818,537, up 18.4% from $691,060 in 1994, and
up 12.9% excluding the impact of a weaker U.S. dollar.
1995 operating income for the segment was $158,037 compared with
$228,864 in 1994. The decline in operating income was primarily due to the
1995 non-recurring charge of $72,870, the 1995 incremental provision for
postemployment benefits expense of $24,300, and an increase in
restructuring expense in 1995 as compared with 1994. Excluding these items,
and the impact of a weaker U.S. dollar, operating income for the segment
increased by 7.4% to $254,378 in 1995 compared with $236,821 in 1994
principally due to the impact of increased spending in new revenue growth
initiatives.
Information Technology Services had 1995 revenue of $337,639, up 41.7%
from $238,255 in 1994. Gartner Group had excellent revenue growth in 1995
principally reflecting an increase in its subscription services revenue.
Operating income for the segment increased 49.7% to $51,180 in 1995
from $34,185 in 1994. The increase in operating income was primarily due to
Gartner Group's revenue growth and its ability to take advantage of
economies of scale and leverage its resources, partially offset by the 1995
incremental provision for postemployment benefits expense. Excluding the
incremental provision, and the impact of a weaker U.S. dollar, operating
income for the segment grew 72.7% to $59,044 in 1995 from $34,185 in 1994.
Revenue in the United States increased by 20.7% to $824,424 in 1995
from $682,965 in 1994, reflecting Nielsen Media Research's entrance into
new metered markets and new product introductions by IMS. Revenue increased
in Europe by 21.7% to $449,610 in 1995 from $369,590 in 1994, principally
reflecting continued growth at IMS and Gartner Group's increased
subscription services revenue and expansion into new global markets. All
other non-U.S. revenues increased 31.0% to $268,306 in 1995 from $204,860
in 1994.
Operating income in the U.S. was $32,072 in 1995 compared with $95,627
in 1994. The decline in operating income was primarily attributable to the
1995 non-recurring charge, the 1995 incremental provision for
postemployment benefits expense and a higher restructuring expense in 1995
as compared with 1994. Excluding the impact of these items, 1995 operating
income grew 22.5% to $123,312 from $100,674 in 1994. Operating income in
Europe was $44,051 in 1995 compared with $71,042 in 1994. The decline in
operating income was primarily due to the 1995 non-recurring charge and
29
<PAGE> 32
the 1995 incremental provision for postemployment benefits expense.
Operating income in other non-U.S. countries grew 31.0% to $78,554 in 1995
from $59,966 in 1994.
Year-ended December 31, 1994 Compared with Year-ended December 31, 1993
Cognizant's 1994 net income increased 116.2% to $146,405 from $67,714 in
1993. The Company's net income in 1993 included the cumulative effects of the
adoption of Financial Accounting Standards Board (FASB) Statements of Financial
Accounting Standards (SFAS) No. 112 and No. 106 ($41,143, after-tax) and an
after tax restructuring charge of $30,212. (See Notes 4 and 7 to Cognizant's
Combined Financial Statements) 1994 net income included after-tax restructuring
expense of $4,742 and an after-tax disposition gain of $12,798. Excluding these
factors net income was $138,349 in 1994 as compared to $139,069 in 1993.
Revenue increased 21.0% in 1994 to $1,257,415, from $1,039,259 in 1993.
Excellent revenue growth at Nielsen Media Research and Gartner Group and good
revenue performance at IMS contributed to the increase. In 1994, the impact of
the U.S. dollar was not significant.
1994 operating income increased by 60.3% to $226,635 from $141,350 in 1993.
The increase in operating income was primarily attributable to restructuring
expense of $7,957 in 1994 compared with $46,408 in 1993, discussed below.
Excluding the impact of restructuring expense in both years, operating income
increased by 24.9% to $234,592 in 1994 from $187,758 in 1993. Operating income
growth outpaced revenue growth primarily because of improved productivity from
workforce reductions, prior restructuring actions and other productivity
initiatives discussed below.
During 1994 Cognizant initiated actions totaling $7,957 to restructure
certain operations and businesses, and to reduce costs and increase operating
efficiencies. These restructuring measures included office consolidations, the
closedown of Sales Technologies' European operations, as well as additional
steps to complete certain actions initiated in 1993. (See Note 4 to Cognizant's
Combined Financial Statements.)
Operating costs and selling and administrative expenses increased 18.5% to
$911,074 in 1994 from $769,162 in 1993, reflecting the full-year impact of
Gartner Group ($32,428), acquired in 1993, partially offset by productivity
gains.
Cognizant's 1994 operating margin was 18.0% compared with 13.6% in 1993.
The increase is primarily due to the lower restructuring charge in 1994 compared
with 1993. Excluding the impact of the restructuring charges, Cognizant's
operating margin was 18.7% in 1994 compared with 18.1% in 1993 due to the
productivity gains discussed above.
Non-operating income was $18,853 in 1994, compared with $25,982 in 1993.
The decline was principally due to higher minority interest expense related to
Gartner Group. 1994 results include a $21,473 gain on the sale of the Machinery
Information Division of Dataquest (MID), a non-strategic business. 1993 results
include a $21,022 gain from the initial public offering of Gartner Group.
The following discusses results by business segments and geographical area:
Marketing Information Services had a 14.0% increase in 1994 revenue to
$1,019,160 from $894,053 in 1993. IMS had 1994 revenue of $691,060, up
12.6% from $613,915 in 1993 due to growth in Europe, Japan and North
America. Nielsen Media Research had excellent revenue growth in 1994
reflecting new product and service introductions.
Operating income for the segment increased 26.5% to $228,864 in 1994
from $180,966 in 1993. The increase in segment operating income was
primarily due to a lower level of restructuring expense in 1994, as
compared with 1993. Excluding restructuring expense for both years,
operating income increased by 12.0% to $236,821 in 1994 from $211,379 in
1993 principally reflecting new product introductions at Nielsen Media
Research.
Information Technology Services had 1994 revenue of $238,255, up 64.1%
from $145,206 in 1993. Revenue growth reflects the full-year impact of
Gartner Group (a 1993 acquisition). Gartner Group
30
<PAGE> 33
reported excellent revenue growth in 1994 as a result of strong new product
sales and expanded worldwide product distribution.
Operating income for the segment was $34,185 in 1994 as compared with
$2,100 in 1993. The increase in segment operating income is primarily due
to Gartner Group's ability to take advantage of economies of scale and
leverage its resources, and the impact of restructuring expense in 1993,
compared with none in 1994.
Cognizant's revenue in the United States increased by 19.4% to
$682,965 in 1994 from $571,815 in 1993. Excellent revenue growth at Nielsen
Media Research and Gartner Group contributed substantially to the increase.
European revenues increased by 18.4% to $369,590 from $312,073 in 1993
principally reflecting growth at IMS and Gartner Group. Other non-U.S.
revenue increased 31.9% to $204,860 from $155,371 in 1993.
Operating income in the United States increased 112.3% to $95,627 in
1994 from $45,047 in 1993. The significant increase in operating income in
the United States was due in part to the impact of lower restructuring
expense in 1994 compared with 1993. Excluding restructuring expenses in
both years, 1994 operating income in the United States increased 23.7% to
$100,674 from $81,373 in 1993. Operating income in Europe increased 71.3%
to $71,042 in 1994 from $41,476 in 1993. The increase in operating income
in Europe was partially attributable to the decline in restructuring
expense from 1993 to 1994. Excluding the impact of restructuring expense in
both years, Europe's operating income increased 43.4% to $73,952 in 1994
from $51,558 in 1993. Operating income growth in the United States and
Europe outpaced revenue growth primarily because of improved productivity
from workforce reductions, prior restructuring actions and other
productivity initiatives discussed previously. Operating income in other
non-U.S. countries increased 9.4% to $59,966 in 1994 from $54,827 in 1993.
INCOME TAXES -- The combined financial statements reflect effective tax
rates of Cognizant on a separate company basis. Cognizant's effective tax rates
were 45.3%, 40.4% and 34.9% in 1995, 1994 and 1993, respectively. As mentioned
previously, these rates do not reflect the benefit of D&B's global tax planning
actions which have historically resulted in lower tax rates for D&B. The
increase in Cognizant's 1995 effective tax rate to 45.3% from 40.4% in 1994
primarily reflected the higher tax impact of the repatriation of non-U.S.
subsidiary earnings without offsetting foreign tax credits. The increase in 1994
from 1993 was principally due to a shift in pre-tax income from non-U.S. income
to U.S. income which is taxed at a higher rate. D&B's reported effective tax
rates were 27.7%, 28.4%, and 27.1% in 1995, 1994 and 1993, respectively.
Cognizant expects to initiate global tax-planning strategies in the future to
minimize its effective tax rate, although management does not believe that
Cognizant's effective tax rate will be reduced to the levels historically
achieved by D&B.
CHANGES IN FINANCIAL POSITION AT DECEMBER 31, 1995 COMPARED WITH DECEMBER
31, 1994 -- Accounts Receivable -- Net increased to $432,957 at December 31,
1995 from $338,760 at December 31, 1994 primarily due to excellent revenue
growth at Gartner Group from increased subscription services and expansion into
new global markets, and strong revenue growth at IMS from new product
introductions.
Other Current Assets increased to $114,177 at December 31, 1995 from
$63,041 at December 31, 1994 principally due to increased marketable securities
at Gartner Group as a result of its strong cash position driven by excellent
operating results.
Accrued and Other Current Liabilities increased to $297,465 at December 31,
1995 from $234,677 at December 31, 1994 primarily due to the current component
of the accrual in the third quarter for post employment benefits and the fourth
quarter non-recurring charge.
Deferred Revenues increased to $270,731 at December 31, 1994 from $215,818
at December 31, 1994 primarily due to excellent subscription sales growth at
Gartner Group.
31
<PAGE> 34
ADOPTION OF STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS -- In 1993,
Cognizant adopted the provisions of SFAS No. 112, "Employers' Accounting for
Postemployment Benefits" and SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions." The adoption of SFAS No. 112 and
SFAS No. 106 resulted in one-time, non-cash, after-tax charges of $28,303 and
$12,840, respectively. The adoption of SFAS No. 112 and SFAS No. 106 did not
have a significant effect on 1993 expense. (See Note 7 to Cognizant's Combined
Financial Statements.)
In 1995, Cognizant recorded a pre-tax charge of $90,070 that included an
impairment loss of $40,570 related to long-lived assets for which management,
having the authority to approve such business decisions, committed to a plan to
discontinue certain product lines and dispose of certain real property.
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" requires that long-lived assets and certain
intangibles be reviewed for impairment 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 flows is less than the
carrying amount of such assets. The measurement for such impairment loss is then
based on the fair value of the asset. While SFAS No. 121 affected the
measurement of the impairment charge noted above, it had no affect on the timing
of recognition of the impairment.
The 1995 charge principally reflected an impairment loss of $40,570
reflecting the revaluation of certain fixed assets, administrative and
production systems and other intangibles that will be replaced or will no longer
be used. In addition, Cognizant recognized a charge of $20,300 principally
related to the write-off of certain computer software product lines at the Pilot
business unit that were discontinued. (See Note 3 to Cognizant's Combined
Financial Statements.)
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which requires that companies with stock-based compensation plans
either recognize compensation expense based on the fair value of options granted
or continue to apply existing accounting rules and disclose pro forma net income
and earnings per share assuming the fair value method had been applied.
Cognizant is evaluating the new statement and has not determined whether it will
adopt the recognition or disclosure alternative of the statement. Therefore, the
impact of adoption on Cognizant's financial statements has not been determined.
RESTRUCTURING -- In 1993, Cognizant recorded $46,408 of restructuring
expense to restructure certain operations and businesses. (See Note 4 to
Cognizant's Combined Financial Statements.) These actions were designed to
achieve long-term productivity improvements, and reduce costs. The costs
associated with this plan, and all other restructuring actions, included only
specific, direct and incremental costs that could be estimated with reasonable
accuracy and were clearly identifiable with the related plans.
Costs included in the restructuring charge included $5,490 for the
consolidation of data centers in North America and Europe, resulting principally
in lease termination costs, asset write-offs and other costs incident to the
consolidation of such data centers. Cognizant also provided $18,163 to initiate
actions to reduce real estate costs by consolidating office facilities in the
U.S. and Europe. Costs incurred included lease termination costs and asset
writeoffs. The restructuring charge also included $22,755 primarily related to
workforce reductions and write-offs of intangible assets at certain divisions.
NON-U.S. OPERATING AND MONETARY ASSETS -- Cognizant operates globally.
Approximately 47% of Cognizant's revenues and 79% of operating income in 1995
were derived from non-U.S. operations, including approximately 29% of revenues
and 28% of operating income from European 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. In 1995, foreign currency
translation increased U.S. dollar revenue growth and operating income growth by
approximately 4% and 6%, respectively. The effect of foreign currency
translation on revenue and operating income growth in 1994 was insignificant.
Non-U.S. monetary assets are maintained in currencies other than the U.S.
dollar, principally in Germany, Japan, Spain and Italy. Changes in the value of
these currencies relative to the U.S. dollar are charged or credited to
divisional equity. The effect of exchange rate changes during 1995 increased the
U.S. dollar amount of cash and cash equivalents by approximately $4,846.
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<PAGE> 35
LIQUIDITY AND CAPITAL RESOURCES -- At December 31, 1995, cash, cash
equivalents and current marketable securities totaled $187,223 (including
$81,392 of Gartner Group cash and marketable securities), an increase of $59,239
from $127,984 (including $43,191 of Gartner Group cash and marketable
securities) at December 31, 1994. The increase in cash was held down by expected
payments for postemployment benefits and restructuring of $18,480 and $15,544
respectively. Cash payments related to these items in 1996 are expected to
aggregate $48,097.
Net cash provided by operating activities was $273,843, $201,049 and
$200,521 in 1995, 1994 and 1993, respectively. The increase of $72,794 in net
cash provided by operating activities in 1995, compared with 1994, primarily
reflected increased operating results (excluding the non-recurring charge) and
lower restructuring payments (a decrease of $8,933), offset in part by a higher
level of accounts receivable (an increase of $10,239), reflecting in part,
increased revenues. The increase of $528 in net cash provided by operating
activities in 1994, compared with 1993, primarily reflected increased operating
results and higher deferred revenue (an increase of $26,560), offset, in part,
by higher restructuring (an increase of $18,355) and postemployment benefit
payments (an increase of $12,251), and a higher level of accounts receivable (an
increase of $53,958), reflecting in part, increased revenues.
Net cash used in investing activities totaled $128,324 for 1995, compared
with $195,476 and $111,367 in 1994 and 1993, respectively. The decrease in cash
usage in 1995 of $67,152 primarily reflected lower payments for acquisitions and
reduced capital expenditures, offset in part by net purchases of marketable
securities. The increase in cash usage of $84,109 in 1994 was principally driven
by the absence of the proceeds from the initial public offering of Gartner Group
in 1993 and by increased payments for acquisitions and higher capital
expenditures, offset in part by proceeds from the sale of MID. Capital
expenditures were $77,032, $104,475, and $70,741 in 1995, 1994 and 1993,
respectively.
Net cash used in/(provided by) financing activities, principally reflecting
net remittances to and cash receipts from D&B, totaled $121,244 in 1995,
compared with $108,353 in 1994 and ($8,599) in 1993.
Following the Distribution, it is expected that the Cognizant's existing
balances of cash, cash equivalents and marketable securities, and cash generated
from operations and debt capacity will be sufficient to meet Cognizant's
long-term and short-term cash requirements including dividends and acquisitions.
DIVIDENDS -- The payment and level of cash dividends by Cognizant after the
Distribution will be subject to the discretion of the Board of Directors of
Cognizant. Although it is anticipated that Cognizant will initially declare
quarterly dividends in the range of 5% to 8% of net earnings, dividend decisions
will be based on, and affected by, a number of factors, including the operating
results and financial requirements of Cognizant on a stand-alone basis.
33
<PAGE> 36
ACNIELSEN CAPITALIZATION
The following table sets forth the combined capitalization of ACNielsen as
of June 30, 1996 on a historical basis, forecasted at November 1, 1996 (the
anticipated Distribution Date), and at November 1, 1996 as adjusted to give
effect to the Distribution and the transactions contemplated thereby. The
following data is qualified in its entirety by the financial statements of
ACNielsen and other information contained elsewhere in this Information
Statement. See "Certain Considerations".
<TABLE>
<CAPTION>
(UNAUDITED)
------------------------------------------------------------
FORECASTED AT FORECASTED AT
JUNE 30, 1996 NOVEMBER 1, 1996 NOVEMBER 1, 1996
ACTUAL BEFORE DISTRIBUTION AFTER DISTRIBUTION(1)
-------------- ------------------- ---------------------
($ IN MILLIONS)
<S> <C> <C> <C>
Cash and Cash Equivalents...................... $ 92.0 $ 107.0 $ 119.7
=========== ============== ===============
Notes Payable.................................. $ 38.6 $ 35.5 $ 35.5
Long-term Debt................................. 7.3 4.5 4.5
Divisional Equity:
Unrealized Losses on Securities.............. (1.7) (1.7) (1.7)
Foreign Currency Translation................. (30.4) (30.4) (30.4)
Other Divisional Equity...................... 430.5 427.9 --
Preferred Stock, par value $.01 per share,
authorized -- 5,000,000 shares:
outstanding -- none.......................... -- -- --
Series Common Stock, par value $.01 per share,
authorized -- 5,000,000 shares:
outstanding -- none.......................... -- -- --
Common Stock, par value $.01 per share,
authorized -- 150,000,000 shares: issued and
outstanding -- 56,963,610.................... -- -- 0.6
Capital in Excess of Par Value................. -- -- 440.0
------- ------- -------
Total Equity......................... 398.4 395.8 408.5
------- ------- -------
Total Capitalization................. $444.3 $ 435.8 $ 448.5
=========== ============== ===============
</TABLE>
- ---------------
(1) Assumes transfer by D&B to ACNielsen of $12.7 million in cash in accordance
with the Distribution Agreement.
SUMMARY OF SIGNIFICANT CAPITALIZATION FORECAST ASSUMPTIONS
The financial forecast of the capitalization of ACNielsen at November 1,
1996 is based on ACNielsen management's forecasts and assumptions concerning
events and circumstances which are expected to occur subsequent to June 30, 1996
but prior to and including November 1, 1996 (the anticipated Distribution Date),
including future results of operations and other events. Significant assumptions
of events between June 30, 1996 and November 1, 1996, include the following:
- ACNielsen operating income for the four months ended October 31, 1996
of approximately $36 million.
- Increase in D&B's cash and cash equivalents of approximately $369
million, primarily reflecting operating cash flows for the four months
ended October 31, 1996 and proceeds from divestitures, less dividend
payments by D&B totalling $43 million for the four months ended October
31, 1996. Dividends of $111 million were paid by D&B in the comparable
period of 1995.
These forecasts and assumptions do not represent an all-inclusive list of
those events or transactions expected to occur prior to the Distribution which
will affect the capitalization of ACNielsen; however, in ACNielsen management's
judgment, the above assumptions and forecasts are the most significant. There
have been no changes in accounting principles included in this capitalization
forecast.
LIMITATIONS ON FORECASTED FINANCIAL INFORMATION
The assumptions and estimates underlying the forecasted data and
information in this Information Statement are inherently uncertain and, although
considered reasonable by management of ACNielsen, are subject to significant
business, economic and competitive uncertainties, many of which are beyond the
control of ACNielsen. Accordingly, there can be no assurance that the forecasted
financial results will be realized. In fact, actual results in the future
usually will differ from the forecasted financial results, and the differences
may be material. ACNielsen does not intend to update any forecasted financial
data or information contained in this Information Statement, and the absence of
any such update should not be construed as an indication that management of
ACNielsen continues to believe the forecasted data or information contained in
this Information Statement is reasonable. ACNielsen's independent accountants
have not examined, compiled, or applied any agreed-upon procedures to these
forecasts, and accordingly assume no responsibility for these forecasts.
34
<PAGE> 37
ACNIELSEN SELECTED FINANCIAL DATA
The following data is qualified in its entirety by the financial statements
of ACNielsen and other information contained elsewhere in this Information
Statement. The financial data as of December 31, 1995 and 1994, and for the
years ended December 31, 1995, 1994 and 1993, has been derived from the audited
financial statements of ACNielsen contained elsewhere in this Information
Statement. The financial data as of June 30, 1996 and 1995, and December 31,
1992 and 1991, for the six months ended June 30, 1996 and 1995, and for the
years ended December 31, 1992 and 1991, are unaudited. The historical financial
statements of ACNielsen contained in this Information Statement are presented as
if ACNielsen were a separate entity for all periods presented. The following
financial data should be read in conjunction with the information set forth
under "ACNielsen Management's Discussion and Analysis of Financial Condition and
Results of Operations" and ACNielsen's Combined Financial Statements and Notes
thereto appearing elsewhere in this Information Statement.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------------
------------------------ 1995(1) 1994(2) 1993(2) 1992 1991
1995 ------- ------- ------- ----------- -----------
-----------
(UNAUDITED) (UNAUDITED)
(UNAUDITED)
1996
-----------
(UNAUDITED) ($ IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating Revenue............... $ 644 $ 611 $1,281 $1,092 $1,045 $ 1,117 $ 1,020
(Loss) Income before cumulative
effect of changes in
accounting principles......... $ (17) $ (37) $ (231 ) $ (65 ) $ (55 ) $ 47 $ 46
PRO FORMA UNAUDITED LOSS PER
SHARE OF COMMON STOCK(3)...... $ (0.31) $(4.09 )
BALANCE SHEET DATA:
Total Assets.................... $ 947 $ 1,052 $ 970 $ 980 $ 845 $ 922 $ 1,385
Long-term Debt.................. $ 7 $ 13 $ 6 $ 9 $ 4 $ 10 $ 12
</TABLE>
- ---------------
(1) (Loss) income before cumulative effect of changes in accounting principles
in 1995 includes a non-recurring pre-tax charge in the fourth quarter of
$152 million ($141 million after-tax) for costs principally associated with
asset impairments, software write-offs and contractual obligations that
have no future economic benefit.
(2) (Loss) income before cumulative effect of changes in accounting principles
includes restructuring expense of $9 million and $60 million pre-tax, in
1994 and 1993, respectively.
(3) The computation of pro forma loss per share for the periods ended June 30,
1996 and December 31, 1995 is based on the average number of shares of D&B
Common Stock outstanding during the respective periods, adjusted for the
one for three Distribution ratio.
35
<PAGE> 38
ACNIELSEN
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis of financial condition and results of
operations is prepared as if ACNielsen were a separate entity for all periods
discussed. This discussion should be read in conjunction with the ACNielsen
Combined Financial Statements and Notes thereto included elsewhere in this
Information Statement.
OVERVIEW
ACNielsen is currently a wholly-owned subsidiary of D&B. The combined
financial statements of ACNielsen, which are discussed below, reflect the
results of operations, financial position and cash flows of the businesses to be
transferred to ACNielsen from D&B in the Distribution. As a result, the combined
financial statements have been prepared using D&B's historical basis in the
assets and liabilities and historical results of operations related to
ACNielsen's businesses except for accounting for income taxes. (See Note 2 to
the ACNielsen Combined Financial Statements.)
The combined financial statements reflect effective tax rates of ACNielsen
on a separate company basis. These rates do not reflect the benefit of D&B's
global tax-planning actions which have historically resulted in lower
consolidated tax rates. ACNielsen expects to initiate global tax-planning
strategies in the future to minimize its effective tax rate.
Additionally, the combined financial statements include allocations of
certain D&B Corporate headquarters assets (including prepaid pension assets) and
liabilities (including pension and postretirement benefits), and expenses
(including cash management, legal, accounting, tax, employee benefits, insurance
services, data services and other D&B corporate overhead) relating to
ACNielsen's businesses that will be transferred to ACNielsen from D&B.
Management believes these allocations are reasonable. However, the financial
information included herein may not necessarily reflect the combined financial
position, results of operations, and cash flows of ACNielsen in the future or
what they would have been had ACNielsen been a separate entity during the
periods presented.
D&B uses a centralized cash management system to finance its operations.
Cash deposits from most of ACNielsen's businesses are transferred to D&B on a
daily basis and D&B funds ACNielsen's disbursement bank accounts as required. No
interest has been charged on these transactions. Cash and cash equivalents
reflected in the combined financial statements represents balances of certain
non-U.S. entities.
For purposes of governing certain of the ongoing relationships among
ACNielsen, D&B and Cognizant after the Distribution and to provide for orderly
transition, ACNielsen, D&B and Cognizant will enter into various agreements
including a Distribution Agreement, Tax Allocation Agreement, Employee Benefits
Agreement, Indemnity and Joint Defense Agreement, TAM Master Agreement,
Intellectual Property Agreement, Shared Transaction Services Agreements, Data
Services Agreement and Transition Services Agreement. Summaries of these
agreements are set forth elsewhere in this Information Statement.
FINANCIAL REVIEW
(Dollar amounts in thousands)
Six Months Ended June 30, 1996 Compared with Six Months Ended June 30, 1995
ACNielsen's net loss for the six months ended June 30, 1996 decreased to
$17,484 compared with a net loss of $36,793 in the comparable period of the
prior year.
Revenue in the first half of 1996 increased 5.4% to $644,240 from $611,169
in the first half of 1995, driven by the strong double-digit revenue growth in
Asia Pacific. The Americas region reported a 5.2% increase in first-half 1996
revenue to $222,091 from $211,175 a year ago. Europe's first-half revenue
increased 1.2% to $286,393 from $283,029 in the first half of 1995, due to
customer service issues resulting from the transition to scanning. Asia
Pacific's first half revenue grew 20.7% to $119,148 from $98,710. Excluding the
36
<PAGE> 39
effect of the acquisition of Reark in Australia in 1995, revenue in Asia Pacific
increased 12.6%. While local currency revenue of ACNielsen Japan increased 3.9%,
driven by growth in scanning services, reported revenue declined 9.0% to $16,608
from $18,255, due to a stronger dollar.
Operating loss in the first six months of 1996 was $7,721 compared with a
loss of $11,029 in the first six months of 1995, reflecting improved U.S.
operations offset in part by increased operating costs in the European business
which resulted in a reduction of the region's profitability compared with
historical levels. In Europe, ACNielsen continues to invest in improving
customer service, data quality and delivery.
Non-operating income-net for the first six months of 1996 was $185 compared
with non-operating expense-net of $3,083 in the first six months of 1995
principally due to lower borrowings in Latin America in 1996.
The income tax provision for the first-half of 1996 decreased to $9,948
from $22,681 in 1995 principally due to lower profits in Europe and a lower
non-U.S. effective tax rate.
Net cash used in operating activities totaled $7,194 in the first six
months of 1996 compared with $40,038 for the comparable period in 1995. The
$32,844 decrease in cash used primarily reflected a decrease in accounts
receivable ($15,353) in 1996, compared with an increase ($20,895) in 1995, lower
postemployment benefit payments (a reduction of $12,343), lower restructuring
payments($4,622), offset in part by higher non-U.S. income taxes paid-net of
refunds (an increase of $18,833) and payments related to the 1995 non-recurring
charge ($15,877).
Net cash used in investing activities for the first six months of 1996
decreased to $44,760 compared with $77,579 for the comparable period in 1995.
The decrease in cash used in investing activities of $32,819 principally
reflected lower capital expenditures of $19,420. First-half 1995 capital
expenditures included the relocation of the U.S. operations to a leased facility
in Schaumburg, Illinois.
Net cash provided by financing activities for the first six months of 1996
totaled $54,397 compared with $123,775 for the comparable period in 1995. The
decrease in cash provided of $69,378 primarily reflected lower remittances from
D&B of $53,275 and a decrease in short-term borrowings of $10,789.
Year-ended December 31, 1995 Compared with Year-ended December 31, 1994
ACNielsen reported a net loss of $230,884 in 1995, compared with a net loss
of $65,061 in 1994. The loss in 1995 reflects a non-recurring pre-tax charge of
$152,170 ($141,260 after-tax) in the fourth quarter of 1995 for costs
principally associated with asset impairments, software write-offs and
contractual obligations that have no future economic benefit. (See Note 3 to the
ACNielsen Combined Financial Statements.) Results for 1995 also included a
pre-tax charge in the third quarter of $31,900 for postemployment benefits.
Excluding the non-recurring charge, ACNielsen reported a net loss of $89,624 in
1995, compared with a net loss of $65,061 in 1994, principally reflecting the
incremental cost of $31,900 for postemployment benefits.
Revenue increased 17.3% in 1995 to $1,281,345 from $1,092,107 in 1994.
Strong revenue increases ($111,310) were achieved in the Asia Pacific region
principally due to the full year impact of acquiring in 1994 SRG, AGB Australia,
AGB New Zealand and Reark. Growth in the U.S. and Europe aggregated 7.2% and
6.3%, respectively. Positive growth in these regions was achieved despite strong
competition, restructuring and issues related to new product integrations.
Excluding the effects of the acquisitions and foreign exchange, ACNielsen's
revenue increased about 6.0%.
Operating costs increased 47.5% to $859,132 in 1995 from $582,225 in 1994.
Operating costs in 1995 included the non-recurring charge of $152,170 and a
$31,900 provision in the third quarter for postemployment benefits. Excluding
these items and 1994 restructuring expense, operating costs increased 17.8%,
reflecting higher production and other costs related to the scanning transition
issues in Europe, the full year impact of the acquisitions of SRG, AGB
Australia, AGB New Zealand and Reark in 1994, and increased costs in Latin
America resulting from continued geographic expansion. In 1995, the Company
embarked on an aggressive program to begin converting the collection of store
data from a manual process("audit") to an electronic process ("scanning").
Issues that arose during the conversion related to timeliness and quality of
37
<PAGE> 40
data and customers being unfamiliar with the expanded data generated by the
scanning process. As a result, the Company ran parallel processes for longer
than anticipated and increased its provision for doubtful accounts in Europe.
The issues are being addressed by reengineering efforts that include stepping up
quality control measures, introducing customer service centers and improving
communications with customers and retailers.
Selling and administrative expenses increased 20.7% to $486,992 in 1995
from $403,469 in 1994. This increase resulted from higher expenses in Asia
Pacific, primarily due to the full year impact of 1994 acquisitions and expense
growth in Europe for increased service levels to support the transition from
audit to scanning, partially offset by a reduction in expenses in the U.S.
reflecting the realignment of the functional organization to improve ACNielsen's
position and focus in the U.S. marketplace.
ACNielsen incurred an operating loss in 1995 of $184,008 compared with an
operating loss of $1,169 in 1994. The operating loss in 1995 primarily reflected
the aforementioned charge and provision for postemployment benefits. Excluding
the aforementioned charge and the provision for postemployment benefits in 1995
and restructuring expense in 1994, operating income was $62 in 1995, compared
with $7,753 in 1994. Lower costs drove a $37,798 reduction in the operating loss
in the U.S., excluding the aforementioned charges in 1995, and restructuring
expense in 1994. In Europe, however, higher production and other costs related
to the scanning transition issues resulted in a $39,218 decline in operating
income in 1995 versus 1994, excluding the charges described above. Operating
income in Asia Pacific increased $1,423, excluding the charges, reflecting the
full year impact of 1994 acquisitions.
Non-operating expense-net decreased to $7,040 in 1995 from $13,419 in 1994
primarily reflecting lower foreign exchange losses in hyperinflationary
countries.
The following discusses results on a geographic basis:
Total Americas revenue increased 9.5% in 1995 to $443,561 from
$405,235 in 1994, and its operating loss increased to $154,004 from $63,343
reflecting the impact of $108,870 of non-recurring charges and $18,500 of
postemployment benefit expense, partially offset by cost reductions in the
U.S. resulting from field force and operational improvements. Excluding the
aforementioned non-recurring charge and provision for postemployment
benefits in 1995, and 1994 restructuring expense, the operating loss
declined $33,313, driven primarily by field force and operational
improvements in the U.S. Revenue in the U.S. increased 7.2% to $274,552 in
1995 from $256,111 in 1994, reflecting increased customer demand for
value-added services in the consumer information, decision support and
analytics product categories. The U.S. operating loss increased to $172,971
in 1995 from $90,665 in 1994 reflecting the aforementioned non-recurring
charge and provision for postemployment benefits. Excluding these charges
and restructuring expense in 1994, operating loss in the U.S. decreased to
$49,471 from $87,269 primarily reflecting significant process improvements
during the year.
Europe's revenue increased 6.3% to $583,269 in 1995 from $548,647 in
1994. The region had an operating loss of $5,599, reflecting, in part, the
fourth quarter charge of $28,400 and provision for postemployment benefits
($13,400). Excluding these charges and restructuring expense in 1994,
operating income declined to $36,201 from $75,419 reflecting increased
expenses in the region to improve customer service, data quality and
delivery and ACNielsen's expansion into Eastern Europe.
Asia Pacific's revenues increased 105% to $216,875 in 1995 from
$105,565 in 1994 reflecting the acquisition of SRG in July 1994. Operating
income increased to $11,695 from $11,172. Excluding the fourth quarter
charge of $900 described above, operating income increased $1,423
reflecting the full year impact of acquisitions as well as continued
investment in China and other new markets.
ACN Japan's operating revenue increased 15.2% to $37,640 from $32,660,
however its operating loss increased to $36,100 from $18,891, reflecting
the non-recurring fourth quarter charge of $14,000. Excluding the
aforementioned charge, operating loss increased by $3,209 reflecting the
highly competitive marketplace and significant costs related to data
collection.
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Year-ended December 31, 1994 Compared with Year-ended December 31, 1993
In 1994, ACNielsen's net loss was $65,061 compared with a net loss of
$174,726 in 1993. The Company's net loss in 1993 included the cumulative effects
to January 1, 1993 of the adoption of Financial Accounting Standards Board
(FASB) Statements of Financial Accounting Standards (SFAS) No. 112 and No. 106
(aggregating $119,494 after tax) and a net restructuring charge of $56,038 after
tax. (See Notes 6 and 4 to the ACNielsen Combined Financial Statements.) In
addition, 1994 operating results reflected a decline in revenue in the U.S.
resulting from past competitive losses and increased costs for increased
servicing of client requirements. Excluding the cumulative effects of changes in
accounting in 1993 and a net restructuring charge of $56,038 after tax,
ACNielsen reported 1993 net income of $806.
1994 revenue increased by 4.5% to $1,092,107 from $1,044,676 in 1993.
Excluding the effects of 1994 acquisitions, 1994 revenue increased about 2.5%.
For the full year, the impact of foreign exchange on revenue growth was not
material. Revenue growth in Asia Pacific resulted from the acquisition of SRG in
July 1994 but was more than offset by a decline in revenue in the U.S. resulting
from past competitive losses.
During 1994, D&B took further steps to improve productivity and initiated
other actions to restructure certain operations and businesses, and to reduce
costs and increase operating efficiencies. (See Note 4 to the Combined Financial
Statements.)
Several non-recurring gains and significant changes in costs were included
in ACNielsen's 1994 operating results. ACNielsen also took proactive measures to
improve its future performance by accelerating the introduction of newer
technologies, which resulted in a charge of $6,967. The charge principally
reflected the revaluation of certain computer software and other intangible
assets that will be replaced or no longer be used. In addition, a change in
eligibility requirements for ACNielsen's postretirement medical plan resulted in
a curtailment gain of approximately $4,082, which was offset by an increase in
spending for new-product development.
In the fourth quarter of 1994, as part of ACNielsen's global initiative to
improve productivity and increase synergies, ACNielsen realized a $2,303
benefit-plan curtailment gain due to workforce reductions and a $10,200 gain
from the sale of ACNielsen's headquarters in Northbrook, Illinois. These gains
partially offset the high level of spending on new growth initiatives in the
quarter.
Operating costs, including restructuring expense, decreased 1% to $591,147
in 1994 from $597,185 in 1993, primarily reflecting a $51,379 decrease in
restructuring expense, partially offset by higher costs in the U.S. business and
the impact of 1994 acquisitions. Selling and administrative expenses increased
11.0% to $403,469 in 1994 from $363,499 in 1993 reflecting higher expenses in
the U.S. business for increased servicing of client requirements and the impact
of acquisitions.
ACNielsen's operating loss in 1994 was $1,169 compared with an operating
loss of $9,901 in 1993. The reduced operating loss resulted from a reduction in
restructuring expense of $51,379 which was largely offset by increased spending,
as well as the effect of past competitive losses and higher costs in ACNielsen's
U.S. business. To meet the competition and stem further customer losses,
ACNielsen increased spending in the U.S. to improve data delivery capabilities
and applications as well as increase client service levels to meet the demands
of existing customers.
ACNielsen reported 1994 non-operating expense-net of $13,419 compared with
non-operating income-net of $4,257 in 1993 reflecting higher interest expense.
The following discusses results on a geographic basis:
Total Americas revenue decreased 3.9% in 1994 to $405,235 from
$421,534 in 1993 and its operating loss was $63,343 essentially unchanged
from $63,062, reflecting a decrease in restructuring expense largely offset
by the factors described above that affected the U.S. business. Excluding
restructuring expense in 1994 and 1993, operating loss increased $45,005 as
a result of the factors described above.
Europe's revenue was $548,647 in 1994, essentially unchanged from
$550,334 in 1993 reflecting weak economic conditions. For the full year,
the effect of foreign exchange on revenue growth was not
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significant. The region's operating income was $69,893 in 1994 compared
with $55,985 in 1993 reflecting a decrease in restructuring expense of
$6,655 and improved productivity in data collection and data center
consolidations. Excluding restructuring expense in 1994 and 1993, the
region's operating income increased $7,253 to $75,419 from $68,166 due to
the improvements described above.
Asia Pacific's revenue increased 134% to $105,565 in 1994 from $45,052
in 1993, reflecting the acquisition of SRG, AGB Australia and AGB New
Zealand in the second half of 1994. The region's operating income was
$11,172 in 1994 compared with $13,030 in 1993 reflecting the impact of
integrating acquisitions and higher administrative costs to support
expansion in the region.
ACN Japan's operating revenue increased 17.7% to $32,660 in 1994 from
$27,756 in 1993, but its operating loss increased to $18,891 from $15,854
due to increased field coverage from the launch of the beverage index in
1993.
INCOME TAXES -- ACNielsen's provision for income taxes for 1995, 1994, and
1993 reflects an effective tax rate significantly higher than the Federal
statutory rate as ACNielsen has not recognized benefits on its U.S. losses (see
Note 8 to the ACNielsen Combined Financial Statements). In addition, income tax
provisions on ACNielsen's profitable non-U.S. operations do not reflect the
impact of D&B's global tax-planning actions designed to reduce D&B's effective
tax rate. D&B's effective tax rates were 27.7%, 28.4% and 27.1% in 1995, 1994
and 1993, respectively. ACNielsen expects to initiate global tax-planning
strategies in the future to minimize its effective tax rate, although management
does not believe that ACNielsen's effective tax rate will be reduced to the
levels historically achieved by D&B.
CHANGES IN FINANCIAL POSITION AT DECEMBER 31, 1995 COMPARED WITH DECEMBER
31, 1994 -- Accounts Receivable-Net increased to $272,976 at December 31, 1995
from $233,368 at December 31, 1994, primarily reflecting increased revenues in
Asia Pacific and an increase in days billings outstanding in Europe as a result
of the issues related to scanning.
Deferred Charges, Computer Software and Other Intangibles decreased to
$68,049, $22,714 and $33,154, at December 31, 1995, respectively, from $81,318,
$55,320 and $65,489 at December 31, 1994, respectively primarily reflecting the
impact of the impairment losses recorded in the fourth quarter of 1995.
Postretirement and Postemployment Benefits increased to $110,191 at
December 31, 1995 from $80,768 at December 31, 1994 primarily reflecting the
impact of the non-current component of the accrual in the third quarter for
postemployment benefits and the fourth quarter non-recurring charge.
Other Liabilities increased to $62,437 at December 31, 1995 from $19,483 at
December 31, 1994 primarily reflecting the non- current component of the
non-recurring charge recorded in the fourth quarter for contractual obligations
that have no future economic benefits.
ADOPTION OF STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS -- In 1993,
ACNielsen adopted the provisions of SFAS No. 112, "Employers' Accounting for
Postemployment Benefits" and SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." The adoption of SFAS No. 112 and
SFAS No. 106 resulted in one-time, non-cash, after-tax charges of $105,294 and
$14,200, respectively, in the first quarter of 1993. The adoption of SFAS No.
112 and SFAS No. 106 did not have a significant effect on 1993 expense. (See
Note 6 to the ACNielsen Combined Financial Statements.)
In the fourth quarter of 1995, ACNielsen recorded a charge within operating
costs of $152,170. This charge included an impairment loss of $74,370 in
connection with the adoption of the provisions of SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of."
SFAS No. 121 requires that long-lived assets and certain intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amounts 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 flows is less than the carrying amount of such
assets. The measurement for such impairment loss is then based on the fair value
of the asset. The impairment losses related to long-lived assets based on the
Company's decision to discontinue using such assets. The 1995 charge principally
reflected
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the revaluation of certain fixed assets, administrative and production systems
and other intangibles that will be replaced or will no longer be used by
ACNielsen. (See Note 3 to the ACNielsen Combined Financial Statements.)
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which requires that companies with stock-based compensation plans
either recognize compensation expense based on the fair value of options granted
or continue to apply the existing accounting rules and disclose pro forma net
income and earnings per share assuming the fair value method had been applied.
ACNielsen is evaluating the new statement and has not determined whether it will
adopt the recognition or disclosure alternative of the statement. Therefore, the
impact of adoption on ACNielsen's financial statements has not been determined.
RESTRUCTURING -- In 1993, ACNielsen recorded $60,301 to restructure certain
operations and businesses. These actions were part of a D&B-wide plan designed
to achieve long-term productivity improvements and reduce costs. The costs
associated with this plan, and all other restructuring actions, included only
specific, direct and incremental costs that could be estimated with reasonable
accuracy and were clearly identifiable with the related plans.
ACNielsen provided $11,811 to initiate approximately sixteen separate
actions to reduce real estate costs by consolidating office facilities in each
of five major geographic regions in the U.S. and eleven geographic regions in
Europe. Costs incurred included lease termination costs and asset write-offs.
The restructuring charge also included $48,490 to discontinue certain systems
and products in the U.S. These costs principally related to write-offs of
computer software and other intangible assets.
At December 31, 1994 and 1995, restructuring accruals for the
aforementioned actions totaled $6,771 and $698, respectively. Other
restructuring accruals totaled $7,619 and $3,627 at December 31, 1994 and 1995,
respectively. (See Note 4 to the ACNielsen Combined Financial Statements.) The
remaining balances of the restructuring accruals of $4,325 at December 31, 1995
will be expended in 1996.
NON-U.S. OPERATING AND MONETARY ASSETS -- ACNielsen operates globally.
Nearly 80 % of ACNielsen's revenues were generated from non-U.S. operations
during 1994 and 1995. During 1995, European and Asian operations contributed 45%
and 17% of Company revenues, respectively. ACNielsen's operations in Japan
generated approximately $38,000 of revenues during 1995. Primarily as a result
of these non-U.S. operations, changes in the value of local currencies relative
to the U.S. dollar may increase the volatility of the U.S. dollar operating
results. In 1995, foreign currency translation increased U.S. revenue growth by
approximately 4%. The impact of foreign currency translation on operating loss
for 1995 was not significant. In addition, during 1994, the effect of such
foreign currency fluctuations on reported results was not significant.
Consistent with D&B's past practice, ACNielsen plans to enter into foreign
exchange forward contracts and other instruments to mitigate the effects of
currency fluctuations on certain of ACNielsen's non-U.S. net investments and to
hedge against foreign exchange movements between the dates that foreign currency
transactions are recorded and the dates they are settled. In addition, ACNielsen
is also evaluating the merits of implementing a broader program to mitigate the
effects of foreign exchange fluctuations on operating results.
Non-U.S. monetary assets are maintained in currencies other than the U.S.
dollar, principally in Spain, Germany, Italy and Belgium. Changes in the value
of these currencies relative to the U.S. dollar are charged or credited to
divisional equity. The effect of exchange rate changes during 1995 increased the
U.S. dollar amount of cash and cash equivalents by approximately $3,600.
LIQUIDITY AND CAPITAL RESOURCES -- At December 31, 1995, cash, cash
equivalents and non-current marketable securities totaled $117,571 (including
$27,095 of non-U.S. pension fund-marketable securities, which are subject to
local country restrictions), an increase of $10,034 from December 31, 1994.
Short-term debt totaled $29,698, a decrease of $12,990 from December 31, 1994.
The increase in cash at December 31, 1995 was held down by expected payments for
postemployment benefits and restructuring of $50,290 and $10,065, respectively.
Cash payments related to these items in 1996 are expected to aggregate $45,000.
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Net cash provided by (used in) operating activities aggregated $24,275,
($39,305) and $74,835 in 1995, 1994 and 1993, respectively. The increase of
$63,580 in net cash provided by operating activities in 1995, compared with
1994, primarily reflected lower restructuring payments ($8,886), lower
postemployment benefit payments ($17,500) and a decrease in other working
capital items ($52,605).
Net cash used in investing activities totaled $111,169 for 1995, compared
with $208,522 and $81,399 in 1994 and 1993, respectively. The decrease in cash
usage in 1995 of $97,353 primarily reflected lower payments for acquisitions and
equity investments (included in Other Investments) of $126,975.
Capital expenditures totaled $86,862, $51,053 and $48,669 in 1995, 1994 and
1993, respectively. The increase in capital expenditures during 1995 was
attributable primarily to higher expenditures in Asia related to SRG's
operations (acquired during 1994) and the acquisition of a building in Brazil.
Net cash provided by financing activities totaled $87,777 in 1995, compared
with $195,521 in 1994 and $17,254 in 1993. A high level of funding from D&B was
required in 1994 to fund acquisitions, primarily SRG.
As a subsidiary of D&B, funding for ACNielsen's U.S. and most non-U.S.
operations was provided by internally generated funds and financing obtained
through D&B. After the Distribution, ACNielsen intends to provide for its normal
capital and operating expenditure needs through internally generated funds and
existing cash reserves. In addition, ACNielsen intends to continue to maintain
its relationships with a world-wide network of banks and plans to secure through
one or more of these banks uncommitted and unsecured lines of credit sufficient
to meet ACNielsen's short-term cash requirements. Management believes that the
combination of cash flows from operations and bank credit lines, as well as
existing cash and cash equivalents are sufficient to support the Company's
long-term cash requirements.
DIVIDENDS -- The payment and level of cash dividends by ACNielsen after the
Distribution will be subject to the discretion of the Board of Directors of
ACNielsen and to the restrictions imposed by the Indemnity and Joint Defense
Agreement. ACNielsen currently intends to retain future earnings for the
development of its business and does not anticipate paying cash dividends in the
near future. Future dividend decisions will be based on, and affected by, a
number of factors, including the operating results and financial requirements of
ACNielsen on a stand-alone basis. There can be no assurance that any dividends
will be declared or paid.
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COGNIZANT BUSINESS
GENERAL
After the Distribution, Cognizant will be engaged, through its
subsidiaries, in two industry segments: Marketing Information Services and
Information Technology Services.
Cognizant is a Delaware corporation with its headquarters in Westport,
Connecticut.
MARKETING INFORMATION SERVICES
I.M.S. International, Inc.
I.M.S. International, Inc. provides information and decision-support
services to the pharmaceutical and healthcare industries. IMS's principal
services fall into two broad categories: sales management services and market
research services. Specific products include sales territory reports, national
pharmaceutical-sales audits and national medical audits, as well as a
multinational data analysis system. Within each of these product classes,
individual country-level reports may differ in one or more important
characteristics depending on the circumstances of local pharmaceutical sales and
distribution. IMS's reports are provided in printed format, as well as on-line
and as part of electronic customer-site workstations. IMS provides information
services covering 79 countries and maintains offices in 62 countries on six
continents, with 64% of total revenue generated outside the United States in
1995. In 1995, IMS continued its expansion in developing markets in Eastern
Europe and Asia. Revenues in 1995 increased by 30% in these areas over 1994. New
product sales were also initiated in China, Russia and India.
Sales territory reports, representing approximately 43% of IMS's worldwide
revenues, are the principal service within sales management services. These
reports, which are customized for each client, measure the sales of a client's
products and those of competitors in each of a client's sales territories, and
are designed to provide sales management with a reliable measure of each sales
representative's activity and effectiveness within a sales territory. Sales
territory reports are available in 30 countries.
In certain countries, IMS provides call reporting services, which record,
assess and organize the call activity of individual sales representatives to
physicians within a specified sales territory, and physician profiling services,
which measure the prescribing potential of individual physicians. In 1995, the
business of Sales Technologies, Inc., a D&B subsidiary, was refocused on the
healthcare industry and became an operating unit of IMS. Sales Technologies
provides sales automation solutions and develops, installs and supports
networked systems that enable pharmaceutical and healthcare organizations to
improve salesforce effectiveness, productivity and communication.
IMS's principal market research services consist of syndicated
pharmaceutical and medical reports for clients. Pharmaceutical audits measure
the sales of pharmaceutical products through pharmacies, supplemented in some
countries by data collected from prescribing physicians, chains and discount
stores. The reports contain data projected to national estimates, showing
product sales by therapeutic class broken down by package size and dosage form.
Pharmaceutical audits are available in over 65 countries.
National medical audits are based on information collected from panels of
practicing physicians. The reports contain projected national estimates of the
number of consultations for each diagnosed disease with details of the therapy
prescribed, and 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. Medical audits are available in
over 45 countries.
Hospital audits contain data projected to national estimates and show the
sale of pharmaceutical products to hospitals by therapeutic class. IMS publishes
hospital audits for 29 countries. Promotional reports measure pharmaceutical
promotion for a particular market, including salesforce 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 for 19 countries.
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In the United States, IMS has launched Xplorer, a customized client/server
decision support system that integrates customers' internal sales and marketing
data with IMS and other external data. IMS has also launched MediVal to assist
in the management and resolution of Medicaid rebate disputes between states and
pharmaceutical manufacturers. In 1995, IMS acquired Decision Surveys
International Ltd., a South African company providing information services to
the pharmaceutical and healthcare industries.
The raw data from which IMS's services are generated are derived either
from statistically selected panels of drugstores, hospitals, physicians and
other sources, or from activities such as warehouse shipments or wholesalers'
sales data. To protect privacy, no individual patient is identified in any IMS
medical database. IMS generally has well-established relationships with the
sources required to create its databases and in many cases has historical
connections with the trade associations and professional associations involved.
All major pharmaceutical companies are customers of IMS, and many of the
companies subscribe to reports and services in several countries. The scope of
IMS's customer base enables it to avoid dependence on any single customer.
While no competitor provides the geographical reach or breadth of IMS's
services, IMS does have competition in many of the countries in which it
operates from 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 the United States, certain of IMS's market research
services, including medical audits and promotional reports, compete with
services offered by Pharmaceutical Marketing Services Inc., and certain of IMS's
sales management services, including its sales territory reports, representing
approximately 60% of the annual revenue of the IMS America unit, compete with
the services of Source Informatics, Inc. ("Source"), which was recently spun off
by Walsh International Inc. Source, which presently does not sell any sales
territory reports outside the U.S., has announced its intention to develop these
services in certain European countries. If Source were successful in launching
such services, they could be competitive with IMS's sales territory reports.
Quality, completeness and speed of delivery of information services and products
are the principal methods of competition in IMS's market; however, pricing has
become a more significant factor in certain countries, including the United
States.
Nielsen Media Research, Inc.
Following the Distribution, Nielsen Media Research, Inc. will conduct media
measurement and related businesses in the United States and Canada. For a
description of the media measurement and related businesses to be conducted by
ACNielsen outside the United States and Canada, see "ACNielsen Business -- Media
Measurement Services".
Nielsen Media Research measures television audiences and reports this and
related information to advertisers, advertising agencies, syndicators, broadcast
networks, cable networks, cable operators, television stations, station
representatives and others in order to increase the effectiveness of television
advertising and programming. This syndicated information is offered on a
subscription basis. Custom or ad-hoc analyses of the data are also offered. The
information is then used by subscribers to buy, sell, plan and price television
time and to make programming and scheduling decisions.
In 1995, advertisers spent approximately $35.8 billion in the United States
on national and local television advertising, including $2.6 billion on cable
television advertising, according to McCann-Erickson Worldwide, to bring a
variety of programs and advertising messages to approximately 95.9 million U.S.
television households. These data underscore the need for television stations,
networks, advertisers, advertising agencies and others to obtain reports on how
many households and types of people are reached by such programming.
Nielsen Media Research measures television audiences and reports data
through seven services: Nielsen Television Index, Nielsen Syndication Services,
Nielsen Homevideo Index, Nielsen Station Index, Nielsen Hispanic Television
Index, Nielsen Hispanic Station Index and Nielsen Sports Marketing Service.
Nielsen Television Index provides daily audience measurement and demographic
estimates for all national broadcast network-television programs through the use
of the Nielsen People Meter. Nielsen Syndication Services provides reports and
services on both the local and national levels to the program syndication
segment of the
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television industry. Nielsen Homevideo Index provides viewing measurement of
cable, pay cable and other newer television technologies. Nielsen Station Index
provides television audience measurement information in over 200 local markets
and daily information in 33 markets through television set meters in the United
States. Nielsen Hispanic Television Index provides viewing measurement of
national Hispanic audiences, while Nielsen Hispanic Station Index provides
viewing measurement of local Hispanic audiences. Nielsen Sports Marketing
Service provides viewing measurement of national and local sports programs.
During 1995, Nielsen Media Research again expanded its local market
television services and continued to invest to enhance product value, technical
competencies and data quality. Significant investments are being made as Nielsen
Media Research switches from its present mainframe-based systems to a new
flexible client/server architecture for data collection, processing and
delivery. In addition, Nielsen Media Research is developing a new metering
system to enable measurement of program viewing in the emerging digital
television environment. This new system will use codes, which are imperceptible
to the viewer, inserted in the active audio and/or video portions of programs
and commercials that can be detected by metering equipment installed in the
sample households. The system also will have a passive back-up capability. When
implemented, this system will allow Nielsen Media Research to identify the
program or commercial regardless of the delivery method to the home and simplify
the process of installing meters in sample households. There can be no assurance
that the coding used by this system will be adopted by the television industry,
be approved by the FCC, or be compatible with signal compression techniques
implemented by the industry in the future.
Nielsen Media Research's Monitor Plus Service links television ratings to
commercial occurrence data and tracks share of spending and share of voice by
company, by brand, and by product category across eleven monitored media,
including print, outdoor, radio and free standing inserts, as well as
television. Customers use the data to determine competitive advertising trends
within markets of interest. While Monitor Plus currently provides service in 50
markets versus the 75 markets covered by its competitor and market leader,
Competitive Media Reporting (CMR), Monitor Plus also includes national
television ratings. Monitor Plus plans to expand its operations to cover 75
markets and to deploy a new digital data collection and processing technology.
This expansion is scheduled for completion in January 1997.
During 1995, Nielsen Media Research entered into a strategic relationship
with Internet Profiles Corporation (I/PRO). Cognizant Enterprises and Nielsen
Media Research have together taken a substantial minority position in the
company. Under the terms of the agreement, Nielsen Media Research and I/PRO will
jointly market and brand two I/PRO products: I/COUNT (monitors Web site usage);
and I/AUDIT (audits and verifies audience usage and characteristics). Also under
the agreement, additional products may be jointly developed and marketed.
Nielsen Media Research has maintained a strong leadership position in
relation to its competitors. Arbitron, a former competitor, discontinued its
syndicated broadcast and cable television ratings service as of December 31,
1993. A television ratings project funded by the Committee on Nationwide
Television Audience Measurement (CONTAM) and designed and operated by
Statistical Research, Inc. (SRI), is developing a national television ratings
laboratory. Installation of a test sample has begun in Philadelphia,
Pennsylvania for completion this year. This sample was scheduled to produce test
data based on codes transmitted in television programs in 1996. As of the date
of this Information Statement, one station in Philadelphia and one station in
Wilkes-Barre, Pennsylvania are transmitting the required codes. Recently, the
NBC and CBS broadcast television networks asked SRI for a business plan for the
creation of a national measurement system that could provide an alternative to
the Nielsen service. This could give rise to a national competitor in the next
few years.
On the local level, ADCOM, an emerging competitor, has announced plans to
offer individual cable system measurement. A coalition of station owners may
issue a "request for proposal" for a new local ratings service that would
potentially compete with the Nielsen Station Index. Arbitron continues to
develop its passive people meter technology and could use this to re-enter the
television audience measurement business. Indirectly, on both a national and
local basis, competition stems from other marketing research services offering
product movement and television audience data and services.
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Pilot Software, Inc.
Pilot Software, Inc. develops interactive decision-support software for
managers and analysts in large organizations who need to make time-critical
decisions based on quantifiable information. Pilot's software products
accelerate the analysis of corporate data to improve understanding of current
key indicators, past performance and predictions of future trends, resulting in
more effective business decisions.
The highly competitive nature of today's global markets is making it
necessary for organizations to quickly identify key trends, problems and
opportunities. In order to accomplish this, they are aggressively building
massive databases from internal and external sources. In addition,
responsibility for analysis and decision-making has been decentralized to permit
more effective action. These factors are driving rapidly increasing demands for
data warehouse and decision-support tools throughout organizations.
Pilot provides a turnkey, client/server on-line analytical processing
(OLAP) environment, including data mining capabilities, that enables companies
to quickly implement decision-support solutions. The comprehensive Pilot
Decision Support Suite includes visual desktop analysis tools, scalable
multidimensional servers, data mining servers, pre-built analysis libraries and
design tools. Its industry-leading support for dynamic and time-based dimensions
can be applied to business problems with thousands of attributes.
Pilot's flexible solution provides several analysis metaphors including
ad-hoc navigation for analysts, graphical analysis for managers and summarized
briefings for executives. It consists of several components and can be installed
as a single-user, workgroup or distributed configuration. The client components
support Windows 95, Windows NT and Windows 3.1 and the server components are
available for Windows NT and six leading UNIX platforms.
Pilot has a multi-channel distribution strategy including business
information providers, value-added resellers and consulting organizations. Pilot
has a strong international presence with offices throughout North and South
America, Europe and the Pacific Rim. Pilot and its business partners offer a
full range of technical support, training and consulting services around the
world.
Pilot experiences competition from other providers of similar products.
Competition is generally based on the range of product offerings, product
functionality and the reliability of the vendor, among other factors.
Revenues are derived primarily from sales of licenses to use Pilot's
products, renewal fees, maintenance fees, and consulting and training services
related to implementation of the products. In 1995, more than 40% of Pilot's
total revenue was generated from operations outside of the United States.
Erisco, Inc.
Erisco, Inc. develops and markets proprietary software applications and
services used primarily in the administration of healthcare benefits and the
support of managed care services. Erisco has successfully completed the
development of the core applications for its newest product, Facets, which is a
managed care administration and information system built using client/server
technology. Erisco's other major product, Facts, provides similar functionality
and operates on a mainframe platform.
Erisco's primary markets include managed care organizations, insurance
carriers, third-party administrators and self-administered corporations. The
target market for Facets consists of managed care companies such as health
maintenance or preferred provider organizations, and has been growing rapidly
over the last several years. Facets combines the latest technology with advanced
managed care business functionality. The continued trend of expanding growth in
managed care membership and the acceptance of enterprise-wide client/server
system architecture positions Facets well in the marketplace.
The marketplace for the Facts product has declined over the past several
years with the trend to managed care and new technology. Nevertheless, Erisco
continues to sell its Facts system to new accounts and to work closely with its
substantial Facts client base to identify new product functionality
requirements. The substantial investment made in mainframe systems will act to
minimize the movement away from these systems. Erisco's management believes that
the "year 2000" issue favorably impacts customer retention and modification
expansion of the existing Facts customer base.
Erisco faces competition from a variety of software vendors in both the new
managed care markets and the traditional indemnity marketplace. With its Facets
product, Erisco faces competition from several
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organizations offering a longer-standing managed care product offering, but for
the most part based on older technology. Erisco believes that it is ahead of the
competition as it relates to a combined functionality/ technological offering.
Satyam Software
Dun & Bradstreet-Satyam Software Private Limited is a software development
company based in India. Satyam Software programmers, located in India and
on-site at customer locations in the United States, provide customers with a
low-cost, high quality alternative to internal mainframe and client-server
software development. Satyam Software's focus over the past two years was on
developing customers within D&B. Beginning in late 1995, Satyam Software
expanded its focus to include select third-party customers. Satyam Software
expects to continue to grow as it expands its capabilities to provide "year
2000" conversion assistance using internally developed, proprietary productivity
tools. Cognizant has a 76% interest in Satyam Software; the remaining 24% is
owned by India-based Satyam Computer Services.
Dun & Bradstreet HealthCare Information, Inc.
Dun & Bradstreet HealthCare Information, Inc. provides syndicated and
custom comparative outcome and resource utilization analyses of healthcare
providers; analytic support for disease state management initiatives; and
software and data processing services that allow healthcare providers to perform
statistically rigorous analyses of electronic healthcare data (such as claims),
including analyses of outcomes and utilization.
D&B Technology Asia K.K.
D&B Technology Asia K.K., based in Japan, markets financial application
software products and services tailored for the Japanese market.
Cognizant Enterprises, Inc.
Cognizant Enterprises, Inc., Cognizant's in-house venture capital business,
invests in emerging and established businesses in the information and technology
industries. It has invested as a limited partner in two venture capital limited
partnerships.
INFORMATION TECHNOLOGY SERVICES
Gartner Group, Inc.
Gartner Group, Inc. ("Gartner Group") is the world's leading independent
provider of research and analysis on the computer hardware, software,
communications and related information technology (IT) industries. Gartner
Group's core business is researching and analyzing significant IT industry
developments, packaging such analysis into annually renewable subscription-based
products and distributing such products through print and electronic media. Its
product offerings collectively provide comprehensive coverage of the IT
industry. Gartner Group's business also comprises the following entities: Real
Decisions, which provides comprehensive assessments of cost, performance,
efficiency and quality for all areas of IT through continuous improvement and
benchmarking services; Dataquest, a leading worldwide provider of IT market
research and consulting for the IT vendor, manufacturer, and financial
communities; and Gartner Group Learning, a leading developer and publisher of
300 software education products and services for computer desktop and technical
applications professionals.
The principal products of Gartner Group are annually renewable subscription
services, called "continuous services", which, on an ongoing basis, highlight
industry developments, review new products and technologies and analyze industry
trends within a particular technology or market sector. There were 53 principal
continuous services products offered at June 30, 1996, not including Dataquest
products. Each service is supported by a team of research staff members with
substantial experience in the covered segment or topic of the IT industry.
Gartner Group staff researches and prepares the published analyses, responds to
on-line and telephone inquiries from client companies, and holds conferences and
executive briefings.
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Gartner Group's "contract value" increased 33 percent to approximately
$334.5 million at June 30, 1996 as compared with June 30, 1995. Gartner believes
that contract value is a significant measure of its volume of business. Contract
value is calculated as the annualized subscription fees under all continuous
services contracts in effect at a given point in time, without regard to the
duration of the contracts outstanding at such time. Historically, a substantial
portion of client companies have renewed subscriptions for an equal or higher
level of total subscription services each year, and annual continuous services
revenues in any fiscal year have closely correlated to contract value at the
beginning of the fiscal year. As of June 30, 1996, approximately 83 percent of
Gartner Group's clients have renewed one or more subscriptions in the last
twelve months. However, this renewal rate is not necessarily indicative of the
rate of retention of Gartner Group's revenue base, and contract value at any
time may not be indicative of future continuous services revenues or cash flows
if the rate of renewal of continuous services contracts or the timing of new
business were to significantly change during the following twelve months
compared to historic patterns. Deferred revenues of $164.6 million at June 30,
1996, represents unamortized revenues from continuous services contracts at the
balance sheet date plus unamortized revenues of certain other products and
noncontinuous services. Therefore, deferred revenues do not directly correlate
to contract value as of the same date because the annualized calculation is made
without regard to the duration of the contracts outstanding at such time, and
contract value is limited to continuous service contracts.
There can be no assurance that Gartner Group will be able to sustain such
high renewal rates. Any deterioration in Gartner Group's ability to generate
significant new business would impact future growth in its business. Moreover, a
significant portion of new contract value in any given year has historically
been generated in the last portion of the year. Accordingly, any such
deterioration might not be apparent until late in Gartner Group's fiscal year
(which ends September 30).
There are approximately 6,500 client organizations which subscribe to
Gartner Group's continuous services products as of June 30, 1996. Gartner Group
delivers its continuous services products in a variety of formats in addition to
mail delivery. Electronic media are becoming an increasingly dominant form of
product delivery, including CD-ROM, Lotus Notes, GartnerWeb and @VANTAGE.
Gartner Group provides telephone support to its continuous services customers
and is currently making significant enhancements to improve the routing,
response and tracking of telephone inquiries.
Gartner Group's subsidiary, Dataquest, publishes subscription-based
research concentrating on quantitative market research, statistical analysis,
growth projections and market share rankings of manufacturers and vendors of IT.
Dataquest sells primarily to the information technology, market research and
financial communities which complements Gartner Group's focus on users,
purchasers, and vendors of IT products and services.
Gartner Group employs a consistent, disciplined research and analysis
methodology across its full product line, and issues published materials, both
on paper and electronic media, using standardized presentation formats, each
optimized to the target presentation medium. Gartner Group conducts its research
and analysis on an ongoing basis, continually modifies its underlying
assumptions, projected scenarios and recommendations for its clients as
developments occur, and highlights to clients material changes to the
assumptions, projections, assigned probabilities or recommendations.
The knowledge and experience of Gartner Group's analysts is critical to the
quality of its products and services. Senior technology analysts at Gartner
Group average more than 15 years of IT industry experience and are located
worldwide. In addition, Gartner Group has a proprietary, electronic research and
collaboration environment whereby draft research in a "research database" can be
easily shared among analysts worldwide. This electronic environment helps
enforce adherence to the research methodology, promotes extensive peer review
and collaboration, and facilitates iterative refinement, quality control and
review by management. This electronic environment is undergoing development to
increase its flexibility in order to meet increasing customer requirements.
Furthermore, Gartner Group has an independent Research Board, which oversees
overall quality and consistency in Gartner Group's research process and
publications. A comprehensive analyst training program reinforces the research
and publication methodology. Periodic surveys of client satisfaction and ongoing
inquiries of clients also ensure that client needs are met.
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Gartner Group has made a substantial investment in recent years in the
expansion of its distribution network and believes that the expanded
organization enables it to better serve clients and to address additional
markets. Gartner Group has expanded its direct sales force in the United States,
the Europe/Middle East/ Africa region and the Asia/Pacific Rim. Additionally, it
has sales relationships with independent distributors in 17 countries in which
it does not have a direct sales force.
As of June 30, 1996, Gartner Group had approximately 19,300 client
interfaces, defined as an individual IT professional at a company who receives
directly from Gartner Group all printed and electronic materials relating to a
particular continuous service. No single client organization accounted for over
two percent of contract value as of June 30, 1996 or 1995.
The principal competitive factors in Gartner Group's industry are quality
of research and analysis, timely delivery of information, customer service, the
ability to offer products that meet changing market needs for information and
analysis and price. Gartner Group believes it competes favorably with respect to
each of these factors.
Gartner Group experiences competition in the market for information
products and services from other independent providers of similar services as
well as the internal marketing and planning organizations of Gartner Group's
clients. Gartner Group also competes indirectly against other information
providers, including electronic and print media companies and consulting firms.
The indirect competitors, many of whom have substantially greater financial,
information gathering and marketing resources than Gartner Group, could choose
to compete directly against it in the future. In addition, although Gartner
Group believes that it has established a significant market presence, there are
few barriers to entry into its market and new competitors could readily seek to
compete against Gartner Group in one or more market segments addressed by the
continuous service products. Increased competition, direct and indirect, could
adversely affect the operating results through pricing pressure and loss of
market share. There can be no assurance that Gartner Group will be able to
continue to compete successfully against existing or new competitors.
FOREIGN OPERATIONS
As indicated above, Cognizant's subsidiaries engage in a significant
portion of their business outside of the United States. Cognizant'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. Cognizant believes that the risk of nationalization or
expropriation is reduced because its products are software, services and
information, rather than the production of products which require manufacturing
facilities or the use of natural resources.
INTELLECTUAL PROPERTY
Cognizant owns and controls a number of patents, trade secrets,
confidential information, trademarks, trade names, copyrights and other
intellectual property rights which, in the aggregate, are of material importance
to its business. Management of Cognizant believes that each of the "IMS",
"Nielsen Media Research" and "Gartner Group" names and related names, marks and
logos are of material importance to Cognizant. Cognizant is licensed to use
certain technology and other intellectual property rights owned and controlled
by others, and, similarly, other companies are or will be licensed to use
certain technology and other intellectual property rights owned and controlled
by Cognizant.
Pursuant to the IP Agreement, Cognizant will have exclusive and
unrestricted rights to the use of the "Nielsen Media Research" name worldwide;
however, Cognizant's future use of the "Nielsen" name, standing alone and as
part of a name describing new products and services to be offered, will be
subject to certain limitations. In addition, the IP Agreement also provides for
the establishment of a new entity, to be jointly owned by Cognizant and
ACNielsen, into which certain trademarks incorporating or relating to the
"Nielsen" name in various countries will be assigned. This entity will be
obligated to license such trademarks on a royalty-free basis to Cognizant or
ACNielsen for use in a manner consistent with the terms of the IP Agreement and
for purposes of conducting their respective businesses after the Distribution
Date, and will be responsible for preserving the quality of those trademarks and
minimizing any risk of possible confusion. Pursuant to the TAM Master Agreement,
Cognizant will grant a non-exclusive license to ACNielsen to use certain
trademarks, technology and related intellectual property rights in the conduct
of the TAM Business
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outside of the United States and Canada for a period of five years. See
"Relationship Among D&B, Cognizant and ACNielsen After the Distribution -- TAM
Master Agreement".
The technology and other intellectual property rights licensed by Cognizant
are of importance to its business, although management of Cognizant believes, as
noted above, that Cognizant's business, as a whole, is not dependent upon any
one intellectual property or group of such properties.
The names of Cognizant's and its subsidiaries' products and services
referred to herein are trademarks, service marks or registered trademarks or
service marks owned by or that are or will be licensed to Cognizant or one of
its subsidiaries.
EMPLOYEES
At June 30, 1996, Cognizant and its subsidiaries had approximately 10,000
full-time equivalent employees. Of this number, approximately 5,500 are located
in the United States, and none of these is represented by labor unions.
Cognizant's non-U.S. employees are subject to numerous labor council
relationships which vary due to the diverse cultures in which the company
operates. Management believes that, generally, labor relations are satisfactory
and have been maintained in a normal and customary manner.
PROPERTIES
Cognizant's real property is geographically distributed to meet sales and
operating requirements worldwide. Most of Cognizant's properties are leased from
third parties, including D&B and ACNielsen. Cognizant's properties are generally
considered to be both suitable and adequate to meet current operating
requirements and virtually all space is being utilized.
STRATEGY
Cognizant's strategy is to focus on high-growth emerging opportunities in
healthcare, high technology and media. Cognizant intends to pursue growth
through innovation and geographic expansion in its existing businesses, and
through an energetic acquisition program. Cognizant's growth is expected to be
driven by the forecasted expansion of the healthcare market, increasing demand
for new products in the high-technology arena, and the fast-growing marketplace
for interactive on-line media.
In the healthcare market, cost-containment pressure is generating new
opportunities for suppliers of information and systems designed to turn
information into knowledge. IMS intends to continue to invest in innovative
technology, products and services, such as its client-server data-warehousing
and decision-support services and workstation products. Geographic expansion
into the emerging Eastern European, Latin American and Asian markets is expected
to continue. Acquisitions are also expected to be an important aspect of IMS's
growth.
Nielsen Media Research intends to bring its television audience measurement
and analytical expertise to the market for interactive on-line media, such as
the Internet and the World Wide Web, an effort that began in 1995 through
several partnerships and ventures. It also expects to continue to increase its
coverage of the television audience research market through, among other things,
expansion of local market and cable television measurement services and ethnic
audience information.
Gartner Group's strategy in the information technology (IT) market is to
strengthen its leadership as a one-stop advisory service for IT professionals.
It plans to continue to introduce new product offerings and to expand
geographically, especially in Asia. Gartner Group has also been moving into
complementary businesses, including computer-based training services, and adding
to the ways its clients can interact with its analysts, such as electronic
delivery of its research.
Cognizant will also seek to acquire or invest in companies in other
high-growth markets, especially in the information and technology areas.
For a discussion of factors which may affect the implementation of
Cognizant's strategy, see "Certain Considerations."
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LEGAL PROCEEDINGS
Cognizant and its subsidiaries are involved in legal proceedings and
litigation arising in the ordinary course of business. In the opinion of
management, the outcome of all such current legal proceedings, claims and
litigation, if decided adversely, could have a material effect on quarterly or
annual operating results or cash flows when resolved in a future period.
However, in the opinion of management, these matters will not materially affect
Cognizant's combined financial position.
On July 29, 1996, IRI filed a complaint in the United States District Court
for the Southern District of New York, naming as defendants D&B, A.C. Nielsen
Company and IMS. The complaint alleges, among other things, various violations
of the antitrust laws and damages in excess of $350 million, which amount IRI
has asked to be trebled under the antitrust laws. IRI also seeks punitive
damages in an unspecified amount. In connection with such action, D&B, ACNielsen
and Cognizant will enter into an Indemnity and Joint Defense Agreement pursuant
to which ACNielsen will agree to be responsible for any potential liabilities
which may ultimately be incurred by D&B or Cognizant as a result of such action,
up to the ACN Maximum Amount, which is to be determined by an independent
investment bank if and when any such liabilities are incurred. The determination
of such maximum amount will be based on ACNielsen's ability to satisfy such
liabilities and remain financially viable, subject to certain assumptions and
limitations. However, Cognizant and D&B will agree that to the extent that
ACNielsen is unable to satisfy any such liabilities in full and remain
financially viable, Cognizant and D&B will each be responsible for 50% of the
difference between the amount, if any, which may be payable as a result of such
litigation and the maximum amount which ACNielsen is then able to pay as
determined by such investment bank. See "Relationship Among D&B, Cognizant and
ACNielsen After the Distribution -- Indemnity and Joint Defense Agreement" and
"ACNielsen Business -- Legal Proceedings". Management of Cognizant is unable to
predict at this time the final outcome of the IRI Action or whether the
resolution of such matter could materially affect Cognizant's results of
operations, cash flows or financial position.
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ACNIELSEN BUSINESS
GENERAL
After the Distribution, ACNielsen will be engaged, through its
subsidiaries, in the marketing research, information and analysis services
business. ACNielsen will hold all the outstanding capital stock of A.C. Nielsen
Company, its primary U.S. operating subsidiary. ACNielsen is a Delaware
corporation with its headquarters in Stamford, Connecticut.
ACNielsen is a global leader in delivering marketing research, information
and analysis to the consumer products and services industries. ACNielsen
services are offered in over 90 countries around the globe. ACNielsen provides
its customers with marketing research, information and analysis for
understanding and making critical decisions about their products and their
markets. Outside the United States and Canada, ACNielsen conducts media
measurement and related businesses.
ACNielsen operates outside the United States through a number of
subsidiaries, affiliates and joint ventures, including ACNielsen SRG, the
largest provider of market research services in the Asia Pacific region, and
Amer Nielsen in Eastern Europe. In 1995, nearly 80% of ACNielsen's revenues were
generated outside the United States.
ACNielsen operates across a wide spectrum of research services. These
services generally fall into four categories: Retail Measurement Services,
Customized Research Services, Media Measurement Services and Consumer Panel
Services.
ACNielsen also offers its customers, through a wide range of modeling and
analytic services, custom-tailored insights into complex marketing issues.
Typical assignments range from marketing-mix modeling to category management,
including topics as diverse as pricing strategy, consumer driven market
structure, variety management, outlet switching and promotion tactics.
ACNielsen's customers include retailers, brokers and distributors of retail
information, manufacturers of consumer packaged goods and other products, and
companies operating in various service industries (including financial services,
telecommunications, advertising, television and radio broadcasting, and
publishing).
ACNielsen operates in one industry segment, Marketing Research, Information
and Analysis Services. The approximate revenues attributable to each type of
service provided by ACNielsen were as follows for the periods shown (in millions
of dollars):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Retail Measurement........................................... $ 956 $ 912 $ 890
Customized Research.......................................... 158 58 47
Media Measurement............................................ 99 67 57
Consumer Panel............................................... 68 55 51
------ ------ ------
Total.............................................. $1,281 $1,092 $1,045
====== ====== ======
</TABLE>
RETAIL MEASUREMENT SERVICE
ACNielsen's Retail Measurement Services, the cornerstone of ACNielsen's
business, remains the industry standard in delivering quality data to customers
on product movement and related causal information on six continents. Introduced
in 1933, ACNielsen's original Food and Drug Indexes soon became the industry
measurement tool for understanding the dynamics of product sales. Over the
years, technology has dramatically improved ACNielsen's ability to collect and
analyze information from retailers and consumers. The availability of scanning
technology in retail outlets around the world has broadened both the scope and
capabilities of ACNielsen's original retail indexes.
ACNielsen's Retail Measurement Services are available in over 65 countries.
Retail Measurement Services includes scanning and retail audit services, account
level reports, information delivery, merchandising services and marketing and
sales applications, along with modeling and analytic services.
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Scanning
Using the bar codes printed on products and scanners installed in retail
outlets, ACNielsen gathers information weekly from stores in the United States,
Europe, Latin America and the Asia/Pacific region. ACNielsen's customers can
monitor performance trends and evaluate price and promotion effectiveness by
tracking and forecasting non-promoted as well as promotional product movement.
ACNielsen offers its customers a number of additional services to promote
each customer's understanding of its markets. Among these are services reporting
data by ethnic market, services aggregating consumer data in multiple channels,
and services disaggregating data to satisfy particular needs of customers.
Retail Audit
Because scanning data is only now becoming available in certain industry
sectors and in certain countries, retail audit remains a valuable source of
market information as a basic measurement tool or as a supplement to or in lieu
of scanning data. Retail audit involves the continuous measurement by ACNielsen
field auditors of product and category performance in the retail trade,
reporting to clients on sales, distribution, stocks, price and other measures
which assist them in marketing and trade negotiations.
Retail Audit is divided into industry segments, traditionally called
Indexes. The Food Index is generally the largest, but there are also Health and
Beauty, Durable, Confectionery, Liquor, Cash & Carry, plus a number of local
country Indexes.
In-Store Observation
ACNielsen field auditors collect data on where products are located in
store, how many facings they have, and on which shelf they are positioned, etc.
(broken down by store type, store size and geographic region). ACNielsen also
collects causal data. These checks can help to monitor the implementation of
retailer/manufacturer promotional agreements in terms of numeric distribution,
space allocation and promotional execution.
Levels of Information
ACNielsen provides information and insight to customers from a macro to a
micro level. Whether on a country, market or individual retailer level,
ACNielsen measures the competitive environment in which manufacturers and
retailers conduct business. In some countries ACNielsen also provides store
census level data which allow retailers and manufacturers to understand consumer
behavior within a specific store or group of stores as well as within a retail
trading area or market.
ACNielsen's account-specific information provides sales and marketing
managers with a comprehensive array of retailer-specific sales and merchandising
information, producing reports of product and category performance that
encompass an organization's own brands as well as competing brands.
On a global basis, ACNielsen sells and provides its multi-national
customers international reports within and across country boundaries. Products
include an International Database (periodic reports of a multi-country retail
database) and an International Market Report (a one-time report on a market and
its competitive environment).
Delivery of Information
ACNielsen converts the data which it collects into insights yielding
competitive advantage for its customers. These include multi-dimensional
reporting, analytical modeling, data navigation and expert systems tools, with
services offered in over 90 countries and to more than 20,000 users. ACNielsen
delivers its information to customers via on-line services and reports on paper,
CD-ROM, tape and diskette.
The ACNielsen INF*ACT Workstation is a tightly integrated Windows-based
analytical and applications development tool set used worldwide by ACNielsen's
customers. Employing on-line analytical processing capabilities, the Workstation
enables organizations to access and analyze a wide range of corporate and
syndicated information.
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ACNielsen also offers a series of Windows-based intelligent business
applications that can enhance the ACNielsen INF*ACT Workstation functionality,
giving organizations the ability to plan, analyze and execute successful
marketing and sales programs. Among these applications are Opportunity Explorer,
Executive Spotlight, Business Review, Trade Manager, Category Manager, Promotion
Optimizer, BrandView and BrandTrack.
In addition, ACNielsen offers merchandising tools in connection with the
ACNielsen INF*ACT Workstation, allowing customers to better utilize ACNielsen
syndicated data. Among these are the SPACEMAN portfolio of products and the
PRICEMAN products.
CUSTOMIZED RESEARCH SERVICES
Customized Research Services are used by manufacturers, retailers,
financial institutions and other service organizations that seek to understand
the position of their current, new and proposed products and services in the
marketplace. With customized research capabilities in more than half of the
countries in which it operates, ACNielsen is well-positioned to build on its
global retail measurement database to offer manufacturers and retailers consumer
insights from customized research as well as to understand dynamic new markets
such as entertainment, fast-foods, financial services and telecommunications.
In addition to services at the country level, through its subsidiary, SRG
International, ACNielsen offers multi-country customized studies at both the
regional and global levels. SRG International, with offices in Hong Kong,
London, New York, Tokyo and Singapore, carries out research in Asia/Pacific,
Western Europe, North and South America, the Middle East and Africa.
MEDIA MEASUREMENT SERVICES
ACNielsen's Media Measurement Services businesses operate exclusively
outside the United States. The information produced by Media Measurement
Services includes audience estimates for television, radio and print, plus
advertising expenditure measurement and customized media research. Television
and radio ratings and readership data are utilized by the sellers of programs,
sellers of time and space, advertising media planners and time and space buyers,
on behalf of manufacturers/advertisers and media owners to determine the best,
most cost-efficient way of reaching their customers.
ACNielsen's Television Audience Measurement service, which operates outside
the United States and Canada, utilizes a representative panel of households,
each with a meter attached to televisions in the household. Viewers in the
household log into the meter whenever they watch TV to record their identity. In
some countries written diaries are used instead of, or in addition to, meters,
with viewers writing the channels, programs and the time watched. As in the case
of people-meter panels, individual and household figures are projected to
represent national viewing habits.
Prior to July 1994, ACNielsen's television audience measurement services
were operational in Australia, Colombia (diary service), Finland, Japan,
Singapore and Sweden. ACNielsen's acquisition of AGB McNair, IBIS, IPSA and SRG
International in that year increased coverage to include Argentina, China, Hong
Kong, Indonesia, Korea, Malaysia, South Africa, Taiwan and Thailand. ACNielsen
plans to launch an electronic people meter service in Ireland during 1996.
ACNielsen's Advertising Expenditure Measurement service provides to its
customers, primarily advertising agencies and manufacturers/advertisers,
verification that an individual commercial or commercial campaign ran as
contracted, reports the cost of the manufacturers' own and competitors'
advertisements and alerts users to new, competitive ad campaigns.
For additional information with respect to ACNielsen's Television Audience
Measurement service and ACNielsen's relationship with Cognizant in respect of
such service following the Distribution, see "Relationship Among D&B, Cognizant
and ACNielsen -- TAM Master Agreement."
CONSUMER PANEL SERVICES
Consumer Panel Services help organizations achieve competitive advantage by
applying consumer insights resident in the ACNielsen Consumer Panel database.
With a comprehensive portfolio of tools for reporting and analysis, ACNielsen
measures the multi-faceted dynamics of consumer behavior across all
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outlets including: consumer demographics, percentage of households purchasing,
quantity purchased, frequency of purchases, shopping trips and shopping
expenditures, products purchased, level of deal sensitivity, price paid, and
attitudinal and usage information.
In the United States, the ACNielsen Consumer Panel, called Homescan,
consists of 40,000 demographically balanced U.S. households that use hand-held
scanners to record every bar-coded item purchased. Outside the United States,
more than 60,000 households in 15 countries are included in the ACNielsen
consumer panel databases.
ACNielsen employs multiple data collection processes throughout the world.
In several countries, ACNielsen installs in-home scanners with which panelists
scan items at home as they unpack purchases from each shopping trip, recording
price, promotions and quantity purchased, as well as the age and gender of the
shopper and intended user. Information detailing each shopping trip is
immediately transmitted, via telephone lines, to ACNielsen.
Consumer panel applications can be used by both manufacturers and retailers
to understand demographics and purchasing habits of consumers. As with all
information derived from the ACNielsen Consumer Panel, data-capture activity is
from all outlet types including grocery, drug, mass merchandiser and warehouse
clubs. Customers can choose from a wide variety of applications or analyses,
from customized and complex to syndicated and simple. In the area of syndicated
applications, ACNielsen offers a full suite of category management applications.
These reports give manufacturers and retailers insights into cross outlet
shopping, consumer loyalty and the value of consumer segments.
ACNielsen also provides unique delivery tools that allow marketers to
process, chart and analyze ACNielsen Consumer Panel information quickly and
easily. Among these are CD-ROM tools and Panel*Fact for Windows, which enable
managers to create customized reports to meet their individual analytic needs
and to share data and analyses with various members within an organization.
COMPETITION
ACNielsen has numerous competitors in its various lines of business
throughout the world. Some are large companies with diverse product and service
lines; others have more limited product and service offerings. Competition comes
from companies specializing in marketing research; the in-house research
departments of manufacturers and advertising agencies; retailers selling
information directly or through brokers; information management and software
companies; and consulting and accounting firms.
In Retail Measurement Services, ACNielsen's main competitor in the United
States is IRI. IRI is also active in Canada, Europe and Latin America by itself
and through joint ventures with GfK (Germany), Secodip (France), Taylor Nelson
AGB (U.K.) and other companies, and is expanding globally.
In Customized Research Services, the global leader is Kantar, with three
global brands: BMRB International, Millward Brown International and Research
International.
In Media Measurement Services, Taylor Nelson AGB operates in Europe, IBOPE
in Latin America, GfK in Germany, Sofres in France, Spain and Asia and Video
Research in Japan.
In Consumer Panels Services, NPD is active in North America and in Europe
as part of the Europanel consortium which also include Taylor Nelson AGB,
Secodip, Dympanel (Spain) and other participants. IRI also competes in this
area.
Principal competitive factors include innovation, the quality, reliability
and comprehensiveness of analytical services and data provided, flexibility in
tailoring services to client needs, price and geographical coverage.
FOREIGN OPERATIONS
As indicated above, ACNielsen engages in a significant portion of its
business outside of the United States, with nearly 80% of its revenues in 1995
being generated through non-U.S. sources. ACNielsen's foreign operations are
subject to the usual risks inherent in carrying on business outside of the
United States, including fluctuations in relative currency values, possible
nationalization, expropriation, price controls or other restrictive government
actions. ACNielsen believes that the risk of nationalization or expropriation is
55
<PAGE> 58
reduced because its products are services and information, rather than the
production of products which require manufacturing facilities or the use of
natural resources.
INTELLECTUAL PROPERTY
ACNielsen owns and controls a number of trade secrets, confidential
information, trademarks, trade names, copyrights and other intellectual property
rights which, in the aggregate, are of material importance to ACNielsen's
business. Management of ACNielsen believes that the "ACNielsen" name and related
names, marks and logos are of material importance to ACNielsen. ACNielsen 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 ACNielsen.
Pursuant to the IP Agreement, ACNielsen will have exclusive and
unrestricted rights to the use of the "ACNielsen" name worldwide; however,
ACNielsen's future use of the "Nielsen" name, standing alone and as part of a
name describing new products and services to be offered, will be subject to
certain limitations. In addition, the IP Agreement also provides for the
establishment of a new entity, to be jointly owned by Cognizant and ACNielsen,
into which certain trademarks incorporating or relating to the "Nielsen" name in
various countries will be assigned. This entity will be obligated to license
such trademarks on a royalty-free basis to Cognizant or ACNielsen for use in a
manner consistent with the terms of the IP Agreement and for purposes of
conducting their respective businesses after the Distribution Date, and will be
responsible for preserving the quality of those trademarks and minimizing any
risk of possible confusion. Pursuant to the TAM Agreement, ACNielsen will
receive from Cognizant a non-exclusive license to use certain trademarks,
technology and related intellectual property rights in the conduct of the TAM
Business outside of the United States and Canada for a period of five years.
ACNielsen shall not be licensed to use any such names or technology in
connection with the conduct of such business within the United States or Canada.
See "Relationship Among D&B, Cognizant and ACNielsen After the
Distribution -- TAM Master Agreement". The technology and other intellectual
property rights licensed by ACNielsen are important to its business, although
management of ACNielsen believes, as noted above, that ACNielsen's business, as
a whole, is not dependent upon any one intellectual property or group of such
properties.
The names of ACNielsen's products and services referred to herein are
trademarks, service marks or registered trademarks or service marks owned by or
that are or will be licensed to ACNielsen or one of its subsidiaries.
EMPLOYEES
At June 30, 1996, ACNielsen had approximately 17,000 full-time equivalent
employees. Of this number, approximately 2,000 employees are located in the
United States, and none of these is represented by labor unions. ACNielsen's
non-U.S. employees are subject to numerous labor council relationships which
vary due to the diverse cultures in which ACNielsen operates. Management
believes that, generally, labor relations are satisfactory and have been
maintained in a normal and customary manner.
PROPERTIES
ACNielsen's real property is geographically distributed to meet sales and
operating requirements worldwide. Most of ACNielsen's properties are leased from
third parties, including D&B and Cognizant. ACNielsen's properties are generally
considered to be both suitable and adequate to meet current operating
requirements and virtually all space is being utilized.
STRATEGY
ACNielsen's goal is to create and enhance value for its stockholders by
returning ACNielsen to profitability and sustaining and increasing such
profitability.
ACNielsen has developed a comprehensive turnaround plan, already underway,
to utilize its scope of services, brand name, worldwide presence and leading
technology to help its customers succeed in the global marketplace. The strategy
is centered on reengineering ACNielsen's business fundamentals in five key ways:
significantly improving profitability, targeting profitable growth
opportunities, further streamlining operations, redefining its business model,
and enhancing its investment returns.
56
<PAGE> 59
ACNielsen intends to continue its geographic expansion in Latin America,
Asia and elsewhere. Outside the United States, the consumer market research
business is very attractive and untapped in many parts of the world. ACNielsen
believes that this, in tandem with the global diversification of its customers,
represents a major growth opportunity.
For a discussion of factors which may bear on the implementation of
ACNielsen's strategy see "Certain Considerations".
LEGAL PROCEEDINGS
On July 29, 1996, IRI filed a complaint in the United States District Court
for the Southern District of New York, naming as defendants D&B, A.C. Nielsen
Company and IMS.
The complaint alleges various violations of United States antitrust law:
(1) a violation of Section 1 of the Sherman Act through an alleged practice of
tying A.C. Nielsen Company services in different countries or of A.C. Nielsen
Company and IMS services; (2) a violation of Section 1 of the Sherman Act
through alleged unreasonable restraints of trade consisting of the contracts
described above and through alleged long-term agreements with multi-national
customers; (3) a violation of Section 2 of the Sherman Act for monopolization
and attempted monopolization of export markets through alleged exclusive data
acquisition agreements with retailers in foreign countries, the contracts with
customers described above, and other means; (4) a violation of Section 2 of the
Sherman Act for attempted monopolization of the United States market through the
alleged exclusive data agreements described above, predatory pricing, and other
means; and (5) a violation of Section 2 of the Sherman Act for an alleged use of
market power in export markets to gain an unfair competitive advantage in the
United States.
The complaint also alleges two claims of tortious interference with
contract and tortious interference with a prospective business relationship.
These claims relate to the acquisition by defendants of SRG. IRI alleges that
SRG violated an alleged agreement with IRI when it agreed to be acquired by
defendants and that defendants induced SRG to breach that agreement.
IRI's complaint alleges damages in excess of $350 million, which amount IRI
has asked to be trebled under the antitrust laws. IRI also seeks punitive
damages in an unspecified amount.
In connection with such action, D&B, ACNielsen and Cognizant will enter
into the Indemnity and Joint Defense Agreement pursuant to which they will agree
(i) to certain arrangements allocating potential IRI Liabilities that may arise
out of or in connection with the IRI Action and (ii) to conduct a joint defense
of such action. In particular, the Indemnity and Joint Defense Agreement will
provide that ACNielsen will assume exclusive liability for IRI Liabilities up to
the ACN Maximum Amount to be determined at the time such liabilities, if any,
become payable, and that Cognizant and D&B 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 stockholder 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,
See "Relationship Among D&B, Cognizant and ACNielsen -- Indemnity and Joint
Defense Agreement".
Directorate General IV of the Commission of the European Union is currently
investigating ACNielsen for the possible violation of European Union competition
law. In May 1996, the Commission issued a Statement of Objections with respect
to certain of ACNielsen's practices in Europe, including discounting and other
sales practices. ACNielsen has submitted its response to the Commission's
Statement of Objections. Following the review of such submission and a hearing
at which representatives of European Union member states will participate, the
Commission may uphold ACNielsen's position and dismiss the complaint or adopt a
decision prohibiting any of the practices identified in the Statement of
Objections and imposing substantial fines.
57
<PAGE> 60
Management of ACNielsen is unable to predict at this time the final outcome
of either the IRI Action or the Commission's investigation or whether the
resolution of either matter could materially affect ACNielsen's results of
operations, cash flows or financial position.
A Civil Investigative Demand ("CID") was served on ACNielsen by the
Antitrust Division of the Department of Justice ("DOJ") in January 1995. The CID
requested documents relating to various competitive practices, including
discounting practices. ACNielsen cannot predict what action, if any, the DOJ may
take.
In August 1995, the Canadian Competition Tribunal issued an order
prohibiting ACNielsen from engaging in certain actions in Canada, including
entering into exclusive agreements to purchase retailer scanning data and
long-term contracts for the sale of data to manufacturers. The order has not had
any material adverse effect on ACNielsen's business.
ACNielsen and its subsidiaries are also involved in legal proceedings and
litigation arising in the ordinary course of business. In the opinion of
management, the outcome of all such current proceedings, claims and litigation,
if decided adversely, could have a material effect on quarterly or annual
operating results or cash flows when resolved in a future period. However, in
the opinion of management, such matters arising in the ordinary course of
business will not materially affect ACNielsen's combined financial position.
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P. ("Coopers & Lybrand") had been engaged by D&B,
ACNielsen's corporate parent, to audit the financial statements of ACNielsen in
connection with the Distribution. The report of Coopers & Lybrand, which
contains no adverse opinion or a disclaimer of opinion, or qualification or
modification as to uncertainty, audit scope, or accounting principles, is
included in this Information Statement (immediately preceding ACNielsen's
Combined Financial Statements and the Notes thereto). As an independent
corporation, the Board of Directors of ACNielsen decided to engage Arthur
Andersen LLP ("Arthur Andersen") as its independent public accountants effective
as of the Distribution Date.
During ACNielsen's two most recent fiscal years, and any subsequent interim
period prior to engaging Arthur Andersen, neither ACNielsen nor, to the best of
ACNielsen's knowledge, anyone acting on ACNielsen's behalf, consulted Arthur
Andersen regarding either (i) the application of accounting principles to a
specified transaction, either completed or proposed, the type of audit opinion
that might be rendered on ACNielsen's financial statements, or a written report
or oral advice provided to ACNielsen that Arthur Andersen concluded was an
important factor considered by ACNielsen in reaching a decision as to the
accounting, auditing or financial reporting issue or (ii) any matter that was
the subject of a disagreement (as defined in paragraph 304(a)(1)(iv) of
Regulation S-K) with the former accountant or a reportable event (as described
in paragraph 304(a)(1)(v) of Regulation S-K).
In connection with the audits of the financial statements of ACNielsen as
of December 31, 1995 and 1994 and for each of the two years in the period ended
December 31, 1995, and in the subsequent interim period, no disagreements
existed between ACNielsen and Coopers & Lybrand on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure that, if not resolved to the satisfaction of Coopers & Lybrand, would
have caused it to make reference to the subject matter of the disagreement in
connection with its report.
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<PAGE> 61
COGNIZANT MANAGEMENT AND EXECUTIVE COMPENSATION
Robert E. Weissman is currently Chairman and Chief Executive Officer of D&B
and Chairman and Chief Executive Officer of Cognizant. Mr. Weissman will resign
from his positions at D&B effective upon the Distribution. The directors of
Cognizant will consist of certain persons who are currently directors of D&B,
and certain persons who are not currently directors of D&B. See "-- Cognizant
Board of Directors". In addition to Mr. Weissman, the other executive officers
of Cognizant will be drawn from the current management of D&B and will resign
from their positions at D&B effective upon the Distribution. See "-- Cognizant
Executive Officers".
COGNIZANT BOARD OF DIRECTORS
Immediately after the Distribution, Cognizant expects to have a board
composed of eight directors.
The following table sets forth the names, in alphabetical order, and
information as to the persons who are expected to serve as directors of
Cognizant following the Distribution, including information as to service with
D&B, if applicable.
<TABLE>
<CAPTION>
DIRECTOR
POSITIONS WITH OF D&B PRINCIPAL OCCUPATION OTHER
NAME DUN & BRADSTREET SINCE DURING LAST FIVE YEARS AGE DIRECTORSHIPS
- ------------------------- ------------------------- -------- ------------------------- --- -------------------------
<S> <C> <C> <C> <C> <C>
Clifford L. Alexander, Director 1993 President, Alexander & 63 D&B; MCI Communications
Jr. Associates, Inc., Corporation; Dreyfus
Washington, D.C. Third Century Fund;
(consulting firm Dreyfus General Family of
specializing in Funds; Dreyfus Premier
work-force Family of Funds; Mutual
inclusiveness), 1/81 to of America Life Insurance
present. Company; American Home
Products Corp.; TLC
Beatrice International
Holdings, Inc.
John P. Imlay, Jr. Chairman, Dun & -- Chairman, Dun & 60 Gartner Group, Inc.;
Bradstreet Software Bradstreet Software Metromedia International
Services, Inc. Services, Inc., Atlanta, Group.
GA (software company),
3/90 to present;
Principal Executive
Officer, 3/90 to 1/93;
President, 3/90 to 3/92.
Robert J. Kamerschen None -- Chairman and Chief 60 ADVO, Inc.; Micrografx,
Executive Officer, ADVO, Inc.; Playboy Enterprises
Inc., Windsor, CT (direct Incorporated.
mail marketing services),
11/88 to present.
Robert J. Lanigan Director 1978 Chairman Emeritus, Owens- 68 D&B; Owens-Illinois,
Illinois, Inc., Toledo, Inc.; Sonat, Inc.; Sonat
OH (glass, plastics and Offshore Drilling Inc.;
other packaging Chrysler Corporation; The
products), 1/92 to Coleman Company, Inc.
present; Chairman of the
Board, 4/84 to 10/91;
Chief Executive Officer,
1/84 to 9/90.
</TABLE>
59
<PAGE> 62
<TABLE>
<CAPTION>
DIRECTOR
POSITIONS WITH OF D&B PRINCIPAL OCCUPATION OTHER
NAME DUN & BRADSTREET SINCE DURING LAST FIVE YEARS AGE DIRECTORSHIPS
- ------------------------- ------------------------- -------- ------------------------- --- -------------------------
<S> <C> <C> <C> <C> <C>
H. Eugene Lockhart None -- President and Chief 46 MasterCard International
Executive Officer, Inc.; Niagara Mohawk
MasterCard International Power Corp.
Inc., Purchase, NY
(credit card company),
3/94 to present;
Executive Vice President,
First Manhattan
Consulting Group, New
York, NY (banking
consulting firm), 9/92 to
2/94; Chief Executive
Officer, UK Banking and
Group Operations, Midland
Bank plc, London,
England, 1986 to 1993.
James R. Peterson Director 1977 Former President and 68 D&B; WMX
Chief Executive Officer, Technologies, Inc.
The Parker Pen Company,
Janesville, WI (writing
instruments and temporary
help services), 1/82 to
1/85.
M. Bernard Puckett Director 1995 Consultant, 1/96 to 52 P-Com, Inc.; R.R.
present; President and Donnelley & Sons Company.
Chief Executive Officer,
Mobile Telecommunication
Technologies Corp.,
Jackson, MS
(telecommunications),
5/95 to 1/96; President,
Chief Operating Officer,
1/94 to 5/95; Senior Vice
President -- Corporate
Strategy and Development,
International Business
Machines Corporation,
Armonk, NY (computers),
7/93 to 12/93; General
Manager of Applications
Solutions, 1/91 to 7/93.
Robert E. Weissman Chairman and Chief 1981 Chairman and Chief 56 State Street Boston
Executive Officer, Executive Officer, D&B, Corporation.
Director 4/95 to present; Chairman
and Chief Executive
Officer, Cognizant, 7/96
to present; President and
Chief Executive Officer,
D&B, 1/94 to 3/95;
President and Chief
Operating Officer, 1/85
to 12/93.
</TABLE>
DIRECTORS' COMPENSATION
The Board of Directors of Dun & Bradstreet has approved a Director
compensation program for Cognizant. It is anticipated that the Board of
Directors of Cognizant will adopt and implement such program as described below
prior to, on or shortly after the Distribution Date.
If such program is adopted and implemented, each non-employee Director will
receive a 1996 retainer of $12,500; thereafter, the retainer will be paid at an
annual rate of $25,000. Each non-employee Director who is the Chairman of a
Committee of the Board of Directors will be paid an additional retainer of
$3,000 for 1996 and annually thereafter. A fee of $1,000 will be paid to each
non-employee Director for every Board or Committee meeting attended. Directors
who are employed by Cognizant shall receive no retainers or meeting fees.
60
<PAGE> 63
Each non-employee Director who commences service on the Cognizant Board
prior to Cognizant's 1997 Annual Meeting of Shareholders will receive an initial
grant of restricted Cognizant Common Stock valued at $30,000 on the date such
non-employee Director commences service on the Board (the "Service Date") or on
the first day of regular trading in Cognizant Common Stock after the
Distribution, whichever is later. Such restricted shares shall generally vest
five years from the date of grant.
On the Service Date or on the first day of regular trading in Cognizant
Common Stock after the Distribution, whichever is later, a non-employee Director
shall receive an option grant for 7,000 shares of Cognizant Common Stock.
Generally, one-sixth of such options will vest annually commencing on the first
anniversary of the date of grant. On the second anniversary of the Service Date,
and on each anniversary thereafter, a non-employee Director will receive
additional option grants for 3,500 shares of Cognizant Common Stock. Such
options will vest in accordance with a schedule set by the Compensation and
Benefits Committee of the Cognizant Board of Directors at the time of grant. The
exercise price per share of all options granted will be not less than 100% of
the Fair Market Value (as hereinafter defined) of a share on the date of grant.
For purposes of these and the following provisions, Fair Market Value of a share
on a given date means the average of the high and low trading prices of such
share on such date.
At a non-employee Director's election, all cash compensation (i.e., meeting
fees and retainers) may be deferred until such Director ceases being a director.
At such Director's election, such compensation may be deferred in share units
and/or cash units. If a non-employee Director elects to defer in share units, he
or she will receive credit, as of the date on which such compensation would
otherwise have been paid, for a number of share units equal to (i) the amount of
such compensation divided by (ii) the Fair Market Value of one share on such
date. A non-employee Director who defers in share units will also receive
dividend equivalents on credited share units in the form of additional share
units. If a non-employee Director elects to defer in cash units, he or she will
receive credit, as of the date on which such compensation would otherwise have
been paid, for a number of cash units equal to the amount of such compensation
and shall receive notional compound interest, earned at the prime rate of Chase
Manhattan Bank, on credited cash units in the form of additional cash units.
COMMITTEES OF THE COGNIZANT BOARD OF DIRECTORS
Prior to the Distribution, the Cognizant Board of Directors will establish
Audit, Executive, Compensation and Benefits, and Nominating Committees and
designate specific functions and areas of oversight as to such committees. No
final determination has yet been made as to the memberships of such standing
committees.
COGNIZANT EXECUTIVE OFFICERS
Listed below is certain information as to the executive officers who have
been selected to serve after the Distribution.
<TABLE>
<CAPTION>
NAME, POSITION WITH COGNIZANT AND AGE BIOGRAPHICAL DATA
- ------------------------------------------------- ------------------------------------------
<S> <C>
Robert E. Weissman, 56........................... See information under "Cognizant Board of
Chairman and Chief Executive Officer Directors."
Dennis G. Sisco, 50.............................. Executive Vice President, D&B, 2/95 to
Executive Vice President present; Senior Vice President, 7/93 to
2/95; President, D&B Enterprises, Inc.,
12/88 to present.
William G. Jacobi, 52............................ Executive Vice President, D&B, 2/95 to
Executive Vice President present; Senior Vice President, D&B, 7/93
to 2/95; President and Chief Operating
Officer, Nielsen Media Research, 1/91 to
7/93.
Victoria R. Fash, 44............................. Senior Vice President-Business Strategy,
Executive Vice President and Chief Financial D&B, 4/95 to present; Vice
Officer President-Business Operations Planning,
5/94 to 4/95; Assistant to the President,
D&B, 9/91 to 5/94; Assistant to the
President, Dun & Bradstreet Software
Services, Inc. (formerly Management
Science America, Inc.), 1/91 to 9/91.
Alan J. Klutch, 52............................... Vice President-Financial Planning, D&B,
Senior Vice President-Finance 10/84 to present.
</TABLE>
61
<PAGE> 64
COMPENSATION OF COGNIZANT EXECUTIVE OFFICERS
The following table discloses the compensation paid by D&B for services
rendered to D&B in 1995 to Cognizant's Chief Executive Officer and to each of
the persons who are anticipated to be one of the four other most highly
compensated executive officers of Cognizant following the Distribution. During
the period presented, the individuals were compensated in accordance with D&B's
plans and policies.
SUMMARY COMPENSATION TABLE
FOR SERVICE WITH D&B
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------------
AWARDS PAYOUTS
------------------------- ----------
ANNUAL COMPENSATION (G)
--------------------------------------- (F) SECURITIES (H)
(A) RESTRICTED UNDERLYING LONG-TERM (I)
NAME AND PRINCIPAL (C) (D) (E) STOCK OPTIONS/ INCENTIVE ALL OTHER
POSITION (B) SALARY BONUS(1) OTHER ANNUAL AWARD(S)(3) SARS(4) PAYOUTS(5) COMPENSATION(6)
WITH COGNIZANT YEAR ($) ($) COMPENSATION(2)($) ($) (#) ($) ($)
- ---------------------- ---- ------- -------- ------------------ ------------ ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert E. Weissman.... 1995 830,000 802,095 216 443,895 34,823 887,800 55,063
Chairman and Chief
Executive Officer
Dennis G. Sisco....... 1995 351,615 453,901 0 252,058 15,696 104,220 26,308
Executive Vice
President
William G. Jacobi..... 1995 377,315 277,557 3,448 277,964 13,813 155,996 21,217
Executive Vice
President
Victoria R. Fash...... 1995 258,359 250,901 0 219,283 8,788 38,600 4,176
Executive Vice
President and Chief
Financial Officer
Alan J. Klutch........ 1995 312,500 224,772 34,778 101,303 6,588 202,650 6,795
Senior Vice
President-Finance
</TABLE>
- ---------------
(1) Bonus amounts shown were earned in 1995 and paid in 1996.
(2) Amounts shown represent reimbursement for taxes paid by the named executive
officers with respect to D&B-directed spousal travel and, for Mr. Klutch,
certain relocation expenses.
(3) Amounts shown represent dollar value on the date of grant. The grants to Ms.
Fash and Messrs. Sisco and Jacobi consisted of grants in connection with
performance unit awards of 382, 1,031 and 1,544 shares respectively, and
additional grants with respect to promotions during 1995 of 3,846 shares
each. Restricted stock awards would have vested one-third in each of the
three years following the date of the award, except that the
promotion-related awards would have vested 100% two years following the
date of the award. Dividends are paid at the rate established from time to
time for D&B Common Stock. In addition, the number and value of the
aggregate restricted stock holdings of the named executive officers at
December 31, 1995 were: Mr. Weissman -- 14,576 shares ($943,798); Mr.
Sisco -- 5,575 shares ($360,982); Mr. Jacobi -- 6,049 shares ($391,673);
Ms. Fash -- 4,228 shares ($273,763) and Mr. Klutch -- 7,872 shares
($509,712). Notwithstanding the original vesting schedules, all restricted
stock will vest as of the Distribution Date.
(4) Amounts shown represent the number of non-qualified stock options, without
tandem stock appreciation rights, granted.
(5) Amounts shown represent payments made under the D&B Key Employees
Performance Unit Plan.
(6) Amounts shown represent aggregate D&B contributions for the account of each
named executive officer under the D&B Profit Participation Plan ("PPP") and
the Profit Participation Benefit Equalization Plan ("PPBEP"), plans which
are open to employees of D&B and certain subsidiaries upon completion of
one year of service. The PPP is a tax-qualified defined contribution plan
and the PPBEP is a non-qualified plan which provides a benefit to
participants in the PPP equal to the amount of D&B contributions that would
have been made to the participant's PPP account but for certain Federal tax
laws.
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<PAGE> 65
OPTIONS GRANTS ON D&B COMMON STOCK TO COGNIZANT EXECUTIVES IN LAST FISCAL YEAR
The following table provides information on fiscal year 1995 grants of
options to the named Cognizant executives to purchase shares of D&B Common
Stock. Options to acquire D&B Common Stock will be replaced by options to
acquire Cognizant Common Stock. See "Relationship Among D&B, Cognizant and
ACNielsen After the Distribution -- Employee Benefits Agreement". For a
discussion of contemplated option grants, see "Contemplated Option Grants"
below.
OPTION GRANTS IN LAST FISCAL YEAR TO PURCHASE D&B COMMON STOCK
<TABLE>
<CAPTION>
(B)
NUMBER OF (C)
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS (D) (F)
OPTIONS/SARS GRANTED TO EXERCISE OR (E) GRANT DATE
(A) GRANTED(1) EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE(2)
NAME (#) FISCAL YEAR ($/SHARE) DATE ($)
- --------------------------------- ------------- ------------- ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Robert E. Weissman............... 34,823 1.91% 63.75 12/19/05 321,416
Dennis G. Sisco.................. 12,235 0.86% 63.75 12/19/05 112,929
3,461 52.00 04/18/05 24,435
William G. Jacobi................ 10,352 0.76% 63.75 12/19/05 95,549
3,461 52.00 04/18/05 24,435
Victoria R. Fash................. 7,058 0.48% 63.75 12/19/05 65,145
1,730 52.00 04/18/05 12,214
Alan J. Klutch................... 6,588 0.36% 63.75 12/19/05 60,807
</TABLE>
- ---------------
(1) Amounts shown represent the number of non-qualified stock options,
without tandem stock appreciation rights ("SARs"), granted in 1995. Options may
not be exercised for at least one year after grant and may then be exercised in
installments of 25% of the grant amount each year until they are 100% vested.
Payment must be made in full upon exercise in cash or D&B Common Stock. The
option holder may elect to have shares of D&B Common Stock issuable upon
exercise withheld by D&B to pay withholding taxes due. The options shown include
Limited SARs in tandem with the options. Limited SARs are exercisable only if
and to the extent that the related option is exercisable and are exercisable
only during the 30-day period following the acquisition of at least 20% of the
outstanding D&B Common Stock pursuant to a tender or exchange offer not made by
D&B. Each Limited SAR permits the holder to receive cash equal to the excess
over the related option exercise price of the highest price paid pursuant to a
tender or exchange offer for D&B Common Stock which is in effect at any time
during the 60 days preceding the date upon which the Limited SAR is exercised.
Limited SARs can be exercised regardless of whether D&B supports or opposes the
offer.
(2) Grant date present value is based on the Black-Scholes option valuation
model, which makes the following material assumptions for the April 19, 1995
grant and the December 20, 1995 grant, respectively: an expected stock-price
volatility factor of 15.006% and 15.911%, a risk-free rate of return of 7.06%
and 5.93%, dividends at the annualized rate of $2.60 and $2.64 per share, a time
of exercise of ten years, and reductions of approximately 9.73% to reflect the
probability of forfeiture due to termination prior to vesting and approximately
10.47% and 11.24% to reflect the probability of a shortened option term due to
termination of employment prior to the option expiration date. These assumptions
may or may not be fulfilled. The amounts shown cannot be considered predictions
of future value. In addition, the options will gain value only to the extent the
stock price exceeds the option exercise price during the life of the option.
63
<PAGE> 66
AGGREGATE D&B OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END D&B
OPTION VALUES
The following table provides information on option exercises in 1995 by the
named executives of Cognizant and the value of each such executive's unexercised
options to acquire D&B Common Stock at December 31, 1995. See also,
"Relationship Among D&B, Cognizant and ACNielsen After the
Distribution -- Employee Benefits Agreement".
AGGREGATE D&B OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
(D) (E)
NUMBER OF SECURITIES VALUE OF UNEXERCISED,
UNDERLYING UNEXERCISED D&B IN-THE-MONEY
(B) (C) OPTIONS/SARS AT FISCAL D&B OPTIONS/SARS AT FISCAL
SHARES ACQUIRED VALUE YEAR-END(2)(#) YEAR-END(3)($)
(A) ON EXERCISE REALIZED(1) --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Weissman........... 0 0 219,875 95,174 3,142,125 482,548
Dennis G. Sisco.............. 0 0 29,672 32,158 376,990 178,778
William G. Jacobi............ 2,390 41,974 35,110 28,512 391,548 158,299
Victoria R. Fash............. 0 0 5,406 13,772 48,626 71,296
Alan J. Klutch............... 1,124 16,228 49,530 18,305 711,865 93,277
2,390 34,506
</TABLE>
- ---------------
(1) Amounts shown represent the value realized upon the exercise of stock
options during 1995, which equals the difference between the exercise price
of the options and the closing market price of the underlying D&B Common
Stock on the date preceding the exercise date.
(2) No SARs were outstanding at December 31, 1995.
(3) The values shown equal the difference between the exercise price of
unexercised in-the-money options and the closing market price of the
underlying D&B Common Stock at December 29, 1995. Options are in-the-money
if the fair market value of the D&B Common Stock exceeds the exercise price
of the option.
LONG-TERM D&B INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E) (F)
NO. OF PERFORMANCE ESTIMATED FUTURE PAYOUTS
SHARES, OR OTHER UNDER NON-STOCK PRICE-BASED PLANS(2)
UNITS OR PERIOD UNTIL ----------------------------------------
OTHER MATURATION THRESHOLD ($) TARGET ($) MAXIMUM ($)
NAME RIGHTS(1)($) OR PAYOUT (0%) (100%) (200%)
- ----------------------------------------- ------------ ------------ ------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Robert E. Weissman....................... 0 N/A N/A N/A N/A
Dennis G. Sisco.......................... 120,000 Three Years 0 120,000 240,000
William G. Jacobi........................ 120,000 Three Years 0 120,000 240,000
Victoria R. Fash......................... 60,000 Three Years 0 60,000 120,000
Alan J. Klutch........................... 0 N/A N/A N/A N/A
</TABLE>
- ---------------
(1) Amounts shown represent the nominal dollar value of grants under the D&B
Performance Unit Plan to Ms. Fash and Messrs. Sisco and Jacobi with respect
to promotions during 1995. In connection with the Distribution, the
three-year performance unit grant that otherwise would have been made to
the named executive officers in 1995 was converted into a one-year cash
award that is not included in this table because it is not a "long-term"
award as defined by the Securities and Exchange Commission.
(2) Awards may range from 0 to 200% of the nominal grant value based on
achievements within a range of performance goals.
D&B RETIREMENT BENEFITS
The following table sets forth the estimated aggregate annual benefits
payable under the D&B Retirement Plan, D&B's Supplemental Executive Benefit Plan
and Pension Benefit Equalization Plan to persons in specified average final
compensation and credited service classifications upon retirement at age 65.
Amounts shown in the table include U.S. Social Security benefits which would be
deducted in calculating
64
<PAGE> 67
benefits payable under these plans. These aggregate annual retirement benefits
do not increase as a result of additional credited service after 15 years.
<TABLE>
<CAPTION>
ESTIMATED AGGREGATE ANNUAL D&B RETIREMENT
BENEFIT ASSUMING CREDITED SERVICE OF:
AVERAGE FINAL --------------------------------------------------------------
COMPENSATION FROM D&B 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 550,000............................ $ 330,000 $ 330,000 $ 330,000 $ 330,000 $ 330,000
700,000........................... 420,000 420,000 420,000 420,000 420,000
850,000........................... 510,000 510,000 510,000 510,000 510,000
1,000,000........................... 600,000 600,000 600,000 600,000 600,000
1,300,000........................... 780,000 780,000 780,000 780,000 780,000
1,600,000........................... 960,000 960,000 960,000 960,000 960,000
1,900,000........................... 1,140,000 1,140,000 1,140,000 1,140,000 1,140,000
</TABLE>
The number of years of credited service for Messrs. Weissman, Sisco,
Jacobi, Ms. Fash and Mr. Klutch are, respectively, 16, 6, 16, 9 and 21.
Compensation, for the purpose of determining retirement benefits, consists
of salary, wages, cash bonuses, commissions and overtime pay. Severance pay,
contingent payments and other forms of special remuneration are excluded.
Bonuses included in the Summary Compensation Table above are not paid until the
year following the year in which they are accrued and expensed; therefore,
compensation for purposes of determining retirement benefits varies from the
Summary Compensation Table amounts in that bonuses expensed in the previous year
but paid in the current year are part of retirement compensation in the current
year and current year's bonuses accrued and included in the Summary Compensation
Table are not. For 1995, compensation for purposes of determining retirement
benefits for the named executive officers differed by less than 10% from the
amounts shown in the table except that compensation for 1995 for purposes of
determining retirement benefits for Mr. Jacobi, Ms. Fash and Mr. Klutch was
$572,384, $375,548 and $487,024, respectively.
Average final compensation is defined as the highest average annual
compensation during five consecutive twelve-month periods in the last ten
consecutive twelve-month periods of the member's credited service. Members vest
in their accrued retirement benefit upon completion of five years' service. The
benefits shown in the table above are calculated on a straight-life annuity
basis.
LIMITED SARS
D&B Limited SARs held by Cognizant executive officers will be converted
into Limited SARs of Cognizant which will have the terms described for D&B
Limited SARs in footnote 1 under the caption "-- Option Grants on D&B Common
Stock to Cognizant Executives in Last Fiscal Year" above. See "Relationship
Among D&B, Cognizant and D&B After the Distribution -- Employee Benefits
Agreement."
CONTEMPLATED OPTION GRANTS
The D&B Board of Directors has approved a program under which certain
Cognizant executive officers and senior management will receive options pursuant
to grants by the Cognizant Compensation Committee having an exercise price per
share equal to the Fair Market Value per share of Cognizant Common Stock on the
date of grant. Options granted upon conversion of unexercised D&B stock options
(see "Relationship Among D&B, Cognizant and ACNielsen After the
Distribution -- Employee Benefits Agreement") and new option grants will
represent a number of shares equal to approximately 2.1% and 11.7%,
respectively, of the anticipated number of outstanding shares (assuming no
exercise of the unexercised D&B stock options). Pursuant to the program, it is
anticipated that no new grants will be made to executive officers for three
years.
65
<PAGE> 68
COGNIZANT SECURITY OWNERSHIP BY
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All the outstanding shares of Cognizant Common Stock are currently held by
D&B. The following table sets forth information concerning shares of Cognizant
Common Stock that are expected to be beneficially owned after the Distribution
by each of the Cognizant directors, by each of the executive officers named in
the Cognizant Summary Compensation Table, by all such directors and executive
officers as a group and by each person known by Cognizant to beneficially own
more than 5% of the outstanding shares of D&B Common Stock as of August 31,
1996. Stock ownership information is based on (i) the number of shares of D&B
Common Stock held by directors and executive officers as of August 31, 1996 and
includes shares of D&B restricted stock, all of which will vest prior to the
Record Date, (ii) the number of shares held by The Capital Group Companies, Inc.
and a subsidiary thereof as of December 31, 1995 and (iii) one share of
Cognizant Common Stock being distributed for every share of D&B Common Stock.
See "The Distribution" and "Cognizant Management and Executive
Compensation -- Compensation of Cognizant Executive Officers". Information
regarding shares subject to options reflects shares of D&B Common Stock subject
to options as of August 31, 1996 and exercisable within 60 days thereafter, all
of which will be converted into options that are exercisable into shares of
Cognizant Common Stock. See "Relationship Among D&B, Cognizant and ACNielsen
After the Distribution -- Employee Benefits Agreement". All directors and
executive officers as a group beneficially owned less than one percent of the
outstanding shares of D&B Common Stock on August 31, 1996 and are expected to
beneficially own less than one percent of the shares of Cognizant Common Stock
outstanding as of the Distribution Date.
<TABLE>
<CAPTION>
NUMBER OF SHARES
SUBJECT TO
OPTIONS
NUMBER OF SHARES EXERCISABLE
BENEFICIALLY WITHIN 60
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNED(2) DAYS(2)(3)
- --------------------------------------------------------------- ------------------- ----------------
<S> <C> <C>
Clifford L. Alexander, Jr...................................... 1,300 --
Victoria R. Fash............................................... 4,171 5,838
John P. Imlay, Jr.............................................. -- --
William G. Jacobi.............................................. 8,073 37,235
Robert J. Kamerschen........................................... -- --
Alan J. Klutch................................................. 11,687 49,530
Robert J. Lanigan(4)........................................... 7,100 --
H. Eugene Lockhart............................................. -- --
James R. Peterson.............................................. 4,300 --
M. Bernard Puckett............................................. 600 --
Dennis G. Sisco................................................ 6,012 31,797
Robert E. Weissman............................................. 119,079 219,875
All Directors and Executive Officers as a Group................ 162,322 344,275
The Capital Group Companies, Inc. and its subsidiary, Capital
Research and Management Company
333 South Hope Street,
Los Angeles, CA 90071........................................ 14,859,800(5)(6) --
</TABLE>
- ---------------
(1) The mailing address for each of the Cognizant directors and executive
officers listed herein is 200 Nyala Farms, Westport, Connecticut 06880.
(2) As of August 31, 1996.
(3) Represents the number of shares of Cognizant Common Stock which would be
obtained in the Distribution if the D&B stock options were exercised prior
to the Record Date. Unexercised D&B stock options held by Cognizant
employees as of the Distribution Date will be converted into options that
are exercisable into shares of Cognizant Common Stock based upon a
conversion formula to be calculated after the Distribution Date. See
"Relationship Among D&B, Cognizant and ACNielsen After the
Distribution -- Employee Benefits Agreement".
(4) Of these shares, 6,200 are held in two revocable trusts (one trust holding
5,000 shares and the other 1,200 shares) for the benefit of Mr. Lanigan in
which he is the settlor and sole beneficial owner and over which he has sole
investment control.
(5) Represents 8.31% of the shares of Cognizant Stock expected to be outstanding
as of the Distribution Date based on one share of Cognizant Common Stock
being distributed for every share of D&B Common Stock held on the Record
Date and assuming (i) no change in the number of outstanding shares of D&B
Common Stock from August 31, 1996 to the Record Date, (ii) all outstanding
D&B stock options are exercised prior to the Record Date and (iii) no change
in beneficial ownership in D&B Common Stock by such persons between December
31, 1995 and the Record Date.
(6) The Capital Group Companies, Inc. ("CGCI") and its wholly-owned subsidiary,
Capital Research and Management Company ("CRMC"), jointly filed a Schedule
13G with the Securities and Exchange Commission ("SEC") on February 9, 1996
with respect to D&B Common Stock. This Schedule 13G shows that CRMC, a
registered investment adviser, had, as of December 31, 1995, sole
dispositive power (but no voting power) over 12,389,000 shares of D&B Common
Stock. Because of the SEC's ownership attribution rules, the Schedule 13G
also shows CGCI as having sole dispositive power over such shares, as well
as sole voting and dispositive power over an additional 1,101,000 shares and
sole dispositive power (but no voting power) over a further 1,369,800
shares.
66
<PAGE> 69
ACNIELSEN MANAGEMENT AND EXECUTIVE COMPENSATION
Nicholas L. Trivisonno is currently Executive Vice President - Finance and
Chief Financial Officer of D&B and Chairman and Chief Executive Officer of
ACNielsen. Mr. Trivisonno will resign from his positions at D&B effective upon
the Distribution. The directors of ACNielsen will include one person who is
currently a director of D&B and certain persons who are not currently directors
of D&B. See "-- ACNielsen Board of Directors". In addition to Mr. Trivisonno,
most of the other executive officers of ACNielsen will be drawn from the current
management of D&B and A.C. Nielsen Company and will resign from their positions
at D&B, if any, effective upon the Distribution. See "-- ACNielsen Executive
Officers".
ACNIELSEN BOARD OF DIRECTORS
Immediately after the Distribution, ACNielsen expects to have a board
composed of eleven directors.
The following table sets forth the names, in alphabetical order, and
information as to the persons who are expected to serve as directors of
ACNielsen following the Distribution, including information as to service with
D&B, if applicable.
<TABLE>
<CAPTION>
DIRECTOR
POSITIONS WITH OF D&B PRINCIPAL OCCUPATION OTHER
NAME DUN & BRADSTREET SINCE DURING LAST FIVE YEARS AGE DIRECTORSHIPS
- ------------------------- ------------------------- -------- ------------------------- --- -------------------------
<S> <C> <C> <C> <C> <C>
Robert H. Beeby None -- Non-Executive Chairman, 64 Applied Extrusion
Service America Technologies, Inc.;
Corporation, Stamford, CT Church & Dwight Company;
(food service Columbia Gas System, Inc.
operations), 9/91 to
present; acting Chief
Executive Officer, 10/92
to 2/93; President &
Chief Executive Officer
of Frito-Lay, Inc. from
1989 to 1991.
Michael P. Connors Senior Vice President and -- Senior Vice President and 41
Chief Human Resources Chief Human Resources
Officer Officer, D&B, 3/95 to
present; Vice Chairman,
ACNielsen, 4/96 to
present; Senior Vice
President, American
Express Travel Related
Services, New York, NY,
9/89 to 3/95.
Donald W. Griffin None -- Chairman, President and 59 Olin Corporation;
Chief Executive Officer, Rayonier, Inc.; Rayonier
Olin Corporation, Forest Products Company.
Norwalk, CT (manufacturer
of chemicals, metals and
ammunition), 4/96 to
present; President and
Chief Executive Officer,
1/96 to 4/96; President
and Chief Operating
Officer, 2/94 to 12/95;
Vice Chairman --
Operations, 1/93 to 2/94;
Executive Vice President
10/87 to 1/93.
Thomas C. Hays None -- Chairman and Chief 61 American Brands, Inc.
Executive Officer,
American Brands, Inc.,
Old Greenwich, CT
(consumer products), 1/95
to present; President and
Chief Operating Officer,
1/88 to 12/94.
</TABLE>
67
<PAGE> 70
<TABLE>
<CAPTION>
DIRECTOR
POSITIONS WITH OF D&B PRINCIPAL OCCUPATION OTHER
NAME DUN & BRADSTREET SINCE DURING LAST FIVE YEARS AGE DIRECTORSHIPS
- ------------------------- ------------------------- -------- ------------------------- --- -------------------------
<S> <C> <C> <C> <C> <C>
Karen L. Hendricks None -- President and Chief 48 Baldwin Piano & Organ
Executive Officer, Company.
Baldwin Piano & Organ
Company, Loveland, OH
(manufacturer of musical
instruments), 11/94 to
present; Executive Vice
President & General
Manager, Skin Care
Division, The Dial Corp,
Phoenix, AZ (consumer
products), 5/92 to 9/94;
Manager, Worldwide
Strategic Planning, Hair
Care, Procter & Gamble
Company, Cincinnati, OH
(consumer products), 9/71
to 5/92.
Robert M. Hendrickson None -- President, Juno Capital 67
Partners Ltd., Jupiter,
FL (corporate finance and
investment management
consulting), 4/88 to
present; Chairman, Juno
Land Investment
Corporation, Jupiter, FL
(real estate
development), 1/90 to
present.
Robert J Lievense Executive Vice President -- Executive Vice President, 50
D&B, 2/95 to present;
President and Chief
Operating Officer,
ACNielsen, 1/96 to
present; Senior Vice
President, D&B, 7/93 to
2/95; Chairman, Dataquest
Incorporated, 9/91 to
7/93; President, NCH
Promotional Services,
Inc., 8/90 to 7/93.
John R. Meyer Director 1967 Professor, Harvard 68 D&B; Union Pacific
University, 7/73 to Corporation; Missouri
present. Pacific Railroad Company;
The Mutual Life Insurance
Company of New York.
Brian B. Pemberton None -- President -- Skycell 52
Services, American Mobile
Satellite Corporation,
Reston, VA (mobile
communications), 8/96 to
present; President &
Chief Executive Officer,
4/95 to 8/96; President,
4/90 to 4/95.
Robert N. Thurston None -- Business consultant, 1985 64 McDonald's Corporation;
to present; former Ag-Bag International Ltd.
Executive Vice President,
The Quaker Oats Company.
</TABLE>
68
<PAGE> 71
<TABLE>
<CAPTION>
DIRECTOR
POSITIONS WITH OF D&B PRINCIPAL OCCUPATION OTHER
NAME DUN & BRADSTREET SINCE DURING LAST FIVE YEARS AGE DIRECTORSHIPS
- ------------------------- ------------------------- -------- ------------------------- --- -------------------------
<S> <C> <C> <C> <C> <C>
Nicholas L. Trivisonno Executive Vice President- -- Executive Vice President- 49 Rayonier, Inc.; Yankee
Finance and Chief Finance and Chief Energy Systems, Inc.
Financial Officer Financial Officer, D&B,
9/95 to present; Chairman
and Chief Executive
Officer, ACNielsen, 1/96
to present; Executive
Vice President- Strategic
Planning and Group
President, GTE
Corporation, Stamford, CT
(telecommunications),
10/93 to 7/95; Senior
Vice President-Finance,
1/89 to 10/93; director,
4/95 to 7/95.
</TABLE>
DIRECTORS' COMPENSATION
The Board of Directors of Dun & Bradstreet has approved a Director
compensation program for ACNielsen. It is anticipated that the Board of
Directors of ACNielsen will adopt and implement such program as described below
prior to, on or shortly after the Distribution Date.
If such program is adopted and implemented each non-employee Director will
receive a 1996 retainer of $12,500; thereafter, the retainer will be paid at an
annual rate of $25,000. Each non-employee Director who is the Chairman of a
Committee of the Board of Directors will be paid an additional retainer of
$3,000 for 1996 and annually thereafter. A fee of $1,000 will be paid to each
non-employee Director for every Board or Committee meeting attended. Directors
who are employed by ACNielsen shall receive no retainers or meeting fees.
Each non-employee Director who commences service on the ACNielsen Board
prior to ACNielsen's 1997 Annual Meeting of Shareholders will receive an initial
grant of restricted ACNielsen Common Stock valued at $30,000 on the date a
non-employee Director commences service on the Board (the "Service Date") or on
the first day of regular trading in ACNielsen Common Stock after the
Distribution, whichever is later. Such restricted shares shall generally vest
five years from the date of grant.
On the Service Date or on the first day of regular trading in ACNielsen
Common Stock after the Distribution, whichever is later, a non-employee Director
will receive an option grant for 10,000 shares of ACNielsen Common Stock.
Generally, one-sixth of such options shall vest annually commencing on the first
anniversary of the date of grant. On the second anniversary of the Service Date,
and on each anniversary thereafter, a non-employee Director will receive
additional option grants for 5,000 shares of ACNielsen Common Stock. Such
options will vest in accordance with a schedule set by the Compensation
Committee of the ACNielsen Board of Directors at the time of grant. The exercise
price per share of all options granted shall be not less than 100% of the Fair
Market Value of a share on the date of grant.
At a non-employee Director's election, all cash compensation (i.e., meeting
fees and retainers) may be deferred until such Director ceases being a director.
At such Director's election, such compensation may be deferred in share units
and/or cash units. If a non-employee Director elects to defer in share units, he
or she will receive credit, as of the date on which such compensation would
otherwise have been paid, for a number of share units equal to (i) the amount of
such compensation divided by (ii) the Fair Market Value of one share on such
date. A non-employee Director who defers in share units will also receive
dividend equivalents on credited share units in the form of additional share
units. If a Director elects to defer in cash units, he or she will receive
credit, as of the date on which such compensation would otherwise have been
paid, for a number of cash units equal to the amount of such compensation and
will receive notional compound interest, earned at the prime rate of Chase
Manhattan Bank on credited cash units in the form of additional cash units.
69
<PAGE> 72
COMMITTEES OF THE ACNIELSEN BOARD OF DIRECTORS
Prior to the Distribution, the ACNielsen Board of Directors will establish
Audit and Finance, Compensation, and Nominating Committees and designate
specific functions and areas of oversight as to such committees. The Audit and
Finance Committee will consist initially of Messrs. Hendrickson (Chairman),
Griffin, Meyer and Pemberton and Ms. Hendricks. The Compensation Committee will
consist initially of Messrs. Thurston (Chairman), Griffin, Hays and Pemberton.
The Nominating Committee will consist initially of Messrs. Meyer (Chairman),
Beeby, Hays, Hendrickson and Trivisonno.
ACNIELSEN EXECUTIVE OFFICERS
Listed below is certain information as to the executive officers who have
been selected to serve after the Distribution.
<TABLE>
<CAPTION>
NAME, POSITION WITH ACNIELSEN AND AGE BIOGRAPHICAL DATA
- ---------------------------------------------- ----------------------------------------------
<S> <C>
Nicholas L. Trivisonno, 49.................... See information under "ACNielsen Board of
Chairman and Chief Executive Officer Directors."
Robert J Lievense, 50......................... See information under "ACNielsen Board of
President and Chief Operating Officer Directors."
Michael P. Connors, 41........................ See information under "ACNielsen Board of
Vice Chairman Directors."
Earl H. Doppelt, 43........................... Senior Vice President and General Counsel,
Executive Vice President and General Counsel D&B, 5/94 to present; Senior Vice President
and Deputy General Counsel, Paramount
Communications Inc. (and Viacom Inc.), 9/92 to
5/94; Vice President and Deputy General
Counsel 10/86 to 9/92.
Robert J. Chrenc, 52.......................... Executive Vice President and Chief Financial
Executive Vice President and Chief Financial Officer, ACNielsen, 6/96 to present; Partner,
Officer Arthur Andersen LLP, 1979 to 5/96.
</TABLE>
70
<PAGE> 73
COMPENSATION OF ACNIELSEN EXECUTIVE OFFICERS
The following table discloses compensation paid by D&B for services
rendered to D&B in 1995 to ACNielsen's Chief Executive Officer and to each of
the persons who are anticipated to be one of the three other most highly
compensated executive officers of ACNielsen following the Distribution. Mr.
Chrenc, Executive Vice President and Chief Financial Officer, who is anticipated
to be one of the five most highly compensated executive officers of ACNielsen
following the Distribution, was not affiliated with D&B in 1995. During the
period presented, the individuals were compensated in accordance with D&B's
plans and policies.
SUMMARY COMPENSATION TABLE
FOR SERVICE WITH D&B
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------ ------------------------ ----------
(E) (G)
OTHER (F) SECURITIES (H) (I)
ANNUAL RESTRICTED UNDERLYING LONG- TERM ALL OTHER
(A) (C) (D) COMPENSA- STOCK OPTIONS/ INCENTIVE COMPENSA-
NAME AND PRINCIPAL POSITION (B) SALARY BONUS(1) TION(2) AWARD(S)(3) SARS(4) PAYOUTS(5) TION(6)
WITH ACNIELSEN YEAR ($) ($) ($) ($) (#) ($) ($)
- ----------------------------- ---- ------- -------- --------- ----------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nicholas L. Trivisonno (7)... 1995 146,591 175,000 0 0 24,114 0 0
Chairman and Chief
Executive Officer
Robert J Lievense............ 1995 411,026 265,662 1,187 307,988 15,696 116,112 23,216
President and Chief
Operating Officer
Michael P. Connors (8)....... 1995 225,000 439,180 0 249,951 16,759 0 0
Vice Chairman
Earl H. Doppelt.............. 1995 340,000 446,960 0 79,992 9,411 0 5,671
Executive Vice President
and General Counsel
</TABLE>
- ---------------
(1) Bonus amounts shown were earned in 1995 and paid in 1995 and/or 1996.
(2) Amounts shown represent reimbursement for taxes paid by the named executive
officers with respect to D&B-directed spousal travel and certain other
expenses.
(3) Amounts shown represent dollar value on the date of grant. The grant to Mr.
Lievense consisted of a grant in connection with a performance unit award
of 1,149 shares which would have vested one-third in each year of the three
years following the date of the award and an additional grant with respect
to a promotion during 1995 of 4,807 shares which will vest 100% two years
following the date of the award. The grants to Messrs. Connors and Doppelt
consisted of grants made in accordance with the terms of their employment.
Mr. Connors received two grants, one for 3,846 shares which would have
vested 50% in each of the two years following the date of the award and a
second grant for 854 shares which would have vested 100% one year following
the date of the award. Mr. Doppelt received a grant for 1,584 shares which
would have vested one-third in each of the three years following the date
of the award. Dividends are paid at the rate established from time to time
for D&B Common Stock. In addition, the number and value of the aggregate
restricted stock holdings of the named executive officers at December 31,
1995 were: Mr. Lievense -- 8,711 shares ($564,038); Mr. Connors -- 4,700
($304,325) and Mr. Doppelt -- 6,917 shares ($447,876). Notwithstanding the
original vesting schedules, all restricted stock will vest as of the
Distribution.
(4) Amounts shown represent the number of non-qualified stock options, without
tandem stock appreciation rights.
(5) Amount shown represents a payment made under the D&B Key Employees
Performance Unit Plan.
(6) Amounts shown represent aggregate Company contributions for the account of
each named executive officer under the D&B Profit Participation Plan
("PPP") and the D&B Profit Participation Benefit Equalization Plan
("PPBEP"), plans which are open to employees of D&B and certain
subsidiaries upon completion of one year of service. The PPP is a
tax-qualified defined contribution plan and the PPBEP is a non-qualified
plan which provides a benefit to participants in the PPP equal to the
amount of Company
71
<PAGE> 74
contributions that would have been made to the participant's PPP account
but for certain Federal tax laws.
(7) The salary and bonus for Mr. Trivisonno represents the amount earned from
his date of employment, September 5, 1995.
(8) The salary for Mr. Connors represents the amount earned from his date of
employment, April 3, 1995.
OPTION GRANTS ON D&B COMMON STOCK TO ACNIELSEN EXECUTIVES IN LAST FISCAL YEAR
The following table provides information on fiscal year 1995 grants of
options to the named ACNielsen executives to purchase shares of D&B Common
Stock. Options to acquire D&B Common Stock will be replaced by options to
acquire ACNielsen Common Stock. See "Relationship Among D&B, Cognizant and
ACNielsen After the Distribution -- Employee Benefits Agreement". For a
discussion of contemplated option grants, see "Contemplated Option Grants"
below.
OPTION GRANTS IN LAST FISCAL YEAR TO PURCHASE D&B COMMON STOCK
<TABLE>
<CAPTION>
(B)
NUMBER OF (C)
SECURITIES % OF TOTAL (D) (F)
UNDERLYING OPTIONS/SARS EXERCISE GRANT DATE
OPTIONS/SARS GRANTED TO OR BASE (E) PRESENT
(A) GRANTED(1) EMPLOYEES IN PRICE EXPIRATION VALUE(2)
NAME (#) FISCAL YEAR ($/SHARE) DATE ($)
- ---------------------------------- ------------- ------------- --------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Nicholas L. Trivisonno............ 11,294 1.32% 63.75 12/19/05 104,244
12,820 58.50 09/19/05 101,919
Robert J Lievense................. 12,235 0.86% 63.75 12/19/05 112,929
3,461 52.00 04/18/05 24,435
Michael P. Connors................ 7,529 0.92% 63.75 12/19/05 69,493
9,230 52.00 04/18/05 65,164
Earl H. Doppelt................... 9,411 0.52% 63.75 12/19/05 86,864
</TABLE>
- ---------------
(1) Amounts shown represent the number of non-qualified stock options, without
tandem stock appreciation rights ("SARs"), granted in 1995. Options may not
be exercised for at least one year after grant and may then be exercised in
installments of 25% of the grant amount each year until they are 100%
vested. Payment must be made in full upon exercise in cash or Common Stock.
The option holder may elect to have shares of D&B Common Stock issuable
upon exercise withheld by D&B to pay withholding taxes due. The options
shown include Limited SARs in tandem with the options. Limited SARs are
exercisable only if and to the extent that the related option is
exercisable and are exercisable only during the 30-day period following the
acquisition of at least 20% of the outstanding D&B Common Stock pursuant to
a tender or exchange offer not made by D&B. Each Limited SAR permits the
holder to receive cash equal to the excess over the related option exercise
price of the highest price paid pursuant to a tender or exchange offer for
D&B Common Stock which is in effect at any time during the 60 days
preceding the date upon which the Limited SAR is exercised. Limited SARs
can be exercised regardless of whether D&B supports or opposes the offer.
(2) Grant date present value is based on the Black-Scholes option valuation
model, which makes the following material assumptions for the April 19,
1995 grant, the September 20, 1995 grant and the December 20, 1995 grant,
respectively: an expected stock-price volatility factor of 15.006%, 15.455%
and 15.911%, a risk-free rate of return of 7.06%, 6.20% and 5.93%,
dividends at the annualized rate of $2.60, $2.64 and $2.64 per share, a
time of exercise of ten years, and reduction of approximately 9.73% to
reflect the probability of forfeiture due to termination prior to vesting
and approximately 10.47%, 10.55% and 11.24% to reflect the probability of a
shortened option term due to termination of employment prior to the option
expiration date. These assumptions may or may not be fulfilled. The
ultimate values of the options will depend on the future market price of
D&B's stock which cannot be forecast with reasonable accuracy. The actual
value, if any, an optionee will realize upon exercise of an option will
depend on the excess of the market value of D&B's Common Stock over the
exercise price on the date the option is exercised.
72
<PAGE> 75
AGGREGATE D&B OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL-YEAR END D&B
OPTION VALUES
The following table provides information on option exercises in 1995 by the
named executives of ACNielsen and the value of each such executive's unexercised
options to acquire D&B Common Stock at December 31, 1995. See also,
"Relationship Among D&B, Cognizant and ACNielsen After the
Distribution -- Employee Benefits Agreement."
AGGREGATE D&B OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
(D) (E)
NUMBER OF SECURITIES VALUE OF UNEXERCISED
(B) UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES (C) D&B OPTIONS/SARS AT D&B OPTIONS/SARS AT
ACQUIRED ON VALUE FISCAL YEAR-END(2)(#) FISCAL YEAR-END(3)($)
(A) EXERCISE REALIZED(1) --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Nicholas L. Trivisonno...... 0 0 0 24,114 0 91,419
Robert J Lievense........... 0 0 28,828 32,271 341,838 179,569
Michael P. Connors.......... 0 0 0 16,759 0 125,212
Earl H. Doppelt............. 0 0 9,638 38,332 88,172 273,992
</TABLE>
- ---------------
(1) Amounts shown represent the value realized upon the exercise of stock
options during 1995, which equals the difference between the exercise price
of the options and the closing market price of the underlying Common Stock
on the date preceding the exercise date.
(2) No SARs were outstanding at December 31, 1995.
(3) The values shown equal the difference between the exercise price of
unexercised in-the-money options and the closing market price of the
underlying Common Stock at December 29, 1995. Options are in-the-money if
the fair market value of the Common Stock exceeds the exercise price of the
option.
LONG-TERM D&B INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E) (F)
PERFORMANCE
OR OTHER
PERIOD UNTIL ESTIMATED FUTURE PAYOUTS
NO. OF MATURATION UNDER NON-STOCK PRICE-BASED PLANS(2)
SHARES, UNITS OR PAYOUT -------------------------------------
OR OTHER ------------ THRESHOLD($) TARGET($) MAXIMUM($)
NAME RIGHTS(1)($) (0%) (100%) (200%)
- ------------------------------------ ------------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Nicholas L. Trivisonno.............. 0 N/A N/A N/A N/A
Robert J Lievense................... 120,000 Three Years 0 120,000 240,000
Michael P. Connors.................. 320,000 Three Years 0 320,000 640,000
Earl H. Doppelt..................... 0 N/A N/A N/A N/A
</TABLE>
- ---------------
(1) Amounts shown represent the nominal dollar value of grants under the D&B
Performance Unit Plan to Mr. Lievense with respect to a promotion during
1995 and to Mr. Connors with respect to the terms of his employment. In
connection with the Distribution, the three-year performance unit grant
that otherwise would have been made to the named executive officers in 1995
was converted into a one-year cash award that is not included in this table
because it is not a "long-term" award as defined by the Securities and
Exchange Commission.
(2) Awards may range from 0 to 200% of the nominal grant value based on
achievements within a range of performance goals.
73
<PAGE> 76
D&B RETIREMENT BENEFITS
The following table sets forth the estimated aggregate annual benefits
payable under the D&B Retirement Plan, D&B's Supplemental Executive Benefit Plan
and Pension Benefit Equalization Plan to persons in specified average final
compensation and credited service classifications upon retirement at age 65.
Amounts shown in the table include U.S. Social Security benefits which would be
deducted in calculating benefits payable under these plans. These aggregate
annual retirement benefits do not increase as a result of additional credited
service after 15 years.
<TABLE>
<CAPTION>
ESTIMATED AGGREGATE ANNUAL D&B RETIREMENT
BENEFIT ASSUMING CREDITED SERVICE OF:
AVERAGE FINAL --------------------------------------------------------------
COMPENSATION FROM D&B 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 550,000............................ $ 330,000 $ 330,000 $ 330,000 $ 330,000 $ 330,000
700,000........................... 420,000 420,000 420,000 420,000 420,000
850,000........................... 510,000 510,000 510,000 510,000 510,000
1,000,000........................... 600,000 600,000 600,000 600,000 600,000
1,300,000........................... 780,000 780,000 780,000 780,000 780,000
1,600,000........................... 960,000 960,000 960,000 960,000 960,000
1,900,000........................... 1,140,000 1,140,000 1,140,000 1,140,000 1,140,000
</TABLE>
The number of years of credited service for Messrs. Trivisonno, Lievense,
Connors and Doppelt are, respectively, zero, six, zero and one.
Compensation, for the purpose of determining retirement benefits, consists
of salary, wages, cash bonuses, commissions and overtime pay. Severance pay,
contingent payments and other forms of special remuneration are excluded.
Bonuses included in the Summary Compensation Table above are not paid until the
year following the year in which they are accrued and expensed; therefore,
compensation for purposes of determining retirement benefits varies from the
Summary Compensation Table amounts in that bonuses expensed in the previous year
but paid in the current year are part of retirement compensation in the current
year and current year's bonuses accrued and included in the Summary Compensation
Table are not. For 1995, compensation for purposes of determining retirement
benefits for the named executive officers differed by less than 10% from the
amounts shown in the table except that compensation for 1995 for purposes of
determining retirement benefits for Messrs. Trivisonno, Connors and Doppelt was
$0, $0 and $540,000, respectively.
Average final compensation is defined as the highest average annual
compensation during five consecutive twelve-month periods in the last ten
consecutive twelve-month periods of the member's credited service. Members vest
in their accrued retirement benefit upon completion of five years' service. The
benefits shown in the table above are calculated on a straight-life annuity
basis.
LIMITED SARS
D&B Limited SARs held by ACNielsen executive officers will be converted
into Limited SARs of ACNielsen which will have the terms described for D&B
Limited SARs in footnote 1 under the caption "Option Grants on D&B Common Stock
to ACNielsen Executives in Last Fiscal Year" above. See "Relationship Among D&B,
Cognizant and ACNielsen After the Distribution -- Employee Benefits Agreement."
CONTEMPLATED OPTION GRANTS
The D&B Board of Directors has approved a program under which certain
ACNielsen executive officers and senior management will receive options pursuant
to grants by the ACNielsen Compensation Committee having an exercise price per
share equal to the fair market value per share of ACNielsen Common Stock on the
date of grant. Options granted upon conversion of unexercised D&B stock options
(see "Relationship Among D&B, Cognizant and ACNielsen After the
Distribution -- Employee Benefits Agreement") and new option grants will
represent a number of shares equal to approximately 5.5% and 9.0%, respectively,
of the anticipated number of outstanding shares (assuming no exercise of the
unexercised D&B stock options). Pursuant to the program, it is anticipated that
no new grants will be made to executive officers for three years.
74
<PAGE> 77
ACNIELSEN SECURITY OWNERSHIP BY
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All the outstanding shares of ACNielsen Common Stock are currently held by
D&B. The following table sets forth information concerning shares of ACNielsen
Common Stock that are expected to be beneficially owned after the Distribution
by each of the ACNielsen directors, by each of the executive officers named in
the ACNielsen Summary Compensation Table, by all such directors and executive
officers as a group and by each person known by ACNielsen to beneficially own
more than 5% of the outstanding shares of D&B Common Stock as of August 31,
1996. Stock ownership information is based on (i) the number of shares of D&B
Common Stock held by directors and executive officers as of August 31, 1996 and
includes shares of D&B restricted stock, all of which will vest prior to the
Record Date, (ii) the number of shares held by The Capital Group Companies, Inc.
and a subsidiary thereof as of December 31, 1995 and (iii) one share of
ACNielsen Common Stock being distributed for every three shares of D&B Common
Stock. See "The Distribution" and "ACNielsen Management and Executive
Compensation -- Compensation of ACNielsen Executive Officers". Information
regarding shares subject to options reflects shares of D&B Common Stock subject
to options as of August 31, 1996 and exercisable within 60 days thereafter, all
of which will be converted into options that are exercisable into shares of
ACNielsen Common Stock. See "Relationship Among D&B, Cognizant and ACNielsen
After the Distribution -- Employee Benefits Agreement". All directors and
executive officers as a group beneficially owned less than one percent of the
outstanding shares of D&B Common Stock on August 31, 1996 and are expected to
beneficially own less than one percent of the shares of ACNielsen Common Stock
outstanding as of the Distribution Date.
<TABLE>
<CAPTION>
NUMBER OF SHARES
SUBJECT TO
OPTIONS
NUMBER OF SHARES EXERCISABLE
BENEFICIALLY WITHIN 60
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNED(2) DAYS(2)(3)
- ------------------------------------------------------ ------------------- ----------------
<S> <C> <C>
Robert H. Beeby....................................... -- --
Robert J. Chrenc...................................... -- --
Michael P. Connors.................................... 1,566 769
Earl H. Doppelt....................................... 1,782 5,500
Donald W. Griffin..................................... -- --
Thomas C. Hays........................................ -- --
Karen L. Hendricks.................................... -- --
Robert M. Hendrickson................................. -- --
Robert J Lievense(4).................................. 1,971 6,137
John R. Meyer......................................... 1,133 --
Brian B. Pemberton.................................... -- --
Robert N. Thurston.................................... -- --
Nicholas L. Trivisonno................................ -- 1,068
All Directors and Executive Officers as a Group....... 6,452 13,474
The Capital Group Companies, Inc. and its subsidiary,
Capital Research and Management Company
333 South Hope Street,
Los Angeles, CA 90071............................... 4,953,266(5)(6) --
</TABLE>
- ---------------
(1) The mailing address for each of the ACNielsen directors and executive
officers listed herein is 177 Broad Street, Stamford, Connecticut 06901.
(2) As of August 31, 1996.
(3) Represents the number of shares of ACNielsen Common Stock which would be
obtained in the Distribution if the D&B stock options were exercised prior
to the Record Date. Unexercised D&B stock options held by ACNielsen
employees as of the Distribution Date will be converted into options that
are exercisable into shares of ACNielsen Common Stock based upon a
conversion formula to be calculated after the Distribution Date. See
"Relationship Among D&B, Cognizant and ACNielsen After the
Distribution -- Employee Benefits Agreement".
(4) Includes 100 shares held in the Robert J Lievense IRA.
75
<PAGE> 78
(5) Represents 8.31% of the shares of ACNielsen Common Stock expected to be
outstanding as of the Distribution Date based on one share of ACNielsen
Common Stock being distributed for every three shares of D&B Common Stock
held on the Record Date and assuming (i) no change in the number of
outstanding shares of D&B Common Stock from August 31, 1996 to the Record
Date, (ii) all outstanding D&B stock options are exercised prior to the
Record Date and (iii) no change in the number of shares of D&B Common Stock
beneficially held by such persons between December 31, 1995 and the Record
Date.
(6) CGCI and its wholly-owned subsidiary, CRMC, jointly filed a Schedule 13G
with the SEC on February 9, 1996 with respect to D&B Common Stock. This
Schedule 13G shows that CRMC, a registered investment adviser, had, as of
December 31, 1995, sole dispositive power (but no voting power) over
12,389,000 shares of D&B Common Stock. Because of the SEC's ownership
attribution rules, the Schedule 13G also shows CGCI as having sole
dispositive power over such shares, as well as sole voting and dispositive
power over an additional 1,101,000 shares and sole dispositive power (but no
voting power) over a further 1,369,800 shares.
76
<PAGE> 79
DESCRIPTION OF COGNIZANT CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
The total number of shares of all classes of stock that Cognizant has
authority to issue under its Restated Certificate of Incorporation is
420,000,000 shares of which 400,000,000 shares represent shares of Cognizant
Common Stock, 10,000,000 shares represent shares of Preferred Stock (the
"Cognizant Preferred Stock") and 10,000,000 shares represent shares of Series
Common Stock (the "Cognizant Series Common Stock"). Based on shares of
D&B Common Stock outstanding as of October , 1996, and a distribution ratio of
one share of Cognizant Common Stock for every one share of D&B Common Stock,
approximately shares of Cognizant Common Stock would be distributed to
holders of D&B Common Stock on the Distribution Date.
COGNIZANT COMMON STOCK
Subject to any preferential rights of any Cognizant Preferred Stock or
Cognizant Series Common Stock created by the Board of Directors of Cognizant,
each outstanding share of Cognizant Common Stock will be entitled to such
dividends, if any, as may be declared from time to time by the Board of
Directors of Cognizant. See "Dividend Policy -- Cognizant Dividend Policy". Each
outstanding share is entitled to one vote on all matters submitted to a vote of
stockholders. In the event of liquidation, dissolution or winding up of
Cognizant, holders of Cognizant Common Stock are entitled to receive on a pro
rata basis any assets remaining after provision for payment of creditors and
after payment of any liquidation preferences to holders of Cognizant Preferred
Stock and Cognizant Series Common Stock.
COGNIZANT PREFERRED STOCK AND COGNIZANT SERIES COMMON STOCK
Each of the authorized Preferred Stock and the authorized Series Common
Stock of Cognizant is available for issuance from time to time in one or more
series at the discretion of the Cognizant Board of Directors without stockholder
approval. The Cognizant Board of Directors has the authority to prescribe for
each series of Cognizant Preferred Stock or Cognizant Series Common Stock it
establishes the number of shares in that series, the voting rights (if any) to
which such shares in that series are entitled, the consideration for such shares
in that series and the designations, powers, preferences and relative,
participating, optional or other special rights, and such qualifications,
limitations or restrictions of the shares in that series. Depending upon the
rights of such Preferred Stock or Series Common Stock, as applicable, the
issuance of Cognizant Preferred Stock or Cognizant Series Common Stock, as
applicable, could have an adverse effect on holders of Cognizant Common Stock by
delaying or preventing a change in control of Cognizant, making removal of the
present management of Cognizant more difficult or resulting in restrictions upon
the payment of dividends and other distributions to the holders of Cognizant
Common Stock.
AUTHORIZED BUT UNISSUED CAPITAL STOCK
Delaware law does not require stockholder approval for any issuance of
authorized shares. However, the listing requirements of the NYSE, which would
apply so long as the Cognizant Common Stock remained listed on the NYSE, require
stockholder approval of certain issuances equal to or exceeding 20% of the then
outstanding voting power or then outstanding number of shares of Cognizant
Common Stock. These additional shares may be used for a variety of corporate
purposes, including future public offerings to raise additional capital or to
facilitate corporate acquisitions. Cognizant currently does not have any plans
to issue additional shares of Cognizant Common Stock, Cognizant Preferred Stock
or Cognizant Series Common Stock other than in connection with employee
compensation plans. See, however, "Certain Considerations -- Considerations
Relevant to Cognizant -- Acquisitions."
One of the effects of the existence of unissued and unreserved Cognizant
Common Stock, Cognizant Preferred Stock and Cognizant Series Common Stock may be
to enable the Board of Directors of Cognizant to issue shares to persons
friendly to current management, which issuance could render more difficult or
discourage an attempt to obtain control of Cognizant by means of a merger,
tender offer, proxy contest or
77
<PAGE> 80
otherwise, and thereby protect the continuity of Cognizant's management and
possibly deprive the stockholders of opportunities to sell their shares of
Cognizant Common Stock at prices higher than prevailing market prices. Such
additional shares also could be used to dilute the stock ownership of persons
seeking to obtain control of Cognizant pursuant to the operation of the
Cognizant Rights Plan, which is discussed below.
COGNIZANT RIGHTS PLAN
On October , 1996 the Board of Directors of Cognizant declared a dividend
of one preferred share purchase right (a "Cognizant Right") for each outstanding
share of Cognizant Common Stock. The dividend was payable on October , 1996
(the "Cognizant Record Date") to D&B, which was the sole stockholder of record
on the Cognizant Record Date. Each Cognizant Right entitles the registered
holder to purchase from Cognizant one one-thousandth of a share of Series A
Junior Participating Cognizant Preferred Stock, par value $.01 per share (the
"Cognizant Preferred Stock"), of Cognizant at a price of $ per one one-
thousandth of a share of Cognizant Preferred Stock (as the same may be adjusted,
hereinafter referred to as the "Purchase Price"), subject to adjustment. The
description and terms of the Cognizant Rights are set forth in a Cognizant
Rights Agreement dated as of October , 1996, as the same may be amended from
time to time (the "Cognizant Rights Agreement"), between Cognizant and First
Chicago Trust Company, as the Cognizant Rights Agent (the "Cognizant Rights
Agent").
Until the earlier to occur of (i) 10 days following a public announcement
that a person or group of affiliated or associated persons (with certain
exceptions, hereinafter referred to in this description of Cognizant Rights, an
"Acquiring Person") have acquired beneficial ownership of 15% or more of the
outstanding shares of Cognizant Common Stock or (ii) 10 business days (or such
later date as may be determined by action of the Board of Directors prior to
such time as any person or group of affiliated persons becomes an Acquiring
Person) following the commencement of, or announcement of an intention to make,
a tender offer or exchange offer the consummation of which would result in the
beneficial ownership by a person or group of 15% or more of the outstanding
shares of Cognizant Common Stock (the earlier of such dates hereinafter referred
to in this description of Cognizant Rights as the "Rights Distribution Date"),
the Cognizant Rights will be evidenced by the certificates representing
Cognizant Common Stock.
The Cognizant Rights Agreement provides that, until the Rights Distribution
Date (or earlier redemption or expiration of the Cognizant Rights), the
Cognizant Rights will be transferred with and only with the Cognizant Common
Stock. Until the Rights Distribution Date (or earlier redemption or expiration
of the Cognizant Rights), Cognizant Common Stock certificates will contain a
notation incorporating the Cognizant Rights Agreement by reference. Until the
Rights Distribution Date (or earlier redemption or expiration of the Cognizant
Rights), the surrender for transfer of any certificates for shares of Cognizant
Common Stock will also constitute the transfer of the Cognizant Rights
associated with the shares of Cognizant Common Stock represented by such
certificate. As soon as practicable following the Rights Distribution Date,
separate certificates evidencing the Cognizant Rights ("Cognizant Right
Certificates") will be mailed to holders of record of the Cognizant Common Stock
as of the close of business on the Rights Distribution Date and such separate
Cognizant Right Certificates alone will evidence the Cognizant Rights.
The Cognizant Rights are not exercisable until the Rights Distribution
Date. The Cognizant Rights will expire on October , 2006 (hereinafter referred
to in this description of Cognizant Rights as the "Final Expiration Date"),
unless the Final Expiration Date is advanced or extended or unless the Cognizant
Rights are earlier redeemed or exchanged by Cognizant, in each case as described
below.
The Purchase Price payable, and the number of shares of Cognizant Preferred
Stock or other securities or property issuable, upon exercise of the Cognizant
Rights are subject to adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Cognizant Preferred Stock, (ii) upon the grant to
holders of the Cognizant Preferred Stock of certain rights or warrants to
subscribe for or purchase Cognizant Preferred Stock at a price, or securities
convertible into Cognizant Preferred Stock with a conversion price, less than
the then-current market price of the Cognizant Preferred Stock or (iii) upon the
distribution to holders of the Cognizant Preferred Stock of evidences of
78
<PAGE> 81
indebtedness or assets (excluding regular periodic cash dividends or dividends
payable in Cognizant Preferred Stock) or of subscription rights or warrants
(other than those referred to above).
The Cognizant Rights are also subject to adjustment in the event of a stock
dividend on the Cognizant Common Stock payable in shares of Cognizant Common
Stock or subdivisions, consolidations or combinations of the Cognizant Common
Stock occurring, in any such case, prior to the Distribution Date.
Shares of Cognizant Preferred Stock purchasable upon exercise of the
Cognizant Rights will not be redeemable. Each share of Cognizant Preferred Stock
will be entitled, when, as and if declared, to a minimum preferential quarterly
dividend payment of $1 per share but will be entitled to an aggregate dividend
of 1,000 times the dividend declared per share of Cognizant Common Stock. In the
event of liquidation, dissolution or winding up of Cognizant, the holders of the
Cognizant Preferred Stock will be entitled to a minimum preferential liquidation
payment of $100 per share (plus any accrued but unpaid dividends) but will be
entitled to an aggregate payment of 1,000 times the payment made per share of
Cognizant Common Stock. Each share of Cognizant Preferred Stock will have 1,000
votes, voting together with the Cognizant Common Stock. Finally, in the event of
any merger, consolidation or other transaction in which shares of Cognizant
Common Stock are converted or exchanged, each share of Cognizant Preferred Stock
will be entitled to receive 1,000 times the amount received per share of
Cognizant Common Stock. These rights are protected by customary antidilution
provisions.
Because of the nature of the Cognizant Preferred Stock's dividend,
liquidation and voting rights, the value of the one one-thousandth interest in a
share of Cognizant Preferred Stock purchasable upon exercise of each Cognizant
Right should approximate the value of one share of Cognizant Common Stock.
In the event that any person or group of affiliated or associated persons
becomes an Acquiring Person, each holder of a Cognizant Right, other than
Cognizant Rights beneficially owned by the Acquiring Person (which will
thereupon become void), will thereafter have the right to receive upon exercise
of a Cognizant Right and payment of the Purchase Price, that number of shares of
Cognizant Common Stock having a market value of two times the Purchase Price.
In the event that, after a person or group has become an Acquiring Person,
Cognizant is acquired in a merger or other business combination transaction or
50% or more of its consolidated assets or earning power are sold, proper
provision will be made so that each holder of a Cognizant Right (other than
Cognizant Rights beneficially owned by an Acquiring Person which will have
become void) will thereafter have the right to receive, upon the exercise
thereof, that number of shares of common stock of the person with whom Cognizant
has engaged in the foregoing transaction (or its parent), which number of shares
at the time of such transaction will have a market value of two times the
Purchase Price.
At any time after any person or group becomes an Acquiring Person and prior
to the acquisition by such person or group of 50% or more of the outstanding
shares of Cognizant Common Stock or the occurrence of an event described in the
prior paragraph, the Board of Directors of Cognizant may exchange the Cognizant
Rights (other than Cognizant Rights owned by such person or group which will
have become void), in whole or in part, at an exchange ratio of one share of
Cognizant Common Stock, or a fractional share of Cognizant Preferred Stock of
equivalent value (or of a share of a class or series of Cognizant's preferred
stock having similar rights, preferences and privileges), per Cognizant Right
(subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares of Cognizant Preferred Stock will be
issued (other than fractions which are integral multiples of one one-thousandth
of a share of Cognizant Preferred Stock, which may, at the election of
Cognizant, be evidenced by depositary receipts) and in lieu thereof, an
adjustment in cash will be made based on the market price of the Cognizant
Preferred Stock on the last trading day prior to the date of exercise.
At any time prior to the time an Acquiring Person becomes such, the Board
of Directors of Cognizant may redeem the Cognizant Rights in whole, but not in
part, at a price of $.01 per Cognizant Right (hereinafter referred to in this
description of Cognizant Rights as the "Redemption Price"). The redemption of
the Cognizant Rights may be made effective at such time, on such basis and with
such conditions as the Board of
79
<PAGE> 82
Directors in its sole discretion may establish. Immediately upon any redemption
of the Cognizant Rights, the right to exercise the Cognizant Rights will
terminate and the only right of the holders of Cognizant Rights will be to
receive the Redemption Price.
For so long as the Cognizant Rights are then redeemable, Cognizant may,
except with respect to the redemption price, amend the Cognizant Rights in any
manner. After the Cognizant Rights are no longer redeemable, Cognizant may,
except with respect to the redemption price, amend the Cognizant Rights in any
manner that does not adversely affect the interests of holders of the Cognizant
Rights.
Until a Cognizant Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of Cognizant, including, without limitation, the
right to vote or to receive dividends.
A copy of the Cognizant Rights Agreement has been filed as an Exhibit to
the Registration Statement on Form 10 of Cognizant in respect of the
registration of the Cognizant Common Stock under the Exchange Act. A copy of the
Cognizant Rights Agreement is available free of charge from Cognizant. The
summary description of the Cognizant Rights set forth above does not purport to
be complete and is qualified in its entirety by reference to the Cognizant
Rights Agreement, as the same may be amended from time to time, which is hereby
incorporated herein by reference.
CERTAIN EFFECTS OF THE COGNIZANT RIGHTS AGREEMENT
The Cognizant Rights Agreement is designed to protect stockholders of
Cognizant in the event of unsolicited offers to acquire Cognizant and other
coercive takeover tactics which, in the opinion of the Board of Directors of
Cognizant, could impair its ability to represent stockholder interests. The
provisions of the Cognizant Rights Agreement may render an unsolicited takeover
of Cognizant more difficult or less likely to occur or might prevent such a
takeover, even though such takeover may offer Cognizant's stockholders the
opportunity to sell their stock at a price above the prevailing market rate and
may be favored by a majority of the stockholders of Cognizant.
NO PREEMPTIVE RIGHTS
No holder of any class of stock of Cognizant authorized at the time of the
Distribution will have any preemptive right to subscribe to any securities of
Cognizant of any kind or class.
DELAWARE GENERAL CORPORATION LAW
The terms of Section 203 of the DGCL apply to Cognizant since it is a
Delaware corporation. Pursuant to Section 203, with certain exceptions, a
Delaware corporation may not engage in any of a broad range of business
combinations, such as mergers, consolidations and sales of assets, with an
"interested stockholder" for a period of three years from the date that such
person became an interested stockholder unless (a) the transaction that results
in the person's becoming an interested stockholder or the business combination
is approved by the board of directors of the corporation before the person
becomes an interested stockholder, (b) upon consummation of the transaction
which results in the stockholder becoming an interested stockholder, the
interested stockholder owns 85% or more of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding shares owned by
persons who are directors and also officers and shares owned by certain employee
stock plans or (c) on or after the date the person becomes an interested
stockholder, the business combination is approved by the corporation's board of
directors and by holders of at least two-thirds of the corporation's outstanding
voting stock, excluding shares owned by the interested stockholder, at a meeting
of stockholders. Under Section 203, an "interested stockholder" is defined as
any person, other than the corporation and any direct or indirect majority-owned
subsidiary, that is (a) the owner of 15% or more of the outstanding voting stock
of the corporation or (b) an affiliate or associate of the corporation and was
the owner of 15% or more of the outstanding voting stock of the corporation at
any time within the three-year period immediately prior to the date on which it
is sought to be determined whether such person is an interested stockholder.
Section 203 does not apply to a corporation that so provides in an amendment to
its certificate of incorporation or by-laws passed by a majority of its
outstanding shares, but such stockholder action does not become effective for 12
months following its adoption and would not apply to
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persons who were already interested stockholders at the time of the amendment.
Cognizant's Restated Certificate of Incorporation does not exclude Cognizant
from the restrictions imposed under Section 203.
Under certain circumstances, Section 203 makes it more difficult for a
person who would be an "interested stockholder" to effect various business
combinations with a corporation for a three-year period. The provisions of
Section 203 may encourage companies interested in acquiring Cognizant to
negotiate in advance with Cognizant's Board of Directors, because the
stockholder approval requirement would be avoided if the Board of Directors
approves either the business combination or the transaction which results in the
stockholder becoming an interested stockholder. Such provisions also may have
the effect of preventing changes in the Board of Directors of Cognizant. It is
further possible that such provisions could make it more difficult to accomplish
transactions which stockholders may otherwise deem to be in their best
interests.
PROVISIONS OF COGNIZANT RESTATED CERTIFICATE OF INCORPORATION AND AMENDED AND
RESTATED BY-LAWS AFFECTING CHANGE IN CONTROL
Certain provisions of the Cognizant Restated Certificate of Incorporation
and Amended and Restated By-laws may delay or make more difficult unsolicited
acquisitions or changes of control of Cognizant. It is believed that such
provisions will enable Cognizant to develop its business in a manner that will
foster its long-term growth without disruption caused by the threat of a
takeover not deemed by its Board of Directors to be in the best interests of
Cognizant and its stockholders. Such provisions could have the effect of
discouraging third parties from making proposals involving an unsolicited
acquisition or change of control of Cognizant, although such proposals, if made,
might be considered desirable by a majority of Cognizant's stockholders. Such
provisions may also have the effect of making it more difficult for third
parties to cause the replacement of the current Board of Directors of Cognizant.
These provisions include (i) the availability of capital stock for issuance from
time to time at the discretion of the Board of Directors (see "-- Authorized but
Unissued Capital Stock"), (ii) prohibitions against stockholders calling a
special meeting of stockholders or acting by written consent in lieu of a
meeting, (iii) requirements for advance notice for raising business or making
nominations at stockholders' meetings, (iv) the ability of the Board of
Directors to increase the size of the board and to appoint directors to newly
created directorships, (v) a classified Board of Directors and (vi) higher than
majority requirements to make certain amendments to the By-laws and Certificate
of Incorporation. These provisions are present in the Restated Certificate of
Incorporation or Amended and Restated By-laws of Cognizant.
No Stockholder Action by Written Consent; Special Meetings
The Cognizant Restated Certificate of Incorporation and Amended and
Restated By-laws provide that stockholder action can be taken only at an annual
or special meeting and cannot be taken by written consent in lieu of a meeting.
The Cognizant Restated Certificate of Incorporation and Amended and Restated
By-laws also provide that special meetings of the stockholders can be called
only by the Chief Executive Officer of Cognizant or by a vote of the majority of
the Board of Directors. Furthermore, the By-laws of Cognizant provide that only
such business as is specified in the notice of any such special meeting of
stockholders may come before such meeting.
Advance Notice for Raising Business or Making Nominations at Meetings
The By-laws of Cognizant establish an advance notice procedure for
stockholder proposals to be brought before an annual meeting of stockholders and
for nominations by stockholders of candidates for election as directors at an
annual or special meeting at which directors are to be elected. Only such
business may be conducted at an annual meeting of stockholders as has been
brought before the meeting by, or at the direction of, the Chairman of the Board
of Directors, or by a stockholder of Cognizant who is entitled to vote at the
meeting who has given to the Secretary of Cognizant timely written notice, in
proper form, of the stockholder's intention to bring that business before the
meeting. The chairman of such meeting has the authority to make such
determinations. Only persons who are nominated by, or at the direction of, the
Chairman of the Board of Directors, or who are nominated by a stockholder who
has given timely written notice, in proper form, to the
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Secretary prior to a meeting at which directors are to be elected will be
eligible for election as directors of Cognizant.
To be timely, a stockholder's notice of business to be brought before an
annual meeting and nominations of candidates for election as directors at any
annual meeting shall be delivered to the Secretary of Cognizant at the principal
executive offices of Cognizant not less than 70 days nor more than 90 days prior
to the first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is advanced by
more than 20 days, or delayed by more than 70 days, from such anniversary date,
notice by the stockholder to be timely must be so delivered not earlier than the
ninetieth day prior to such annual meeting and not later than the close of
business on the later of the seventieth day prior to such annual meeting or the
tenth day following the day on which public announcement of the date of such
meeting is first made.
To be timely, a stockholder's notice of nominations of persons for election
to the Board of Directors may be made at such a special meeting of stockholders
if the stockholder's notice shall be delivered to the Secretary of Cognizant at
the principal executive offices of Cognizant not earlier than the ninetieth day
prior to such special meeting and not later than the close of business on the
later of the seventieth day prior to such special meeting or the tenth day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting.
The notice of any nomination for election as a director must set forth the
name and address of, and the class and number of shares of Cognizant held by,
the stockholder who intends to make the nomination and the beneficial owner, if
any, on whose behalf the nomination is being made; the name and address of the
person or persons to be nominated; a representation that the stockholder is a
holder of record of stock of Cognizant entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; such other information regarding
each nominee proposed by such stockholder as would have been required to be
included in a proxy statement filed pursuant to the proxy rules of the SEC had
each nominee been nominated, or intended to be nominated, by the Board of
Directors; and the consent of each nominee to serve as a director if so elected.
Number of Directors; Filling of Vacancies; Removal
The Cognizant Restated Certificate of Incorporation and Amended and
Restated By-laws provide that newly created directorships resulting from any
increase in the authorized number of directors (or any vacancy) may be filled by
a vote of a majority of directors then in office. Accordingly, the Board of
Directors of Cognizant may be able to prevent any stockholder from obtaining
majority representation on the Board of Directors by increasing the size of the
board and filling the newly created directorships with its own nominees. If any
applicable provision of the DGCL expressly confers power on stockholders to fill
such a directorship at a special meeting of stockholders, such a directorship
may be filled at such meeting only by the affirmative vote of at least 80% in
voting power of all shares of Cognizant entitled to vote generally in the
election of directors, voting as a single class. Directors may be removed only
for cause, and only by the affirmative vote of at least 80% in voting power of
all shares of Cognizant entitled to vote generally in the election of directors,
voting as a single class.
Classified Board of Directors
The Cognizant Restated Certificate of Incorporation provides for
Cognizant's Board of Directors to be divided into three classes of directors
serving staggered three-year terms. As a result, approximately one third of
Cognizant's Board of Directors will be elected each year. See "Cognizant
Management and Executive Compensation -- Cognizant Board of Directors."
Cognizant believes that a classified board will help to assure the
continuity and stability of its Board of Directors, and its business strategies
and policies as determined by its Board, because a majority of the directors at
any given time will have prior experiences as directors of Cognizant. This
provision should also
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help to ensure that Cognizant's Board of Directors, if confronted with an
unsolicited proposal from a third party that has acquired a block of Cognizant's
voting stock, will have sufficient time to review the proposal and appropriate
alternatives and to seek the best available result for all stockholders.
This provision could prevent a party who acquires control of a majority of
the outstanding voting stock from obtaining control of Cognizant's Board of
Directors until the second annual stockholders meeting following the date the
acquiror obtains the controlling stock interest, could have the effect of
discouraging a potential acquiror from making a tender offer or otherwise
attempting to obtain control of Cognizant and could thus increase the likelihood
that incumbent directors will retain their positions.
Amendments to the Amended and Restated By-laws
The Cognizant Restated Certificate of Incorporation provides that the
affirmative vote of the holders of at least 80% in voting power of all the
shares of Cognizant entitled to vote generally in the election of directors,
voting together as a single class, shall be required in order for the
stockholders to alter, amend or repeal any provision of the Amended and Restated
By-laws which is to the same effect as provisions contained in the Restated
Certificate of Incorporation relating to (i) the amendment of the Amended and
Restated By-laws, (ii) the classified Board of Directors and the filling of
director vacancies and (iii) calling and taking actions at meetings of
stockholders.
Amendments to the Restated Certificate of Incorporation
The Cognizant Restated Certificate of Incorporation requires the
affirmative vote of the holders of at least 80% in voting power of all the
shares of Cognizant entitled to vote generally in the election of directors,
voting together as a single class, to alter, amend or repeal provisions of the
Restated Certificate of Incorporation relating to (i) the amendment of the
Restated Certificate of Incorporation and/or the Amended and Restated By-laws,
(ii) the classified Board of Directors and the filling of director vacancies and
(iii) calling and taking actions at meetings of stockholders.
INDEMNIFICATION AND LIMITATION OF LIABILITY FOR DIRECTORS AND OFFICERS
The Cognizant Restated Certificate of Incorporation provides that Cognizant
shall indemnify directors and officers to the fullest extent permitted by the
laws of the State of Delaware. The Cognizant Restated Certificate of
Incorporation also provides that a director of Cognizant shall not be liable to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended.
The indemnification rights conferred by the Restated Certificate of
Incorporation of Cognizant are not exclusive of any other right to which a
person seeking indemnification may otherwise be entitled. Cognizant will also
provide liability insurance for the directors and officers for certain losses
arising from claims or charges made against them while acting in their
capacities as directors or officers.
DESCRIPTION OF ACNIELSEN CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
The total number of shares of all classes of stock that ACNielsen has
authority to issue under its Restated Certificate of Incorporation is
160,000,000 shares of which 150,000,000 represent shares of ACNielsen Common
Stock, 5,000,000 represent shares of Preferred Stock (the "ACNielsen Preferred
Stock") and 5,000,000 shares represent shares of Series Common Stock (the
"ACNielsen Series Common Stock"). Based on shares of D&B Common Stock
outstanding as of October , 1996, and a distribution ratio of one share of
ACNielsen Common Stock for every three shares of D&B Common Stock, approximately
shares of ACNielsen Common Stock would be distributed to holders of
D&B Common Stock on the Distribution Date.
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ACNIELSEN COMMON STOCK
Subject to any preferential rights of any ACNielsen Preferred Stock or
ACNielsen Series Common Stock created by the Board of Directors of ACNielsen,
each outstanding share of ACNielsen Common Stock will be entitled to such
dividends as may be declared from time to time by the Board of Directors of
ACNielsen. See "Dividend Policy -- ACNielsen Dividend Policy". Each outstanding
share is entitled to one vote on all matters submitted to a vote of
stockholders. In the event of liquidation, dissolution or winding up of
ACNielsen, holders of ACNielsen Common Stock will be entitled to receive on a
pro rata basis any assets remaining after provision for payment of creditors and
after payment of any liquidation preferences to holders of ACNielsen Preferred
Stock and ACNielsen Series Common Stock.
ACNIELSEN PREFERRED STOCK AND ACNIELSEN SERIES COMMON STOCK
Each of the authorized Preferred Stock and the authorized Series Common
Stock of ACNielsen is available for issuance from time to time in one or more
series at the discretion of the ACNielsen Board of Directors without stockholder
approval. The ACNielsen Board of Directors has the authority to prescribe for
each series of ACNielsen Preferred Stock or ACNielsen Series Common Stock it
establishes the number of shares in that series, the voting rights (if any) to
which such shares in that series are entitled, the consideration for such shares
in that series and the designations, powers, preferences and relative,
participating, optional or other special rights, and such qualifications,
limitations or restrictions of the shares in that series. Depending upon the
rights of such Preferred Stock or Series Common Stock, as applicable, the
issuance of ACNielsen Preferred Stock or ACNielsen Series Common Stock, as
applicable, could have an adverse effect on holders of ACNielsen Common Stock by
delaying or preventing a change in control of ACNielsen, making removal of the
present management of ACNielsen more difficult or resulting in restrictions upon
the payment of dividends and other distributions to the holders of ACNielsen
Common Stock.
AUTHORIZED BUT UNISSUED CAPITAL STOCK
Delaware law does not require stockholder approval for any issuance of
authorized shares. However, the listing requirements of the NYSE, which would
apply so long as the ACNielsen Common Stock remained listed on the NYSE, require
stockholder approval of certain issuances that equal or exceed 20% of the then
outstanding voting power or then outstanding number of shares of Common Stock of
ACNielsen. These additional shares may be used for a variety of corporate
purposes, including future public offerings to raise additional capital or to
facilitate corporate acquisitions. ACNielsen currently does not have any plans
to issue additional shares of ACNielsen Common Stock, ACNielsen Preferred Stock
or ACNielsen Series Common Stock other than in connection with employee
compensation plans.
One of the effects of the existence of unissued and unreserved ACNielsen
Common Stock, ACNielsen Preferred Stock and ACNielsen Series Common Stock may be
to enable the Board of Directors of ACNielsen to issue shares to persons
friendly to current management, which issuance could render more difficult or
discourage an attempt to obtain control of ACNielsen by means of a merger,
tender offer, proxy contest or otherwise, and thereby protect the continuity of
ACNielsen's management and possibly deprive the stockholders of opportunities to
sell their shares of ACNielsen Common Stock at prices higher than prevailing
market prices. Such additional shares also could be used to dilute the stock
ownership of persons seeking to obtain control of ACNielsen pursuant to the
operation of the ACNielsen Rights Plan, which is discussed below.
ACNIELSEN RIGHTS PLAN
On October , 1996 the Board of Directors of ACNielsen declared a dividend
of one preferred share purchase right (an "ACNielsen Right") for each
outstanding share of ACNielsen Common Stock. The dividend was payable on October
, 1996 (the "ACNielsen Record Date") to D&B, which was the sole stockholder of
record on the ACNielsen Record Date. Each ACNielsen Right entitles the
registered holder to purchase from ACNielsen one one-thousandth of a share of
Series A Junior Participating ACNielsen
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Preferred Stock, par value $.01 per share (the "ACNielsen Preferred Stock"), of
ACNielsen at a price of $ per one one-thousandth of a share of
ACNielsen Preferred Stock (as the same may be adjusted, hereinafter referred to
as the "Purchase Price"), subject to adjustment. The description and terms of
the ACNielsen Rights are set forth in an ACNielsen Rights Agreement dated as of
October , 1996, as the same may be amended from time to time (the "ACNielsen
Rights Agreement"), between ACNielsen and First Chicago Trust Company, as the
ACNielsen Rights Agent (the "ACNielsen Rights Agent").
Until the earlier to occur of (i) 10 days following a public announcement
that a person or group of affiliated or associated persons (with certain
exceptions, hereinafter referred to in this description of ACNielsen Rights, an
"Acquiring Person") have acquired beneficial ownership of 15% or more of the
outstanding shares of ACNielsen Common Stock or (ii) 10 business days (or such
later date as may be determined by action of the Board of Directors prior to
such time as any person or group of affiliated persons becomes an Acquiring
Person) following the commencement of, or announcement of an intention to make,
a tender offer or exchange offer the consummation of which would result in the
beneficial ownership by a person or group of 15% or more of the outstanding
shares of ACNielsen Common Stock (the earlier of such dates hereinafter referred
to in this description of ACNielsen Rights as the "Rights Distribution Date"),
the ACNielsen Rights will be evidenced by the certificates representing
ACNielsen Common Stock.
The ACNielsen Rights Agreement provides that, until the Rights Distribution
Date (or earlier redemption or expiration of the ACNielsen Rights), the
ACNielsen Rights will be transferred with and only with the ACNielsen Common
Stock. Until the Rights Distribution Date (or earlier redemption or expiration
of the ACNielsen Rights), ACNielsen Common Stock certificates will contain a
notation incorporating the ACNielsen Rights Agreement by reference. Until the
Rights Distribution Date (or earlier redemption or expiration of the ACNielsen
Rights), the surrender for transfer of any certificates for shares of ACNielsen
Common Stock, will also constitute the transfer of the ACNielsen Rights
associated with the shares of ACNielsen Common Stock represented by such
certificate. As soon as practicable following the Rights Distribution Date,
separate certificates evidencing the ACNielsen Rights ("ACNielsen Right
Certificates") will be mailed to holders of record of the ACNielsen Common Stock
as of the close of business on the Rights Distribution Date and such separate
ACNielsen Right Certificates alone will evidence the ACNielsen Rights.
The ACNielsen Rights are not exercisable until the Rights Distribution
Date. The ACNielsen Rights will expire on October , 2006 (hereinafter referred
to in this description of ACNielsen Rights as the "Final Expiration Date"),
unless the Final Expiration Date is advanced or extended or unless the ACNielsen
Rights are earlier redeemed or exchanged by ACNielsen, in each case as described
below.
The Purchase Price payable, and the number of shares of ACNielsen Preferred
stock or other securities or property issuable, upon exercise of the ACNielsen
Rights are subject to adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the ACNielsen Preferred Stock, (ii) upon the grant to
holders of the ACNielsen Preferred Stock of certain rights or warrants to
subscribe for or purchase ACNielsen Preferred Stock at a price, or securities
convertible into ACNielsen Preferred Stock with a conversion price, less than
the then-current market price of the ACNielsen Preferred Stock or (iii) upon the
distribution to holders of the ACNielsen Preferred Stock of evidences of
indebtedness or assets (excluding regular periodic cash dividends or dividends
payable in ACNielsen Preferred Stock) or of subscription rights or warrants
(other than those referred to above).
The ACNielsen Rights are also subject to adjustment in the event of a stock
dividend on the ACNielsen Common Stock payable in shares of ACNielsen Common
Stock or subdivisions, consolidations or combinations of the ACNielsen Common
Stock occurring, in any such case, prior to the Distribution Date.
Shares of ACNielsen Preferred Stock purchasable upon exercise of the
ACNielsen Rights will not be redeemable. Each share of ACNielsen Preferred Stock
will be entitled, when, as and if declared, to a minimum preferential quarterly
dividend payment of $1 per share but will be entitled to an aggregate dividend
of 1,000 times the dividend declared per share of ACNielsen Common Stock. In the
event of liquidation, dissolution or winding up of ACNielsen, the holders of the
ACNielsen Preferred Stock will be entitled to a minimum preferential liquidation
payment of $100 per share (plus any accrued but unpaid dividends) but will be
entitled to an aggregate payment of 1,000 times the payment made per share of
ACNielsen Common
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Stock. Each share of ACNielsen Preferred Stock will have 1,000 votes, voting
together with the ACNielsen Common Stock. Finally, in the event of any merger,
consolidation or other transaction in which shares of ACNielsen Common Stock are
converted or exchanged, each share of ACNielsen Preferred Stock will be entitled
to receive 1,000 times the amount received per share of ACNielsen Common Stock.
These rights are protected by customary antidilution provisions.
Because of the nature of the ACNielsen Preferred Stock's dividend,
liquidation and voting rights, the value of the one one-thousandth interest in a
share of ACNielsen Preferred Stock purchasable upon exercise of each ACNielsen
Right should approximate the value of one share of ACNielsen Common Stock.
In the event that any person or group of affiliated or associated persons
becomes an Acquiring Person, each holder of an ACNielsen Right, other than
ACNielsen Rights beneficially owned by the Acquiring Person (which will
thereupon become void), will thereafter have the right to receive upon exercise
of an ACNielsen Right and payment of the Purchase Price, that number of shares
of ACNielsen Common Stock having a market value of two times the Purchase Price.
In the event that, after a person or group has become an Acquiring Person,
ACNielsen is acquired in a merger or other business combination transaction or
50% or more of its consolidated assets or earning power are sold, proper
provision will be made so that each holder of an ACNielsen Right (other than
ACNielsen Rights beneficially owned by an Acquiring Person which will have
become void) will thereafter have the right to receive, upon the exercise
thereof and payment of the Purchase Price, that number of shares of common stock
of the person with whom ACNielsen has engaged in the foregoing transaction (or
its parent), which number of shares at the time of such transaction will have a
market value of two times the Purchase Price.
At any time after any person or group becomes an Acquiring Person and prior
to the acquisition by such person or group of 50% or more of the outstanding
shares of ACNielsen Common Stock or the occurrence of an event described in the
prior paragraph, the Board of Directors of ACNielsen may exchange the ACNielsen
Rights (other than ACNielsen Rights owned by such person or group which will
have become void), in whole or in part, at an exchange ratio of one share of
ACNielsen Common Stock, or a fractional share of ACNielsen Preferred Stock (or
of a share of a class or series of ACNielsen's preferred stock having similar
rights, preferences and privileges) of equivalent value, per ACNielsen Right
(subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares of ACNielsen Preferred Stock will be
issued (other than fractions which are integral multiples of one one-thousandth
of a share of ACNielsen Preferred Stock, which may, at the election of
ACNielsen, be evidenced by depositary receipts) and in lieu thereof, an
adjustment in cash will be made based on the market price of the ACNielsen
Preferred Stock on the last trading day prior to the date of exercise.
At any time prior to the time an Acquiring Person becomes such, the Board
of Directors of ACNielsen may redeem the ACNielsen Rights in whole, but not in
part, at a price of $.01 per ACNielsen Right (hereinafter referred to in this
description of ACNielsen Rights as the "Redemption Price"). The redemption of
the ACNielsen Rights may be made effective at such time, on such basis and with
such conditions as the Board of Directors in its sole discretion may establish.
Immediately upon any redemption of the ACNielsen Rights, the right to exercise
the ACNielsen Rights will terminate and the only right of the holders of
ACNielsen Rights will be to receive the Redemption Price.
For so long as the ACNielsen Rights are then redeemable, ACNielsen may,
except with respect to the redemption price, amend the ACNielsen Rights in any
manner. After the ACNielsen Rights are no longer redeemable, ACNielsen may,
except with respect to the redemption price, amend the ACNielsen Rights in any
manner that does not adversely affect the interests of holders of the ACNielsen
Rights.
Until an ACNielsen Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of ACNielsen, including, without limitation, the
right to vote or to receive dividends.
A copy of the ACNielsen Rights Agreement has been filed as an Exhibit to
the Registration Statement on Form 10 of ACNielsen in respect of the
registration of the ACNielsen Common Stock under the Exchange Act. A copy of the
ACNielsen Rights Agreement is available free of charge from ACNielsen. The
summary description of the ACNielsen Rights set forth above does not purport to
be complete and is qualified in its
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entirety by reference to the ACNielsen Rights Agreement, as the same may be
amended from time to time, which is hereby incorporated herein by reference.
CERTAIN EFFECTS OF THE ACNIELSEN RIGHTS AGREEMENT
The ACNielsen Rights Agreement is designed to protect stockholders of
ACNielsen in the event of unsolicited offers to acquire ACNielsen and other
coercive takeover tactics which, in the opinion of the Board of Directors of
ACNielsen, could impair its ability to represent stockholder interests. The
provisions of the ACNielsen Rights Agreement may render an unsolicited takeover
of ACNielsen more difficult or less likely to occur or might prevent such a
takeover, even though such takeover may offer ACNielsen's stockholders the
opportunity to sell their stock at a price above the prevailing market rate and
may be favored by a majority of the stockholders of ACNielsen.
NO PREEMPTIVE RIGHTS
No holder of any class of stock of ACNielsen authorized at the time of the
Distribution will have any preemptive right to subscribe to any securities of
ACNielsen of any kind or class.
DELAWARE GENERAL CORPORATION LAW
The terms of Section 203 of the DGCL apply to ACNielsen since it is a
Delaware corporation. Section 203, with certain exceptions, limits the ability
of a Delaware corporation to engage in any of a broad range of business
combinations, such as mergers, consolidations and sales of assets, with an
"interested stockholder" for a period of three years from the date that such
person became an interested stockholder. See "Description of the Cognizant
Capital Stock -- Delaware General Corporation Law".
PROVISIONS OF ACNIELSEN RESTATED CERTIFICATE OF INCORPORATION AND AMENDED AND
RESTATED BY-LAWS AFFECTING CHANGE IN CONTROL
Certain provisions of the ACNielsen Restated Certificate of Incorporation
and Amended and Restated By-laws may delay or make more difficult unsolicited
acquisitions or changes of control of ACNielsen. It is believed that such
provisions will enable ACNielsen to develop its business in a manner that will
foster its long-term growth without disruption caused by the threat of a
takeover not deemed by its Board of Directors to be in the best interests of
ACNielsen and its stockholders. Such provisions could have the effect of
discouraging third parties from making proposals involving an unsolicited
acquisition or change of control of ACNielsen, although such proposals, if made,
might be considered desirable by a majority of ACNielsen's stockholders. Such
provisions may also have the effect of making it more difficult for third
parties to cause the replacement of the current management of ACNielsen without
the concurrence of the Board of Directors.
These provisions include (i) the availability of capital stock for issuance
from time to time at the discretion of the Board of Directors (see "Authorized
but Unissued Capital Stock"), (ii) prohibitions against stockholders calling a
special meeting of stockholders or acting by written consent in lieu of a
meeting, (iii) requirements for advance notice for raising business or making
nominations at stockholders' meetings, (iv) the ability of the Board of
Directors to increase the size of the board and to appoint directors to newly
created directorships, (v) a classified board of directors and (vi) greater than
majority requirements to make certain amendments to the By-laws and the
Certificate of Incorporation. These provisions are present in the Restated
Certificate of Incorporation or Amended and Restated By-laws of ACNielsen.
No Stockholder Action by Written Consent; Special Meetings
The ACNielsen Restated Certificate of Incorporation and Amended and
Restated By-laws provide that stockholder action can be taken only at an annual
or special meeting and cannot be taken by written consent in lieu of a meeting.
The ACNielsen Restated Certificate of Incorporation and Amended and Restated
By-laws also provide that special meetings of the stockholders can be called
only by the Chief Executive Officer of ACNielsen or by a vote of the majority of
the entire Board of Directors. Furthermore, the By-laws of ACNielsen provide
that only such business as is specified in the notice of any such special
meeting of stockholders may come before such meeting.
87
<PAGE> 90
Advance Notice for Raising Business or Making Nominations at Meetings
The By-laws of ACNielsen establish an advance notice procedure for
stockholder proposals to be brought before an annual meeting of stockholders and
for nominations by stockholders of candidates for election as directors at an
annual or special meeting at which directors are to be elected. Only such
business may be conducted at an annual meeting of stockholders as has been
brought before the meeting by, or at the direction of, the Chairman of the Board
of Directors, or by a stockholder of ACNielsen who is entitled to vote at the
meeting who has given to the Secretary of ACNielsen timely written notice, in
proper form, of the stockholder's intention to bring that business before the
meeting. The chairman of such meeting has the authority to make such
determinations. Only persons who are nominated by, or at the direction of, the
Chairman of the Board of Directors, or who are nominated by a stockholder who
has given timely written notice, in proper form, to the Secretary prior to a
meeting at which directors are to be elected will be eligible for election as
directors of ACNielsen.
To be timely, a stockholder's notice of business to be brought before an
annual meeting and nominations of candidates for election as directors at any
annual meeting shall be delivered to the Secretary of ACNielsen at the principal
executive offices of ACNielsen not less than 70 days nor more than 90 days prior
to the first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is advanced by
more than 20 days, or delayed by more than 70 days, from such anniversary date,
notice by the stockholder to be timely must be so delivered not earlier than the
ninetieth day prior to such annual meeting and not later than the close of
business on the later of the seventieth day prior to such annual meeting or the
tenth day following the day on which public announcement of the date of such
meeting is first made.
To be timely, a stockholder's notice of nominations of persons for election
to the Board of Directors may be made at such a special meeting of stockholders
if the stockholder's notice shall be delivered to the Secretary of ACNielsen at
the principal executive offices of ACNielsen not earlier than the ninetieth day
prior to such special meeting and not later than the close of business on the
later of the seventieth day prior to such special meeting or the tenth day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting.
The notice of any nomination for election as a director must set forth the
name and address of, and the class and number of shares of ACNielsen held by,
the stockholder who intends to make the nomination and the beneficial owner, if
any, on whose behalf the nomination is being made; the name and address of the
person or persons to be nominated; a representation that the stockholder is a
holder of record of stock of ACNielsen entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; such other information regarding
each nominee proposed by such stockholder as would have been required to be
included in a proxy statement filed pursuant to the proxy rules of the SEC had
each nominee been nominated, or intended to be nominated, by the Board of
Directors; and the consent of each nominee to serve as a director if so elected.
Number of Directors; Filling of Vacancies; Removal
The ACNielsen Restated Certificate of Incorporation and Amended and
Restated By-laws provide that newly created directorships resulting from any
increase in the authorized number of directors (or any vacancy) may be filled by
a vote of a majority of directors then in office. If any applicable provision of
the DGCL expressly confers power on stockholders to fill such a directorship at
a special meeting of stockholders, such a directorship may be filled at such
meeting only by the affirmative vote of at least 80% in voting power of all
shares of ACNielsen entitled to vote generally in the election of directors,
voting as a single class. Directors may be removed only for cause, and only be
the affirmative vote of at least 80% in voting power of all shares of ACNielsen
entitled to vote generally in the election of directors, voting as a single
class. Accordingly, the Board of Directors of ACNielsen may be able to prevent
any stockholder from obtaining majority
88
<PAGE> 91
representation on the Board of Directors by increasing the size of the board and
filling the newly created directorships with its own nominees.
Classified Board of Directors
The ACNielsen Restated Certificate of Incorporation provides for
ACNielsen's Board of Directors to be divided into three classes of directors
serving staggered three-year terms. As a result, approximately one third of
ACNielsen's Board of Directors will be elected each year. See "ACNielsen
Management and Executive Compensation -- ACNielsen Board of Directors."
ACNielsen believes that a classified board will help to assure the
continuity and stability of its Board of Directors, and its business strategies
and policies as determined by its Board, because a majority of the directors at
any given time will have prior experiences as directors of ACNielsen. This
provision should also help to ensure that ACNielsen's Board of Directors, if
confronted with an unsolicited proposal from a third party that has acquired a
block of ACNielsen's voting stock, will have sufficient time to review the
proposal and appropriate alternatives and to seek the best available result for
all stockholders.
This provision could prevent a party who acquires control of a majority of
the outstanding voting stock from obtaining control of ACNielsen's Board of
Directors until the second annual stockholders meeting following the date the
acquiror obtains the controlling stock interest, could have the effect of
discouraging a potential acquiror from making a tender offer or otherwise
attempting to obtain control of ACNielsen and could thus increase the likelihood
that incumbent directors will retain their positions.
Amendments to the Amended and Restated By-laws
The ACNielsen Restated Certificate of Incorporation provides that the
affirmative vote of the holders of at least 80% in voting power of all the
shares of ACNielsen entitled to vote generally in the election of directors,
voting together as a single class, shall be required in order for the
stockholders to alter, amend or repeal any provisions of the Amended and
Restated By-laws which is to the same effect as provisions contained in the
Restated Certificate of Incorporation relating to (i) the amendment of the
Amended and Restated By-laws, (ii) the classified Board of Directors and (iii)
calling and taking actions at meetings of stockholders.
Amendments to the Restated Certificate of Incorporation
The ACNielsen Restated Certificate of Incorporation requires the
affirmative vote of the holders of at least 80% in voting power of all the
shares of ACNielsen entitled to vote generally in the election of directors,
voting together as a single class, to alter, amend or repeal provisions of the
Restated Certificate of Incorporation relating to (i) the amendment of the
Restated Certificate of Incorporation and/or the Amended and Restated By-laws,
(ii) the classified Board of Directors and (iii) calling and taking actions at
meetings of stockholders.
INDEMNIFICATION AND LIMITATION OF LIABILITY FOR DIRECTORS AND OFFICERS
The ACNielsen Restated Certificate of Incorporation provides that ACNielsen
shall indemnify directors and officers to the fullest extent permitted by the
laws of the State of Delaware. The ACNielsen Restated Certificate of
Incorporation also provides that a director of ACNielsen shall not be liable to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended.
The indemnification rights conferred by the Restated Certificate of
Incorporation of ACNielsen are not exclusive of any other right to which a
person seeking indemnification may otherwise be entitled. ACNielsen will also
provide liability insurance for the directors and officers for certain losses
arising from claims or charges made against them while acting in their
capacities as directors or officers.
89
<PAGE> 92
AVAILABLE INFORMATION
Cognizant and ACNielsen have each filed with the SEC a Registration
Statement on Form 10 with respect to the shares of Cognizant Common Stock and
ACNielsen Common Stock to be received by the stockholders of D&B in the
Distribution. This Information Statement does not contain all of the information
set forth in the respective Form 10 Registration Statements and the exhibits
thereto, to which reference is hereby made. Statements made in this Information
Statement as to the contents of any contract, agreement or other documents
referred to herein are not necessarily complete. With respect to each such
contract, agreement or other documents filed as an exhibit to the Registration
Statements, reference is made to such exhibit for a more complete description of
the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. The respective Registration Statements and the
exhibits thereto may be inspected and copied at the public reference facilities
maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549 and at the Regional Offices of the SEC at Seven World Trade Center, Suite
1300, New York, New York 10048 and in the Citicorp Center, Suite 1400, 500 West
Madison Street, Chicago, Illinois 60661. In addition, copies of the Registration
Statement and related documents may be obtained through the SEC Internet address
at http://www.sec.gov.
REPORTS OF COGNIZANT AND ACNIELSEN
After the Distribution, both Cognizant and ACNielsen will be required to
comply with the reporting requirements of the Exchange Act and, in accordance
therewith, to file reports, proxy statements and other information with the SEC.
After the Distribution, such reports, proxy statements and other
information may be inspected and copied at the public reference facilities of
the SEC listed above and obtained by mail from the SEC as described above.
Application has been made to list the shares of Cognizant Common Stock and
ACNielsen Common Stock on the NYSE and, if and when such shares of Cognizant
Common Stock and ACNielsen Common Stock, as applicable, commence trading on the
NYSE, such reports, proxy statements and other information will be available for
inspection at the offices of the NYSE, 20 Broad Street, New York, New York
10005.
Additionally, each of Cognizant and ACNielsen will be required to provide
annual reports, containing audited financial statements, to its stockholders in
connection with its annual meetings of stockholders.
90
<PAGE> 93
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
COGNIZANT CORPORATION (COMBINED FINANCIAL STATEMENTS)
Report of Independent Accountants..................................................... F-2
Financial Statements:
Combined Statement of Income for the Six Months Ended June 30, 1996 and 1995
(unaudited) and the Three Years Ended December 31, 1995.......................... F-3
Combined Statement of Financial Position as of June 30, 1996 (unaudited) and
December 31, 1995 and 1994....................................................... F-4
Combined Statement of Cash Flows for the Six Months Ended June 30, 1996 and 1995
(unaudited) and the Three Years Ended December 31, 1995.......................... F-5
Combined Statement of Divisional Equity for the Six Months Ended June 30, 1996
(unaudited) and the Three Years Ended December 31, 1995.......................... F-6
Notes to Combined Financial Statements.............................................. F-7
COGNIZANT CORPORATION
Report of Independent Accountants..................................................... F-20
Financial Statements:
Statement of Financial Position as of June 30, 1996................................. F-21
Notes to Financial Statements....................................................... F-22
ACNIELSEN CORPORATION (COMBINED FINANCIAL STATEMENTS)
Report of Independent Accountants..................................................... F-23
Financial Statements:
Combined Statement of Operations for the Six Months Ended June 30, 1996 and 1995
(unaudited) and the Three Years Ended December 31, 1995.......................... F-24
Combined Statement of Financial Position as of June 30, 1996 (unaudited) and
December 31, 1995 and 1994....................................................... F-25
Combined Statement of Cash Flows for the Six Months Ended June 30, 1996 and 1995
(unaudited) and the Three Years Ended December 31, 1995.......................... F-26
Combined Statement of Divisional Equity for the Six Months Ended June 30, 1996
(unaudited) and the Three Years Ended December 31, 1995.......................... F-27
Notes to Combined Financial Statements.............................................. F-28
ACNIELSEN CORPORATION
Report of Independent Accountants..................................................... F-40
Financial Statements:
Statement of Financial Position as of June 30, 1996................................. F-41
Notes to Financial Statements....................................................... F-42
</TABLE>
F-1
<PAGE> 94
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder of Cognizant Corporation:
We have audited the combined financial statements of Cognizant Corporation
(a wholly-owned subsidiary of The Dun & Bradstreet Corporation), as defined in
the notes to the combined financial statements, as of December 31, 1995 and
1994, and for each of the three years in the period ended December 31, 1995, as
listed in the accompanying Index to Financial Statements. These combined
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Cognizant
Corporation as of December 31, 1995 and 1994, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.
As discussed in the notes to the combined financial statements, in 1995 the
Company changed its method of accounting for the impairment of long-lived assets
and, in 1993, for postemployment benefits and postretirement benefits other than
pensions.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Stamford, Connecticut
September 16, 1996
F-2
<PAGE> 95
COGNIZANT CORPORATION
COMBINED STATEMENT OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, ------------------------------------
------------------------- 1995 1994 1993
1995 ---------- ---------- ----------
-----------
1996 (UNAUDITED)
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
Operating Revenue.................... $ 785,722 $ 709,749 $1,542,340 $1,257,415 $1,039,259
-------- -------- ---------- ---------- ----------
Operating Costs...................... 334,682 282,578 753,466 516,895 439,042
Selling and Administrative
Expenses........................... 244,334 245,099 488,865 394,179 330,120
Depreciation & Amortization.......... 65,816 67,165 132,532 111,749 82,339
Restructuring Expense................ -- -- 12,800 7,957 46,408
-------- -------- ---------- ---------- ----------
Operating Income..................... 140,890 114,907 154,677 226,635 141,350
-------- -------- ---------- ---------- ----------
Interest Income...................... 3,702 4,588 10,325 9,217 14,286
Interest Expense..................... (411) (348) (540) (715) (523)
Gains From Dispositions.............. -- -- 15,124 21,473 --
Gain on Sale of Gartner Group
Stock.............................. -- -- -- -- 21,022
Other Expense -- Net................. (8,194) (3,663) (17,029) (11,122) (8,803)
-------- -------- ---------- ---------- ----------
Non-Operating (Expense)
Income -- Net...................... (4,903) 577 7,880 18,853 25,982
-------- -------- ---------- ---------- ----------
Income Before Provision for Income
Taxes and Cumulative Effect of
Changes in Accounting Principles... 135,987 115,484 162,557 245,488 167,332
Provision for Income Taxes........... (59,835) (52,341) (73,676) (99,083) (58,475)
-------- -------- ---------- ---------- ----------
Income Before Cumulative Effect of
Changes in Accounting Principles... 76,152 63,143 88,881 146,405 108,857
Cumulative Effect to January 1, 1993,
of Changes in Accounting
Principles:
-- SFAS No. 106, "Employers'
Accounting for Postretirement
Benefits Other Than Pensions",
Net of Income Tax Benefits of
$8,560.......................... -- -- -- -- (12,840)
-- SFAS No. 112, "Employers'
Accounting for Postemployment
Benefits", Net of Income Tax
Benefits of $16,982............. -- -- -- -- (28,303)
-------- -------- ---------- ---------- ----------
Net Income........................... $ 76,152 $ 63,143 $ 88,881 $ 146,405 $ 67,714
======== ======== ========== ========== ==========
Pro Forma Unaudited Earnings Per
Share of Common Stock.............. $0.45 $0.52
======== ==========
Pro Forma Unaudited Average Number of
Shares Outstanding................. 169,808 169,522
======== ==========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-3
<PAGE> 96
COGNIZANT CORPORATION
COMBINED STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1994
---------- ----------
JUNE 30,
1996
----------
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents........................... $ 184,052 $ 157,105 $ 127,984
Accounts Receivable -- Net.......................... 415,478 432,957 338,760
Other Current Assets................................ 143,677 114,177 63,041
---------- ---------- ----------
Total Current Assets........................ 743,207 704,239 529,785
---------- ---------- ----------
Investments........................................... 51,067 50,566 55,731
---------- ---------- ----------
Property, Plant and Equipment -- Net.................. 256,729 247,127 274,561
---------- ---------- ----------
Other Assets -- Net
Computer Software................................... 134,129 137,700 124,201
Goodwill............................................ 215,795 230,888 250,127
Other Assets........................................ 74,198 71,570 96,633
---------- ---------- ----------
Total Other Assets -- Net................... 424,122 440,158 470,961
---------- ---------- ----------
Total Assets................................ $1,475,125 $1,442,090 $1,331,038
========== ========== ==========
LIABILITIES AND DIVISIONAL EQUITY
Current Liabilities
Accounts and Notes Payable.......................... $ 43,639 $ 60,966 $ 43,414
Accrued and Other Current Liabilities............... 253,924 297,465 234,677
Accrued Income Taxes................................ 39,853 37,747 72,924
Deferred Revenues................................... 293,387 270,731 215,818
---------- ---------- ----------
Total Current Liabilities................... 630,803 666,909 566,833
---------- ---------- ----------
Postretirement and Postemployment Benefits............ 59,238 48,602 36,229
Deferred Income Taxes................................. 87,935 68,724 74,820
Other Liabilities and Minority Interests.............. 69,462 53,267 46,673
---------- ---------- ----------
Total Liabilities........................... 847,438 837,502 724,555
---------- ---------- ----------
Commitments and Contingencies
Divisional Equity..................................... 627,687 604,588 606,483
---------- ---------- ----------
Total Liabilities and Divisional Equity..... $1,475,125 $1,442,090 $1,331,038
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-4
<PAGE> 97
COGNIZANT CORPORATION
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, ---------------------------------
------------------------- 1995 1994 1993
1995 --------- --------- ---------
-----------
(UNAUDITED)
1996
-----------
(UNAUDITED) (DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income.................................... $ 76,152 $ 63,143 $ 88,881 $ 146,405 $ 67,714
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Cumulative Effect of Change in Accounting
Principles:
Postemployment Benefits................ -- -- -- -- 28,303
Postretirement Benefits Other than
Pensions............................ -- -- -- -- 12,840
Depreciation and Amortization............... 65,816 67,165 132,532 111,749 82,339
Gain on Sale of Gartner Group Stock......... -- -- -- -- (21,022)
Gains from Dispositions..................... -- -- (15,124) (21,473) --
Restructuring Provisions.................... -- -- 12,800 7,957 46,408
Non-Recurring Charge........................ -- -- 90,070 -- --
Restructuring Payments...................... (2,036) (10,820) (15,544) (24,477) (6,122)
Postemployment Benefit Expense.............. 3,334 2,424 37,632 1,427 981
Postemployment Benefit Payments............. (8,751) (6,697) (18,480) (19,552) (7,301)
Payments Related to 1995 Non-recurring
Charge................................... (8,073) -- -- -- --
Net Decrease (Increase) in Accounts
Receivable............................... 7,083 3,378 (83,035) (72,796) (18,838)
Deferred Income Taxes....................... 26,255 (1,132) (13,392) 5,189 (9,277)
Non-U.S. Income Taxes Paid.................. (24,734) (18,249) (26,956) (29,287) (20,831)
Non-U.S. Income Tax Refunds................. 55 2,767 4,322 5,351 3,042
Net Decrease in Other Working Capital
Items.................................... 5,415 30,493 88,955 88,766 37,463
Other....................................... 1,577 (1,111) (8,818) 1,790 4,822
-------- -------- --------- --------- ---------
Net Cash Provided by Operating
Activities........................ 142,093 131,361 273,843 201,049 200,521
-------- -------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Maturities of Marketable
Securities............................... 14,129 -- 40,338 -- 9,171
Payments for Marketable Securities.......... (44,685) -- (70,546) -- --
Proceeds from Sale of Gartner Group Stock... -- -- -- -- 54,222
Proceeds from Sale of Businesses............ -- -- 11,349 20,700 --
Payments for Acquisition of Businesses...... -- (1,956) (10,916) (63,579) (22,720)
Capital Expenditures........................ (27,846) (32,937) (77,032) (104,475) (70,741)
Additions to Computer Software.............. (13,543) (26,133) (70,565) (60,241) (50,045)
Decrease (Increase) in Investments.......... 1,704 891 (8,232) (20,479) (4,979)
Other....................................... 5,592 19,989 57,280 32,598 (26,275)
-------- -------- --------- --------- ---------
Net Cash Used in Investing
Activities........................ (64,649) (40,146) (128,324) (195,476) (111,367)
-------- -------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Amount (Remitted to) Received from The
Dun & Bradstreet Corporation............. (44,359) 803 (113,051) (111,212) 10,982
Other....................................... (4,350) (5,203) (8,193) 2,859 (2,383)
-------- -------- --------- --------- ---------
Net Cash (Used in) Provided by
Financing Activities.............. (48,709) (4,400) (121,244) (108,353) 8,599
-------- -------- --------- --------- ---------
Effect of Exchange Rate Changes on Cash and
Cash Equivalents............................ (1,788) 13,193 4,846 9,699 (14,745)
-------- -------- --------- --------- ---------
Increase (Decrease) in Cash and Cash
Equivalents................................. 26,947 100,008 29,121 (93,081) 83,008
Cash and Cash Equivalents, Beginning of
Period...................................... 157,105 127,984 127,984 221,065 138,057
-------- -------- --------- --------- ---------
Cash and Cash Equivalents, End of Period...... $ 184,052 $ 227,992 $ 157,105 $ 127,984 $ 221,065
======== ======== ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for interest...... $ 536 $ 326 $ 425 $ 925 $ 303
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-5
<PAGE> 98
COGNIZANT CORPORATION
COMBINED STATEMENT OF DIVISIONAL EQUITY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1995 1994 1993
--------- --------- --------
SIX MONTHS
ENDED
JUNE 30,
1996
-----------
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance, Beginning of Period.............................. $ 604,588 $ 606,483 $ 540,833 $483,005
Net Income.............................................. 76,152 88,881 146,405 67,714
Net Transfers (to) from The Dun & Bradstreet
Corporation.......................................... (44,359) (113,051) (111,212) 10,982
Foreign Currency Translation............................ (8,694) 22,275 30,457 (20,868)
-------- --------- --------- --------
Balance, End of Period.................................... $ 627,687 $ 604,588 $ 606,483 $540,833
======== ========= ========= ========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-6
<PAGE> 99
COGNIZANT CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 1. BASIS OF PRESENTATION
On January 9, 1996 The Dun & Bradstreet Corporation ("D&B") announced a
plan to reorganize into three publicly traded independent companies by spinning
off through a tax-free distribution (the "Distribution") two of its businesses
to shareholders. The Distribution is subject to final approval by D&B's Board of
Directors. The Internal Revenue Service has ruled that the spin-off will be a
tax-free transaction for shareholders. Certain separate international tax
rulings are pending with respect to the tax-free treatment of the Distribution.
Under the plan, Cognizant Corporation (the "Company") will become a publicly
traded company that will include the I.M.S. International, Inc. ("IMS"), Gartner
Group, Inc. ("Gartner Group"), Nielsen Media Research, Inc. ("Nielsen Media"),
Pilot Software, Inc., Erisco, Inc., Dun & Bradstreet Satyam Software Proprietary
Limited ("Satyam Software"), Cognizant Enterprises, Inc., Dun & Bradstreet
HealthCare Information, Inc. ("DBHC") and D&B Technology Asia KK ("DBTA")
businesses of the former D&B. The Company was incorporated on January 2, 1996,
with 1,000 shares of Common Stock authorized, par value of $.01 per share, and
100 shares outstanding, all of which are owned by D&B. For purposes of these
financial statements, all references to the Company include the assets and
liabilities related to the businesses that will be transferred to the Company
prior to the Distribution.
The combined financial statements have been prepared using D&B's historical
basis in the assets and liabilities and historical results of operations related
to the Company's businesses, except for accounting for income taxes (see Note 2
to the Combined Financial Statements).
Investments in companies over which the Company has significant influence
but not a controlling interest are carried at equity. The effects of all
significant intercompany transactions have been eliminated.
The financial statements of IMS and its affiliates reflect a fiscal year
ending November 30 to facilitate timely reporting of the Company's combined
financial results.
The combined financial statements generally reflect the financial position,
results of operations, and cash flows of the Company as if it were a separate
entity for all periods presented. The combined financial statements include
allocations of certain D&B Corporate headquarters assets (including prepaid
pension assets) and liabilities (including pension and postretirement benefits),
and expenses (including cash management, legal, accounting, tax, employee
benefits, insurance services, data services and other D&B corporate overhead)
relating to the Company's businesses that will be transferred to the Company
from D&B. Management believes these allocations are reasonable. However, the
financial information included herein may not necessarily reflect the combined
financial position, results of operations, and cash flows of the Company in the
future or what they would have been had the Company been a separate entity
during the periods presented.
For purposes of governing certain of the ongoing relationships between the
Company, D&B and ACNielsen Corporation after the Distribution and to provide for
orderly transition, the Company, D&B and ACNielsen Corporation will enter into
various agreements including a Distribution Agreement, which includes among
other items an allocation to Cognizant of liabilities related to certain prior
business transactions if such liabilities exceed certain specified amounts, Tax
Allocation Agreement, Employee Benefits Agreement, Indemnity and Joint Defense
Agreement, TAM Master Agreement, Intellectual Property Agreement, Shared
Transaction Services Agreements, Data Services Agreement and Transition Services
Agreement. Summaries of these agreements are set forth elsewhere in this
Information Statement.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents and Marketable Securities. Marketable securities that
mature within ninety days of purchase date are considered cash equivalents. All
marketable securities that mature in more than ninety days are valued at
amortized cost (which approximates market value) in accordance with the
provisions of
F-7
<PAGE> 100
COGNIZANT CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Debt and Equity Securities." It is management's intent to hold these
investments to maturity.
Property, Plant and Equipment. Buildings and machinery and equipment are
depreciated over their estimated useful lives using principally the
straight-line method. Leasehold improvements are amortized on a straight-line
basis over the shorter of the term of the lease or the estimated useful life of
the improvement.
Other Assets. Certain internal costs incurred in the development of
computer software are capitalized in accordance with SFAS No. 86, "Accounting
for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed".
As such, costs incurred to establish technological feasibility of a computer
software product are expensed in the periods in which they are incurred.
Capitalization ceases and amortization starts when the product is available for
general release to customers. Computer software costs are being amortized on a
product by product basis, over three to five years. Annual amortization is the
greater of the amount computed using (a) the ratio that gross revenues for a
product bear to the total of current and anticipated future gross revenues for
that product or (b) the straight-line method over the remaining estimated
economic life of the product. Other intangibles result from acquisitions and
database development and are included in other assets. Other intangibles are
being amortized, using principally the straight-line method, over five to
fifteen years. Goodwill represents the excess purchase price over the fair value
of identifiable net assets of businesses acquired and is amortized on a
straight-line basis over seven to forty years.
The Company adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" in
1995. This statement requires that long-lived assets and certain identifiable
intangibles held and used by an entity be reviewed for impairment 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 flows is less
than the carrying amount of such assets. The measurement for such impairment
loss is then based on the fair value of the asset. See Note 3 to the Combined
Financial Statements.
At each balance sheet date, the Company reviews the recoverability of the
unamortized capitalized costs of computer software products by comparing the
carrying value of computer software with its estimated net realizable value.
At each balance sheet date, the Company reviews the recoverability of
goodwill, not identified with impaired long-lived assets, based on estimated
undiscounted future cash flows 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.
Revenue Recognition. The Company recognizes revenue as earned, which is
over the contract period or as the information is delivered or related services
are performed. Amounts billed for service and subscriptions are credited to
deferred revenues and reflected in operating revenue over the subscription term,
which is generally one year. Software license revenue is recognized upon
delivery of the software and documentation when there are no significant
remaining related obligations. Revenue from post-contract customer support
(maintenance) is recognized on a straight-line basis over the term of the
contract.
Foreign Currency Translation. For all operations outside the United States
where the Company 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 divisional equity, whereas realized transaction gains and losses
are recognized in other expense -- net. For operations in countries that are
considered to be highly inflationary, where the U.S. dollar is designated as the
functional currency, monetary assets and liabilities are translated using
end-of-period exchange rates, nonmonetary accounts are translated using
historical exchange rates, and all translation and transaction adjustments are
recognized in other expense -- net.
F-8
<PAGE> 101
COGNIZANT CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
The Company has significant investments in non-U.S. countries. Therefore,
changes in the value of foreign currencies affect the Company's combined
financial statements when translated into U.S. dollars.
Income Taxes. The Company has been included in the Federal and certain
state and non-U.S. income tax returns of D&B. The provision for income taxes in
the Company's combined financial statements has been calculated on a
separate-company basis. Income taxes paid on behalf of the Company by D&B are
included in divisional equity. Effective after the Distribution, the Company
will file separate income tax returns.
Divisional Equity. Divisional equity includes historical investments and
advances from D&B, including net transfers to/from D&B, third party liabilities
paid on behalf of the Company by D&B and amounts due to/from D&B for services
and other charges, as well as current period income, and foreign currency
translation adjustments.
Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses and the disclosure of contingent assets and liabilities.
Actual results could differ from those estimates.
Pro Forma Earnings Per Share (Unaudited). The computation of pro forma
earnings per share for the periods ended June 30, 1996 and December 31, 1995 is
based on the average number of shares of D&B common stock outstanding during the
respective periods, reflecting the one for one distribution ratio.
Interim Period Financial Statements. The unaudited condensed combined
interim financial statements reflect all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position of the
Company at June 30, 1996 and its results of operations and cash flows for the
six months ended June 30, 1996 and 1995. Interim results are not necessarily
indicative of full year performance.
Concentrations of Credit Risk. IMS maintains accounts receivable balances
($252,067 and $184,974 at December 31, 1995 and 1994) principally from customers
in the pharmaceutical industry.
Business Segments. The Company operates in two principal business
segments, Marketing Information Services and Information Technology Services.
Marketing Information Services consists of IMS, Nielsen Media, Pilot Software,
Erisco, Satyam Software, Cognizant Enterprises, DBHC and DBTA. Information
Technology Services consists of Gartner Group.
NOTE 3. NON-RECURRING CHARGES
In the fourth quarter of 1995, the Company recorded within operating costs
a charge of $90,070. This charge primarily reflected an impairment loss in
connection with the adoption of the provisions of SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
($40,570), the write-off of certain computer software ($20,300), a provision for
postemployment benefits ($7,400) under the Company's severance plan and an
accrual for contractual obligations that have no future economic benefits
($21,800). No payments relating to the accrued contractual obligations were made
in 1995.
SFAS No. 121 requires that long-lived assets and certain intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. In connection with
this review, the Company recorded an impairment loss of $40,570 reflecting the
revaluation of certain fixed assets, administrative and production systems and
other intangibles that will be replaced or will no longer be used. In addition,
the Company recognized a charge of $20,300 principally related to the write-off
of certain computer software product lines at the Pilot Software business unit
that were discontinued.
The provision for postemployment benefits of $7,400, represents the cost of
workforce reductions. The accrual for contractual obligations that have no
future economic benefits of $21,800 relates to the acquisition of certain
information and other services that are no longer used by the Company.
F-9
<PAGE> 102
COGNIZANT CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 4. RESTRUCTURING
In 1995, the Company reported a $12,800 restructuring provision primarily
to write off software for product lines that were discontinued at Sales
Technologies, a division of IMS.
In the second quarter of 1994, the Company initiated actions totaling
$7,957 to restructure certain operations and businesses, and to reduce costs and
increase operating efficiencies. These restructuring actions included office
consolidations, the closedown of Sales Technologies' European operations, as
well as additional steps to complete certain actions initiated in 1993.
In 1993, the Company recorded $46,408 of restructuring expense to
restructure certain operations and businesses. These actions were part of a
D&B-wide plan designed to achieve long-term productivity improvements and reduce
costs. The costs associated with this plan, and all other restructuring actions,
included only specific, direct and incremental costs that could be estimated
with reasonable accuracy and were clearly identifiable with the related plans.
The restructuring charge included $5,490 for the consolidation of data
centers in North America and Europe, resulting principally in lease termination
costs, asset writeoffs and other costs incident to the consolidation of such
data centers. The Company also provided $18,163 to initiate actions to reduce
real estate costs by consolidating office facilities in the U.S. and Europe.
Costs incurred included lease termination costs and asset writeoffs. The
restructuring charge also included $22,755 primarily related to workforce
reductions and write-offs of intangible assets at certain divisions.
In 1995, the Company recognized non-operating gains of $15,124 related to a
number of divestitures.
In 1994, the Company recognized a non-operating gain of $21,473 on the
divestiture of the Machinery Information Division of Dataquest.
In 1993, the Company recognized a $21,022 non-operating gain related to the
initial public offering of Gartner Group, in which 2.7 million shares were sold
for net proceeds of $54,222. As a result of the offering the Company's interest
was reduced from 70% to 52%.
The table below sets forth the details of all restructuring accrual
activity by major category for the years ended December 31, 1994 and 1995.
<TABLE>
<CAPTION>
1994 ACTIVITY 1995 ACTIVITY
------------------ ------------------
CASH & CASH &
JANUARY 1, NONCASH DECEMBER 31, NONCASH DECEMBER 31,
CATEGORY 1994 EXPENSE ITEMS 1994 EXPENSE ITEMS 1995
- ----------------------------------- ---------- ------- -------- ------------ ------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Real estate cost reductions........ $ 18,163 -- $ (4,487) $ 13,676 -- $(12,617) $ 1,059
Data center consolidations......... 5,490 -- (5,490) -- -- -- --
Discontinue production and data
collection systems and
products......................... 1,930 -- (1,930) -- $12,800 (8,400) 4,400
Other.............................. 16,396 $7,957 (12,570) 11,783 -- (5,727) 6,056
------- ------ -------- ------- ------- -------- -------
Total.............................. $ 41,979 $7,957 $(24,477) $ 25,459 $12,800 $(26,744) $ 11,515
======= ====== ======== ======= ======= ======== =======
</TABLE>
NOTE 5. ACQUISITIONS
In 1995, 1994 and 1993, the Company acquired various companies in separate
transactions that were accounted for as purchases.
The aggregate purchase price of such acquisitions totaled approximately
$10,900 in 1995.
The aggregate purchase price for acquisitions totaled approximately $63,600
in 1994. The largest acquisition was Pilot Software, a leading provider of
on-line analytic processing software solutions that support business decision
making needs across many industries.
F-10
<PAGE> 103
COGNIZANT CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
In 1993, the Company acquired a seventy percent interest in Gartner Group,
a provider of research, analysis and advisory services to users and suppliers of
information technology systems and software. The aggregate purchase price for
acquisitions totaled approximately $22,700 in 1993.
The results of operations of all purchases are included in the Combined
Statement of Income from dates of acquisition. Had the acquisitions made in
1993, 1994 and 1995 been consummated on January 1 of the year preceding the year
of acquisition, the results of these acquired operations would not have had a
significant impact on the Company's combined results of operations for any of
the years presented.
NOTE 6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
Foreign exchange forward contracts are entered into in the normal course of
business to hedge against foreign exchange movements on certain assets and
liabilities of subsidiaries that are denominated in currencies other than the
subsidiary's functional currency. The counter parties to these instruments are
major international financial institutions. The forward contracts typically have
maturities of three months or less. At December 31, 1995, the Company had
approximately $79,839 in foreign exchange forward contracts outstanding with
various expiration dates through January 1996. Realized and unrealized gains and
losses on these contracts and the offsetting losses and gains on hedged
transactions are included in other expense -- net.
NOTE 7. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
At the Distribution, the Company will assume responsibility for pension and
postretirement benefits for active employees of the Company; the responsibility
for all others, principally retirees, will remain with D&B. An allocation of
assets and liabilities for such benefits, which are not material, has been
included in the combined financial statements.
U.S. Benefit Plans. Certain of the Company's businesses participate in
D&B's defined benefit pension plan covering substantially all employees in the
United States. The benefits to be paid to employees under these plans are based
on years of credited service and average final compensation. The Company
accounts for the plan as a multi-employer plan. Accordingly, the Company has
recorded pension income (costs) as allocated by D&B totaling $(1,241), $890 and
$1,253 for the years 1995, 1994 and 1993. During 1994, the Company recognized a
pension curtailment gain of $2,653 resulting from a workforce reduction.
Certain employees of the Company in the United States also are eligible to
participate in the D&B-sponsored defined contribution plan. The Company's
businesses make a matching contribution of up to 100% of the employee's
contribution based on specified limits of the employee's salary. The Company's
expense related to this plan was $3,178, $2,627 and $2,777 for the years 1995,
1994 and 1993.
Non-U.S. Benefit Plans. The Company's non-U.S. subsidiaries provide
retirement benefits for employees consistent with local practices, primarily
using defined benefit or termination indemnity plans. The projected benefit
obligations for these funded and unfunded plans at December 31, 1995 and 1994
were $52,685 and $45,024, respectively. Prepaid (Accrued) pension costs for the
funded plans totaled ($1,684) and $703 as of December 31, 1995 and 1994. Accrued
pension costs for the unfunded plans totaled $5,059 and $3,021 as of December
31, 1995 and 1994. Pension costs for these plans were $4,078, $3,249 and $3,305
for the years 1995, 1994 and 1993.
The weighted average expected long-term rate of return on pension plan
assets was 9.82%, 9.75% and 10.14% for 1995, 1994 and 1993, respectively. At
December 31, 1995 and 1994, the projected benefit obligations were determined
using weighted average discount rates of 7.76% and 8.46%, respectively, and
weighted average rates of increase in future compensation levels of 5.06% and
5.77%, respectively. Plan assets are invested in diversified portfolios that
consist primarily of equity and debt securities.
Postretirement Benefits. In addition to providing pension benefits, D&B
provides various health-care and life-insurance benefits for retired employees.
Employees at certain businesses of the Company in the
F-11
<PAGE> 104
COGNIZANT CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
United States become eligible for these benefits if they reach normal retirement
age while working for the Company. Certain of the Company's subsidiaries outside
the United States have postretirement benefit plans, although most participants
are covered by government-sponsored or-administered plans. The cost of
Company-sponsored postretirement benefit plans outside the U.S. is not
significant.
During 1993 the Company adopted the provisions of SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions." The initial effect
of adopting SFAS No. 106 was a one-time, non-cash after-tax charge of $12,840.
The adoption of SFAS No. 106 did not have a significant effect on 1993 expense.
The Company accounts for the plan as a multi-employer plan. Accordingly, the
Company has recorded postretirement benefits costs as allocated by D&B totaling
$3,447, $2,129 and $3,775 for the years 1995, 1994 and 1993. During 1994 the
Company recognized a curtailment gain of $4,199 resulting from a change in
eligibility requirements for the postretirement medical plan.
Postemployment Benefits. During 1993, the Company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits." SFAS No. 112 requires that
employers expense the costs of postemployment benefits paid before retirement,
principally severance benefits, over the service lives of employees if certain
conditions are met. Under the Company's previous accounting policy, the total
cost of such benefits was expensed when the event occurred. The initial effect
of adopting SFAS No. 112 was a one-time, after-tax charge of $28,303. The
adoption of SFAS No. 112 did not have a significant effect on 1993 expense.
NOTE 8. EMPLOYEE STOCK PLANS
Under D&B's Key Employees Stock Option Plans, certain employees of the
Company are eligible for the grant of stock options, stock appreciation rights
and limited stock appreciation rights in tandem with stock options. These awards
are granted at the market price on the date of the grant. At December 31, 1995,
outstanding options for D&B common stock held by Company employees totaled
1,936,436, of which 943,072 had vested and were exercisable. The option prices
range from $33.55 to $63.75 per share.
Immediately following the Distribution, outstanding awards under the D&B
Key Employees Stock Option Plans held by Company employees will be replaced by
substitute awards under the Company's plan. The substitute awards will have the
same ratio of the exercise price per option to the market value per share, the
same aggregate difference between market value and exercise price and the same
vesting provisions, option periods and other terms and conditions as the options
they replace.
In 1995, Pilot Software adopted an equity participation plan authorizing
Pilot to grant options up to 19.5% of its stock to its employees. The options
are exercisable after nine years at fair market value, as determined by
independent appraisal; however, vesting may be accelerated based on the
occurrence of "trigger events" as defined by the plan. Two-thirds of the
authorized options were granted in February 1995 at an exercise price of $1.75
per share, which was fair value at the date of grant.
The Company's majority-owned subsidiary Gartner Group has several stock
option plans to provide a method of retention and motivation of its senior
personnel and also to align senior management's objectives with long-term stock
price appreciation. The exercise price of options granted under the plans are
equal to the fair market value at the date of grant of Gartner Group stock.
Options outstanding and exercisable were 10,463,820 and 2,408,050, respectively
at December 31, 1995, at prices ranging from $.04 to $37.876 per share.
In October 1995, the Financial Accounting Standards Board (FASB) issued
SFAS No. 123, "Accounting for Stock-Based Compensation," which requires that
companies with stock-based compensation plans either recognize compensation
expense based on the fair value of options granted or continue to apply the
existing accounting rules and disclose pro forma net income and earnings per
share assuming the fair value method had been applied. The Company is evaluating
the new statement and has not determined whether it
F-12
<PAGE> 105
COGNIZANT CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
will adopt the recognition or disclosure alternative of the statement.
Therefore, the impact of adoption on the Company's financial statements has not
been determined. The new disclosure requirements are generally effective for
financial statements for fiscal years beginning after December 15, 1995.
NOTE 9. INCOME TAXES
Income before provision for income taxes consisted of:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
U.S........................................ $ 43,495 $111,054 $ 43,318
Non-U.S.................................... 119,062 134,434 124,014
-------- -------- --------
$162,557 $245,488 $167,332
======== ======== ========
</TABLE>
The provision (benefit) for income taxes consisted of:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
U.S. Federal and state:
Current.................................. $ 57,596 $ 54,161 $ 50,543
Deferred................................. (23,871) (2,377) (26,930)
-------- -------- --------
Total.................................... 33,725 51,784 23,613
-------- -------- --------
Non-U.S.:
Current.................................. 33,632 40,643 42,271
Deferred................................. 6,319 6,656 (7,409)
-------- -------- --------
Total.................................... 39,951 47,299 34,862
-------- -------- --------
Total.................................... $ 73,676 $ 99,083 $ 58,475
======== ======== ========
</TABLE>
The following table summarizes the significant differences between the U.S.
Federal statutory taxes and the Company's provision for income taxes for
combined financial statement purposes.
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Tax expense at statutory rate.............. $ 56,895 $ 85,922 $ 58,565
State and local income taxes, net of
Federal effect........................... 13,079 9,536 5,301
Non-U.S. taxes............................. (3,684) (941) (7,775)
Goodwill amortization...................... 4,457 1,585 1,425
Other...................................... 2,929 2,981 959
------- -------- -------
Total taxes................................ $ 73,676 $ 99,083 $ 58,475
======= ======== =======
</TABLE>
F-13
<PAGE> 106
COGNIZANT CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
The Company's deferred tax assets (liabilities) are comprised of the
following at December 31:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Deferred Tax Assets:
Operating Losses..................................... $ 20,817 $ 32,748
Non-Recurring Charges................................ 12,840 --
Restructuring Costs.................................. 12,138 8,482
Bad Debts............................................ 2,754 2,637
Postretirement Benefits.............................. 2,608 2,747
Postemployment Benefits.............................. 1,138 4,996
Other................................................ 2,326 5,445
-------- --------
54,621 57,055
Valuation Allowance.................................... (20,817) (32,748)
-------- --------
33,804 24,307
-------- --------
Deferred Tax Liabilities:
Intangibles.......................................... (62,473) (62,838)
Deferred Revenue..................................... (17,385) (17,931)
Depreciation......................................... (2,350) (11,188)
Other................................................ (3,494) (1,800)
-------- --------
(85,702) (93,757)
-------- --------
Net Deferred Tax Liability............................. $(51,898) $(69,450)
======== ========
</TABLE>
The Company has established a valuation allowance attributable to deferred
tax assets in certain U.S. state and foreign tax jurisdictions where, based on
available evidence, it is more likely than not that such assets will not be
realized.
Undistributed earnings of non-U.S. subsidiaries aggregated approximately
$485,221 at December 31, 1995. Deferred tax liabilities have not been recognized
for these undistributed earnings because it has been D&B's policy to permanently
reinvest such undistributed earnings outside the U.S. If such earnings are
repatriated in the future, or are no longer deemed to be permanently reinvested,
applicable taxes will be provided for on such amounts. It is not currently
practicable to determine the amount of applicable taxes.
NOTE 10. OTHER TRANSACTIONS WITH AFFILIATES
D&B uses a centralized cash management system to finance its operations.
Cash deposits from most of the Company's businesses are transferred to D&B on a
daily basis and D&B funds the Company's disbursement bank accounts as required.
No interest has been charged on these transactions. Cash and cash equivalents in
the accompanying combined financial statements represents balances of certain
foreign entities and of the Gartner Group.
D&B provided certain centralized services (see Note 1 to the Combined
Financial Statements) to the Company. Expenses related to these services were
allocated to the Company based on utilization of specific services or, where not
estimable, based on assets employed by the Company in proportion to D&B's total
assets. Management believes these allocation methods are reasonable. These
allocations were $116,900 (including data service charges beginning in 1995),
$65,100 and $61,900 in 1995, 1994, and 1993, respectively, and are included in
operating costs and selling and administrative expenses in the Combined
Statement of Income. Amounts due to D&B for these expenses are included in
divisional equity.
The Company provided certain services to D&B and affiliates at negotiated
prices. Operating revenue from such services totaled $3,539, $9,345 and $3,654
in 1995, 1994, and 1993, respectively.
Net transfers to/from D&B, included in Divisional Equity, includes advances
and loans from affiliates, net cash transfers to/from D&B, third party
liabilities paid on behalf of the Company by D&B, amounts due
F-14
<PAGE> 107
COGNIZANT CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
to/from D&B for services and other charges, and income taxes paid on behalf of
the Company by D&B. No interest has been charged on these transactions. The
weighted average balance due from D&B was $452,693, $365,120, and $293,635 for
1995, 1994 and 1993, respectively.
The activity in the net transfers (to) from D&B account, included in
Divisional Equity is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
D&B services and other charges.................. $ 121,673 $ 52,801 $ 130,230
Loans and advances -- Net....................... 44,917 (124,561) 6,293
U.S. income taxes............................... 57,596 54,161 50,543
Cash transfers -- Net........................... (337,237) (93,613) (176,084)
--------- --------- ---------
Net transfers (to) from D&B..................... $(113,051) $(111,212) $ 10,982
========= ========= =========
</TABLE>
NOTE 11. LEASE COMMITMENTS
Certain of the Company's operations are conducted from leased facilities,
which are under operating leases. Rental expense under real estate operating
leases for the years 1995, 1994 and 1993 was $34,997, $30,670, and $25,376,
respectively. The totals include $446 and $32 in 1995 and 1994, respectively for
facilities usage charged by D&B or an affiliate. The approximate minimum annual
rental expense for real estate operating leases that have remaining
noncancelable lease terms in excess of one year, net of sublease rentals, at
December 31, 1995, was: 1996 -- $39,034; 1997 -- $35,826; 1998 -- $31,564;
1999 -- $25,962; 2000 -- $22,095; and an aggregate of $80,957 thereafter.
The Company also leases or participates with D&B in leases of certain
computer and other equipment under operating leases. These leases are frequently
renegotiated or otherwise changed as advancements in computer technology produce
opportunities to lower costs and improve performance. Rental expense under
computer and other equipment leases was $21,864, $18,538 and $16,845 for 1995,
1994 and 1993, respectively. At December 31, 1995, the approximate minimum
annual rental expense for computer and other equipment under operating leases
that have remaining noncancelable lease terms in excess of one year was:
1996 -- $21,540; 1997 -- $18,275; 1998 -- $13,101; 1999 -- $8,484;
2000 -- $3,130; and an aggregate of $1,382 thereafter.
Prior to the Distribution the Company will enter into certain lease or
sublease agreements with D&B, an affiliate or third parties for certain leased
facilities, computer and other equipment, which principally are a continuation
of existing lease commitments at market rates. These commitments are included in
the amounts disclosed above.
NOTE 12. LITIGATION
The Company and its subsidiaries are involved in legal proceedings and
litigation arising in the ordinary course of business. In the opinion of
management, the outcome of such current legal proceedings and litigation, if
decided adversely, could have a material effect on quarterly or annual operating
results or cash flows when resolved in a future period. However, in the opinion
of management, these matters will not materially affect the Company's combined
financial position.
In addition, on July 29, 1996, Information Resources, Inc. ("IRI") filed a
complaint in the United States District Court for the Southern District of New
York, naming as defendants The Dun & Bradstreet Corporation ("D&B"), A.C.
Nielsen Company and I.M.S. International, Inc. ("IMS"), a company that will be
owned by the Company after the Distribution (the "IRI Action").
F-15
<PAGE> 108
COGNIZANT CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
The complaint alleges various violations of the United States antitrust
laws, including alleged violations of Sections 1 and 2 of the Sherman Act. The
complaint also alleges a claim of tortious interference with a contract and a
claim of tortious interference with a prospective business relationship. These
claims relate to the acquisition by defendants of Survey Research Group Limited
("SRG"). IRI alleges that SRG violated an alleged agreement with IRI when it
agreed to be acquired by defendants and that the defendants induced SRG to
breach that agreement.
IRI's complaint alleges damages in excess of $350 million, which amount IRI
has asked to be trebled under the antitrust laws. IRI also seeks punitive
damages in an unspecified amount.
In connection with the IRI Action, D&B, ACNielsen Corporation ("ACNielsen")
(the parent company of A.C. Nielsen Company) and the Company will enter into an
Indemnity and Joint Defense Agreement (the "Indemnity and Joint Defense
Agreement") pursuant to which they will agree (i) to certain arrangements
allocating potential liabilities ("IRI Liabilities") that may arise out of or in
connection with the IRI Action and (ii) to conduct a joint defense of such
action. In particular, the Indemnity and Joint Defense Agreement will provide
that ACNielsen will assume exclusive liability for IRI Liabilities up to a
maximum amount to be calculated at the time such liabilities, if any, become
payable (the "ACN Maximum Amount"), and that the Company and D&B 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 stockholder 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.
Management of Cognizant is unable to predict at this time the final outcome of
this matter or whether the resolution of this matter could materially affect
Cognizant's results of operations, cash flows or financial position.
NOTE 13. SUPPLEMENTAL FINANCIAL DATA
Accounts Receivable -- Net:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Trade................................................ $ 386,941 $ 301,649
Less: allowance for doubtful accounts................ (11,446) (10,839)
Unbilled receivables................................. 39,476 34,786
Other................................................ 17,986 13,164
--------- ---------
$ 432,957 $ 338,760
========= =========
</TABLE>
Other Current Assets:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Deferred taxes....................................... $ 16,826 $ 5,370
Prepaid expenses..................................... 42,759 36,059
Inventories.......................................... 24,474 21,612
Marketable securities................................ 30,118 --
--------- ---------
$ 114,177 $ 63,041
========= =========
</TABLE>
F-16
<PAGE> 109
COGNIZANT CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
Property, Plant and Equipment -- Net, carried at cost, less accumulated
depreciation and amortization:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Buildings............................................ $ 125,536 $ 138,882
Machinery and Equipment.............................. 363,305 342,844
Less: accumulated depreciation....................... (281,226) (240,473)
Leasehold improvements, less: accumulated
amortization of $16,117 and $15,528................ 26,276 18,276
Land................................................. 13,236 15,032
--------- ---------
$ 247,127 $ 274,561
========= =========
</TABLE>
Computer Software and Goodwill:
<TABLE>
<CAPTION>
COMPUTER
SOFTWARE GOODWILL
--------- ---------
<S> <C> <C>
January 1, 1994...................................... $ 97,708 $ 183,282
Additions at cost.................................... 60,241 72,630
Amortization......................................... (23,548) (8,793)
Other deductions and reclassifications............... (10,200) 3,008
--------- ---------
December 31, 1994.................................... $ 124,201 $ 250,127
Additions at cost.................................... 70,565 11,799
Amortization......................................... (39,221) (16,167)
Other deductions and reclassifications............... (17,845) (14,871)
--------- ---------
December 31, 1995.................................... $ 137,700 $ 230,888
========= =========
</TABLE>
Accumulated amortization of computer software and goodwill was $164,829 and
$123,258 at December 31, 1995 and 1994, respectively.
Accounts and Notes Payable:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Trade................................................ $ 28,562 $ 19,459
Taxes other than income taxes........................ 14,420 7,212
Notes................................................ 7,424 9,760
Other................................................ 10,560 6,983
--------- ---------
$ 60,966 $ 43,414
========= =========
</TABLE>
Accrued and Other Current Liabilities:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Salaries, wages, bonuses and other compensation...... $ 63,381 $ 64,121
Restructuring costs.................................. 11,515 18,652
Postemployment benefits.............................. 36,582 20,371
Other................................................ 185,987 131,533
--------- ---------
$ 297,465 $ 234,677
========= =========
</TABLE>
F-17
<PAGE> 110
COGNIZANT CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 14. OPERATIONS BY BUSINESS SEGMENTS
The Company, operating globally, delivers information, software and related
services principally through two business segments referenced below.
<TABLE>
<CAPTION>
MARKETING INFORMATION
INFORMATION TECHNOLOGY
YEAR ENDED DECEMBER 31, 1995 SERVICES(1) SERVICES TOTAL
- -------------------------------------------------------- ----------- ---------- ----------
<S> <C> <C> <C>
Operating Revenue..................................... $ 1,204,701 $337,639 $1,542,340
Restructuring Expense (2)............................. $ 12,800 $ -- $ 12,800
Segment Operating Income (3).......................... $ 158,037 $ 51,180 $ 209,217
General Corporate Expenses (6)........................ 54,540
Non-Operating Income -- Net........................... 7,880
Income Before Provision for Income Taxes.............. $ 162,557
Segment Depreciation and Amortization(4).............. $ 120,545 $ 11,987 $ 132,532
Segment Capital Expenditures.......................... $ 45,975 $ 19,657 $ 65,632
Identifiable Assets at December 31, 1995 (5)............ $ 1,025,787 $355,088 $1,380,875
YEAR ENDED DECEMBER 31, 1994
Operating Revenue..................................... $ 1,019,160 $238,255 $1,257,415
Restructuring Expense (2)............................. $ 7,957 $ -- $ 7,957
Segment Operating Income.............................. $ 228,864 $ 34,185 $ 263,049
General Corporate Expenses............................ 36,414
Non-Operating Income -- Net........................... 18,853
Income Before Provision for Income Taxes.............. $ 245,488
Segment Depreciation and Amortization (4)............. $ 101,826 $ 9,923 $ 111,749
Segment Capital Expenditures.......................... $ 74,686 $ 5,273 $ 79,959
Identifiable Assets at December 31, 1994 (5)............ $ 1,008,507 $275,272 $1,283,779
YEAR ENDED DECEMBER 31, 1993
Operating Revenue..................................... $ 894,053 $145,206 $1,039,259
Restructuring Expense (2)............................. $ 30,413 $ 8,179 $ 38,592
Segment Operating Income.............................. $ 180,966 $ 2,100 $ 183,066
General Corporate Expenses (6)........................ 41,716
Non-Operating Income -- Net........................... 25,982
Income Before Provision for Income Taxes and
Accounting Changes................................. $ 167,332
Segment Depreciation and Amortization (4)............. $ 75,236 $ 7,103 $ 82,339
Segment Capital Expenditures.......................... $ 65,660 $ 3,467 $ 69,127
Identifiable Assets at December 31, 1993 (5)............ $ 908,692 $215,230 $1,123,922
</TABLE>
- ---------------
(1) IMS' operating revenue was $818,537 in 1995, $691,060 in 1994 and $613,915
in 1993.
(2) See Note 4 to the Combined Financial Statements.
(3) Marketing Information Services 1995 Operating Income includes a
non-recurring charge of $72,870 in the fourth quarter. See Note 3 to the
Combined Financial Statements.
(4) Includes depreciation and amortization of Property, Plant and Equipment,
Computer Software, Other Intangibles and Goodwill.
(5) Non-operating assets of $61,215, $47,259 and $34,842 at December 31, 1995,
1994 and 1993, respectively, included primarily Investments and Property,
Plant & Equipment. These assets are not identified with business segments
and represent the reconciling item between the identifiable assets shown and
the Company's total assets.
(6) General Corporate Expenses include $17,200 of non-recurring charges in 1995
and $7,816 of Restructuring expense in 1993 and are principally related to
Corporate owned Property, Plant & Equipment. See Notes 3 and 4 to the
Combined Financial Statements.
F-18
<PAGE> 111
COGNIZANT CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 15. OPERATIONS BY GEOGRAPHIC AREA
Financial information by geographic area is summarized as follows.
Inter-area sales were not significant.
<TABLE>
<CAPTION>
OTHER
UNITED STATES EUROPE NON-U.S. TOTAL
------------- -------- -------- ----------
<S> <C> <C> <C> <C>
1995
Operating Revenue................................. $ 824,424 $449,610 $268,306 $1,542,340
Restructuring Expense(1).......................... $ 12,800 $ -- $ -- $ 12,800
Operating Income(2)............................... $ 32,072 $ 44,051 $ 78,554 $ 154,677
Identifiable Assets............................... $ 834,003 $405,059 $141,813 $1,380,875
1994
Operating Revenue................................. $ 682,965 $369,590 $204,860 $1,257,415
Restructuring Expense(1).......................... $ 5,047 $ 2,910 $ -- $ 7,957
Operating Income.................................. $ 95,627 $ 71,042 $ 59,966 $ 226,635
Identifiable Assets............................... $ 800,691 $375,666 $107,422 $1,283,779
1993
Operating Revenue................................. $ 571,815 $312,073 $155,371 $1,039,259
Restructuring Expense(1).......................... $ 36,326 $ 10,082 $ -- $ 46,408
Operating Income.................................. $ 45,047 $ 41,476 $ 54,827 $ 141,350
Identifiable Assets............................... $ 629,861 $405,598 $ 88,463 $1,123,922
</TABLE>
- ---------------
(1) See Note 4 to the Combined Financial Statements.
(2) 1995 Operating Income includes a non-recurring charge of $90,070 ($60,440 in
the U.S., $27,000 in Europe, and $2,630 in Other Non-U.S.) in the fourth
quarter. See Note 3 to the Combined Financial Statements.
NOTE 16. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 YEAR
-------- -------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
1995
Operating Revenue.................... $347,519 $362,230 $374,521 $ 458,070 $1,542,340
Restructuring Expense................ $ -- $ -- $ 12,800 $ $ 12,800
Operating Income(1).................. $ 47,881 $ 67,026 $ 34,450 $ 5,320 $ 154,677
Net Income........................... $ 25,853 $ 37,290 $ 15,485 $ 10,253 $ 88,881
1994
Operating Revenue.................... $272,626 $305,150 $311,433 $ 368,206 $1,257,415
Restructuring Expense................ $ -- $ 7,957 $ -- $ -- $ 7,957
Operating Income..................... $ 38,929 $ 56,801 $ 58,877 $ 72,028 $ 226,635
Net Income........................... $ 24,139 $ 45,601 $ 32,712 $ 43,953 $ 146,405
</TABLE>
- ---------------
(1) Includes a non-recurring charge of $90,070 in the fourth quarter. See Note 3
to the Combined Financial Statements.
F-19
<PAGE> 112
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder of Cognizant Corporation:
We have audited the accompanying balance sheet of Cognizant Corporation, a
wholly owned subsidiary of The Dun & Bradstreet Corporation, as of June 30,
1996. This financial statement is the responsibility of the management of
Cognizant Corporation. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosure in the balance sheet. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall balance sheet presentation. We believe that our audit of
the balance sheet provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Cognizant Corporation as of June
30, 1996, in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Stamford, Connecticut
September 16, 1996
F-20
<PAGE> 113
COGNIZANT CORPORATION
STATEMENT OF FINANCIAL POSITION
JUNE 30, 1996
<TABLE>
<S> <C>
ASSETS
Cash................................................................................. $1.00
=====
LIABILITIES AND SHAREHOLDER EQUITY
Common Stock, par value $0.01 per share; authorized -- 1,000 shares; issued and
outstanding -- 100 shares.......................................................... $1.00
=====
</TABLE>
The accompanying notes are an integral part of the financial statement.
F-21
<PAGE> 114
COGNIZANT CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
On January 2, 1996, Cognizant Corporation (the "Company") was incorporated
under the General Corporation Law of the State of Delaware. The Company has the
authority under its Certificate of Incorporation to issue 1,000 shares of common
stock, par value $0.01 per share (the "Common Stock"), one hundred shares of
which were issued to The Dun & Bradstreet Corporation ("D&B") on January 3,
1996. The Company has no assets other than cash and has not commenced
operations. The Company's activities to date have been solely related to its
incorporation.
NOTE 2. PROPOSED REORGANIZATIONS
On January 9, 1996, the Board of Directors of D&B approved in principal a
plan to distribute the Common Stock and the common stock of ACNielsen
Corporation to all holders of outstanding shares of common stock of D&B (the
"Distribution"). After the Distribution, Company will operate as an independent
company that will provide information systems and services for high-growth
emerging markets in healthcare, high-tech and media in approximately 100
countries. The Company's businesses will include those of I.M.S. International,
Inc.; Nielsen Media Research, Inc.; Gartner Group, Inc., in which the Company
has approximately a 51% interest; Pilot Software, Inc.; Erisco, Inc.; Dun &
Bradstreet-Satyam Software Private Limited, in which the Company has a 76%
interest; and Cognizant Enterprises, Inc. In connection with the Distribution,
application has been made to list the Common Stock on the New York Stock
Exchange.
NOTE 3. AMENDED CERTIFICATE OF INCORPORATION
Prior to the date of the Distribution, the Company will file a Restated
Certificate of Incorporation which will authorize the issuance of 420,000,000
shares of all classes of stock of which 10,000,000 shares will represent shares
of preferred stock, par value $.01 per share ("Preferred Stock"), 400,000,000
shares will represent shares of Common Stock, and 10,000,000 shares will
represent shares of Series Common Stock, par value $.01 per share ("Series
Common Stock").
F-22
<PAGE> 115
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder of ACNielsen Corporation:
We have audited the combined financial statements of ACNielsen Corporation
(a wholly-owned subsidiary of The Dun & Bradstreet Corporation), as defined in
the notes to the combined financial statements, as of December 31, 1995 and
1994, and for each of the three years in the period ended December 31, 1995, as
listed in the accompanying Index to Financial Statements. These combined
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of ACNielsen
Corporation as of December 31, 1995 and 1994, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.
As discussed in the notes to the combined financial statements, in 1995 the
Company changed its method of accounting for the impairment of long-lived assets
and, in 1993, for postemployment benefits and postretirement benefits other than
pensions.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Stamford, Connecticut
September 16, 1996
F-23
<PAGE> 116
ACNIELSEN CORPORATION
COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
------------------------- ------------------------------------
1996 1995 1995 1994 1993
----------- ----------- ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Operating Revenue.................. $ 644,240 $ 611,169 $1,281,345 $1,092,107 $1,044,676
-------- -------- ---------- ---------- ----------
Operating Costs.................... 351,634 325,829 859,132 582,225 536,884
Selling and Administrative
Expenses......................... 253,039 238,630 486,992 403,469 363,499
Depreciation & Amortization........ 47,288 57,739 119,229 98,660 93,893
Restructuring Expense.............. -- -- -- 8,922 60,301
-------- -------- ---------- ---------- ----------
Operating Loss..................... (7,721) (11,029) (184,008) (1,169) (9,901)
-------- -------- ---------- ---------- ----------
Interest Income.................... 3,282 4,714 10,025 9,681 11,918
Interest Expense................... (2,651) (7,153) (14,735) (13,111) (1,881)
Other Expense -- Net............... (446) (644) (2,330) (9,989) (5,780)
-------- -------- ---------- ---------- ----------
Non-Operating Income (Expense) --
Net.............................. 185 (3,083) (7,040) (13,419) 4,257
-------- -------- ---------- ---------- ----------
Loss Before Provision for Income
Taxes and Cumulative Effect of
Changes in Accounting
Principles....................... (7,536) (14,112) (191,048) (14,588) (5,644)
Provision for Income Taxes......... (9,948) (22,681) (39,836) (50,473) (49,588)
-------- -------- ---------- ---------- ----------
Loss Before Cumulative Effect of
Changes in Accounting
Principles....................... (17,484) (36,793) (230,884) (65,061) (55,232)
Cumulative Effect to January 1,
1993, of Changes in Accounting
Principles:
-- SFAS No. 106, "Employers'
Accounting for Postretirement
Benefits Other Than Pensions,"
Net of Income Tax Benefits of
$0............................ -- -- -- -- (14,200)
-- SFAS No. 112, "Employers'
Accounting for Postemployment
Benefits," Net of Income Tax
Benefits of $19,697........... -- -- -- -- (105,294)
-------- -------- ---------- ---------- ----------
Net Loss........................... $ (17,484) $ (36,793) $ (230,884) $ (65,061) $ (174,726)
======== ======== ========== ========== ==========
Pro Forma Unaudited Net Loss Per
Share of Common Stock............ $ (0.31) $ (4.09)
======== ==========
Pro Forma Unaudited Average Number
of Shares Outstanding............ 56,603 56,507
======== ==========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-24
<PAGE> 117
ACNIELSEN CORPORATION
COMBINED STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ---------------------
1996 1995 1994
----------- -------- --------
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents............................... $ 91,962 $ 89,568 $ 85,036
Accounts Receivable -- Net.............................. 249,137 272,976 233,368
Other Current Assets.................................... 46,969 43,808 30,943
-------- -------- --------
Total Current Assets............................ 388,068 406,352 349,347
-------- -------- --------
Marketable Securities and Other Investments............... 43,469 41,674 51,760
-------- -------- --------
Property, Plant and Equipment -- Net...................... 187,270 189,485 183,050
-------- -------- --------
Other Assets -- Net
Deferred Charges........................................ 61,471 68,049 81,318
Computer Software....................................... 30,595 22,714 55,320
Other Intangibles....................................... 32,111 33,154 65,489
Goodwill................................................ 203,762 208,454 193,464
-------- -------- --------
Total Other Assets -- Net....................... 327,939 332,371 395,591
-------- -------- --------
Total Assets.................................... $ 946,746 $969,882 $979,748
======== ======== ========
LIABILITIES AND DIVISIONAL EQUITY
Current Liabilities
Accounts and Notes Payable.............................. $ 119,198 $118,761 $108,676
Accrued and Other Current Liabilities................... 225,572 239,976 228,992
Accrued Income Taxes.................................... 18,604 33,804 16,653
-------- -------- --------
Total Current Liabilities....................... 363,374 392,541 354,321
-------- -------- --------
Postretirement and Postemployment Benefits................ 106,887 110,191 80,768
Deferred Income Taxes..................................... 28,451 27,588 28,029
Other Liabilities......................................... 49,668 62,437 19,483
-------- -------- --------
Total Liabilities............................... 548,380 592,757 482,601
-------- -------- --------
Commitments and Contingencies
Divisional Equity......................................... 398,366 377,125 497,147
-------- -------- --------
Total Liabilities and Divisional Equity......... $ 946,746 $969,882 $979,748
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-25
<PAGE> 118
ACNIELSEN CORPORATION
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
------------------------ ---------------------------------
1996 1995 1995 1994 1993
----------- ----------- --------- --------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
(DOLLAR AMOUNTS IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss........................................... $ (17,484) $ (36,793) $(230,884) $ (65,061) $(174,726)
Reconciliation of Net Loss to Net Cash (Used in)
Provided by Operating Activities:
Cumulative Effect of Changes in Accounting
Principles:
Postemployment Benefits..................... -- -- -- -- 105,294
Postretirement Benefits Other than
Pensions................................. -- -- -- -- 14,200
Depreciation and Amortization.................... 47,288 57,739 119,229 98,660 93,893
Restructuring Provisions......................... -- -- -- 8,922 60,301
Non-Recurring Charge............................. -- -- 152,170 -- --
Restructuring Payments........................... (342) (4,964) (10,065) (18,951) (20,134)
Postemployment Benefit Expense................... 3,333 2,016 36,168 2,565 1,816
Postemployment Benefit Payments.................. (14,008) (26,351) (50,290) (67,790) (7,423)
Payments Related to 1995 Non-recurring Charge.... (15,877) -- -- -- --
Net Decrease (Increase) in Accounts
Receivable.................................... 15,353 (20,895) (32,461) (21,693) 2,492
Deferred Income Taxes............................ 1,597 (214) (15,603) 32,347 7,446
Non-U.S. Income Taxes Paid....................... (33,189) (12,088) (19,882) (35,654) (30,131)
Non-U.S. Income Tax Refunds...................... 2,664 396 -- 219 589
Net Decrease (Increase)in Other Working
Capital Items................................. 7,562 (3,395) 74,371 21,766 22,517
Other............................................ (4,091) 4,511 1,522 5,365 (1,299)
-------- -------- --------- --------- ---------
Net Cash (Used in) Provided by Operating
Activities....................................... (7,194) (40,038) 24,275 (39,305) 74,835
-------- -------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Marketable Securities................ 3 -- 257 5,608 8,541
Payments for Marketable Securities................. (841) (2,283) (2,807) (4,119) (2,421)
Payments for Acquisition of Businesses............. -- (2,766) (11,466) (112,009) (7,255)
Capital Expenditures............................... (29,786) (49,206) (86,862) (51,053) (48,669)
Additions to Computer Software..................... (10,868) (9,610) (20,535) (21,726) (22,389)
Investments in Efficient Market Services and
Manugistics...................................... -- -- -- (21,932) --
(Increase) Decrease in Other Investments........... (1,447) 640 2,199 (2,239) 4,732
Other.............................................. (1,821) (14,354) 8,045 (1,052) (13,938)
-------- -------- --------- --------- ---------
Net Cash Used in Investing Activities.............. (44,760) (77,579) (111,169) (208,522) (81,399)
-------- -------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Amount Received from
The Dun & Bradstreet Corporation................. 41,876 95,151 101,140 155,260 27,025
Increase (Decrease) in Short-Term Borrowings....... 12,924 23,713 (11,731) 38,630 (5,983)
Other.............................................. (403) 4,911 (1,632) 1,631 (3,788)
-------- -------- --------- --------- ---------
Net Cash Provided by Financing Activities.......... 54,397 123,775 87,777 195,521 17,254
-------- -------- --------- --------- ---------
Effect of Exchange Rate Changes on Cash and Cash
Equivalents...................................... (49) 4,775 3,649 12,193 (13,747)
-------- -------- --------- --------- ---------
Increase (Decrease) in Cash and Cash Equivalents... 2,394 10,933 4,532 (40,113) (3,057)
Cash and Cash Equivalents, Beginning of Period..... 89,568 85,036 85,036 125,149 128,206
-------- -------- --------- --------- ---------
Cash and Cash Equivalents, End of Period........... $ 91,962 $ 95,969 $ 89,568 $ 85,036 $ 125,149
======== ======== ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest........... $ 2,584 $ 3,150 $ 14,713 $ 12,586 $ 2,601
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-26
<PAGE> 119
ACNIELSEN CORPORATION
COMBINED STATEMENT OF DIVISIONAL EQUITY
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
JUNE 30, ------------------------------------
1996 1995 1994 1993
----------- --------- -------- ---------
(UNAUDITED)(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance, Beginning of Period................ $ 377,125 $ 497,147 $385,793 $ 571,519
Net Loss.................................. (17,484) (230,884) (65,061) (174,726)
Unrealized Gains (Losses) on Securities... 957 (439) (2,252) --
Net Transfers from The Dun & Bradstreet
Corporation............................ 41,876 101,140 155,260 27,025
Foreign Currency Translation.............. (4,108) 10,161 23,407 (38,025)
-------- -------- -------- --------
Balance, End of Period...................... $ 398,366 $ 377,125 $497,147 $ 385,793
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-27
<PAGE> 120
ACNIELSEN CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 1. BASIS OF PRESENTATION
On January 9, 1996 The Dun & Bradstreet Corporation ("D&B") announced a
plan to reorganize into three publicly traded independent companies by spinning
off through a tax-free distribution (the "Distribution") two of its businesses
to shareholders. The Distribution is subject to final approval by D&B's Board of
Directors. The Internal Revenue Service has ruled that the spin-off will be a
tax-free transaction for shareholders. Certain separate international tax
rulings are pending with respect to the tax-free treatment of the Distribution.
Under the plan, ACNielsen Corporation (the "Company") will become a publicly
traded company comprised of the D&B businesses and operations that now comprise
the Company, and substantially all of the assets and liabilities of such
businesses. The Company was incorporated on April 30, 1996, with 100 shares of
Common Stock, with a par value of $1.00 per share, authorized and outstanding,
all of which are owned by D&B. The articles of incorporation were subsequently
restated to amend the par value of Common Stock to $.01 per share. For purposes
of these financial statements, all references to the Company include the assets
and liabilities related to the businesses that will be transferred to the
Company prior to the Distribution.
The combined financial statements have been prepared using D&B's historical
basis of accounting for the assets and liabilities and historical results of
operations related to the Company's businesses, except for accounting for income
taxes (see Note 2 to the Combined Financial Statements). Investments in
companies over which the Company has significant influence but not a controlling
interest are carried at equity. The effects of all significant intercompany
transactions have been eliminated.
The financial statements of subsidiaries outside the United States and
Canada reflect a fiscal year ending November 30 to facilitate timely reporting
of the Company's combined financial results.
The combined financial statements generally reflect the financial position,
results of operations, and cash flows of the Company as if it were a separate
entity for all periods presented. The combined financial statements include
allocations of certain D&B Corporate assets (including prepaid pension assets)
and liabilities (including pension and postretirement benefits), and expenses
(including cash management, legal, accounting, tax, employee benefits, insurance
services, data services and other D&B Corporate overhead) relating to the
Company's businesses that will be transferred to the Company from D&B.
Management believes these allocations are reasonable. However, the financial
information included herein may not necessarily reflect the combined financial
position, results of operations, and cash flows of the Company in the future or
what they would have been had the Company been a separate entity during the
periods presented.
For purposes of governing certain of the ongoing relationships between the
Company, D&B and Cognizant Corporation after the Distribution and to provide for
orderly transition, the Company, D&B and Cognizant Corporation will enter into
various agreements including a Distribution Agreement, Employee Benefits
Agreement, Tax Allocation Agreement, Indemnity and Joint Defense Agreement, TAM
Master Agreement, Shared Transaction Services Agreements, Intellectual Property
Agreement, Transition Services Agreement and Data Services Agreement. Summaries
of these agreements are set forth elsewhere in this Information Statement.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents and Marketable Securities. Marketable securities that
mature within 90 days of purchase date are considered cash equivalents. At
December 31, 1995 and 1994, all marketable securities are classified as
'available for sale' and therefore are reported at fair value, with net
unrealized gains and losses reported in divisional equity, in accordance with
the provisions of Statement of Financial Accounting Standards (SFAS) No. 115,
"Accounting for Certain Debt and Equity Securities."
Property, Plant and Equipment. Buildings and machinery and equipment are
depreciated over their estimated useful lives using principally the
straight-line method. Leasehold improvements are amortized on a straight-line
basis over the shorter of the term of the lease or the estimated useful life of
the improvement.
Other Assets. Deferred charges include prepaid pension costs. Certain
internal costs incurred in the development of computer software are capitalized
in accordance with SFAS 86, "Accounting for the Costs of
F-28
<PAGE> 121
ACNIELSEN CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
Computer Software to be Sold, Leased or Otherwise Marketed". As such, costs
incurred to establish technological feasibility of a computer software product
are expensed in the periods in which they are incurred. Capitalization ceases
and amortization starts when the product is available for general release to
customers. Computer software costs are being amortized on a product by product
basis, over three to five years. Annual amortization is the greater of the
amount computed using (a) the ratio that gross revenues for a product bear to
the total of current and anticipated future gross revenues for that product or
(b) the straight-line method over the remaining estimated economic life of the
product. Other intangibles result from acquisitions, customer lists and database
development. Other intangibles are being amortized, using principally the
straight-line method, over five to fifteen years. Goodwill represents the excess
purchase price over the fair value of identifiable net assets of businesses
acquired and is amortized on a straight-line basis over five to forty years.
The Company adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" in
1995. This statement requires that long-lived assets and certain identifiable
intangibles held and used by an entity be reviewed for impairment 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 flows is less
than the carrying amount of such assets. The measurement for such impairment
loss is then based on the fair value of the asset. See Note 3 to the Combined
Financial Statements.
At each balance sheet date, the Company reviews the recoverability of the
unamortized capitalized costs of computer software products by comparing the
carrying value of computer software with its estimated net realizable value.
At each balance sheet date, the Company reviews the recoverability of
goodwill, not identified with impaired long-lived assets, based on estimated
undiscounted future cash flows 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.
Revenue Recognition. Retail Measurement Service Products generally have
contract terms of one to three years. The base contract revenue from the first
commitment period is recognized ratably over the initial contract term. Revenues
from remaining years of multi-year contracts, extensions and renewals are
recognized ratably over their extension periods. After the initial commitment,
the contract generally continues indefinitely, unless canceled by the client
with a minimum of eight months prior written notice.
Revenue for special analytical services is recognized as services are
performed. Consumer Panel products generally have contract terms of one year
with revenue recognized over the term of the contract on a straight-line basis.
International Media Services are generally provided over longer periods
with revenues recognized on a straight-line basis over the contract term. The
contracts are cancelable only with significant penalties.
Foreign Currency Translation. For all operations outside the United States
where the Company 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 divisional equity, whereas realized transaction gains and losses
are recognized in other income (expense)-net. For operations in countries that
are considered to be highly inflationary, where the U.S. dollar is designated as
the functional currency, monetary assets and liabilities are translated using
end-of-period exchange rates, nonmonetary accounts are translated using
historical exchange rates, and all translation and transaction adjustments are
recognized in other income (expense)-net.
The Company has significant operations in non-U.S. countries. Therefore,
changes in the value of foreign currencies affect the Company's combined
financial statements when translated into U.S. dollars.
F-29
<PAGE> 122
ACNIELSEN CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
Income Taxes. The Company has been included in the Federal and certain
state and non-U.S. income tax returns of D&B. The provision for income taxes in
the Company's combined financial statements has been calculated on a
separate-company basis. Income taxes paid on behalf of the Company by D&B are
included in divisional equity. Effective after the Distribution, the Company
will file separate income tax returns.
Divisional Equity. Divisional equity includes historical investments and
advances from D&B, including net transfers to/from D&B, third party liabilities
paid on behalf of the Company by D&B and amounts due to/from D&B for services
and other charges, as well as current period loss, unrealized gains (losses) on
securities, and foreign currency translation adjustments.
Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses and the disclosure of contingent assets and liabilities.
Actual results could differ from those estimates.
Pro Forma Loss Per Share (Unaudited). The computation of pro forma loss
per share for the periods ended June 30, 1996 and December 31, 1995 is based on
the average number of shares of D&B common stock outstanding during the
respective periods, adjusted for the one for three distribution ratio.
Interim Period Financial Statements. The unaudited condensed combined
interim financial statements reflect all adjustments (which include only normal
recurring adjustments) necessary to present fairly the combined financial
position of the Company and its affiliates at June 30, 1996 and its results of
operations and cash flows for the six months ended June 30, 1996 and 1995.
Interim results are not necessarily indicative of full year performance.
NOTE 3. NON-RECURRING CHARGES
In the fourth quarter of 1995, the Company recorded within operating costs
a charge of $152,170. This charge primarily reflected an impairment loss in
connection with the adoption of the provisions of SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
($74,370), a provision for postemployment benefits ($14,300) under the Company's
severance plan, an accrual for contractual obligations that have no future
economic benefits ($55,800) and other asset revaluations ($7,700). No payments
relating to the accrued contractual obligations were made in 1995.
SFAS No. 121 requires that long-lived assets and certain intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. In connection with
this review, the Company recorded an impairment loss of $74,370 reflecting the
revaluation of certain fixed assets, administrative and production systems and
other intangibles that will be replaced or will no longer be used by the
Company.
The provision for postemployment benefits of $14,300, represents the cost
of workforce reductions. The accrual for contractual obligations that have no
future economic benefits of $55,800 relates to the acquisition of certain
information and services that are no longer used by the Company, and the other
asset revaluations of $7,700 are necessitated based on an evaluation of the new
business initiatives.
NOTE 4. RESTRUCTURING
In 1994, the Company recorded $8,922 to restructure certain operations and
businesses, and to reduce costs and increase operating efficiencies.
In 1993, the Company recorded $60,301 to restructure certain operations and
businesses. These actions were part of a D&B-wide plan designed to achieve
long-term productivity improvements and reduce costs. The costs associated with
this plan, and all other restructuring actions, included only specific, direct
and incremental costs that could be estimated with reasonable accuracy and were
clearly identifiable with the related plans.
F-30
<PAGE> 123
ACNIELSEN CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
The restructuring charge in 1993 included $11,811 to initiate approximately
16 separate actions to reduce real estate costs by consolidating office
facilities in each of five major geographic regions in the U.S. and eleven
geographic regions in Europe. Costs incurred included lease termination costs
and asset writeoffs. The Company also provided $48,490 to discontinue certain
production systems and products. These costs principally related to writeoffs of
computer software and other intangible assets.
The table below sets forth the details of all restructuring accrual
activity by major category for the years ended December 31, 1994 and 1995.
<TABLE>
<CAPTION>
1995
1994 ACTIVITY ACTIVITY
------------------ --------
JANUARY 1, CASH DECEMBER 31, CASH DECEMBER 31,
CATEGORY 1994 EXPENSE PAYMENTS 1994 PAYMENTS 1995
- -------------------------------------- ---------- ------- -------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Real estate cost reductions........... $ 11,811 $ -- $ (5,411) $ 6,400 $ (5,702) $ 698
Discontinue production and data
collection systems and products..... 8,319 -- (7,948) 371 (371) --
Other................................. 4,289 8,922 (5,592) 7,619 (3,992) 3,627
------- ------ -------- ------- -------- ------
Total................................. $ 24,419 $8,922 $(18,951) $ 14,390 $(10,065) $4,325
======= ====== ======== ======= ======== ======
</TABLE>
NOTE 5. ACQUISITIONS
In 1995, 1994 and 1993, the Company acquired various companies in separate
transactions that were accounted for as purchases.
The aggregate purchase price of such acquisitions totaled $11,466 in 1995,
$112,009 in 1994 and $7,255 in 1993. In 1994, the largest acquisition was Survey
Research Group, a premier market research firm in Southeast Asia. The purchase
price was $85,351.
The results of operations of all purchases are included in the Combined
Statement of Operations from dates of acquisition. With the exception of the
acquisition of Survey Research Group in 1994, had all other acquisitions made in
1995, 1994 and 1993 been consummated on January 1 of the year preceding the year
of acquisition, the results of these acquired operations would not have had a
significant impact on the Company's combined results of operations for any of
the years presented.
The following unaudited pro forma summary of operations for the years ended
December 31, 1994 and 1993, presents information as if the acquisition of Survey
Research Group occurred as of the beginning of the respective years:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
(UNAUDITED)
<S> <C> <C>
Operating Revenue............................................ $1,142,507 $1,114,449
Loss Before Cumulative Effect of Changes in Accounting
Principles................................................. $ (66,947) $ (54,505)
</TABLE>
The pro forma information is not necessarily indicative of the results that
would have occurred had the acquisition taken place at the beginning of the
respective years or what may occur in the future.
NOTE 6. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
At the Distribution, the Company will assume responsibility for pension and
postretirement benefits for active employees of the Company; the responsibility
for all others, principally retirees, will remain with D&B. An allocation of
assets and liabilities for such active employee benefits, which are not
material, has been included in the combined financial statements.
F-31
<PAGE> 124
ACNIELSEN CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
U.S. Benefit Plans. Certain of the Company's businesses participate in
D&B's defined benefit pension plan covering substantially all employees in the
United States. The benefits to be paid to employees under these plans are based
on years of credited service and average final compensation. The Company
accounts for the plan as a multi-employer plan. Accordingly, the Company has
recorded pension (costs) income as allocated by D&B totaling $(882), $645 and
$825 for the years 1995, 1994 and 1993, respectively. During 1994, the Company
recognized a pension curtailment gain of $2,303 resulting from a workforce
reduction.
Certain employees of the Company in the United States also are eligible to
participate in the D&B-sponsored defined contribution plan. The Company's
businesses make a matching contribution of up to 100% of the employee's
contribution based on specified limits of the employee's salary. The Company's
expense related to this plan was $4,695, $4,105 and $4,473 for the years 1995,
1994 and 1993, respectively.
Non-U.S. Benefit Plans. The Company's non-U.S. subsidiaries provide
retirement benefits for employees consistent with local practices, primarily
using defined benefit or termination indemnity plans. The projected benefit
obligations for these funded and unfunded plans at December 31, 1995 and 1994
were $196,073 and $182,645, respectively. Prepaid pension costs for the funded
plans totaled $31,393 and $26,547 as of December 31, 1995 and 1994. Accrued
pension costs for the unfunded plans totaled $57,153 and $55,694 as of December
31, 1995 and 1994. Pension costs for these plans were $9,194, $12,427 and $7,514
for the years 1995, 1994 and 1993, respectively.
The weighted average expected long-term rate of return on pension plan
assets was 9.85%, 9.87% and 9.78% for 1995, 1994 and 1993, respectively. At
December 31, 1995 and 1994, the projected benefit obligations were determined
using weighted average discount rates of 8.15% and 8.57%, respectively, and
weighted average rates of increase in future compensation levels of 4.94% and
5.24%, respectively. Plan assets are invested in diversified portfolios that
consist primarily of equity and debt securities.
Postretirement Benefits. In addition to providing pension benefits, D&B
provides various health-care and life-insurance benefits for retired employees.
Employees at certain businesses of the Company in the United States become
eligible for these benefits if they reach normal retirement age while working
for the Company. Certain of the Company's subsidiaries outside the United States
have postretirement benefit plans, although most participants are covered by
government-sponsored or-administered plans. The cost of Company-sponsored
postretirement benefit plans outside the U.S. is not significant.
During 1993 the Company adopted the provisions of SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions." The initial effect
of adopting SFAS No. 106 was a one-time, non-cash, after-tax charge of $14,200.
The adoption of SFAS No. 106 did not have a significant effect on 1993 expense.
The Company accounts for the plan as a multi-employer plan. Accordingly, the
Company has recorded postretirement benefits costs as allocated by D&B totaling
$1,356, $2,365 and $3,629 for the years 1995, 1994 and 1993, respectively.
During 1994 the Company recognized a curtailment gain of $4,082 resulting from a
change in eligibility requirements for the postretirement medical plan.
Postemployment Benefits. During 1993, the Company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits." SFAS No. 112 requires that
employers expense the costs of postemployment benefits paid before retirement,
principally severance benefits, over the service lives of employees if certain
conditions are met. Under the Company's previous accounting policy, the total
cost of such benefits was expensed when the event occurred.
The initial effect of adopting SFAS No. 112 was a one-time, after-tax
charge of $105,294. The adoption of SFAS No. 112 did not have a significant
effect on 1993 expense.
F-32
<PAGE> 125
ACNIELSEN CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 7. EMPLOYEE STOCK PLANS
Under D&B's Key Employees Stock Option Plans, certain employees of the
Company are eligible for the grant of stock options, stock appreciation rights
and limited stock appreciation rights in tandem with stock options. These awards
are granted at the market price on the date of the grant. At December 31, 1995,
outstanding options for D&B common stock held by Company employees totaled
1,347,020 of which 497,842 had vested and were exercisable. The option prices
range from $41.50 to $63.75 per share.
Immediately following the Distribution, outstanding awards under the D&B
Key Employees Stock Option Plans held by Company employees will be replaced by
substitute awards under the Company's plan. The substitute awards will have the
same ratio of the exercise price per option to the market value per share, the
same aggregate difference between market value and exercise price and the same
vesting provisions, option periods and other terms and conditions as the options
they replace.
In October 1995, the Financial Accounting Standards Board (FASB) issued
SFAS No. 123, "Accounting for Stock-Based Compensation," which requires that
companies with stock-based compensation plans either recognize compensation
expense based on the fair value of options granted or continue to apply the
existing accounting rules and disclose pro forma net income and earnings per
share assuming the fair value method had been applied. The Company is evaluating
the new statement and has not determined whether it will adopt the recognition
or disclosure alternative of the statement. Therefore, the impact of adoption on
the Company's financial statements has not been determined. The new disclosure
requirements are generally effective for financial statements for fiscal years
beginning after December 15, 1995.
NOTE 8. INCOME TAXES
Income (loss) before provision for income taxes consisted of:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
U.S..................................... $(244,236) $(129,484) $(100,307)
Non-U.S................................. 53,188 114,896 94,663
--------- --------- ---------
$(191,048) $ (14,588) $ (5,644)
========= ========= =========
</TABLE>
The Company has not recognized benefits on the U.S. losses reflected above
since the Company does not believe it is more likely than not that such benefits
could be recognized on a separate-company basis, however the losses have been
included in D&B's consolidated tax return and as such, benefits have been
reflected as a capital transaction in divisional equity.
The provision (benefit) for income taxes consisted of:
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- --------
<S> <C> <C> <C>
U.S. Federal and state:
Current................................... $ 32,237 $(6,186) $ 22,704
Deferred.................................. (30,237) 6,860 (21,767)
-------- ------- --------
Total..................................... 2,000 674 937
-------- ------- --------
Non-U.S.:
Current................................... 22,846 24,127 40,740
Deferred.................................. 14,990 25,672 7,911
-------- ------- --------
Total..................................... 37,836 49,799 48,651
-------- ------- --------
Total..................................... $ 39,836 $50,473 $ 49,588
======== ======= ========
</TABLE>
F-33
<PAGE> 126
ACNIELSEN CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
The following table summarizes the significant differences between the U.S.
Federal statutory taxes and the Company's provision for income taxes for
combined financial statement purposes.
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Tax benefit at statutory rate........................ $(66,867) $(5,106) $(1,975)
State and local income taxes, net of Federal
effect............................................. (8,962) (3,488) (3,607)
U.S. losses for which no tax benefits were
provided........................................... 94,445 48,807 38,714
Non-U.S. taxes....................................... 19,220 9,586 15,519
Other................................................ 2,000 674 937
-------- ------- -------
Total taxes.......................................... $ 39,836 $50,473 $49,588
======== ======= =======
</TABLE>
The Company's deferred tax assets (liabilities) are comprised of the
following at December 31:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Deferred Tax Assets:
Operating Losses..................................... $ 55,043 $ 38,683
Non Recurring Charges................................ 22,928 0
Postemployment Benefits.............................. 8,766 13,806
Postretirement Benefits.............................. 8,197 8,405
Bad Debts............................................ 1,469 924
Restructuring Costs.................................. 747 6,375
Other................................................ 922 841
-------- --------
98,072 69,034
Valuation Allowance.................................... (80,522) (45,105)
-------- --------
17,550 23,929
-------- --------
Deferred Tax Liabilities:
Intangibles.......................................... (10,239) (27,715)
Deferred Revenue..................................... (7,364) (5,854)
Depreciation......................................... (3,847) (9,171)
Other................................................ (3,253) (3,589)
-------- --------
(24,703) (46,329)
-------- --------
Net Deferred Tax Liability............................. $ (7,153) $(22,400)
======== ========
</TABLE>
Undistributed earnings of non-U.S. subsidiaries aggregated approximately
$340,328 at December 31, 1995. Deferred tax liabilities have not been recognized
for these undistributed earnings because it has been D&B's policy to permanently
reinvest such undistributed earnings outside the U.S. If such earnings are
repatriated in the future, or are no longer deemed to be permanently reinvested,
applicable taxes will be provided for on such amounts. It is not currently
practicable to determine the amount of applicable taxes.
NOTE 9. OTHER TRANSACTIONS WITH AFFILIATES
D&B uses a centralized cash management system to finance its operations.
Cash deposits from most of the Company's businesses are transferred to D&B on a
daily basis and D&B funds the Company's disbursement bank accounts as required.
No interest has been charged on these transactions. Cash and cash equivalents in
the accompanying combined financial statements represents balances of certain
foreign entities.
D&B historically has provided certain centralized services (see Note 1 to
the Combined Financial Statements) to the Company. Expenses related to these
services were allocated to the Company based on utilization of specific services
or, where not estimable, based on assets employed by the Company in proportion
to D&B's total assets. Management believes these allocation methods are
reasonable. These
F-34
<PAGE> 127
ACNIELSEN CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
allocations were $85,700 (including data service charges beginning in 1995),
$45,017 and $44,200 in 1995, 1994, and 1993, respectively, and are included in
operating costs and selling and administrative expenses in the Combined
Statement of Operations. Amounts due to D&B for these expenses are included in
divisional equity.
The Company provided certain services to D&B and affiliates at negotiated
prices. Operating revenue from such services totaled $1,531, $2,970 and $721 in
1995, 1994, and 1993, respectively.
Net transfers to/from D&B, included in Divisional Equity, includes advances
and loans from affiliates, net cash transfers to/from D&B, third party
liabilities paid on behalf of the Company by D&B, amounts due to/from D&B for
services and other charges, and income taxes paid on behalf of the Company by
D&B. No interest has been charged on these transactions. The weighted average
balance due to D&B was $713,099, $518,738, and $458,661 for 1995, 1994 and 1993,
respectively.
The activity in the net transfers (to) from D&B account, included in
Divisional Equity is summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
D&B services and other charges................. $ 88,505 $ 36,881 $ 182,689
Loans and advances -- Net...................... 132,734 206,835 104,141
U.S. income taxes.............................. 32,237 (6,186) 22,704
Cash transfers -- Net.......................... (152,336) (82,270) (282,509)
--------- --------- ---------
Net transfers from D&B......................... $ 101,140 $ 155,260 $ 27,025
========= ========= =========
</TABLE>
NOTE 10. LEASE COMMITMENTS
Certain of the Company's operations are conducted from leased facilities,
which are under operating leases. Rental expense under real estate operating
leases for the years 1995, 1994 and 1993 was $40,109, $31,781 and $34,581,
respectively. The totals include $115 and $124 in 1995 and 1994, respectively
for facilities usage charged by D&B or an affiliate. The approximate minimum
annual rental expense for real estate operating leases that have remaining
noncancelable lease terms in excess of one year, net of sublease rentals, at
December 31, 1995, was: 1996 -- $33,187; 1997 -- $30,047; 1998 -- $29,051;
1999 -- $26,275; 2000 -- $21,908; and an aggregate of $31,607 thereafter.
The Company also leases or participates with D&B in leases of certain
computer and other equipment under operating leases. These leases are frequently
renegotiated or otherwise changed as advancements in computer technology produce
opportunities to lower costs and improve performance. Rental expense under
computer and other equipment leases was $25,076, $17,796 and $36,124 for 1995,
1994 and 1993, respectively. At December 31, 1995, the approximate minimum
annual rental expense for computer and other equipment under operating leases
that have remaining noncancelable lease terms in excess of one year was:
1996 -- $27,079; 1997 -- $22,966; 1998 -- $15,106; 1999 -- $10,538;
2000 -- $4,923; and an aggregate of $2,973 thereafter.
The Company has an agreement with a third party to purchase certain data
processing services, extending beyond one year. At December 31, 1995, the
purchases covered by this agreement total approximately: 1996 -- $8,700;
1997 -- $6,500; 1998 -- $3,600; 1999 -- $800; 2000 -- $800; and thereafter
$2,200.
Prior to the Distribution, the Company will enter into certain lease or
sublease agreements with D&B, an affiliate or third parties for certain leased
facilities, computer and other equipment, which principally are a continuation
of existing lease commitments at market rates. The commitments are included in
the amounts disclosed above.
F-35
<PAGE> 128
ACNIELSEN CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 11. LITIGATION
The Company and its subsidiaries are involved in legal proceedings and
litigation arising in the ordinary course of business. In the opinion of
management, the outcome of such current legal proceedings, claims and
litigation, if decided adversely, could have a material effect on quarterly or
annual operating results or cash flows when resolved in a future period.
However, in the opinion of management, these matters will not materially affect
the Company's combined financial position.
Directorate General IV of the Commission of the European Union (the
"Commission") is currently investigating the Company for the possible violation
of European Union competition law. In May 1996, the Commission issued a
Statement of Objections with respect to certain of the Company's practices in
Europe, including discounting and other sales practices. The Company has
submitted its response to the Commission's Statement of Objections. Following
the review of such submission and a hearing at which representatives of European
Union member states will participate, the Commission may uphold the Company's
position and dismiss the complaint or adopt a decision prohibiting any of the
practices identified in the Statement of Objections and imposing substantial
fines.
In addition, on July 29, 1996, Information Resources, Inc. ("IRI") filed a
complaint in the United States District Court for the Southern District of New
York, naming as defendants The Dun & Bradstreet Corporation ("D&B"), A.C.
Nielsen Company (which is a subsidiary of the Company) and I.M.S. International,
Inc. ("IMS") (the "IRI Action").
The complaint alleges various violations of the United States antitrust
laws, including alleged violations of Sections 1 and 2 of the Sherman Act. The
complaint also alleges a claim of tortious interference with a contract and a
claim of tortious interference with a prospective business relationship. These
claims relate to the acquisition by defendants of Survey Research Group Limited
("SRG"). IRI alleges that SRG violated an alleged agreement with IRI when it
agreed to be acquired by the defendants and that the defendants induced SRG to
breach that agreement.
IRI's complaint alleges damages in excess of $350 million, which amount IRI
has asked to be trebled under the antitrust laws. IRI also seeks punitive
damages in an unspecified amount.
In connection with the IRI Action, D&B, Cognizant Corporation (the parent
company of IMS) and the Company will enter into an Indemnity and Joint Defense
Agreement (the "Indemnity and Joint Defense Agreement") pursuant to which they
will agree (i) to certain arrangements allocating potential liabilities ("IRI
Liabilities") that may arise out of or in connection with the IRI Action and
(ii) to conduct a joint defense of such action. In particular, the Indemnity and
Joint Defense Agreement will provide that the Company will assume exclusive
liability for IRI Liabilities up to a maximum amount to be calculated at the
time such liabilities, if any, become payable (the "ACN Maximum Amount"), and
that Cognizant and D&B 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 the Company 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 the Company without impairing
the investment banking firm's ability to deliver a viability opinion (but which
will not require any action requiring stockholder approval), and (ii) payment of
related fees and expenses. For these purposes, financial viability means the
ability of the Company, 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.
F-36
<PAGE> 129
ACNIELSEN CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
Management of ACNielsen is unable to predict at this time the final outcome
of either the IRI Action or the Commission's investigation or whether the
resolution of either matter could materially affect the Company's results of
operations, cash flows or financial position.
NOTE 12. SUPPLEMENTAL FINANCIAL DATA
Accounts Receivable -- Net:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Trade..................................................... $229,492 $197,603
Less: allowance for doubtful accounts..................... (17,289) (8,077)
Unbilled receivables...................................... 30,579 19,305
Other..................................................... 30,194 24,537
-------- --------
$272,976 $233,368
======== ========
</TABLE>
Other Current Assets:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Deferred taxes.............................................. $20,435 $ 5,629
Prepaid expenses............................................ 23,373 25,314
------- -------
$43,808 $30,943
======= =======
</TABLE>
Property, Plant and Equipment -- Net, carried at cost, less accumulated
depreciation and amortization:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Buildings............................................... $ 53,927 $ 52,944
Machinery and Equipment................................. 371,659 344,852
Less: accumulated depreciation.......................... (260,090) (227,221)
Leasehold improvements, less: accumulated amortization
of $20,644 and $18,543................................ 19,237 9,252
Land.................................................... 4,752 3,223
--------- ---------
$ 189,485 $ 183,050
========= =========
</TABLE>
Computer Software, Other Intangibles and Goodwill:
<TABLE>
<CAPTION>
COMPUTER OTHER
SOFTWARE INTANGIBLES GOODWILL
-------- ----------- --------
<S> <C> <C> <C>
January 1, 1994............................... $ 47,363 $ 74,882 $106,550
Additions at cost............................. 21,726 8,439 90,536
Amortization.................................. (27,290) (4,815) (5,834)
Other deductions and reclassifications........ 13,521 (13,017) 2,212
-------- -------- --------
December 31, 1994............................. 55,320 65,489 193,464
Additions at cost............................. 20,535 1,793 3,444
Amortization.................................. (36,643) (5,410) (9,609)
Other deductions and reclassifications........ (16,498) (28,718) 21,155
-------- -------- --------
December 31, 1995............................. $ 22,714 $ 33,154 $208,454
======== ======== ========
</TABLE>
F-37
<PAGE> 130
ACNIELSEN CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
Accumulated amortization of computer software, other intangibles and
goodwill was $130,642 and $91,286 at December 31, 1995 and 1994, respectively.
Accounts and Notes Payable:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Trade..................................................... $ 43,692 $ 32,452
Customer advances......................................... 2,768 3,268
Taxes other than income taxes............................. 33,359 25,561
Notes..................................................... 29,698 42,688
Other..................................................... 9,244 4,707
-------- --------
$118,761 $108,676
======== ========
</TABLE>
Accrued and Other Current Liabilities:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Salaries, wages, bonuses and other compensation........... $ 39,633 $ 40,098
Restructuring costs....................................... 4,325 14,390
Postemployment benefits................................... 39,232 62,571
Other..................................................... 156,786 111,933
-------- --------
$239,976 $228,992
======== ========
</TABLE>
NOTE 13. OPERATIONS BY GEOGRAPHIC AREA
The Company, operating globally, provides marketing research, information
and analysis services to the worldwide consumer products services industry.
Financial information by geographic area is summarized as follows.
Inter-area sales were not significant.
<TABLE>
<CAPTION>
OPERATING OPERATING IDENTIFIABLE
REVENUE INCOME (LOSS) ASSETS
---------- ------------- ------------
<S> <C> <C> <C>
1995
United States...................................... $ 274,552 $(172,971) $192,429
Canada/Latin America............................... 169,009 18,967 112,373
---------- -------- --------
Total Americas........................... 443,561 (154,004) 304,802
---------- -------- --------
Europe............................................. 583,269 (5,599) 457,681
Asia Pacific....................................... 216,875 11,695 198,310
ACN Japan.......................................... 37,640 (36,100) 9,089
---------- -------- --------
Total.................................... $1,281,345 $(184,008)(1) $969,882
========== ======== ========
1994
United States...................................... $ 256,111 $ (90,665) $249,071
Canada/Latin America............................... 149,124 27,322 94,329
---------- -------- --------
Total Americas........................... 405,235 (63,343) 343,400
---------- -------- --------
</TABLE>
F-38
<PAGE> 131
ACNIELSEN CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
OPERATING OPERATING IDENTIFIABLE
REVENUE INCOME (LOSS) ASSETS
---------- -------- --------
<S> <C> <C> <C>
Europe............................................. 548,647 69,893 434,870
Asia Pacific....................................... 105,565 11,172 178,447
ACN Japan.......................................... 32,660 (18,891) 23,031
---------- -------- --------
Total.................................... $1,092,107 $ (1,169) (2) $979,748
========== ======== ========
1993
United States...................................... $ 296,802 $ (87,168) $256,942
Canada/Latin America............................... 124,732 24,106 61,678
---------- -------- --------
Total Americas........................... 421,534 (63,062) 318,620
---------- -------- --------
Europe............................................. 550,334 55,985 454,721
Asia Pacific....................................... 45,052 13,030 51,718
ACN Japan.......................................... 27,756 (15,854) 20,027
---------- -------- --------
Total.................................... $1,044,676 $ (9,901)(3) $845,086
========== ======== ========
</TABLE>
- ---------------
(1) 1995 Operating Loss includes a non-recurring charge of $152,170 ($107,000 in
the U.S., $1,870 in Canada/Latin America, $28,400 in Europe, $900 in Asia
Pacific and $14,000 in Japan) in the fourth quarter. See Note 3 to the
Combined Financial Statements.
(2) 1994 Operating Income includes restructuring expense of $8,922 ($3,396 in
the U.S. and $5,526 in Europe). See Note 4 to the Combined Financial
Statements.
(3) 1993 Operating Loss includes restructuring expense of $60,301 ($48,120 in
the U.S. and $12,181 in Europe). See Note 4 to the Combined Financial
Statements.
NOTE 14. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 YEAR
--------- -------- ------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
1995
Operating Revenue............ $ 285,341 $325,828 $ 321,235 $ 348,941 $1,281,345
Operating (Loss) Income(1)... $ (19,903) $ 8,874 $ (24,425) $ (148,554) $ (184,008)
Net Loss..................... $ (26,654) $(10,139) $ (33,143) $ (160,948) $ (230,884)
1994
Operating Revenue............ $ 233,041 $254,240 $ 274,538 $ 330,288 $1,092,107
Restructuring Expense........ $ -- $ 8,922 $ -- $ -- $ 8,922
Operating (Loss) Income...... $ (21,270) $ (8,645) $ (6,297) $ 35,043 $ (1,169)
Net (Loss) Income............ $ (26,429) $(26,525) $ (26,257) $ 14,150 $ (65,061)
</TABLE>
- ---------------
(1) Includes a non-recurring charge of $152,170 in the fourth quarter. See Note
3 to the Combined Financial Statements.
F-39
<PAGE> 132
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder of ACNielsen Corporation:
We have audited the accompanying balance sheet of ACNielsen Corporation, a
wholly owned subsidiary of The Dun & Bradstreet Corporation, as of June 30,
1996. This financial statement is the responsibility of the management of
ACNielsen Corporation. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosure in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of ACNielsen Corporation as of June
30, 1996, in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Stamford, Connecticut
September 16, 1996
F-40
<PAGE> 133
ACNIELSEN CORPORATION
STATEMENT OF FINANCIAL POSITION
JUNE 30, 1996
<TABLE>
<S> <C>
ASSETS
Cash............................................................................... $100.00
=======
LIABILITIES AND SHAREHOLDER EQUITY
Common Stock, par value $1.00 per share; authorized, issued and outstanding -- 100
shares........................................................................... $100.00
=======
</TABLE>
The accompanying notes are an integral part of the financial statement.
F-41
<PAGE> 134
ACNIELSEN CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
On April 13, 1996, ACNielsen Corporation (the "Company") was incorporated
under the General Corporation Law of the State of Delaware. The Company has the
authority under its Certificate of Incorporation to issue one hundred shares of
common stock, par value $1.00 per share ("Common Stock"), of which one hundred
shares were issued to The Dun & Bradstreet Corporation ("D&B") on May 1, 1996.
The Company has no assets other than cash and has not commenced operations. The
Company's activities to date have been solely related to its incorporation.
NOTE 2. PROPOSED REORGANIZATION
On January 9, 1996, the Board of Directors of D&B approved in principal a
plan to distribute the Common Stock and the common stock of Cognizant
Corporation to all holders of outstanding shares of common stock of D&B (the
"Distribution"). After the Distribution, the Company will operate as an
independent company which will deliver marketing research, information and
analysis to the consumer products and service industries. Outside the United
States and Canada, the Company will conduct media measurement and related
businesses. The Company will offer its services in over 90 countries around the
globe and will employ over 17,000 employees worldwide. In connection with the
Distribution, application has been made to list the Common Stock on the New York
Stock Exchange.
NOTE 3. AMENDED CERTIFICATE OF INCORPORATION
Prior to the date of the Distribution, the Company will file a Restated
Certificate of Incorporation which will authorize the issuance of 160,000,000
shares of all classes of stock of which 5,000,000 shares will represent shares
of preferred stock, par value $.01 per share ("Preferred Stock"), 150,000,000
shares will represent shares of Common Stock, and 5,000,000 shares will
represent shares of Series Common Stock, par value $.01 per share ("Series
Common Stock").
F-42
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
COGNIZANT CORPORATION
The name of the corporation is Cognizant Corporation, and the
original Certificate of Incorporation of the corporation was filed with the
Secretary of State of the State of Delaware on January 2, 1996. The original
Certificate of Incorporation of the corporation is hereby amended and restated
to read in its entirety as follows:
"FIRST: The name of the corporation is Cognizant Corporation.
SECOND: The registered office of the corporation in the State of
Delaware is located at No. 1209 Orange Street, in the City of Wilmington, County
of New Castle; and the name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The purposes of the corporation are to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: (1) The total number of shares of all classes of stock which
the corporation shall have authority to issue is 420,000,000, consisting of (1)
10,000,000 shares of Preferred Stock, par value $.01 per share ("Preferred
Stock"), (2) 400,000,000 shares of Common Stock, par value $.01 per share
("Common Stock"), and (3) 10,000,000 shares of Series Common Stock, par value
$.01 per share ("Series Common Stock"). The number of authorized shares of any
of the Preferred Stock, the Common Stock or the Series Common Stock may be
increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority in voting
power of the stock of the corporation entitled to vote thereon irrespective of
the provisions of Section 242(b)(2) of the General Corporation Law of the State
of Delaware (or any successor provision thereto), and no vote of the holders of
any of the Preferred Stock, the Common Stock or the Series Common Stock voting
separately as a class shall be required therefor.
(2) The Board of Directors is hereby expressly authorized, by
resolution or resolutions, to provide, out of the unissued shares of Preferred
Stock, for series of Preferred Stock and, with respect to each such series, to
fix the number of shares constituting such series and the designation of such
series, the voting powers (if any) of the shares of such series, and the
preferences and relative, participating, optional or other special rights, if
any, and any qualifications, limitations or restrictions thereof, of the shares
of such series. The powers, preferences and relative, participating, optional
and other special rights of each series of Preferred Stock, and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other series at any time outstanding.
<PAGE> 2
2
(3) The Board of Directors is hereby expressly authorized, by
resolution or resolutions, to provide, out of the unissued shares of Series
Common Stock, for series of Series Common Stock and, with respect to each such
series, to fix the number of shares constituting such series and the designation
of such series, the voting powers (if any) of the shares of such series, and the
preferences and relative, participating, optional or other special rights, if
any, and any qualifications, limitations or restrictions thereof, of the shares
of such series. The powers, preferences and relative, participating, optional
and other special rights of each series of Series Common Stock, and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other series at any time outstanding.
(4) (a) Each holder of Common Stock, as such, shall be entitled to one
vote for each share of Common Stock held of record by such holder on all matters
on which stockholders generally are entitled to vote; provided, however, that,
except as otherwise required by law, holders of Common Stock, as such, shall not
be entitled to vote on any amendment to this Restated Certificate of
Incorporation (including any certificate of designations relating to any series
of Preferred Stock or Series Common Stock) that relates solely to the terms of
one or more outstanding series of Preferred Stock or Series Common Stock if the
holders of such affected series are entitled, either separately or together with
the holders of one or more other such series, to vote thereon pursuant to this
Restated Certificate of Incorporation (including any certificate of designations
relating to any series of Preferred Stock or Series Common Stock) or pursuant to
the General Corporation Law of the State of Delaware.
(b) Except as otherwise required by law, holders of a series of
Preferred Stock or Series Common Stock, as such, shall be entitled only to such
voting rights, if any, as shall expressly be granted thereto by this Restated
Certificate of Incorporation (including any certificate of designations relating
to such series).
(c) Subject to applicable law and the rights, if any, of the holders of
any outstanding series of Preferred Stock or Series Common Stock or any class or
series of stock having a preference over or the right to participate with the
Common Stock with respect to the payment of dividends, dividends may be declared
and paid on the Common Stock at such times and in such amounts as the Board of
Directors in its discretion shall determine.
(d) Upon the dissolution, liquidation or winding up of the corporation,
subject to the rights, if any, of the holders of any outstanding series of
Preferred Stock or Series Common Stock or any class or series of stock having a
preference over or the right to participate with the Common Stock with respect
to the distribution of assets of the corporation upon such dissolution,
liquidation or winding up of the corporation, the holders of the Common Stock,
as such, shall be entitled to receive the assets of the corporation available
for distribution to its stockholders ratably in proportion to the number of
shares held by them.
<PAGE> 3
3
FIFTH: The Board of Directors shall be authorized to make, amend,
alter, change, add to or repeal the By-Laws of the corporation in any manner not
inconsistent with the laws of the State of Delaware, subject to the power of the
stockholders to amend, alter, change, add to or repeal the By-Laws made by the
Board of Directors. Notwithstanding anything contained in this Restated
Certificate of Incorporation to the contrary, the affirmative vote of the
holders of at least 80 percent in voting power of all the shares of the
corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required in order for the stockholders to
alter, amend or repeal any provision of the By-laws which is to the same effect
as Article Fifth, Article Seventh, and Article Eighth of this Restated
Certificate of Incorporation or to adopt any provision inconsistent therewith.
SIXTH: (1) To the fullest extent permitted by the laws of the State of
Delaware:
(a) The corporation shall indemnify any person (and such person's
heirs, executors or administrators) who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding
(brought in the right of the corporation or otherwise), whether civil, criminal,
administrative or investigative, and whether formal or informal, including
appeals, by reason of the fact that such person is or was a director or officer
of the corporation or, if a director or officer of the corporation, by reason of
the fact that such person is or was serving at the request of the corporation as
a director, officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, for and against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person or such heirs,
executors or administrators in connection with such action, suit or proceeding,
including appeals. Notwithstanding the preceding sentence, the corporation shall
be required to indemnify a person described in such sentence in connection with
any action, suit or proceeding (or part thereof) commenced by such person only
if the commencement of such action, suit or proceeding (or part thereof) by such
person was authorized by the Board of Directors of the corporation. The
corporation may indemnify any person (and such person's heirs, executors or
administrators) who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (brought in the
right of the corporation or otherwise), whether civil, criminal, administrative
or investigative, and whether formal or informal, including appeals, by reason
of the fact that such person is or was an employee or agent of the corporation
or is or was serving at the request of the corporation as a director, officer,
partner, trustee, employee or agent of another corporation, for and against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person or such heirs,
executors or administrators in connection with such action, suit or proceeding,
including appeals.
(b) The corporation shall promptly pay expenses incurred by (i) any
person whom the corporation is obligated to indemnify pursuant to the first
sentence of subsection (a) of this Article Sixth, Section 1 or (ii) any person
whom the corporation
<PAGE> 4
4
has determined to indemnify pursuant to the third sentence of subsection (a) of
this Article Sixth, Section 1, in defending any action, suit or proceeding in
advance of the final disposition of such action, suit or proceeding, including
appeals, upon presentation of appropriate documentation.
(c) The corporation may purchase and maintain insurance on behalf of
any person described in subsection (a) of this Article Sixth, Section (1)
against any liability asserted against such person, whether or not the
corporation would have the power to indemnify such person against such liability
under the provisions of this Article Sixth, Section (1) or otherwise.
(d) The provisions of this Article Sixth, Section (1) shall be
applicable to all actions, claims, suits or proceedings made or commenced after
the adoption hereof, whether arising from acts or omissions to act occurring
before or after its adoption. The provisions of this Article Sixth, Section (1)
shall be deemed to be a contract between the corporation and each director or
officer who serves in such capacity at any time while this Article Sixth,
Section (1) and the relevant provisions of the laws of the State of Delaware and
other applicable law, if any, are in effect, and any repeal or modification
hereof shall not affect any rights or obligations then existing with respect to
any state of facts or any action, suit or proceeding then or theretofore
existing, or any action, suit or proceeding thereafter brought or threatened
based in whole or in part on any such state of facts. If any provision of this
Article Sixth, Section (1) shall be found to be invalid or limited in
application by reason of any law or regulation, it shall not affect the validity
of the remaining provisions hereof. The rights of indemnification provided in
this Article Sixth, Section (1) shall neither be exclusive of, nor be deemed in
limitation of, any rights to which an officer, director, employee or agent may
otherwise be entitled or permitted by contract, this Restated Certificate of
Incorporation, vote of stockholders or directors or otherwise, or as a matter of
law, both as to actions in such person's official capacity and actions in any
other capacity while holding such office, it being the policy of the corporation
that indemnification of any person whom the corporation is obligated to
indemnify pursuant to the first sentence of subsection (a) of this Article
Sixth, Section 1 shall be made to the fullest extent permitted by law.
(e) For purposes of this Article Sixth, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries.
(2) A director of the corporation shall not be liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the General Corporation Law of the
State of Delaware as the same exists or may
<PAGE> 5
5
hereafter be amended. Any amendment, modification or repeal of the foregoing
sentence shall not adversely affect any right or protection of a director of the
corporation hereunder in respect of any act or omission occurring prior to the
time of such amendment, modification or repeal.
SEVENTH: (1) The business and affairs of the corporation shall be
managed by or under the direction of a Board of Directors consisting of not less
than three directors, the exact number of directors to be determined from time
to time by resolution adopted by affirmative vote of a majority of the Board of
Directors. The directors shall be divided into three classes designated Class I,
Class II and Class III. Each class shall consist, as nearly as possible, of
one-third of the total number of directors constituting the entire Board of
Directors. Class I directors shall be originally elected for a term expiring at
the succeeding annual meeting of stockholders, Class II directors shall be
originally elected for a term expiring at the second succeeding annual meeting
of stockholders, and Class III directors shall be originally elected for a term
expiring at the third succeeding annual meeting of stockholders. At each
succeeding annual meeting of stockholders following 1996, successors to the
class of directors whose term expires at that annual meeting shall be elected
for a term expiring at the third succeeding annual meeting. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible, and any additional director of any class elected to fill a newly
created directorship resulting from an increase in such class shall hold office
for a term that shall coincide with the remaining term of that class, but in no
case shall a decrease in the number of directors remove or shorten the term of
any incumbent director. A director shall hold office until the annual meeting
for the year in which his term expires and until his successor shall be elected
and shall qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office. Any newly created directorship on the
Board of Directors that results from an increase in the number of directors and
any vacancy occurring in the Board of Directors may be filled only by a majority
of the directors then in office, although less than a quorum, or by a sole
remaining director. If any applicable provision of the General Corporation Law
of the State of Delaware expressly confers power on stockholders to fill such a
directorship at a special meeting of stockholders, such a directorship may be
filled at such meeting only by the affirmative vote of at least 80 percent of
the voting power of all shares of the corporation entitled to vote generally in
the election of directors voting as a single class. Any director elected to fill
a vacancy not resulting from an increase in the number of directors shall have
the same remaining term as that of his predecessor. Directors may be removed
only for cause, and only by the affirmative vote of at least 80 percent in
voting power of all shares of the corporation entitled to vote generally in the
election of directors, voting as a single class.
(2) Notwithstanding the foregoing, whenever the holders of any one or
more series of Preferred Stock or Series Common Stock issued by the corporation
shall have the right, voting separately as a series or separately as a class
with one or more such other series, to elect directors at an annual or special
meeting of stockholders, the
<PAGE> 6
6
election, term of office, removal, filling of vacancies and other features of
such directorships shall be governed by the terms of this Restated Certificate
of Incorporation (including any certificate of designations relating to any
series of Preferred Stock or Series Common Stock) applicable thereto, and such
directors so elected shall not be divided into classes pursuant to this Article
Seventh unless expressly provided by such terms.
EIGHTH: Any action required or permitted to be taken by the holders of
the Common Stock of the corporation must be effected at a duly called annual or
special meeting of such holders and may not be effected by any consent in
writing by such holders. Except as otherwise required by law and subject to the
rights of the holders of any series of Preferred Stock or Series Common Stock,
special meetings of stockholders of the corporation may be called only by the
Chief Executive Officer of the corporation or by the Board of Directors pursuant
to a resolution approved by the Board of Directors.
NINTH: Notwithstanding anything contained in this Restated Certificate
of Incorporation to the contrary, the affirmative vote of the holders of at
least 80 percent in voting power of all the shares of the corporation entitled
to vote generally in the election of directors, voting together as a single
class, shall be required to alter, amend or repeal Article Fifth, Article
Seventh, Article Eighth or this Article Ninth or to adopt any provision
inconsistent therewith."
Cognizant Corporation does hereby further certify that this
Restated Certificate of Incorporation was duly adopted by unanimous written
consent of the stockholders in accordance with the provisions of Sections 228,
242 and 245 of the General Corporation Law of the State of Delaware.
<PAGE> 7
7
IN WITNESS WHEREOF, COGNIZANT CORPORATION has caused its
corporate seal to be hereunto affixed and this certificate to be signed by
Susan H. Reynolds, its Secretary, this 7th day of October, 1996.
COGNIZANT CORPORATION
By: /s/ Susan H. Reynolds
-----------------------------
Susan H. Reynolds
Secretary
<PAGE> 1
EXHIBIT 3.2
FORM OF AMENDED AND RESTATED
BY-LAWS
OF
COGNIZANT CORPORATION
October 7, 1996
<PAGE> 2
EXHIBIT 3.2
FORM OF AMENDED AND RESTATED
BY-LAWS
OF
COGNIZANT CORPORATION
ARTICLE I.
STOCKHOLDERS.
Section 1. The annual meeting of the stockholders of the
corporation for the purpose of electing directors and for the transaction of
such other business as may properly be brought before the meeting shall be held
on such date, and at such time and place within or without the State of Delaware
as may be designated from time to time by the Board of Directors.
Section 2. Special meetings of the stockholders shall be
called at any time by the Secretary or any other officer, whenever directed by
the Board of Directors or by the Chief Executive Officer. The purpose or
purposes of the proposed meeting shall be included in the notice setting forth
such call.
Section 3. Except as otherwise provided by law, notice of the
time, place and, in the case of a special meeting, the purpose or purposes of
the meeting of stockholders shall be delivered personally or mailed not earlier
than sixty, nor less than ten days previous thereto, to each stockholder of
record entitled to vote at the meeting at such address as appears on the records
of the corporation.
Section 4. The holders of a majority in voting power of the
stock issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business, except as otherwise provided by
statute or by the Restated Certificate of Incorporation; but if at any regularly
called meeting of stockholders there be less than a quorum present, the
stockholders present may adjourn the meeting from time to time without further
notice other than announcement at the meeting until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the original meeting. If the adjournment is for more than 30 days, or if, after
the adjournment, a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting.
Section 5. The Chairman of the Board, or in the Chairman's
absence or at the Chairman's direction, the President, or in the President's
absence or at the President's direction, any officer of the Corporation shall
call all meetings of the stockholders to order and shall act as Chairman of such
meeting. The Secretary of the corporation or, in such officer's absence, an
Assistant Secretary shall act as secretary of the meeting. If neither the
<PAGE> 3
2
Secretary nor an Assistant Secretary is present, the Chairman of the meeting
shall appoint a secretary of the meeting. Unless otherwise determined by the
Board of Directors prior to the meeting, the Chairman of the meeting shall
determine the order of business and shall have the authority in his or her
discretion to regulate the conduct of any such meeting, including, without
limitation, by imposing restrictions on the persons (other than stockholders of
the corporation or their duly appointed proxies) who may attend any such
meeting, whether any stockholder or stockholders' proxy may be excluded from any
meeting of stockholders based upon any determination by the Chairman, in his or
her sole discretion, that any such person has unduly disrupted or is likely to
disrupt the proceedings thereat, and the circumstances in which any person may
make a statement or ask questions at any meeting of stockholders.
Section 6. At all meetings of stockholders, any stockholder
entitled to vote thereat shall be entitled to vote in person or by proxy, but no
proxy shall be voted after three years from its date, unless such proxy provides
for a longer period. Without limiting the manner in which a stockholder may
authorize another person or persons to act for the stockholder as proxy pursuant
to the General Corporation Law of the State of Delaware, the following shall
constitute a valid means by which a stockholder may grant such authority: (1) a
stockholder may execute a writing authorizing another person or persons to act
for the stockholder as proxy, and execution of the writing may be accomplished
by the stockholder or the stockholder's authorized officer, director, employee
or agent signing such writing or causing his or her signature to be affixed to
such writing by any reasonable means including, but not limited to, by facsimile
signature; or (2) a stockholder may authorize another person or persons to act
for the stockholder as proxy by transmitting or authorizing the transmission of
a telegram, cablegram, or other means of electronic transmission to the person
who will be the holder of the proxy or to a proxy solicitation firm, proxy
support service organization or like agent duly authorized by the person who
will be the holder of the proxy to receive such transmission, provided that any
such telegram, cablegram or other means of electronic transmission must either
set forth or be submitted with information from which it can be determined that
the telegram, cablegram or other electronic transmission was authorized by the
stockholder. If it is determined that such telegrams, cablegrams or other
electronic transmissions are valid, the judge or judges of stockholder votes or,
if there are no such judges, such other persons making that determination shall
specify the information upon which they relied.
Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to the preceding
paragraph of this Section 6 may be substituted or used in lieu of the original
writing or transmission for any and all purposes for which the original writing
or transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission.
Proxies shall be filed with the Secretary of the meeting prior
to or at the commencement of the meeting to which they relate.
Section 7. When a quorum is present at any meeting, the vote
of the holders of a majority in voting power of the stock present in person or
represented by proxy and
<PAGE> 4
3
entitled to vote on the matter shall decide any question brought before such
meeting, unless the question is one upon which by express provision of statute
or of the Restated Certificate of Incorporation or these By-Laws, a different
vote is required, in which case such express provision shall govern and control
the decision of such question.
Section 8. In order that the corporation may determine the
stockholders (a) entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or (b) entitled to consent to corporate action in
writing without a meeting, or (c) entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted, and which record date (i) in the case of
clause (a) above, shall not be more than sixty nor less than ten days before the
date of such meeting, (ii) in the case of clause (b) above, shall not be more
than ten days after the date upon which the resolution fixing the record date is
adopted by the board of directors, and (iii) in the case of clause (c) above,
shall not be more than sixty days prior to such action. If for any reason the
Board of Directors shall not have fixed a record date for any such purpose, the
record date for such purpose shall be determined as provided by law. Only those
stockholders of record on the date so fixed or determined shall be entitled to
any of the foregoing rights, notwithstanding the transfer of any such stock on
the books of the corporation after any such record date so fixed or determined.
Section 9. The officer who has charge of the stock ledger of
the corporation shall prepare and make at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of meeting,
or, if not so specified, at the place where the meeting is to be held. The list
shall also be produced at the time and kept at the place of the meeting during
the whole time thereof, and may be inspected by any stockholder who is present.
Section 10. The Board of Directors, in advance of all meetings
of the stockholders, shall appoint one or more judges of stockholder votes, who
may be stockholders or their proxies, but not directors of the corporation or
candidates for office. In the event that the Board of Directors fails to so
appoint judges of stockholder votes or, in the event that one or more judges of
stockholder votes previously designated by the Board of Directors fails to
appear or act at the meeting of stockholders, the Chairman of the meeting may
appoint one or more judges of stockholder votes to fill such vacancy or
vacancies. Judges of stockholder votes appointed to act at any meeting of the
stockholders, before entering upon the discharge of their duties, shall be sworn
faithfully to execute the duties of judge of stockholder votes with strict
impartiality and according to the best of their ability and the oath so taken
shall be subscribed by them. Judges of stockholder votes shall, subject to the
power of the Chairman
<PAGE> 5
4
of the meeting to open and close the polls, take charge of the polls, and, after
the voting, shall make a certificate of the result of the vote taken.
Section 11. (A) Annual Meetings of Stockholders. (1)
Nominations of persons for election to the Board of Directors of the corporation
and the proposal of business to be considered by the stockholders may be made at
an annual meeting of stockholders (a) pursuant to the corporation's notice of
meeting delivered pursuant to Article I, Section 3 of these By-Laws, (b) by or
at the direction of the Chairman of the Board or (c) by any stockholder of the
corporation who is entitled to vote at the meeting, who complied with the notice
procedures set forth in subparagraphs (2) and (3) of this paragraph (A) of this
By-Law and who was a stockholder of record at the time such notice is delivered
to the Secretary of the corporation.
(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (c) of paragraph
(A)(1) of this By-Law, the stockholder must have given timely notice thereof in
writing to the Secretary of the corporation, and, in the case of business other
than nominations, such other business must be a proper matter for stockholder
action. To be timely, a stockholder's notice shall be delivered to the Secretary
at the principal executive offices of the corporation not less than seventy days
nor more than ninety days prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than twenty days, or delayed by more than seventy
days, from such anniversary date, notice by the stockholder to be timely must be
so delivered not earlier than the ninetieth day prior to such annual meeting and
not later than the close of business on the later of the seventieth day prior to
such annual meeting or the tenth day following the day on which public
announcement of the date of such meeting is first made. Such stockholder's
notice shall set forth (a) as to each person whom the stockholder proposes to
nominate for election or re-election as a director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected; (b) as to
any other business that the stockholder proposes to bring before the meeting, a
brief description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the stockholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made
(i) the name and address of such stockholder, as they appear on the
corporation's books, and of such beneficial owner and (ii) the class and number
of shares of the corporation which are owned beneficially and of record by such
stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (A)(2) of this By-Law to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the corporation is
increased and there is no public announcement naming all of the nominees for
director or specifying the size of the increased Board of Directors made by the
corporation at least eighty days prior to the first anniversary of the
<PAGE> 6
5
preceding year's annual meeting, a stockholder's notice required by this By-Law
shall also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary at
the principal executive offices of the corporation not later than the close of
business on the tenth day following the day on which such public announcement is
first made by the corporation.
(B) Special Meetings of Stockholders. Only such business shall
be conducted at a special meeting of stockholders as shall have been brought
before the meeting pursuant to the corporation's notice of meeting pursuant to
Article I, Section 2 of these By-Laws. Nominations of persons for election to
the Board of Directors may be made at a special meeting of stockholders at which
directors are to be elected pursuant to the corporation's notice of meeting (a)
by or at the direction of the Board of Directors or (b) by any stockholder of
the corporation who is entitled to vote at the meeting, who complies with the
notice procedures set forth in this By-Law and who is a stockholder of record at
the time such notice is delivered to the Secretary of the corporation.
Nominations of stockholders of persons for election to the Board of Directors
may be made at such a special meeting of stockholders if the stockholder's
notice as required by paragraph (A)(2) of this By-Law shall be delivered to the
Secretary at the principal executive offices of the corporation not earlier than
the ninetieth day prior to such special meeting and not later than the close of
business on the later of the seventieth day prior to such special meeting or the
tenth day following the day on which public announcement is first made of the
date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting.
(C) General. (1) Only persons who are nominated in accordance
with the procedures set forth in this By-Law shall be eligible to serve as
directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this By-Law. Except as otherwise provided by law, the Restated
Certificate of Incorporation or these By-Laws, the Chairman of the meeting shall
have the power and duty to determine whether a nomination or any business
proposed to be brought before the meeting was made in accordance with the
procedures set forth in this By-Law and, if any proposed nomination or business
is not in compliance with this By-Law, to declare that such defective nomination
shall be disregarded or that such proposed business shall not be transacted.
(2) For purposes of this By-Law, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
(3) For purposes of this By-Law, no adjournment nor notice of
adjournment of any meeting shall be deemed to constitute a new notice of such
meeting for purposes of this Section 11, and in order for any notification
required to be delivered by a stockholder pursuant to this Section 11 to be
timely, such notification must be delivered within the periods set forth above
with respect to the originally scheduled meeting.
<PAGE> 7
6
(4) Notwithstanding the foregoing provisions of this By-Law, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this By-Law. Nothing in this By-Law shall be deemed to affect any
rights of stockholders to request inclusion of proposals in the corporation's
proxy statement pursuant to Rule 14a-8 under the Exchange Act.
ARTICLE II.
BOARD OF DIRECTORS.
Section 1. The Board of Directors of the corporation shall
consist of such number of directors, not less than three nor more than 15, as
shall from time to time be fixed exclusively by resolution of the Board of
Directors. The directors shall be divided into three classes in the manner set
forth in the Restated Certificate of Incorporation of the corporation, each
class to be elected for the term set forth therein. Directors shall (except as
hereinafter provided for the filling of vacancies and newly created
directorships) be elected by the holders of a plurality of the voting power
present in person or represented by proxy and entitled to vote. A majority of
the total number of directors then in office (but not less than one-third of the
number of directors constituting the entire Board of Directors) shall constitute
a quorum for the transaction of business and, except as otherwise provided by
law or by the corporation's Restated Certificate of Incorporation, the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors. Directors need not be stockholders.
Section 2. Newly created directorships in the Board of
Directors that result from an increase in the number of directors and any
vacancy occurring in the Board of Directors may be filled only by a majority of
the directors then in office, although less than a quorum, or by a sole
remaining director; and the directors so chosen shall hold office for a term as
set forth in the Restated Certificate of Incorporation of the corporation. If
any applicable provision of the General Corporation Law of the State of Delaware
expressly confers power on stockholders to fill such a directorship at a special
meeting of stockholders, such a directorship may be filled at such meeting only
by the affirmative vote of at least 80 percent in voting power of all shares of
the corporation entitled to vote generally in the election of directors, voting
as a single class.
Section 3. Meetings of the Board of Directors shall be held at
such place within or without the State of Delaware as may from time to time be
fixed by resolution of the Board or as may be specified in the notice of any
meeting. Regular meetings of the Board of Directors shall be held at such times
as may from time to time be fixed by resolution of the Board and special
meetings may be held at any time upon the call of the Chairman of the Board or
the President, by oral, or written notice including, telegraph, telex or
transmission of a telecopy, e-mail or other means of transmission, duly served
on or sent or mailed to each director to such director's address or telecopy
number as shown on the books of the corporation not less than one day before the
meeting. The notice of any meeting need not specify the purposes thereof. A
meeting of the Board may be held without notice
<PAGE> 8
7
immediately after the annual meeting of stockholders at the same place at which
such meeting is held. Notice need not be given of regular meetings of the Board
held at times fixed by resolution of the Board. Notice of any meeting need not
be given to any director who shall attend such meeting in person (except when
the director attends a meeting for the express purpose of objecting at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened), or who shall waive notice thereof, before
or after such meeting, in writing.
Section 4. Notwithstanding the foregoing, whenever the holders
of any one or more series of Preferred Stock or Series Common Stock issued by
the corporation shall have the right, voting separately by series, to elect
directors at an annual or special meeting of stockholders, the election, term of
office, removal, filling of vacancies and other features of such directorships
shall be governed by the terms of the Restated Certificate of Incorporation
applicable thereto, and such directors so elected shall not be divided into
classes pursuant to Article SEVENTH of the Restated Certificate of Incorporation
unless expressly provided by such terms. The number of directors that may be
elected by the holders of any such series of Preferred Stock or Series Common
Stock shall be in addition to the number fixed by or pursuant to the By-Laws.
Except as otherwise expressly provided in the terms of such series, the number
of directors that may be so elected by the holders of any such series of stock
shall be elected for terms expiring at the next annual meeting of stockholders
and without regard to the classification of the members of the Board of
Directors as set forth in Section 1 hereof, and vacancies among directors so
elected by the separate vote of the holders of any such series of Preferred
Stock or Series Common Stock shall be filled by the affirmative vote of a
majority of the remaining directors elected by such series, or, if there are no
such remaining directors, by the holders of such series in the same manner in
which such series initially elected a director.
Section 5. If at any meeting for the election of directors,
the corporation has outstanding more than one class of stock, and one or more
such classes or series thereof are entitled to vote separately as a class, and
there shall be a quorum of only one such class or series of stock, that class or
series of stock shall be entitled to elect its quota of directors
notwithstanding absence of a quorum of the other class or series of stock.
Section 6. The Board of Directors may designate three or more
directors to constitute an executive committee, one of whom shall be designated
Chairman of such committee. The members of such committee shall hold such office
until the next election of the Board of Directors and until their successors are
elected and qualify. Any vacancy occurring in the committee shall be filled by
the Board of Directors. Regular meetings of the committee shall be held at such
times and on such notice and at such places as it may from time to time
determine. The committee shall act, advise with and aid the officers of the
corporation in all matters concerning its interest and the management of its
business, and shall generally perform such duties and exercise such powers as
may from time to time be delegated to it by the Board of Directors, and shall
have authority to exercise all the powers of the Board of Directors, so far as
may be permitted by law, in the management of the business and the affairs of
the corporation whenever the Board of Directors is not in session or whenever a
quorum of the Board of Directors fails to attend any regular or special meeting
<PAGE> 9
8
of such Board. Without limiting the generality of the foregoing grant of
authority, the executive committee is expressly authorized to declare dividends,
whether regular or special, to authorize the issuance of stock of the
corporation and to adopt a certificate of ownership and merger pursuant to
Section 253 or any successor provision of the Delaware General Corporation Law.
The committee shall have power to authorize the seal of the corporation to be
affixed to all papers which are required by the Delaware General Corporation Law
to have the seal affixed thereto. The fact that the executive committee has
acted shall be conclusive evidence that the Board of Directors was not in
session at such time or that a quorum of the Board had failed to attend the
regular or special meeting thereof.
The executive committee shall keep regular minutes of its
transactions and shall cause them to be recorded in a book kept in the office of
the corporation designated for that purpose, and shall report the same to the
Board of Directors at their regular meeting. The committee shall make and adopt
its own rules for the government thereof and shall elect its own officers.
7. The Board of Directors may from time to time establish such
other committees to serve at the pleasure of the Board which shall be comprised
of such members of the Board and have such duties as the Board shall from time
to time establish. Any director may belong to any number of committees of the
Board. The Board may also establish such other committees with such members
(whether or not directors) and such duties as the Board may from time to time
determine.
8. Unless otherwise restricted by the Restated Certificate of
Incorporation or these By-Laws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board of Directors.
9. The members of the Board of Directors or any committee
thereof may participate in a meeting of such Board or committee, as the case may
be, by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this subsection shall constitute presence
in person at such a meeting.
10. The Board of Directors may establish policies for the
compensation of directors and for the reimbursement of the expenses of
directors, in each case, in connection with services provided by directors to
the corporation.
ARTICLE III.
OFFICERS.
Section 1. The Board of Directors, as soon as may be after
each annual meeting of the stockholders, shall elect officers of the
corporation, including a Chairman of
<PAGE> 10
9
the Board or President and a Secretary. The Board of Directors may also from
time to time elect such other officers (including one or more Vice Presidents, a
Treasurer, one or more Assistant Vice Presidents, one or more Assistant
Secretaries and one or more Assistant Treasurers) as it may deem proper or may
delegate to any elected officer of the corporation the power to appoint and
remove any such other officers and to prescribe their respective terms of
office, authorities and duties. Any Vice President may be designated Executive,
Senior or Corporate, or may be given such other designation or combination of
designations as the Board of Directors may determine. Any two or more offices
may be held by the same person.
Section 2. All officers of the corporation elected by the
Board of Directors shall hold office for such term as may be determined by the
Board of Directors or until their respective successors are chosen and
qualified. Any officer may be removed from office at any time either with or
without cause by the affirmative vote of a majority of the members of the Board
then in office, or, in the case of appointed officers, by any elected officer
upon whom such power of removal shall have been conferred by the Board of
Directors.
Section 3. Each of the officers of the corporation elected by
the Board of Directors or appointed by an officer in accordance with these
By-laws shall have the powers and duties prescribed by law, by the By-Laws or by
the Board of Directors and, in the case of appointed officers, the powers and
duties prescribed by the appointing officer, and, unless otherwise prescribed by
the By-Laws or by the Board of Directors or such appointing officer, shall have
such further powers and duties as ordinarily pertain to that office. The
Chairman of the Board or the President, as determined by the Board of Directors,
shall be the Chief Executive Officer and shall have the general direction of the
affairs of the corporation.
Section 4. Unless otherwise provided in these By-Laws, in the
absence or disability of any officer of the corporation, the Board of Directors
may, during such period, delegate such officer's powers and duties to any other
officer or to any director and the person to whom such powers and duties are
delegated shall, for the time being, hold such office.
ARTICLE IV.
CERTIFICATES OF STOCK.
Section 1. The shares of stock of the corporation shall be
represented by certificates, provided that the Board of Directors may provide by
resolution or resolutions that some or all of any or all classes or series of
the corporation's stock shall be uncertificated shares. Any such resolution
shall not apply to shares represented by a certificate until such certificate is
surrendered to the corporation. Notwithstanding the adoption of such a
resolution by the Board of Directors, every holder of stock represented by
certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate signed by, or in the name of the corporation by
the Chairman of the Board of Directors, or the President or a Vice President,
and by the Treasurer or the Secretary of the corporation, or as
<PAGE> 11
10
otherwise permitted by law, representing the number of shares registered in
certificate form. Any or all the signatures on the certificate may be a
facsimile.
Section 2. Transfers of stock shall be made on the books of
the corporation by the holder of the shares in person or by such holder's
attorney upon surrender and cancellation of certificates for a like number of
shares, or as otherwise provided by law with respect to uncertificated shares.
Section 3. No certificate for shares of stock in the
corporation shall be issued in place of any certificate alleged to have been
lost, stolen or destroyed, except upon production of such evidence of such loss,
theft or destruction and upon delivery to the corporation of a bond of indemnity
in such amount, upon such terms and secured by such surety, as the Board of
Directors in its discretion may require.
ARTICLE V.
CORPORATE BOOKS.
The books of the corporation may be kept outside of the State
of Delaware at such place or places as the Board of Directors may from time to
time determine.
ARTICLE VI.
CHECKS, NOTES, PROXIES, ETC.
All checks and drafts on the corporation's bank accounts and
all bills of exchange and promissory notes, and all acceptances, obligations and
other instruments for the payment of money, shall be signed by such officer or
officers or agent or agents as shall be thereunto authorized from time to time
by the Board of Directors. Proxies to vote and consents with respect to
securities of other corporations owned by or standing in the name of the
corporation may be executed and delivered from time to time on behalf of the
corporation by the Chairman of the Board, the President, or by such officers as
the Board of Directors may from time to time determine.
ARTICLE VII.
FISCAL YEAR.
The fiscal year of the corporation shall begin on the first
day of January in each year and shall end on the thirty-first day of December
following.
<PAGE> 12
11
ARTICLE VIII.
CORPORATE SEAL.
The corporate seal shall have inscribed thereon the name of
the corporation. In lieu of the corporate seal, when so authorized by the Board
of Directors or a duly empowered committee thereof, a facsimile thereof may be
impressed or affixed or reproduced.
ARTICLE IX.
AMENDMENTS.
These By-Laws may be amended, added to, rescinded or repealed
at any meeting of the Board of Directors or of the stockholders, provided notice
of the proposed change was given in the notice of the meeting of the
stockholders or, in the case of a meeting of the Board of Directors, in a notice
given not less than two days prior to the meeting; provided, however, that,
notwithstanding any other provisions of these By-Laws or any provision of law
which might otherwise permit a lesser vote of the stockholders, the affirmative
vote of the holders of at least 80 percent in voting power of all shares of the
corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required in order for the stockholders to
alter, amend or repeal Section 2 and Section 11 of Article I, Sections 1 and 2
of Article II or this proviso to this Article IX of these By-Laws or to adopt
any provision inconsistent with any of such Sections or with this proviso.
<PAGE> 1
EXHIBIT 4.1
[CERTIFICATE OF STOCK]
COMMON STOCK COMMON STOCK
PAR VALUE $.01 PAR VALUE $.01
C NUMBER [ART] SHARES
CUSIP 192441 10 3
SEE REVERSE FOR CERTAIN
DEFINITIONS
COGNIZANT CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
Cognizant Corporation (the "Corporation"), transferable on the books of the
Corporation by the holder hereof in person or by duly authorized attorney upon
surrender of this certificate properly endorsed. This certificate and the
shares represented hereby are issued and shall be held subject to all the
provisions of the Certificate of Incorporation of the Corporation, as amended,
to all of which the holder of this certificate by the acceptance hereof
expressly assents. This certificate is not valid unless countersigned by the
Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
DATED:
COUNTERSIGNED AND REGISTERED: /s/
FIRST CHICAGO TRUST COMPANY OF NEW YORK [SEAL] CHAIRMAN
BY TRANSFER AGENT
/s/ AND REGISTRAR
/s/
AUTHORIZED SIGNATURE CORPORATE SECRETARY
<PAGE> 2
COGNIZANT CORPORATION
THE CORPORATION WILL FURNISH TO ANY SHAREHOLDER, UPON REQUEST AND WITHOUT
CHARGE, A STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR
SERIES THEREOF AUTHORIZED TO BE ISSUED AND THE QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS. SUCH REQUEST MAY BE ADDRESSED
TO THE SECRETARY OF THE CORPORATION.
This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in the Rights Agreement between the Corporation and First
Chicago Trust Company of New York (the "Rights Agent"), dated as of
___________, 1996, as may be amended from time to time (the "Rights Agreement"),
the terms of which are hereby incorporated herein by reference and a copy of
which is on file at the principal offices of the Corporation. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by this
certificate. The Corporation will mail to the holder of this certificate a copy
of the Rights Agreement, as in effect on the date of mailing, without charge
promptly after receipt of a written request therefor. Under certain
circumstances set forth in the Rights Agreement, Rights issued to, or held by,
any Person who is, was or becomes an Acquiring Person or any Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement), whether
currently held by or on behalf of such Person or by any subsequent holder, may
become null and void.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN
ACT --........Custodian........
(Cust) (Minor)
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right under Uniform Gifts to Minors
of survivorship and not as
tenants in common Act ..................................
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, ____________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
__________________________________
_______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
_______________________________________________________________________________
_______________________________________________________________________________
________________________________________________________________________ Shares
of the capital stock represented by the within Certificate and do hereby
irrevocably constitute and appoint ____________________________________________
______________________________________________________________________ Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated ___________________
________________________________________________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED
BY ____________________________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION,
(Banks, Stockbrokers, Savings and Loan Associations and Credit Unions) WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE> 1
EXHIBIT 10.1
FORM OF
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT is dated as of [ ], 1996, among THE DUN &
BRADSTREET CORPORATION, a Delaware corporation ("D&B"), COGNIZANT CORPORATION, a
Delaware corporation ("Cognizant"), and ACNIELSEN CORPORATION, a Delaware
corporation ("ACNielsen").
WHEREAS, D&B, acting through its direct and indirect subsidiaries,
currently conducts a number of businesses, including, without limitation, (i)
providing information and decision support services to the pharmaceutical and
healthcare industries, and providing sales automation solutions and developing,
installing and supporting networked systems for pharmaceutical, healthcare and
consumer packaged goods organizations (the "IMS Business"), (ii) measuring
television audiences and Internet usage and reporting of the results thereof and
related information to advertisers, advertising agencies, syndicators, broadcast
networks, cable networks, cable operators, television stations and/or station
representatives, both in the United States and Canada (the "Nielsen Media
Research Business") and elsewhere (the "Non-U.S. Media Business"), (iii)
providing research and analysis of the computer hardware, software,
communications and related technology industries (the "Gartner Group Business"),
(iv) providing client/server decision support solutions for medium and large
scale enterprises (the "Pilot Business"), (v) developing and marketing
proprietary software applications and services used primarily in the
administration of health care benefits and the support of managed care services
(the "Erisco Business"), (vi) developing other software (the "Saytam Software
Business"), (vii) providing information and analytic support services focusing
on healthcare providers (the "DBHC Business"), (viii) providing financial
application software products and services to the Japanese markets (the "DBTA
Business"), (ix) delivering marketing research, information and analysis to the
consumer products services industry (the "Nielsen Marketing Business"), and (x)
investing in emerging and established businesses in the information industry
(the "Cognizant Enterprises Business");
WHEREAS, the Board of Directors of D&B has determined that it is
appropriate, desirable and in the best interests of the holders of shares of
common stock, par value $1.00 per share, of D&B (the "D&B Common Stock") to
reorganize D&B to separate from D&B (i) the IMS Business, the Nielsen Media
Research Business, the Gartner Group Business, the Pilot Business, the Erisco
Business, the Saytam Software Business, the DBHC Business, the DBTA Business and
the Cognizant Enterprises Business, and to cause such businesses to be owned and
conducted, directly or
<PAGE> 2
2
indirectly, by Cognizant, and (ii) the Nielsen Marketing Business and the
Non-U.S. and Non-Canadian Media Business and to cause such businesses to be
owned and conducted, directly or indirectly, by ACNielsen;
WHEREAS, in order to effect such separations, the Board of Directors of
D&B has determined that it is appropriate, desirable and in the best interests
of the holders of D&B Common Stock to take certain steps to reorganize D&B's
Subsidiaries and businesses and then to distribute to the holders of the D&B
Common Stock all the outstanding shares of common stock of Cognizant, together
with the appurtenant share purchase rights (the "Cognizant Common Shares"), and
all the outstanding shares of common stock of ACNielsen, together with the
appurtenant share purchase rights (the "ACNielsen Common Shares");
WHEREAS, each of D&B, Cognizant and ACNielsen has determined that it is
necessary and desirable, on or prior to the Distribution Date (as defined
herein), to allocate and transfer those assets and to allocate and assign
responsibility for those liabilities in respect of the activities of the
businesses of such entities and those assets and liabilities in respect of other
businesses and activities of D&B and its current and former Subsidiaries and
other matters; and
WHEREAS, each of D&B, Cognizant and ACNielsen has determined that it is
necessary and desirable to set forth the principal corporate transactions
required to effect such Distribution and to set forth other agreements that will
govern certain other matters following the Distribution.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.1. General. As used in this Agreement, the following terms
shall have the following meanings:
(a) "ACNielsen" shall mean ACNielsen Corporation, a Delaware
corporation.
(b) "ACNielsen Assets" shall mean:
(i) any and all Assets that are expressly contemplated by
this Agreement, including the list of pre-
Distribution reorganization steps attached as
Schedule 1.1(b)(i)(1) hereto, or any Ancillary
Agreement (or included on Schedule 1.1(b)(i)(2) or
any other Schedule hereto or thereto) as Assets which
have been or are to be transferred to
<PAGE> 3
3
ACNielsen or any other member of the ACNielsen Group;
(ii) the ownership interests in those Business Entities
listed on Schedule 1.1(b)(ii);
(iii) subject to Article VII, any rights of any member of
the ACNielsen Group under any of the Policies,
including any rights thereunder arising after the
Distribution Date in respect of any Policies that are
occurrence policies;
(iv) any ACNielsen Contracts, any rights or claims arising
thereunder, and any other rights or claims or
contingent rights or claims primarily relating to or
arising from any ACNielsen Asset or the ACNielsen
Business;
(v) any Assets reflected on the ACNielsen Balance Sheet
or the accounting records supporting such balance
sheet and any Assets acquired by or for ACNielsen or
any member of the ACNielsen Group subsequent to the
date of such balance sheet which, had they been so
acquired on or before such date and owned as of such
date, would have been reflected on such balance sheet
if prepared on a consistent basis, subject to any
dispositions of any of such Assets subsequent to the
date of such balance sheet; and
(vi) any and all Assets owned or held immediately prior to
the Distribution Date by D&B or any of its
Subsidiaries (including Cognizant or any of its
Subsidiaries) primarily relating to or used in the
ACNielsen Business. The intention of this clause (vi)
is only to rectify any inadvertent omission of
transfer or conveyance of any Asset that, had the
parties given specific consideration to such Asset as
of the date hereof, would have otherwise been
classified as an ACNielsen Asset. No Asset shall be
deemed to be an ACNielsen Asset solely as a result of
this clause (vi) if such Asset is within the category
or type of Asset expressly covered by the subject
matter of an Ancillary Agreement. In addition, no
Asset shall be deemed an ACNielsen Asset solely as a
result of this clause (vi) unless a claim with
respect thereto is made by ACNielsen on or prior to
the first anniversary of the Distribution Date.
Notwithstanding the foregoing, the ACNielsen Assets
shall not in any event include:
<PAGE> 4
4
(x) the Assets listed or described on Schedule
1.1(b)(x); or
(y) any Assets primarily relating to or used in any
terminated or divested Business Entity, business or
operation formerly owned or managed by or associated
with ACNielsen or any ACNielsen Business, except for
those Assets primarily relating to or used in those
Business Entities, businesses or operations listed on
Schedule 1.1(b)(y); or
(z) any and all Assets that are expressly contemplated by
this Agreement or any Ancillary Agreement (or the
Schedules hereto or thereto) as Assets to be retained
by any member of the D&B Group or the Cognizant
Group.
In the event of any inconsistency or conflict which may arise
in the application or interpretation of any of the foregoing
provisions, for the purpose of determining what is and is not
an ACNielsen Asset, any item explicitly included on a Schedule
referred to in this Section 1.1(b) shall take priority over
any provision of the text hereof, and clause (i) shall take
priority over clause (v) of this paragraph (b) and over clause
(v) of paragraph (w) of this Section 1.1.
(c) "ACNielsen Balance Sheet" shall mean the combined balance
sheet of the ACNielsen Group, including the notes thereto, as of June 30, 1996,
set forth as Schedule 1.1(c) hereto.
(d) "ACNielsen Business" shall mean (i) the Nielsen Marketing
Business and the Non-U.S. Media Business, (ii) the businesses of the members of
the ACNielsen Group, (iii) any other business conducted primarily through the
use of the ACNielsen Assets, and (iv) the businesses of Business Entities
acquired or established by or for ACNielsen or any of its Subsidiaries after the
date of this Agreement.
(e) "ACNielsen Common Shares" shall have the meaning as
defined in the recitals hereto.
(f) "ACNielsen Contracts" shall mean the following contracts
and agreements to which D&B or any of its Affiliates is a party or by which it
or any of its Affiliates or any of their respective Assets is bound, whether or
not in writing, except for any such contract or agreement (i) that is not
expressly contemplated to be transferred or assigned by any member of the D&B
Group or (ii) that is expressly contemplated to be transferred or assigned to
any member of the Cognizant Group, in
<PAGE> 5
5
each case, pursuant to any provision of this Agreement or any Ancillary
Agreement:
(i) any contracts or agreements listed or described on
Schedule 1.1(f)(i);
(ii) any contract or agreement entered into in the name
of, or expressly on behalf of, any division, business
unit or member of the ACNielsen Group;
(iii) any contract or agreement that relates primarily to
the ACNielsen Business;
(iv) federal, state and local government and other
contracts and agreements that are listed or described
on Schedule 1.1(f)(iv) and any other government
contracts or agreements entered into after the date
hereof and prior to the Distribution Date that relate
primarily to the ACNielsen Business;
(v) any contract or agreement representing capital or
operating equipment lease obligations reflected on
the ACNielsen Balance Sheet, including obligations as
lessee under those contracts or agreements listed on
Schedule 1.1(f)(v);
(vi) any contract or agreement that is otherwise expressly
contemplated pursuant to this Agreement or any of the
Ancillary Agreements to be assigned to any member of
the ACNielsen Group; and
(vii) (i) any guarantee, indemnity, representation or
warranty of the ACNielsen Group.
(g) "ACNielsen Group" shall mean ACNielsen and each Business
Entity which is contemplated to remain or become a Subsidiary of ACNielsen
hereunder, which shall include those identified as such on Schedule 1.1(g)
hereto, which Schedule shall also indicate the amount of ACNielsen's direct or
indirect ownership interest therein.
(h) "ACNielsen Indemnitees" shall mean each member of the
ACNielsen Group, each of their respective directors, officers, employees and
agents and each of the heirs, executors, successors and assigns of any of the
foregoing.
(i) "ACNielsen Liabilities" shall mean:
(i) any and all Liabilities that are expressly
contemplated by this Agreement or any Ancillary
Agreement (or the Schedules hereto or thereto,
including Schedule 1.1(i)(i) hereto) as Liabilities
to be assumed by any member of the
<PAGE> 6
6
ACNielsen Group, and all agreements, obligations and
Liabilities of any member of the ACNielsen Group
under this Agreement or any of the Ancillary
Agreements;
(ii) all Liabilities (other than Taxes and any
employee-related Liabilities), primarily relating to,
arising out of or resulting from:
(A) the operation of the ACNielsen Business,
as conducted at any time prior to, on or after the
Distribution Date (including any Liability relating
to, arising out of or resulting from any act or
failure to act by any director, officer, employee,
agent or representative (whether or not such act or
failure to act is or was within such person's
authority));
(B) the operation of any business conducted
by any member of the ACNielsen Group at any time
after the Distribution Date (including any Liability
relating to, arising out of or resulting from any act
or failure to act by any director, officer, employee,
agent or representative (whether or not such act or
failure to act is or was within such person's
authority)); or
(C) any ACNielsen Assets;
whether arising before, on or after the Distribution
Date;
(iii) all Liabilities reflected as liabilities or
obligations on the ACNielsen Balance Sheet or the
accounting records supporting such balance sheet, and
all Liabilities arising or assumed after the date of
such balance sheet which, had they arisen or been
assumed on or before such date and been retained as
of such date, would have been reflected on such
balance sheet if prepared on a consistent basis,
subject to any discharge of such Liabilities
subsequent to the date of the ACNielsen Balance
Sheet.
Notwithstanding the foregoing, the ACNielsen Liabilities shall
not include:
(x) any Liabilities that are expressly contemplated by
this Agreement or any Ancillary Agreement (or the
Schedules hereto or thereto) as Liabilities to be
retained or assumed by any member of the D&B Group or
by any member of the Cognizant Group;
<PAGE> 7
7
(y) any Liabilities primarily relating to, arising out of
or resulting from any terminated or divested Business
Entity, business or operation formerly owned or
managed by or associated with ACNielsen or any
ACNielsen Business (except for Liabilities primarily
relating to, arising out of or resulting from those
Business Entities, businesses or operations listed on
Schedule 1.1(i)(y)); any Liabilities which are
excluded by this clause (y) from the ACN Liabilities
shall be deemed to be D&B Liabilities; or
(z) all agreements and obligations of any member of the
D&B Group or the Cognizant Group under this Agreement
or any of the Ancillary Agreements.
(j) "ACNielsen Policies" shall mean all Policies, current or
past, which are owned or maintained by or on behalf of D&B or any Subsidiary of
D&B, which relate to the ACNielsen Business but do not relate to the D&B
Business or the Cognizant Business, and which Policies are either maintained by
ACNielsen or a member of the ACNielsen Group or assignable to ACNielsen or a
member of the ACNielsen Group.
(k) "ACNielsen Shared Policies" shall mean all Policies,
current or past, which are owned or maintained by or on behalf of D&B or any
Subsidiary of D&B which relate to the ACNielsen Business, other than ACNielsen
Policies.
(l) "Action" shall mean any action, suit, arbitration,
inquiry, proceeding or investigation by or before any court, any governmental or
other regulatory or administrative agency, body or commission or any arbitration
tribunal.
(m) "Affiliate" shall mean, when used with respect to a
specified person, another person that controls, is controlled by, or is under
common control with the person specified. As used herein, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person, whether through the
ownership of voting securities or other interests, by contract or otherwise.
(n) "Agent" shall have the meaning as defined in Section
2.1(b).
(o) "Agreement Disputes" shall have the meaning as defined in
Section 6.1.
- - (p) "Ancillary Agreements" shall mean all of the written
agreements, instruments, assignments or other arrangements (other than this
Agreement) entered into in connection with the transactions contemplated hereby,
including, without limitation, the Conveyancing and Assumption Instruments,
<PAGE> 8
8
the Data Services Agreements, the Employee Benefits Agreement, the Indemnity and
Joint Defense Agreement, the Intellectual Property Agreement, the Shared
Transaction Services Agreements, the TAM Master Agreement, the Tax Allocation
Agreement and the Transition Services Agreement.
(q) "Assets" shall mean assets, properties and rights
(including goodwill), wherever located (including in the possession of vendors
or other third parties or elsewhere), whether real, personal or mixed, tangible,
intangible or contingent, in each case whether or not recorded or reflected or
required to be recorded or reflected on the books and records or financial
statements of any person, including, without limitation, the following:
(i) all accounting and other books, records and files
whether in paper, microfilm, microfiche, computer
tape or disc, magnetic tape or any other form;
(ii) all apparatus, computers and other electronic data
processing equipment, fixtures, machinery, equipment,
furniture, office equipment, automobiles, trucks,
aircraft and other transportation equipment, special
and general tools, test devices, prototypes and
models and other tangible personal property;
(iii) all inventories of materials, parts, raw materials,
supplies, work-in-process and finished goods and
products;
(iv) all interests in real property of whatever nature,
including easements, whether as owner, mortgagee or
holder of a Security Interest in real property,
lessor, sublessor, lessee, sublessee or otherwise;
(v) all interests in any capital stock or other equity
interests of any Subsidiary or any other person, all
bonds, notes, debentures or other securities issued
by any Subsidiary or any other person, all loans,
advances or other extensions of credit or capital
contributions to any Subsidiary or any other person
and all other investments in securities of any
person;
(vi) all license agreements, leases of personal property,
open purchase orders for raw materials, supplies,
parts or services, unfilled orders for the
manufacture and sale of products and other contracts,
agreements or commitments;
(vii) all deposits, letters of credit and performance and
surety bonds;
<PAGE> 9
9
(viii) all written technical information, data,
specifications, research and development information,
engineering drawings, operating and maintenance
manuals, and materials and analyses prepared by
consultants and other third parties;
(ix) all domestic and foreign patents, copyrights, trade
names, trademarks, service marks and registrations
and applications for any of the foregoing, mask
works, trade secrets, inventions, data bases, other
proprietary information and licenses from third
persons granting the right to use any of the
foregoing;
(x) all computer applications, programs and other
software, including operating software, network
software, firmware, middleware, design software,
design tools, systems documentation and instructions;
(xi) all cost information, sales and pricing data,
customer prospect lists, supplier records, customer
and supplier lists, customer and vendor data,
correspondence and lists, product literature,
artwork, design, development and manufacturing files,
vendor and customer drawings, formulations and
specifications, quality records and reports and other
books, records, studies, surveys, reports, plans and
documents;
(xii) all prepaid expenses, trade accounts and other
accounts and notes receivables;
(xiii) all rights under contracts or agreements, all claims
or rights against any person arising from the
ownership of any asset, all rights in connection with
any bids or offers and all claims, chooses in action
or similar rights, whether accrued or contingent;
(xiv) all rights under insurance policies and all rights in
the nature of insurance, indemnification or
contribution;
(xv) all licenses (including radio and similar licenses),
permits, approvals and authorizations which have been
issued by any Governmental Authority;
(xvi) cash or cash equivalents, bank accounts, lock boxes
and other deposit arrangements; and
<PAGE> 10
10
(xvii) interest rate, currency, commodity or other swap,
collar, cap or other hedging or similar agreements or
arrangements.
(r) "Assignee" shall have the meaning as defined in Section
2.1(f).
(s) "Business Entity" shall mean any corporation, partnership,
limited liability company or other entity which may legally hold title to
Assets.
(t) "Claims Administration" shall mean the processing of
claims made under the Shared Policies, including, without limitation, the
reporting of claims to the insurance carriers, management and defense of claims
and providing for appropriate releases upon settlement of claims.
(u) "Code" shall mean the Internal Revenue Code of 1986, as
amended, and the Treasury regulations promulgated thereunder, including any
successor legislation.
(v) "Cognizant" shall mean Cognizant Corporation, a Delaware
corporation.
(w) "Cognizant Assets" shall mean:
(i) any and all Assets that are expressly contemplated by
this Agreement, including the list of pre-
Distribution reorganization steps attached as
Schedule 1.1(b)(i)(1) hereto, or any Ancillary
Agreement (or included on Schedule 1.1(w)(i) or any
other Schedule hereto or thereto) as Assets which
have been or are to be transferred to Cognizant or
any other member of the Cognizant Group;
(ii) the ownership interests in those Business Entities
listed on Schedule 1.1(w)(ii);
(iii) subject to Article VII, any rights of any member of
the Cognizant Group under any of the Policies,
including any rights thereunder arising after the
Distribution Date in respect of any Policies that are
occurrence policies;
(iv) any Cognizant Contracts, any rights or claims arising
thereunder, and any other rights or claims or
contingent rights or claims primarily relating to or
arising from any Cognizant Asset or the Cognizant
Business;
(v) any Assets reflected on the Cognizant Balance Sheet
or the accounting records supporting such balance
sheet and any Assets acquired by or for
<PAGE> 11
11
Cognizant or any member of the Cognizant Group
subsequent to the date of such balance sheet which,
had they been so acquired on or before such date and
owned as of such date, would have been reflected on
such balance sheet if prepared on a consistent basis,
subject to any dispositions of any of such Assets
subsequent to the date of such balance sheet; and
(vi) any and all Assets owned or held immediately prior to
the Distribution Date by D&B or any of its
Subsidiaries (including ACNielsen or any of its
Subsidiaries) primarily relating to or used in the
Cognizant Business. The intention of this clause (vi)
is only to rectify any inadvertent omission of
transfer or conveyance of any Asset that, had the
parties given specific consideration to such Asset as
of the date hereof, would have otherwise been
classified as a Cognizant Asset. No Asset shall be
deemed to be a Cognizant Asset solely as a result of
this clause (vi) if such Asset is within the category
or type of Asset expressly covered by the subject
matter of an Ancillary Agreement. In addition, no
Asset shall be deemed a Cognizant Asset solely as a
result of this clause (vi) unless a claim with
respect thereto is made by Cognizant on or prior to
the first anniversary of the Distribution Date.
Notwithstanding the foregoing, the Cognizant
Assets shall not in any event include:
(x) the Assets listed or described on Schedule
1.1(w)(x); or
(y) any Assets primarily relating to or used in
any terminated or divested Business Entity,
business or operation formerly owned or
managed by or associated with Cognizant or
any Cognizant Business, except for those
Assets primarily relating to or used in
those Business Entities, businesses or
operations listed on Schedule 1.1(w)(y); or
(z) any and all Assets that are expressly
contemplated by this Agreement or any
Ancillary Agreement (or the Schedules hereto
or thereto) as Assets to be retained by any
member of the D&B Group or the ACNielsen
Group.
In the event of any inconsistency or conflict which
may arise in the application or interpretation of any
of the foregoing provisions,
<PAGE> 12
12
for the purpose of determining what is and is not a
Cognizant Asset, any item explicitly included on a
Schedule referred to in this Section 1.1(w) shall
take priority over any provision of the text hereof,
and clause (i) shall take priority over clause (v)
hereof of this paragraph (w) and over clause (v) of
paragraph (b) of this section 1.1.
(x) "Cognizant Balance Sheet" shall mean the
combined balance sheet of the Cognizant
Group, including the notes thereto, as of
June 30, 1996, set forth as Schedule 1.1(x)
hereto.
(y) "Cognizant Business" shall mean (i) the IMS
Business, the Nielsen Media Research
Business, the Gartner Business, the Pilot
Business, the Erisco Business and the
Cognizant Enterprises Business, (ii) the
businesses of the members of the Cognizant
Group, (iii) any other business conducted
primarily through the use of the Cognizant
Assets, and (iv) the businesses of Business
Entities acquired or established by or for
Cognizant or any of its Subsidiaries after
the date of this Agreement.
(z) "Cognizant Common Shares" shall have the
meaning as defined in the recitals hereto.
(aa) "Cognizant Contracts" shall mean the following contracts
and agreements to which D&B or any of its Affiliates is a party or by which it
or any of its Affiliates or any of their respective Assets is bound, whether or
not in writing, except for any such contract or agreement (i) that is not
expressly contemplated to be transferred or assigned by any member of the D&B
Group or (ii) that is expressly contemplated to be transferred or assigned to
any member of the ACNielsen Group, in each case, pursuant to any provision of
this Agreement or any Ancillary Agreement:
(i) any contracts or agreements listed or
described on Schedule 1.1(aa)(i);
(ii) any contract or agreement entered into in
the name of, or expressly on behalf of, any
division, business unit or member of the
Cognizant Group;
(iii) any contract or agreement that relates
primarily to the Cognizant Business;
(iv) federal, state and local government and
other contracts and agreements that are
listed or described on Schedule 1.1(aa)(iv)
and any other government contracts or
agreements entered into after the date
hereof and prior to the
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13
Distribution Date that relate primarily to
the Cognizant Business;
(v) any contract or agreement representing
capital or operating equipment lease
obligations reflected on the Cognizant
Balance Sheet, including obligations as
lessee under those contracts or agreements
listed on Schedule 1.1(aa)(v);
(vi) any contract or agreement that is otherwise
expressly contemplated pursuant to this
Agreement or any of the Ancillary Agreements
to be assigned to Cognizant or any member of
the Cognizant Group; and
(vii) any guarantee, indemnity, representation or
warranty of any member of the Cognizant
Group.
(ab) "Cognizant Enterprises Business" shall have the meaning
as defined in the recitals hereto.
(ac) "Cognizant Group" shall mean Cognizant and each Business
Entity which is contemplated to remain or become a Subsidiary of Cognizant
hereunder, which shall include those identified as such on Schedule 1.1(ab)
hereto, which Schedule shall also indicate the amount of Cognizant's direct or
indirect ownership interest therein.
(ad) "Cognizant Indemnitees" shall mean Cognizant, each member
of the Cognizant Group, each of their respective directors, officers, employees
and agents and each of the heirs, executors, successors and assigns of any of
the foregoing.
(ae) "Cognizant Liabilities" shall mean:
(i) any and all Liabilities that are expressly
contemplated by this Agreement or any Ancillary
Agreement (or the Schedules hereto or thereto,
including Schedule 1.1(ae)(i) hereto) as Liabilities
to be assumed by Cognizant or any member of the
Cognizant Group, and all agreements, obligations and
Liabilities of any member of the Cognizant Group
under this Agreement or any of the Ancillary
Agreements;
(ii) all Liabilities (other than Taxes and any
employee-related Liabilities), primarily relating to,
arising out of or resulting from:
(A) the operation of the Cognizant Business,
as conducted at any time prior to, on or after the
Distribution Date (including any Liability relating
to, arising out of or resulting from any act or
failure to act by any director, officer,
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14
employee, agent or representative (whether or not
such act or failure to act is or was within such
person's authority));
(B) the operation of any business conducted
by Cognizant or any Subsidiary of Cognizant at any
time after the Distribution Date (including any
Liability relating to, arising out of or resulting
from any act or failure to act by any director,
officer, employee, agent or representative (whether
or not such act or failure to act is or was within
such person's authority)); or
(C) any Cognizant Assets;
whether arising before, on or after the Distribution
Date;
(iii) all Liabilities reflected as liabilities or
obligations on the Cognizant Balance Sheet or the
accounting records supporting such balance sheet, and
all Liabilities arising or assumed after the date of
such balance sheet which, had they arisen or been
assumed on or before such date and been retained as
of such date, would have been reflected on such
balance sheet, subject to any discharge of such
Liabilities subsequent to the date of the Cognizant
Balance Sheet.
Notwithstanding the foregoing, the Cognizant Liabilities shall
not include:
(x) any Liabilities that are expressly
contemplated by this Agreement or any
Ancillary Agreement (or the Schedules hereto
or thereto) as Liabilities to be retained or
assumed by D&B or any member of the D&B
Group or by ACNielsen or any member of the
ACNielsen Group;
(y) any Liabilities primarily relating to,
arising out of or resulting from any
terminated or divested Business Entity,
business or operation formerly owned or
managed by or associated with Cognizant or
any Cognizant Business (except for
Liabilities primarily relating to, arising
out of or resulting from those Business
Entities, businesses or operations listed in
Schedule 1.1(ae)(y)); any Liabilities which
are excluded by this clause (y) from the
definition of Cognizant Liabilities shall be
deemed to be D&B Liabilities; or
(z) all agreements and obligations of any member
of the D&B Group or the ACNielsen Group
under this Agreement or any of the Ancillary
Agreements.
<PAGE> 15
15
(af) "Cognizant Policies" shall mean all Policies, current or
past, which are owned or maintained by or on behalf of D&B or any Subsidiary of
D&B, which relate to the Cognizant Business but do not relate to the D&B
Business or the ACNielsen Business, and which Policies are either maintained by
Cognizant or a member of the Cognizant Group or assignable to Cognizant or a
member of the Group.
(ag) "Cognizant Shared Policies" shall mean all Policies,
current or past, which are owned or maintained by or on behalf of D&B or any
Subsidiary of D&B which relate to the Cognizant Business, other than Cognizant
Policies.
(ah) "Commission" shall have the meaning as defined in Section
4.2(b).
(ai) "Conveyancing and Assumption Instruments" shall mean,
collectively, the various agreements, instruments and other documents heretofore
entered into and to be entered into to effect the transfer of Assets and the
assumption of Liabilities in the manner contemplated by this Agreement, or
otherwise arising out of or relating to the transactions contemplated by this
Agreement, which shall be in substantially the forms attached hereto as Schedule
1.1(ai) for transfers to be effected pursuant to New York law or the laws of one
of the other states of the United States, or, if not appropriate for a given
transfer, and for transfers to be effected pursuant to non-U.S. laws, shall be
in such other form or forms as the parties agree and as may be required by the
laws of such non-U.S. jurisdictions.
(aj) "Data Services Agreements" shall mean the Data Services
Agreements to be entered into by D&B, Cognizant and ACNielsen.
(ak) "D&B" shall mean The Dun & Bradstreet Corporation, a
Delaware corporation.
(al) "D&B Assets" shall mean, collectively, all the rights and
Assets owned or held by D&B or any Subsidiary of D&B, except the Cognizant
Assets and ACNielsen Assets.
(am) "D&B Business" shall mean each and every business
conducted at any time by D&B or any Subsidiary of D&B except a Cognizant
Business or an ACNielsen Business.
(an) "D&B Common Stock" shall have the meaning as defined in
the recitals hereto.
(ao) "D&B Contracts" shall mean all the contracts and
agreements to which D&B or any of its Affiliates is a party or by which it or
any of its Affiliates is bound, except the Cognizant Contracts and the ACNielsen
Contracts.
<PAGE> 16
16
(ap) "D&B Group" shall mean D&B and each person (other than
any member of the Cognizant Group or the ACNielsen Group) that is a Subsidiary
of D&B.
(aq) "D&B Indemnitees" shall mean D&B, each member of the D&B
Group, each of their respective directors, officers, employees and agents and
each of the heirs, executors, successors and assigns of any of the foregoing,
except the Cognizant Indemnitees and ACNielsen Indemnitees.
(ar) "D&B Liabilities" shall mean collectively, all
obligations and Liabilities of D&B or any Subsidiary of D&B, except the
Cognizant Liabilities and ACNielsen Liabilities.
(as) "D&B Policies" shall mean all Policies, current or past,
which are owned or maintained by or on behalf of D&B or any Subsidiary of D&B
which do not relate to the Cognizant Business or the ACNielsen Business.
(at) "DBHC Business" shall have the meaning as defined in the
recitals hereto.
(au) "DBTA Business" shall have the meaning as defined in the
recitals hereto.
(av) "Distribution" shall mean the distribution on the
Distribution Date to holders of record of shares of D&B Common Stock as of the
Distribution Record Date of (i) the Cognizant Common Shares owned by D&B on the
basis of one Cognizant Common Share for each outstanding share of D&B Common
Stock and (ii) the ACNielsen Common Shares owned by D&B on the basis of one
ACNielsen Common Share for each three outstanding shares of D&B Common Stock.
(aw) "Distribution Date" shall mean such date as may hereafter
be determined by D&B's Board of Directors as the date as of which the
Distribution shall be effected.
(ax) "Distribution Record Date" shall mean such date as may
hereafter be determined by D&B's Board of Directors as the record date for the
Distribution.
(ay) "Effective Time" shall mean 12:01 a.m., New York time, on
the Distribution Date.
(az) "Employee Benefits Agreement" shall mean the Employee
Benefits Agreement among D&B, Cognizant and ACNielsen.
(ba) "Erisco Business" shall have the meaning as defined in
the recitals hereto.
(bb) "Gartner Group Business" shall have the meaning as
defined in the recitals hereto.
<PAGE> 17
17
(bc) "Governmental Authority" shall mean any federal, state,
local, foreign or international court, government, department, commission,
board, bureau, agency, official or other regulatory, administrative or
governmental authority.
(bd) "IMS Business" shall have the meaning as defined in the
recitals hereto.
(be) "Indemnifiable Losses" shall mean any and all losses,
liabilities, claims, damages, demands, costs or expenses (including, without
limitation, reasonable attorneys' fees and any and all out-of-pocket expenses)
reasonably incurred in investigating, preparing for or defending against any
Actions or potential Actions or in settling any Action or potential Action or in
satisfying any judgment, fine or penalty rendered in or resulting from any
Action.
(bf) "Indemnifying Party" shall have the meaning as defined in
Section 3.4.
(bg) "Indemnitee" shall have the meaning as defined in Section
3.4.
(bh) "Indemnity and Joint Defense Agreement" shall mean the
Indemnity and Joint Defense Agreement by and among D&B, Cognizant and ACNielsen.
(bi) "Information Statement" shall mean the Information
Statement sent to the holders of shares of D&B Common Stock in connection with
the Distribution, including any amendment or supplement thereto.
(bj) "Insurance Administration" shall mean, with respect to
each Shared Policy, the accounting for premiums, retrospectively-rated premiums,
defense costs, indemnity payments, deductibles and retentions, as appropriate,
under the terms and conditions of each of the Shared Policies; and the reporting
to excess insurance carriers of any losses or claims which may cause the
per-occurrence, per claim or aggregate limits of any Shared Policy to be
exceeded, and the distribution of Insurance Proceeds as contemplated by this
Agreement.
(bk) "Insurance Proceeds" shall mean those monies (i) received
by an insured from an insurance carrier or (ii) paid by an insurance carrier on
behalf of an insured, in either case net of any applicable premium adjustment,
retrospectively-rated premium, deductible, retention, or cost of reserve paid or
held by or for the benefit of such insured.
(bl) "Insured Claims" shall mean those Liabilities that,
individually or in the aggregate, are covered within the terms and conditions of
any of the Shared Policies, whether or
<PAGE> 18
18
not subject to deductibles, co-insurance, uncollectibility or
retrospectively-rated premium adjustments.
(bm) "Intellectual Property Agreement" shall mean the
Intellectual Property Agreement among D&B, Cognizant and ACNielsen.
(bn) "Liabilities" shall mean any and all losses, claims,
charges, debts, demands, actions, causes of action, suits, damages, obligations,
payments, costs and expenses, sums of money, accounts, reckonings, bonds,
specialties, indemnities and similar obligations, exonerations, covenants,
contracts, controversies, agreements, promises, doings, omissions, variances,
guarantees, make whole agreements and similar obligations, and other
liabilities, including all contractual obligations, whether absolute or
contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising, and including those arising under
any law, rule, regulation, Action, threatened or contemplated Action (including
the costs and expenses of demands, assessments, judgments, settlements and
compromises relating thereto and attorneys' fees and any and all costs and
expenses, whatsoever reasonably incurred in investigating, preparing or
defending against any such Actions or threatened or contemplated Actions), order
or consent decree of any governmental or other regulatory or administrative
agency, body or commission or any award of any arbitrator or mediator of any
kind, and those arising under any contract, commitment or undertaking, including
those arising under this Agreement or any Ancillary Agreement, in each case,
whether or not recorded or reflected or required to be recorded or reflected on
the books and records or financial statements of any person.
(bo) "Nielsen Marketing Business" shall have the meaning as
defined in the recitals hereto.
(bp) "Nielsen Media Research Business" shall have the meaning
as defined in the recitals hereto.
(bq) "Non-U.S. Media Business" shall have the meaning as
defined in the recitals hereto.
(br) "person" shall mean any natural person, corporation,
business trust, joint venture, association, company, partnership or government,
or any agency or political subdivision thereof.
(bs) "Pilot Business" shall have the meaning as defined in the
recitals hereto.
(bt) "Policies" shall mean insurance policies and insurance
contracts of any kind (other than life and benefits policies or contracts),
including, without limitation, primary, excess and umbrella policies,
comprehensive general liability
<PAGE> 19
19
policies, director and officer liability, fiduciary liability, automobile,
aircraft, property and casualty, workers' compensation and employee dishonesty
insurance policies, bonds and self-insurance and captive insurance company
arrangements, together with the rights, benefits and privileges thereunder.
(bu) "Provider" shall have the meaning as defined in Section
5.1.
(bv) "Recipient" shall have the meaning as defined in Section
5.1.
(bw) "Records" shall have the meaning as defined in Section
4.1.
(bx) "Rules" shall have the meaning as defined in Section 6.2.
(by) "Security Interest" shall mean any mortgage, security
interest, pledge, lien, charge, claim, option, right to acquire, voting or other
restriction, right-of-way, covenant, condition, easement, encroachment,
restriction on transfer, or other encumbrance of any nature whatsoever.
(bz) "Shared Policies" shall mean all Policies, current or
past, which are owned or maintained by or on behalf of D&B or any of its
Subsidiaries which relate to one or more of the D&B Business, the Cognizant
Business or the ACNielsen Business.
(ca) "Shared Transaction Services Agreements" shall mean the
Shared Transaction Services Agreements among D&B, Cognizant and ACNielsen or
Subsidiaries thereof.
(cb) "Subsidiary" shall mean any corporation, partnership or
other entity of which another entity (i) owns, directly or indirectly, ownership
interests sufficient to elect a majority of the Board of Directors (or persons
performing similar functions) (irrespective of whether at the time any other
class or classes of ownership interests of such corporation, partnership or
other entity shall or might have such voting power upon the occurrence of any
contingency) or (ii) is a general partner or an entity performing similar
functions (e.g., a trustee).
(cc) "TAM Master Agreement" shall mean the master agreement
between Cognizant and ACNielsen, including any agreements ancillary thereto,
relating to the conduct of the television audience measurement business after
the Distribution.
(cd) "Tax" shall have the meaning set forth in the Tax
Allocation Agreement.
(ce) "Tax Allocation Agreement" shall mean the Tax Allocation
Agreement among D&B, Cognizant and ACNielsen.
<PAGE> 20
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(cf) "Third Party Claim" shall have the meaning as defined in
Section 3.5.
(cg) "Transition Services Agreement" shall mean the Transition
Services Agreement among D&B, Cognizant and ACNielsen.
SECTION 1.2. References; Interpretation. References in this
Agreement to any gender include references to all genders, and references to the
singular include references to the plural and vice versa. The words "include",
"includes" and "including" when used in this Agreement shall be deemed to be
followed by the phrase "without limitation". Unless the context otherwise
requires, references in this Agreement to Articles, Sections, Exhibits and
Schedules shall be deemed references to Articles and Sections of, and Exhibits
and Schedules to, such Agreement. Unless the context otherwise requires, the
words "hereof", "hereby" and "herein" and words of similar meaning when used in
this Agreement refer to this Agreement in its entirety and not to any particular
Article, Section or provision of this Agreement.
ARTICLE II. DISTRIBUTION AND OTHER TRANSACTIONS; CERTAIN COVENANTS
SECTION 2.1. The Distribution and Other Transactions.
(a) Certain Transactions. On or prior to the Distribution
Date:
(i) D&B shall, on behalf of itself and its Subsidiaries,
transfer or cause to be transferred to Cognizant or another member of
the Cognizant Group effective prior to or as of the Effective Time all
of D&B's and its Subsidiaries' right, title and interest in the
Cognizant Assets. D&B shall, on behalf of itself and its Subsidiaries,
transfer or cause to be transferred to ACNielsen or another member of
the ACNielsen Group effective prior to or as of the Effective Time all
of D&B's and its Subsidiaries' right, title and interest in the
ACNielsen Assets.
(ii) Cognizant shall, on behalf of itself and its
Subsidiaries, transfer or cause to be transferred to D&B or another
member of the D&B Group effective prior to or as of the Effective Time
all of Cognizant's and its Subsidiaries' right, title and interest in
the D&B Assets. Cognizant shall, on behalf of itself and its
Subsidiaries, transfer or cause to be transferred to ACNielsen or
another member of the ACNielsen Group effective prior to or as of the
Effective Time all of Cognizant's and its Subsidiaries' right, title
and interest in the ACNielsen Assets.
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(iii) ACNielsen shall, on behalf of itself and its
Subsidiaries, transfer or cause to be transferred to Cognizant or
another member of the Cognizant Group effective prior to or as of the
Effective Time all of ACNielsen's and its Subsidiaries' right, title
and interest in the Cognizant Assets. ACNielsen shall, on behalf of
itself and its Subsidiaries, transfer or cause to be transferred to D&B
or another member of the D&B Group effective prior to or as of the
Effective Time all of ACNielsen's and its Subsidiaries' right, title
and interest in the D&B Assets.
(iv) To the extent not indicated by Schedule 1.1(b)(i)(1) or
otherwise agreed by the parties hereto, D&B, Cognizant or ACNielsen, as
applicable, shall be entitled to designate the Business Entity within
such party's respective Group to which any Assets are to be transferred
pursuant to this Section 2.1(a).
(b) Stock Dividends to D&B. On or prior to the Distribution
Date:
(i) Cognizant shall issue to D&B as a stock dividend such
number of Cognizant Common Shares as will be required to effect the
Distribution, as certified by D&B's stock transfer agent (the "Agent").
In connection therewith D&B shall deliver to Cognizant for cancellation
the share certificate held by it representing Cognizant Common Shares
and shall receive a new certificate representing the total number of
Cognizant Common Shares to be owned by D&B after giving effect to such
stock dividend.
(ii) ACNielsen shall issue to D&B as a stock dividend such
number of ACNielsen Common Shares as will be required to effect the
Distribution, as certified by the Agent. In connection therewith D&B
shall deliver to ACNielsen for cancellation the share certificate held
by it representing ACNielsen Common Shares and shall receive a new
certificate representing the total number of ACNielsen Common Shares to
be owned by D&B after giving effect to such stock dividend.
(c) Charters; By-laws; Rights Plans. On or prior to the
Distribution Date:
(i) All necessary actions shall have been taken to provide for
the adoption of the form of Certificate of Incorporation and By-laws
and the execution and delivery of the form of Rights Agreement filed by
Cognizant with the Commission as exhibits to Cognizant's Registration
Statement on Form 10.
(ii) All necessary actions shall have been taken to provide
for the adoption of the form of Certificate of Incorporation, By-laws
and the execution and delivery of the form of Rights Agreement filed by
ACNielsen with the
<PAGE> 22
22
Commission as exhibits to ACNielsen's Registration Statement on Form
10.
(d) Directors. On or prior to the Distribution Date, D&B, as
the sole stockholder of Cognizant and ACNielsen, shall have taken all necessary
action on or prior to the Distribution Date to cause the Board of Directors of
Cognizant and the Board of Directors of ACNielsen to consist of the individuals
identified in the Information Statement as directors of Cognizant and ACNielsen,
respectively.
(e) Certain Licenses and Permits. Without limiting the
generality of the obligations set forth in Section 2.1(a), on or prior to the
Distribution Date or as soon as reasonably practicable thereafter:
(i) all transferable licenses, permits and authorizations
issued by any Governmental Authority which relate primarily to the
Cognizant Business or the ACNielsen Business but which are held in the
name of any member of the D&B Group, or in the name of any employee,
officer, director, stockholder or agent of any such member, or
otherwise, on behalf of a member of the Cognizant Group or the
ACNielsen Group, as applicable, shall be duly and validly transferred
or caused to be transferred by D&B to the appropriate member of the
Cognizant Group or the ACNielsen Group, as applicable;
(ii) all transferable licenses, permits and authorizations
issued by Governmental Authorities which relate primarily to the D&B
Business or the ACNielsen Business but which are held in the name of
any member of the Cognizant Group, or in the name of any employee,
officer, director, stockholder, or agent of any such member, or
otherwise, on behalf of a member of the D&B Group or the ACNielsen
Group, as applicable, shall be duly and validly transferred or caused
to be transferred by Cognizant to the appropriate member of the D&B
Group or the ACNielsen Group, as applicable; and
(iii) all transferable licenses, permits and authorizations
issued by Governmental Authorities which relate primarily to the
Cognizant Business or the D&B Business but which are held in the name
any member of the ACNielsen Group, or any employee, officer, director,
stockholder, or agent of any such member, or otherwise, on behalf of a
member of the Cognizant Group or the D&B Group, as applicable, shall be
duly and validly transferred or caused to be transferred by ACNielsen
to the appropriate member of the Cognizant Group or the D&B Group, as
applicable.
(f) Transfer of Agreements. Without limiting the generality of
the obligations set forth in Section 2.1(a):
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(i) D&B hereby agrees that on or prior to the Distribution
Date or as soon as reasonably practicable thereafter, subject to the
limitations set forth in this Section 2.1(f), it will, and it will
cause each member of the D&B Group to, assign, transfer and convey (A)
to the appropriate member of the Cognizant Group all of D&B's or such
member of the D&B Group's respective right, title and interest in and
to any and all Cognizant Contracts, and (B) to the appropriate member
of the ACNielsen Group all of D&B's or such member of the D&B Group's
respective right, title and interest in and to any and all ACNielsen
Contracts.
(ii) Cognizant hereby agrees that on or prior to the
Distribution Date or as soon as reasonably practicable thereafter,
subject to the limitations set forth in this Section 2.1(f), it will,
and it will cause each member of the Cognizant Group to, assign,
transfer and convey (A) to the appropriate member of the D&B Group all
of Cognizant's or such member of the Cognizant Group's respective
right, title and interest in and to any and all D&B Contracts, and (B)
to the appropriate member of the ACNielsen Group all of Cognizant's or
such member of the Cognizant Group's respective right, title and
interest in and to any and all ACNielsen Contracts.
(iii) ACNielsen hereby agrees that on or prior to the
Distribution Date or as soon as reasonably practicable thereafter,
subject to the limitations set forth in this Section 2.1(f), it will,
and it will cause each member of the ACNielsen Group to, assign,
transfer and convey (A) to the appropriate member of the D&B Group all
of ACNielsen's or such member of the ACNielsen Group's respective
right, title and interest in and to any and all D&B Contracts, and (B)
to the appropriate member of the Cognizant Group all of ACNielsen's or
such member of the ACNielsen Group's respective right, title and
interest in and to any and all Cognizant Contracts.
(iv) Subject to the provisions of this Section 2.1(f), any
agreement to which any of the parties hereto or any of their
Subsidiaries is a party that inures to the benefit of more than one of
the D&B Business, Cognizant Business and ACNielsen Business shall be
assigned in part so that each party shall be entitled to the rights and
benefits inuring to its business under such agreement.
(v) The assignee of any agreement assigned, in whole or in
part, hereunder (an "Assignee") shall assume and agree to pay, perform,
and fully discharge all obligations of the assignor under such
agreement or, in the case of a partial assignment under paragraph
(f)(iv), such Assignee's related portion of such obligations as
determined in accordance with the terms of the relevant agreement,
where determinable on
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24
the face thereof, and otherwise as determined in accordance with the
practice of the parties prior to the Distribution.
(vi) Notwithstanding anything in this Agreement to the
contrary, this Agreement shall not constitute an agreement to assign
any agreement, in whole or in part, or any rights thereunder if the
agreement to assign or attempt to assign, without the consent of a
third party, would constitute a breach thereof or in any way adversely
affect the rights of the assignor or Assignee thereof. Until such
consent is obtained, or if an attempted assignment thereof would be
ineffective or would adversely affect the rights of any party hereto so
that the intended Assignee would not, in fact, receive all such rights,
the parties will cooperate with each other in any arrangement designed
to provide for the intended Assignee the benefits of, and to permit the
intended Assignee to assume liabilities under, any such agreement.
(g) Consents. The parties hereto shall use their commercially
reasonable efforts to obtain required consents to transfer and/or assignment of
licenses, permits and authorizations of Governmental Authorities and of
agreements hereunder.
(h) Delivery of Shares to Agent. D&B shall deliver to the
Agent the share certificates representing the Cognizant Common Shares and the
ACNielsen Common Shares issued to D&B by Cognizant and ACNielsen, respectively,
pursuant to Section 2.1(b) and shall instruct the Agent to distribute, on or as
soon as practicable following the Distribution Date, such Common Shares to
holders of record of shares of D&B Common Stock on the Distribution Record Date
as further contemplated by the Information Statement and herein. Cognizant and
ACNielsen shall provide all share certificates that the Agent shall require in
order to effect the Distribution.
(i) Certain Liabilities. For purposes of this Agreement,
including Article III hereof, D&B agrees with each of Cognizant and ACNielsen
that any and all Liabilities arising from or based upon misstatements in or
omissions from the Form 10 filed by either such party shall be deemed to be D&B
Liabilities and not Cognizant Liabilities or ACNielsen Liabilities, as the case
may be.
(j) Certain Contingencies.
(i) ACNielsen and Cognizant shall observe and comply with the
provisions of Schedule 2.1(j)(i) pursuant to which, under the
circumstances described therein, certain contributions to the capital
of ACNielsen may be made.
(ii) Cognizant shall be liable for a portion of the
liabilities related to certain prior business transactions
<PAGE> 25
25
to the extent and in the circumstances described in Schedule
2.1(j)(ii).
(iii) (A) D&B and Cognizant agree that to the extent the
aggregate cash proceeds received by D&B upon the disposition of the
businesses known as Dun & Bradstreet Software, NCH Promotional Services
and American Credit Indemnity are higher or lower than the aggregate
amount set forth on Schedule 2.1(j)(iii)(A), 50% of any such excess
shall be deemed to be a Cognizant Asset and be payable by D&B to
Cognizant immediately upon the consummation of the disposition of the
last of such businesses remaining with D&B, and 50% of any such deficit
shall be deemed to be a Cognizant Liability and be payable by Cognizant
to D&B immediately upon the consummation of the disposition of the last
of such businesses remaining with D&B.
(B) In addition, Cognizant and D&B shall each be entitled to
receive 50% of the aggregate operating cash flow, if any, of each such
business from the Distribution Date to the date of the disposition of
such business (where operating cash flow shall be determined by the
accounting procedures that had been applied by D&B prior to the
Distribution for determining operating cash flow, applied on a
consistent basis), and shall each be liable for 50% of any contingent
liabilities arising in connection with such disposition to the extent
such contingent liabilities exceed the amount set forth in Schedule
2.1(j)(iii)(B).
(C) Cognizant shall have primary responsibility for marketing,
negotiating and consummating the disposition of the businesses known as
Dun & Bradstreet Software and NCH Promotional Services, and D&B shall
have primary responsibility for marketing, negotiating and consummating
the disposition of the business known as American Credit Indemnity.
(iv) D&B and Cognizant shall be liable for the portions of
certain contingent liabilities described in Schedule 2.1(j)(iv) to the
extent and in circumstances described in such Schedule.
(k) Matters Relating to Certain Partnerships.
(i) The interest in Duns Licensing Associates L.P. held by
members of the Cognizant Group will be retired prior to or as promptly
as practicable after the Distribution in exchange for (x) those assets
of Duns Licensing Associates L.P. that are currently licensed to
members of the Cognizant Group and (y) the stock of a subsidiary
currently held by Duns Licensing Associates L.P. all as more fully set
forth in Schedule 2.1(k)(i).
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26
(ii) Prior to the Distribution Record Date, IMS America, Ltd.
shall withdraw as a partner of D&B Investors, L.P. (the "Partnership")
and, in connection with such withdrawal, shall receive from the
Partnership 800,000 shares of D&B Common Stock from the Partnership and
a warrant (the "Warrant") to purchase up to 3,000,000 shares of D&B
Common Stock. Cognizant agrees that it will not sell, and will not
permit the sale, to any non-affiliated third-party of any of the D&B
Common Stock so received from the Partnership, the Warrant, any shares
of D&B Common Stock received upon exercise of the Warrant, or any
shares of ACNielsen Common Stock received as a result of being the
holder of record of D&B Common Stock on the Distribution Record Date.
D&B agrees that Cognizant or any of its Subsidiaries may at any time
after the Distribution Date sell any of such D&B Common Stock or the
Warrant to D&B at the market value thereof on such sale date
(calculated as described below) by giving D&B written notice of such
proposed sale five business days in advance thereof. ACNielsen agrees
that Cognizant or any of its Subsidiaries may at any time after the
Distribution Date sell any of such ACNielsen Common Stock to ACNielsen
at the market value thereof on such sale date (calculated as described
below) by giving ACNielsen written notice of such proposed sale five
business days in advance thereof. Any such notice to D&B or ACNielsen
shall be irrevocable. For purposes of the foregoing, the market value
of the D&B Common Stock or the ACNielsen Common stock on any date on
which any such securities are to be sold pursuant hereto shall be equal
to the average of the closing prices therefore on the New York Stock
Exchange on each of the five trading days preceding such date, and the
market value of the Warrant on any date shall be equal to the amount
determined by Merrill Lynch & Co. based upon the Black-Scholes
option-pricing model as the market value of such Warrant.
(l) Other Transactions. On or prior to the Distribution Date,
each of D&B, Cognizant and ACNielsen shall have consummated those other
transactions in connection with the Distribution that are contemplated by the
Information Statement and the ruling request submissions by D&B to the Internal
Revenue Service in respect of the ruling granted on August 6, 1996, and not
specifically referred to in subparagraphs (a)-(k) above.
SECTION 2.2. Intercompany Accounts.
All intercompany receivables, payables and loans (other than
receivables, payables and loans otherwise specifically provided for hereunder or
under any Ancillary Agreement, including payables created or required hereby or
by any Ancillary Agreement), including, without limitation, in respect of any
cash balances, any cash balances representing deposited checks or drafts for
which only a provisional credit has been allowed or any cash held in any
centralized cash management system, (i)
<PAGE> 27
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between any member of the Cognizant Group, on the one hand, and any member of
the D&B Group, on the other hand, (ii) between any member of the ACNielsen
Group, on the one hand, and any member of the D&B Group, on the other hand, or
(iii) between any member of the Cognizant Group, on the one hand, and any member
of the ACNielsen Group, on the other hand, in each case, which exist and are
reflected in the accounting records of the relevant parties as of September 30,
1996 or which arise on or after October 1, 1996 shall be paid or settled in the
ordinary course of business in a manner consistent with the payment or
settlement of similar accounts arising from transactions with third parties.
SECTION 2.3. Cash balances. In addition to any other
obligations hereunder or under any Ancillary Agreement or otherwise, on the
Distribution Date, D&B shall deliver, in immediately available funds, $12.7
million to ACNielsen and $229.6 million to Cognizant. If, by November 1, 1996,
any business referred to in Section 2.1(j)(iii) has not been sold, the amount
payable to Cognizant pursuant to the preceding sentence shall be reduced by the
amount of cash expected to be received upon such sale, as set forth on Schedule
2.1(j)(iii)(A), and, if and when such business is actually sold, Cognizant shall
be entitled to the cash proceeds received upon such sale, subject, however, to
the adjustments required by Section 2.1(j)(iii).
SECTION 2.4. Assumption and Satisfaction of Liabilities.
Except as otherwise specifically set forth in any Ancillary Agreement, and
subject to Section 2.3 hereof, from and after the Effective Time, (i) D&B shall,
and shall cause each member of the D&B Group to, assume, pay, perform and
discharge all D&B Liabilities, (ii) Cognizant shall, and shall cause each member
of the Cognizant Group to, assume, pay, perform and discharge all Cognizant
Liabilities, and (iii) ACNielsen shall, and shall cause each member of the
ACNielsen Group to, assume, pay, perform and discharge all ACNielsen
Liabilities. To the extent reasonably requested to do so by another party
hereto, each party hereto agrees to sign such documents, in a form reasonably
satisfactory to such party, as may be reasonably necessary to evidence the
assumption of any Liabilities hereunder.
SECTION 2.5. Resignations. (a) Subject to Section 2.5(d), D&B
shall cause all its employees to resign, effective as of the Effective Time,
from all positions as officers or directors of any member of the Cognizant Group
in which they serve, and Cognizant shall cause all its employees to resign,
effective as of the Effective Time, from all positions as officers or directors
of any members of the D&B Group in which they serve.
(b) Subject to Section 2.5(d), D&B shall cause all its
employees to resign, effective as of the Effective Time, from all positions as
officers or directors of any member of the ACNielsen
<PAGE> 28
28
Group in which they serve, and ACNielsen shall cause all its employees to
resign, effective as of the Effective Time, from all positions as officers or
directors of any members of the D&B Group in which they serve.
(c) Subject to Section 2.5(d), ACNielsen shall cause all its
employees to resign, effective as of the Effective Time, from all positions as
officers or directors of any member of the Cognizant Group in which they serve,
and Cognizant shall cause all its employees to resign, effective as of the
Effective Time, from all positions as officers or directors of any member of the
ACNielsen Group in which they serve.
(d) No person shall be required by any party hereto to resign
from any position or office with another party hereto if such person is
disclosed in the Information Statement as the person who is to hold such
position or office following the Distribution.
SECTION 2.6. Further Assurances. In case at any time after the
Effective Time any further action is reasonably necessary or desirable to carry
out the purposes of this Agreement and the Ancillary Agreements, the proper
officers of each party to this Agreement shall take all such necessary action.
Without limiting the foregoing, D&B, Cognizant and ACNielsen shall use their
commercially reasonable efforts promptly to obtain all consents and approvals,
to enter into all amendatory agreements and to make all filings and applications
that may be required for the consummation of the transactions contemplated by
this Agreement and the Ancillary Agreements, including, without limitation, all
applicable governmental and regulatory filings.
SECTION 2.7. Limited Representations or Warranties. Each of
the parties hereto agrees that no party hereto is, in this Agreement or in any
other agreement or document contemplated by this Agreement or otherwise, making
any representation or warranty whatsoever, as to title or value of Assets being
transferred. It is also agreed that, notwithstanding anything to the contrary
otherwise expressly provided in the relevant Conveyancing and Assumption
Instrument, all Assets either transferred to or retained by the parties, as the
case may be, shall be "as is, where is" and that (subject to Section 2.6) the
party to which such Assets are to be transferred hereunder shall bear the
economic and legal risk that such party's or any of the Subsidiaries' title to
any such Assets shall be other than good and marketable and free from
encumbrances. Similarly, each party hereto agrees that, except as otherwise
expressly provided in the relevant Conveyancing and Assumption Instrument, no
party hereto is representing or warranting in any way that the obtaining of any
consents or approvals, the execution and delivery of any amendatory agreements
and the making of any filings or applications contemplated by this Agreement
will satisfy the provisions of any or all applicable agreements or the
<PAGE> 29
29
requirements of any or all applicable laws or judgments, it being agreed that
the party to which any Assets are transferred shall bear the economic and legal
risk that any necessary consents or approvals are not obtained or that any
requirements of laws or judgments are not complied with.
SECTION 2.8. Guarantees. (a) Except as otherwise specified in
any Ancillary Agreement, D&B, Cognizant and ACNielsen shall use their
commercially reasonable efforts to have, on or prior to the Distribution Date,
or as soon as practicable thereafter, any member of the D&B Group removed as
guarantor of or obligor for any Cognizant Liability or ACNielsen Liability,
including, without limitation, in respect of those guarantees set forth on
Schedule 2.8(a).
(b) Except as otherwise specified in any Ancillary Agreement,
D&B, Cognizant and ACNielsen shall use their commercially reasonable efforts to
have, on or prior to the Distribution Date, or as soon as practicable
thereafter, any member of the Cognizant Group removed as guarantor of or obligor
for any D&B Liability or ACNielsen Liability, including, without limitation, in
respect of those guarantees set forth on Schedule 2.8(b).
(c) Except as otherwise specified in any Ancillary Agreement,
D&B, Cognizant and ACNielsen shall use their commercially reasonable efforts to
have, on or prior to the Distribution Date, or as soon as practicable
thereafter, any member of the ACNielsen Group removed as guarantor of or obligor
for any D&B Liability or Cognizant Liability, including, without limitation, in
respect of those guarantees set forth on Schedule 2.8(c).
(d) If D&B, Cognizant or ACNielsen is unable to obtain, or to
cause to be obtained, any such required removal as set forth in clauses (a)-(c)
of this Section 2.8, the applicable guarantor or obligor shall continue to be
bound as such and, unless not permitted by law or the terms thereof, the
relevant beneficiary shall or shall cause one of its Subsidiaries, as agent or
subcontractor for such guarantor or obligor to pay, perform and discharge fully
all the obligations or other liabilities of such guarantor or obligor thereunder
from and after the date hereof.
SECTION 2.9. Witness Services. At all times from and after the
Distribution Date, each of D&B, Cognizant and ACNielsen shall use their
commercially reasonable efforts to make available to the other, upon reasonable
written request, its and its Subsidiaries' officers, directors, employees and
agents as witnesses to the extent that (i) such persons may reasonably be
required in connection with the prosecution or defense of any Action in which
the requesting party may from time to time be involved and (ii) there is no
conflict in the Action between the requesting party and D&B, Cognizant or
ACNielsen, as applicable.
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A party providing witness services to the other party under this Section shall
be entitled to receive from the recipient of such services, upon the
presentation of invoices therefor, payments for such amounts, relating to
disbursements and other out-of-pocket expenses (which shall be deemed to exclude
the costs of salaries and benefits of employees who are witnesses), as may be
reasonably incurred in providing such witness services.
SECTION 2.10. Certain Post-Distribution Transactions. (a)(i)
D&B shall comply and shall cause its Subsidiaries to comply with and otherwise
not take action inconsistent with each representation and statement made to the
Internal Revenue Service in connection with the request by D&B for a ruling
letter in respect of the Distribution as to certain tax aspects of the
Distribution and (ii) until two years after the Distribution Date, D&B will
maintain its status as a company engaged in the active conduct of a trade or
business, as defined in Section 355(b) of the Code.
(b)(i) Cognizant shall comply and shall cause its Subsidiaries
to comply with and otherwise not take action inconsistent with each
representation and statement made to the Internal Revenue Service in connection
with the request by D&B for a ruling letter in respect of the Distribution as to
certain tax aspects of the Distribution and (ii) until two years after the
Distribution Date, Cognizant will maintain its status as a company engaged in
the active conduct of a trade or business, as defined in Section 355(b) of the
Code.
(c)(i) ACNielsen shall comply and shall cause its Subsidiaries
to comply with and otherwise not take action inconsistent with each
representation and statement made with respect to ACNielsen to the Internal
Revenue Service in connection with the request by D&B for a ruling letter in
respect of the Distribution as to certain tax aspects of the Distribution and
(ii) until two years after the Distribution Date, ACNielsen will maintain its
status as a company engaged in the active conduct of a trade or business, as
defined in Section 355(b) of the Code.
SECTION 2.11. Transfers Not Effected Prior to the
Distribution; Transfers Deemed Effective as of the Distribution Date. To the
extent that any transfers contemplated by this Article II shall not have been
consummated on or prior to the Distribution Date, the parties shall cooperate to
effect such transfers as promptly following the Distribution Date as shall be
practicable. Nothing herein shall be deemed to require the transfer of any
Assets or the assumption of any Liabilities which by their terms or operation of
law cannot be transferred; provided, however, that the parties hereto and their
respective Subsidiaries shall cooperate to seek to obtain any necessary consents
or approvals for the transfer of all Assets and Liabilities contemplated to be
transferred pursuant to this Article II. In the event that any such transfer of
Assets or
<PAGE> 31
31
Liabilities has not been consummated, from and after the Distribution Date the
party retaining such Asset or Liability shall hold such Asset in trust for the
use and benefit of the party entitled thereto (at the expense of the party
entitled thereto) or retain such Liability for the account of the party by whom
such Liability is to be assumed pursuant hereto, as the case may be, and take
such other action as may be reasonably requested by the party to whom such Asset
is to be transferred, or by whom such Liability is to be assumed, as the case
may be, in order to place such party, insofar as is reasonably possible, in the
same position as would have existed had such Asset or Liability been transferred
as contemplated hereby. As and when any such Asset or Liability becomes
transferable, such transfer shall be effected forthwith. The parties agree that,
as of the Distribution Date, each party hereto shall be deemed to have acquired
complete and sole beneficial ownership over all of the Assets, together with all
rights, powers and privileges incident thereto, and shall be deemed to have
assumed in accordance with the terms of this Agreement all of the Liabilities,
and all duties, obligations and responsibilities incident thereto, which such
party is entitled to acquire or required to assume pursuant to the terms of this
Agreement.
SECTION 2.12. Conveyancing and Assumption Instruments. In
connection with the transfers of Assets and the assumptions of Liabilities
contemplated by this Agreement, the parties shall execute or cause to be
executed by the appropriate entities the Conveyancing and Assumption Instruments
in substantially the form contemplated hereby for transfers to be effected
pursuant to New York law or the laws of one of the other states of the United
States or, if not appropriate for a given transfer, and for transfers to be
effected pursuant to non-U.S. laws, in such other form as the parties shall
reasonably agree, including the transfer of real property with deeds as may be
appropriate. The transfer of capital stock shall be effected by means of
delivery of stock certificates and executed stock powers and notation on the
stock record books of the corporation or other legal entities involved, or by
such other means as may be required in any non-U.S.jurisdiction to transfer
title to stock and, to the extent required by applicable law, by notation on
public registries.
SECTION 2.13. Ancillary Agreements. Prior to the Distribution
Date, each of D&B, Cognizant and ACNielsen shall enter into, and/or (where
applicable) shall cause members of their respective Groups to enter into, the
Ancillary Agreements and any other agreements in respect of the Distribution
reasonably necessary or appropriate in connection with the transactions
contemplated hereby and thereby.
SECTION 2.14. Corporate Names. (a) Except as otherwise
specifically provided in any Ancillary Agreement:
(i) as soon as reasonably practicable after the Distribution
Date but in any event within six months
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thereafter, Cognizant and ACNielsen will each, at their own expense,
remove (or, if necessary, on an interim basis, cover up) any and all
exterior signs and other identifiers located on any of their respective
property or premises or on the property or premises used by them or
their respective Subsidiaries (except property or premises to be shared
with D&B or its Subsidiaries after the Distribution) which refer or
pertain to D&B or which include the D&B name, logo or other trademark
or other D&B intellectual property; and
(ii) as soon as is reasonably practicable after the
Distribution Date but in any event within six months thereafter,
Cognizant and ACNielsen will, and will cause their respective
Subsidiaries to, remove from all letterhead, envelopes, invoices and
other communications media of any kind, all references to D&B,
including the "Dun & Bradstreet" name, logo and any other trademark or
other D&B intellectual property (except that neither Cognizant nor
ACNielsen shall be required to take any such action with respect to
materials in the possession of customers), and neither Cognizant,
ACNielsen nor any of their respective Subsidiaries shall use or display
the "Dun & Bradstreet" name, logo or other trademarks or D&B
intellectual property without the prior written consent of D&B.
(b) Except as otherwise specifically provided in any Ancillary
Agreement:
(i) as soon as reasonably practicable after the Distribution
Date but in any event within six months thereafter, D&B and Cognizant
will each, at their own expense, remove (or, if necessary, on an
interim basis, cover up) any and all exterior signs and other
identifiers located on any of their respective property or premises
owned or used by them or their respective Subsidiaries (except property
or premises to be shared with ACNielsen or its Subsidiaries after the
Distribution) which refer or pertain to ACNielsen or which include the
"ACNielsen" or "A.C. Nielsen" name, logo or other trademark or other
ACNielsen intellectual property; and
(ii) as soon as is reasonably practicable after the
Distribution Date but in any event within six months thereafter, D&B
and Cognizant will each, and will cause their respective Subsidiaries
to, remove from all letterhead, envelopes, invoices and other
communications media of any kind, all references to ACNielsen,
including the "ACNielsen" and "A.C. Nielsen" name, logo and any other
trademark or other ACNielsen intellectual property (except that neither
D&B nor Cognizant shall be required to take any such action with
respect to materials in the possession of customers), and neither D&B
nor any of its Subsidiaries shall use or display the "ACNielsen" or
"A.C. Nielsen" name,
<PAGE> 33
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logo or other trademarks or ACNielsen intellectual property without the
prior written consent of ACNielsen.
(c) Each of D&B and ACNielsen acknowledges that they have no
interest in nor any right to use or display the Cognizant name or any Cognizant
trademark or intellectual property in any way, except to the extent specifically
set forth in the Intellectual Property Agreement and the TAM Master Agreement.
ARTICLE III. INDEMNIFICATION
SECTION 3.1. Indemnification by D&B. Except as otherwise
specifically set forth in any provision of this Agreement or of any Ancillary
Agreement, D&B shall indemnify, defend and hold harmless the Cognizant
Indemnitees and the ACNielsen Indemnitees from and against any and all
Indemnifiable Losses of the Cognizant Indemnitees and the ACNielsen Indemnitees,
respectively, arising out of, by reason of or otherwise in connection with the
D&B Liabilities or alleged D&B Liabilities, including any breach by D&B of any
provision of this Agreement or any Ancillary Agreement.
SECTION 3.2. Indemnification by Cognizant. Except as otherwise
specifically set forth in any provision of this Agreement or of any Ancillary
Agreement, Cognizant shall indemnify, defend and hold harmless the D&B
Indemnitees and the ACNielsen Indemnitees from and against any and all
Indemnifiable Losses of the D&B Indemnitees and the ACNielsen Indemnitees,
respectively, arising out of, by reason of or otherwise in connection with the
Cognizant Liabilities or alleged Cognizant Liabilities, including any breach by
Cognizant of any provision of this Agreement or any Ancillary Agreement.
SECTION 3.3. Indemnification by ACNielsen. Except as otherwise
specifically set forth in any provision of this Agreement or of any Ancillary
Agreement, ACNielsen shall indemnify, defend and hold harmless the D&B
Indemnitees and the Cognizant Indemnitees from and against any and all
Indemnifiable Losses of the D&B Indemnitees and the Cognizant Indemnitees,
respectively, arising out of, by reason of or otherwise in connection with the
ACNielsen Liabilities or alleged ACNielsen Liabilities, including any breach by
ACNielsen of any provision of this Agreement or any Ancillary Agreement.
SECTION 3.4. Procedures for Indemnification.
(a) Third Party Claims. If a claim or demand is made against
an ACNielsen Indemnitee, a Cognizant Indemnitee or a D&B Indemnitee (each, an
"Indemnitee") by any person who is not a party to this Agreement (a "Third Party
Claim") as to which such Indemnitee is entitled to indemnification pursuant to
this Agreement, such Indemnitee shall notify the party which is or may be
required pursuant to Section 3.1, Section 3.2 or Section 3.3
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hereof to make such indemnification (the "Indemnifying Party") in writing, and
in reasonable detail, of the Third Party Claim promptly (and in any event within
15 business days) after receipt by such Indemnitee of written notice of the
Third Party Claim; provided, however, that failure to give such notification
shall not affect the indemnification provided hereunder except to the extent the
Indemnifying Party shall have been actually prejudiced as a result of such
failure (except that the Indemnifying Party shall not be liable for any expenses
incurred during the period in which the Indemnitee failed to give such notice).
Thereafter, the Indemnitee shall deliver to the Indemnifying Party, promptly
(and in any event within five business days) after the Indemnitee's receipt
thereof, copies of all notices and documents (including court papers) received
by the Indemnitee relating to the Third Party Claim.
If a Third Party Claim is made against an Indemnitee, the
Indemnifying Party shall be entitled to participate in the defense thereof and,
if it so chooses and acknowledges in writing its obligation to indemnify the
Indemnitee therefor, to assume the defense thereof with counsel selected by the
Indemnifying Party; provided that such counsel is not reasonably objected to by
the Indemnitee. Should the Indemnifying Party so elect to assume the defense of
a Third Party Claim, the Indemnifying Party shall, within 30 days (or sooner if
the nature of the Third Party Claim so requires), notify the Indemnitee of its
intent to do so, and the Indemnifying Party shall thereafter not be liable to
the Indemnitee for legal or other expenses subsequently incurred by the
Indemnitee in connection with the defense thereof; provided, that such
Indemnitee shall have the right to employ counsel to represent such Indemnitee
if, in such Indemnitee's reasonable judgment, a conflict of interest between
such Indemnitee and such Indemnifying Party exists in respect of such claim
which would make representation of both such parties by one counsel
inappropriate, and in such event the fees and expenses of such separate counsel
shall be paid by such Indemnifying Party. If the Indemnifying Party assumes such
defense, the Indemnitee shall have the right to participate in the defense
thereof and to employ counsel, subject to the proviso of the preceding sentence,
at its own expense, separate from the counsel employed by the Indemnifying
Party, it being understood that the Indemnifying Party shall control such
defense. The Indemnifying Party shall be liable for the fees and expenses of
counsel employed by the Indemnitee for any period during which the Indemnifying
Party has failed to assume the defense thereof (other than during the period
prior to the time the Indemnitee shall have given notice of the Third Party
Claim as provided above). If the Indemnifying Party so elects to assume the
defense of any Third Party Claim, all of the Indemnitees shall cooperate with
the Indemnifying Party in the defense or prosecution thereof, including by
providing or causing to be provided, Records and witnesses as soon as reasonably
practicable after receiving any request therefor from or on behalf of the
Indemnifying Party.
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If the Indemnifying Party acknowledges in writing
responsibility for a Third Party Claim, then in no event will the Indemnitee
admit any liability with respect to, or settle, compromise or discharge, any
Third Party Claim without the Indemnifying Party's prior written consent;
provided, however, that the Indemnitee shall have the right to settle,
compromise or discharge such Third Party Claim without the consent of the
Indemnifying Party if the Indemnitee releases the Indemnifying Party from its
indemnification obligation hereunder with respect to such Third Party Claim and
such settlement, compromise or discharge would not otherwise adversely affect
the Indemnifying Party. If the Indemnifying Party acknowledges in writing
liability for a Third Party Claim, the Indemnitee will agree to any settlement,
compromise or discharge of a Third Party Claim that the Indemnifying Party may
recommend and that by its terms obligates the Indemnifying Party to pay the full
amount of the liability in connection with such Third Party Claim and releases
the Indemnitee completely in connection with such Third Party Claim and that
would not otherwise adversely affect the Indemnitee; provided, however, that the
Indemnitee may refuse to agree to any such settlement, compromise or discharge
if the Indemnitee agrees that the Indemnifying Party's indemnification
obligation with respect to such Third Party Claim shall not exceed the amount
that would be required to be paid by or on behalf of the Indemnifying Party in
connection with such settlement, compromise or discharge. If an Indemnifying
Party elects not to assume the defense of a Third Party Claim, or fails to
notify an Indemnitee of its election to do so as provided herein, such
Indemnitee may compromise, settle or defend such Third Party Claim.
Notwithstanding the foregoing, the Indemnifying Party shall
not be entitled to assume the defense of any Third Party Claim (and shall be
liable for the fees and expenses of counsel incurred by the Indemnitee in
defending such Third Party Claim) if the Third Party Claim seeks an order,
injunction or other equitable relief or relief for other than money damages
against the Indemnitee which the Indemnitee reasonably determines, after
conferring with its counsel, cannot be separated from any related claim for
money damages. If such equitable relief or other relief portion of the Third
Party Claim can be so separated from that for money damages, the Indemnifying
Party shall be entitled to assume the defense of the portion relating to money
damages.
(b) In the event of payment by an Indemnifying Party to any
Indemnitee in connection with any Third-Party Claim, such Indemnifying Party
shall be subrogated to and shall stand in the place of such Indemnitee as to any
events or circumstances in respect of which such Indemnitee may have any right
or claim relating to such Third-Party Claim against any claimant or plaintiff
asserting such Third-Party Claim. Such Indemnitee shall cooperate with such
Indemnifying Party in a reasonable manner, and at the cost and expense of such
Indemnifying Party, in prosecuting any subrogated right or claim.
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(c) The remedies provided in this Article III shall be
cumulative and shall not preclude assertion by any Indemnitee of any other
rights or the seeking of any and all other remedies against any Indemnifying
Party.
SECTION 3.5. Indemnification Payments. Indemnification
required by this Article III shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills are
received or loss, liability, claim, damage or expense is incurred.
ARTICLE IV. ACCESS TO INFORMATION
SECTION 4.1. Provision of Corporate Records.
(a) Other than in circumstances in which indemnification is
sought pursuant to Article III (in which event the provisions of such Article
will govern), after the Distribution Date, upon the prior written request by
Cognizant or ACNielsen for specific and identified agreements, documents, books,
records or files (collectively, "Records") which relate to (x) Cognizant or
ACNielsen or the conduct of the Cognizant Business or ACNielsen Business, as the
case may be, up to the Effective Time, or (y) any Ancillary Agreement to which
D&B and Cognizant and/or ACNielsen are parties, as applicable, D&B shall
arrange, as soon as reasonably practicable following the receipt of such
request, for the provision of appropriate copies of such Records (or the
originals thereof if the party making the request has a reasonable need for such
originals) in the possession or control of D&B or any of its Subsidiaries, but
only to the extent such items are not already in the possession or control of
the requesting party.
(b) Other than in circumstances in which indemnification is
sought pursuant to Article III (in which event the provisions of such Article
will govern), after the Distribution Date, upon the prior written request by D&B
or ACNielsen for specific and identified Records which relate to (x) D&B or
ACNielsen or the conduct of the D&B Business or the ACNielsen Business, as the
case may be, up to the Effective Time, or (y) any Ancillary Agreement to which
Cognizant and D&B and/or ACNielsen are parties, as applicable, Cognizant shall
arrange, as soon as reasonably practicable following the receipt of such
request, for the provision of appropriate copies of such Records (or the
originals thereof if the party making the request has a reasonable need for such
originals) in the possession or control of Cognizant or any of its Subsidiaries,
but only to the extent such items are not already in the possession or control
of the requesting party.
(c) Other than in circumstances in which indemnification is
sought pursuant to Article III (in which event the provisions of such Article
will govern), after the
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Distribution Date, upon the prior written request by D&B or Cognizant for
specific and identified Records which relate to D&B or Cognizant or the conduct
of the D&B Business or the Cognizant Business, as the case may be, up to the
Effective Time, or any Ancillary Agreement to which ACNielsen and D&B and/or
Cognizant are parties, as applicable, ACNielsen shall arrange, as soon as
reasonably practicable following the receipt of such request, for the provision
of appropriate copies of such Records (or the originals thereof if the party
making the request has a reasonable need for such originals) in the possession
or control of ACNielsen or any of its Subsidiaries, but only to the extent such
items are not already in the possession or control of the requesting party.
SECTION 4.2. Access to Information. Other than in
circumstances in which indemnification is sought pursuant to Article III (in
which event the provisions of such Article will govern), from and after the
Distribution Date, each of D&B, Cognizant and ACNielsen shall afford to the
other and its authorized accountants, counsel and other designated
representatives reasonable access during normal business hours, subject to
appropriate restrictions for classified, privileged or confidential information,
to the personnel, properties, books and records of such party and its
Subsidiaries insofar as such access is reasonably required by the other party
and relates to (x) such other party or the conduct of its business prior to the
Effective Time or (y) any Ancillary Agreement to which each of the party
requesting such access and the party requested to grant such access are parties.
SECTION 4.3. Reimbursement; Other Matters. Except to the
extent otherwise contemplated by any Ancillary Agreement, a party providing
Records or access to information to the other party under this Article IV shall
be entitled to receive from the recipient, upon the presentation of invoices
therefor, payments for such amounts, relating to supplies, disbursements and
other out-of-pocket expenses, as may be reasonably incurred in providing such
Records or access to information.
SECTION 4.4. Confidentiality. Each of (i) D&B and its
Subsidiaries, (ii) Cognizant and its Subsidiaries and (iii) ACNielsen and its
Subsidiaries shall not use or permit the use of (without the prior written
consent of the other) and shall keep, and shall cause its consultants and
advisors to keep, confidential all information concerning the other parties in
its possession, its custody or under its control (except to the extent that (A)
such information has been in the public domain through no fault of such party or
(B) such information has been later lawfully acquired from other sources by such
party or (C) this Agreement or any other Ancillary Agreement or any other
agreement entered into pursuant hereto permits the use or disclosure of such
information) to the extent such information (w) relates to or was acquired
during the period up to the Effective Time, (x) relates to any Ancillary
Agreement, (y) is
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obtained in the course of performing services for the other party pursuant to
any Ancillary Agreement, or (z) is based upon or is derived from information
described in the preceding clauses (w), (x) or (y), and each party shall not
(without the prior written consent of the other) otherwise release or disclose
such information to any other person, except such party's auditors and
attorneys, unless compelled to disclose such information by judicial or
administrative process or unless such disclosure is required by law and such
party has used commercially reasonable efforts to consult with the other
affected party or parties prior to such disclosure.
SECTION 4.5. Privileged Matters. The parties hereto recognize
that legal and other professional services that have been and will be provided
prior to the Distribution Date have been and will be rendered for the benefit of
each of the members of the D&B Group, the members of the Cognizant Group, and
the members of the ACNielsen Group, and that each of the members of the D&B
Group, the members of the Cognizant Group, and the members of the ACNielsen
Group should be deemed to be the client for the purposes of asserting all
privileges which may be asserted under applicable law. To allocate the interests
of each party in the information as to which any party is entitled to assert a
privilege, the parties agree as follows:
(a) D&B shall be entitled, in perpetuity, to control the
assertion or waiver of all privileges in connection with privileged information
which relates solely to the D&B Business, whether or not the privileged
information is in the possession of or under the control of D&B, Cognizant or
ACNielsen. D&B shall also be entitled, in perpetuity, to control the assertion
or waiver of all privileges in connection with privileged information that
relates solely to the subject matter of any claims constituting D&B Liabilities,
now pending or which may be asserted in the future, in any lawsuits or other
proceedings initiated against or by D&B, whether or not the privileged
information is in the possession of or under the control of D&B, Cognizant or
ACNielsen.
(b) Cognizant shall be entitled, in perpetuity, to control the
assertion or waiver of all privileges in connection with privileged information
which relates solely to the Cognizant Business, whether or not the privileged
information is in the possession of or under the control of D&B, Cognizant or
ACNielsen. Cognizant shall also be entitled, in perpetuity, to control the
assertion or waiver of all privileges in connection with privileged information
which relates solely to the subject matter of any claims constituting Cognizant
Liabilities, now pending or which may be asserted in the future, in any lawsuits
or other proceedings initiated against or by Cognizant, whether or not the
privileged information is in the possession of Cognizant or under the control of
D&B, Cognizant or ACNielsen.
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(c) ACNielsen shall be entitled, in perpetuity, to control the
assertion or waiver of all privileges in connection with privileged information
which relates solely to the ACNielsen Business, whether or not the privileged
information is in the possession of or under the control of D&B, Cognizant or
ACNielsen. ACNielsen shall also be entitled, in perpetuity, to control the
assertion or waiver of all privileges in connection with privileged information
which relates solely to the subject matter of any claims constituting ACNielsen
Liabilities, now pending or which may be asserted in the future, in any lawsuits
or other proceedings initiated against or by ACNielsen, whether or not the
privileged information is in the possession of ACNielsen or under the control of
D&B, Cognizant or ACNielsen.
(d) The parties hereto agree that they shall have a shared
privilege, with equal right to assert or waive, subject to the restrictions in
this Section 4.5, with respect to all privileges not allocated pursuant to the
terms of Sections 4.5(a), (b) and (c). All privileges relating to any claims,
proceedings, litigation, disputes, or other matters which involve two or more of
D&B, Cognizant or ACNielsen in respect of which two or more of such parties
retain any responsibility or liability under this Agreement, shall be subject to
a shared privilege among them.
(e) No party hereto may waive any privilege which could be
asserted under any applicable law, and in which any other party hereto has a
shared privilege, without the consent of the other party, except to the extent
reasonably required in connection with any litigation with third-parties or as
provided in subsection (f) below. Consent shall be in writing, or shall be
deemed to be granted unless written objection is made within twenty (20) days
after notice upon the other party requesting such consent.
(f) In the event of any litigation or dispute between or among
any of the parties hereto, any party and a Subsidiary of another party hereto,
or a Subsidiary of one party hereto and a Subsidiary of another party hereto,
either such party may waive a privilege in which the other party has a shared
privilege, without obtaining the consent of the other party, provided that such
waiver of a shared privilege shall be effective only as to the use of
information with respect to the litigation or dispute between the relevant
parties and/or their Subsidiaries, and shall not operate as a waiver of the
shared privilege with respect to third parties.
(g) If a dispute arises between or among the parties hereto or
their respective Subsidiaries regarding whether a privilege should be waived to
protect or advance the interest of any party, each party agrees that it shall
negotiate in good faith, shall endeavor to minimize any prejudice to the rights
of the other parties, and shall not unreasonably withhold consent to any request
for waiver by another party. Each party hereto
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specifically agrees that it will not withhold consent to waiver for any purpose
except to protect its own legitimate interests.
(h) Upon receipt by any party hereto or by any Subsidiary
thereof of any subpoena, discovery or other request which arguably calls for the
production or disclosure of information subject to a shared privilege or as to
which another party has the sole right hereunder to assert a privilege, or if
any party obtains knowledge that any of its or any of its Subsidiaries' current
or former directors, officers, agents or employees have received any subpoena,
discovery or other requests which arguably calls for the production or
disclosure of such privileged information, such party shall promptly notify the
other party or parties of the existence of the request and shall provide the
other party or parties a reasonable opportunity to review the information and to
assert any rights it or they may have under this Section 4.5 or otherwise to
prevent the production or disclosure of such privileged information.
(i) The transfer of all Records and other information pursuant
to this Agreement is made in reliance on the agreement of D&B, Cognizant and
ACNielsen, as set forth in Sections 4.4 and 4.5, to maintain the confidentiality
of privileged information and to assert and maintain all applicable privileges.
The access to information being granted pursuant to Sections 4.1 and 4.2 hereof,
the agreement to provide witnesses and individuals pursuant to Sections 2.9 and
3.4 hereof, the furnishing of notices and documents and other cooperative
efforts contemplated by Section 3.4 hereof, and the transfer of privileged
information between and among the parties and their respective Subsidiaries
pursuant to this Agreement shall not be deemed a waiver of any privilege that
has been or may be asserted under this Agreement or otherwise.
SECTION 4.6. Ownership of Information. Any information owned
by one party or any of its Subsidiaries that is provided to a requesting party
pursuant to Article III or this Article IV shall be deemed to remain the
property of the providing party. Unless specifically set forth herein, nothing
contained in this Agreement shall be construed as granting or conferring rights
of license or otherwise in any such information.
SECTION 4.7. Limitation of Liability. (a) No party shall have
any liability to any other party in the event that any information exchanged or
provided pursuant to this Agreement which is an estimate or forecast, or which
is based on an estimate or forecast, is found to be inaccurate.
(b) No party or any Subsidiary thereof shall have any
liability or claim against any other party or any Subsidiary of any other party
based upon, arising out of or resulting from any agreement, arrangement, course
of dealing or understanding existing on or prior to the Distribution Date (other
than this
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Agreement or any Ancillary Agreement), unless such agreement, arrangement,
course of dealing or understanding is listed on Schedule 4.7(b) hereto, and any
such liability or claim, whether or not in writing, which is not reflected on
such Schedule, is hereby irrevocably cancelled, released and waived.
SECTION 4.8. Other Agreements Providing for Exchange of
Information. The rights and obligations granted under this Article IV are
subject to any specific limitations, qualifications or additional provisions on
the sharing, exchange or confidential treatment of information set forth in any
Ancillary Agreement.
ARTICLE V. ADMINISTRATIVE SERVICES
SECTION 5.1. Performance of Services. Beginning on the
Distribution Date, each party will provide, or cause one or more of its
Subsidiaries to provide, to the other party and its Subsidiaries such services
on such terms as may be set forth in the Transition Services Agreement. Except
as otherwise set forth in the Transition Services Agreement or any Schedule
thereto, the party that is to provide the services (the "Provider") will use
(and will cause its Subsidiaries to use) commercially reasonable efforts to
provide such services to the other party (the "Recipient") and its Subsidiaries
in a satisfactory and timely manner and as further specified in such Transition
Services Agreement.
SECTION 5.2. Independence. Unless otherwise agreed in writing,
all employees and representatives of the Provider providing the scheduled
services to the Recipient will be deemed for purposes of all compensation and
employee benefits matters to be employees or representatives of the Provider and
not employees or representatives of the Recipient. In performing such services,
such employees and representatives will be under the direction, control and
supervision of the Provider (and not the Recipient) and the Provider will have
the sole right to exercise all authority with respect to the employment
(including, without limitation, termination of employment), assignment and
compensation of such employees and representatives.
SECTION 5.3. Non-exclusivity. Nothing in this Agreement
precludes any party from obtaining, in whole or in part, services of any nature
that may be obtainable from the other parties from its own employees or from
providers other than the other parties.
ARTICLE VI. DISPUTE RESOLUTION
SECTION 6.1. Negotiation. In the event of a controversy,
dispute or claim arising out of, in connection with, or in relation to the
interpretation, performance,
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nonperformance, validity or breach of this Agreement or otherwise arising out
of, or in any way related to this Agreement or the transactions contemplated
hereby, including, without limitation, any claim based on contract, tort,
statute or constitution (but excluding any controversy, dispute or claim arising
out of any agreement relating to the use or lease of real property if any third
party is a party to such controversy, dispute or claim) (collectively,
"Agreement Disputes"), the general counsels of the relevant parties shall
negotiate in good faith for a reasonable period of time to settle such Agreement
Dispute, provided such reasonable period shall not, unless otherwise agreed by
the parties in writing, exceed 30 days from the time the relevant parties began
such negotiations; provided further that in the event of any arbitration in
accordance with Section 6.2 hereof, the relevant parties shall not assert the
defenses of statute of limitations and laches arising for the period beginning
after the date the relevant parties began negotiations hereunder, and any
contractual time period or deadline under this Agreement or any Ancillary
Agreement to which such Agreement Dispute relates shall not be deemed to have
passed until such Agreement Dispute has been resolved.
SECTION 6.2. Arbitration. If after such reasonable period such
general counsels are unable to settle such Agreement Dispute (and in any event,
unless otherwise agreed in writing by the relevant parties, after 60 days have
elapsed from the time the relevant parties began such negotiations), such
Agreement Dispute shall be determined, at the request of any relevant party, by
arbitration conducted in New York City, before and in accordance with the
then-existing International Arbitration Rules of the American Arbitration
Association (the "Rules"). In any dispute between two of the parties hereto, the
number of arbitrators shall be three, and in any dispute among all three parties
hereto, the number of arbitrators shall be one. Any judgment or award rendered
by the arbitrator shall be final, binding and nonappealable (except upon grounds
specified in 9 U.S.C. Section 10(a) as in effect on the date hereof). If the
parties are unable to agree on an arbitrator or arbitrators, the arbitrator or
arbitrators shall be selected in accordance with the Rules. Any controversy
concerning whether an Agreement Dispute is an arbitrable Agreement Dispute,
whether arbitration has been waived, whether an assignee of this Agreement is
bound to arbitrate, or as to the interpretation of enforceability of this
Article VI shall be determined by the arbitrator or arbitrators. In resolving
any dispute, the parties intend that the arbitrator or arbitrators apply the
substantive laws of the State of New York, without regard to the choice of law
principles thereof. The parties intend that the provisions to arbitrate set
forth herein be valid, enforceable and irrevocable. The undersigned agree to
comply with any award made in any such arbitration proceedings that has become
final in accordance with the Rules and agree to enforcement of or entry of
judgment upon such award, by any court of competent jurisdiction, including (a)
the Supreme Court of the State of New York, New York County, or
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(b) the United States District Court for the Southern District of New York, in
accordance with Section 8.18 hereof. The arbitrator or arbitrators shall be
entitled, if appropriate, to award any remedy in such proceedings, including,
without limitation, monetary damages, specific performance and all other forms
of legal and equitable relief; provided, however, the arbitrator or arbitrators
shall not be entitled to award punitive damages. Without limiting the provisions
of the Rules, unless otherwise agreed in writing by or among the relevant
parties or permitted by this Agreement, the undersigned shall keep confidential
all matters relating to the arbitration or the award, provided such matters may
be disclosed (i) to the extent reasonably necessary in any proceeding brought to
enforce the award or for entry of a judgment upon the award and (ii) to the
extent otherwise required by law. Notwithstanding Article 32 of the Rules, the
party other than the prevailing party in the arbitration shall be responsible
for all of the costs of the arbitration, including legal fees and other costs
specified by such Article 32. Nothing contained herein is intended to or shall
be construed to prevent any party, in accordance with Article 22(3) of the Rules
or otherwise, from applying to any court of competent jurisdiction for interim
measures or other provisional relief in connection with the subject matter of
any Agreement Disputes.
SECTION 6.3. Continuity of Service and Performance. Unless
otherwise agreed in writing, the parties will continue to provide service and
honor all other commitments under this Agreement and each Ancillary Agreement
during the course of dispute resolution pursuant to the provisions of this
Article VI with respect to all matters not subject to such dispute, controversy
or claim.
SECTION 6.4. Indemnity and Joint Defense Agreement. In no
event or circumstances will any arbitrator or arbitrators appointed hereunder
have any right, authority or jurisdiction to determine the "ACN Maximum Amount"
under the Indemnity and Joint Defense Agreement, or otherwise relating to any
dispute which may arise in connection with Article II thereof, or to prevent,
delay or otherwise interfere with such dispute arbitration or determination.
ARTICLE VII. INSURANCE
SECTION 7.1. Policies and Rights Included Within Assets. (a)
The Cognizant Assets shall include (i) any and all rights of an insured party
under each of the Cognizant Shared Policies, subject to the terms of such
Cognizant Shared Policies and any limitations or obligations of Cognizant
contemplated by this Article VII, specifically including rights of indemnity and
the right to be defended by or at the expense of the insurer, with respect to
all claims, suits, actions, proceedings, injuries, losses, liabilities, damages
and expenses incurred or claimed to have been incurred prior to the Distribution
Date by
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any party in or in connection with the conduct of the Cognizant Business or, to
the extent any claim is made against Cognizant or any of its Subsidiaries, the
conduct of the D&B Business or the ACNielsen Business, and which claims, suits,
actions, proceedings, injuries, losses, liabilities, damages and expenses may
arise out of an insured or insurable occurrence under one or more of such
Cognizant Shared Policies; provided, however, that nothing in this clause shall
be deemed to constitute (or to reflect) an assignment of such Cognizant Shared
Policies, or any of them, to Cognizant, and (ii) the Cognizant Policies.
(b) The ACNielsen Assets shall include (i) any and all rights
of an insured party under each of the ACNielsen Shared Policies, subject to the
terms of such ACNielsen Shared Policies and any limitations or obligations of
ACNielsen contemplated by this Article VII, specifically including rights of
indemnity and the right to be defended by or at the expense of the insurer, with
respect to all claims, suits, actions, proceedings, injuries, losses,
liabilities, damages and expenses incurred or claimed to have been incurred
prior to the Distribution Date by any party in or in connection with the conduct
of the ACNielsen Business or, to the extent any claim is made against ACNielsen
or any of its Subsidiaries, the conduct of the D&B Business or the Cognizant
Business, and which claims, suits, actions, proceedings, injuries, losses,
liabilities, damages and expenses may arise out of an insured or insurable
occurrence under one or more of such ACNielsen Shared Policies; provided,
however, that nothing in this clause shall be deemed to constitute (or to
reflect) an assignment of such ACNielsen Shared Policies, or any of them, to
ACNielsen, and (ii) the ACNielsen Policies.
SECTION 7.2. Post-Distribution Date Claims. (a) If, subsequent
to the Distribution Date, any person shall assert a claim against Cognizant or
any of its Subsidiaries (including, without limitation, where Cognizant or its
Subsidiaries are joint defendants with other persons) with respect to any claim,
suit, action, proceeding, injury, loss, liability, damage or expense incurred or
claimed to have been incurred prior to the Distribution Date in or in connection
with the conduct of the Cognizant Business or, to the extent any claim is made
against Cognizant or any of its Subsidiaries (including, without limitation,
where Cognizant or its Subsidiaries are joint defendants with other persons),
the conduct of the D&B Business or the ACNielsen Business, and which claim,
suit, action, proceeding, injury, loss, liability, damage or expense may arise
out of an insured or insurable occurrence under one or more of the Cognizant
Shared Policies, D&B shall, at the time such claim is asserted, to the extent
any such Policy may require that Insurance Proceeds thereunder be collected
directly by the named insured or anyone other than the party against whom the
Insured Claim is asserted, be deemed to designate, without need of further
documentation, Cognizant as the agent and attorney-in-fact to assert and to
collect any related Insurance Proceeds under such Cognizant Shared Policy, and
shall further be deemed
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to assign, without need of further documentation, to Cognizant any and all
rights of an insured party under such Cognizant Shared Policy with respect to
such asserted claim, specifically including rights of indemnity and the right to
be defended by or at the expense of the insurer and the right to any applicable
Insurance Proceeds thereunder; provided, however, that nothing in this Section
7.2(a) shall be deemed to constitute (or to reflect) an assignment of the
Cognizant Shared Policies, or any of them, to Cognizant.
(b) If, subsequent to the Distribution Date, any person shall
assert a claim against ACNielsen or any of its Subsidiaries (including, without
limitation, where ACNielsen or its Subsidiaries are joint defendants with other
persons) with respect to any claim, suit, action, proceeding, injury, loss,
liability, damage or expense incurred or claimed to have been incurred prior to
the Distribution Date in or in connection with the conduct of the ACNielsen
Business or, to the extent any claim is made against ACNielsen or any of its
Subsidiaries (including, without limitation, where ACNielsen or its Subsidiaries
are joint defendants with other persons), the conduct of the D&B Business or the
Cognizant Business, and which claim, suit, action, proceeding, injury, loss,
liability, damage or expense may arise out of an insured or insurable occurrence
under one or more of the ACNielsen Shared Policies, D&B shall, at the time such
claim is asserted, to the extent such Policy may require that Insurance Proceeds
thereunder be collected directly by the named insured or anyone other than the
party against whom the Insured Claim is asserted, be deemed to designate,
without need of further documentation, ACNielsen as the agent and
attorney-in-fact to assert and to collect any related Insurance Proceeds under
such ACNielsen Shared Policy, and shall further be deemed to assign, without
need of further documentation, to ACNielsen any and all rights of an insured
party under such ACNielsen Shared Policy with respect to such asserted claim,
specifically including rights of indemnity and the right to be defended by or at
the expense of the insurer and the right to any applicable Insurance Proceeds
thereunder; provided, however, that nothing in this Section 7.2(b) shall be
deemed to constitute (or to reflect) an assignment of the ACNielsen Shared
Policies to ACNielsen.
SECTION 7.3. Administration; Other Matters. (a)
Administration. Except as otherwise provided in Section 7.2 hereof, from and
after the Distribution Date, D&B shall be responsible for (i) Insurance
Administration of the Shared Policies and (ii) Claims Administration under such
Shared Policies with respect to D&B Liabilities, Cognizant Liabilities and
ACNielsen Liabilities; provided that the retention of such responsibilities by
D&B is in no way intended to limit, inhibit or preclude any right to insurance
coverage for any Insured Claim of a named insured under such Policies as
contemplated by the terms of this Agreement; and provided further that D&B's
retention of the administrative responsibilities for the Shared Policies shall
not relieve the party submitting any Insured Claim
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of the primary responsibility for reporting such Insured Claim accurately,
completely and in a timely manner or of such party's authority to settle any
such Insured Claim within any period permitted or required by the relevant
Policy. D&B may discharge its administrative responsibilities under this Section
7.3 by contracting for the provision of services by independent parties. Each of
the parties hereto shall administer and pay any costs relating to defending its
respective Insured Claims under Shared Policies to the extent such defense costs
are not covered under such Policies and shall be responsible for obtaining or
reviewing the appropriateness of releases upon settlement of its respective
Insured Claims under Shared Policies. The disbursements, out-of-pocket expenses
and direct and indirect costs of employees or agents of D&B relating to Claims
Administration and Insurance Administration contemplated by this Section 7.3(a)
shall be treated in accordance with the terms of the Transition Services
Agreement, if still in effect with respect to insurance and risk management, or,
if the Transition Services Agreement shall no longer be in effect with respect
to insurance and risk management, then each of D&B, Cognizant and ACNielsen
shall be responsible for its own Claims Administration and Insurance
Administration.
(b) Exceeding Policy Limits.
(i) Where Cognizant Liabilities or ACNielsen Liabilities, as
applicable, are specifically covered under the same Shared Policy for
periods prior to the Distribution Date, or covering claims made after
the Distribution Date with respect to an occurrence prior to the
Distribution Date, then from and after the Distribution Date Cognizant
and ACNielsen may claim coverage for Insured Claims under such Shared
Policy as and to the extent that such insurance is available up to the
full extent of the applicable limits of liability of such Shared Policy
(and may receive any Insurance Proceeds with respect thereto as
contemplated by Section 7.2 or Section 7.3(c) hereof), subject to the
terms of this Section 7.3.
(ii) Except as set forth in this Section 7.3(b), D&B,
Cognizant and ACNielsen shall not be liable to one another for claims
not reimbursed by insurers for any reason not within the control of
D&B, Cognizant or ACNielsen, as the case may be, including, without
limitation, coinsurance provisions, deductibles, quota share
deductibles, self-insured retentions, bankruptcy or insolvency of an
insurance carrier, Shared Policy limitations or restrictions, any
coverage disputes, any failure to timely claim by D&B, Cognizant or
ACNielsen or any defect in such claim or its processing, provided that
D&B shall be responsible for the amount of the difference, if any,
between the deductible set forth in any Shared Policy and the
deductible allocable to Cognizant and/or ACNielsen as set forth in
Schedule 7.3(b) hereto.
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(c) Allocation of Insurance Proceeds. Except as otherwise
provided in Section 7.2, Insurance Proceeds received with respect to claims,
costs and expenses under the Shared Policies shall be paid to D&B, which shall
thereafter administer the Shared Policies by paying the Insurance Proceeds, as
appropriate, to D&B with respect to D&B Liabilities, to Cognizant with respect
to Cognizant Liabilities and to ACNielsen with respect to the ACNielsen
Liabilities. Payment of the allocable portions of indemnity costs of Insurance
Proceeds resulting from such Policies will be made by D&B to the appropriate
party upon receipt from the insurance carrier. In the event that the aggregate
limits on any Shared Policies are exceeded by the aggregate of outstanding
Insured Claims by two or more of the relevant parties hereto, such parties agree
to allocate the Insurance Proceeds received thereunder based upon their
respective percentage of the total of their bona fide claims which were covered
under such Shared Policy (their "allocable portion of Insurance Proceeds"), and
any party who has received Insurance Proceeds in excess of such party's
allocable portion of Insurance Proceeds shall pay to the other party or parties
the appropriate amount so that each party will have received its allocable
portion of Insurance Proceeds pursuant hereto. Each of the parties agrees to use
commercially reasonable efforts to maximize available coverage under those
Shared Policies applicable to it, and to take all commercially reasonable steps
to recover from all other responsible parties in respect of an Insured Claim to
the extent coverage limits under a Shared Policy have been exceeded or would be
exceeded as a result of such Insured Claim.
(d) Allocation of Deductibles. In the event that two or more
parties have bona fide claims under any Shared Policy for which a deductible is
payable, the parties agree that the aggregate amount of the deductible paid
shall be borne by the parties in the same proportion which the Insurance
Proceeds received by each such party bears to the total Insurance Proceeds
received under the applicable Shared Policy (their "allocable share of the
deductible"), and any party who has paid more than such share of the deductible
shall be entitled to receive from any other party or parties an appropriate
amount so that each party has borne its allocable share of the deductible
pursuant hereto. For purposes of this paragraph 7.3(d), the amount of the
relevant deductible under any Shared Policy shall be that set forth in Schedule
7.3(b) hereto.
(e) Effective as of the Distribution Date, Cognizant and
ACNielsen shall be responsible for the full amount of the deductible for
workers' compensation, general liability and automobile liability claims as set
forth in Schedule 7.3(e).
SECTION 7.4. Agreement for Waiver of Conflict and Shared
Defense. In the event that Insured Claims of more than one of the parties hereto
exist relating to the same occurrence, the relevant parties shall jointly defend
and waive any conflict
<PAGE> 48
48
of interest necessary to the conduct of the joint defense. Nothing in this
Article VII shall be construed to limit or otherwise alter in any way the
obligations of the parties to this Agreement, including those created by this
Agreement, by operation of law or otherwise.
SECTION 7.5. Cooperation. The parties agree to use their
commercially reasonable efforts to cooperate with respect to the various
insurance matters contemplated by this Agreement.
ARTICLE VIII. MISCELLANEOUS
SECTION 8.1. Complete Agreement; Construction. This Agreement,
including the Exhibits and Schedules, and the Ancillary Agreements shall
constitute the entire agreement between the parties with respect to the subject
matter hereof and shall supersede all previous negotiations, commitments and
writings with respect to such subject matter. In the event of any inconsistency
between this Agreement and any Schedule hereto, the Schedule shall prevail.
Other than Section 2.7, Section 4.5 and Article VI, which shall prevail over any
inconsistent or conflicting provisions in any Ancillary Agreement other than the
Indemnity and Joint Defense Agreement (the provisions of which shall prevail),
notwithstanding any other provisions in this Agreement to the contrary, in the
event and to the extent that there shall be a conflict between the provisions of
this Agreement and the provisions of any Ancillary Agreement, such Ancillary
Agreement shall control.
SECTION 8.2. Ancillary Agreements. Subject to the last
sentence of Section 8.1, this Agreement is not intended to address, and should
not be interpreted to address, the matters specifically and expressly covered by
the Ancillary Agreements. D&B, Cognizant and ACNielsen acknowledge and agree
that except to the extent that the Indemnity and Joint Defense Agreement
expressly states otherwise, the provisions of such agreement are independent of
the provisions hereof, and, subject to the foregoing exception, none of the
agreements herein or in any other Ancillary Agreement are intended to govern in
any way any of the matters which are the subject of such Indemnity and Joint
Defense Agreement.
SECTION 8.3. Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more such counterparts have
been signed by each of the parties and delivered to the other parties.
SECTION 8.4. Survival of Agreements. Except as otherwise
contemplated by this Agreement, all covenants and agreements of the parties
contained in this Agreement shall survive the Distribution Date.
<PAGE> 49
49
SECTION 8.5. Expenses. Except as otherwise set forth in this
Agreement or any Ancillary Agreement, all costs and expenses incurred on or
prior to the Distribution Date (whether or not paid on or prior to the
Distribution Date) in connection with the preparation, execution, delivery and
implementation of this Agreement and any Ancillary Agreement, the Information
Statement (including any registration statement on Form 10 of which such
Information Statement may be a part) and the Distribution and the consummation
of the transactions contemplated thereby shall be charged to and paid by D&B.
Except as otherwise set forth in this Agreement or any Ancillary Agreement, each
party shall bear its own costs and expenses incurred after the Distribution
Date. Any amount or expense to be paid or reimbursed by any party hereto to any
other party hereto shall be so paid or reimbursed promptly after the existence
and amount of such obligation is determined and demand therefor is made.
SECTION 8.6. 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:
To The Dun & Bradstreet Corporation:
One Diamond Hill Road
Murray Hill, NJ 07974
Telecopy: (908) 665-5803
Attn: General Counsel
To Cognizant Corporation:
200 Nyala Farms
Westport, Connecticut 06880
Telecopy: (203) 222-4201
Attn: General Counsel
To ACNielsen Corporation:
177 Broad Street
Stamford, Connecticut 06901
Telecopy: (203) 961-3190
Attn: General Counsel
<PAGE> 50
50
SECTION 8.7. Waivers. The failure of any party to require
strict performance by any other party of any provision in this Agreement will
not waive or diminish that party's right to demand strict performance thereafter
of that or any other provision hereof.
SECTION 8.8. Amendments. Subject to the terms of Section 8.11
hereof, this Agreement may not be modified or amended except by an agreement in
writing signed by each of the parties hereto.
SECTION 8.9. Assignment. (a) This Agreement shall not be
assignable, in whole or in part, directly or indirectly, by any party hereto
without the prior written consent of the other parties hereto, and any attempt
to assign any rights or obligations arising under this Agreement without such
consent shall be void.
(b) D&B will not distribute to its stockholders any interest
in any D&B Business Entity, by way of a spin-off distribution, split-off or
other exchange of interests in a D&B Business Entity for any interest in D&B
held by D&B stockholders, or any similar transaction or transactions, unless the
distributed D&B Business Entity undertakes to each of Cognizant and ACNielsen to
be jointly and severally liable for all D&B Liabilities hereunder.
(c) Cognizant will not distribute to its stockholders any
interest in any Cognizant Business Entity, by way of a spin-off distribution,
split-off or other exchange of interests in a Cognizant Business Entity for any
interest in Cognizant held by Cognizant stockholders, or any similar transaction
or transactions, unless the distributed Cognizant Business Entity undertakes to
each of D&B and ACNielsen to be jointly and severally liable for all Cognizant
Liabilities hereunder.
(d) ACNielsen will not distribute to its stockholders any
interest in any ACNielsen Business Entity, by way of a spin-off distribution,
split-off or other exchange of interests in an ACNielsen Business Entity for any
interest in ACNielsen held by ACNielsen stockholders, or any similar transaction
or transactions, unless the distributed ACNielsen Business Entity undertakes to
each of D&B and Cognizant to be jointly and severally liable for all ACNielsen
Liabilities hereunder.
SECTION 8.10. Successors and Assigns. The provisions to this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and permitted assigns.
SECTION 8.11. Termination. This Agreement (including, without
limitation, Article III hereof) may be terminated and the Distribution may be
amended, modified or abandoned at any time prior to the Distribution by and in
the sole discretion of D&B
<PAGE> 51
51
without the approval of Cognizant or ACNielsen or the shareholders of D&B. In
the event of such termination, no party shall have any liability of any kind to
any other party or any other person. After the Distribution, this Agreement may
not be terminated except by an agreement in writing signed by the parties;
provided, however, that Article III shall not be terminated or amended after the
Distribution in respect of the third party beneficiaries thereto without the
consent of such persons.
SECTION 8.12. Subsidiaries. Each of the parties hereto shall
cause to be performed, and hereby guarantees the performance of, all actions,
agreements and obligations set forth herein to be performed by any Subsidiary of
such party or by any entity that is contemplated to be a Subsidiary of such
party on and after the Distribution Date.
SECTION 8.13. Third Party Beneficiaries. Except as provided in
Article III relating to Indemnitees, this Agreement is solely for the benefit of
the parties hereto and their respective Subsidiaries and Affiliates and should
not be deemed to confer upon third parties any remedy, claim, liability,
reimbursement, claim of action or other right in excess of those existing
without reference to this Agreement.
SECTION 8.14. Title and Headings. Titles and headings to
sections herein are inserted for the convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
SECTION 8.15. Exhibits and Schedules. The Exhibits and
Schedules shall be construed with and as an integral part of this Agreement to
the same extent as if the same had been set forth verbatim herein.
SECTION 8.16. GOVERNING LAW. THIS AGREEMENT 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.
SECTION 8.17. Consent to Jurisdiction. Without limiting the
provisions of Article VI hereof, each of the parties irrevocably submits to the
exclusive jurisdiction of (a) the Supreme Court of the State of New York, New
York County, and (b) the United States District Court for the Southern District
of New York, for the purposes of any suit, action or other proceeding arising
out of this Agreement or any transaction contemplated hereby. Each of the
parties agrees to commence any action, suit or proceeding relating hereto either
in the United States District Court for the Southern District of New York or if
such suit, action or other proceeding may not be brought in such court for
jurisdictional reasons, in the Supreme Court of the State of New York, New York
County. Each of the parties further agrees that service of any process, summons,
notice or document by U.S.
<PAGE> 52
52
registered mail to such party's respective address set forth above shall be
effective service of process for any action, suit or proceeding in New York with
respect to any matters to which it has submitted to jurisdiction in this Section
8.17. Each of the parties irrevocably and unconditionally waives any objection
to the laying of venue of any action, suit or proceeding arising out of this
Agreement or the transactions contemplated hereby in (i) the Supreme Court of
the State of New York, New York County, or (ii) the United States District Court
for the Southern District of New York, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
SECTION 8.18. Severability. In the event any one or more of
the provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
<PAGE> 53
53
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the day and year first above written.
THE DUN & BRADSTREET CORPORATION
by
----------------------
Name:
Title:
COGNIZANT CORPORATION
by
----------------------
Name:
Title:
ACNIELSEN CORPORATION
by
----------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.2
FORM OF TAX ALLOCATION AGREEMENT
This TAX ALLOCATION AGREEMENT is dated as of [ ], 1996, among
THE DUN & BRADSTREET CORPORATION, a Delaware corporation ("D&B"), COGNIZANT
CORPORATION, a Delaware corporation ("Cognizant"), and ACNIELSEN CORPORATION, a
Delaware corporation ("ACNielsen") (collectively, the "Parties").
WHEREAS, as of the date hereof, D&B is the common parent of an
affiliated group of domestic corporations within the meaning of Section 1504(a)
of the Code, including members of the Cognizant Group (as defined below) and
members of the ACNielsen Group (as defined below), and the members of the
affiliated group have heretofore joined in filing consolidated federal income
tax returns;
WHEREAS, D&B proposes to distribute all of the outstanding
stock of Cognizant and ACNielsen to its stockholders (the "Distribution") and,
as a result of the Distribution, the Cognizant Group and the ACNielsen Group
will not be included in the consolidated Federal income tax return of D&B for
the portion of the year following the Distribution or in future years;
WHEREAS, D&B, Cognizant and ACNielsen have entered into an
agreement (the "Distribution Agreement") to, among other things, allocate
certain assets and to allocate and assign responsibility for certain liabilities
of the present D&B and its present and former subsidiaries; and
WHEREAS, D&B, Cognizant and ACNielsen desire to allocate the
tax burdens and benefits of transactions which occurred on or prior to the
Distribution Date and to provide for certain other tax matters, including the
assignment of responsibility for the preparation and filing of tax returns, the
payment of taxes, and the prosecution and defense of any tax controversies;
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained in this Agreement, the parties hereby agree
as follows:
ARTICLE I. DEFINITIONS
SECTION 1.1. General. As used in this Agreement, the
following terms shall have the following meanings:
(a) "ACNielsen" shall mean ACNielsen Corporation, a
Delaware corporation.
(b) "ACNielsen Business" shall mean the businesses of
the members of the ACNielsen Group, as conducted at any time
<PAGE> 2
2
prior to, on or after the Distribution Date. Notwithstanding the foregoing, the
ACNielsen Businesses shall not include (i) any activities or operations
primarily related to, arising out of or resulting from any business terminated
or divested prior to the Distribution Date; or (ii) any of the businesses
listed on Schedule 1.1(b).
(c) "ACNielsen Common Shares" shall mean all the outstanding
shares of common stock of ACNielsen, together with the appurtenant share
purchase rights.
(d) "ACNielsen Group" shall mean ACNielsen and each
corporation, partnership, limited liability company, or other entity
contemplated to remain or become a Subsidiary of ACNielsen pursuant to the
Distribution Agreement.
(e) "Ancillary Agreements" shall mean all of the written
agreements, instruments, assignments or other arrangements (other than this
Agreement) entered into in connection with the transactions contemplated hereby,
including, without limitation, the Distribution Agreement, the Conveyancing and
Assumption Instruments, the Employee Benefits Services and Liability Agreement,
the Shared Transaction Services Agreement, the Transition Services Agreement,
the Data Processing Agreement and the Intellectual Property Agreements.
(f) "Code" shall mean the Internal Revenue Code of 1986, as
amended, and the Treasury regulations promulgated thereunder, including any
successor legislation.
(g) "Cognizant" shall mean Cognizant Corporation, a
Delaware corporation.
(h) "Cognizant Business" shall mean the businesses of the
members of the Cognizant Group, as conducted at any time prior to, on or after
the Distribution Date. Notwithstanding the foregoing, the Cognizant Businesses
shall not include (i) any activities or operations primarily related to, arising
out of or resulting from any business terminated or divested prior to the
Distribution Date; or (ii) any of the businesses listed on Schedule 1.1(h).
(i) "Cognizant Common Shares" shall mean all the outstanding
shares of common stock of Cognizant, together with the appurtenant share
purchase rights.
(j) "Cognizant Group" shall mean Cognizant and each
corporation, partnership, limited liability company, or other entity
contemplated to remain or become a Subsidiary of Cognizant pursuant to the
Distribution Agreement.
(k) "Consolidated Return" shall mean the consolidated federal
income tax return of D&B for the period commencing on January 1, 1996, and
including the members of the ACNielsen Group
<PAGE> 3
3
and the members of the Cognizant Group through the Distribution Date.
(l) "Controlled Entity" shall mean any corporation,
partnership or other entity of which another entity (i) owns, directly or
indirectly, ownership interests sufficient to elect a majority of the Board of
Directors (or persons performing similar functions) (irrespective of whether at
the time any other class or classes of ownership interests of such corporation,
partnership or other entity shall or might have such voting power upon the
occurrence of any contingency) or (ii) is a general partner or an entity
performing similar functions (e.g., a trustee).
(m) "D&B" shall mean The Dun & Bradstreet Corporation, a
Delaware corporation.
(n) "D&B Business" shall mean each and every business
conducted at any time by D&B or any Subsidiary of D&B except a Cognizant
Business or an ACNielsen Business.
(o) "D&B Common Stock" shall mean the shares of common stock,
par value $1.00 per share, of D&B.
(p) "D&B Group" shall mean D&B and each person (other than a
member of the Cognizant Group or the ACNielsen Group) that is a Subsidiary of
D&B.
(q) "Deferred Compensation Deduction" shall mean a deduction
with respect to deferred compensation payments and/or the exercise of stock
options in D&B by any former employee of the Old D&B Group if such deduction is
disallowed for a member of the D&B Group and may be claimed by any member of the
Cognizant Group or any member of the ACNielsen Group.
(r) "Distribution" shall mean the distribution on the
Distribution Date to holders of record of shares of D&B Common Stock as of the
Distribution Record Date of (i) the Cognizant Common Shares owned by D&B on the
basis of one Cognizant Common Share for each outstanding share of D&B Common
Stock and (ii) the ACNielsen Common Shares owned by D&B on the basis of one
ACNielsen Common Share for each three outstanding share of D&B Common Stock.
(s) "Distribution Agreement" shall have the meaning as
defined in the recitals hereto.
(t) "Distribution Date" shall mean such date as may hereafter
be determined by D&B's Board of Directors as the date as of which the
Distribution shall be effected.
(u) "Distribution Record Date" shall mean such date as may
hereafter be determined by D&B's Board of Directors as the record date for the
Distribution.
<PAGE> 4
4
(v) "Final Determination" shall mean the final resolution of
liability for any Tax for any taxable period, including any related interest or
penalties, by or as a result of: (i) a final and unappealable decision,
judgment, decree or other order by any court of competent jurisdiction; (ii) a
closing agreement or accepted offer in compromise under Section 7121 or 7122 of
the Code, or comparable agreement under the laws of other jurisdictions which
resolves the entire tax liability for any taxable period; (iii) any allowance of
a refund or credit in respect of an overpayment of tax, but only after the
expiration of all periods during which such refund may be recovered by the
jurisdiction imposing the Tax; or (iv) any other final disposition, including by
reason of the expiration of the applicable statute of limitations.
(w) "Foreign Tax Agreement" shall have the meaning as defined
in Section 6.2.
(x) "Governmental Authority" shall mean any federal, state,
local, foreign or international court, government, department, commission,
board, bureau, agency, official or other regulatory, administrative or
governmental authority.
(y) "Included Party" shall have the meaning as defined in
Section 2.1.
(z) "Income Taxes" shall mean any federal, state or local
Taxes determined by reference to income or imposed in lieu of income taxes, such
as taxes based on net worth or gross receipts.
(aa) "Indemnifying Party" shall have the meaning as defined in
Section 3.6.
(ab) "Indemnitee" shall have the meaning as defined in Section
3.6.
(ac) "IRS" shall mean the Internal Revenue Service.
(ad) "Nonperforming Party" shall have the meaning as defined
in Section 5.2.
(ae) "Old D&B Consolidated Group" shall mean D&B and all of
the direct and indirect Subsidiaries of D&B prior to the Distribution Date that
joined in or were eligible to join the Consolidated Return or any Prior Period
Consolidated Return.
(af) "Old D&B Group" shall mean D&B and all of its
Subsidiaries (direct and indirect, domestic and foreign) prior to the
Distribution.
(ag) "Other Taxes" shall mean any federal, state or local
Taxes other than Income Taxes.
<PAGE> 5
5
(ah) "Parties" shall have the meaning as defined in the
recitals hereto.
(ai) "person" shall mean any natural person, corporation,
business trust, joint venture, association, company, partnership or government,
or any agency or political subdivision thereof.
(aj) "Preparing Party" shall have the meaning as defined in
Section 2.1.
(ak) "Prior Period Consolidated Return" shall mean any
consolidated tax return of D&B filed, or to be filed, for years prior to the
Consolidated Return year.
(al) "Reorganization Tax Payment" shall mean the payment of
any Tax for which Cognizant or D&B is liable pursuant to Section 3.3 of this
Agreement and the imposition and/or payment of which will permit another Party
or any Subsidiary to increase deductions, losses or tax credits or decrease
income, gains or recapture of tax credits for any taxable period or periods
beginning after or including but not ending on the Distribution Date.
(am) "Reorganizations" shall mean the series of contributions
and distributions of Controlled Entities and assets, transfers and assumptions
of liabilities, and other transactions whereby the D&B Group, the ACNielsen
Group and the Cognizant Group are formed and all other Controlled Entities of
D&B prior to the Distribution are placed under the control of the appropriate
parent corporation(s) in preparation for the Distribution.
(an) "Separate Business Foreign Taxes" shall have the meaning
as defined in Section 3.1(d).
(ao) "Separate Company Income Tax Item" shall mean any item or
position reported or reportable on a state or local Income Tax Return other than
those items determined by the D&B corporate office and allocated by the
corporate office to the operating division or entity filing such Income Tax
Return.
(ap) "Subpart F Income" shall have the meaning as defined in
Section 3.5.
(aq) "Subsidiary" shall mean any entity of which another
entity's ownership satisfies the 80-percent voting and value test defined in
Section 1504(a)(2) of the Code, whether directly or indirectly.
(ar) "Tax" or "Taxes" whether used in the form of a noun or
adjective, shall mean taxes on or measured by income, franchise, gross receipts,
sales, use, excise, payroll, personal property, real property, ad-valorem,
value-added, leasing,
<PAGE> 6
6
leasing use or other taxes, levies, imposts, duties, charges or withholdings of
any nature. Whenever the term "Tax" or "Taxes" is used (including, without
limitation, regarding any duty to reimburse another party for indemnified taxes
or refunds or credits of taxes) it shall include penalties, fines, additions to
tax and interest thereon.
(as) "Tax Benefit" shall mean the sum of the amount by which
the tax liability (after giving effect to any alternative minimum or similar
tax) of a corporation or group of affiliated corporations to the appropriate
taxing authority is reduced (including, without limitation, by deduction,
entitlement to refund, credit or otherwise, whether available in the current
taxable year, as an adjustment to taxable income in any other taxable year or as
a carryforward or carryback, as applicable) plus any interest from such
government or jurisdiction relating to such tax liability.
(at) "Tax Item" shall mean any item of income, capital gain,
net operating loss, capital loss, deduction, credit or other tax attribute
relevant to the calculation of a Tax liability.
(au) "Tax Returns" shall mean all reports or returns
(including information returns) required to be filed or that may be filed for
any period with any taxing authority (whether domestic or foreign) in connection
with any Tax or Taxes (whether domestic or foreign).
(av) "Timing Adjustment" shall mean any adjustment which (x)
decreases deductions, losses or credits or increases income (including any
increases in income where no income was previously reported), gains or recapture
of tax credits for the period in question, and for which D&B is liable pursuant
to this Agreement, and (y) will permit any member of the ACNielsen Group or any
member of the Cognizant Group to increase deductions, losses or tax credits or
decrease income, gains or recapture of tax credits for any taxable period or
periods beginning after or including but not ending on the Distribution Date.
SECTION 1.2. References; Interpretation. References in this
Agreement to any gender include references to all genders, and references to the
singular include references to the plural and vice versa. The words "include",
"includes" and "including" when used in this Agreement shall be deemed to be
followed by the phrase "without limitation". Unless the context otherwise
requires, references in this Agreement to Articles, Sections, Exhibits and
Schedules shall be deemed references to Articles and Sections of, and Exhibits
and Schedules to, such Agreement. Unless the context otherwise requires, the
words "hereof", "hereby" and "herein" and words of similar meaning when used in
this Agreement refer to this Agreement in its entirety and not to any particular
Article, Section or provision of this Agreement.
<PAGE> 7
7
ARTICLE II. PREPARATION AND FILING OF TAX RETURNS
SECTION 2.1. Manner of Preparation.
(a) All Tax Returns filed after the Distribution Date shall be
prepared on a basis that is consistent with the rulings obtained from the IRS or
any other Governmental Authority in connection with the Reorganizations or
Distribution (in the absence of a controlling change in law or circumstances)
and shall be filed on a timely basis (including pursuant to extensions) by the
party responsible for such filing under this Agreement. In the absence of a
controlling change in law or circumstances and unless deviation from past
practice would have no adverse effect on any of the Parties, all Tax Returns
filed after the date of this Agreement shall be prepared on a basis consistent
with the elections, accounting methods, conventions, assumptions and principles
of taxation used for the most recent taxable periods for which Tax Returns
involving similar Tax Items have been filed; provided, however, that a party
filing any Tax Return that does not conform to such past practices shall not be
liable for any additional Tax liability imposed, in whole or in part, as a
result of such deviation from past practice if: (i) for Tax Returns filed within
three years of the Distribution Date, 30 days prior to the filing of such Tax
Return, the party filing such Tax Return notifies all parties that may be
adversely affected; and (ii) the party filing such Tax Return establishes that
conformity with past practice involves a significant risk of the imposition of a
penalty. Subject to the provisions of this Agreement, all decisions relating to
the preparation of Tax Returns shall be made in the sole discretion of the party
responsible under this Agreement for its preparation; provided, however, that to
the extent a party (or any of its businesses) is included in a Tax Return
prepared by another party (the "Preparing Party"), the party not responsible for
preparing the Tax Return (the "Included Party") shall have the right to review
and comment on such Tax Return prior to the filing thereof in the following
manner:
(i) The Preparing Party shall submit any part of such Tax
Return relating to the Included Party to the Included Party at least 21 days
prior to the date on which such Tax Return is due (including extensions). The
Included Party shall submit its comments to the Preparing Party within 10 days
of receipt of the relevant portions of such Tax Return. The Preparing Party
shall alter such Tax Return to reflect the comments of the Included Party unless
the Preparing Party reasonably believes that such alteration would have an
adverse impact upon the Preparing Party.
(b) Unless otherwise required by the IRS, any Governmental
Authority or a court, the Parties hereby agree to file all Tax Returns, and to
take all other actions, in a manner consistent with the position that the last
day on which any member of the ACNielsen Group and any member of the Cognizant
Group was included in the Old D&B Consolidated Group is the
<PAGE> 8
8
Distribution Date. For any period that includes but does not end on the
Distribution Date, to the extent permitted by law or administrative practice,
the taxable year of each member of the Old D&B Consolidated Group and any group
of such members shall be treated as closing on the Distribution Date. If a
taxable year of any member of the Old D&B Consolidated Group or any group or
other combination of such members that begins on or before and ends after the
Distribution Date is not treated under the previous sentence as closing on the
Distribution Date, it will be treated for purposes of this Agreement as if the
member or group had a taxable year that ended on the Distribution Date, except
that Tax Items that are calculated on an annual basis shall be apportioned on a
time basis.
SECTION 2.2. Predistribution Tax Returns.
(a) All consolidated federal Income Tax Returns of the Old D&B
Consolidated Group, as well as any separate, non-consolidated federal Income Tax
Returns of any member of the Old D&B Group, that are required to be filed for
periods beginning before the Distribution Date shall be prepared and filed by
D&B.
(b) All state and local Income Tax Returns of any member of
the Old D&B Consolidated Group that may be or are required to be filed for
periods beginning before the Distribution Date shall be prepared and filed by
D&B.
(c) All Tax Returns for Other Taxes of any member of the Old
D&B Consolidated Group that may be or are required to be filed for any period
beginning before the Distribution Date shall be prepared and filed by ACNielsen
if they relate to an ACNielsen Business, by Cognizant if they relate to a
Cognizant Business, and by D&B if they relate to a D&B Business. If any such Tax
Return relates to businesses of more than one of the Parties, then the entity
that filed the corresponding Tax Return for the most recent period for which
such a Tax Return has been filed, or, if no such corresponding Tax Return has
been filed, the appropriate entity in accordance with local law or custom, shall
prepare and file such Tax Return.
(d) All foreign Tax Returns that are required to be filed by
or relating to any member of the Old D&B Group for periods beginning before the
Distribution Date shall be prepared and filed by the entity that filed the
corresponding Tax Return for the most recent period for which such a Tax Return
has been filed, or, if no such corresponding Tax Return has been filed, by the
appropriate entity in accordance with local law or custom.
SECTION 2.3. Post-Distribution Tax Returns.
(a) The filing of all Tax Returns for periods beginning on or
after the Distribution Date shall be the responsibility of D&B if they relate to
the D&B Group or any
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9
member thereof, shall be the responsibility of ACNielsen if they relate to the
ACNielsen Group or any member thereof, and shall be the responsibility of
Cognizant if they relate to the Cognizant Group or any member thereof.
(b) In the case of any partnership in which a member of the
Old D&B Consolidated Group is the designated tax matters partner, such entity
shall continue to be responsible for the preparation and filing of such
partnership's Tax Returns.
ARTICLE III. PAYMENT OF TAXES
SECTION 3.1. Predistribution Taxes.
(a) D&B shall be liable for and shall pay all Taxes due (or
receive all refunds) in connection with the filing of the Old D&B Consolidated
Group's consolidated federal Income Tax Return, as well as any separate,
non-consolidated federal Income Taxes of any member of the Old D&B Group, for
all taxable periods beginning before the Distribution Date.
(b) Except to the extent provided below, D&B shall be liable
for and shall pay to the relevant taxing authority all state and local Income
Taxes (or receive all refunds) for any taxable periods for which D&B has filing
responsibility under Section 2.2(b) of this Agreement, including any audit
adjustments to such Taxes. To the extent that any Tax Return for such state and
local Income Taxes includes Income Taxes relating to a business of Cognizant or
ACNielsen, the Included Party shall prepare and deliver to D&B, at least 90 days
prior to the due date (including extensions) of such Tax Return, a true and
correct accounting of all relevant Tax Items relating to the Included Party's
business.
(i) Straddle Periods.
(A) In the case of any such taxable period that does not end
on or before the Distribution Date, ACNielsen shall also provide D&B, at least
90 days prior to the due date (including extensions) of the relevant Tax Return,
with a true and correct accounting of all relevant Tax Items and corresponding
Taxes of each member of the ACNielsen Group as if the taxable period for such
entity began immediately after the Distribution Date (using the principles
provided in Section 2.1(b) of this Agreement) and ACNielsen shall be liable for
and shall pay to D&B any such Taxes attributable to such period, including any
audit adjustments to such Taxes.
(B) In the case of any such taxable period that does not end
on or before the Distribution Date, Cognizant shall also provide D&B, at least
90 days prior to the due date (including extensions) of the relevant Tax Return,
with a true and correct accounting of all relevant Tax Items and corresponding
Taxes of
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each member of the Cognizant Group as if the taxable period for such entity
began immediately after the Distribution Date, (using the principles provided in
Section 2.1(b) of this Agreement) and Cognizant shall be liable for and shall
pay to D&B any such Taxes attributable to such period, including any audit
adjustments to such Taxes.
(ii) Adjustments to Separate Company Income Tax Items.
(A) If an audit adjustment to any separate, non-consolidated
state or local Income Tax Return of a member of the ACNielsen Group for any
period beginning prior to the Distribution Date is made by the state or local
governmental authority and relates to a Separate Company Income Tax Item, then
ACNielsen shall be liable for such audit adjustment.
(B) If an audit adjustment to any separate, non-consolidated
state or local Income Tax Return of a member of the Cognizant Group for any
period beginning prior to the Distribution Date is made by the state or local
governmental authority and relates to a Separate Company Income Tax Item, then
Cognizant shall be liable for such audit adjustment.
(c) The entity responsible for the filing of any Tax Return
for Other Taxes pursuant to Section 2.2(c) shall pay to the relevant taxing
authority all Other Taxes due or payable (or receive all refunds) in connection
therewith; provided, however, that each of the Parties shall be liable for all
Other Taxes (or be entitled to receive all refunds) for all periods prior to the
Distribution Date, including audit adjustments thereto, relating to such Party's
businesses. To the extent any Tax Return for such Other Taxes includes Other
Taxes relating to a business other than the Preparing Party's businesses, the
Included Party shall prepare and deliver to the Preparing Party, at least 90
days prior to the due date (including extensions) of such Tax Return, a true and
correct accounting of all relevant Tax Items and corresponding Taxes relating to
the Included Party's business and shall pay the Preparing Party the amount of
any such Other Taxes attributable to the Included Party's business at that time.
(d) Except as provided in Schedule 3.1(d), the entity
responsible for the filing of any foreign Tax Return pursuant to Section 2.2(d)
shall pay to the relevant taxing authority all Taxes due or payable (or receive
all refunds) in connection therewith; provided, however, that each of the
Parties shall be liable for all foreign Taxes (or be entitled to receive all
refunds) for all taxable periods beginning prior to the Distribution Date,
including audit adjustments thereto, relating to such Party's businesses. To the
extent any foreign Tax Return includes Taxes relating to a business other than
the Preparing Party's business, the Included Party shall prepare and deliver to
the Preparing Party, at least 90 days prior to the due date (including
extensions) of such foreign Tax Return, a true and correct accounting of all
relevant Tax Items and corresponding
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Taxes relating to the Included Party's business for the taxable period
("Separate Business Foreign Taxes") and shall pay the Preparing Party the amount
of any such Separate Business Foreign Taxes at that time.
(i) Separate Business Foreign Taxes shall be calculated as if
the Included Party's business were a separate taxpayer for the relevant taxable
period. All such calculations shall be based upon the business's actual tax
attributes for the relevant taxable period, including the use of the business's
tax attributes (such as losses or credits) from prior periods that are not
otherwise utilized and that are carried over to the relevant taxable period
under local law.
(ii) Tax items that relate to or arise out of the tax planning
of the group of entities or businesses included in the relevant foreign Tax
Return as a whole rather than any separate entity or business shall not be
included in the calculation of Separate Business Foreign Taxes.
(iii) If the total liability for Taxes reported as due and
payable on the relevant foreign Tax Return exceeds or is less than the total of
the Separate Business Foreign Taxes for all businesses included in such foreign
Tax Return, then the cost or benefit of any net difference shall be allocated to
each business in proportion to the amount of taxable income generated by such
business.
(iv) Notwithstanding any statement to the contrary in this
Section 3.1(d), the Separate Business Foreign Taxes of any entity shall not
exceed the total liability for Taxes reported as due and payable on the relevant
foreign Tax Return.
(v) In the event of any Final Determination upholding an audit
adjustment to the amount of foreign Taxes reported as due and payable on the
relevant foreign Tax Return, Separate Business Foreign Taxes shall be
recalculated to incorporate any such adjustment.
SECTION 3.2. Post-Distribution Taxes. Unless otherwise
provided in this Agreement:
(a) D&B shall pay all Taxes and shall be entitled to receive
and retain all refunds of Taxes with respect to periods beginning on or after
the Distribution Date that are attributable to the D&B Group or any member
thereof;
(b) Cognizant shall pay all Taxes and shall be entitled to
receive and retain all refunds of Taxes with respect to periods beginning on or
after the Distribution Date that are attributable to the Cognizant Group or any
member thereof;
(c) ACNielsen shall pay all Taxes and shall be entitled to
receive and retain all refunds of Taxes with respect
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to periods beginning on or after the Distribution Date that are attributable to
the ACNielsen Group or any member thereof.
SECTION 3.3. Restructuring Taxes. Notwithstanding any
statement to the contrary in this Agreement and except as otherwise provided in
the Distribution Agreement, to the extent that any Taxes are found to arise out
of the Reorganizations, then any such Tax liability incurred by the Parties (or
any of their Subsidiaries) shall be the responsibility of D&B.
SECTION 3.4. Gain Recognition Agreements.
(a) In the event that the Cognizant Group transfers,
liquidates or otherwise disposes of the stock or assets of any entity listed on
Schedule 3.4(a) and such transfer, liquidation or disposition results in the D&B
Group recognizing gain pursuant to a gain recognition agreement under Section
367(a) of the Code, then Cognizant shall be liable for any resulting Taxes,
including interest, that any member of the D&B Group is required to pay.
(b) In the event that the ACNielsen Group transfers,
liquidates or otherwise disposes of the stock or assets of any entity listed on
Schedule 3.4(b) and such transfer, liquidation or disposition results in the D&B
Group recognizing gain pursuant to a gain recognition agreement under Section
367(a) of the Code, then ACNielsen shall be liable for any resulting Taxes,
including interest, that any member of the D&B Group is required to pay.
SECTION 3.5. Subpart F Inclusions.
(a) If income earned by any foreign member of the Cognizant
Group is required to be included in the United States federal income tax return
of any member of the Cognizant Group pursuant to Subpart F of the Code ("Subpart
F Income"), then D&B shall be liable for the Taxes attributable to the portion
of such income generated while such foreign member of the Cognizant Group was a
member of the Old D&B Group. The portion of such income which shall be
considered attributable to the period in which such foreign member was a member
of the Old D&B Group shall be computed as if the foreign member's taxable year
ended on the Distribution Date.
(b) If income earned by any foreign member of the ACNielsen
Group constitutes Subpart F Income of any member of the ACNielsen Group, then
D&B shall be liable for the Taxes attributable to the portion of such income
generated while such foreign member of the ACNielsen Group was a member of the
Old D&B Group. The portion of such income which shall be considered attributable
to the period in which such foreign member was a member of the Old D&B Group
shall be computed as if the foreign member's taxable year ended on the
Distribution Date.
(c) The amount payable by D&B pursuant to this Section 3.5
shall not exceed the actual Taxes payable with respect to
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such Subpart F Income minus any foreign tax credits attributable to such Subpart
F Income.
SECTION 3.6. Indemnification.
(a) Indemnification by D&B. D&B shall indemnify, defend and
hold harmless Cognizant and ACNielsen (and their respective affiliates) from and
against any and all Tax liabilities allocated to D&B by this Agreement.
(b) Indemnification by Cognizant. Cognizant shall indemnify,
defend and hold harmless D&B and ACNielsen (and their respective affiliates)
from and against any and all Tax liabilities allocated to Cognizant by this
Agreement.
(c) Indemnification by ACNielsen. ACNielsen shall indemnify,
defend and hold harmless D&B and Cognizant (and their respective affiliates)
from and against any and all Tax liabilities allocated to ACNielsen by this
Agreement.
(d) Indemnity Payments.
(i) To the extent that one party (the "Indemnifying Party")
owes money to another party (the "Indemnitee") pursuant to this Section 3.6, the
Indemnitee shall, within 14 days after receiving the Indemnifying Party's
calculations (as specified in Sections 3.1(b), 3.1(c) and 3.1(d)), submit to the
Indemnifying Party the Indemnitee's calculations of the amount required to be
paid pursuant to this Section 3.6, showing such calculations in sufficient
detail so as to permit the Indemnifying Party to understand the calculations.
The Indemnifying Party shall pay the Indemnitee, no later than 30 days prior to
the due date (including extensions) of the relevant Tax Returns or 14 days after
the Indemnifying Party receives the Indemnitee's calculations, the amount for
which the Indemnifying Party is required to pay or indemnify the Indemnitee
under this Section 3.6. The Indemnifying Party shall have the right to disagree
with the Indemnitee's calculations. Any dispute regarding such calculations
shall be resolved in accordance with Section 5.4 of this Agreement.
(ii) All indemnity payments shall be calculated on a pre-tax
basis and shall be treated as contributions to capital and/or dividends
immediately prior to the Distribution.
ARTICLE IV. TAX ATTRIBUTES, TIMING ADJUSTMENTS AND
REORGANIZATION TAX PAYMENTS
SECTION 4.1. Carrybacks. In the event of the realization of
any deduction, loss or credit by a party for any taxable period beginning on or
after the Distribution Date, the party realizing such deduction, loss or credit
may, in its sole discretion, and to the extent permitted under applicable tax
law, elect not to carry back such deduction, loss or credit. To the
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extent any amount is carried back and used by D&B for a taxable period beginning
prior to the Distribution Date, D&B shall not be obligated to make any payment
regarding such carryback.
SECTION 4.2. Deductions or Credits. Except as provided in
Section 4.3, none of the Parties shall be obligated to make a payment to another
party as a result of utilizing a net operating loss, credit or similar tax
attribute arising in a period beginning prior to the Distribution Date.
SECTION 4.3. Timing Adjustments, Reorganization Tax Payments,
and Deferred Compensation Deductions.
(a) If an audit or other examination of any federal, state or
local Tax Return (x) for any period beginning prior to the Distribution Date
shall result (by settlement or otherwise) in a Timing Adjustment in favor of the
ACNielsen Group or any member thereof or the Cognizant Group or any member
thereof, or (y) for any taxable period shall result (by settlement or otherwise)
in a Deferred Compensation Deduction in favor of the ACNielsen Group or any
member thereof or the Cognizant Group or any member thereof, or if any
Reorganization Tax Payment in favor of the ACNielsen Group or any member thereof
or the Cognizant Group or any member thereof is made by D&B, then:
(i) D&B shall notify ACNielsen or Cognizant, as the case may
be, and shall provide ACNielsen or Cognizant with adequate information so that
it can reflect on the appropriate Tax Returns any resulting increases in
deductions, losses or tax credits or decreases in income, gains or recapture of
tax credits;
(ii) ACNielsen or Cognizant, as the case may be, shall pay D&B
the amount of any Tax Benefit that results from such Timing Adjustment,
Reorganization Tax Payment, or Deferred Compensation Deduction within 30 days of
the date such Tax Benefits are realized;
(iii) Notwithstanding the foregoing, ACNielsen or Cognizant,
as the case may be, shall only be required to take steps to obtain such Tax
Benefit or to pay D&B if, in the opinion of ACNielsen's or Cognizant's tax
counsel, which counsel shall be reasonably acceptable to D&B, the reporting of
such Tax Benefit shall not subject ACNielsen or Cognizant to the imposition of a
penalty.
(b) If any Reorganization Tax Payment in favor of the
ACNielsen Group or any member thereof or the D&B Group or any member thereof is
made by Cognizant, then:
(i) Cognizant shall notify ACNielsen or D&B, as the case may
be, and shall provide ACNielsen or D&B with adequate information so that it can
reflect on the appropriate Tax Returns
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any resulting increases in deductions, losses or tax credits or decreases in
income, gains or recapture of tax credits;
(ii) ACNielsen or D&B, as the case may be, shall pay Cognizant
the amount of any Tax Benefit that results from such Reorganization Tax Payment
within 30 days of the date such Tax Benefits are realized.
(iii) Notwithstanding the foregoing, ACNielsen or D&B, as the
case may be, shall only be required to take steps to obtain such Tax Benefit or
to pay Cognizant if, in the opinion of ACNielsen's or D&B's tax counsel, which
counsel shall be reasonably acceptable to Cognizant, the reporting of such Tax
Benefit shall not subject ACNielsen or D&B to the imposition of a penalty.
(c) Realization of Tax Benefits.
(i) For purposes of this Section 4.3, a Tax Benefit shall be
deemed to have been realized at the time any refund of Taxes is received or
applied against other Taxes due, or at the time of filing of a Tax Return
(including any Tax Return relating to estimated Taxes) on which a loss,
deduction or credit is applied in reduction of Taxes which would otherwise be
payable; provided, however, that where a party has other losses, deductions,
credits or similar items available to it, such deductions, credits or similar
items of such party may be applied prior to the use of any Timing Adjustment,
Reorganization Tax Payment, or Deferred Compensation Deduction.
(ii) The party in receipt of a Tax Benefit may, at its
election, pay the amount of any Tax Benefit to D&B rather than filing amended
returns or otherwise reflecting adjustments or taking positions on its Tax
Returns. If such an election is made, the party will be treated as having
realized a Tax Benefit at the time it would have realized a Tax Benefit had it
chosen to file amended returns or otherwise to reflect adjustments or to take
positions on its Tax Returns.
(d) Tax Benefits Subsequently Denied. If any Tax Benefit
realized pursuant to Section 4.3(c)(i) is subsequently denied, then D&B shall
refund the amount of any payment for such Tax Benefit within 30 days of its
notification by ACNielsen or Cognizant, as the case may be, that a Final
Determination has been reached denying the claimed Tax Benefit.
SECTION 4.4. Competent Authority Relief. If as a result of any
audit of a taxable period beginning prior to the Distribution Date, a Party (or
Subsidiary) is required to adjust its income, deductions, credits or allowances
under Section 482 of the Code or under similar principles in a foreign
jurisdiction, and the payment of additional Taxes in accordance with such a
determination allows another Party (or Subsidiary) to obtain competent authority
relief as a result thereof, then the
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Party eligible to obtain such relief shall: (a) execute or cause to be executed
any powers of attorney or other documents necessary to enable the other Party to
pursue such relief at its own expense; and (b) cooperate with the other Party
and the competent authorities in seeking such relief. If a mutual agreement is
reached among the competent authorities, then the Party (or Subsidiary)
realizing a Tax Benefit as a result thereof shall pay the amount of such Tax
Benefit to the Party (or Subsidiary) for which the Tax liability is
correspondingly increased within 30 days of the date such Tax Benefit is
realized (within the meaning of Section 4.3(c) of this Agreement). If any Tax
Benefit so realized is subsequently denied, then the Party in receipt of payment
therefor shall refund the amount of any such payment within 30 days of its
notification by the payor that a Final Determination has been reached denying
the claimed Tax Benefit.
ARTICLE V. TAX AUDITS, TRANSACTIONS AND OTHER MATTERS
SECTION 5.1. Tax Audits and Controversies. In the case of any
audit, examination or other proceeding ("Proceeding") brought against any Party
(or Subsidiary) with respect to Taxes for which another Party is or may be
liable pursuant to this Agreement, the Party subject to such Proceeding shall
promptly inform the other Party and shall execute or cause to be executed any
powers of attorney or other documents necessary to enable the other Party to
take all actions desired with respect to such Proceeding to the extent such
Proceeding may affect the amount of Taxes for which the other Party is liable
pursuant to this Agreement. Each Party shall have the right to control, at its
own expense, the portion of any such Proceeding that relates to Taxes for which
such Party is or may be liable pursuant to this Agreement; provided, however,
that such Party shall consult with the other Parties with respect to any issue
that may affect another Party (or Subsidiary). The Party in control of such
Proceeding or any part thereof shall not enter into any final settlement or
closing agreement that may adversely affect another Party (or Subsidiary)
without the consent of such other Party, which consent may not unreasonably be
withheld. Where consent to any final settlement or closing agreement is
withheld, the Party withholding consent shall continue or initiate further
proceedings, at its own expense, and the liability of the Party in control of
such Proceeding shall not exceed the liability that would have resulted from the
proposed closing agreement or final settlement (including interest, additions to
tax and penalties which have accrued at that time).
SECTION 5.2. Cooperation. D&B, ACNielsen and Cognizant shall
cooperate with each other in the filing of any Tax Returns and the conduct of
any audit or other proceeding and each shall execute and deliver such powers of
attorney and other documents and make available such information and documents
as are necessary to carry out the intent of this Agreement. To the extent such
cooperation involves the services of officers,
<PAGE> 17
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directors, employees, or agents of a Party, such services shall be made
available in accordance with Section 2.9 of the Distribution Agreement. Each
party agrees to notify the other parties of any audit adjustment that does not
result in Tax liability but can reasonably be expected to affect Tax Returns of
the other parties or any of their Subsidiaries. Notwithstanding any other
provision of this Agreement, if a party (the "Nonperforming Party") fails to
give its full cooperation and use its best efforts in the conduct of an audit or
other proceeding as provided by this Section 5.2, and such failure results in
the imposition of additional Taxes for the period or periods involved in the
audit or other proceeding, the Nonperforming Party shall be liable in full for
such additional Taxes.
SECTION 5.3. Retention of Records; Access. Beginning on the
Distribution Date, D&B, ACNielsen and Cognizant shall, and shall cause each of
their Controlled Entities to:
(a) retain adequate records, documents, accounting data and
other information (including computer data) necessary for the preparation and
filing of all Tax Returns required to be filed by any member of the Old D&B
Group or any combination of such members and for any audits and litigation
relating to such Tax Returns or to any Taxes payable by any member of the Old
D&B Group or any combination of such members; and
(b) give to the other parties reasonable access to such
records, documents, accounting data and other information (including computer
data) and to its personnel and premises, for the purpose of the review or audit
of such reports or returns to the extent relevant to an obligation or liability
of a party under this Agreement and in accordance with the procedures provided
in Article IV of the Distribution Agreement. The obligations set forth in these
paragraphs 5.3(a) and 5.3(b) shall continue until the final conclusion of any
litigation to which the records and information relate or until expiration of
all applicable statutes of limitations, whichever is longer.
SECTION 5.4. Dispute Resolution. Any dispute or claim arising
out of, in connection with, or in relation to the interpretation, performance,
nonperformance, validity or breach of this Agreement or otherwise arising out
of, or in any way related to this Agreement, shall be resolved in the manner set
forth in Article VI of the Distribution Agreement.
SECTION 5.5. Confidentiality; Ownership of Information;
Privileged Information. The provisions of Article IV of the Distribution
Agreement relating to confidentiality of information, ownership of information,
privileged information and related matters shall apply with equal force to any
records and information prepared and/or shared by and among the Parties in
carrying out the intent of this Agreement.
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ARTICLE VI. MISCELLANEOUS
SECTION 6.1. Complete Agreement; Construction. This Agreement,
including the Exhibits and Schedules, and the Ancillary Agreements shall
constitute the entire agreement between the parties with respect to the subject
matter hereof and shall supersede all previous negotiations, commitments and
writings with respect to such subject matter. In the event of any inconsistency
between this Agreement and any Schedule hereto, the Schedule shall prevail.
Other than Sections 2.1(j)(i), 2.1(j)(ii), 2.7, 2.10 and 4.5 and Article VI of
the Distribution Agreement, which shall prevail over any inconsistent or
conflicting provisions in this Agreement, notwithstanding any other provisions
in this Agreement to the contrary, in the event and to the extent that there
shall be a conflict between the provisions of this Agreement and the provisions
of the Distribution Agreement, this Agreement shall control.
SECTION 6.2. Master Tax Allocation Agreement. This Agreement,
including the Exhibits and Schedules, shall take precedence over any and all
agreements with respect to foreign taxes among members of the D&B Group, the
ACNielsen Group, and the Cognizant Group (a "Foreign Tax Agreement"). In the
event that any payment is made or other action taken by a member of the D&B
Group, the ACNielsen Group, or the Cognizant Group pursuant to any Foreign Tax
Agreement and contrary to the terms of this Agreement, then an offsetting
indemnity payment shall be made by the appropriate Party to the injured Party to
conform with the provisions of this Agreement.
SECTION 6.3. Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more such counterparts have
been signed by each of the parties and delivered to the other parties.
SECTION 6.4. Survival of Agreements. Except as otherwise
contemplated by this Agreement, all covenants and agreements of the parties
contained in this Agreement shall survive the Distribution Date.
SECTION 6.5. Expenses. Except as otherwise set forth in this
Agreement, all costs and expenses incurred on or prior to the Distribution Date
(whether or not paid on or prior to the Distribution Date) in connection with
the preparation, execution, delivery and implementation of this Agreement shall
be charged to and paid by D&B. Except as otherwise set forth in this Agreement,
each party shall bear its own costs and expenses incurred after the Distribution
Date.
SECTION 6.6. 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
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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:
To The Dun & Bradstreet Corporation:
One Diamond Hill Road
Murray Hill, NJ 07974
Telecopy: (908) 665-5803
Attn: General Counsel
To Cognizant Corporation:
200 Nyala Farms
Westport, CT 06880
Telecopy: (203) 222-4201
Attn: General Counsel
To ACNielsen Corporation:
177 Broad Street
Stamford, CT 06901
Telecopy: (203) 961-3190
Attn: General Counsel
SECTION 6.7. Waivers. The failure of any party to require
strict performance by any other party of any provision in this Agreement will
not waive or diminish that party's right to demand strict performance thereafter
of that or any other provision hereof.
SECTION 6.8. Amendments. This Agreement may not be modified or
amended except by an agreement in writing signed by each of the parties hereto.
SECTION 6.9. Assignment. This Agreement shall not be
assignable, in whole or in part, directly or indirectly, by any party hereto
without the prior written consent of the other parties hereto, and any attempt
to assign any rights or obligations arising under this Agreement without such
consent shall be void.
SECTION 6.10. Successors and Assigns. The provisions to this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and permitted assigns.
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SECTION 6.11. Termination. This Agreement may be terminated,
amended, modified or abandoned at any time prior to the Distribution by and in
the sole discretion of D&B without the approval of Cognizant or ACNielsen or the
stockholders of D&B. In the event of such termination, no party shall have any
liability of any kind to any other party or any other person. After the
Distribution, this Agreement may not be terminated except by an agreement in
writing signed by the parties.
SECTION 6.12. Controlled Entities. Each of the parties hereto
shall cause to be performed, and hereby guarantees the performance of, all
actions, agreements and obligations set forth herein to be performed by any
Controlled Entity of such party or by any entity that is contemplated to be a
Controlled Entity of such party on and after the Distribution Date.
SECTION 6.13. Third Party Beneficiaries. This Agreement is
solely for the benefit of the parties hereto and their respective Subsidiaries
and should not be deemed to confer upon third parties any remedy, claim,
liability, reimbursement, claim of action or other right in excess of those
existing without reference to this Agreement.
SECTION 6.14. Title and Headings. Titles and headings to
sections herein are inserted for the convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
SECTION 6.15. Exhibits and Schedules. The Exhibits and
Schedules shall be construed with and as an integral part of this Agreement to
the same extent as if the same had been set forth verbatim herein.
SECTION 6.16. GOVERNING LAW. THIS AGREEMENT 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.
SECTION 6.17. Consent to Jurisdiction. Without limiting the
provisions of Section 5.4 hereof, each of the parties irrevocably submits to the
exclusive jurisdiction of (a) the Supreme Court of the State of New York, New
York County, and (b) the United States District Court for the Southern District
of New York, for the purposes of any suit, action or other proceeding arising
out of this Agreement or any transaction contemplated hereby. Each of the
parties agrees to commence any action, suit or proceeding relating hereto either
in the United States District Court for the Southern District of New York or if
such suit, action or other proceeding may not be brought in such court for
jurisdictional reasons, in the Supreme Court of the State of New York, New York
County. Each of the parties further agrees that service of any process, summons,
notice or document by U.S. registered mail to such party's respective address
set forth above shall be effective service of process for any action,
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suit or proceeding in New York with respect to any matters to which it has
submitted to jurisdiction in this Section 6.17. Each of the parties irrevocably
and unconditionally waives any objection to the laying of venue of any action,
suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in (i) the Supreme Court of the State of New York, New York
County, or (ii) the United States District Court for the Southern District of
New York, and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
SECTION 6.18. Severability. In the event any one or more of
the provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
<PAGE> 22
22
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the day and year first above written.
THE DUN & BRADSTREET CORPORATION
by
----------------------
Name:
Title:
COGNIZANT CORPORATION
by
----------------------
Name:
Title:
ACNIELSEN CORPORATION
by
----------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.3
FORM OF EMPLOYEE BENEFITS AGREEMENT
This EMPLOYEE BENEFITS AGREEMENT is dated as of ________ __,
1996 (the "Agreement"), among THE DUN & BRADSTREET CORPORATION, a Delaware
corporation ("D&B"), COGNIZANT CORPORATION, a Delaware corporation,
("Cognizant"), and ACNIELSEN CORPORATION, a Delaware corporation ("ACNielsen").
WHEREAS, the Board of Directors of D&B has determined that it
is appropriate, desirable and in the best interests of the holders of shares of
common stock, par value $1.00 per share, of D&B (the "D&B Common Stock") to take
certain steps to reorganize D&B's Subsidiaries (as defined herein) and
businesses and then to distribute to the holders of the D&B Common Stock all the
outstanding shares of common stock of Cognizant, together with the appurtenant
share purchase rights (the "Cognizant Common Shares"), and all the outstanding
shares of common stock of ACNielsen, together with the appurtenant share
purchase rights (the "ACNielsen Common Shares"); and
WHEREAS, each of D&B, Cognizant and ACNielsen has determined
that it is necessary and desirable to allocate and assign responsibility for
certain employee benefit matters in respect of such entities on and after the
Effective Time (as defined herein).
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, D&B, Cognizant and ACNielsen agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. Capitalized terms used in this
Agreement shall have the following meanings:
"ACNielsen" shall mean ACNielsen Corporation, a Delaware
corporation.
"ACNielsen Bifurcated Savings Plan Employees" shall have the
meaning set forth in Section 3.3(a) of this Agreement.
"ACNielsen Common Shares" shall have the meaning set forth in
the recitals hereto.
"ACNielsen Employees" shall mean persons who, immediately
after the Effective Time, are employed by the ACNielsen Group (including persons
who are absent from work by reason of layoff or leave of absence and inactive
employees treated as such by agreement therewith).
<PAGE> 2
2
"ACNielsen Group" shall mean ACNielsen and each Business
Entity which is contemplated to remain or become a Subsidiary of ACNielsen
pursuant to the Distribution Agreement.
"ACNielsen Lump-Sum Savings Plan Employees" shall have the
meaning set forth in Section 3.3(a) of this Agreement.
"ACNielsen Replacement Plan" shall mean the replacement plan
to be adopted by ACNielsen pursuant to Section 6.1(c) of this Agreement.
"ACNielsen Retirement Eligible Employees" shall have the
meaning set forth in Section 5.6 of this Agreement.
"ACNielsen Retirement Plan" shall mean the defined benefit
plan to be adopted by ACNielsen pursuant to Section 2.3(a) of this Agreement.
"ACNielsen Retirement Plan Effective Date" shall have the
meaning set forth in Section 2.3(a) of this Agreement.
"ACNielsen Retirement Plan Segregation Ratio" shall equal a
fraction, the numerator of which is the Present Value of the accrued vested and
nonvested benefits (as defined in ERISA Section 4044(a)(1)-(6)) of the ACNielsen
Transferred Retirement Plan Employees under the D&B Retirement Plan at the
Effective Time, and the denominator of which is the Present Value of the accrued
vested and nonvested benefits (as defined in ERISA Section 4044(a)(1)-(6)) of
the D&B Pre-Distribution Employees under the D&B Retirement Plan at the
Effective Time.
"ACNielsen Retirement Plan Transfer Date" shall have the
meaning set forth in Section 2.3(b) of this Agreement.
"ACNielsen Savings Plan" shall mean the defined contribution
plan to be adopted by ACNielsen pursuant to Section 3.3(a) of this Agreement.
"ACNielsen Savings Plan Transfer Date" shall have the meaning
set forth in Section 3.3(b) of this Agreement.
"ACNielsen Transferred Retirement Plan Employees" shall have
the meaning set forth in Section 2.3(a) of this Agreement.
"ACNielsen Transferred Savings Plan Employees" shall have the
meaning set forth in Section 3.3(a) of this Agreement.
"Action" shall mean any action, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any governmental or other
regulatory or administrative agency, body or commission or any arbitration
tribunal.
"Affiliate" shall mean, when used with respect to a specified
person, another person that controls, is controlled by,
<PAGE> 3
3
or is under common control with the person specified. As used herein, "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such person, whether through the
ownership of voting securities or other interests, by contract or otherwise.
"Ancillary Agreements" shall mean all of the written
agreements, instruments, assignments or other written arrangements (other than
this Agreement and the Distribution Agreement) entered into in connection with
the transactions contemplated by this Agreement and the Distribution Agreement,
including, without limitation, the Conveyancing and Assumption Instruments, the
Data Services Agreements, the Intellectual Property Agreement, the Shared
Transaction Services Agreements, the Tax Allocation Agreement and the Transition
Services Agreement.
"Assets" shall have the meaning set forth in Section 1.1(q) of
the Distribution Agreement.
"Board of Directors" shall mean, when used with respect to a
specified corporation, the board of directors of the corporation so specified.
"Business Entity" shall mean any corporation, partnership,
limited liability company or other entity which may legally hold title to
Assets.
"COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, and the regulations promulgated
thereunder, including any successor legislation.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder, including any successor
legislation.
"Cognizant" shall mean Cognizant Corporation, a Delaware
corporation.
"Cognizant and ACNielsen Nonqualified Plan Participants" shall
have the meaning as set forth in Section 4.2 of this Agreement.
"Cognizant Bifurcated Savings Plan Employees" shall have the
meaning set forth in Section 3.2(a) of this Agreement.
"Cognizant Common Shares" shall have the meaning set forth in
the recitals hereto.
"Cognizant Employees" shall mean persons who, immediately
after the Effective Time, are employed by the Cognizant Group (including persons
who are absent from work by reason of layoff or leave of absence and inactive
employees treated as such by agreement therewith).
<PAGE> 4
4
"Cognizant Group" shall mean Cognizant and each Business
Entity which is contemplated to remain or become a Subsidiary of Cognizant
pursuant to the Distribution Agreement.
"Cognizant Lump-Sum Savings Plan Employees" shall have the
meaning set forth in Section 3.2(a) of this Agreement.
"Cognizant Replacement Plans" shall mean the replacement plans
(including, without limitation, the replacement plan for certain IMS employees)
to be adopted by Cognizant pursuant to Section 6.1(b) of this Agreement.
"Cognizant Retirement Eligible Employees" shall have the
meaning set forth in Section 5.6 of this Agreement.
"Cognizant Retirement Plan" shall mean the defined benefit
plan to be adopted by Cognizant pursuant to Section 2.2(a) of this Agreement.
"Cognizant Retirement Plan Effective Date" shall have the
meaning set forth in Section 2.2(a) of this Agreement.
"Cognizant Retirement Plan Segregation Ratio" shall equal a
fraction, the numerator of which is the Present Value of the accrued vested and
nonvested benefits (as defined in ERISA Section 4044(a)(1)-(6)) of the Cognizant
Transferred Retirement Plan Employees under the D&B Retirement Plan at the
Effective Time, and the denominator of which is the Present Value of the accrued
vested and nonvested benefits (as defined in ERISA Section 4044(a)(1)-(6)) of
the D&B Pre-Distribution Employees under the D&B Retirement Plan at the
Effective Time.
"Cognizant Retirement Plan Transfer Date" shall have the
meaning set forth in Section 2.2(b) of this Agreement.
"Cognizant Savings Plan" shall mean the defined contribution
plan to be adopted by Cognizant pursuant to Section 3.2(a) of this Agreement.
"Cognizant Savings Plan Transfer Date" shall have the meaning
set forth in Section 3.2(b) of this Agreement.
"Cognizant Transferred Retirement Plan Employees" shall have
the meaning set forth in Section 2.2(a) of this Agreement.
"Cognizant Transferred Savings Plan Employees" shall have the
meaning set forth in Section 3.2 of this Agreement.
<PAGE> 5
5
"Conveyancing and Assumption Instruments" shall mean,
collectively, the various agreements, instruments and other documents heretofore
entered into and to be entered into to effect the transfer of Assets and the
assumption of Liabilities in the manner contemplated by the Distribution
Agreement, or otherwise arising out of or relating to the transactions
contemplated in the Distribution Agreement.
"D&B" shall mean The Dun & Bradstreet Corporation, a Delaware
corporation.
"D&B Career Transition Plan" shall mean The Dun & Bradstreet
Career Transition Plan.
"D&B Committee" shall mean the Executive Compensation and
Stock Option Committee of the Board of Directors of D&B.
"D&B Common Stock" shall have the meaning set forth in the
recitals hereto.
"D&B Disabled Employees" shall mean all D&B Pre- Distribution
Employees who are receiving benefits under the D&B Long-Term Disability Plan as
of the Effective Time.
"D&B Group" shall mean D&B and each Business Entity (other
than any member of the Cognizant Group or the ACNielsen Group) that is a
Subsidiary of D&B.
"D&B Long-Term Disability Plan" shall mean The Dun &
Bradstreet Corporation Long Term Disability Plan or any other long-term
disability plan sponsored by D&B or any Subsidiary of D&B prior to the Effective
Time.
"D&B LSARs" shall have the meaning set forth in Section 6.2 of
this Agreement.
"D&B Nonqualified Plans" shall have the meaning as set forth
in Section 4.1 of this Agreement.
"D&B Pension BEP" shall mean the Pension Benefit Equalization
Plan of The Dun & Bradstreet Corporation, as amended effective December 21,
1994.
"D&B Pension BEP Trust" shall mean the trust established in
connection with the D&B Pension BEP and made as of December 15, 1995.
"D&B Post-Distribution Employees" shall mean persons who,
immediately after the Effective Time, are employed by the D&B Group (including
persons who are absent from work by reason of layoff or leave of absence and
inactive employees treated as such by agreement therewith).
<PAGE> 6
6
"D&B Pre-Distribution Employees" shall mean persons who, at
any time prior to the Effective Time, were employed by D&B or its Subsidiaries.
"D&B Retirees" shall mean persons who (i) were D&B Pre-
Distribution Employees, (ii) terminated employment from D&B prior to the
Effective Time and (iii) are neither Cognizant Employees nor ACNielsen Employees
immediately after the Effective Time.
"D&B Retirement Plan" shall mean the Master Retirement Plan of
The Dun & Bradstreet Corporation, as amended and restated effective January 1,
1994, with certain earlier effective dates.
"D&B Savings BEP" shall mean the Profit Participation Benefit
Equalization Plan of The Dun & Bradstreet Corporation, as amended and restated
effective January 1, 1995.
"D&B Savings Plan" shall mean the Profit Participation Plan of
The Dun & Bradstreet Corporation, as in effect on January 1, 1994, with certain
earlier effective dates.
"D&B Stock Option" shall have the meaning set forth in Section
6.1 of this Agreement.
"D&B Stock Option Plans" shall mean (i) the 1982 Key Employees
Stock Option Plan for The Dun & Bradstreet Corporation and Subsidiaries and (ii)
the 1991 Key Employees Stock Option Plan for The Dun & Bradstreet Corporation
and Subsidiaries.
"D&B Supplemental EBP" shall mean the Supplemental Executive
Benefit Plan of The Dun & Bradstreet Corporation, as amended effective December
21, 1994.
"D&B Supplemental EBP Trust" shall mean the trust established
in connection with the D&B Supplemental EBP and made as of December 15, 1995.
"Daily Average Trading Price" of a given stock on a given day
shall mean the average of the high and low trading prices for such stock on such
date.
"Data Services Agreements" shall mean the Data Services
Agreements to be entered into by D&B, Cognizant and ACNielsen.
"Distribution" shall mean the distribution on the Distribution
Date to holders of record of shares of D&B Common Stock as of the Distribution
Record Date of (i) the Cognizant Common Shares owned by D&B on the basis of one
Cognizant Common Share for each outstanding share of D&B Common Stock and (ii)
the ACNielsen Common Shares owned by D&B on the basis of one share of ACNielsen
Common Share for each three outstanding shares of D&B Common Stock.
<PAGE> 7
7
"Distribution Agreement" shall mean the Distribution Agreement
among D&B, Cognizant and ACNielsen.
"Distribution Date" shall mean such date as may hereafter be
determined by D&B's Board of Directors as the date as of which the Distribution
shall be effected.
"Distribution Record Date" shall mean such date as may
hereafter be determined by D&B's Board of Directors as the record date for the
Distribution.
"Effective Time" shall mean 12:01 a.m., New York time, on the
Distribution Date.
"Employee Benefit Dispute" shall include any controversy,
dispute or claim arising out of, in connection with, or in relation to the
interpretation, performance, nonperformance, validity or breach of this
Agreement or otherwise arising out of, or in any way related to this Agreement
or the transactions contemplated hereby, including, without limitation, any
claim based on contract, tort, statute or constitution.
"Employee Benefit Litigation Liability" shall mean, with
respect to a Business Entity, a Liability relating to a controversy, dispute or
claim arising out of, in connection with or in relation to the interpretation,
performance, nonperformance, validity or breach of an Employee Benefit Plan of
such Business Entity or otherwise arising out of, or in any way related to such
Employee Benefit Plan, including, without limitation, any claim based on
contract, tort, statute or constitution.
"Employee Benefit Plans" shall mean, with respect to a
Business Entity, all "employee benefit plans" (within the meaning of Section
3(3) of ERISA), "multiemployer plans" (within the meaning of Section 3(37) of
ERISA), retirement, pension, savings, profit-sharing, welfare, stock purchase,
stock option, equity- based, severance, employment, change-in-control, fringe
benefit, collective bargaining, bonus, incentive, deferred compensation and all
other employee benefit plans, agreements, programs, policies or other
arrangements (including any funding mechanisms therefor), whether or not subject
to ERISA, whether formal or informal, oral or written, legally binding or not,
under which (i) any past, present or future employee of the Business Entity or
its Subsidiaries has a right to benefits and (ii) the Business Entity or its
Subsidiaries has any Liability.
"Employee Benefit Records" shall mean all agreements,
documents, books, records or files relating to the Employee Benefit Plans of
D&B, Cognizant and ACNielsen.
"Employee Benefit Welfare Plans" shall mean, with respect to a
Business Entity, all Employee Benefit Plans that are "welfare plans" within the
meaning of Section 3(1) of ERISA.
<PAGE> 8
8
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and the regulations promulgated thereunder, including any
successor legislation.
"ESOP" shall mean an "employee stock ownership plan" within
the meaning of Section 4975(e)(7) of the Code.
"FSA Coverage Period" shall have the meaning set forth in
Section 5.4 of this Agreement.
"IMS" shall mean I.M.S. International, Inc., a Delaware
corporation.
"Information Statement" shall mean the Information Statement
sent to the holders of shares of D&B Common Stock in connection with the
Distribution, including any amendment or supplement thereto.
"Intellectual Property Agreement" shall mean the intellectual
property and licensing agreement among D&B, Cognizant and ACNielsen.
"Liabilities" shall mean any and all losses, claims, charges,
debts, demands, actions, causes of action, suits, damages, obligations,
payments, costs and expenses, sums of money, accounts, reckonings, bonds,
specialties, indemnities and similar obligations, exonerations, covenants,
contracts, controversies, agreements, promises, doings, omissions, variances,
guarantees, make whole agreements and similar obligations, and other
liabilities, including all contractual obligations, whether absolute or
contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising, and including those arising under
any law, rule, regulation, Action, threatened or contemplated Action (including
the costs and expenses of demands, assessments, judgments, settlements and
compromises relating thereto and attorneys' fees and any and all costs and
expenses (including allocated costs of in-house counsel and other personnel),
whatsoever reasonably incurred in investigating, preparing or defending against
any such Actions or threatened or contemplated Actions), order or consent decree
of any governmental or other regulatory or administrative agency, body or
commission or any award of any arbitrator or mediator of any kind, and those
arising under any contract, commitment or undertaking, including those arising
under this Agreement, the Distribution Agreement or any Ancillary Agreement, in
each case, whether or not recorded or reflected or required to be recorded or
reflected on the books and records or financial statements of any person.
"Participant Election Period" shall mean the period during
which the elections described in Sections 3.2 and 3.3 are permitted (such
period, in no event, to be less than 30 days
<PAGE> 9
9
following notice thereof to persons who are eligible to make the election).
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any successor entity thereto.
"PBGC Assumptions" shall mean the actuarial assumptions set
forth in 29 C.F.R. Part 2619, et seq.
"person" shall mean any natural person, corporation, business
trust, joint venture, association, company, partnership or government, or any
agency or political subdivision thereof.
"Present Value" shall mean the single sum value of a series of
future payments, determined utilizing PBGC Assumptions in effect as of the
measurement date.
"Service" shall mean the Internal Revenue Service or any
successor entity thereto.
"Shared Transaction Services Agreements" shall mean the
Shared Transaction Services Agreements among D&B, Cognizant and ACNielsen.
"Subsidiary" shall mean any corporation, partnership or other
entity of which another entity (i) owns, directly or indirectly, ownership
interests sufficient to elect a majority of the Board of Directors (or persons
performing similar functions) (irrespective of whether at the time any other
class or classes of ownership interests of such corporation, partnership or
other entity shall or might have such voting power upon the occurrence of any
contingency) or (ii) is a general partner or an entity performing similar
functions (e.g., a trustee).
"Tax Allocation Agreement" shall mean the Tax Allocation
Agreement among D&B, Cognizant and ACNielsen.
"Transition Services Agreement" shall mean the Transition
Services Agreement among D&B, Cognizant and ACNielsen.
ARTICLE II
DEFINED BENEFIT PLANS
SECTION 2.1. D&B Retirement Plan. From and after the Effective
Time, D&B shall continue to sponsor the D&B Retirement Plan for the benefit of
D&B Post-Distribution Employees, D&B Retirees and D&B Disabled Employees. Active
participation of Cognizant Employees and ACNielsen Employees in the D&B
Retirement Plan shall cease immediately after the Effective Time.
SECTION 2.2. Cognizant Retirement Plan. (a) As soon as
practicable after the Effective Time, but not later than the first day of the
fourth calendar month that begins after the
<PAGE> 10
10
Effective Time (herein referred to as the "Cognizant Retirement Plan Effective
Date"), Cognizant shall establish the Cognizant Retirement Plan for the benefit
of Cognizant Employees who were participants in the D&B Retirement Plan
immediately prior to the Effective Time (the "Cognizant Transferred Retirement
Plan Employees"). As soon as practicable after the Effective Time, D&B shall
cause the trustee of the D&B Retirement Plan to segregate the assets of the D&B
Retirement Plan allocable to Cognizant Transferred Retirement Plan Employees in
an amount equal to the sum of (i) and (ii), as follows:
(i) the amount allocable to Cognizant Transferred Retirement Plan
Employees under ERISA Section 4044 as of the Effective Time,
determined using PBGC Assumptions; and
(ii) the excess (if any) of the fair market value of assets of the
D&B Retirement Plan over the Present Value of the vested and
nonvested benefits accrued thereunder for all the D&B
Pre-Distribution Employees as of the Effective Time,
multiplied by the Cognizant Retirement Plan Segregation Ratio.
(b) As soon as practicable after the Effective Time, the
assets allocable to the Cognizant Transferred Retirement Plan Employees shall be
transferred to a separate trust established under the Cognizant Retirement Plan
(such date herein referred to as the "Cognizant Retirement Plan Transfer Date");
provided, however, that in no event shall such transfer take place until (i) D&B
has made all required filings and submissions to the appropriate governmental
agencies and (ii) Cognizant has furnished to D&B (A) a favorable determination
letter that the Cognizant Retirement Plan is qualified under Section 401(a) of
the Code or (B) an opinion letter from Simpson Thacher & Bartlett to the effect
that the Cognizant Retirement Plan is qualified under Section 401(a) of the
Code. The value of such assets to be transferred shall equal the value of
segregated assets determined under Section 2.2(a) of this Agreement, adjusted as
follows:
(i) reduced by the amount of benefit payments made under the D&B
Retirement Plan with respect to Cognizant Transferred
Retirement Plan Employees from the Effective Time to the
Cognizant Retirement Plan Transfer Date; and
(ii) increased (or decreased) by the share of the net investment
income (or loss) from the Effective Time to the Cognizant
Retirement Plan Transfer Date attributable to the value of
such segregated assets.
(c) Unless otherwise agreed to by D&B and Cognizant (as well
as ACNielsen if it has assets in the D&B Retirement Plan on the Cognizant
Retirement Plan Transfer Date), the form of the assets to be transferred shall
consist of an undivided percentage
<PAGE> 11
11
interest in each asset that is held by the D&B Retirement Plan on the Cognizant
Retirement Plan Transfer Date, such undivided percentage interest being equal to
the value of assets allocable to the Cognizant Transferred Retirement Plan
Employees, divided by the fair market value of plan assets.
(d) Prior to the Cognizant Retirement Plan Transfer Date, all
benefit payments to Cognizant Transferred Retirement Plan Employees shall be
made from the D&B Retirement Plan.
SECTION 2.3 ACNielsen Retirement Plan. (a) As soon as
practicable after the Effective Time, but not later than the first day of the
fourth calendar month that begins after the Effective Time (herein referred to
as the "ACNielsen Retirement Plan Effective Date"), ACNielsen shall establish
the ACNielsen Retirement Plan for the benefit of ACNielsen Employees who were
participants in the D&B Retirement Plan immediately prior to the Effective Time
(the "ACNielsen Transferred Retirement Plan Employees"). As soon as practicable
after the Effective Time, D&B shall cause the trustee of the D&B Retirement Plan
to segregate the assets of the D&B Retirement Plan allocable to ACNielsen
Transferred Retirement Plan Employees in an amount equal to the sum of (i) and
(ii), as follows:
(i) the amount allocable to ACNielsen Transferred Retirement Plan
Employees under ERISA Section 4044 as of the Effective Time,
determined using PBGC Assumptions; and
(ii) the excess (if any) of the fair market value of assets of the
D&B Retirement Plan over the Present Value of the vested and
nonvested benefits accrued thereunder for all the D&B
Pre-Distribution Employees as of the Effective Time,
multiplied by the ACNielsen Retirement Plan Segregation Ratio.
(b) As soon as practicable after the Effective Time, the
assets allocable to the ACNielsen Transferred Retirement Plan Employees shall be
transferred to a separate trust established under the ACNielsen Retirement Plan
(such date herein referred to as the "ACNielsen Retirement Plan Transfer Date");
provided, however, that in no event shall such transfer take place until (i) D&B
has made all required filings and submissions to the appropriate governmental
agencies and (ii) ACNielsen has furnished to D&B (A) a favorable determination
letter that the ACNielsen Retirement Plan is qualified under Section 401(a) of
the Code or (B) an opinion letter from Simpson Thacher & Bartlett to the effect
that the ACNielsen Retirement Plan is qualified under Section 401(a) of the
Code. The value of such assets to be transferred shall equal the value of
segregated assets determined under Section 2.3(a) of this Agreement, adjusted as
follows:
(i) reduced by the amount of benefit payments made under the D&B
Retirement Plan with respect to ACNielsen
<PAGE> 12
12
Transferred Retirement Plan Employees from the
Effective Time to the ACNielsen Retirement Plan
Transfer Date; and
(ii) increased (or decreased) by the share of the net investment
income (or loss) from the Effective Time to the ACNielsen
Retirement Plan Transfer Date attributable to the value of
such segregated assets.
(c) Unless otherwise agreed to by D&B and ACNielsen (as well
as Cognizant if it has assets in the D&B Retirement Plan on the ACNielsen
Retirement Plan Transfer Date), the form of the assets to be transferred shall
consist of an undivided percentage interest in each asset that is held by the
D&B Retirement Plan on the ACNielsen Retirement Plan Transfer Date, such
undivided percentage interest being equal to the value of assets allocable to
the ACNielsen Transferred Retirement Plan Employees, divided by the fair market
value of plan assets.
(d) Prior to the ACNielsen Retirement Plan Transfer Date, all
benefit payments to ACNielsen Transferred Retirement Plan Employees shall be
made from the D&B Retirement Plan.
SECTION 2.4. Allocation of Liabilities. The Cognizant Group
shall assume all Liabilities relating to the participation of Cognizant
Transferred Retirement Plan Employees in the D&B Retirement Plan and in the
Cognizant Retirement Plan. The ACNielsen Group shall assume all Liabilities
relating to the participation of ACNielsen Transferred Retirement Plan Employees
in the D&B Retirement Plan and in the ACNielsen Retirement Plan. The D&B Group
shall retain all other Liabilities relating to the D&B Retirement Plan.
ARTICLE III
DEFINED CONTRIBUTION PLANS
SECTION 3.1. D&B Savings Plan. From and after the Effective
Time, D&B shall continue to sponsor the D&B Savings Plan for the benefit of D&B
Post-Distribution Employees, D&B Retirees, D&B Disabled Employees, Cognizant
Bifurcated Savings Plan Employees (as defined in Section 3.2(a) below) and
ACNielsen Bifurcated Savings Plan Employees (as defined in Section 3.3(a)
below). Active participation of Cognizant Employees and ACNielsen Employees in
the D&B Savings Plan shall cease immediately after the Effective Time.
SECTION 3.2. Cognizant Savings Plan. (a) As of the Effective
Time, Cognizant shall adopt the Cognizant Savings Plan for the benefit of
Cognizant Employees who were participants in the D&B Savings Plan immediately
prior to the Effective Time. Prior to the Effective Time, Cognizant Employees
shall be given the right to elect one of the following options with respect to
their D&B Savings Plan account balances: (i) Cognizant Employees
<PAGE> 13
13
may keep their balances in the D&B Savings Plan (such employees being known as
"Cognizant Bifurcated Savings Plan Employees"); (ii) Cognizant Employees may
receive a lump-sum payment (in cash and/or stock) of their balances (such
employees being known as "Cognizant Lump-Sum Savings Plan Employees") or (iii)
Cognizant Employees may transfer their balances to the Cognizant Savings Plan
(such employees being known as "Cognizant Transferred Savings Plan Employees").
If a Cognizant Employee fails to elect any of the foregoing options prior to the
end of the Participant Election Period, (i) his or her balance shall remain in
the D&B Savings Plan, and (ii) such employee shall be treated as a Cognizant
Bifurcated Savings Plan Employee.
(b) Prior to the date on which the transfer of assets and
liabilities to the Cognizant Savings Plan shall occur (the "Cognizant Savings
Plan Transfer Date"), which date shall occur as promptly as practicable
following the Participant Election Period, (i) D&B shall (A) cause the trustee
of the D&B Savings Plan to segregate, in accordance with the spinoff provisions
set forth under Section 414(l) of the Code, the assets of the D&B Savings Plan
representing the full account balances of Cognizant Transferred Savings Plan
Employees for all periods of participation through the Effective Time
(including, as applicable, all contributions and all earnings attributable
thereto); (B) make all required filings and submissions to the appropriate
governmental agencies; and (C) make all required amendments to the D&B Savings
Plan and related trust agreement necessary to provide for the segregation and
transfer of assets described in this Section 3.2, and (ii) Cognizant shall
furnish to D&B (A) a favorable determination letter that the Cognizant Savings
Plan is qualified under Section 401(a) of the Code or (B) an opinion letter from
Simpson Thacher & Bartlett to the effect that the Cognizant Savings Plan is
qualified under Section 401(a) of the Code.
(c) On the Cognizant Savings Plan Transfer Date, D&B shall
cause the trustee of the D&B Savings Plan to transfer to the trustee of the
Cognizant Savings Plan the full account balances (inclusive of loans) of
Cognizant Transferred Savings Plan Employees in kind based on those investment
funds in which such account balances are then invested (including, but not
limited to, the pooled stock fund); provided, however, that loans to Cognizant
Transferred Savings Plan Employees shall be transferred in the form of notes and
amounts in the D&B stock fund shall be transferred in the form of cash. In
consideration of the segregation and transfer of assets described herein, the
Cognizant Savings Plan shall, as of the Cognizant Savings Plan Transfer Date,
assume all Liabilities attributable to such assets.
(d) Notwithstanding anything in this Agreement to the
contrary, (i) a Cognizant Employee may not elect to be treated as a Cognizant
Bifurcated Savings Plan Employee if his or her account balance in the D&B
Savings Plan is $3,500 or less (in
<PAGE> 14
14
which case such Cognizant Employee shall be treated as a Cognizant Lump-Sum
Savings Plan Employee) and (ii) a Cognizant Bifurcated Savings Plan Employee
may, prior to the second anniversary of the Distribution Date, elect to receive
a distribution of his or her account balance in the D&B Savings Plan.
SECTION 3.3. ACNielsen Savings Plan. (a) As of the Effective
Time, ACNielsen shall adopt the ACNielsen Savings Plan for the benefit of
ACNielsen Employees who were participants in the D&B Savings Plan immediately
prior to the Effective Time. Prior to the Effective Time, ACNielsen Employees
shall be given the right to elect one of the following options with respect to
their D&B Savings Plan account balances: (i) ACNielsen Employees may keep their
balances in the D&B Savings Plan (such employees being known as "ACNielsen
Bifurcated Savings Plan Employees"); (ii) ACNielsen Employees may receive a
lump-sum payment (in cash and/or stock) of their balances (such employees being
known as "ACNielsen Lump-Sum Savings Plan Employees") or (iii) ACNielsen
Employees may transfer their balances to the ACNielsen Savings Plan (such
employees being known as "ACNielsen Transferred Savings Plan Employees"). If an
ACNielsen Employee fails to elect any of the foregoing options prior to the end
of the Participant Election Period, (i) his or her balance shall remain in the
D&B Savings Plan, and (ii) such employee shall be treated as a ACNielsen
Bifurcated Savings Plan Employee.
(b) Prior to the date on which the transfer of assets and
liabilities to the ACNielsen Savings Plan shall occur (the "ACNielsen Savings
Plan Transfer Date"), which date shall occur as promptly as practicable
following the Participant Election Period, (i) D&B shall (A) cause the trustee
of the D&B Savings Plan to segregate, in accordance with the spinoff provisions
set forth under Section 414(l) of the Code, the assets of the D&B Savings Plan
representing the full account balances of ACNielsen Transferred Savings Plan
Employees for all periods of participation through the Effective Time
(including, as applicable, all contributions and all earnings attributable
thereto); (B) make all required filings and submissions to the appropriate
governmental agencies; and (C) make all required amendments to the D&B Savings
Plan and related trust agreement necessary to provide for the segregation and
transfer of assets described in this Section 3.3, and (ii) ACNielsen shall
furnish to D&B (A) a favorable determination letter that the ACNielsen Savings
Plan is qualified under Section 401(a) of the Code or (B) an opinion letter from
Simpson Thacher & Bartlett to the effect that the ACNielsen Savings Plan is
qualified under Section 401(a) of the Code.
(c) On the ACNielsen Savings Plan Transfer Date, D&B shall
cause the trustee of the D&B Savings Plan to transfer to the trustee of the
ACNielsen Savings Plan the full account balances (inclusive of loans) of
ACNielsen Transferred Savings Plan Employees in kind based on those investment
funds in which
<PAGE> 15
15
such account balances are then invested (including, but not limited to, the
pooled stock fund); provided, however, that loans to ACNielsen Transferred
Savings Plan Employees shall be transferred in the form of notes and amounts in
the D&B stock fund shall be transferred in the form of cash. In consideration of
the segregation and transfer of assets described herein, the ACNielsen Savings
Plan shall, as of the ACNielsen Savings Plan Transfer Date, assume all
Liabilities attributable to such assets.
(d) Notwithstanding anything in this Agreement to the
contrary, (i) an ACNielsen employee may not elect to be treated as an ACNielsen
Bifurcated Savings Plan Employee if his or her account balance in the D&B
Savings Plan is $3,500 or less (in which case such ACNielsen Employee shall be
treated as an ACNielsen Lump-Sum Savings Plan Employee) and (ii) an ACNielsen
Bifurcated Savings Plan Employee may, prior to the second anniversary of the
Distribution Date, elect to receive a distribution of his or her account balance
in the D&B Savings Plan.
SECTION 3.4. Vesting. As of the Effective Time, the account
balances of Cognizant Employees and ACNielsen Employees in the D&B Savings Plan
shall fully vest.
SECTION 3.5. Outstanding Loans. During their employment with
Cognizant or ACNielsen (as the case may be), Cognizant Transferred Savings Plan
Employees and ACNielsen Transferred Savings Plan Employees who have outstanding
loans originally made from the D&B Savings Plan shall be permitted to repay such
loans by way of regular deductions from their paychecks, and, prior to the
Cognizant Savings Plan Transfer Date or ACNielsen Savings Plan Transfer Date (as
the case may be), D&B, Cognizant or ACNielsen (as the case may be) shall cause
all such deductions to be forwarded to the D&B Savings Plan as promptly as
practicable. No such deductions by Cognizant or ACNielsen shall be made in
respect of Cognizant Bifurcated Savings Plan Employees and ACNielsen Bifurcated
Savings Plan Employees who have outstanding loans from the D&B Savings Plan, and
all such employees shall be required to repay their loans directly to the D&B
Savings Plan in accordance with the existing terms thereof. Notwithstanding the
foregoing, prior to the end of the Participant Election Period, and for such
period thereafter as may be reasonably determined by D&B, Cognizant Employees
and ACNielsen Employees who have outstanding loans from the D&B Savings Plan
shall be permitted to repay such loans by way of regular deductions from their
paychecks.
SECTION 3.6. Employer Stock Fund. Participants in the D&B
Savings Plan who, immediately prior to the Effective Time, have balances in the
D&B Common Stock fund shall have such balances converted, as of the Effective
Time, to units in a pooled stock fund consisting of D&B Common Stock, Cognizant
Common Shares and ACNielsen Common Shares. The initial ratio of
<PAGE> 16
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stock in the pooled stock fund shall be one share of D&B Common Stock to one
share of Cognizant Common Shares to 1/3 share of ACNielsen Common Shares. The
percentage interest of each participant in the pooled stock fund as of the
Effective Time shall equal such participant's percentage interest in the D&B
Common Stock fund immediately prior to the Effective Time. Each of the Cognizant
Savings Plan and ACNielsen Savings Plan shall maintain a pooled stock fund, to
which the pooled stock fund assets of Cognizant Transferred Savings Plan
Employees and ACNielsen Transferred Savings Plan Employees in the D&B Savings
Plan shall be transferred on the Cognizant Savings Plan Transfer Date and the
ACNielsen Savings Plan Transfer Date (as the case may be). From and after the
Effective Time, a participant may liquidate his or her units in the pooled stock
fund and invest the proceeds thereof in any other investment option available
under the applicable plan. A participant may not acquire additional units in the
pooled stock fund from or after the Effective Time.
SECTION 3.7. Matching Contributions. D&B shall make its
regular monthly matching contributions to the D&B Savings Plan accounts of
Cognizant Employees and ACNielsen Employees for all periods of service on or
prior to the Effective Time.
SECTION 3.8. Allocation of Liabilities. The Cognizant Group
shall assume all Liabilities relating to the participation of (a) Cognizant
Transferred Savings Plan Employees in the D&B Savings Plan and in the Cognizant
Savings Plan and (b) Cognizant Bifurcated Savings Plan Employees in the
Cognizant Savings Plan. The ACNielsen Group shall assume all Liabilities
relating to the participation of (a) ACNielsen Employees in the D&B Savings Plan
and in the ACNielsen Savings Plan and (b) ACNielsen Bifurcated Savings Plan
Employees in the ACNielsen Savings Plan. The D&B Group shall retain all other
Liabilities relating to the D&B Savings Plan.
ARTICLE IV
NONQUALIFIED PLANS
SECTION 4.1. D&B Nonqualified Plans. From and after the
Effective Time, D&B shall continue to sponsor the D&B Supplemental EBP, the D&B
Supplemental EBP Trust, the D&B Pension BEP, the D&B Pension BEP Trust and the
D&B Savings BEP (collectively, the "D&B Nonqualified Plans") for the benefit of
persons who, prior to the Effective Time, were participants thereunder;
provided, however, that, with respect to Cognizant Employees and ACNielsen
Employees, D&B shall retain only those Liabilities for benefits under the D&B
Nonqualified Plans that, prior to the Effective Time, were accrued and to which
such participants had earned vested rights thereunder.
SECTION 4.2. Service Credit. Cognizant Employees and ACNielsen
Employees who were participants in the D&B Nonqualified
<PAGE> 17
17
Plans immediately prior to the Effective Time (the "Cognizant and ACNielsen
Nonqualified Plan Participants") shall continue to receive service credit under
such plans for their service with the Cognizant Group or the ACNielsen Group (as
the case may be) from and after the Effective Time, but solely for purposes of
satisfying the one-year waiting requirement for a valid election under the D&B
Nonqualified Plans.
SECTION 4.3. Consent to Termination. Solely with respect to
determining the level of benefits payable under the D&B Nonqualified Plans,
Cognizant and ACNielsen shall have the authority to consent to the termination
of employment prior to age 60 of a Cognizant or ACNielsen Nonqualified Plan
Participant from the Cognizant Group or the ACNielsen Group (as the case may
be).
SECTION 4.4. Termination of Employment. Benefits under the D&B
Nonqualified Plans shall not become payable to a Cognizant or ACNielsen
Nonqualified Plan Participant until such participant terminates employment from
the Cognizant Group or the ACNielsen Group (as the case may be).
SECTION 4.5. Noncompetition. Solely with respect to the
noncompetition clauses of the D&B Nonqualified Plans, D&B hereby consents to the
employment of the Cognizant and ACNielsen Nonqualified Plan Participants by the
Cognizant Group or the ACNielsen Group (as the case may be) after the Effective
Time, whether or not such employment would otherwise trigger such noncompetition
clauses.
SECTION 4.6. Distributions; Lump-Sum Elections. Cognizant and
ACNielsen Nonqualified Plan Participants who participated in the D&B Savings BEP
immediately prior to the Effective Time shall receive a distribution thereunder,
based on their notional elective deferrals through the Effective Time, at the
time distributions are otherwise made under such plan.
SECTION 4.7. Guarantees; Subrogation. The Cognizant Group
agrees that, in the event the D&B Group is unable to satisfy its obligations in
respect of the benefits of any Cognizant Employee that have accrued under the
D&B Nonqualified Plans prior to the Effective Time, the Cognizant Group shall
make payment when due with respect to such obligations of the D&B Group. The
ACNielsen Group agrees that, in the event the D&B Group is unable to satisfy its
obligations in respect of the benefits of any ACNielsen Employee that have
accrued under the D&B Nonqualified Plans prior to the Effective Time, the
ACNielsen Group shall make payment when due with respect to such obligations of
the D&B Group. In the event that the Cognizant Group or the ACNielsen Group is
required to make any payment pursuant to this Section 4.7, the Cognizant Group
or the ACNielsen Group (as the case may be) shall have full rights of
subrogation against the D&B Group.
<PAGE> 18
18
SECTION 4.8. Third-Party Beneficiaries. It is the intention of
the parties to this Agreement that the provisions of Section 4.7 shall be
enforceable by (a) the Cognizant and ACNielsen Nonqualified Plan Participants
and (b) their respective surviving beneficiaries.
ARTICLE V
WELFARE PLANS
SECTION 5.1. Employee Benefit Welfare Plans. Except as
provided in Section 5.4 and Section 5.5 below, from and after the Effective
Time, D&B shall sponsor its Employee Benefit Welfare Plans solely for the
benefit of D&B Post-Distribution Employees, D&B Retirees and D&B Disabled
Employees. From and after the Effective Time, Cognizant shall sponsor its
Employee Benefit Welfare Plans solely for the benefit of Cognizant Employees.
From and after the Effective Time, ACNielsen shall sponsor its Employee Benefit
Welfare Plans solely for the benefit of ACNielsen Employees. Notwithstanding the
foregoing, none of D&B, Cognizant or ACNielsen shall have any obligation to
sponsor any Employee Benefit Welfare Plan from or after the Effective Time.
SECTION 5.2. Pre-Existing Conditions; Dollar Limits. With
respect to any medical plan that may be sponsored by Cognizant or ACNielsen
after the Effective Time, Cognizant and ACNielsen (a) shall cause there to be
waived any pre-existing condition limitations and (b) shall give effect, in
determining any deductible and maximum out-of-pocket limitations, to claims
incurred, and amounts paid by, and amounts reimbursed to, (in each case during
1996 prior to the Effective Time) ACNielsen Employees and Cognizant Employees
under similar plans maintained by D&B (or any Affiliate thereof) for their
benefit immediately prior to the Effective Time.
SECTION 5.3. Severance Plans. The Cognizant Group shall retain
all Liabilities with respect to severance payments made or to be made to
employees of the Cognizant Group who terminated employment prior to the
Effective Time. The ACNielsen Group shall retain all Liabilities with respect to
severance payments made or to be made to employees of the ACNielsen Group who
terminated employment prior to the Effective Time. The D&B Group shall retain
all Liabilities with respect to severance payments made or to be made to all
other D&B Pre-Distribution Employees who terminated employment prior to the
Effective Time. For purposes of this Section 5.3, the term "severance payments"
shall include any welfare benefit coverage provided under severance plans.
SECTION 5.4. Flexible Spending Accounts. From the Effective
Time until December 31, 1996 (the "FSA Coverage Period"), D&B shall continue to
sponsor its flexible spending accounts for all D&B Pre-Distribution Employees;
provided,
<PAGE> 19
19
however, that Cognizant and ACNielsen shall cause all deductions from
participant paychecks to be forwarded to D&B as promptly as practicable.
SECTION 5.5. Allocation of Liabilities. (a) The D&B Group
shall retain responsibility for and continue to pay all expenses and benefits
relating to the D&B Employee Benefit Welfare Plans with respect to (i) claims
incurred prior to the Effective Time by D&B Pre-Distribution Employees and their
covered dependents and (ii) claims incurred from and after the Effective Time by
D&B Post-Distribution Employees, D&B Retirees and D&B Disabled Employees. The
Cognizant Group shall be responsible for and pay expenses and benefits relating
to all Employee Benefit Welfare Plan claims incurred by Cognizant Employees and
their covered dependents from and after the Effective Time. The ACNielsen Group
shall be responsible for and pay expenses and benefits relating to all Employee
Benefit Welfare Plan claims incurred by ACNielsen Employees and their covered
dependents from and after the Effective Time. For purposes of this paragraph, a
claim is deemed incurred when the services that are the subject of the claim are
performed; in the case of life insurance, when the death occurs; in the case of
long-term disability, when the disability occurs; and, in the case of a hospital
stay, when the employee first enters the hospital. Notwithstanding the
foregoing, claims incurred by any employee of a pre-Distribution Subsidiary of
D&B or their covered dependents under any welfare plan maintained by such
Subsidiary solely for the benefit of its employees and their dependents shall,
whether incurred prior to, on or after the Effective Time, be the sole
responsibility and liability of that Subsidiary.
(b) The Cognizant Group shall be responsible for all COBRA
coverage for any employee of the Cognizant Group and his or her covered
dependents who participated in a D&B Employee Benefit Welfare Plan and who had
or have a loss of health care coverage due to a qualifying event occurring prior
to the Effective Time. The ACNielsen Group shall be responsible for all COBRA
coverage for any employee of the ACNielsen Group and his or her covered
dependents who participated in a D&B Employee Benefit Welfare Plan and who had
or have a loss of health care coverage due to a qualifying event occurring prior
to the Effective Time. The D&B Group shall be responsible for all COBRA coverage
for any other D&B Pre-Distribution Employee and his or her covered dependents
who participated in a D&B Employee Benefit Welfare Plan and who had or have a
loss of health care coverage due to a qualifying event occurring prior to the
Effective Time. Notwithstanding the foregoing, a pre-Distribution Subsidiary of
D&B shall be responsible for all COBRA coverage for its former employees and
covered dependents who participated in a plan maintained solely for their
benefit whether the applicable event occurs prior to, on or after the Effective
Time. COBRA coverage to which a Cognizant Employee or ACNielsen Employee is
entitled as a result of a qualifying event occurring at or after the Effective
Time
<PAGE> 20
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shall be the responsibility of the Cognizant Group or the ACNielsen Group,
respectively.
SECTION 5.6. Retiree Welfare Plans. The Cognizant Group shall
be responsible for providing retiree welfare benefits to those D&B
Pre-Distribution Employees who are Cognizant Employees and who, immediately
prior to the Effective Time, are (i) eligible to retire and (ii) eligible to
elect such coverage under the D&B Employee Benefit Welfare Plans (but who do not
in fact elect such coverage) (the "Cognizant Retirement Eligible Employees");
provided, however, that in the event the Cognizant Group fails to provide to a
Cognizant Retirement Eligible Employee one or more components of retiree welfare
coverage (such components consisting of medical, dental and life benefits), the
D&B Group shall be responsible for the missing component(s), but only to the
same extent it provides such component(s) to its retirees from and after the
time when such Cognizant Retirement Eligible Employee retires or loses his or
her coverage. In the event the D&B Group must provide the benefits described
hereunder, it shall have full rights of reimbursement from the Cognizant Group.
The ACNielsen Group shall be responsible for providing retiree welfare benefits
to those D&B Pre-Distribution Employees who are ACNielsen Employees and who,
immediately prior to the Effective Time, are (i) eligible to retire and (ii)
eligible to elect such coverage under the D&B Employee Benefit Welfare Plans
(but who do not in fact elect such coverage) (the "ACNielsen Retirement Eligible
Employees"); provided, however, that in the event the ACNielsen Group fails to
provide to an ACNielsen Retirement Eligible Employee one or more components of
retiree welfare coverage (such components consisting of medical, dental and life
benefits), the D&B Group shall be responsible for the missing component(s), but
only to the same extent it provides such component(s) to its retirees from and
after the time when such ACNielsen Retirement Eligible Employee retires or loses
his or her coverage. In the event the D&B Group must provide the benefits
described hereunder, it shall have full rights of reimbursement from the
ACNielsen Group. Notwithstanding the provisions of Sections 10.2, 10.3 or 10.4
hereof, in the event any D&B Pre-Distribution Employee elects to retire on or
prior to the Effective Time and receive retiree welfare coverage under the D&B
Employee Welfare Benefit Plans, neither the Cognizant Group nor the ACNielsen
Group shall provide such employee with past service credit under their
respective Employee Benefit Plans, nor shall any assets and liabilities be
transferred in respect of such employee under Article II hereof, upon any
subsequent employment of such individual by the Cognizant Group or the ACNielsen
Group.
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ARTICLE VI
EQUITY-BASED PLANS
SECTION 6.1. D&B Stock Options. Stock options awarded under
the D&B Stock Option Plans ("D&B Stock Options") shall be treated as follows:
(a) D&B Retirees; D&B Disabled Employees; D&B Post-
Distribution Employees. From and after the Effective Time, each unexercised D&B
Stock Option held by D&B Post-Distribution Employees, D&B Retirees and D&B
Disabled Employees shall remain outstanding pursuant to the terms of the award
agreements and the D&B Stock Option Plans; provided, however, that from and
after such time, each unexercised D&B Stock Option shall be adjusted as follows:
(i) the exercise price of the adjusted stock option shall be determined by
multiplying the exercise price of the D&B Stock Option by a fraction, the
numerator of which is the average of the Daily Average Trading Prices of D&B
Common Stock for the five consecutive trading days starting on the first date on
which D&B Common Stock is traded ex-dividend, and the denominator of which is
the average of the Daily Average Trading Prices of D&B Common Stock for the five
consecutive trading days immediately preceding the first date on which D&B
Common Stock is traded ex-dividend and (ii) the number of shares of D&B Common
Stock covered by the adjusted stock option shall be determined by (A)
multiplying the number of shares of D&B Common Stock covered by the D&B Stock
Option by a fraction, the numerator of which is the average of the Daily Average
Trading Prices of D&B Common Stock for the five consecutive trading days
immediately preceding the first date on which D&B Common Stock is traded
ex-dividend, and the denominator of which is the average of the Daily Average
Trading Prices of D&B Common Stock for the five consecutive trading days
starting on the first date on which D&B Common Stock is traded ex-dividend and
(B) rounding down the result to a whole number of shares.
(b) Cognizant Employees. As of the Effective Time, (i) each
unexercised D&B Stock Option held by Cognizant Employees shall be cancelled and
(ii) such individuals shall receive replacement stock options awarded under the
Cognizant Replacement Plans, which shall be adopted by Cognizant prior to the
Effective Time. The exercise price of each replacement stock option shall be
determined by multiplying the exercise price of the cancelled D&B Stock Option
by a fraction, the numerator of which is the average of the Daily Average
Trading Prices of Cognizant Common Shares for the five consecutive trading days
starting on the first date on which Cognizant Common Shares are traded regular
way, and the denominator of which is the average of the Daily Average Trading
Prices of D&B Common Stock for the five consecutive trading days immediately
preceding the first date on which D&B Common Stock is traded ex-dividend. The
number of shares of Cognizant Common Shares covered by each replacement stock
option shall be determined by (i) multiplying the number of shares of D&B Common
Stock covered by the cancelled D&B Stock
<PAGE> 22
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Option by a fraction, the numerator of which is the average of the Daily Average
Trading Prices of D&B Common Stock for the five consecutive trading days
immediately preceding the first date on which D&B Common Stock is traded
ex-dividend, and the denominator of which is the average of the Daily Average
Trading Prices of Cognizant Common Shares for the five consecutive trading days
starting on the first date on which Cognizant Common Shares are traded regular
way and (ii) rounding down the result to a whole number of shares. Except as
otherwise provided in the Cognizant Replacement Plans, all other terms of the
replacement stock options shall remain substantially identical to the terms of
the cancelled D&B Stock Options.
(c) ACNielsen Employees. As of the Effective Time, (i) each
unexercised D&B Stock Option held by ACNielsen Employees shall be cancelled and
(ii) such individuals shall receive replacement stock options awarded under the
ACNielsen Replacement Plan, which shall be adopted by ACNielsen prior to the
Effective Time. The exercise price of each replacement stock option shall be
determined by multiplying the exercise price of the cancelled D&B Stock Option
by a fraction, the numerator of which is the average of the Daily Average
Trading Prices of ACNielsen Common Shares for the five consecutive trading days
starting on the first date on which ACNielsen Common Shares are traded regular
way, and the denominator of which is the average of the Daily Average Trading
Prices of D&B Common Stock for the five consecutive trading days immediately
preceding the first date on which D&B Common Stock is traded ex-dividend. The
number of shares of ACNielsen Common Shares covered by each replacement stock
option shall be determined by multiplying the number of shares of D&B Common
Stock covered by the cancelled D&B Stock Option by a fraction, the numerator of
which is the average of the Daily Average Trading Prices of D&B Common Stock for
the five consecutive trading days immediately preceding the first date on which
D&B Common Stock is traded ex-dividend, and the denominator of which is the
average of the Daily Average Trading Prices of ACNielsen Common Shares for the
five consecutive trading days starting on the first date on which ACNielsen
Common Shares are traded regular way and (ii) rounding down the result to a
whole number of shares. Except as otherwise provided in the ACNielsen
Replacement Plan, all other terms of the replacement stock options shall remain
substantially identical to the terms of the cancelled D&B Stock Options.
SECTION 6.2. D&B LSARs. All limited stock appreciation rights
awarded under the D&B Stock Option Plans ("D&B LSARs") shall be adjusted or
substituted (as the case may be) in substantially the same manner as the D&B
Stock Options described in Section 6.1 above.
SECTION 6.3. Allocation of Liabilities. The Cognizant Group
shall assume all Liabilities with respect to awards granted to Cognizant
Employees pursuant to the Cognizant Replacement Option Plan. The ACNielsen Group
shall assume all Liabilities
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with respect to awards granted to ACNielsen Employees pursuant to the ACNielsen
Replacement Option Plan. The D&B Group shall retain all other Liabilities with
respect to awards granted pursuant to the D&B Stock Option Plans (including, but
not limited to, awards granted to D&B Post-Distribution Employees, D&B Retirees
and D&B Disabled Employees).
ARTICLE VII
FOREIGN EMPLOYEE BENEFIT PLANS
SECTION 7.1. UK Pensions. D&B, Cognizant and ACNielsen shall
use their best efforts to ensure that the relevant employers may continue to
participate in The Dun & Bradstreet (UK) Pension Plan (the "D&B UK Plan") on the
terms and for the period following the Effective Time set forth in Schedule 7.1.
Cognizant and ACNielsen shall cause the relevant employers to establish or
nominate replacement pension arrangements which comply with the provisions of
Schedule 7.1 and which are capable of receiving a transfer of assets and
liabilities from the D&B UK Plan in respect of the "transferring members" (as
defined in Schedule 7.1). D&B shall request the trustees of the D&B UK Plan to
make a transfer to such replacement arrangements on the basis set forth in
Schedule 7.1(a) subject to compliance by Cognizant and ACNielsen with their
respective obligations thereunder.
ARTICLE VIII
EMPLOYEE STOCK OWNERSHIP PLAN
SECTION 8.1. Employee Stock Ownership Plan. After the
Effective Time, D&B, Cognizant and ACNielsen shall each establish an ESOP for
the benefit of their respective employees, but only to the extent required by
any letter ruling issued by the Service with respect to the Distribution.
ARTICLE IX
OTHER EMPLOYEE BENEFIT ISSUES
SECTION 9.1. Employee Benefit Litigation Liabilities. Except
as otherwise expressly provided in this agreement or with respect to Articles
II, III and VI hereof, the D&B Group shall retain all Employee Benefit
Litigation Liabilities that are asserted by D&B Pre-Distribution Employees prior
to the Effective Time.
SECTION 9.2. Workers' Compensation. The D&B Group shall retain
all Liabilities relating to workers' compensation claims that were incurred (a)
prior to the Effective Time with respect to D&B Pre-Distribution Employees who
were employed by the D&B Group and (b) on and after the Effective Time with
respect to D&B Post-Distribution Employees. The Cognizant Group shall retain all
Liabilities relating to workers' compensation
<PAGE> 24
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claims that were incurred (a) prior to the Effective Time with respect to D&B
Pre-Distribution Employees who were employed by the Cognizant Group and (b) on
and after the Effective Time with respect to Cognizant Employees. The ACNielsen
Group shall retain all Liabilities relating to workers' compensation claims that
were incurred (a) prior to the Effective Time with respect to D&B
Pre-Distribution Employees who were employed by the ACNielsen Group and (b) on
and after the Effective Time with respect to ACNielsen Employees. For purposes
of this paragraph, a claim is deemed incurred when the injury that is the
subject of the claim occurs.
ARTICLE X
BENEFIT PLAN PARTICIPATION
SECTION 10.1. D&B Plans. Except as specifically provided
herein, all Cognizant Employees and ACNielsen Employees shall cease
participation in all domestic D&B Employee Benefit Plans as of the Effective
Time.
SECTION 10.2. Cognizant Plans. Except as provided in Section
5.6 herein, (a) with respect to any Employee Benefit Plan sponsored by the
Cognizant Group after the Effective Time, the Cognizant Group shall cause to be
recognized (to the extent applicable) each Cognizant Employee's (i) past service
with the D&B Group to the extent recognized under similar plans maintained by
the D&B Group immediately prior to the Effective Time and (ii) accrued but
unused vacation time and sick days, and (b) any Cognizant Employee who
participated in a D&B Employee Benefit Plan immediately prior to the Effective
Time shall be entitled to immediate participation in a similar Employee Benefit
Plan sponsored by the Cognizant Group.
SECTION 10.3. ACNielsen Plans. Except as provided in Section
5.6 herein, (a) with respect to any Employee Benefit Plan sponsored by the
ACNielsen Group after the Effective Time, the ACNielsen Group shall cause to be
recognized (to the extent applicable) each ACNielsen Employee's (i) past service
with the D&B Group to the extent recognized under similar plans maintained by
the D&B Group immediately prior to the Effective Time and (ii) accrued but
unused vacation time and sick days, and (b) any ACNielsen Employee who
participated in a D&B Employee Benefit Plan immediately prior to the Effective
Time shall be entitled to immediate participation in a similar Employee Benefit
Plan sponsored by ACNielsen.
SECTION 10.4. Subsequent Employer. Except as provided in
Section 5.6 herein, if, during the one-year period following the Effective Time,
a D&B Post-Distribution Employee, a Cognizant Employee or ACNielsen Employee
terminates employment with his or her employer and then immediately commences
employment with one of the D&B Group, the Cognizant Group or the ACNielsen
Group, the subsequent employer shall cause to be recognized (to the extent
<PAGE> 25
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applicable) such employee's past service with the D&B Group, the Cognizant Group
or the ACNielsen Group to the extent recognized under similar plans maintained
by the prior employer. Notwithstanding the foregoing, no past service shall be
recognized with respect to pension accruals under the defined benefit plans of
the subsequent employer.
SECTION 10.5. Right to Amend or Terminate. Except as
specifically provided herein, nothing in this Agreement shall be construed or
interpreted to restrict the D&B Group's, the Cognizant Group's or the ACNielsen
Group's right or authority to amend or terminate any of their Employee Benefit
Plans following the Effective Time.
ARTICLE XI
ACCESS TO INFORMATION
SECTION 11.1. Access to Information. Article IV of the
Distribution Agreement shall govern the rights of the D&B Group, the Cognizant
Group and the ACNielsen Group with respect to access to information. The term
"Records" in that Article shall be read to include all Employee Benefit Records.
ARTICLE XII
INDEMNIFICATION
SECTION 12.1. Indemnification. Article III of the Distribution
Agreement shall govern the rights of the D&B Group, the Cognizant Group and the
ACNielsen Group with respect to indemnification. The term "D&B Liabilities" in
that Article shall be read to include all Liabilities assumed by the D&B Group
pursuant to this Agreement. The term "Cognizant Liabilities" in that Article
shall be read to include all Liabilities assumed by the Cognizant Group pursuant
to this Agreement. The term "ACNielsen Liabilities" in that Article shall be
read to include all Liabilities assumed by the ACNielsen Group pursuant to this
Agreement.
ARTICLE XIII
DISPUTE RESOLUTION
SECTION 13.1. Dispute Resolution. Article VI of the
Distribution Agreement shall govern the rights of the D&B Group, the Cognizant
Group and the ACNielsen Group with respect to dispute resolution. The term
"Agreement Dispute" in that Article shall be read to include all Employee
Benefit Disputes.
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ARTICLE XIV
MISCELLANEOUS
SECTION 14.1. Complete Agreement; Construction. This
Agreement, including the Exhibits and Schedules (if any), and the Distribution
Agreement shall constitute the entire agreement between the parties with respect
to the subject matter hereof and shall supersede all previous negotiations,
commitments and writings with respect to such subject matter. In the event of
any inconsistency between this Agreement and any Schedule hereto, the Schedule
shall prevail. Other than Sections 2.7 and 4.5 and Article VI of the
Distribution Agreement, which shall prevail over any inconsistent or conflicting
provisions in this Agreement, notwithstanding any other provisions in this
Agreement to the contrary, in the event and to the extent that there shall be a
conflict between the provisions of this Agreement and the provisions of the
Distribution Agreement, this Agreement shall control.
SECTION 14.2. Ancillary Agreements. This Agreement is not
intended to address, and should not be interpreted to address, the matters
specifically and expressly covered by the Ancillary Agreements.
SECTION 14.3. Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more such counterparts have
been signed by each of the parties and delivered to the other parties.
SECTION 14.4. Survival of Agreements. Except as otherwise
contemplated by this Agreement, all covenants and agreements of the parties
contained in this Agreement shall survive the Distribution Date.
SECTION 14.5. Expenses. Except as otherwise set forth in this
Agreement, the Distribution Agreement or any Ancillary Agreement, all costs and
expenses incurred on or prior to the Distribution Date (whether or not paid on
or prior to the Distribution Date) in connection with the preparation,
execution, delivery and implementation of this Agreement, the Distribution
Agreement, any Ancillary Agreement, the Information Statement (including any
registration statement on Form 10 of which such Information Statement may be a
part) and the Distribution and the consummation of the transactions contemplated
thereby shall be charged to and paid by D&B. Except as otherwise set forth in
this Agreement, the Distribution Agreement or any Ancillary Agreement, each
party shall bear its own costs and expenses incurred after the Distribution
Date. Any amount or expense to be paid or reimbursed by any party hereto to any
other party hereto shall be so paid or reimbursed promptly after the existence
and amount of such obligation is determined and demand therefor is paid.
<PAGE> 27
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SECTION 14.6. 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:
To The Dun & Bradstreet Corporation:
One Diamond Hill Road
Murray Hill, NJ 07974
Telecopy: (908) 665-5803
Attn: General Counsel
To Cognizant Corporation:
200 Nyala Farms
Westport, CT 06880
Telecopy: (203) 222-4201
Attn: General Counsel
To ACNielsen Corporation:
177 Broad Street
Stamford, CT 06901
Telecopy: (203) 961-3190
Attn: General Counsel
SECTION 14.7. Waivers. The failure of any party to require
strict performance by any other party of any provision in this Agreement will
not waive or diminish that party's right to demand strict performance thereafter
of that or any other provision hereof.
SECTION 14.8. Amendments. Subject to the terms of Section
14.11 hereof, this Agreement may not be modified or amended except by an
agreement in writing signed by each of the parties hereto.
SECTION 14.9. Assignment. This Agreement shall not be
assignable, in whole or in part, directly or indirectly, by any party hereto
without the prior written consent of the other parties hereto, and any attempt
to assign any rights or obligations arising under this Agreement without such
consent shall be void.
SECTION 14.10. Successors and Assigns. The provisions to this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and permitted assigns.
<PAGE> 28
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SECTION 14.11. Termination. This Agreement (including, without
limitation, Section 4.8 and Article XII hereof) may be terminated and may be
amended, modified or abandoned at any time prior to the Distribution by and in
the sole discretion of D&B without the approval of Cognizant or ACNielsen or the
shareholders of D&B. In the event of such termination, no party shall have any
liability of any kind to any other party or any other person. After the
Distribution, this Agreement may not be terminated except by an agreement in
writing signed by the parties; provided, however, that Section 4.8 and Article
XII shall not be terminated or amended after the Distribution in respect of the
third party beneficiaries thereto without the consent of such persons.
SECTION 14.12. Subsidiaries. Each of the parties hereto shall
cause to be performed, and hereby guarantees the performance of, all actions,
agreements and obligations set forth herein to be performed by any Subsidiary of
such party or by any entity that is contemplated to be a Subsidiary of such
party on and after the Distribution Date.
SECTION 14.13. Third Party Beneficiaries. Except as provided
in Section 4.8 and Article XII, this Agreement is solely for the benefit of the
parties hereto and their respective Subsidiaries and Affiliates and should not
be deemed to confer upon third parties any remedy, claim, liability,
reimbursement, claim of action or other right in excess of those existing
without reference to this Agreement.
SECTION 14.14. Title and Headings. Titles and headings to
sections herein are inserted for the convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
SECTION 14.15. Exhibits and Schedules. The Exhibits and
Schedules, if any, shall be construed with and as an integral part of this
Agreement to the same extent as if the same had been set forth verbatim herein.
SECTION 14.16. GOVERNING LAW. THIS AGREEMENT 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.
SECTION 14.17. Consent to Jurisdiction. Without limiting the
provisions of Article XIII hereof, each of the parties irrevocably submits to
the exclusive jurisdiction of (a) the Supreme Court of the State of New York,
New York County, and (b) the United States District Court for the Southern
District of New York, for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby. Each of
the parties agrees to commence any action, suit or proceeding relating hereto
either in the United States District Court for the Southern District of New York
or if
<PAGE> 29
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such suit, action or other proceeding may not be brought in such court for
jurisdictional reasons, in the Supreme Court of the State of New York, New York
County. Each of the parties further agrees that service of any process, summons,
notice or document by U.S. registered mail to such party's respective address
set forth above shall be effective service of process for any action, suit or
proceeding in New York with respect to any matters to which it has submitted to
jurisdiction in this Section 14.17. Each of the parties irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby in (i) the Supreme Court of the State of New York, New York County, or
(ii) the United States District Court for the Southern District of New York, and
hereby further irrevocably and unconditionally waives and agrees not to plead or
claim in any such court that any such action, suit or proceeding brought in any
such court has been brought in an inconvenient forum.
SECTION 14.18. Severability. In the event any one or more of
the provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
SECTION 14.19. Governmental Notices; Cooperation.
Notwithstanding anything in this Agreement to the contrary, all actions
contemplated herein with respect to Employee Benefit Plans which are to be
consummated pursuant to this Agreement shall be subject to such notices to,
and/or approvals by, the Service or the PBGC (or any other governmental agency
or entity) as are required or deemed appropriate by such Employee Benefit Plan's
sponsor. Each of D&B, Cognizant and ACNielsen agrees to use its commercially
reasonable efforts to cause all such notices and/or approvals to be filed or
obtained, as the case may be. Each party hereto shall reasonably cooperate with
the other parties with respect to any government filings, employee notices or
any other actions reasonably necessary to maintain and implement the Employee
Benefit Plans covered by this Agreement.
SECTION 14.20. Further Assurances. From time to time, as and
when reasonably requested by any other party hereto, each party hereto shall
execute and deliver, or cause to be executed and delivered, all such documents
and instruments and shall take, or cause to be taken, all such further or other
actions as such other party may reasonably deem necessary or desirable to effect
the purposes of this Agreement and the transactions contemplated hereunder.
<PAGE> 30
30
IN WITNESS WHEREOF, the parties have duly executed and entered
into this Agreement, as of the date first above written.
THE DUN & BRADSTREET CORPORATION
by__________________________
Name:
Title:
COGNIZANT CORPORATION
by__________________________
Name:
Title:
ACNIELSEN CORPORATION
by__________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.4
FORM OF
INTELLECTUAL PROPERTY AGREEMENT
This INTELLECTUAL PROPERTY AGREEMENT ("Agreement") is dated as of
______________, 1996, between and among THE DUN & BRADSTREET CORPORATION, a
Delaware corporation ("D&B"), COGNIZANT CORPORATION, a Delaware corporation
("Cognizant"), and ACNIELSEN CORPORATION, a Delaware corporation ("ACNielsen")
(each a "Party" and collectively, the "Parties").
RECITALS
WHEREAS, D&B, acting through its direct and indirect subsidiaries,
currently owns various intellectual property rights used in connection with a
number of businesses, which businesses are described in the Distribution
Agreement dated as of __________, 1996, among D&B, Cognizant and ACNielsen (the
"Distribution Agreement"); and
WHEREAS, the Parties hereto have determined that this Agreement is
appropriate in order to effectuate the purposes of the Distribution Agreement as
described therein, and in order to promote a clear understanding of their
respective intellectual property rights subsequent to the execution of said
Distribution Agreement and the Distribution (as defined therein) contemplated
thereby;
NOW, THEREFORE, in consideration of the mutual agreements, undertakings
and covenants herein and therein, the sufficiency of which is hereby
acknowledged, the Parties hereby agree as follows:
ARTICLE I. DEFINITIONS
1. Except as may be set forth herein, all defined terms shall have the
meaning set forth in Article I, Section 1.1 of the Distribution Agreement.
2. "Data Services Agreements" shall mean the Data Services Agreements
between and among D&B, Cognizant and ACNielsen.
3. "Infringement" shall mean any unauthorized use or conduct in
violation or derogation of the rights in question.
4. "Intellectual Property" shall mean all intellectual property rights
related to the assets or businesses in question, including without limitation:
<PAGE> 2
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a. any and all rights, privileges and priorities arising under the laws
or treaties of the United States, any state, territory or possession
thereof, any other country or political subdivision or territory
thereof, or the European Community, relating to patents, copyrights,
trade names, trademarks, service marks, mask works, trade secrets,
inventions, databases, names and logos, trade dress, and other
proprietary information and licenses from third persons granting the
right to use any of the foregoing, including all registrations and
applications for any of the foregoing that have been issued by or
filed with the appropriate authorities prior to the Distribution
Date, any common-law rights arising from the use of the foregoing
prior to the Distribution Date, any rights commonly known as
"industrial property rights" or the "moral rights" of authors
relating to the foregoing, and all claims, causes of action, or
other rights arising out of or relating to any actual or threatened
Infringement by any person not a Party to this Agreement accruing,
commencing or occurring prior to the Distribution Date;
b. all computer applications, programs and other software, including
without limitation operating software, network software, firmware,
middleware, design software, design tools, systems documentation and
instructions, except to the extent that they may be more
specifically addressed in the Data Services Agreements; and
c. all cost information, sales and pricing data, customer prospect
lists, supplier records, customer and supplier lists, customer and
vendor data, correspondence and lists, product literature, artwork,
design, development and manufacturing files, vendor and customer
drawings, formulations and specifications, quality records and
reports and other books, records, studies, surveys, reports, plans
and documents.
5. "Intellectual Property Disputes" shall mean any and all
controversies, disputes or claims arising out of, in connection with, or in
relation to the interpretation, performance, nonperformance, validity or breach
of this Agreement or otherwise arising out of, or in any way related to this
Agreement or the Intellectual Property, including, without limitation, any and
all claims based on contract, tort, statute or constitution.
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6. "LLC" shall mean CZT/ACN Trademarks, L.L.C., a Delaware limited
liability company to be jointly owned by Cognizant and ACN pursuant to the LLC
Agreement.
7. "LLC Agreement" shall mean the agreement to be entered into by
Cognizant and ACN substantially in the form of Schedule I.
8. "Nielsen Intellectual Property" shall mean those patents,
trademarks, service marks, registrations and applications therefor identified in
the Schedules described in Article III of this Agreement.
ARTICLE II. OWNERSHIP OF INTELLECTUAL PROPERTY.
General Principles of Allocation and Recognition
Section 2.01. Without limiting any obligation or liability of D&B under
the Distribution Agreement or any Ancillary Agreement, and subject to the
provisions set forth in Article III below, each of the Parties hereto
acknowledges, recognizes and agrees that, after the Distribution, D&B (or
another member of the D&B Group) shall retain all right, title and interest in
all Intellectual Property that (i) originated primarily with the conduct of the
D&B Business or primarily in connection with the D&B Assets; (ii) was obtained
by, or exclusively or primarily for the conduct of, the D&B Business or in
connection with the D&B Assets; (iii) was developed exclusively or primarily for
the conduct of the D&B Business or in connection with the D&B Assets; (iv) arose
from funding by, or exclusively or primarily for the benefit of the conduct of,
the D&B Business or in connection with the D&B Assets; or (v) as of the
Distribution Date is used or held for use exclusively or primarily for the
conduct of the D&B Business or in connection with the D&B Assets. If a conflict
exists between any of the subsections (i) through (iv) of this Section on the
one hand and subsection (v) of this Section on the other hand, then subsection
(v) shall prevail.
Section 2.02. Without limiting any obligation or liability of Cognizant
under the Distribution Agreement or any Ancillary Agreement, and subject to the
provisions set forth in Article III below, each of the Parties hereto
acknowledges, recognizes and agrees that, after the Distribution, Cognizant (or
another member of the Cognizant Group) shall retain all right, title and
interest in all Intellectual Property that (i) originated primarily with the
conduct of the Cognizant Business or primarily in connection with the Cognizant
Assets; (ii) was obtained by, or exclusively or primarily for the conduct of,
the Cognizant Business or in connection with the Cognizant Assets; (iii) was
developed exclusively or primarily for the conduct of the Cognizant Business or
in connection with the Cognizant Assets; (iv) arose from funding by, or
exclusively or primarily
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4
for the benefit of the conduct of, the Cognizant Business or in connection with
the Cognizant Assets; or (v) as of the Distribution Date is used or held for use
exclusively or primarily for the conduct of the Cognizant Business or in
connection with the Cognizant Assets. If a conflict exists between any of the
subsections (i) through (iv) of this Section on the one hand and subsection (v)
of this Section on the other hand, then subsection (v) shall prevail.
Section 2.03. Without limiting any obligation or liability of ACNielsen
under the Distribution Agreement or any Ancillary Agreement, and subject to the
provisions set forth in Article III below, each of the Parties hereto
acknowledges, recognizes and agrees that, after the Distribution, ACNielsen (or
another member of the ACNielsen Group) shall retain all right, title and
interest in all Intellectual Property that (i) originated primarily with the
conduct of the ACNielsen Business or primarily in connection with the ACNielsen
Assets; (ii) was obtained by, or exclusively or primarily for the conduct of,
the ACNielsen Business or in connection with the ACNielsen Assets; (iii) was
developed exclusively or primarily for the conduct of the ACNielsen Business or
in connection with the D&B Assets; (iv) arose from funding by, or exclusively or
primarily for the benefit of the conduct of, the ACNielsen Business or in
connection with the ACNielsen Assets; or (v) as of the Distribution Date is used
or held for use exclusively or primarily for the conduct of the ACNielsen
Business or in connection with the ACNielsen Assets. If a conflict exists
between any of the subsections (i) through (iv) of this Section on the one hand
and subsection (v) of this Section on the other hand, then subsection (v) shall
prevail.
Section 2.04. Certain Specified Items. Without limiting any obligation
or liability of any Party under the Distribution Agreement or any Ancillary
Agreement, and subject to the provisions set forth in Article III below, each of
the Parties hereto acknowledges, recognizes and agrees that, after the
Distribution, all right, title and interest in all Intellectual Property
relating to and associated with the items identified in Schedule A shall be
owned by or vested in the Party indicated therein. This provision is intended to
supplement the preceding Sections 2.01-2.03 with regard to these specified
items, and should not be construed in any manner that would tend to derogate
from the validity or applicability of the general principles of allocation and
recognition set forth therein. Nevertheless, in the event of conflict between
this provision and Sections 2.01-2.03, this Section 2.04 shall prevail.
Section 2.05. Rights Arising in Future. Subject to the provisions set
forth in Article III below, each of the Parties hereto acknowledges, recognizes
and agrees that, after the Distribution Date, (i) any and all Intellectual
Property created by or on behalf of a Party, including common-law rights related
thereto, shall belong solely and exclusively to such
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Party; and (ii) any and all subsequent ownership, possession and use by each
Party of the Intellectual Property that it will own subsequent to the
Distribution pursuant to the terms of this Agreement (excluding any possession
or use pursuant to license granted by another Party), including common-law
rights related thereto, shall inure solely to such Party's own benefit.
Section 2.06. No Warranties. Each of the Parties hereto understands and
agrees that, except as otherwise expressly provided, no Party hereto is, in this
Agreement or in any other agreement or document contemplated by this Agreement
or otherwise, making any representation or warranty whatsoever regarding the
Intellectual Property, including, without limitation, as to title, value or
legal sufficiency. It is also agreed and understood that any and all
Intellectual Property assets either transferred or retained by the Parties, as
the case may be, shall be "as is, where is".
Section 2.07. Recognition of Non-Party Rights. The recognition among
the Parties of ownership of Intellectual Property rights under Sections
2.01-2.05 of this Agreement is subject to all pre-existing rights, obligations
and restrictions of non-parties to this Agreement as of the Distribution Date.
ARTICLE III. NIELSEN INTELLECTUAL PROPERTY.
PATENTS AND PATENT APPLICATIONS
Section 3.01. Notwithstanding the provisions of Article II of this
Agreement, each of the Parties hereto acknowledges, recognizes and agrees that,
after the Distribution, Cognizant shall have all right, title and interest in,
to and under those patents and patent applications previously owned by ACNielsen
identified in Schedule B, together with all Intellectual Property related
thereto and associated therewith, for the exclusive use and benefit of Cognizant
in connection with the Cognizant Business as it is now or may hereinafter be
conducted anywhere in the world.
Section 3.02. Notwithstanding the provisions of Article II of this
Agreement, each of the parties hereto acknowledges, recognizes and agrees that,
after the Distribution, ACNielsen shall retain all right, title and interest in,
to and under those patents and patent applications identified in Schedule C,
together with all Intellectual Property related thereto and associated
therewith, for the exclusive use and benefit of ACNielsen in connection with the
ACNielsen Business as it is now or may hereinafter be conducted anywhere in the
world.
Section 3.03. Notwithstanding the provisions of Article II of this
Agreement, each of the Parties hereto acknowledges, recognizes and agrees that
NCH Promotional Services, Inc., shall own all right, title and interest in, to
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and under those patents identified in Schedule D, together with all Intellectual
Property related thereto and associated therewith, for the exclusive use and
benefit of NCH Promotional Services, Inc., in connection with its business as it
is now or may hereinafter be conducted anywhere in the world.
TRADEMARKS AND TRADEMARK APPLICATIONS
Section 3.04. Notwithstanding the provisions of Article II of this
Agreement, each of the Parties hereto acknowledges, recognizes and agrees that,
after the Distribution, Cognizant shall have all right, title and interest in,
to and under those trademarks, service marks, registrations and applications
therefor identified in Schedule E, together with all goodwill and Intellectual
Property related thereto and associated therewith, for the exclusive use of
Cognizant in connection with the Cognizant Business as it is now or may
hereinafter be conducted anywhere in the world.
Section 3.05. Notwithstanding the provisions of Article II of this
Agreement, each of the Parties hereto acknowledges, recognizes and agrees that,
after the Distribution, ACNielsen shall have all right, title and interest in,
to and under those trademarks, service marks, registrations and applications
therefor identified in Schedule F, together with all goodwill and Intellectual
Property related thereto and associated therewith, for the exclusive use of
ACNielsen in connection with the ACNielsen Business as it is now or may
hereinafter be conducted anywhere in the world.
Section 3.06. Notwithstanding the provisions of Article II of this
Agreement, each of the Parties hereto acknowledges, recognizes and agrees that
NCH Promotional Services, Inc., shall own all right, title and interest in, to
and under those trademarks, service marks, registrations and applications
therefor identified in Schedule G, together with all goodwill and Intellectual
Property related thereto and associated therewith, for the exclusive use and
benefit of NCH Promotional Services, Inc., in connection with its business as it
is now or may hereinafter be conducted anywhere in the world.
Section 3.07. Notwithstanding the provisions of Article II of this
Agreement, each of the parties hereto acknowledges, recognizes and agrees that,
after the Distribution, all right, title and interest in, to and under those
trademarks, service marks, registrations and applications therefor identified in
Schedule H, together with all goodwill and Intellectual Property related thereto
and associated therewith, shall be owned by the LLC, which shall have sole
responsibility for maintaining and preserving the quality of those trademarks,
service marks, registrations and applications therefor in a manner consistent
with the high standards and reputation for quality associated with the "NIELSEN"
name. The LLC will be organized and governed according to the LLC Agreement,
substantially in the form of
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Schedule I and as it may be amended or modified by Cognizant and ACNielsen
pursuant to its terms, with the fundamental purpose at all times of assisting
both Cognizant and ACNielsen in achieving their legitimate business purposes to
the greatest extent possible while also preserving the integrity of the
trademarks, service marks, registrations and applications therefor owned by it
and minimizing the risk of confusion to any relevant group of consumers for any
product or service associated with any such trademark, service mark,
registration or application therefor. Schedule H also identifies those trademark
and service mark applications that cannot be immediately transferred or assigned
to the LLC under the relevant local law. Ownership of each such application
shall be retained by ACNielsen pursuant to an escrow agreement, in a form valid
and legally enforceable pursuant to the relevant local law, until such
application is granted; at which time the registration and all goodwill and
Intellectual Property related thereto and associated therewith, if any, shall be
transferred to the LLC, as shall be specified in both the LLC Agreement and the
pertinent escrow agreement.
Section 3.08. Reversion of Certain Property. Schedule H also identifies
certain trademarks and service marks that shall be distributed, together with
all goodwill and Intellectual Property related thereto and associated therewith,
by the LLC to either Cognizant or ACNielsen as indicated therein and to the
extent appropriate under the LLC Agreement, in the event that the relevant local
law pursuant to which rights in such trademarks or service marks are granted
should subsequently, in the opinion of counsel to the LLC with expertise in the
relevant local law, both (a) permit the ownership of such trademarks or service
marks by unrelated entities without substantial jeopardy to their validity or
enforceability, and (b) not present a substantial impediment to the future
registration (subject to the other provisions of this Article) by either
Cognizant or ACNielsen of a trademark or service mark incorporating, referring
to or derived from the "NIELSEN" name, if applications for concurrent
registration of such trademarks or service marks were to be made by unrelated
entities. In no event, however, shall any trademark or service mark consisting
of the "NIELSEN" name or the "split-N" symbol, standing alone, be so
distributed, for so long as both Cognizant and ACNielsen shall continue to use
any trademark or service mark anywhere in the world incorporating, referring to
or derived from the "NIELSEN" name.
Section 3.09. Clear Identification of Source. Cognizant and ACNielsen
agree that, subsequent to the Distribution Date, neither Cognizant nor ACNielsen
shall possess or acquire any right to use the "NIELSEN" name or "split-N" symbol
standing alone or by itself in any manner for any purpose, including use of the
name as an Internet domain name or the equivalent or as the name or logo for a
business, corporation, or other legal entity, except as may otherwise be agreed
by and between Cognizant and ACNielsen; provided, however, that both
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Cognizant and ACNielsen may continue to use the "NIELSEN" name or "split-N"
symbol in any usage for which each, respectively, is currently using the name or
symbol, including usage of the name as part of electronic mail or messaging
addresses for its employees using existing systems, during a transitional period
of six months subsequent to the Distribution Date (a "Transitional Use").
Subsequent to the Distribution Date, except for a Transitional Use, any use that
Cognizant or ACNielsen may make of the "NIELSEN" name or "split-N" symbol for
any business purpose, including any use in trade, advertising, publicity,
packaging, or labeling, and including any use of any trademark or service mark
identified in Schedule H or in Schedules E and F that incorporates, refers to,
or is derived from the "NIELSEN" name or "split-N" symbol, shall only be made in
conjunction with other words, names, symbols or logos prominently displayed in
as near proximity thereto as is reasonably feasible and, at minimum, on the same
page, panel, sheet or screen therewith, clearly identifying the source of the
communication, good or service: (a) with regard to Cognizant, as "NIELSEN TV,"
"NIELSEN MEDIA," "NIELSEN MEDIA RESEARCH," or another entity using a name not
incorporating, referring to, or derived from the "NIELSEN" name; and (b) with
regard to ACNielsen, as "ACNIELSEN" or another entity using a name not
incorporating, referring to, or derived from the "NIELSEN" name. In addition, in
the event that ACNielsen enters into any television audience measurement
business in the United States or Canada subsequent to the Distribution Date, its
use of any name incorporating, referring to, or derived from the "NIELSEN" name
in connection with such business shall be subject to the provisions of Schedule
J.
Section 3.10. Limitations on Concurrent Use. The provisions in this
Article shall in no way restrict the rights of Cognizant or ACNielsen to sell
any product or service or enter into any business identical or similar to any
product or service sold, or business conducted by, the other before or after the
Distribution Date. Cognizant and ACNielsen agree, however, that in the event
that either Cognizant or ACNielsen sells any product or service, or enters into
any business, after the Distribution Date in any country that is identical or
substantially similar to those sold or conducted by the other in that country
prior to the Distribution Date, neither Cognizant nor ACNielsen shall use any
name incorporating, referring to or derived from the "NIELSEN" name or the
"split-N" symbol to describe or identify such product, service, or business;
provided that any product, service or business relating to the measurement of
Internet usage or to research and analysis of Internet usage, utilization,
advertising, or purchasing patterns, by businesses or consumers, shall not be
subject to such restriction and shall only be subject to the restrictions set
forth in Section 3.09, and provided further that any product or service that may
in future be sold by ACNielsen in connection with any television audience
measurement business in the United States or Canada shall be subject to both
this restriction and the provisions of Schedule J.
<PAGE> 9
9
Section 3.11. Clear Fields. Cognizant and ACNielsen agree that,
subsequent to the Distribution Date, neither Cognizant nor ACNielsen shall use
(except pursuant to license), register or attempt to register any trademark or
service mark (whether registered or not) that has been used (except pursuant to
license), owned or applied for by the other in any country or geographic area as
of the Distribution Date, including but not limited to those trademarks and
service marks identified in Schedules A, F, G and H, in either that country or
geographic area or in any other country or geographic area.
Section 3.12. Notice and Publicity. Prior to or subsequent to the
Distribution, both Cognizant and ACNielsen agree to give or cause to be given,
in each distinct geographic area or line of business in which they intend to
operate or to sell any product or service, such notice and publicity of their
separation and distinct identities as the source of any such business, product
or service as may be reasonable under the circumstances or required by the
relevant local law, where the local law imposes such a duty so to notify and/or
publicize.
Section 3.13. Internet Hyperlinks. Cognizant and ACNielsen agree to
assign and transfer all rights in the existing "nielsen.com" Internet domain
name to the LLC, and to cause the LLC to provide and maintain an Internet or Web
site using that domain name for the purpose of providing and maintaining
"hyperlinks" to the principal Internet or Web sites maintained by both Cognizant
and ACNielsen. In addition, both Cognizant and ACNielsen agree to provide and
maintain in any Internet or Web site maintained by Cognizant or ACNielsen,
respectively, for a period of two (2) years subsequent to the Distribution Date,
a hyperlink to the principal Internet or Web site maintained by the other. All
such hyperlinks shall be displayed together with appropriate text indicating the
nature and purpose of the hyperlink and describing in summary the separation and
distinct identities of each as sources of their respective goods and services.
Cognizant and ACNielsen further agree to cooperate reasonably in the
identification of appropriate addresses and/or domain names and in resolving
technical issues necessary to provide and maintain such hyperlinks.
Section 3.14. Assignments and Sublicenses; Remedies for Improper Use.
Cognizant and ACNielsen agree that any form of transfer of, or grant of rights
in or to, any trademark or service mark (whether registered or not)
incorporating, referring to or derived from the "NIELSEN" name or "split-N"
symbol by either Cognizant or ACNielsen (the "Granting Party") to a non- party
to this Agreement shall be made explicitly subject to all pertinent provisions
of Article III of this Agreement concerning the Granting Party's own use of any
such trademark or service mark, and notice shall be given by the Granting Party
to the Party other than the Granting Party (the "Interested Party") of any such
transfer or grant of rights. Any such grant of rights that is not an outright
transfer, assignment, sale or disposition
<PAGE> 10
10
of all of the Granting Party's rights and interests in any such trademark or
service mark, including any sub-license, consent or permission to use, to a
non-party to this Agreement (a "Grantee") shall be pursuant to a written
instrument that shall both (a) explicitly bind the Grantee to all pertinent
provisions of this Agreement restricting the Granting Party's own use of any
such trademark or service mark, and (b) explicitly provide that the Granting
Party may revoke the grant of rights, in its sole discretion, upon not more than
thirty days' notice to the Grantee. It shall be the obligation of the Granting
Party to use its best efforts to police the use made of any such trademark or
service mark by a Grantee. If the Granting Party reasonably believes that a
Grantee is using any such trademark or service mark in a manner that is (c)
inconsistent with the terms of this Agreement or (d) injurious to the high
standards and reputation for quality associated with the "NIELSEN" name (an
"Improper Use"), the Granting Party shall promptly so notify both the Grantee
and the Interested Party. If the Grantee does not thereafter correct or
terminate the Improper Use within thirty days, the Granting Party shall revoke
the grant of rights to the Grantee, and shall give notice thereof to the
Interested Party. If the Interested Party reasonably believes that the use made
by a Grantee of rights granted by the Granting Party is an Improper Use, it may
so notify the Granting Party, which shall thereupon take appropriate measures to
investigate the use in question and shall notify the Interested Party within
fourteen (14) days as to whether it also reasonably believes that the Grantee is
engaging in an Improper Use. If the Granting Party, after receiving notice from
the Interested Party, also reasonably believes that the Grantee is engaging in
an Improper Use, it shall take all appropriate measures to correct or terminate
the Improper Use, including the giving of notice of revocation to the Grantee,
if necessary. If the Granting Party (x) gives notice to the Interested Party
that it does not reasonably believe that a Grantee is engaging in an Improper
Use, or (y) fails to take appropriate measures to correct or terminate an
Improper Use after giving notice to the Interested Party that it reasonably
believes a Grantee is engaging in an Improper Use, or (z) is unable to correct
or terminate an Improper Use by a Grantee within sixty (60) days of the first
notice of suspected Improper Use given by either the Granting Party or the
Interested Party, the Interested Party may both take such legal measures it
deems appropriate against the Grantee and invoke its rights against the Granting
Party in the event of an Intellectual Property Dispute as defined in this
Agreement.
Section 3.15. Duty to Avoid Confusion. The Parties hereto confirm their
belief that likelihood of confusion will not result from the Parties' use of
their respective trademarks and service marks as provided for in this Agreement,
due to the differences in the environments in which and the customers to whom
the goods and services of the Parties associated therewith are primarily offered
and sold. The Parties further believe that any potential future confusion will
be prevented under the terms
<PAGE> 11
11
of this Agreement. Furthermore, in order to enable and permit each other to
continue using and to register their respective trademarks and service marks and
to ensure that there is no confusion in any relevant marketplace between them,
the Parties agree to use their best efforts to avoid actual or potential
confusion arising from their use, to advise any other affected Party of any
instance of actual or potential confusion that comes to a Party's attention
concerning use of their respective trademarks and service marks, to take all
such steps as may be appropriate and necessary to remedy any actual or potential
confusion caused by their actions, and to cooperate with each other in good
faith to avoid and prevent actual or potential confusion.
Section 3.16. Consent to Registration. Subject to the other provisions
of this Article, each Party agrees that any other Party may use a copy of this
Agreement to evidence the other Party's express consent to registration of the
Party's trademarks or service marks, if necessary to obtain or maintain a
registration of such mark in the United States Patent and Trademark Office or
any other pertinent governmental agency in any country or group of countries;
and further agrees to take any other necessary action that any other Party may
reasonably request to express or confirm such consent.
Section 3.17. Transfer at or Prior to Distribution. The Parties agree
to execute all such documents, and to take all such actions, prior to or at the
Distribution as they may deem to be necessary to achieve or confirm the
respective ownership of rights in the Nielsen Intellectual Property as
contemplated in this Article to be effective upon the Distribution Date.
Section 3.18. Construction. In the event of any inconsistency between
Article III and Article II of this Agreement with respect to the Nielsen
Intellectual Property, then Article III shall prevail.
ARTICLE IV. FURTHER ASSURANCES AND COOPERATION.
Section 4.01. Without limiting the obligations of any party under
Article III of this Agreement, each Party hereto shall execute and deliver, or
cause to be executed and delivered, as and when reasonably requested by any
other Party hereto, all such documents and instruments and shall take, or cause
to be taken, all such further or other actions as such other Party may
reasonably deem necessary or desirable to effect the purposes of this Agreement
and/or to clarify or confirm the respective ownership rights of the Parties as
provided for in this Agreement.
Section 4.02. Without limiting the obligations of any party under
Article III of this Agreement, each Party hereto shall reasonably cooperate with
the other Parties with respect to
<PAGE> 12
12
any government filings or any other actions reasonably necessary to maintain and
enforce the rights to the Intellectual Property covered by this Agreement.
Section 4.03. Without limiting the obligations of any Party under
Article III of this Agreement, each Party hereto shall, upon the prior written
request of another Party, arrange for the provision of appropriate copies of
Records in its possession or control (or the originals thereof if the Party
making the request has a reasonable need for such originals) created prior to
the Distribution Date and relating to the Intellectual Property, as soon as
reasonably practicable following the receipt of such request, but only to the
extent such items are not already in the possession or control of the requesting
Party.
ARTICLE V. INDEMNIFICATION.
Section 5.01. Article III of the Distribution Agreement shall govern
the rights of D&B, Cognizant and ACNielsen with respect to indemnification for
any and all Indemnifiable Losses incurred by any Party related to the
Intellectual Property. The term "D&B Liabilities" in that Article shall be read
to include all Liabilities relating to the Intellectual Property to be owned by
D&B pursuant to this Agreement. The term "Cognizant Liabilities" in that Article
shall be read to include all Liabilities relating to the Intellectual Property
to be owned by Cognizant pursuant to this Agreement. The term "ACNielsen
Liabilities" in that Article shall be read to include all Liabilities relating
to the Intellectual Property to be owned by ACNielsen pursuant to this
Agreement. The term "Third Party Claim" in that Article shall be read to include
all claims or demands made by a non-party to this Agreement concerning the
Intellectual Property, including but not limited to claims for Infringement
accruing or arising before the Distribution Date.
ARTICLE VI. DISPUTE RESOLUTION.
Section 6.01. Article VI of the Distribution Agreement shall govern the
rights of D&B, Cognizant and ACNielsen with respect to dispute resolution. The
term "Agreement Dispute" in that Article shall be read to include all
Intellectual Property Disputes.
ARTICLE VII. MISCELLANEOUS.
Section 7.01. Complete Agreement; Construction. This Agreement, the
Schedules thereto, the Distribution Agreement, the LLC Agreement and the Data
Services Agreements shall constitute the entire agreement between the Parties
with respect to the subject matter hereof and shall supersede all previous
<PAGE> 13
13
negotiations, commitments and writings with respect to such subject matter. In
the event of any inconsistency between this Agreement and any Schedule thereto,
the Schedule shall prevail. In the event of any inconsistency between this
Agreement and the LLC Agreement, this Agreement shall prevail. Other than
Sections 2.7, 2.14 and 4.5 and Article VI of the Distribution Agreement, which
shall prevail over any inconsistent or conflicting provisions in this Agreement
notwithstanding any other provisions in this Agreement to the contrary, in the
event and to the extent that there shall be an inconsistency between the
provisions of this Agreement and the provisions of the Distribution Agreement,
this Agreement shall prevail.
Section 7.02. Other Agreements. This Agreement is not intended to
address, and should not be interpreted to address, the matters specifically and
expressly covered by the Distribution Agreement and/or other Ancillary
Agreements.
Section 7.03. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been signed
by each of the Parties and delivered to the other Parties.
Section 7.04. Survival of Agreements. Except as otherwise contemplated
by this Agreement, all covenants and agreements of the Parties contained in this
Agreement shall survive the Distribution Date.
Section 7.05. Expenses. Except as otherwise set forth in this
Agreement, the LLC Agreement, the Distribution Agreement or any Ancillary
Agreement, all costs and expenses incurred on or prior to the Distribution Date
(whether or not paid on or prior to the Distribution Date) in connection with
the preparation, execution, delivery and implementation of this Agreement and
the consummation of the transactions contemplated thereby shall be charged to
and paid by D&B. Except as otherwise set forth in this Agreement and the LLC
Agreement, each Party shall bear its own costs and expenses related to the
Intellectual Property, including the performance of any obligation arising under
Articles III and IV of this Agreement.
Section 7.06. 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
<PAGE> 14
14
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:
To The Dun & Bradstreet Corporation:
One Diamond Hill Road
Murray Hill, NJ 07974
Telecopy: (908) 665-5803
Attn: General Counsel
To Cognizant Corporation:
200 Nyala Farms
Westport, Connecticut 06880
Telecopy: (203) 222-4201
Attn: General Counsel
To ACNielsen Corporation:
177 Broad Street
Stamford, Connecticut 06901
Telecopy: (203) 961-3190
Attn: General Counsel
Section 7.07. Waivers. The failure of any Party to require strict
performance by any other Party of any provision in this Agreement will not waive
or diminish that Party's right to demand strict performance thereafter of that
or any other provision hereof.
Section 7.08. Amendments. Subject to the terms of Section 7.11 hereof,
this Agreement may not be modified or amended except by an agreement in writing
signed by each of the Parties hereto.
Section 7.09. Assignment. This Agreement shall not be assignable, in
whole or in part, directly or indirectly, by any Party hereto without the prior
written consent of the other Parties hereto, and any attempt to assign any
rights or obligations arising under this Agreement (except as set forth in
Section 3.14) without such consent shall be void.
Section 7.10. Successors and Assigns. The provisions to this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the Parties
and their respective successors and permitted assigns.
<PAGE> 15
15
Section 7.11. Termination. This Agreement may be terminated and may be
amended, modified or abandoned at any time prior to the Distribution by and in
the sole discretion of D&B without the approval of Cognizant or ACNielsen or the
shareholders of D&B. In the event of such termination, no Party shall have any
liability of any kind to any other Party or any other person. After the
Distribution, this Agreement may not be terminated except by an agreement in
writing signed by the Parties.
Section 7.12. Subsidiaries. Each of the Parties hereto shall cause to
be performed, and hereby guarantees the performance of, all actions, agreements
and obligations set forth herein to be performed by any Subsidiary of such Party
or by any entity that is contemplated to be a Subsidiary of such Party on and
after the Distribution Date.
Section 7.13. Third Party Beneficiaries. This Agreement is solely for
the benefit of the Parties hereto and their respective Subsidiaries and
Affiliates and should not be deemed to confer upon third Parties any remedy,
claim, liability, reimbursement, claim of action or other right in excess of
those existing without reference to this Agreement.
Section 7.14. Title and Headings. Titles and headings to sections
herein are inserted for the convenience of reference only and are not intended
to be a part of or to affect the meaning or interpretation of this Agreement.
Section 7.15. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 7.16. Consent to Jurisdiction. Without limiting the provisions
of Article VI hereof, each of the Parties irrevocably submits to the exclusive
jurisdiction of (a) the Supreme Court of the State of New York, New York County,
and (b) the United States District Court for the Southern District of New York,
for the purposes of any suit, action or other proceeding arising out of this
Agreement or any transaction contemplated hereby. Each of the Parties agrees to
commence any action, suit or proceeding relating hereto either in the United
States District Court for the Southern District of New York or if such suit,
action or other proceeding may not be brought in such court for jurisdictional
reasons, in the Supreme Court of the State of New York, New York County. Each of
the Parties further agrees that service of any process, summons, notice or
document by U.S. registered mail to such Party's respective address set forth
above shall be effective service of process for any action, suit or proceeding
in New York with respect to any matters to which it has submitted to
jurisdiction in this Section 7.16. Each of the Parties irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby in
<PAGE> 16
16
(i) the Supreme Court of the State of New York, New York County, or (ii) the
United States District Court for the Southern District of New York, and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
Section 7.17. Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The Parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
<PAGE> 17
17
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed as of the day and year first above written.
THE DUN & BRADSTREET CORPORATION
By: _____________________________
Name:
Title:
COGNIZANT CORPORATION
By:_____________________________
Name:
Title:
ACNIELSEN CORPORATION
By:______________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.5
FORM OF SHARED TRANSACTION SERVICES AGREEMENT
BETWEEN
[SERVICE PROVIDER]
AND
[RECIPIENT]
DATED AS OF ___________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1. DEFINITIONS AND CONSTRUCTION................................. 1
1.01 Definitions............................................... 1
1.02 References................................................ 3
1.03 Headings.................................................. 3
1.04 Interpretation of Documents............................... 4
ARTICLE 2. TERM OF AGREEMENT............................................ 4
ARTICLE 3. SERVICES..................................................... 4
3.01 Services.................................................. 4
3.02 Priority.................................................. 4
3.03 Reports................................................... 4
3.04 Additional Services....................................... 4
3.05 Facilities................................................ 5
3.06 Tax and Accounting Work Group............................. 5
ARTICLE 4. RECIPIENT OBLIGATIONS........................................ 5
4.01 Recipient Hardware........................................ 5
4.02 Generally................................................. 6
4.03 Associated Equipment...................................... 6
4.04 Security.................................................. 6
4.05 Business Planning......................................... 6
ARTICLE 5. PROPRIETARY RIGHTS........................................... 7
5.01 Recipient Software........................................ 7
5.02 Service Provider Software................................. 7
ARTICLE 6. DATA......................................................... 7
6.01 Form of Data.............................................. 7
6.02 Ownership of Data......................................... 7
6.03 Ownership of Media........................................ 7
6.04 Responsibility for Data................................... 7
ARTICLE 7. FEES......................................................... 8
7.01 Fees...................................................... 8
7.02 Time of Payment........................................... 8
7.03 Substantial Change in Volume.............................. 8
7.04 Taxes..................................................... 8
7.05 Late Payments............................................. 8
7.06 Termination Fees.......................................... 8
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 8. AUDITS....................................................... 9
ARTICLE 9. CONFIDENTIALITY.............................................. 9
ARTICLE 10. INDEMNITY................................................... 9
ARTICLE 11. DISCLAIMER AND LIMITATION OF LIABILITY...................... 10
11.01 DISCLAIMER............................................... 10
11.02 Limitation of Liability.................................. 10
ARTICLE 12. DISPUTE RESOLUTION.......................................... 10
12.01 Negotiation.............................................. 10
12.02 Arbitration.............................................. 10
12.03 Continuity of Services and Performance................... 11
ARTICLE 13. CONTINUED PROVISION OF SERVICES............................. 12
13.01 Force Majeure............................................ 12
13.02 Disaster Recovery........................................ 12
ARTICLE 14. TERMINATION................................................. 12
14.01 For Convenience.......................................... 12
14.02 Effect of Termination.................................... 12
ARTICLE 15. TERMINATION ASSISTANCE SERVICES............................. 12
ARTICLE 16. MISCELLANEOUS PROVISIONS.................................... 13
16.01 No Waivers............................................... 13
16.02 Consents, Approvals and Requests......................... 13
16.03 Partial Invalidity....................................... 13
16.04 Notices.................................................. 13
16.05 Relationship............................................. 14
16.06 Governing Law............................................ 14
16.07 Covenant of Further Assurances........................... 14
16.08 Assignment............................................... 14
16.09 Entire Understanding..................................... 14
16.10 Successors............................................... 14
16.11 Amendments............................................... 15
16.12 Survival................................................. 15
16.13 Counterparts............................................. 15
16.14 Good Faith and Fair Dealing.............................. 15
16.15 Third Party Beneficiaries................................ 15
</TABLE>
ii
<PAGE> 4
SCHEDULES
Schedule A Services and Capacity Levels
Schedule B Service Levels
Schedule C Reports
Schedule D Recipient Software
Schedule E Fees
Schedule F Extended Term Charges
Schedule G Real Estate and Facilities Agreements
Schedule H Service Provider Software
Schedule I Termination Fees
Schedule J Disaster Recovery Plan
iii
<PAGE> 5
SHARED TRANSACTION SERVICES AGREEMENT (this "Agreement"),
dated as of ___________, 1996 (the "Agreement Date"), by and between [SERVICE
PROVIDER], a ___________ corporation ("Service Provider") and [RECIPIENT], a
___________ corporation ("Recipient").
W I T N E S S E T H:
WHEREAS, The Dun & Bradstreet Corporation shall be separated
into three separate and independent businesses by means of a spin-off (the
"Distribution"), pursuant to a Distribution Agreement dated as of
________________, 1996 (the "Distribution Agreement"), among The Dun &
Bradstreet Corporation ("D&B"), Cognizant Corporation ("Cognizant") and
ACNielsen Corporation ("ACN") (collectively, called the "Newcos"); and
WHEREAS, the target date of the Distribution is October 1,
1996, and the actual date that the Distribution becomes effective shall be
called the "Distribution Date"; and
WHEREAS, prior to the Distribution Date, Service Provider has
provided and Recipient has purchased, pursuant to various written and oral
agreements, the Shared Transaction Services and the Other Services described in
this Agreement; and
WHEREAS, in order to facilitate the orderly continuation of
Recipient's business for a transitional period after the Distribution Date,
Service Provider has agreed to provide to Recipient, and Recipient has agreed to
purchase from Service Provider, the Shared Transaction Services and the Other
Services described in this Agreement.
NOW, THEREFORE, in consideration of the agreements of Service
Provider and Recipient set forth below, Service Provider and Recipient agree as
follows:
ARTICLE 1. DEFINITIONS AND CONSTRUCTION.
1.01 Definitions. The following defined terms shall have the
meanings specified below:
(1) "ACN" shall have the meaning set forth in the Recitals.
(2) "Additional Services" shall mean those services in addition to the
Services requested by Recipient pursuant to Section 3.05.
(3) "Agreement" shall have the meaning set forth in the Heading.
<PAGE> 6
2
(4) "Agreement Date" shall have the meaning set forth in the Heading.
(5) "Agreement Disputes" shall have the meaning set forth in Section 12.01.
(6) "Alternative Provider" shall mean any alternative external service
provider selected by Recipient for the provision of services similar to
the Services following the expiration or termination of this Agreement.
(7) "Cognizant" shall have the meaning set forth in the Recitals.
(8) "D&B" shall have the meaning set forth in the Recitals.
(9) "Distribution" shall have the meaning set forth in the Recitals.
(10) "Distribution Agreement" shall have the meaning set forth in the
Recitals.
(11) "Distribution Date" shall have the meaning set forth in the Recitals.
(12) "Extended Term" shall have the meaning set forth in Article 2.
(13) "Fees" shall mean those charges for the Services set forth in Schedule
E.
(14) "Initial Term" shall have the meaning set forth in Article 2.
(15) "Licensed Documentation" shall mean all documentation that is used in
connection with the operation of the Licensed Software.
(16) "Licensed Software" shall mean the software described in Schedule D.
(17) "Newcos" shall have the meaning set forth in the Recitals.
(18) "Other Services" shall mean the services described in Schedule A-2.
(19) "Parties" shall mean Service Provider and Recipient, collectively.
(20) "Party" shall mean either of Service Provider or Recipient, as the case
may be.
(21) "Recipient" shall have the meaning set forth in the Heading.
(22) "Recipient Data" shall mean all data or information supplied by
Recipient to Service Provider for processing or transmission in
connection with the Services.
<PAGE> 7
3
(23) "Rules" shall have the meaning set forth in Section 12.02.
(24) "Service Provider" shall have the meaning set forth in the Heading.
(25) "Service Provider Service Location" shall mean any Service Provider
service location from which Service Provider provides or performs the
Services. The Service Provider Service Locations as of the Agreement
Date are located at _________________.
(26) "Service Provider Software" shall mean the software and related
documentation (a) owned, acquired or developed by Service Provider that
is used in connection with the provision of the Services or (b)
licensed or leased by Service Provider from a third party which is used
in connection with the provision of the Services. The Service Provider
Software includes the software set forth in Schedule H.
(27) "Services" shall mean the Shared Transaction Services and the Other
Services, collectively.
(28) "Shared Transaction Services" shall mean the services described in
Schedule A-1.
1.02 References. In this Agreement and the Schedules to this
Agreement:
(1) the Schedules to this Agreement shall be incorporated in and deemed
part of this Agreement and all references to this Agreement shall
include the Schedules to this Agreement; and
(2) references to the word "including" or the phrase "e.g." in this
Agreement shall mean "including, without limitation".
1.03 Headings. The article and section headings and the table
of contents are for reference and convenience only and shall not be considered
in the interpretation of this Agreement.
1.04 Interpretation of Documents. In the event of a conflict
between this Agreement and the terms of any of the Schedules, the terms of this
Agreement shall prevail.
ARTICLE 2. TERM OF AGREEMENT.
<PAGE> 8
4
The initial term of this Agreement shall commence on the
Distribution Date and shall continue until 12:00 midnight (Eastern Standard
Time) on December 31, 1997 (the "Initial Term"), unless terminated earlier
pursuant to Section 14.01; provided, however, that Recipient may, upon notice to
Service Provider at least 120 days prior to the expiration of the Initial Term,
extend the term of this Agreement for a period to be specified in such notice of
up to one additional 12-month period (the "Extended Term") at the charges set
forth in Schedule F.
ARTICLE 3. SERVICES.
3.01 Services. Service Provider shall provide to Recipient,
and Recipient shall purchase from Service Provider, (1) the Shared Transaction
Services and (2) the Other Services. The Services shall be of substantially the
same type, quality and utilization levels and provided with substantially the
same degree of care and diligence as such services had been provided to
Recipient during the period prior to the Distribution Date. The Services shall
be provided at the levels of service set forth in Schedule B.
3.02 Priority. Service Provider shall provide the Services to
Recipient with respect to prioritizing, processing and recovery in accordance
with Schedule B.
3.03 Reports. Service Provider shall provide Recipient with
the reports set forth in Schedule C according to the schedule set forth in
Schedule C.
3.04 Additional Services. Service Provider shall provide to
Recipient, upon commercially reasonable terms and at a commercially reasonable
charge, the Additional Services requested by Recipient. Service Provider and
Recipient shall execute a written amendment to this Agreement setting forth any
additional terms and conditions applicable to such Additional Services. In
connection with its receipt of the Services, Recipient may purchase or lease
upgrades to the machines used to provide the Services and request that Service
Provider install such upgrades; provided, however, that, in the event such
upgrade requires Service Provider to incur any incremental expense or provide
additional resources, Recipient shall (a) obtain Service Provider's consent
prior to such installation and (b) be responsible for the payment of such
incremental expense or the costs of such additional resources. Except as
otherwise provided in this Agreement, Service Provider shall not be obligated to
(i) purchase or otherwise acquire any hardware or software in addition to that
used before the Distribution Date in connection with the Services or (ii)
provide any services to Recipient other than the Services.
<PAGE> 9
5
3.05 Facilities. Certain matters relating to real estate
matters and the use of facilities shared by D&B and the Newcos subsequent to the
Distribution Date are set forth in Schedule G.
3.06 Tax and Accounting Work Group. Each Party shall appoint a
member of its staff to provide such assistance as may be necessary to address
issues relating to tax periods prior to the Distribution Date. Each Party shall
maintain accurate and complete accounting and tax records relating to such tax
periods.
ARTICLE 4. RECIPIENT OBLIGATIONS.
4.01 Recipient Hardware. For Recipient owned or leased
equipment, Recipient shall:
(1) maintain all equipment, software and operational features at the same
level that was provided immediately prior to the Distribution Date, and
shall receive maintenance services from those third party service
providers that provided maintenance services to Recipient immediately
prior to the Distribution Date; and
(2) upon notice from Service Provider (which notice shall include Service
Provider's estimate of the costs, if any, of the enhancement or
modification) as soon as possible after it has been determined that an
enhancement or modification is necessary, but in any event upon at
least 30 days' notice, enhance or modify such equipment, software and
operational features as may be necessary to remain compatible with any
systems used by Service Provider in connection with the Services;
provided, however, in the event such enhancement or modification
results in Service Provider incurring any incremental expense or
providing any additional resources, Recipient shall be responsible for
the payment of such incremental expense or the costs of such additional
resources;
4.02 Generally. Recipient shall:
(1) comply with any reasonable instructions provided by Service Provider
that are necessary for Service Provider to adequately provide the
Services;
(2) comply with all applicable standards and procedures applicable to the
Service Provider Service Location;
(3) promptly report any operational or system problem to Service Provider;
<PAGE> 10
6
(4) maintain a business recovery plan detailing the requirements of
Recipient in the event of the occurrence of a disaster affecting the
Services and periodically test such plan; and
(5) provide the working environment, including space, furniture,
electricity, telephones and other infrastructure requirements for
Service Provider's employees located at Recipient's premises.
4.03 Associated Equipment. Except to the extent otherwise
provided for herewith in any Schedule, Recipient shall maintain and be
responsible for all costs (including personnel, maintenance and repair)
associated with communications equipment (including terminals, communications
hardware, modems and telephone lines) that Recipient owns or operates and that
are not located at the Service Provider Service Location necessary to provide
the Services or to transmit the Recipient Data for processing at the Service
Provider Service Location.
4.04 Security. Recipient shall ensure that user accounts shall
only be used by the person for whom such account was created or other authorized
personnel. Recipient shall promptly inform Service Provider of any individual
who is no longer authorized to use the Services.
4.05 Business Planning. During the Initial Term and, if any,
the Extended Term, Recipient shall, within a reasonable period of time after
such plans are available, provide Service Provider with a detailed plan
identifying any changes in Recipient's business that may affect the Services or
result in additional capacity being required in order for Service Provider to
provide the Services to Recipient. Recipient's business plan provided to Service
Provider pursuant to this Section 4.05 shall be deemed confidential information
of Recipient.
ARTICLE 5. PROPRIETARY RIGHTS.
5.01 Recipient Software. Recipient shall grant a
non-exclusive, non-transferable, royalty-free right for Service Provider, solely
in connection with providing the Services, to (1) have access to and (a) operate
the Licensed Software set forth in Schedule D and (b) use the Licensed
Documentation, and (2) use any other hardware, software and documentation owned
by, leased by or licensed to Recipient that is necessary to allow Service
Provider to perform the Services. Recipient shall obtain any consents or
approvals necessary in connection with Service Provider's use of the Licensed
Software, the Licensed Documentation and any other such hardware, software and
documentation.
<PAGE> 11
7
5.02 Service Provider Software. All Service Provider Software
is, or shall be, and shall remain, the exclusive property of Service Provider or
its third party licensor and Recipient shall have no rights or interests to the
Service Provider Software, except as described in this Section 5.02. Service
Provider shall obtain any consents or approvals necessary in connection with
Service Provider's use of the Service Provider Software to provide the Services
to Recipient.
ARTICLE 6. DATA.
6.01 Form of Data. All data submitted by Recipient to Service
Provider in connection with the Services shall be in the form substantially
similar to that submitted before the Distribution Date, unless otherwise agreed
to in writing by the parties.
6.02 Ownership of Data. The Recipient Data is and shall remain
the property of Recipient or its customers.
6.03 Ownership of Media. Unless furnished to Service Provider
by Recipient, all media upon which Recipient Data is stored is and shall remain
the property of Service Provider. Recipient may, upon Service Provider's
consent, (1) provide Service Provider with a replacement for the media upon
which the Recipient Data is stored or (2) purchase such media from Service
Provider at the price specified by Service Provider.
6.04 Responsibility for Data. Recipient is responsible from
the Agreement Date for (1) the accuracy and completeness of the data submitted
by Recipient in connection with the Services and (2) any errors in and with
respect to data obtained from Service Provider because of any inaccurate or
incomplete data submitted by Recipient to Service Provider.
ARTICLE 7. FEES.
7.01 Fees. Recipient shall pay to Service Provider the fees
set forth in Schedule E in respect of each of the Services.
7.02 Time of Payment. The Fees shall be paid by Recipient
monthly in arrears on or before the first business day immediately following the
end of each whole or partial calendar month of the Initial Term and, if any, the
Extended Term.
7.03 Substantial Change in Volume. In the event that
Recipient's use of a Service increases above that set forth in Schedule A for
such Service, Service Provider shall determine whether any additional hardware
or software is necessary
<PAGE> 12
8
in order for Service Provider to provide the Service and, in the event that
Service Provider and Recipient determine, pursuant to this Section 7.03, that
additional hardware or software is required, (1) Service Provider shall acquire,
upon Recipient's request, such additional hardware or software on behalf of
Recipient and Recipient shall pay to Service Provider or to the supplier or
third party lessor, as may be applicable, the purchase or lease fees in respect
of such additional hardware or software, (2) Service Provider shall implement an
appropriate increase to the Fees and (3) the Parties shall establish a mechanism
for determining the costs to Service Provider of maintaining such additional
hardware or software beyond the Initial Term and, if any, the Extended Term and
Recipient shall pay such costs to Service Provider upon the expiration or
termination of this Agreement. Except as otherwise agreed in writing by the
Parties, all rights in and title to any hardware or software acquired by Service
Provider on behalf of Recipient and paid for by Recipient shall belong to
Recipient.
7.04 Taxes. Recipient shall pay any value-added tax and any
tariff, duty, export or import fee, sales tax, use tax, service tax or other tax
or charge subsequently imposed by any government or government agency on
Recipient or Service Provider with respect to the Services or the execution or
performance of this Agreement.
7.05 Late Payments. Any fees or payments owing to Service
Provider pursuant to this Agreement that are not paid when due shall bear
interest at the rate of _______ percent per month, but in no event to exceed the
highest lawful rate of interest, calculated from the date such amount was due
until the date payment is received by Service Provider.
7.06 Termination Fees. Upon the termination of this Agreement,
Recipient shall pay to Service Provider the fees set forth in Schedule I.
ARTICLE 8. AUDITS.
Recipient shall have the right during normal business hours
and upon reasonable advance notice, to review the computer printouts and reports
and other records of Service Provider to the extent such books and records
relate to the provision by Service Provider of the Services. Any such review
shall be conducted at Recipient's sole expense.
ARTICLE 9. CONFIDENTIALITY.
Each of the Parties shall not use or permit the use of
(without the prior consent of the other) and shall keep, and shall cause its
consultants and advisors
<PAGE> 13
9
to keep, confidential all information concerning the other Party in its
possession, its custody or under its control (except to the extent that (1) such
information has been in the public domain through no fault of such Party or (2)
such information has been later lawfully acquired from other sources by such
Party or (3) this Agreement or any other agreement entered into pursuant to this
Agreement permits the use or disclosure of such information) to the extent such
information (a) relates to the period up to the Distribution Date or (b) is
obtained in the course of providing or receiving the Services pursuant to this
Agreement, and each Party shall not (without the prior consent of the other)
otherwise release or disclose such information to any other person, except such
Party's auditors and attorneys, unless compelled to disclose such information by
judicial or administrative process or unless such disclosure is required by law
and such Party has used commercially reasonable efforts to consult with the
other Party prior to such disclosure.
ARTICLE 10. INDEMNITY.
Each Party agrees to indemnify and hold harmless the other
Party in respect of all claims, costs, expenses, damages and liabilities
(including reasonable attorney's fees) arising from the gross negligence or
willful misconduct of the employees, agents or other representatives of the
indemnifying Party after the Agreement Date or the breach of such Party's
covenants or other obligations under this Agreement. In no event shall either
Party have any liability to the other Party for any claims, losses, damages,
judgments, costs or expenses which the other Party may suffer or incur as a
result of injuries to personnel of such other Party or loss or theft or damage
to any personal property of such other Party at the Service Provider Service
Location, except as provided in the foregoing sentence.
ARTICLE 11. DISCLAIMER AND LIMITATION OF LIABILITY.
11.01 DISCLAIMER. EXCEPT AS EXPRESSLY SET FORTH HEREIN,
SERVICE PROVIDER MAKES NO REPRESENTATIONS OR WARRANTIES IN RESPECT OF THE
SERVICES, THE LICENSED SOFTWARE, THE SERVICE PROVIDER SOFTWARE OR THE LICENSED
DOCUMENTATION, EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE.
11.02 Limitation of Liability. Recipient acknowledges that the
Services are provided by Service Provider (1) at the request of Recipient in
order to accommodate the Distribution, (2) at Service Provider's cost and that
no profit is being made by Service Provider and (3) with the expectation that
Service Provider is not assuming any financial or operational risks, including
those usually assumed by a service provider. Accordingly, Recipient agrees that
Service Provider shall not
<PAGE> 14
10
be liable for any direct, indirect, special, incidental or consequential
damages, including lost profits or savings, whether or not such damages are
foreseeable, or for any third party claims relating to the Services or Service
Provider's performance under this Agreement.
ARTICLE 12. DISPUTE RESOLUTION.
12.01 Negotiation. In the event of a controversy, dispute or
claim arising out of, or in connection with, or in relation to the
interpretation, performance, nonperformance, validity or breach of this
Agreement or otherwise arising out of, or in any way related to this Agreement
or the transactions contemplated hereby, including any claim based on contract,
tort, statute or constitution (collectively, "Agreement Disputes"), the general
counsels of the Parties shall negotiate in good faith for a reasonable period of
time to settle such Agreement Dispute, provided such reasonable period shall
not, unless otherwise agreed by the Parties in writing, exceed 30 days from the
time the Parties began such negotiations; provided further, that in the event of
any arbitration in accordance with Section 12.02, the Parties shall not assert
the defenses of statute of limitations and laches arising for the period
beginning after the date the Parties began negotiations hereunder, and any
contractual time period or deadline under this Agreement to which such Agreement
Dispute relates shall not be deemed to have passed until such Agreement Dispute
has been resolved.
12.02 Arbitration. If after such reasonable period such
general counsels are unable to settle such Agreement Dispute (and, in any event,
unless otherwise agreed in writing by the Parties, after 60 days have elapsed
from the time the Parties began such negotiations), such Agreement Dispute shall
be determined, at the request of a Party, by arbitration conducted in
___________, before and in accordance with the then-existing International
Arbitration Rules of the American Arbitration Association (the "Rules"). In any
dispute between the Parties, the number of arbitrators shall be three. Any
judgment or award rendered by the arbitrators shall be final, binding and
nonappealable (except on grounds specified in 9 U.S.C. Section 10(a), as in
effect on the Agreement Date). If the Parties are unable to agree on the
arbitrators, the arbitrators shall be selected in accordance with the Rules. Any
controversy concerning whether an Agreement Dispute is an arbitrable Agreement
Dispute, whether arbitration has been waived, whether an assignee of this
Agreement is bound to arbitrate, or as to the interpretation or enforceability
of this Article 12 shall be determined by the arbitrators. In resolving any
dispute, the Parties intend that the arbitrators apply the substantive laws of
_____________, without regard to the choice of law principles thereof. The
Parties intend that the provisions to arbitrate set forth in this Section 12.02
be valid, enforceable and irrevocable. The undersigned agree to comply with any
award made in any such arbitration proceedings that has become
<PAGE> 15
11
final in accordance with the Rules and agree to enforcement of or entry of
judgment upon such award, by any court of competent jurisdiction, including (1)
_______________________, or (2) ________________________________. The
arbitrators shall be entitled, if appropriate, to award any remedy in such
proceedings, including monetary damages, specific performance and all other
forms of legal and equitable relief; provided, however, the arbitrators shall
not be entitled to award punitive damages. Without limiting the provisions of
the Rules, unless otherwise agreed in writing by the Parties or as permitted by
this Agreement, the undersigned shall keep confidential all matters relating to
the arbitration or the award, provided such matters may be disclosed (a) to the
extent reasonably necessary in any proceeding brought to enforce the award or
for entry of a judgment upon the award and (b) to the extent otherwise required
by law. Notwithstanding Article 32 of the Rules, the losing Party in the
arbitration shall be responsible for all of the costs of the arbitration,
including legal fees and other costs specified by such Article 32. Nothing
contained in this Section 12.02 is intended to or shall be construed to prevent
either Party, in accordance with Article 22(3) of the Rules or otherwise, from
applying to any court of competent jurisdiction for interim measures or other
provisional relief in connection with the subject matter of any Agreement
Disputes.
12.03 Continuity of Services and Performance. Unless otherwise
agreed in writing, the Parties shall continue to provide the Services and honor
all other commitments under this Agreement during the course of dispute
resolution pursuant to the provisions of this Article 12 with respect to all
matters not subject to such dispute, controversy or claim.
ARTICLE 13. CONTINUED PROVISION OF SERVICES.
13.01 Force Majeure. Service Provider shall not be in default
of its obligations hereunder for any delays or failure in performance resulting
from any cause or circumstance beyond the reasonable control of Service
Provider, provided that Service Provider exercises commercially reasonable
efforts to perform its obligations in a timely manner. If any such occurrence
prevents Service Provider from providing any of the Services, Service Provider
shall cooperate with Recipient in obtaining, at Recipient's sole expense, an
alternative source for the affected Services, and Recipient shall be released
from any payment obligation to Service Provider in respect of such Services
during the period of such force majeure.
13.02 Disaster Recovery. Service Provider shall maintain a
disaster recovery policy in accordance with Schedule J. Upon the occurrence of a
disaster affecting the Services, Service Provider shall implement the disaster
recovery policy and Recipient shall be responsible for its proportionate share
of any fees incurred by Service Provider in connection with implementing the
disaster recovery policy.
<PAGE> 16
12
ARTICLE 14. TERMINATION.
14.01 For Convenience. Recipient may terminate this Agreement
at any time during the Initial Term upon 90 days' notice to Service Provider.
14.02 Effect of Termination. Upon the termination of this
Agreement pursuant to Section 14.01, Recipient shall pay to Service Provider, no
later than the effective date of such termination, the balance of the Fees due
for the Initial Term and, if any, the Extended Term.
ARTICLE 15. TERMINATION ASSISTANCE SERVICES.
Upon the expiration of this Agreement or the effective date of
termination of this Agreement, Service Provider shall have no further obligation
to provide the Services to Recipient:
(1) for a period up to (a) 60 days prior to the expiration or the effective
date of termination of this Agreement and (b) 30 days following the
expiration of this Agreement or the effective date of termination of
this Agreement, Service Provider shall use reasonable efforts to
cooperate, at Recipient's expense, with (i) the Alternative Provider or
(ii) Recipient, in connection with the transfer of the Services, the
Recipient Data, the Licensed Software and the Licensed Documentation,
from Service Provider to the facilities of (x) the Alternative Provider
or (y) Recipient, as requested by Recipient; and
(2) the rights granted to Service Provider in Section 5.01 shall
immediately terminate and Service Provider shall deliver to Recipient
(a) a current copy of the Licensed Software in the form in use as of
that time and (b) a current copy of the Licensed Documentation in the
form in use as of that time.
ARTICLE 16. MISCELLANEOUS PROVISIONS.
16.01 No Waivers. No failure on the part of either Party to
exercise and no delay in exercising any right or remedy hereunder shall operate
as a waiver thereof nor shall any single or partial exercise by a Party of any
right or remedy hereunder preclude any other right or remedy or further exercise
thereof or the exercise of any other right.
16.02 Consents, Approvals and Requests. Unless otherwise
specified in this Agreement, all consents and approvals, acceptances or similar
actions to be given by either Party under this Agreement shall not be
unreasonably
<PAGE> 17
13
withheld or delayed and each Party shall make only reasonable requests under
this Agreement.
16.03 Partial Invalidity. In the event any of the provisions
of this Agreement shall be invalid, illegal or unenforceable in any respect, the
validity, legality or enforceability of the remaining provisions of this
Agreement shall not be affected or impaired.
16.04 Notices. All notices, designations, approvals, consents,
requests, acceptances, rejections or other communications required or permitted
by this Agreement shall be in writing and shall be sent via telecopy to the
telecopy number specified below. A copy of any such notice shall also be sent by
registered express air mail on the date such notice is transmitted by telecopy
to the address specified below:
If to Service Provider:
Telecopy No.:
Attention: General Counsel
If to Recipient:
Telecopy No.:
Attention: General Counsel
Any Party may at any time, by notice to the other Party transmitted or sent in
the manner described above, change the address or telecopy number to which
communications to it are to be sent.
16.05 Relationship. The performance by Service Provider of its
duties and obligations under this Agreement shall be that of an independent
contractor and nothing herein contained shall create or imply an agency
relationship between the Parties, nor shall this Agreement be deemed to
constitute a joint venture or partnership between the Parties.
16.06 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of ___________.
16.07 Covenant of Further Assurances. The Parties covenant and
agree that, subsequent to the execution and delivery of this Agreement and
without any additional consideration, each of the Parties will execute and
deliver
<PAGE> 18
14
any further legal instruments and perform any acts which are or may become
reasonably necessary to effectuate this Agreement.
16.08 Assignment. This Agreement may not be assigned by either
Party, other than to an affiliate of such Party or pursuant to a corporate
reorganization or merger, without the consent of the other Party. Any assignment
in contravention of this Section 16.08 shall be void.
16.09 Entire Understanding. This Agreement represents the
entire understanding of the Parties with respect to the Services and supersedes
all previous writings, correspondence and memoranda with respect thereto, and no
representations, warranties, agreements or covenants, express or implied, of any
kind or character whatsoever with respect to such subject matter have been made
by either Party to the other, except as herein expressly set forth.
16.10 Successors. Subject to the restrictions on assignment
set forth in Section 16.08, this Agreement shall be binding upon and inure to
the benefit of and be enforceable against the Parties hereto and their
respective successors and assigns.
16.11 Amendments. This Agreement can be modified or amended
only by a written amendment executed by both Parties.
16.12 Survival. The provisions of Article 5, Article 8,
Article 9, Article 10, Article 11, Article 12, Article 15, Section 3.06, Section
6.02, Section 6.03, Section 7.02, Section 14.02, Section 16.06, this Section
16.12 and Section 16.14 shall survive the expiration or termination of this
Agreement.
16.13 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
16.14 Good Faith and Fair Dealing. Each Party hereby agrees
that its performance of all obligations and exercise of all rights under this
Agreement shall be governed by the fundamental principles of good faith and fair
dealing.
16.15 Third Party Beneficiaries. Each Party intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any person or entity other than Recipient and Service Provider.
<PAGE> 19
15
IN WITNESS WHEREOF, the Parties hereto have caused this
Agreement to be executed by their duly authorized officers as of the day and
year first above written.
[SERVICE PROVIDER]
By:______________________________
Name:
Title:
[RECIPIENT]
By:______________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.6
FORM OF DATA SERVICES AGREEMENT
BETWEEN
[SERVICE PROVIDER]
AND
[RECIPIENT]
DATA CENTER LOCATION:
SERVICE PROVIDER:
RECIPIENT:
<PAGE> 2
SCHEDULES
<TABLE>
<CAPTION>
<S> <C> <C>
Schedule A Services and Capacity Levels
Schedule B Service Levels
Schedule C Reports
Schedule D Recipient Software
Schedule E Fees
Schedule F Extended Term Charges
Schedule G Service Provider Software
Schedule H Termination Fees
Schedule I Disaster Recovery
Schedule J Recipient Obligations
</TABLE>
<PAGE> 3
DATA SERVICES AGREEMENT (this "Agreement"), dated as of
___________, 1996 (the "Agreement Date"), by and between [ ] ("[
]") and [ ] ("[ ]").
W I T N E S S E T H:
WHEREAS, the Board of Directors of The Dun & Bradstreet
Corporation ("D&B") has determined that it is appropriate, desirable and in the
best interests of the shareholders of D&B to reorganize D&B so as to separate
certain businesses to be owned and operated apart from D&B (the "Distribution");
WHEREAS, as part of the Distribution, D&B will be divesting
certain of its businesses, including subsidiaries of [ ] and/or [ ];
WHEREAS, prior to the Distribution Date, [ ]("Service
Provider") a subsidiary of [ ], has provided and [ ] ("Recipient"), a subsidiary
of [ ], has purchased, pursuant to various written and oral agreements, the
Services described in this Agreement; and
WHEREAS, in order to facilitate the orderly continuation of
Recipient's business for a transitional period after the Distribution Date, [ ],
on behalf of Service Provider, has agreed to provide to Recipient, and [ ], on
behalf of Recipient, has agreed to purchase from Service Provider, the Services
described in this Agreement.
NOW, THEREFORE, in consideration of the agreements as set
forth below, it is agreed as follows:
ARTICLE 1. DEFINITIONS AND CONSTRUCTION.
1.01 Definitions. The following defined terms shall have the
meanings specified below:
"Agreement" shall have the meaning set forth in the Heading.
"Agreement Date" shall have the meaning set forth in the Heading.
"Agreement Disputes" shall have the meaning set forth in Section 12.01.
"Alternative Provider" shall mean any alternative external service
provider selected by Recipient for the provision of services similar to the
Services following the expiration or termination of this Agreement.
"D&B" shall have the meaning set forth in the Recitals.
<PAGE> 4
2
"Data Center" shall mean Service Provider's data center located at
- ------------- --------, and any successor location.
"Data Processing Services" shall mean the data processing services
described in Schedule A.
"Distribution" shall have the meaning set forth in the Recitals.
"Distribution Agreement" shall mean the Distribution Agreement, dated
___________, 1996, by and among D&B, Cognizant Corporation and ACNielsen
Corporation.
"Distribution Date" shall mean the date on which the distributions to
effect the reorganization of D&B are made under the Distribution Agreement.
"Extended Term" shall have the meaning set forth in Article 2.
"Fees" shall mean those charges for the Services set forth in Schedule
E.
"Initial Term" shall have the meaning set forth in Article 2.
"Licensed Documentation" shall mean all documentation that is used in
connection with the operation of the Licensed Software.
"Licensed Software" shall mean the software described in Schedule D.
"Recipient" shall have the meaning set forth in the Recitals.
"Recipient Data" shall mean all data or information supplied by
Recipient to Service Provider for processing or transmission in connection with
the Services.
"Service Provider" shall have the meaning set forth in the Recitals.
"Service Provider Software" shall mean the software and related
documentation (a) owned, acquired or developed by Service Provider that is used
in connection with the provision of the Services or (b) licensed or leased by
Service Provider from a third party which is used in connection with the
provision of the Services. The Service Provider Software includes the software
set forth in Schedule G.
"Services" shall mean the Data Processing Services.
<PAGE> 5
3
1.02 References. In this Agreement and the Schedules to this
Agreement:
(1) the Schedules to this Agreement shall be incorporated in and deemed part of
this Agreement and all references to this Agreement shall include the
Schedules to this Agreement; and
(2) references to the word "including" or the phrase "e.g." in this Agreement
shall mean "including, without limitation".
1.03 Headings. The article and section headings and the table
of contents are for reference and convenience only and shall not be considered
in the interpretation of this Agreement.
1.04 Interpretation of Documents. In the event of a conflict
between this Agreement and the terms of any of the Schedules, the terms of this
Agreement shall prevail.
ARTICLE 2. TERM OF AGREEMENT.
The initial term of this Agreement shall commence on the
Distribution Date and shall continue until 12:00 midnight (Eastern Standard
Time) on _____________, 1997 (the "Initial Term"), unless terminated earlier
pursuant to Section 14.01; provided, however, that Recipient may, upon notice to
Service Provider at least 120 days prior to the expiration of the Initial Term
or the Extended Term described in (2) below, extend the term of this Agreement
for either of (1) one additional six-month period or (2) one additional
three-month period (each of (1) and (2), the "Extended Term") at the charges set
forth in Schedule F.
ARTICLE 3. SERVICES.
3.01 Services. Service Provider shall provide to Recipient,
and Recipient shall purchase from Service Provider the Data Processing Services
described in Schedule A. The Services shall be provided with substantially the
same degree of care and diligence as such services had been provided to
Recipient during the period prior to the Distribution Date. The Services shall
be provided at the levels of service set forth in Schedule B.
3.02 Priority. Service Provider shall provide the Services to
Recipient with respect to prioritizing, processing and recovery in accordance
with Schedule B.
3.03 Reports. Service Provider shall provide Recipient with
the reports set forth in Schedule C according to the schedule set forth in
Schedule C.
3.04 New Releases and Versions of the Software. Except as
provided in Schedule A, Service Provider shall not be required to provide,
install or maintain any new releases or versions of the systems software or the
applications software. In the event that Schedule A includes Service Provider's
provision, installation and maintenance of the systems software or the
applications software, Service Provider shall, at the fees set forth in Schedule
<PAGE> 6
4
E, after any such release or version is commercially available, provide, install
on the machines used to provide the Services after sufficient testing, and
maintain new releases and versions of the systems software and applications
software in use as of the Agreement Date. In the event that Service Provider
fails to provide, install or maintain any new releases or versions of the
systems software or the applications software in accordance with Schedule A,
Service Provider shall be responsible for the payment of any incremental expense
incurred by Recipient in connection with such failure.
ARTICLE 4. RECIPIENT OBLIGATIONS.
4.01 Recipient Equipment. With respect to that equipment owned
or leased by Recipient, Recipient shall:
(1) maintain all equipment, software and operational features at the same level
that was provided immediately prior to the Distribution Date, and shall
receive maintenance services from those third party service providers that
provided maintenance services to Recipient immediately prior to the
Distribution Date; and
(2) upon notice from Service Provider (which notice shall include Service
Provider's estimate of the costs, if any, of the enhancement or
modification) as soon as possible after it has been determined that an
enhancement or modification is necessary, but in any event upon at least 30
days' notice, enhance or modify such equipment, software and operational
features as may be necessary to remain compatible with any systems used by
Service Provider in connection with the Services; provided, however, in the
event such enhancement or modification results in Service Provider
incurring any incremental expense or providing any additional resources,
Recipient shall be responsible for the payment of such incremental expense
or the costs of such additional resources.
4.02 Generally. Recipient shall:
(1) comply with any reasonable instructions provided by Service Provider that
are necessary for Service Provider to adequately provide the Services;
(2) comply with all standards and procedures applicable to the Data Center;
(3) promptly report any operational or system problem to Service Provider;
(4) maintain a business recovery plan detailing the requirements of Recipient
in the event of the occurrence of a disaster affecting the Services and
periodically test such plan;
(5) provide the working environment, including space, furniture, electricity,
telephones and other infrastructure requirements for Service Provider's
employees located at Recipient's premises; and
<PAGE> 7
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(6) except as provided in Schedule J, after any such release or version is
commercially available, provide, install after sufficient testing, and
maintain new releases and versions of the systems software and applications
software in use as of the Agreement Date. In the event that Recipient fails
to provide, install or maintain any new releases or versions of the systems
software or the applications software in accordance with Schedule J,
Recipient shall be responsible for the payment of any incremental expense
incurred by Service Provider in connection with such failure.
4.03 Associated Equipment. Except to the extent otherwise
provided in this Agreement or any Schedule to this Agreement, Recipient shall
maintain and be responsible for all costs (including personnel, maintenance and
repair) associated with communications equipment (including terminals,
communications hardware, modems and telephone lines) that Recipient owns or
operates and that is not located at the Data Center necessary to provide the
Services or to transmit the Recipient Data for processing at the Data Center.
4.04 Security. Recipient shall ensure that user accounts shall
only be used by the person for whom such account was created or other authorized
personnel. Recipient shall promptly inform Service Provider of any individual
who is no longer authorized to use the Services.
4.05 Business Planning. During the Initial Term and, if any,
the Extended Term, Recipient shall, within a reasonable period of time after
such plans are available, provide Service Provider with a detailed plan
identifying any changes in Recipient's business that may affect the Services or
result in additional capacity being required in order for Service Provider to
provide the Services to Recipient, and what action, if any, may be necessary to
adjust the level of Services. Recipient's business plan provided to Service
Provider pursuant to this Section 4.05 shall be deemed confidential information
of Recipient.
ARTICLE 5. PROPRIETARY RIGHTS.
5.01 Recipient Software. Recipient shall grant a
non-exclusive, non-transferable, royalty-free right for Service Provider, solely
in connection with providing the Services, to (1) have access to and (a) operate
the Licensed Software set forth in Schedule D and (b) use the Licensed
Documentation and (2) use any
<PAGE> 8
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other hardware, software and documentation owned by Recipient that is necessary
to allow Service Provider to perform the Services. Recipient shall obtain any
consents or approvals necessary in connection with Service Provider's use of the
Licensed Software, the Licensed Documentation and any other such hardware,
software and documentation.
5.02 Service Provider Software. All Service Provider Software
is, or shall be, and shall remain, the exclusive property of Service Provider or
its third party licensor and Recipient shall have no rights or interests to the
Service Provider Software, except as described in this Section 5.02. Service
Provider shall obtain, at its expense, any consents or approvals necessary in
connection with Service Provider's use of the Service Provider Software to
provide the Services to Recipient.
ARTICLE 6. DATA.
6.01 Form of Data. All data submitted by Recipient to Service
Provider in connection with the Services shall be in the form substantially
similar to that submitted before the Distribution Date, unless otherwise agreed
to in writing by the parties.
6.02 Ownership of Data. The Recipient Data is and shall remain
the property of Recipient or its customers.
6.03 Ownership of Media. All media upon which Recipient Data
is stored is and shall remain the property of Recipient. In the event additional
media is needed, it shall be obtained by Recipient, and be the property of
Recipient or its lessor.
6.04 Responsibility for Data. Recipient is responsible from
the Agreement Date for (1) the accuracy and completeness of the data submitted
by Recipient in connection with the Services and (2) any errors in and with
respect to data obtained from Service Provider because of any inaccurate or
incomplete data submitted by Recipient to Service Provider.
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ARTICLE 7. FEES.
7.01 Fees. Recipient shall pay to Service Provider the fees
set forth in Schedule E in respect of each of the Services.
7.02 Time of Payment. The Fees shall be paid by Recipient
monthly in arrears on or before the first business day immediately following the
end of each whole or partial calendar month of the Initial Term and, if any, the
Extended Term.
7.03 Additional Services. In the event that Recipient's use of
a Service increases above that set forth in Schedule A for such Service, and/or
Recipient notifies Service Provider of the need for such an increase, Service
Provider shall determine whether any additional hardware or software is
necessary in order for Service Provider to provide the Service and, in the event
that Service Provider and Recipient determine, pursuant to this Section 7.03,
that additional hardware or software is required, (1) Service Provider shall
acquire, upon Recipient's request, such additional hardware or software on
behalf of Recipient and Recipient shall pay to Service Provider or to the
supplier or third party lessor, as may be applicable, the purchase or lease fees
in respect of such additional hardware or software, (2) Service Provider shall
implement an appropriate increase to the Fees and (3) the Parties shall
establish a mechanism for determining the costs to Service Provider of
maintaining such additional hardware or software beyond the Initial Term and, if
any, the Extended Term and any impact on the Fees. Except as otherwise agreed in
writing by the Parties, all rights in and title to any hardware or software
acquired by Service Provider on behalf of Recipient and paid for by Recipient
shall belong to Recipient.
7.04 Taxes. Recipient shall pay any value-added tax and any
tariff, duty, export or import fee, sales tax, use tax, service tax or other tax
or charge subsequently imposed by any government or government agency on
Recipient or Service Provider with respect to the Services or the execution or
performance of this Agreement.
7.05 Late Payments . Any undisputed fees or payments owing to
Service Provider pursuant to this Agreement that are not paid when due shall
bear interest at the rate of one and one-half (1 1/2) percent per month, but in
no event to exceed the highest lawful rate of interest, calculated from the date
such amount was due until the date payment is received by Service Provider.
7.06 Transition/Termination Fees. Upon the termination of this
Agreement, Recipient shall pay to Service Provider the fees set forth in
Schedule H.
ARTICLE 8. AUDITS.
Recipient shall have the right during normal business hours
and upon reasonable advance notice, to review the computer printouts and reports
and other records of Service Provider to the extent such books and records
relate to the provision by Service Provider of the Services. Any such review
shall be conducted at Recipient's sole expense.
<PAGE> 10
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ARTICLE 9. CONFIDENTIALITY.
Each of the Parties shall not use or permit the use of
(without the prior consent of the other) and shall keep, and shall cause its
consultants and advisors to keep, confidential all information concerning the
other Party in its possession, its custody or under its control (except to the
extent that (1) such information has been in the public domain through no fault
of such Party or (2) such information has been later lawfully acquired from
other sources by such Party or (3) this Agreement or any other agreement entered
into pursuant to this Agreement permits the use or disclosure of such
information) to the extent such information (a) relates to the period up to the
Distribution Date or (b) is obtained in the course of providing or receiving the
Services pursuant to this Agreement, and each Party shall not (without the prior
consent of the other) otherwise release or disclose such information to any
other person, except such Party's auditors and attorneys, unless compelled to
disclose such information by judicial or administrative process or unless such
disclosure is required by law and such Party has used commercially reasonable
efforts to consult with the other Party prior to such disclosure.
ARTICLE 10. INDEMNITY.
10.1 Service Provider shall indemnify and hold harmless Recipient in
respect of all claims, costs, expenses, damages and liabilities (including
reasonable attorneys' fees) arising from any claim by a third party licensor
that the Service Provider Software made available to Recipient by Service
Provider infringes such third party's proprietary rights.
10.2 Recipient shall indemnify and hold harmless Service Provider in
respect of all claims, costs, expenses, damages and liabilities (including
reasonable attorneys' fees) arising from any claim by a third party licensor
that the Recipient Software made available to Service Provider by Recipient
infringes such third party's proprietary rights.
ARTICLE 11. DISCLAIMER AND LIMITATION OF LIABILITY.
11.01 DISCLAIMER. EXCEPT AS EXPRESSLY SET FORTH HEREIN,
SERVICE PROVIDER MAKES NO REPRESENTATIONS OR WARRANTIES IN RESPECT OF THE
SERVICES, THE LICENSED SOFTWARE, THE SERVICE PROVIDER SOFTWARE OR THE LICENSED
DOCUMENTATION, EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE.
11.02 Limitation of Liability. Neither of the parties shall be
liable to the other (or any claiming under or through the other) for any
indirect, special, incidental or consequential damages, including lost profits
or savings, whether or not such damages are foreseeable, or for any third party
claims relating to the Services or a Party's performance under this Agreement
regardless of the form of action (including negligence). Except as may
<PAGE> 11
9
arise as a result of a party's gross negligence or willful misconduct, and as
set forth in Section 10 above, each party's liability for direct damages arising
in connection with its performance or failure to perform under this Agreement
shall in no event exceed six (6) months' Fees hereunder.
ARTICLE 12. DISPUTE RESOLUTION.
12.01 Procedure. Any disputes arising out of or in connection
with this Agreement shall be settled in accordance with the dispute resolution
mechanisms set forth in Article VI of the Distribution Agreement.
12.02 Continuity of Services and Performance. Unless otherwise
agreed in writing, the Parties shall continue to provide the Services and honor
all other commitments under this Agreement during the course of dispute
resolution pursuant to the provisions of this Article 12 with respect to all
matters not subject to such dispute, controversy or claim.
ARTICLE 13. CONTINUED PROVISION OF SERVICES.
13.01 Force Majeure. Service Provider shall not be in default
of its obligations hereunder for any delays or failure in performance resulting
from any cause or circumstance beyond the reasonable control of Service
Provider, provided that Service Provider exercises commercially reasonable
efforts to perform its obligations in a timely manner. If any such occurrence
prevents Service Provider from providing any of the Services, Service Provider
shall cooperate with Recipient in obtaining, at Recipient's sole expense, an
alternative source for the affected Services, and Recipient shall be released
from any payment obligation to Service Provider in respect of such Services
during the period of such force majeure.
13.02 Disaster Recovery. Service Provider shall maintain a
mainframe computer disaster recovery coverage plan, including coverage for the
Services. Upon the occurrence of a disaster affecting the Services relating to
mainframe computing, Service Provider shall implement the mainframe computer
disaster recovery procedures and Recipient shall be responsible for its
proportionate share of any fees incurred by Service Provider in connection with
implementing such procedures. Service Provider shall provide Recipient with a
copy of the plan upon request.
ARTICLE 14. TERMINATION.
14.01 For Convenience. Recipient may terminate this Agreement
at any time during the Initial Term upon 90 days' notice to Service Provider.
14.02 Effect of Termination. Upon the termination of this
Agreement pursuant to Section 14.01, Recipient shall pay to Service Provider, no
later than the effective date of
<PAGE> 12
10
such termination, the balance of the Fees due for the Initial Term and, if any,
the Extended Term.
ARTICLE 15. TERMINATION ASSISTANCE SERVICES.
Upon the expiration of this Agreement or the effective date of
termination of this Agreement, Service Provider shall have no further obligation
to provide the Services to Recipient and:
(1) for a period of up to (a) 60 days prior to the expiration or the effective
date of termination of this Agreement and (b) 30 days following the
expiration of this Agreement or the effective date of termination of this
Agreement, Service Provider shall use reasonable efforts to cooperate, at
Recipient's expense, with (i) the Alternative Provider or (ii) Recipient,
in connection with the transfer of the Services, the Recipient Data, the
Licensed Software and the Licensed Documentation, from Service Provider to
the facilities of (x) the Alternative Provider or (y) Recipient, as
requested by Recipient; and
(2) the rights granted to Service Provider in Section 5.01 shall immediately
terminate and Service Provider shall deliver to Recipient (a) a current
copy of the Licensed Software in the form in use as of that time and (b) a
current copy of the Licensed Documentation in the form in use as of that
time.
ARTICLE 16. MISCELLANEOUS PROVISIONS.
16.01 No Waivers. No failure on the part of either Party to
exercise and no delay in exercising any right or remedy hereunder shall operate
as a waiver thereof nor shall any single or partial exercise by a Party of any
right or remedy hereunder preclude any other right or remedy or further exercise
thereof or the exercise of any other right.
16.02 Consents, Approvals and Requests. Unless otherwise
specified in this Agreement, all consents and approvals, acceptances or similar
actions to be given by either Party under this Agreement shall not be
unreasonably withheld or delayed and each Party shall make only reasonable
requests under this Agreement.
16.03 Partial Invalidity. In the event any of the provisions
of this Agreement shall be invalid, illegal or unenforceable in any respect, the
validity, legality or enforceability of the remaining provisions of this
Agreement shall not be affected or impaired.
16.04 Notices. All notices, designations, approvals, consents,
requests, acceptances, rejections or other communications required or permitted
by this Agreement shall be in writing and shall be sent via telecopy to the
telecopy number specified below. A copy of any such notice shall also be sent by
registered express air mail on the date such notice is transmitted by telecopy
to the address specified below:
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If to Service Provider:
Telecopy No.:
Attention: General Counsel
If to Recipient:
Telecopy No.:
Attention: General Counsel
Any Party may at any time, by notice to the other Party transmitted or sent in
the manner described above, change the address or telecopy number to which
communications to it are to be sent.
16.05 Relationship. The performance by Service Provider of its
duties and obligations under this Agreement shall be that of an independent
contractor and nothing herein contained shall create or imply an agency
relationship between the Parties, nor shall this Agreement be deemed to
constitute a joint venture or partnership between the Parties.
16.06 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of New York.
16.07 Covenant of Further Assurances. The Parties covenant and
agree that, subsequent to the execution and delivery of this Agreement and
without any additional consideration, each of the Parties will execute and
deliver any further legal instruments and perform any acts which are or may
become reasonably necessary to effectuate this Agreement.
16.08 Assignment. This Agreement may not be assigned by either
Party, other than to an affiliate of such Party or pursuant to a corporate
reorganization or merger, without the consent of the other Party. Any assignment
in contravention of this Section 16.08 shall be void.
16.09 Entire Understanding. This Agreement represents the
entire understanding of the Parties with respect to the Services and supersedes
all previous writings, correspondence and memoranda with respect thereto, and no
representations, warranties, agreements or covenants, express or implied, of any
kind or character whatsoever with respect to such subject matter have been made
by either Party to the other, except as expressly set forth herein.
<PAGE> 14
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16.10 Successors. Subject to the restrictions on assignment
set forth in Section 16.08, this Agreement shall be binding upon and inure to
the benefit of and be enforceable against the Parties hereto and their
respective successors and assigns.
16.11 Amendments. This Agreement can be modified or amended
only by a written amendment executed by both Parties.
16.12 Survival. The provisions of Article 5, Article 8,
Article 9, Article 10, Article 11, Article 12, Article 15, Section 6.02, Section
6.03, Section 7.06, Section 14.02, Section 16.06, this Section 16.12 and Section
16.15 shall survive the expiration or termination of this Agreement.
16.13 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
16.14 Third Party Beneficiaries. Each Party intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any person or entity other than Recipient and Service Provider.
16.15 Good Faith and Fair Dealing. Each Party hereby agrees
that its performance of all obligations and exercise of all rights under this
Agreement shall be governed by the fundamental principles of good faith and fair
dealing.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers as of the day and
year first above written.
[ ]
By:______________________________
Name:
Title:
[ ]
By:______________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.7
FORM OF TRANSITION SERVICES AGREEMENT
This TRANSITION SERVICES AGREEMENT is dated as of [ ],
1996, among THE DUN & BRADSTREET CORPORATION, a Delaware corporation ("D&B"),
COGNIZANT CORPORATION, a Delaware corporation ("Cognizant"), and ACNIELSEN
CORPORATION, a Delaware corporation ("ACN").
W I T N E S S E T H
WHEREAS, D&B, Cognizant and ACN have entered into a
Distribution Agreement dated as of the date hereof (the "Distribution
Agreement") pursuant to which, among other matters, each party has agreed to
provide, or cause one or more of its Subsidiaries to provide, to the other
parties and their respective Subsidiaries certain transitional, administrative
and support services on the terms set forth in this Agreement and the Appendices
hereto. Each party, when providing a service pursuant hereto, shall hereinafter
be referred to as a "Provider", and each party, when receiving a service
pursuant hereto, shall hereinafter be referred to as a "Recipient".
NOW, THEREFORE, subject to the terms, conditions, covenants
and provisions of this Agreement, each of D&B, Cognizant and ACN mutually
covenant and agree as follows:
ARTICLE I
SERVICES PROVIDED
1.1 Transition Services. Upon the terms and subject to the
conditions set forth in this Agreement, with respect to each of those services
set forth in an Appendix hereto, each of which Appendices is made a part of this
Agreement, the relevant Provider will provide to the relevant Recipient the
services indicated in such Appendix (hereinafter referred to individually as a
"Transition Service", and collectively as the "Transition Services") during the
time period for each such Transition Service set forth in such Appendix
(hereinafter referred to as the "Time Periods" for all of the Transition
Services, and the "Time Period" for each Transition Service).
1.2 Personnel. In providing the Transition Services, each
party, in its capacity as a Provider and as it deems necessary or appropriate in
its sole discretion, may (i) use the personnel of such Provider or its
Affiliates, and (ii) employ the services of third parties to the extent such
third party services are routinely utilized to provide similar services to other
businesses of such Provider or are reasonably necessary for the efficient
performance of any of such Transition Services. Each party, in its capacity as a
Recipient, may retain at its own expense its own consultants and other
professional advisers.
<PAGE> 2
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1.3 Representatives. Each of D&B, Cognizant and ACN shall
nominate a representative to act as its primary contact person for the provision
of all of the Transition Services (collectively, the "Primary Coordinators").
The initial Primary Coordinators shall be _____________ for D&B, ____________
for Cognizant and ______________ for ACN. The initial coordinators for each
specific Transition Service shall be the individuals named in the Appendix
relating to such Transition Service (the "Service Coordinators"). Each party may
treat an act of a Primary Coordinator or Service Coordinator of another party as
being authorized by such other party without inquiring behind such act or
ascertaining whether such Primary Coordinator or Service Coordinator had
authority to so act. The relevant Provider and the relevant Recipient of a
Transition Service shall advise each other in writing of any change in the
Primary Coordinators and any Service Coordinator for such Transition Service,
setting forth the name of the Primary Coordinator or Service Coordinator to be
replaced and the name of the replacement, and certifying that the replacement
Primary Coordinator or Service Coordinator is authorized to act for such party
in all matters relating to this Agreement. Each of D&B, Cognizant and ACN agree
that all communications relating to the provision of the Transition Services
shall be directed to the Primary Coordinators.
1.4 Level of Transition Services. (a) Each party, in its
capacity as a Provider, shall perform the Transition Services for which it is
responsible hereunder following commonly accepted standards of care in the
industry and exercising the same degree of care as it exercises in performing
the same or similar services for its own account as of the date of this
Agreement, with priority equal to that provided to its own businesses or those
of any of its Affiliates, Subsidiaries or divisions. Nothing in this Agreement
shall require any party, in its capacity as a Provider, to favor the businesses
of any Recipient over its own businesses or those of any of its Affiliates,
Subsidiaries or divisions.
(b) No Provider of Transition Services shall be required to
provide the Recipient of such Transition Services with extraordinary levels of
Transition Services, special studies, training, or the like or the advantage of
systems, equipment, facilities, training, or improvements procured, obtained or
made after the Distribution Date by such Provider.
(c) In addition to being subject to the terms and conditions
of this Agreement for the provision of the Transition Services, each party, in
its capacity as a Recipient, agrees that the Transition Services provided by
third parties shall be subject to the terms and conditions of any agreements
between the Provider of such Transition Services and such third parties. The
relevant Provider shall consult with the relevant Recipient concerning the terms
and conditions of any such agreements to be
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entered into, or proposed to be entered into, with third parties after the date
hereof.
1.5 Limitation of Liability. [In the absence of gross
negligence or willful misconduct on the part of any party acting in its capacity
as a Provider, and whether or not such Provider is negligent, such Provider
shall not be liable for any claims, liabilities, damages, losses, costs,
expenses (including, but not limited to, settlements, judgments, court costs and
reasonable attorneys' fees), fines and penalties, arising out of any actual or
alleged injury, loss or damage of any nature whatsoever in providing or failing
to provide Transition Services for which it is responsible hereunder to the
Recipient of such Transition Services.] Notwithstanding anything to the contrary
contained herein, in the event such Provider commits an error with respect to or
incorrectly performs or fails to perform any Transition Service, at the relevant
Recipient's request, such Provider shall use reasonable efforts and good faith
to correct such error, re-perform or perform such Transition Service at no
additional cost to such Recipient; provided, that such Provider shall have no
obligation to recreate any lost or destroyed data to the extent the same cannot
be cured by the re-performance of the Transition Service in question.
1.6 Force Majeure. Any failure or omission by a party in the
performance of any obligation under this Agreement shall not be deemed a breach
of this Agreement or create any liability, if the same arises from any cause or
causes beyond the control of such party, including, but not limited to, the
following, which, for purposes of this Agreement shall be regarded as beyond the
control of each of the parties hereto: acts of God, fire, storm, flood,
earthquake, governmental regulation or direction, acts of the public enemy, war,
rebellion, insurrection riot, invasion, strike or lockout; provided, however,
that such party shall resume the performance whenever such causes are removed.
Notwithstanding the foregoing, if such party cannot perform under this Agreement
for a period of forty-five (45) days due to such cause or causes, the affected
party may terminate the Agreement with the defaulting party by providing written
notice thereto.
1.7 Modification of Procedures. Each party, in its capacity as
a Provider, may make changes from time to time in its standards and procedures
for performing the Transition Services for which it is responsible hereunder.
Notwithstanding the foregoing sentence, unless required by law, no party, in its
capacity as a Provider, shall implement any substantial changes affecting a
Recipient of the relevant Transition Services unless:
(a) such Provider has furnished such Recipient notice (which
shall be the same notice such Provider shall provide its own businesses)
thereof;
(b) such Provider changes such procedures for its own
businesses at the same time; and
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(c) such Provider gives such Recipient a reasonable period of
time for such Recipient (i) to adapt its operations to accommodate such changes
or (ii) to reject the proposed changes. In the event such Recipient fails to
accept or reject a proposed change on or before a date specified in such notice
of change, such Recipient shall be deemed to have accepted such change. In the
event such Recipient rejects a proposed change but does not terminate this
Agreement, such Recipient agrees to pay any charges resulting from such
Provider's need to maintain different versions of the same systems, procedures,
technologies, or services or resulting from requirements of third party vendors
or suppliers.
1.8 No Obligation to Continue to Use Services. No party, in
its capacity as a Recipient, shall have any obligation to continue to use any of
the Transition Services and may delete any Transition Service from the
Transition Services that the Provider thereof is providing to such Recipient by
giving the Provider notice thereof in accordance with the notice provisions
herein and in the Appendix relating to such Transition Service.
1.9 Provider Access. To the extent reasonably required for
personnel of a Provider to perform the Transition Services for which such
Provider is responsible hereunder, the Recipient of such Transition Services
shall provide personnel of such Provider with access to its equipment, office
space, plants, telecommunications and computer equipment and systems, and any
other areas and equipment.
ARTICLE II
COMPENSATION
2.1 Consideration. As consideration for the Transition
Services, each party, in its capacity as a Recipient of Transition Services,
shall pay to the Provider of such Transition Services the amount specified for
each such Transition Service as set forth in the Appendix relating to such
Transition Service.
2.2 Invoices. After the end of each month, each party, in its
capacity as a Provider, together with such party's Affiliates or Subsidiaries
providing Transition Services will submit one invoice to the Recipient of such
Transition Services for all Transition Services provided to such Recipient and
its Subsidiaries by such Provider during such month. Such monthly invoices shall
be issued no later than the fifteenth day of each succeeding month. Each invoice
shall include a summary list of the previously agreed upon Transition Service
for which there are fixed dollar fees, together with documentation supporting
each of the invoiced amounts that are not covered by the fixed fee agreements.
The total amount set forth on such summary list and such supporting detail shall
equal the invoice total, and will be provided under separate cover apart from
the invoice. All
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invoices shall be sent to the applicable Recipient at the following address or
to such other address as such Recipient shall have specified by notice in
writing to the Provider of the Transition Services referenced on each such
invoice:
To D&B:
The Dun and Bradstreet Corporation
[address]
Attention:
Fax: (___) ___-____
To Cognizant:
Cognizant Corporation
[address]
Attention:
Fax: (___) ___-____
To ACN:
ACNielsen Corporation
[address]
Attention:
Fax: (___) ___-____
2.3 Payment of Invoices. (a) Payment of all invoices in
respect of a Transition Service shall be made by check or electronic funds
transmission in U.S. Dollars, without any offset or deduction of any nature
whatsoever, within thirty (30) days of the invoice date unless otherwise
specified in the Appendix relating to such Transition Service. All payments
shall be made to the account set forth below with written confirmation of
payment sent by facsimile to the person set forth below.
Account:
To D&B:
The Dun and Bradstreet Corporation
[City and State]
Account No.
ABA Routing No.
To Cognizant:
Cognizant Corporation
[City and State]
Account No.
ABA Routing No.
To ACN:
ACNielsen Corporation
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[City and State]
Account No.
ABA Routing No.
Written Confirmation:
To D&B:
The Dun and Bradstreet Corporation:
[address]
Attention:
Fax: (___) ___-____
To Cognizant:
Cognizant Corporation
[address]
Attention:
Fax: (___) ___-____
To ACN:
ACNielsen Corporation
[address]
Attention:
Fax: (___) ___-____
(b) If any payment is not paid when due, the Provider of the
relevant Transition Service shall have the right, without any liability to the
Recipient of such Transition Service, or anyone claiming by or through such
Recipient, to immediately cease providing any or all of the Transition Services
provided by such Provider to such Recipient, which right may be exercised by
such Provider in its sole and absolute discretion.
ARTICLE III
CONFIDENTIALITY
3.1 Obligation. Each party and its Subsidiaries shall not use
or permit the use of (without the prior written consent of the other parties)
and shall keep, and shall cause its consultants and advisors to keep,
confidential all information concerning the other parties received pursuant to
or in connection with this Agreement.
3.2 Care and Inadvertent Disclosure. With respect to
any confidential information, each party agrees as follows:
(a) it shall use the same degree of care in
safeguarding said information as it uses to safeguard its
own information which must be held in confidence; and
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(b) upon the discovery of any inadvertent disclosure
or unauthorized use of said information, or upon obtaining notice of
such a disclosure or use from any other party, it shall take all
necessary actions to prevent any further inadvertent disclosure or
unauthorized use, and, subject to the provisions of Section 1.5 above,
each such other party shall be entitled to pursue any other remedy
which may be available to it.
ARTICLE IV
TERM AND TERMINATION
4.1 Term. This Agreement shall become effective on the
Distribution Date and shall remain in force until the expiration of the longest
Time Period specified in any Appendix hereto, including any extension thereof,
unless all of the Transition Services are deleted by each Recipient in
accordance with Section 1.8 above, or this Agreement is terminated under
Sections 1.6, 4.3 or 6.16 below prior to the end of such Time Period.
4.2 Extension. Subject to the earlier termination of this
Agreement in accordance with Sections 1.6, 4.3 or 6.16 below, each Recipient of
a Transition Service may extend each Time Period for such Transition Service for
the time period, if any, set forth in the relevant Appendix by giving the
Provider of such Transition Service the period of prior written notice set forth
in such Appendix prior to the end of the Time Period in question.
4.3 Termination. If any party (hereafter called the
"Defaulting Party") shall fail to perform or default in the performance of any
of its obligations under this Agreement (other than a payment default), the
party entitled to the benefit of such performance (hereinafter referred to as a
"Non-Defaulting Party") may give written notice to the Defaulting Party
specifying the nature of such failure or default and stating that the
Non-Defaulting Party intends to terminate this Agreement with respect to the
Defaulting Party if such failure or default is not cured within ______ days of
such written notice. If any failure or default so specified is not cured within
such ______ day period, the Non-Defaulting Party may elect to immediately
terminate this Agreement with respect to the Defaulting Party; provided,
however, that if the failure or default relates to a dispute contested in good
faith by the Defaulting Party, the Non-Defaulting Party may not terminate this
Agreement pending the resolution of such dispute in accordance with Article V
hereof. Such termination shall be effective upon giving a written notice of
termination from the Non-Defaulting Party to the Defaulting Party and shall be
without prejudice to any other remedy which may be available to the
Non-Defaulting Party against the Defaulting Party.
<PAGE> 8
8
4.4 Termination of Obligations. Each party, in its capacity as
a Recipient, specifically agrees and acknowledges that all obligations of each
Provider to provide each Transition Service for which such Provider is
responsible hereunder shall immediately cease upon the expiration of the Time
Period (and any extension thereof in accordance with Section 4.2) for such
Transition Service, and each Provider's obligations to provide all of the
Transition Services for which such Provider is responsible hereunder shall
immediately cease upon the termination of this Agreement. Upon the cessation of
such Provider's obligation to provide any Transition Service, the Recipient of
such Transition Service shall immediately cease using, directly or indirectly,
such Transition Service (including, without limitation, any and all software of
such Provider or third party software provided through such Provider,
telecommunications services or equipment, or computer systems or equipment).
4.5 Survival of Certain Obligations. Without prejudice to the
survival of the other agreements of the parties, the following obligations shall
survive the termination of this Agreement: (a) the obligations of each party
under Articles III and IV, and (b) each Provider's right to receive the
compensation for the Transition Services provided by it hereunder provided in
Section 2.1 above incurred prior to the effective date of termination.
ARTICLE V
DISPUTE RESOLUTION
5.1 Dispute Resolution. Any disputes arising out of or in
connection with this Agreement shall be settled in accordance with the dispute
resolution mechanisms set forth in Article VI of the Distribution Agreement.
ARTICLE VI
MISCELLANEOUS
6.1 Complete Agreement; Construction. This Agreement,
including the Appendices hereto, shall constitute the entire agreement between
the parties with respect to the subject matter hereof and shall supersede all
previous negotiations, commitments and writings with respect to such subject
matter. In the event of any inconsistency between this Agreement and any
Appendix hereto, the Appendix shall prevail. In the event and to the extent that
there shall be a conflict between the provisions of this Agreement and the
provisions of any other Ancillary Agreement, this Agreement shall control.
6.2 Other Ancillary Agreements. This Agreement is not
intended to address, and should not be interpreted to address,
<PAGE> 9
9
the matters specifically and expressly covered by the other Ancillary
Agreements.
6.3 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been signed
by each of the parties and delivered to the other parties.
6.4 Survival of Agreements. Except as otherwise contemplated
by this Agreement, all covenants and agreements of the parties contained in this
Agreement shall survive the Distribution Date.
6.5 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:
To D&B:
The Dun & Bradstreet Corporation
[address]
Attn: General Counsel
To Cognizant:
Cognizant Corporation
[address]
Attn: General Counsel
To ACN:
ACNielsen Corporation
[address]
Attn: General Counsel
6.6 Waivers. The failure of any party to require strict
performance by any other party of any provision in this Agreement will not waive
or diminish that party's right to demand strict performance thereafter of that
or any other provision hereof.
6.7 Amendments. Subject to the terms of Section 4.3 hereof,
this Agreement may not be modified or amended except by an agreement in writing
signed by each of the parties hereto.
6.8 Assignment. This Agreement shall not be
assignable, in whole or in part, directly or indirectly, by any
party hereto without the prior written consent of the other
<PAGE> 10
10
parties hereto, and any attempt to assign any rights or obligations arising
under this Agreement without such consent shall be void.
6.9 Successors and Assigns. The provisions to this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and permitted assigns.
6.10 Subsidiaries. Each of the parties hereto shall cause to
be performed, and hereby guarantees the performance of, all actions, agreements
and obligations set forth herein to be performed by any Subsidiary of such party
or by any entity that is contemplated to be a Subsidiary of such party on and
after the Distribution Date.
6.11 Third Party Beneficiaries. This Agreement is solely for
the benefit of the parties hereto and their respective Subsidiaries and
Affiliates and should not be deemed to confer upon third parties any remedy,
claim, liability, reimbursement, claim of action or other right in excess of
those existing without reference to this Agreement.
6.12 Title and Headings. Titles and headings to sections
herein are inserted for the convenience of reference only and are not intended
to be a part of or to affect the meaning or interpretation of this Agreement.
6.13 Appendices. The Appendices shall be construed with and as
an integral part of this Agreement to the same extent as if the same had been
set forth verbatim herein. In the event of any inconsistency between the terms
of any Appendix and the terms set forth in the main body of this Agreement, the
terms of the Appendix shall govern.
6.14 GOVERNING LAW. THIS AGREEMENT 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.
6.15 Consent to Jurisdiction. Each of the parties irrevocably
submits to the exclusive jurisdiction of (a) the Supreme Court of the State of
New York, New York County, and (b) the United States District Court for the
Southern District of New York, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated hereby.
Each of the parties agrees to commence any action, suit or proceeding relating
hereto either in the United States District Court for the Southern District of
New York or if such suit, action or other proceeding may not be brought in such
court for jurisdictional reasons, in the Supreme Court of the State of New York,
New York County. Each of the parties further agrees that service of any process,
summons, notice or document by U.S. registered mail to such party's respective
address set forth
<PAGE> 11
11
above shall be effective service of process for any action, suit or proceeding
in New York with respect to any matters to which it has submitted to
jurisdiction in this Section 6.15. Each of the parties irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby in (i) the Supreme Court of the State of New York, New York County, or
(ii) the United States District Court for the Southern District of New York, and
hereby further irrevocably and unconditionally waives and agrees not to plead or
claim in any such court that any such action, suit or proceeding brought in any
such court has been brought in an inconvenient forum.
6.16 Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
6.17 Laws and Government Regulations. Each party, in its
capacity as a Recipient, shall be responsible for (i) compliance with all laws
and governmental regulations affecting its businesses and (ii) any use such
Recipient may make of the Transition Services to assist it in complying with
such laws and governmental regulations. While no party, in its capacity as a
Provider, shall have any responsibility for the compliance by the Recipient of
such Transition Services with such laws and regulations, each party, in its
capacity as a Provider, agrees to use reasonable efforts to cause the Transition
Services to be provided by such party to be designed in such manner that such
Transition Services shall be able to assist the Recipient of such Transition
Services in complying with applicable legal and regulatory responsibilities.
6.18 Relationship of Parties. Nothing in this Agreement shall
be deemed or construed by the parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties, it being understood and agreed that no provision contained herein, and
no act of the parties, shall be deemed to create any relationship between the
parties other than the relationship of buyer and seller of services nor be
deemed to vest any rights, interests or claims in any third parties. The parties
do not intend to waive any privileges or rights to which they may be entitled.
6.19 Definitions. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to such terms in the
Distribution Agreement.
<PAGE> 12
12
IN WITNESS WHEREOF, the parties hereto have caused this
Transition Services Agreement to be executed the day and year first above
written.
THE DUN & BRADSTREET CORPORATION
By:___________________________
Name:
Title:
COGNIZANT CORPORATION
By:___________________________
Name:
Title:
ACNIELSEN CORPORATION
By:___________________________
Name:
Title:
<PAGE> 13
[FORM OF APPENDIX TO TRANSITION SERVICES AGREEMENT]
Description of Transition Service (including the identity of the Provider and
Recipient(s) of such Transition Service):
Payment:
Time Period (including terms of extension, if any):
Service Coordinator for Provider:
Service Coordinator for each Recipient:
Notice Period for Deletion of Transition Services:
Any Other Terms:
<PAGE> 1
EXHIBIT 10.8
FORM OF TAM MASTER AGREEMENT
between
Cognizant Corporation
and
ACNielsen Corporation
dated as of
_________ __, 1996
***
<PAGE> 2
TABLE OF CONTENTS
RECITALS......................... 1
ARTICLE I
DEFINITIONS....................... 2
1.1 Defined Terms.................................................. 2
1.2 References; Interpretation..................................... 11
ARTICLE II
TECHNOLOGY AND TRADEMARKS................ 13
2.1 Obligation to License Technology............................... 13
2.2 Limited Obligation............................................. 14
2.3 Research and Development....................................... 14
ARTICLE III
OPTION TO PURCHASE.................... 15
3.1 Segregation of ACNielsen TAM Business.......................... 15
3.2 Option......................................................... 17
3.3 Price.......................................................... 21
3.4 Other Terms and Conditions of Exercise......................... 22
3.5 Survival....................................................... 22
ARTICLE IV
INDEMNIFICATION..................... 24
4.1 Indemnification............................................ 24
ARTICLE V
DISPUTE RESOLUTION.................... 24
5.1 Dispute Resolution............................................. 24
ARTICLE VI
CONDITIONS TO EFFECTIVENESS............... 25
6.1 ................................................................ 25
ARTICLE VII
COVENANTS........................ 26
7.1 Further Assurances............................................. 26
<PAGE> 3
ARTICLE VIII
MISCELLANEOUS.............................. 27
8.1 Construction................................................... 27
8.2 Counterparts................................................... 27
8.3 Expenses....................................................... 27
8.4 Notices........................................................ 27
8.5 Waivers........................................................ 27
8.6 Amendments..................................................... 28
8.7 Assignment..................................................... 28
8.8 Successors and Assigns......................................... 28
8.9 Subsidiaries................................................... 28
8.10 Third-Party Beneficiaries..................................... 28
8.11 Titles and Headings........................................... 28
8.12 Exhibits and Schedules........................................ 28
8.13 GOVERNING LAW................................................. 28
8.14 Consent to Jurisdiction....................................... 28
8.15 Severability.................................................. 29
Schedules
Schedule 1.1 (_) Calculation of TAM Purchase Price
Schedule 1.1 (_) Excluded Assets
Schedule 1.1 (_) TAM Marks
Schedule 1.1 (_) TAM Technology
Schedule 1.1 (_) Taxes Included in Transfer Costs
Schedule 1.1 (_) Financial Statements
Schedule 1.1 (_) Countries in which ACNielsen TAM Business Conducted
Schedule 3.1 (a) Principles Governing Separation of Multiple-Use Assets and
Shared TAM Personnel
Schedule 3.2 (e) Arbitration in Respect of the Plan
Schedule 8.2 (b) "Media Advisor" Software
Exhibits
Exhibit __ Form of Technology Licensing Agreement
Exhibit __ Form of Trademark Licensing Agreement
Exhibit __ Form of "Media Advisor" Licensing Agreement
<PAGE> 4
This MASTER AGREEMENT is dated as of , 1996, between COGNIZANT
CORPORATION, a Delaware corporation ("Cognizant") and ACNIELSEN CORPORATION, a
Delaware corporation ("ACNielsen").
RECITALS
* WHEREAS, The Dun & Bradstreet Corporation, a Delaware
corporation ("D&B"), has determined that it is in the best
interests of the holders of common stock of D&B to separate
from D&B certain businesses currently conducted by D&B;
* WHEREAS, D&B has determined to cause certain of such
businesses, including the NMR TAM Business (as defined herein)
to be owned and conducted, directly or indirectly, by
Cognizant, and to cause certain other businesses, including
the ACNielsen TAM Business (as defined herein), to be owned
and conducted, directly or indirectly, by ACNielsen; and
* WHEREAS, each of Cognizant and ACNielsen has determined that
it is necessary and desirable to set forth agreements relating
to the TAM Business (as defined herein), including their use
of TAM Marks and TAM Technology (each as defined herein) and
their rights upon a change of control of ACNielsen or the
ACNielsen TAM Business.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained in this Agreement, the parties hereby agree as follows:
<PAGE> 5
2
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following
terms have the following meanings:
"ACN Change of Control Transaction": an event or series of
events by which
(a) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act as in effect on the Distribution Date), of more than 50%
of the total voting power of all voting stock of ACNielsen then
outstanding;
(b) another corporation merges into ACNielsen or ACNielsen
consolidates with or merges into any other corporation, in one
transaction or a series of related transactions with the effect that a
person or group, other than a person or group which is the beneficial
owner of more than 50% of the total voting power of all voting stock of
ACNielsen immediately prior to such transaction becomes the beneficial
owner of more than 50% of the total voting power of all voting stock of
the surviving or transferee corporation of such transaction or series;
or
(c) ACNielsen, in one transaction or a series of transactions
(each, a "Disposition"), conveys, transfers, spins off, or leases
Assets to any person or persons other than Cognizant or a wholly owned
Subsidiary of ACNielsen or Cognizant, (i) which Assets would have
constituted greater than 66 2/3% of ACNielsen's Assets as of the
Distribution Date or (ii) which Disposition or Dispositions would have
resulted in a 50% decrease in ACNielsen's revenue for the fiscal year
immediately preceding the first such Disposition had each such
Disposition taken place on the first day of such preceding fiscal year;
provided, however, that to the extent that within three months of such
Disposition such ACNielsen party (A) reinvests or enters into a binding
agreement or letter of intent to reinvest the proceeds from such
Disposition in Assets that are used in connection with the ACNielsen
Business or (B) outsources to third parties the functions or
information generated by the Assets disposed of, such Disposition shall
not be deemed to be an ACNielsen Change of Control Transaction or count
as a Disposition for purposes of subsequent applications of this
provision; or
(d) during any period of two consecutive years, individuals
who at the beginning of such period constituted ACNielsen's Board of
Directors (together with any new directors whose election by
ACNielsen's Board of Directors, or whose nomination for election by
ACNielsen's shareholders, was approved by a vote of a majority of the
Directors then still in office who were either Directors at the
beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a
majority of the Directors then in office.
<PAGE> 6
3
"ACNielsen Business": shall have the meaning ascribed in the
Distribution Agreement.
"ACNielsen Party": each of ACNielsen and each Subsidiary
thereof on or after the Distribution Date.
"ACNielsen Policies": "ACNielsen Policies" as defined in the
Distribution Agreement, together with all Policies owned or maintained
by or on behalf of any ACNielsen Party or assigned to any ACNielsen
Party on or after the Distribution Date.
"ACNielsen Shared Policies": shall have the meaning ascribed
in the Distribution Agreement.
"ACNielsen TAM Business": the TAM Business outside the United
States and Canada conducted by ACNielsen Parties on the Distribution
Date in the countries listed on Schedule 1.1(_) hereto and any
additional TAM Assets acquired or created by any ACNielsen Parties
after the Distribution Date ("After Acquired Assets"), to the extent
such businesses or Assets have been integrated into and are not easily
severable from the TAM Business outside the United States and Canada
conducted by ACNielsen Parties on the Distribution Date; provided, that
such integrated After Acquired Assets may be separated and excluded
from the ACNielsen TAM Business only if such separation leaves the
remaining business intact. After Acquired Assets that are either
severable in the manner described above or not integrated into the
ACNielsen TAM Business existing on the Distribution Date (including, by
way of example and without limitation, new operations begun or acquired
in a country where ACNielsen does not currently have a TAM Business)
shall be excluded from the ACNielsen TAM Business. Notwithstanding
anything to the contrary contained herein, if an ACNielsen Party
establishes, purchases or otherwise acquires a TAM Business in India
(i) within a reasonable period of time after the Distribution Date and
(ii) in accordance with the business plan currently in effect with
respect to India, such TAM Business will be deemed to be part of the
ACNielsen TAM Business as of the Distribution Date. If ACNielsen
abandons its current plans to begin a TAM Business in India and
subsequently establishes, purchases or otherwise acquires a TAM
Business in India, such TAM Business in India shall be deemed to be an
After Acquired Asset subject to the provisions of this paragraph
regarding After Acquired Assets.
"Action": any action, suit, arbitration, inquiry, proceeding
or investigation by or before any court, any governmental or other
regulatory or administrative agency, body or commission or any
arbitration tribunal.
"Affiliate": when used with respect to a specified person,
another person that controls, is controlled by, or is under common
control with the person specified. As used herein, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person, whether
through the ownership of voting securities or other interests, by
contract or otherwise.
<PAGE> 7
4
"After Acquired Assets": shall have the meaning set forth in
the definition of ACNielsen TAM Business.
"Ancillary Licensing Agreements": the collective reference to
the Technology Licensing Agreement and the Trademark Licensing
Agreement.
"Asset Purchase Agreement": an Asset purchase agreement to be
executed by the TAM Purchaser and ACNielsen in connection with a TAM
Acquisition.
"Assets": with respect to any party, assets, properties and
rights (including goodwill), wherever located (including in the
possession of vendors or other third parties or elsewhere), whether
real, personal or mixed, tangible, intangible or contingent, in each
case whether or not recorded or reflected or required to be recorded or
reflected on the books and records or financial statements of any
person, including, without limitation, the following:
a. all accounting and other books, records and files
whether in paper, microfilm, microfiche, computer
tape or disc, magnetic tape or any other form;
b. all apparatus, computers and other electronic data
processing equipment, fixtures, machinery, equipment,
furniture, office equipment, automobiles, trucks,
aircraft and other transportation equipment, special
and general tools, test devices, prototypes and
models and other tangible personal property;
c. all inventories of materials, parts, raw materials,
supplies, work-in- process and finished goods and
products;
d. all interests in real property of whatever nature,
including easements, whether as owner, mortgagee or
holder of a Security Interest in real property,
lessor, sublessor, lessee, sublessee or otherwise;
e. all interests in any capital stock or other equity
interests of any Subsidiary or any other person, all
bonds, notes, debentures or other securities issued
by any Subsidiary or any other person, interests in
partnerships or joint ventures (whether or not
majority interests), all loans, advances or other
extensions of credit or capital contributions to any
Subsidiary or any other person and all other
investments in securities of any person;
f. all license agreements, leases of personal property,
open purchase orders for raw materials, supplies,
parts or services, unfilled orders for the
manufacture and sale of products and other contracts,
agreements or commitments;
<PAGE> 8
5
g. letters of credit and performance and surety bonds
issued in favor of such party by a third party;
h. all written technical information, data,
specifications, research and development information,
engineering drawings, operating and maintenance
manuals, and materials and analyses prepared by
consultants and other third parties;
i. all domestic and foreign patents, copyrights, trade
names, trademarks, service marks and registrations
and applications for any of the foregoing, mask
works, trade secrets, inventions, data bases, other
proprietary information and licenses from third
persons granting the right to use any of the
foregoing;
j. all computer applications, programs and other
software, including operating software, network
software, firmware, middleware, design software,
design tools, systems documentation and instructions;
k. all cost information, sales and pricing data,
customer prospect lists, supplier records, customer
and supplier lists, customer and vendor data,
correspondence and lists, product literature,
artwork, design, development and manufacturing files,
vendor and customer drawings, formulations and
specifications, quality records and reports and other
books, records, studies, surveys, reports, plans and
documents;
l. all prepaid expenses, deposits made by such party,
trade accounts and other accounts and notes
receivable;
m. all rights under contracts or agreements, all claims
or rights against any person arising from the
ownership of any asset, all rights in connection with
any bids or offers and all claims, chooses in action
or similar rights, whether accrued or contingent;
n. all rights under insurance policies and all rights in
the nature of insurance, indemnification or
contribution;
o. all licenses (including radio and similar licenses),
permits, approvals and authorizations which have been
issued by any Governmental Authority;
p. cash and Cash Equivalents, bank accounts, lock boxes
and other deposit arrangements; and
q. interest rate, currency, commodity or other swap,
collar, cap or other hedging or similar agreements or
arrangements.
<PAGE> 9
6
"Book Value": TAM Assets to be transferred with all or that
portion of the ACNielsen TAM Business being offered or sold less TAM
Liabilities to be transferred with all or that portion of the ACNielsen
TAM Business being offered or sold, in each case calculated in
accordance with United States generally accepted accounting principles.
"Business Day": a day other than Saturday, Sunday or other day
on which commercial banks in New York, New York or Connecticut are
authorized or required by law to be closed.
"Cash Equivalents": certificates of deposit, securities issued
by the United States Treasury and similar readily marketable
securities.
"Cognizant Business": shall have the meaning ascribed in the
Distribution Agreement.
"Cognizant Party": each of Cognizant and each Subsidiary
thereof on or after the Distribution Date.
"Contractual Obligation": as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
other undertaking to which such Person is a party or by which it or any
of its property is bound.
"Corporate Administration": all personnel, equipment, office
space and other Assets required to perform internal management
functions such as accounting, hiring, payroll, benefits and in-house
legal services.
"D&B": The Dun & Bradstreet Corporation, a Delaware
corporation.
"D&B Party": D&B and each Subsidiary of D&B on and after the
Distribution Date.
"Disclosure Schedules": the meaning ascribed in Section
3.2(a).
"Distribution Agreement": the agreement dated as of
____________ __, 1996 among D&B, Cognizant and ACNielsen.
"Distribution Agreements": the Distribution Agreement and all
of the written agreements, instruments, assignments or other
arrangements (other than this Agreement and the TAM Ancillary
Agreements) entered into in connection with the transactions
contemplated hereby, including, without limitation, the Conveyancing
and Assumption Instruments, the Data Services Agreements, the Employee
Benefits Agreement, the Indemnity and Joint Defense Agreement, the
Intellectual Property Agreement, the Shared Transaction Services
Agreements, the Tax Allocation Agreement and the Transition Services
Agreement.
<PAGE> 10
7
"Distribution Date": shall have the meaning ascribed in the
Distribution Agreement.
"Effective Date": _____________ __, 1996, the effective date
of this Agreement.
"Exercise Period": the meaning ascribed in Section 3.2(c).
"Financial Statements" shall mean the financial statements and
schedules listed on Schedule 1.1(_) hereto.
"Governmental Authority": any federal, state, local, foreign
or international court, government, department, commission, board,
bureau, agency, official or other regulatory, administrative or
governmental authority.
"Liabilities": shall have the meaning ascribed in the
Distribution Agreement.
"License Term": shall have the meaning set forth in Section
2.1.
"Material Adverse Effect": a material adverse effect on the
validity or enforceability of this Agreement or any of the transactions
contemplated hereby.
"MONITOR-PLUS Agreement": the agreement dated as of __________
__, 1996 between NMR and ACNielsen pursuant to which NMR agrees to
provide MONITOR-PLUS UPC Linking Services to ACNielsen and ACNielsen
agrees to provide certain data to NMR.
"Multiple-Use Asset": any Asset of any ACNielsen Party that is
employed in the ACNielsen TAM Business and one or more other businesses
conducted by such ACNielsen Party.
"NMR": Nielsen Media Research Inc., a Delaware corporation.
"NMR TAM Business": the TAM Business in the United States and
Canada that is conducted by Cognizant Parties on the Distribution Date.
"Open Issues": the meaning ascribed in Section 3.2(e).
"Option": shall mean the option described in Section 3.2
pursuant to which the Optionee may, under certain circumstances,
acquire all or part of the ACNielsen TAM Business.
"Option Information": the meaning set forth in Section 3.2.
"Option Trigger Event": shall mean each of the events
described in Section 3.2(b)(i), (ii), (iii) and (iv).
<PAGE> 11
8
"Person": any natural person, corporation, business trust,
joint venture, association, company, partnership or government, or any
agency or political subdivision thereof.
"Policies": insurance policies and insurance contracts of any
kind (other than life and benefits policies or contracts), including,
without limitation, primary, excess and umbrella policies,
comprehensive general liability policies, director and officer
liability, fiduciary liability, automobile, aircraft, property and
casualty, workers' compensation and employee dishonesty insurance
policies, bonds and self-insurance and captive insurance company
arrangements, together with the rights, benefits and privileges
thereunder.
"Records": specific and identified agreements, documents,
books, records or files.
"Requirement of Law": as to any Person, the certificate of
incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its property or to which such Person or any of its property is
subject.
"Security Interest": any mortgage, security interest, pledge,
lien, charge, claim, option, right to acquire, voting or other
restriction, right-of-way, covenant, condition, easement, encroachment,
restriction on transfer, or other encumbrance of any nature whatsoever.
"Shared TAM Personnel": the collective reference to each
person employed by any ACNielsen Party after the Distribution Date,
which person divides (in any manner) his or her working hours between
the ACNielsen TAM Business and other ACNielsen businesses.
"Subsidiary": any corporation, partnership or other entity of
which another entity (i) owns, directly or indirectly, ownership
interests sufficient to elect a majority of the board of directors (or
persons performing similar functions) (irrespective of whether at the
time any other class or classes of ownership interests of such
corporation, partnership or other entity shall or might have such
voting power upon the occurrence of any contingency) or (ii) is a
general partner or an entity performing similar functions (e.g., a
trustee).
"TAM Acquisition": an acquisition of all or part of the
ACNielsen TAM Business by the TAM Purchaser as contemplated by Article
III.
"TAM Acquisition Date": the date of the consummation of the
related TAM Acquisition.
"TAM Assets": at any date of determination, without
duplication:
<PAGE> 12
9
a. any and all Assets employed by any ACNielsen Party in
connection with the ACNielsen TAM Business, including
b. subject to Article VII of the Distribution Agreement,
any rights of any ACNielsen Party under any of the
ACNielsen Policies or the ACNielsen Shared Policies
arising out of any ACNielsen Party's conduct of the
ACNielsen TAM Business, including any rights
thereunder arising after the Distribution Date in
respect of any Policies that are (i) occurrence
Policies or (ii) claims made policies, to the extent
that claims relating to a TAM Acquisition are made
prior to the related TAM Acquisition Date;
c. any contract of any ACNielsen Party, any rights or
claims arising thereunder, and any other rights or
claims or contingent rights or claims to the extent
relating to or arising from any TAM Asset or the
ACNielsen TAM Business;
Notwithstanding the foregoing, TAM Assets
shall not in any event include:
(x) the Assets listed or described on Schedule
1.1(_); or
(y) any Asset that is expressly contemplated by
this Agreement or any Ancillary Licensing
Agreements, including the schedules hereto
or thereto as an Asset to be retained by any
ACNielsen Party upon the consummation of a
TAM Acquisition.
In the event of any inconsistency or conflict which
may arise in the application or interpretation of any
of the foregoing provisions, for the purpose of
determining what is and is not a TAM Asset, any item
expressly included or excluded as a TAM Asset on a
Schedule to this Agreement or any Ancillary Licensing
Agreement shall take priority over any provision of
the text hereof.
"TAM Business": the meaning ascribed in Schedule 1.1(_).
"TAM Liabilities": at any date of determination, without
duplication: all obligations and Liabilities of any ACNielsen Party
under this Agreement or any of the Ancillary Licensing Agreements and
all Liabilities of each ACNielsen Party primarily relating to, arising
out of or resulting from:
a. the operation of the ACNielsen TAM Business
(including any Liability relating to, arising out of
or resulting from any act or failure to act by any
director, officer, employee, agent or representative
(whether or not such act or failure to act is or was
within such person's authority)); or
<PAGE> 13
10
b. any TAM Assets;
whether arising before, on or after the Distribution Date. Notwithstanding the
foregoing, the TAM Liabilities shall not include:
(x) Liabilities allocated to another party
pursuant to the Tax Allocation Agreement;
(y) any Liabilities that are expressly
contemplated by this Agreement or any
Ancillary Licensing Agreements, including
the Schedules hereto or thereto, in
particular, the excluded Liabilities listed
on Schedule 1.1(_) hereto) as Liabilities to
be retained or assumed by any ACNielsen
Party or by any Cognizant Party upon an ACN
Change of Control Transaction; or
(z) any agreement or obligation of (i) any D&B
Party or any Cognizant Party under the
Distribution Agreements or (ii) any
Cognizant Party under this Agreement or any
of the Ancillary Licensing Agreements.
"TAM Marks": the trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles,
service marks, logos and other source or business identifiers, and the
goodwill associated therewith, now existing or hereafter adopted or
acquired for use in connection with the TAM Business, and all
applications in connection therewith, whether in the United States
Patent and Trademark Office or in any similar office or agency of the
United States, any state thereof or any other country or any political
subdivision thereof, or otherwise, including, without limitation, any
thereof referred to on Schedule 1.1(_), and all renewals thereof.
"TAM Personnel": the collective reference to Shared TAM
Personnel and to each person employed by any ACNielsen Party after the
Distribution Date, which person devotes all of his or her working hours
to the ACNielsen TAM Business.
"TAM Purchase Price": Book Value, as adjusted in accordance
with Schedule 1.1 (_) plus one-half of Transfer Costs.
"TAM Purchaser": Any of Cognizant, NMR or a permitted
successor or assign of either that acquires all or part of the
ACNielsen TAM Business pursuant to Article III.
"TAM Technology": the technology set forth on Schedule 1.1(_)
hereto and the schedules to the Ancillary Licensing Agreements.
"Tax" or "Taxes": taxes on or measured by income, franchise,
gross receipts, sales, use, excise, payroll, personal property, real
property, ad-valorem, value-added,
<PAGE> 14
11
leasing, leasing use or other taxes, levies, imposts, duties, charges
or withholdings of any nature. Whenever the term "Tax" or "Taxes" is
used (including, without limitation, regarding any duty to reimburse
another party for indemnified taxes or refunds or credits of taxes), it
shall include penalties, fines, additions to tax and interest thereon.
"Technology Licensing Agreement": the collective reference to
one or more nonexclusive technology licensing and support services
agreements substantially in the form of Exhibit _, by and between a
Cognizant Party, as licensor, and one or more ACNielsen Parties, as
licensee and any related permitted sublicensing agreements between
ACNielsen Parties or between an ACNielsen Party and a joint venture
partner.
"Trademark Licensing Agreement": the collective reference to
one or more nonexclusive trademark licensing agreements covering TAM
Marks and substantially in the forms of [Exhibit _, _ and _ ] by and
between a Cognizant Party or an ACNielsen Party, as licensor, and one
or more ACNielsen Parties or Cognizant Parties, respectively, as
licensee, and any related permitted sublicensing agreements between
ACNielsen Parties, between Cognizant Parties or between an ACNielsen
Party or a Cognizant Party and a joint venture partner.
"Transfer Costs": costs reasonably attributable to the
transfer of all or that portion of the ACNielsen TAM Business being
offered or sold including, without limitation, transfer taxes and
filing fees, but excluding ACNielsen's (i) accountants' fees incurred
in connection with the determination of Book Value and the TAM Purchase
Price in accordance with Section 3.1, (ii) any investment bankers' fees
incurred by ACNielsen in connection with such transfer or (iii) certain
taxes of the type set forth on Schedule 1.1(_) incurred by ACNielsen in
connection with such transfer.
"Year Four": shall have the meaning set forth in Section 3.2.
"Year Four Purchaser": shall have the meaning set forth in
Section 3.2.
"Year Four Trigger Event": shall have the meaning set forth in
Section 3.2.
1.2 References; Interpretation. References in this Agreement
to any gender include references to all genders, and references to the singular
include references to the plural and vice versa. The words "include", "includes"
and "including" when used in this Agreement shall be deemed to be followed by
the phrase "without limitation". Unless the context otherwise requires,
references in this Agreement to Articles, Sections, Exhibits and schedules shall
be deemed references to Articles and Sections of, and Exhibits and schedules to,
this Agreement. Unless the context otherwise requires, the words "hereof",
"hereby" and "herein" and words of similar meaning when used in this Agreement
refer to this Agreement in its entirety and not to any particular Article,
Section or provision of this Agreement.
<PAGE> 15
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ARTICLE II
TECHNOLOGY AND TRADEMARKS
2.1 Obligation to License Technology.
(a) Each Cognizant Party shall license to each ACNielsen Party
that so requests, (i) TAM Technology for use in Australia, Ireland and India to
which such Cognizant Party has rights in commercial use, (ii) upgrades thereof
to the extent required to permit such ACNielsen Party to fulfill a Contractual
Obligation existing on the Distribution Date including, without limitation, any
Contractual Obligation resulting from the exercise of a unilateral renewal (or
other) right by a party other than such ACNielsen Party and (iii) additional
licenses to permit use of new technology in connection with the technology
described in clauses (i) and (ii) to the extent required to permit such
ACNielsen Party to fulfill a Contractual Obligation existing on the Distribution
Date with respect to Australia, Ireland and/or India, as the case may be,
pursuant to one or more licensing agreements substantially in the form of
Exhibit _ for the period commencing on the Distribution Date to and including
the later of the fifth anniversary thereof and such date as is required to
permit such ACNielsen Party to fulfill any Contractual Obligation existing on
the Distribution Date, including, without limitation, any Contractual Obligation
resulting from the exercise of a unilateral renewal (or other) right by a party
other than such ACNielsen Party (each such period, a "License Term") provided
that ACNielsen may terminate any or all of such Licenses prior to the expiration
of the License Term upon two months notice to the licensing Cognizant Party.
(b) ACNielsen, on behalf of itself and each other ACNielsen
Party, shall pay to Cognizant for as long as such TAM Technology is licensed a
royalty in an amount equal to 3% of the gross revenue (including cash and
non-cash consideration) generated by the ACNielsen TAM Business in each of
Australia and Ireland, and in an amount to be specified in the relevant
licensing agreements with respect to India. Such royalty shall be payable in
respect of the revenue generated in each such country until the earlier of (x)
the end of the stated License Term latest to end in such country and (y) the
date the Agreement is terminated pursuant to the notice described in the proviso
at the end of (a) above.
(i) For purposes of this Section, revenue generated
during the License Term shall mean revenue arising from products and
services of the ACNielsen TAM Business delivered during the License
Term in the covered country, whether such revenue is collected during
or after the expiration of the License Term.
(ii) Such royalty shall be payable only to the extent
that an ACNielsen Party has collected such revenue in cash. Any cash
collected by an ACNielsen Party shall be allocated to the earliest
unpaid receivable due from the party that has made such payment to such
ACNielsen Party.
<PAGE> 16
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(iii) ACNielsen's obligation to pay such royalty in
accordance with the relevant Technology License Agreement shall survive
the termination of this Agreement.
(iv) To the extent that ACNielsen generates revenue
during the License Term from a product or service that covers more than
one country, the percentage of such revenue allocable to each such
country ("Country X") shall be the percentage equivalent of a fraction,
the numerator of which is the list price of the data originated in
Country X, and the denominator of which is the aggregate list price of
all data included in such product or service.
2.2 Limited Obligation. Nothing contained herein shall
prohibit any ACNielsen Party from amending or modifying any existing Contractual
Obligation relating to the licensed TAM Technology provided that such amendment
or modification does not in any way extend the Cognizant Party licensor's
obligations other than as permitted hereunder.
2.3 Research and Development. (a) Each Cognizant Party, on the
one hand, and each ACNielsen Party, on the other, will maintain ownership and
control over, and will bear all costs with respect to, all technology research
and development originated by such party.
(b) No Cognizant Party or ACNielsen Party shall have any
obligation to share research and development except to the extent expressly set
forth in Section 2.1 or in any Ancillary Licensing Agreement.
2.4 Audit Rights. ACNielsen shall, and shall cause each
relevant ACNielsen Party to, maintain complete and accurate accounts and records
of each ACNielsen Party's revenues in respect of which a royalty is payable
under the relevant Technology Licensing Agreement in accordance with generally
accepted accounting principles. Cognizant shall have the right to cause an audit
during normal business hours of each ACNielsen Party's records referred to in
the first sentence of this Section 2.4 once a year upon reasonable business
notice. Cognizant shall bear the cost of any audit performed pursuant to this
Section 2.4 except that if, as a result of Cognizant's audit (which shall be
calculated in accordance with generally accepted accounting principles) the
royalty owed to Cognizant is determined to be greater than the royalty
determined by ACNielsen by 10% or more, ACNielsen shall bear the cost of such
audit.
2.5 Trademark Licensing Agreement. Cognizant and ACNielsen
will or will cause the appropriate ACNielsen Party and/or Cognizant Party, as
the case may be, to enter into the Trademark Licensing Agreements, including,
without limitation, the grant to Cognizant by ACNielsen of a non-exclusive,
non-transferable, royalty-free license (without right to sub-license to a party
unrelated to Cognizant) substantially in the form of Exhibit __ hereto, pursuant
to which Cognizant will obtain the right to use the "Media Advisor" trademark
and/or computer software programs relating thereto in the conduct of the TAM
Business in Canada until the fifth anniversary of the Distribution Date.
<PAGE> 17
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ARTICLE III
OPTION TO PURCHASE
3.1 Segregation of ACNielsen TAM Business. (a) ACNielsen
shall, no later than January 1, 1998, produce and deliver to Cognizant or the
then-Optionee a comprehensive, detailed and feasible written plan (the "Plan")
for segregating the ACNielsen TAM Business from other ACNielsen businesses, for
the purpose of rendering feasible the consummation of a TAM Acquisition with
respect to the ACNielsen TAM Business as a whole pursuant to Section 3.2 and
enabling the TAM Purchaser, commencing on the TAM Acquisition Date, to operate
the ACNielsen TAM Business as a going concern without interruption, subject to
Section 3.1(b) below; provided, however, that ACNielsen shall not be required to
create a standalone Corporate Administration pursuant to the Plan to satisfy the
requirements of this Section 3.1(a). The Plan shall be based on the principles
and guidelines set forth on Schedule 3.1(a) and shall include, without
limitation, the following:
(i) complete and correct schedules setting forth the
following in reasonable detail:
(x) each Asset, including each Multiple-Use
Asset, employed in connection with the
ACNielsen TAM Business and a description
thereof; and
(y) the TAM Personnel and the Shared TAM
Personnel, including without limitation
persons involved in Corporate Administration
for the ACNielsen TAM Business, each
employee's job description, the approximate
percentage of each employee's time spent on
the TAM Business, if less than all, and a
description of such employee's compensation
(salary, benefits, bonuses and options);
(ii) provisions identifying Assets and specified TAM
Personnel to be transferred to the TAM Purchaser upon
the consummation of the TAM Acquisition together with
a transition plan relating to the fair and equitable
separation of Multiple Use Assets and Shared TAM
Personnel and an analysis demonstrating how such
transfers would be effected and that such transfers
would enable the TAM Purchaser to operate the
ACNielsen TAM Business as a going concern without
interruption commencing on the TAM Acquisition Date,
subject to Section 3.1(b) below. Such provisions must
expressly address technical infrastructure,
operations, sales, customer relations, and data
collection, transmission and analysis on a
country-by-country basis; and (iii) a certification
of the chief financial officer of ACNielsen as to all
of the foregoing.
(b) Cognizant, any subsequent Optionee and ACNielsen shall at
all relevant times cooperate in good faith with respect to the Plan. Each such
party will act in good faith
<PAGE> 18
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in negotiating the allocation of Shared TAM Personnel and Multiple-Use Assets.
After the Optionee has given notice of the exercise of the Option, no party
shall attempt to solicit for employment or otherwise influence any ACNielsen
employee to accept employment with an employer other than the employer
designated by the Plan for such employee. Subject to the foregoing, no ACNielsen
Party, or Cognizant Party or Optionee shall be prohibited from (i) hiring
(subject to the prohibition on solicitation described above) any person who is
designated in the Plan to be employed by the other party or (ii) prior to the
exercise of the Option, moving employees from one business group to another or
otherwise changing an employee's position. Each of Cognizant and ACNielsen
understand and acknowledge that the separation of Shared TAM Personnel and
Multiple Use Assets will cause disruption of and create expense for the
ACNielsen TAM Business and other ACNielsen businesses. It is further understood
that the transition arrangements contained in the Plan regarding Shared TAM
Personnel and Multiple Use Assets shall be in accordance with Schedule 3.1(a)
but that the parties shall make a good faith effort to divide the potential
disruption and expense to the ACNielsen TAM Business and the other ACNielsen
businesses fairly and equitably. Each party acknowledges that such party may be
required to hire additional personnel and replace Assets to enable its
businesses to operate as going concerns after the TAM Acquisition.
(c) The Optionee shall give written notice of any objection to
the initial Plan within 90 days after receipt thereof. During such 90-day
period, ACNielsen shall afford to the Optionee and its outside accountants,
counsel, financial advisors and other representatives, access during normal
business hours to all officers, employees and information (including, without
limitation, books and records) reasonably necessary for the Optionee to
determine the feasibility of the Plan and ACNielsen's compliance with the terms
of this Agreement relating to the Plan, and shall furnish to the Optionee such
information concerning the ACNielsen TAM Business as the Optionee may reasonably
request.
(d) ACNielsen shall deliver a revised Plan, together with a
written response addressing each objection set forth in a notice delivered
pursuant to clause (c) above, within 45 days after receipt of such notice. The
chief financial officer of ACNielsen shall sign each such document.
(e) To the extent that the Optionee objects to such revised
Plan, the Optionee shall deliver written notice thereof within 30 days of
receipt of such revised Plan. Failure to deliver such notice shall be deemed to
be approval of such revised Plan.
(f) If the parties cannot agree on a Plan within 30 days after
the delivery of notice pursuant to clause (e) above, the provisions of Article V
shall govern.
(g) ACNielsen shall, and shall cause each other ACNielsen
Party, promptly after the Distribution Date to use commercially reasonable
efforts (without expending money or making any contractual concessions) to cause
each new and each existing contract with employees working in the ACNielsen TAM
Business to be assignable to the TAM Purchaser without consent. Contracts (other
than employee contracts) which cannot be assigned shall be addressed in the
transition arrangements of the Plan and ACNielsen will (or will cause the
<PAGE> 19
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appropriate ACNielsen Party to) endeavor to obtain the benefits of such contract
for the TAM Purchaser.
(h) ACNielsen shall, and shall cause each other ACNielsen
Party, to keep complete and correct books of records and account in which full,
true and correct entries in conformity with generally accepted accounting
principles and all requirements of law of all dealings and transactions in
relation to the ACNielsen TAM Business are separately identified.
(i) ACNielsen shall, and shall cause each other ACNielsen
Party, to create and maintain written internal and external operating
procedures, policies and guidelines with respect to the ACNielsen TAM Business,
including, without limitation, sales, credit and collection policies.
3.2 Option.
(a) Voluntary Option. At any time after the Distribution Date
ACNielsen, acting in good faith, may notify the Optionee in writing that it
desires to sell all or a portion of the ACNielsen TAM Business to the Optionee
(which notice, with respect to TAM Assets constituting less than all of the
ACNielsen TAM Business, must be based upon ACNielsen's good faith intention to
find a purchaser for such TAM Assets), by submitting to the Optionee with such
notification the following items relating to all or the portion of the ACNielsen
TAM Business being offered, (i) the Plan (unless ACNielsen has already submitted
the Plan to the Optionee), (ii) a statement setting forth Book Value and an
estimate of the TAM Purchase Price, each as of a reasonably recent date, setting
forth in reasonable detail the basis for their respective calculations, (iii)
Financial Statements and (iv) schedules setting forth as of a recent date (but
in no event dating back more than 60 days), all known Liabilities and known
contingent Liabilities not reflected in the Financial Statements which
individually or in the aggregate are material, threatened or pending litigation
matters that individually or in the aggregate are material, material
non-compliance with laws, material required consents, and material Assets
(including contracts) which require approval to be transferred (the "Disclosure
Schedules"). To the extent that a TAM Acquisition is to be consummated pursuant
to this Article III, ACNielsen shall deliver updated Disclosure Schedules dated
as of the related TAM Acquisition Date to the TAM Purchaser. Such updated
Disclosure Schedules shall include all Liabilities, other than Liabilities
incurred in the ordinary course of business, which would have been required to
be included by ACNielsen in the Disclosure Schedules originally provided to the
Optionee had such Liabilities existed on such date. The items set forth in (i),
(ii), (iii) and (iv), as they relate to all or any portion of the ACNielsen TAM
Business being offered or sold, are hereinafter referred to as the "Option
Information".
(b) Mandatory Option. If on or prior to the third anniversary
of the Distribution Date, subject to (f) below:
(i) an ACN Change of Control Transaction occurs; or
<PAGE> 20
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(ii) any ACNielsen Party executes a binding agreement
or letter of intent (each of which must be subject to
the Cognizant Party's Option rights hereunder) in
connection with the sale or other disposition of TAM
Assets that (A) generate 50% or more of the revenue
of the ACNielsen TAM Business for the preceding
twelve months or (B) represent greater than 50% of
the TAM Assets before giving effect to such sale or
disposition, including for purposes of determining
whether the tests in (A) or (B) are met any prior
dispositions that, when aggregated with the proposed
disposition, would cause the aggregate amount of TAM
Assets disposed of collectively by the ACNielsen
Parties in a series of transactions to exceed 50% of
TAM Assets or constitute TAM Assets generating 50% or
more of the revenue of the ACNielsen TAM Business for
the preceding twelve months; provided, however, that
to the extent that within three months of such
disposition, such ACNielsen party (A) reinvests or
enters into a binding agreement or letter of intent
to reinvest the proceeds from such disposition of TAM
Assets in Assets that are used in connection with the
ACNielsen TAM Business or (B) outsources or enters
into a binding agreement or letter of intent to
outsource to third parties the functions or
information generated by the TAM Assets disposed of,
such disposition shall not be deemed to be an Option
Trigger Event or count as a disposition for purposes
of subsequent applications of this provision; or
(iii) any ACNielsen Party executes a binding
agreement or letter of intent (each of which must be
subject to the Cognizant Party's Option rights
hereunder) in connection with the sale or other
disposition of TAM Assets that (A) generate 50% or
more of the revenue of the ACNielsen TAM Business in
any country for the preceding twelve months or (B)
represent greater than 50% of the TAM Assets in any
country before giving effect to such sale or
disposition, including for purposes of determining
whether the tests in (A) or (B) are met any prior
dispositions that, when aggregated with the proposed
disposition, would cause the aggregate amount of TAM
Assets disposed of collectively by the ACNielsen
Parties in such country in a series of transactions
to exceed 50% of such Assets or constitute Assets
generating 50% or more of the revenue in such country
for the preceding twelve months; provided, however,
that to the extent that within three months of such
disposition, such ACNielsen party (A) reinvests or
enters into a binding agreement or letter of intent
to reinvest the proceeds from the proposed
disposition of TAM Assets in such country in Assets
that are used in connection with the TAM Business in
such country or (B) outsources or enters into a
binding agreement or letter of intent to outsource to
third parties the functions or information generated
by the TAM Assets disposed of in such country, such
disposition shall not be deemed to be an Option
Trigger
<PAGE> 21
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Event with respect to such country or count as a
disposition for purposes of subsequent applications
of this provision; or
(iv) any ACNielsen Party adopts a definitive plan or
takes similar definitive action to shut down or
otherwise terminate the operations of the ACNielsen
TAM Business in any country or other geographic area
which constitutes a distinct TAM Business.
ACNielsen must give Cognizant written notice within ten Business Days of such
event and must provide to Cognizant, within sixty Business Days of such event,
the Option Information.
(c) During the period beginning on the fifteenth day after the
occurrence of the Option Trigger Event and ending no later than the thirtieth
day following the Optionee's receipt of all of the Option Information, ACNielsen
shall provide to Cognizant during ACNielsen's normal business hours (and upon
reasonable notice) reasonable access to (i) members of ACNielsen's management
and ACNielsen's independent accountants and counsel who possess an in-depth
understanding of the ACNielsen TAM Business and (ii) the premises, books and
records of ACNielsen that relate to all or that portion of the ACNielsen TAM
Business proposed to be sold. On or prior to the expiration of the thirty-day
period following the Optionee's receipt of all of the Option Information (the
"Exercise Period"), the Optionee must notify ACNielsen in writing whether the
Optionee desires to acquire all or the portion of the AcNielsen TAM Business
described in the notice in (b) above for the TAM Purchase Price. Failure of the
Optionee timely to give such notice shall be deemed to be notice that the
Optionee does not desire to effect such TAM Acquisition. If the Optionee
notifies ACNielsen that the Optionee desires to effect to effect such TAM
Acquisition but disagrees with the Plan (to the extent not previously agreed) or
the calculation of the TAM Purchase Price, the parties shall promptly negotiate
to resolve such issues during the period referred to in (d) below,
notwithstanding any other time period set forth this Agreement in respect of
negotiation of the Plan including Section 3.1(b).
(d) If the Optionee gives ACNielsen notice that it desires to
make such acquisition, ACNielsen and the Optionee must negotiate in good faith
in a manner consistent with Section 3.4 the consummation of the acquisition by
the Optionee of all or the portion of the ACNielsen TAM Business proposed to be
sold for the period of thirty days immediately following such notice. Cognizant
may not withdraw such notice within such thirty-day period.
(e) (i) Notwithstanding anything set forth herein to the
contrary, after each of the Optionee and ACNielsen has given written notice
confirming such party's approval of a Plan, no term of such Plan shall be
subject to renegotiation, except to the extent that a change in the ACNielsen
TAM Business (including, without limitation, the addition or removal of hybrid
products, Shared TAM Personnel, nonassignable contracts and Multiple-Use Assets)
has rendered such term incomplete or inapplicable. The Optionee and ACNielsen
shall negotiate terms so affected, together with new terms to address changes in
the ACNielsen TAM Business not addressed by the previously approved Plan, during
the Exercise Period.
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(ii) In the event that during the Exercise Period the Optionee
and ACNielsen are unable to agree on (x) a Plan (to the extent the Optionee has
not previously approved any Plan), (y) changes to a Plan to be made pursuant to
clause (i), or (z) ACNielsen fails to submit a plan, as applicable, the Optionee
shall give ACNielsen written notice within [five] Business Days after the
expiration of the Exercise Period whether the Optionee still desires to acquire
the ACNielsen TAM Business proposed to be sold. If so, the Optionee may submit
all or a portion of the Plan to arbitration in accordance with Schedule 3.2(e).
(iii) Article V, as modified by Schedule 3.2(e), shall govern
the submission of all or any part of the Plan to arbitration.
(f) Option Tail. In the event that:
(i) any of the events described in (b)(i), (ii) (iii)
or (iv) above occurs within the one-year period after
the third anniversary of the Distribution Date (such
one-year period referred to as "Year Four", and any
such event a "Year Four Trigger Event"), and
(ii) any of the following actions were taken by any
ACNielsen Party during the one-year period prior to
the third anniversary of the Distribution Date: (A)
the adoption by such ACNielsen Party of resolutions
of the board of directors or equivalent body
authorizing the engagement of investment bankers or
financial advisors in contemplation of such Year Four
Trigger Event or otherwise authorizing the ACNielsen
Party to solicit offers or indications of interest
for the purchase of all or part of the ACNielsen TAM
Business, or the entry into discussions with the
third party with whom such Year Four Trigger Event
was ultimately consummated (such party being referred
to as the "Year Four Purchaser") or with any
representative or agent thereof; (B) the engagement
of investment bankers or financial advisors in
contemplation of a Year Four Trigger Event or the
entry into discussions with the Year Four Purchaser
or any representative or agent thereof in
contemplation of a Year Four Trigger Event, whether
or not such action was authorized by the board of
directors or equivalent body or (C) the solicitation
of the Year Four Purchaser to participate in such
Year Four Trigger Event,
then ACNielsen must notify the Optionee of such Year Four Trigger Event and
treat such Year Four Trigger Event as an Option Trigger Event for all purposes
under this Agreement.
(g) Limits on Option. If the Optionee notifies ACNielsen that
it does not desire to exercise a mature Option to purchase the entire ACNielsen
TAM Business, the Optionee shall no longer have any right to exercise any Option
hereunder and ACNielsen Parties may sell all or any part of the ACNielsen TAM
Business or TAM Assets without any obligation to the Optionee under this Article
III. If after a notice has been delivered with respect to a part of the
ACNielsen TAM Business, including, without limitation, a particular
<PAGE> 23
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country or countries, the Optionee notifies ACNielsen that it does not desire to
exercise its Option with respect to the TAM Assets that are the subject of the
original notification from ACNielsen to the Optionee, it shall thereafter no
longer have any right to exercise any Option hereunder in respect of such TAM
Assets unless such TAM Assets are subsequently offered as part of a larger group
of TAM Assets, in which case such TAM Assets would be subject to the Option
rights hereunder as part of such larger group of TAM Assets.
3.3 Price.
(a) ACNielsen will notify the TAM Purchaser in writing of its
final calculation and estimation of the TAM Purchase Price at least 5 Business
Days prior to the closing of the acquisition. The TAM Purchaser will pay
undisputed Transfer Costs on the TAM Acquisition Date and will deposit any
disputed amounts in escrow. ACNielsen will deliver an accounting of the TAM
Purchase Price within 30 days after the TAM Acquisition Date. The TAM Purchaser
must deliver written notice of any objection to any part of such accounting
within 10 days after receipt of such accounting. If the TAM Purchaser delivers
such notice, the provisions of Article VII will govern the resolution of all
disputed items.
3.4 Other Terms and Conditions of Exercise. (a) ACNielsen
shall use its commercially reasonable efforts (without expending money or making
any contractual concessions) to obtain assignments of (i) employment contracts
of employees working in the ACNielsen TAM Business whom the TAM Purchaser
desires to retain and (ii) such other contracts constituting TAM Assets as the
TAM Purchaser shall reasonably request.
(b) (i) ACNielsen shall represent in each Asset Purchase
Agreement that ACNielsen has not knowingly or recklessly included in the
information delivered by or on behalf of ACNielsen to the TAM Purchaser,
including the Option Information and information provided pursuant to Section
3.2(c) (the "Disclosure Information"), any untrue statement of a material fact,
or omitted to disclose or state any material fact required to be stated therein
or necessary in order to make the Disclosure Information, in light of the
circumstances under which such information was delivered, not misleading.
(ii) Neither ACNielsen nor any TAM Purchaser shall be required
to make any other representation or warranty in any Asset Purchase Agreement.
(c) No Asset Purchase Agreement shall provide for
indemnification of either party by the other in connection with the TAM
Acquisition, except that the parties shall indemnify each other in respect of
third party claims to the extent provided in Article III of the Distribution
Agreement.
(d) Each Asset Purchase Agreement shall subject the parties
thereto to dispute resolution as provided in Article VI of the Distribution
Agreement.
(e) ACNielsen shall covenant in each Asset Purchase Agreement
not to compete with the TAM Purchaser in the TAM Business for a period of three
years after the TAM Acquisition Date in the country or countries in which the
acquired TAM Business was
<PAGE> 24
21
operated as of such Acquisition Date, subject to any Contractual Obligation of
any ACNielsen Party existing on the Distribution Date which Contractual
Obligation is not transferred to the TAM Purchaser; provided, however, that
nothing contained herein shall restrict or limit ACNielsen's ability to engage
in any operations, new business ventures or activities relating to the Internet
(including without limitation measurement of Internet usage by consumers) or to
computers.
3.5 Survival. (a) In the event that Cognizant disposes of a
controlling interest in NMR, the purchaser of such controlling interest shall
succeed to Cognizant's rights and obligations under this Article III.
(b) Any person who acquires a controlling interest in
ACNielsen shall acquire such interest subject to this Agreement, provided that
the foregoing shall not operate (i) to toll, extend or duplicate any time period
set forth in Section 3.2 within which the TAM Purchaser must give notice of its
exercise of its option to acquire the ACNielsen TAM Business or (ii) to give a
successor TAM Purchaser the right to give notice that such successor TAM
Purchaser desires to acquire the ACNielsen Business to the extent that such
notice is based on the occurrence of an event described in Section 3.2(a) in
respect of which the predecessor to the TAM Purchaser gave notice that it did
not desire to acquire the ACNielsen TAM Business or failed to give notice within
the period set forth in Section 3.2. The foregoing shall not operate to preclude
a successor TAM Purchaser from exercising its option based on any event that (x)
occurs after it becomes the TAM Purchaser or (y) occurs prior to its becoming
the TAM Purchaser if the time period set forth in Section 3.2(c) has not expired
and the predecessor TAM Purchaser did not give notice that it declined to
exercise the option.
<PAGE> 25
22
ARTICLE IV
INDEMNIFICATION
4.1 Indemnification. Article III of the Distribution Agreement
shall govern the rights of Cognizant Parties and ACNielsen Parties with respect
to indemnification. The term "Cognizant Liabilities" in that Article shall be
read to include all Liabilities assumed by Cognizant Parties pursuant to this
Agreement. The term "ACNielsen Liabilities" in that Article shall be read to
include all Liabilities assumed by ACNielsen Parties pursuant to this Agreement.
ARTICLE V
DISPUTE RESOLUTION
5.1 Dispute Resolution. Article VI of the Distribution
Agreement shall govern the rights of Cognizant Parties and ACNielsen Parties
with respect to dispute resolution. The term "Agreement Dispute" in that Article
shall be read to include all disputes between Cognizant Parties and ACNielsen
Parties relating to or arising out of this Agreement.
<PAGE> 26
23
ARTICLE VI
CONDITIONS TO EFFECTIVENESS
6.1 The effectiveness of this agreement is subject of the
satisfaction, or waiver by the party to whom performance is owed, of the
following conditions:
(a) Occurrence of Distribution Date. The Distribution Date
shall have occurred.
<PAGE> 27
24
ARTICLE VII
COVENANTS
7.1 Further Assurances. In case at any time after the
Distribution Date any further action is reasonably necessary or desirable to
carry out the purposes of this Agreement, any Asset Purchase Agreement or any
Ancillary Licensing Agreements, the proper officers of each party to this
Agreement shall take all such necessary action. Without limiting the foregoing,
Cognizant and ACNielsen shall use their commercially reasonable efforts promptly
to obtain all consents and approvals, to enter into all amendatory agreements
and to make all filings and applications that may be required for the
consummation of the transactions contemplated by this Agreement, any Asset
Purchase Agreement and the Ancillary Licensing Agreements, including, without
limitation, all applicable governmental and regulatory filings.
<PAGE> 28
25
ARTICLE VIII
MISCELLANEOUS
8.1 Construction. This Agreement, including the Exhibits and
Schedules, and the Ancillary Licensing Agreements shall constitute the entire
agreement between the parties with respect to the subject matter hereof and
shall supersede all previous negotiations, commitments and writings with respect
to such subject matter. In the event of any inconsistency between this Agreement
and any Schedule hereto, the Schedule shall prevail. Other than Section 4.5 and
Article V of this Agreement, which shall prevail over any inconsistent or
conflicting provisions in any Ancillary Licensing Agreement, notwithstanding any
other provisions in this Agreement to the contrary, in the event and to the
extent that there shall be a conflict between the provisions of this Agreement
and the provisions of any Ancillary Licensing Agreement, such Ancillary
Licensing Agreement shall control.
8.2 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been signed
by each of the parties and delivered to the other parties.
8.3 Expenses. Except as otherwise expressly set forth in this
Agreement or any Ancillary Licensing Agreement, each party shall bear its own
costs and expenses. Any amount or expense to be paid or reimbursed by any party
hereto to any other party hereto shall be so paid or reimbursed promptly after
the existence and amount of such obligation is determined and demand therefor is
made.
8.4 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:
To Cognizant Corporation: 200 Nyala Farms
Westport, CT 06880
Attention: General Counsel
To ACNielsen Corporation:
177 Broad Street
Stamford, CT 06901
Attention: General Counsel
8.5 Waivers. The failure of any party to require strict
performance by any other party of any provision in this Agreement will not waive
or diminish that party's right to demand strict performance thereafter of that
or any other provision hereof.
<PAGE> 29
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8.6 Amendments. This Agreement may not be modified or amended
except by an agreement in writing signed by each of the parties hereto.
8.7 Assignment. (a) Except as set forth in Article III above,
ACNielsen may not assign this Agreement, in whole or in part, directly or
indirectly, without the prior written consent of Cognizant.
(b) Cognizant may assign this Agreement to a purchaser of a
controlling interest in, or all or substantially all of the Assets of, NMR.
8.8 Successors and Assigns. The provisions to this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and permitted assigns.
8.9 Subsidiaries. Each of the parties hereto shall cause to be
performed, and hereby guarantees the performance of, all actions, agreements and
obligations set forth herein to be performed by any Subsidiary of such party or
by any entity that is contemplated to be a Subsidiary of such party on or after
the Distribution Date.
8.10 Third-Party Beneficiaries. Except as provided in Article
IV relating to Indemnities, this Agreement is solely for the benefit of the
parties hereto and their respective Subsidiaries and Affiliates and should not
be deemed to confer upon third parties any remedy, claim, Liability,
reimbursement, claim of action or other right in excess of those existing
without reference to this Agreement.
8.11 Titles and Headings. Titles and headings to sections
herein are inserted for the convenience of reference only and are not intended
to be a part of or to affect the meaning or interpretation of this Agreement.
8.12 Exhibits and Schedules. The Exhibits and Schedules shall
be construed with and as an integral part of this Agreement to the same extent
as if the same had been set forth verbatim herein.
8.13 GOVERNING LAW. THIS AGREEMENT 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.
8.14 Consent to Jurisdiction. Without limiting the provisions
of Article V hereof, each of the parties irrevocably submits to the exclusive
jurisdiction of (a) the Supreme Court of the State of New York, New York County,
and (b) the United States District Court for the Southern District of New York,
for the purposes of any suit, action or other proceeding arising out of this
Agreement or any transaction contemplated hereby. Each of the parties agrees to
commence any action, suit or proceeding relating hereto either in the United
States District Court for the Southern District of New York or if such suit,
action or other proceeding may not be brought in such court for jurisdictional
reasons, in the Supreme Court
<PAGE> 30
27
of the State of New York, New York County. Each of the parties further agrees
that service of any process, summons, notice or document by U.S. registered mail
to such party's respective address set forth above shall be effective service of
process for any action, suit or proceeding in New York with respect to any
matters to which it has submitted to jurisdiction in this Section 8.14. Each of
the parties irrevocably and unconditionally waives any objection to the laying
of venue of any action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby in (i) the Supreme Court of the State of New
York, New York County, or (ii) the United States District Court for the Southern
District of New York, and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient forum.
8.15 Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
COGNIZANT CORPORATION
By
---------------------------------
Name:
Title:
ACNIELSEN CORPORATION
By
---------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.9
FORM OF
INDEMNITY AND JOINT DEFENSE AGREEMENT
This INDEMNITY AND JOINT DEFENSE AGREEMENT is dated as of
________ __, 1996 (the "Agreement"), among THE DUN & BRADSTREET CORPORATION, a
Delaware corporation ("D&B"), COGNIZANT CORPORATION, a Delaware corporation,
("Cognizant"), and ACNIELSEN CORPORATION, a Delaware corporation ("ACNielsen").
WHEREAS, the Board of Directors of D&B has determined that it
is appropriate, desirable and in the best interests of the holders of shares of
common stock, par value $1.00 per share, of D&B (the "D&B Common Stock") to take
certain steps to reorganize D&B's Subsidiaries (as defined herein) and
businesses and then to distribute to the holders of the D&B Common Stock all the
outstanding shares of common stock of Cognizant, together with the appurtenant
share purchase rights, and all the outstanding shares of common stock of
ACNielsen, together with the appurtenant share purchase rights; and
WHEREAS, D&B, A.C. Nielsen Company and I.M.S. International,
Inc. ("IMS") have been named as defendants in an action commenced by Information
Resources, Inc. ("IRI") by the filing of its complaint dated July 29, 1996 in
the action captioned Information Resources, Inc. v. The Dun & Bradstreet
Corporation, A.C. Nielsen Co. and IMS International, Inc. (S.D.N.Y.) 96 Civ.
5716 (this action and any amended complaint or action arising out of the same or
substantially similar factual allegations by IRI or any successor or affiliate
thereof are referred to herein as the "Lawsuit");
WHEREAS, the reorganization of D&B's Subsidiaries and
businesses as contemplated by the Distribution Agreement (as defined herein)
could be potentially affected by the commencement of the Lawsuit, and in order
to consummate such reorganization in a timely fashion and in substantially the
manner contemplated prior to the commencement of the Lawsuit, the parties hereto
have determined that it is desirable to enter into this Agreement, and each
party hereto expressly acknowledges that the execution and delivery of this
Agreement does not in any manner constitute an admission that the Lawsuit has
any merit;
WHEREAS, pursuant to the terms and subject to the limitations
hereof, (x) ACNielsen has agreed, inter alia, to indemnify D&B and Cognizant
against IRI Liabilities (as defined below), up to a certain amount, which may be
incurred directly or indirectly by D&B or Cognizant, and (y) D&B and Cognizant
have agreed, inter alia, to indemnify ACNielsen against IRI Liabilities, in
excess of such amount, if any, which may be incurred directly or indirectly by
ACNielsen;
WHEREAS, the parties believe that they have a mutuality of
interest in a joint defense in connection with the Lawsuit and
<PAGE> 2
2
any additional actions, investigations or proceedings that have arisen or may
arise in connection with the subject matter of the Lawsuit;
WHEREAS, it is the intention and understanding of the parties
that communications between and among them as provided herein and any joint
interviews of prospective witnesses for the purpose of a joint defense are
confidential and are protected from disclosure to any third party by the
attorney-client privilege, the work product doctrine and any other applicable
privileges;
WHEREAS, in order to pursue a joint defense effectively, the
parties have also concluded that, from time to time, their mutual interests will
be best served by sharing privileged material, mental impressions, memoranda,
interview reports and other work products and information, including the
confidences of each party;
WHEREAS, it is a purpose of this Agreement to insure that the
exchanges and disclosures of privileged materials contemplated herein do not
diminish or constitute a waiver of any privilege that may otherwise be available
by virtue of any prior agreement, conduct, operation of law or otherwise;
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, D&B, Cognizant and ACNielsen agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. Capitalized terms used in this
Agreement and not defined herein shall have the meanings set forth in the
Distribution Agreement (as defined herein) and the following terms shall have
the following meanings:
"ACN Maximum Amount" means the maximum amount which, at the
time any IRI Liability becomes payable, a hypothetical investment banking firm
would determine that ACNielsen would be able to pay after giving effect to (i)
any recapitalization or similar corporate transaction, including, without
limitation, asset dispositions and/or increased borrowings or other capital
raising transactions, which would be recommended by such hypothetical investment
bank in order to maximize the claims paying ability of ACNielsen (a
"Hypothetical Recapitalization Plan"), and (ii) the payment of interest which
would be reasonably expected to be incurred on any ACN Notes and the payment of
investment banking, legal and other fees and expenses which would be reasonably
expected to be incurred in connection with such Hypothetical Recapitalization
Plan, without impairing the financial viability of ACNielsen or A.C. Nielsen
Company as either such company would exist after consummation of such
<PAGE> 3
3
Hypothetical Recapitalization Plan and the payment of such interest, fees and
expenses.
"ACN Note" shall have the meaning set forth in Section 2.1(c)
hereto.
"ACN Payment" shall have the meaning set forth in Section
2.1(b).
"ACNielsen" shall have the meaning set forth in the preamble
hereto.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of Voting Stock, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Ancillary Agreements" shall mean all of the written
agreements, instruments, assignments or other written arrangements (other than
this Agreement and the Distribution Agreement) entered into in connection with
the transactions contemplated by this Agreement and the Distribution Agreement,
including, without limitation, the Conveyancing and Assumption Instruments, the
Data Services Agreement, the Employee Benefits Agreement, the Intellectual
Property Agreement, the Shared Transaction Services Agreements, the TAM Master
Agreement, the Tax Allocation Agreement and the Transition Services Agreement.
"Board of Directors" shall mean, when used with respect to a
specified corporation, the board of directors of the corporation so specified.
"Business Combination" means, with respect to any Person, any
consolidation or merger or any sale, conveyance, assignment, transfer, lease or
other disposition of all or substantially all of the properties and assets of
such Person as an entirety in one transaction or series of transactions.
"Capital Lease Obligations" of a Person means any obligation
which is required to be classified and accounted for as a capital lease on the
balance sheet of such Person prepared in accordance with GAAP; the amount of
such obligations shall be the capitalized amount thereof, determined in
accordance with GAAP.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights to purchase, warrants, options, or
other equivalents (however designated) of capital stock of a corporation, and
any and all equivalent
<PAGE> 4
4
ownership interests in a Person other than a corporation, in each case whether
now outstanding or hereafter issued.
"Cash Equivalents" means, at any time, (a) any evidence of
Indebtedness with a maturity of 180 days or less from the date of acquisition
issued or directly and fully guaranteed or insured by the United States of
America or any agency or instrumentality thereof (provided that the full faith
and credit of the United States of America is pledged in support thereof); (b)
certificates of deposit, money market deposit accounts and acceptances with a
maturity of 180 days or less from the date of acquisition of any financial
institution that is a member of the Federal Reserve System having combined
capital and surplus and undivided profits of not less than $500 million; (c)
commercial paper with a maturity of 180 days or less from the date of
acquisition issued by a corporation that is not an Affiliate of ACNielsen and is
organized under the laws of any state of the United States or the District of
Columbia whose debt rating, at the time as of which such investment is made, is
at least "A-1" by Standard & Poor's Corporation or at least "P-1" by Moody's
Investors Service, Inc. or rated at least an equivalent rating category of
another nationally recognized securities rating agency; (d) repurchase
agreements and reverse repurchase agreements having a term of not more than 30
days for underlying securities of the types described in clause (a) above
entered into with a financial institution meeting the qualifications described
in clause (b) above; (e) any security, maturing not more than 180 days after the
date of acquisition, backed by standby or direct pay letters of credit issued by
a bank meeting the qualifications described in clause (b) above; and (f) any
security, maturing not more than 180 days after the date of acquisition, issued
or fully guaranteed by any state, commonwealth, or territory of the United
States of America, or by any political subdivision thereof, and rated at least
"A" by Standard & Poor's Corporation or at least "A" by Moody's Investors
Service, Inc. or rated at least an equivalent rating category of another
nationally recognized securities rating agency.
"Cognizant" shall have the meaning set forth in the preamble
hereto.
"Cognizant Counsel" shall have the meaning set forth in
Section 4.1(b) hereto.
"Cognizant/D&B Payment" shall have the meaning set forth in
Section 2.1(b) hereto.
"Consolidated Earnings Before Interest, Taxes, Depreciation
and Amortization" means for any period the sum of Consolidated Net Income plus,
to the extent deducted in computing Consolidated Net Income, Consolidated
Interest Expense, Consolidated Tax Expense, all depreciation and, without
duplication, all amortization, in each case, for such period, of
<PAGE> 5
5
the Relevant Party and its Subsidiaries on a consolidated basis, all as
determined in accordance with GAAP.
"Consolidated Interest Expense" means for any period the sum
of (a) the aggregate of the interest expense on Indebtedness of the Relevant
Party and its Subsidiaries for such period, on a consolidated basis as
determined in accordance with GAAP (excluding the amortization of costs relating
to original debt issuances but including the amortization of debt discount) plus
(b) without duplication, that portion of Capital Lease Obligations of the
Relevant Party and its Subsidiaries representing the interest factor for such
period as determined in accordance with GAAP plus (c) without duplication,
dividends paid in respect of preferred stock of Subsidiaries or Disqualified
Stock of the Relevant Party to Persons other than the Relevant Party or a wholly
owned Subsidiary.
"Consolidated Net Income" means for any period the net income
or loss of the Relevant Party and its Subsidiaries for such period on a
consolidated basis as determined in accordance with GAAP, adjusted by excluding
the after-tax effect of (a) any gains (but not losses) from currency exchange
transactions not in the ordinary course of business; (b) the net income of any
Person which is not a Subsidiary or is accounted for by the equity method of
accounting except to the extent of the amount of dividends or distributions
actually paid in cash by such Person to the Relevant Party or a Subsidiary of
the Relevant Party during such period; (c) except to the extent includible
pursuant to clause (b), the net income of any Person accrued prior to the date
it becomes a Subsidiary of the Relevant Party or is merged into or consolidated
with the Relevant Party or any of its Subsidiaries or such Person's assets are
acquired by the Relevant Party or any of its Subsidiaries; (d) net gains
attributable to write-ups (determined after taking into account losses
attributable to write-downs) of assets or liabilities other than in the ordinary
course of business; (e) the cumulative effect of a change in accounting
principles; and (f) net income from discontinued operations.
"Consolidated Net Worth" of a Person and its Subsidiaries
means as of any date all amounts that would be included under stockholders'
equity on a consolidated balance sheet of such Person and its Subsidiaries
determined in accordance with GAAP.
"Consolidated Tax Expense" means for any period the aggregate
of the federal, state, local and foreign income tax expense of the Relevant
Party and its Subsidiaries for such period, on a consolidated basis as
determined in accordance with GAAP, to the extent deducted in computing
Consolidated Net Income.
"Counsel of Record" shall have the meaning set forth in
Section 4.1(a).
<PAGE> 6
6
"D&B" shall have the meaning set forth in the preamble hereto.
"D&B Common Stock" shall have the meaning set forth in the
recitals hereto.
"D&B Counsel" shall have the meaning set forth in Section
4.1(b) hereto.
"Defense Costs" shall have the meaning set forth in Section
4.1(h).
"Defense Materials" shall have the meaning set forth in
Section 4.1(c) hereto.
"Disqualified Firm" shall have the meaning set forth in
Section 2.2(a) hereto.
"Disqualified Stock" means any Capital Stock which pays a
mandatory dividend (other than in Capital Stock) or which, by its terms (or by
the terms of any security into which it is convertible or exchangeable), or upon
the happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part or is exchangeable for debt securities of ACNielsen
or its Subsidiaries.
"Distribution Agreement" shall mean the Distribution Agreement
among D&B, Cognizant and ACNielsen.
"Fixed Charge Coverage Ratio" means for any period the ratio
of Consolidated Earnings Before Interest, Taxes, Depreciation and Amortization
to Consolidated Interest Expense for such period; provided, however, that in
making such computation, the interest expense on any Indebtedness to be incurred
and computed on a pro forma basis and bearing a floating interest rate shall be
computed as if the rate in effect on the date of computation had been the
applicable rate for the entire period.
"GAAP" means the generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession in the United States, in each case applied on a
consistent basis.
"Hypothetical Recapitalization Plan" shall have the meaning
set forth in the definition of "ACN Maximum Amount", above.
<PAGE> 7
7
"IMS" shall have the meaning set forth in the recitals hereto.
"IMS Counsel" shall have the meaning set forth in Section
4.1(b) hereto.
"Indebtedness" means, with respect to any Person, without
duplication, (a) the principal of and premium (if any) in respect of (i)
indebtedness of such Person for money borrowed and (ii) indebtedness evidenced
by notes, indentures, bonds, other similar instruments for the payment of which
such Person is responsible or liable; (b) all Capital Lease Obligations of such
Person; (c) all obligations of such Person issued or assumed as the deferred
purchase price of property; (d) all obligations of such Person for the
reimbursement of any obligor on any letter of credit or similar credit
transaction; (e) all dividends on Capital Stock issued by third parties for the
payment of which such Person is responsible; (f) all obligations of the type
referred to in clauses (a) through (e) above of third parties secured by any
Lien on any property or asset of such Person, the amount of such obligation
being deemed to be the lesser of the value of such property or assets or the
amount of the obligation so secured; (g) indebtedness secured by any Lien
existing on property acquired by such Person subject to such Lien, whether or
not the indebtedness secured thereby shall have been assumed, provided that if
such Person has not assumed such Indebtedness the amount of Indebtedness of such
Person shall be deemed to be the lesser of the value of such acquired property
or the amount of the indebtedness secured; (h) guarantees, endorsements and
other obligations, whether or not contingent, in respect of, or agreements to
purchase or otherwise acquire, Indebtedness of other Persons; (i) all
Disqualified Stock issued by such Person valued at the greater of its voluntary
or involuntary maximum fixed repurchase price plus accrued and unpaid dividends;
(j) preferred stock issued by any Subsidiary valued at the greater of its
voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid
dividends; and (k) all obligations under or in respect of Interest Rate
Protection or other Hedging Agreements.
For purposes of this definition, "maximum fixed repurchase
price" of any preferred stock issued by any Subsidiary and of any Disqualified
Stock which does not have a fixed repurchase price shall be calculated in
accordance with the terms of such preferred stock or such Disqualified Stock as
if such preferred stock or such Disqualified Stock were purchased on any date on
which Indebtedness shall be required to be determined pursuant to the Indenture,
and if such price is based upon, or measured by, the fair market value of such
preferred stock or Disqualified Stock, such fair market value shall be
determined in good faith by the board of directors of the issuer of such
preferred stock or such Disqualified Stock.
<PAGE> 8
8
"Interest Rate Protection and Other Hedging Agreements" means
one or more of the following agreements entered into by one or more financial
institutions: (a) interest rate protection agreements (including, without
limitation, interest rate swaps, caps, floors, collars and similar agreements),
(b) foreign exchange contracts, currency swap agreements or other, similar
agreements or arrangements designed to protect against fluctuations in currency
values and/or (c) other types of hedging agreements from time to time.
"IRI" shall have the meaning set forth in the recitals hereto.
"IRI Liabilities" shall have the meaning set forth in Section
2.1(a) hereto.
"Lawsuit" shall have the meaning set forth in the recitals
hereto.
"Lien" means any mortgage, lien, pledge, security interest,
conditional sale or other title retention agreement or other security interest
or encumbrance of any kind (including any agreement to give any security
interest).
"Note Amount" shall have the meaning set forth in Section
2.1(c) hereto.
"Parent" of a Person means any other Person with the power to
direct the management and policies of such Person, directly or indirectly,
whether through ownership of Voting Stock, by contract or otherwise.
"Party Counsel" shall have the meaning set forth in Section
4.1(b) hereto.
"Payment Date" shall mean the day on which the IRI
Liabilities, if any, are ultimately required to be paid.
"Person" shall mean any natural person, corporation, business
trust, joint venture, association, company, partnership or government, or any
agency or political subdivision thereof.
"Recapitalization Plan" shall have the meaning set forth in
Section 2.2(c) hereto.
"Related Person" means (a) any Affiliate of ACNielsen, (b) any
Person who directly or indirectly holds 5% or more of any class of Voting Stock
of ACNielsen, (c) any Person who is an executive officer or director of
ACNielsen and (d) any Affiliate of or any relative by blood, marriage or
adoption not more remote than first cousin of any such Person referred to in
clause (b) or (c) above.
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9
"Relevant Party" shall have the meaning set forth in Section
3.4 hereto.
"Restricted Payment" means, with respect to ACNielsen and its
Subsidiaries, (a) any declaration or payment of any dividend on, or any
distribution in respect of, or any purchase, redemption or retirement for value
of, any Capital Stock of ACNielsen or such Subsidiary or any deposit with
respect to the foregoing (other than (i) through the issuance of Capital Stock
of ACNielsen, other than Disqualified Stock or rights to Disqualified Stock, and
(ii) dividends or distributions payable solely to ACNielsen or a wholly owned
Subsidiary), other than dividends or repurchases contemplated by the
Distribution Agreement or any Ancillary Agreement, (b) any charitable
contribution, (c) any voluntary payments to pension or other benefit plans, or
(d) any accelerated payment of any accounts payable or any cancellation or
discounting of, or delay or extension in the collection of, any accounts
receivable, unless such acceleration, cancellation, discounting, delay or
extension, as the case may be, is in the ordinary course of ACNielsen's
business.
"Service" shall mean the Internal Revenue Service or any
successor entity thereto.
"Strategic Transaction" shall mean any acquisition or
disposition of any business or of any assets comprising a business, or any
acquisition or disposition of any interest in a joint venture or other equity
investment in any business.
"Subsidiary" shall mean any corporation, partnership or other
entity of which another entity (a) owns, directly or indirectly, ownership
interests sufficient to elect a majority of the Board of Directors (or persons
performing similar functions) (irrespective of whether at the time any other
class or classes of ownership interests of such corporation, partnership or
other entity shall or might have such voting power upon the occurrence of any
contingency) or (b) is a general partner or an entity performing similar
functions (e.g., a trustee).
"Viability Opinion" shall have the meaning set forth in
Section 2.2(c) hereto.
"Voting Stock" means all outstanding classes of Capital Stock
of any entity entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof.
"Withdrawing Party" shall have the meaning set forth in
Section 4.1(g).
ARTICLE II
ALLOCATION OF LIABILITIES/ARBITRATION OF ACN MAXIMUM AMOUNT
<PAGE> 10
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SECTION 2.1. Allocation of Liabilities. (a) The parties agree
that in the event that liabilities are incurred by any party hereto or any
Subsidiary thereof directly relating to, arising out of or resulting from a
final, non-appealable judgment being entered, or any settlement permitted hereby
being entered into, in connection with the Lawsuit, such liabilities ("IRI
Liabilities") shall be allocated among the parties as follows:
(i) ACNielsen agrees to assume exclusive liability for
the IRI Liabilities up to the ACN Maximum Amount; and
(ii) Cognizant and D&B each agree to assume exclusive
liability for 50% of any IRI Liabilities not payable
by ACNielsen pursuant to this Agreement.
(b) No later than five business days after the date on which
any IRI Liabilities are incurred, ACNielsen shall give notice to each of
Cognizant and D&B of the amount of such IRI Liabilities which ACNielsen will
then pay (such amount, the "ACN Payment") and of the amount which ACNielsen has
determined to be the ACN Maximum Amount, and ACNielsen will deliver the ACN
Payment to Counsel of Record for delivery to the plaintiff in the Lawsuit. Each
of Cognizant and D&B agrees to pay to the plaintiff in the Lawsuit on the
Payment Date an amount equal to 50% of the excess (if any) of (x) the aggregate
amount of the IRI Liabilities over (y) the ACN Payment (such amount, the
"Cognizant/D&B Payment"). In the event Cognizant or D&B disputes or disagrees
with ACNielsen's determination of the ACN Maximum Amount, the dispute shall be
resolved and the ACN Maximum Amount determined as described in Section 2.2.
(c) Upon the payment of the Cognizant/D&B Payment pursuant to
the immediately preceding sentence, ACNielsen shall issue a note (an "ACN Note")
to each of Cognizant and D&B. The principal amount of each ACN Note shall be
equal to the Note Amount, as defined below, and each such ACN Note shall be in
the form of Schedule A hereto. Interest on the Note Amount as finally determined
for each ACN Note shall accrue at a rate equal to the rate of interest per annum
publicly announced from time to time by The Chase Manhattan Bank as its prime
rate in effect at its principal office in New York City and shall be payable at
maturity. For purposes hereof, the "Note Amount" of each Note shall initially be
equal to the Cognizant/D&B Payment, provided, however, (i) that upon the
determination of the ACN Maximum Amount, if the Note Amount is greater than 50%
of the difference between the ACN Maximum Amount and the ACN Payment, then the
Note Amount shall be reduced to and shall equal 50% of such difference, and (ii)
that upon receipt of the aggregate amount of proceeds generated by any
Recapitalization Plan (as defined below) upon completion thereof in accordance
with the first sentence of Section 2.2(g), if the Note Amount (after giving
effect to any adjustment pursuant to clause (i)) is greater than
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50% of the amount of such proceeds, then the Note Amount shall be reduced to and
shall equal 50% of the amount of such proceeds. The Note Amount, together with
accrued and unpaid interest thereon, shall be payable upon the earlier of (x)
the completion of the Recapitalization Plan, provided, however, that if the
Recapitalization Plan is structured to generate proceeds which are receivable by
ACNielsen at different times without being contingent upon the completion of any
other aspect of the Recapitalization Plan, then at each time that proceeds are
so received, 50% of such proceeds shall be payable to each of Cognizant and D&B,
and the receipt by Cognizant and D&B of their respective share of such proceeds
shall reduce the then applicable Note Amount accordingly, and (y) the
declaration by the Payee of an ACN Note (as defined therein) that such Note
Amount and interest thereon are immediately due and payable in accordance with
the terms of such ACN Note upon determination being made under Section 2.2(g)
hereof that ACNielsen has not exercised its good faith best efforts to implement
the Recapitalization Plan as soon as practicable, or as otherwise provided by
such ACN Note.
(d) Immediately after the Payment Date, ACNielsen agrees to
grant to, and to cause each of its Subsidiaries to grant to, Cognizant and D&B,
as collateral security for the payment and performance of ACNielsen's
obligations under the ACN Notes and otherwise to indemnify Cognizant and D&B
against any IRI Liabilities as required by this Article II, a perfected first
priority security interest in all of its tangible and intangible assets
(including, without limitation, intellectual property, real property and all of
the capital stock of each of its direct and indirect domestic subsidiaries and
first-tier foreign subsidiaries), to the extent permitted by any other bona fide
security or other similar agreements with third-parties not controlled by
ACNielsen or any of its Affiliates, pursuant to such documents (the "Security
Documents") as Cognizant and D&B shall deem reasonably necessary or advisable to
grant to them a perfected first priority lien on such assets. Each of the
Security Documents shall be in form and substance reasonably satisfactory to
Cognizant and D&B, shall contain terms and conditions which are usual and
customary for similar documents delivered in secured financings and shall
include guarantees executed and delivered by each of ACNielsen's Subsidiaries
which shall be secured by the security interests granted by such Subsidiaries
pursuant to the Security Documents. Without limiting the foregoing, ACNielsen
agrees to take, and to cause each of its Subsidiaries to take, all actions
necessary or advisable to cause the liens granted pursuant to the Security
Documents to be duly perfected in accordance with all applicable requirements of
law, including, without limitation, the filing of financing statements in such
jurisdictions as may be requested by Cognizant and D&B and the delivery to
Cognizant and D&B (or their representative) of any certificates representing
pledged stock, together with undated stock powers executed and delivered in
<PAGE> 12
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blank by a duly authorized officer of ACNielsen or the relevant Subsidiary.
SECTION 2.2. Arbitration of ACN Maximum Amount. (a) Cognizant,
D&B and ACNielsen expressly agree that any dispute or disagreement concerning
the ACN Maximum Amount shall be submitted to binding arbitration and agree that
disputes concerning the ACN Maximum Amount shall be resolved by an
internationally recognized investment banking firm, as arbitrator, pursuant to
the procedures and instructions set forth below. Such arbitrator shall be chosen
by ACNielsen, Cognizant and D&B, unless the parties cannot agree within two
business days of the determination of the Cognizant/D&B Payment, in which case
the arbitrator shall be selected through a random drawing, conducted jointly by
the parties, in which each party selects and enters the name of one of the firms
listed on Schedule B hereto and the firm whose name is picked in such drawing
shall be the arbitrator, provided, however, that if the firm picked is a
"Disqualified Firm", the process shall be repeated until the firm picked is not
a Disqualified Firm. A "Disqualified Firm" shall be any firm which could
reasonably be expected to be partial to one or more parties hereto within the
meaning of Section 10(b) of the Federal Arbitration Act. Any firm picked by such
drawing shall, within two business days, disclose to each of the parties hereto
any and all potential conflicts of interest with respect to any of the parties.
The parties shall have two business days from receiving such disclosure to
dispute such firm's impartiality. The parties agree that failure to dispute any
such firm's impartiality within such period shall constitute a waiver of any
right to challenge such firm's impartiality based on facts known or disclosed at
such time. Any dispute concerning whether or not a firm is a Disqualified Firm
shall be resolved by a single arbitrator, who shall be a lawyer, selected by the
parties or, if the parties are unable to agree on an arbitrator within two
business days, then one shall be selected by the American Arbitration
Association in accordance with its most expeditious procedures. The arbitrator
selected to resolve any dispute concerning the impartiality of a proposed
investment banking firm shall be instructed to resolve such dispute within ten
business days pursuant to the dispute resolution procedures set forth in Section
6.2 of the Distribution Agreement. The place of any such arbitration shall be in
New York City, New York.
(b) Cognizant, D&B and ACNielsen agree that any arbitrator or
arbitrators appointed to resolve any dispute pursuant to Article VI of the
Distribution Agreement shall have no right, authority or jurisdiction to
determine the ACN Maximum Amount, to resolve any dispute concerning the
determination of the ACN Maximum Amount, to resolve any other dispute arising
under this Article II (except in the limited circumstance explicitly set forth
in the penultimate sentence of the preceding paragraph), or to prevent, delay or
otherwise interfere with any such dispute arbitration or determination, and that
any dispute
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concerning the determination of the ACN Maximum Amount shall only be resolved by
an investment banking firm appointed as arbitrator pursuant hereto. The
determination of the ACN Maximum Amount and the resolution of any other dispute
arising under this Article II by such investment banking firm shall be made
without any party hereto asserting any other claims, offsets, defenses or
counterclaims. Each of Cognizant, D&B and ACNielsen agrees that notwithstanding
any other disputes between or among any of them or any of their respective
Subsidiaries under the Distribution Agreement, any Ancillary Agreement or
otherwise, such party will not take any action to prevent or delay the
arbitration contemplated hereby or claim any right to offset any claim or amount
payable hereunder. The parties hereto intend the provisions to arbitrate set
forth in this Article II to be valid, enforceable and irrevocable. Any award
rendered by the arbitrator shall be final and binding on the parties and their
respective Subsidiaries, and judgment on the award rendered by the arbitrator
may be entered in any court having jurisdiction thereof in accordance with
Section 5.15 hereof.
(c) The investment banking firm chosen as arbitrator to
resolve any disputes concerning the ACN Maximum Amount may perform such
financial analyses and studies and consider such historical and projected
financial information and other data as it deems relevant, and shall afford each
party with an opportunity to be heard and to present financial information and
other data relevant to the determination of the ACN Maximum Amount. Such
investment banking firm shall be directed to make an award determining the ACN
Maximum Amount as the maximum amount which, at the time any such IRI Liabilities
become payable, ACNielsen is able to pay after giving effect to (i) any
recapitalization or similar corporate transaction, including, without
limitation, asset dispositions and/or increased borrowings or other capital
raising transactions, that may be submitted pursuant to paragraph (e) below in
order to maximize the claims paying ability of ACNielsen (a "Recapitalization
Plan"), and (ii) the payment of interest on the ACN Notes and investment
banking, legal and other fees and expenses reasonably expected to be incurred in
connection with such Recapitalization Plan, without impairing the financial
viability of ACNielsen or A.C. Nielsen Company as either such company would
exist after consummation of the Recapitalization Plan and the payment of such
interest, fees and expenses. The award made by such investment banking firm
shall also allocate the IRI Liabilities based on the ACN Maximum Amount, as
determined by such investment banking firm, strictly in accordance with Section
2.1 (a) hereof. Such investment banking firm shall consider the amount of any
proceeds to be received by ACNielsen pursuant to any counterclaim against IRI in
connection with the Lawsuit. In addition to the award required by this paragraph
(c), such investment banking firm shall deliver a written opinion addressed to
the Boards of Directors of each of ACNielsen, Cognizant, D&B and A.C. Nielsen
Company (a) confirming any determination of the ACN Maximum Amount and (b) to
the effect that, after taking into account the
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Recapitalization Plan, the payment of interest on the ACN Notes, the payment of
related fees and expenses and the payment of the ACN Maximum Amount as so
determined, each of ACNielsen and A.C. Nielsen Company will be financially
viable as described below (the "Viability Opinion").
(d) Notwithstanding any amount determined by an investment
banking firm as contemplated hereby, the ACN Maximum Amount may never exceed an
amount which would require the portion of the ACN Maximum Amount payable by A.C.
Nielsen Company to exceed an amount which, if paid by A.C. Nielsen Company
immediately prior to the Distribution, would have prevented A.C. Nielsen Company
from immediately after the Distribution paying $1.00 of dividends out of surplus
in compliance with Delaware law.
(e) In addition to the award required by paragraph (c) above,
such investment banking firm shall be directed to prepare and submit to the
parties a Recapitalization Plan which shall be designed to give effect to the
goal of the parties to maximize the ACN Maximum Amount without preventing such
investment banking firm from delivering the Viability Opinion, but which shall
not require any action requiring shareholder approval pursuant to the Delaware
General Corporation Law or the Certificate of Incorporation or By-Laws of
ACNielsen as in effect on the date hereof or any transaction which, in the sole
discretion of such investment banking firm, is not reasonably practicable in the
circumstances.
(f) For purposes of this Section 2.2 and of the Viability
Opinion, financial viability of each of ACNielsen and A.C. Nielsen Company shall
mean the ability of ACNielsen and A.C. Nielsen Company, respectively, after
giving effect to the Recapitalization Plan, the payment of interest on the ACN
Notes, the payment of related fees and expenses and the payment by ACNielsen of
the ACN Maximum Amount and the payment by A.C. Nielsen Company of the portion,
if any, of the ACN Maximum Amount payable by A.C. Nielsen Company, (i) to pay
its debts as they become due and payable and (ii) to finance the current and
anticipated operating and capital requirements of its business, as
reconstituted, for two years from the date any such Recapitalization Plan is
expected to be implemented.
(g) ACNielsen agrees (i) to cause its management to cooperate
with such investment banking firm and (ii) to exercise its good faith best
efforts, and to cause its Board of Directors and management to use good faith
best efforts, to implement the Recapitalization Plan as soon as practicable and
to take all actions which may be necessary or appropriate in connection
therewith. Cognizant and D&B agree that notwithstanding Section 2.1(a), if
ACNielsen has used its good faith best efforts to implement the Recapitalization
Plan as soon as practicable but the sum of the aggregate proceeds generated
thereby and the ACN Payment are less than the ACN Maximum Amount, then, upon
payment
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of such proceeds to Cognizant and D&B, any such deficit shall be forgiven, and
ACNielsen's obligation to assume the IRI Liabilities up to the ACN Maximum
Amount hereunder shall be deemed discharged. In no event will the failure of
ACNielsen to take the action provided for in the first sentence of this Section
2.2(g) relieve ACNielsen of its obligation to pay the ACN Maximum Amount, and
ACNielsen agrees that if a determination is made pursuant to the next succeeding
sentence that ACNielsen has not used its good faith best efforts to implement
the Recapitalization Plan as soon as practicable, then (x) ACNielsen shall
remain liable for the full ACN Maximum Amount, and (y) immediately after
receiving the investment banking firm's determination referred to in the
succeeding sentence, Cognizant and D&B shall be entitled (a) to enforcement of
or entry of a judgment upon the award of the ACN Maximum Amount by the Supreme
Court of the State of New York, New York County, or the United States District
Court for the Southern District of New York in accordance with Section 5.15
hereof or (b) to declare the Note Amount and interest thereon to be immediately
due and payable in accordance with the terms of such ACN Note. Any dispute
concerning whether or not ACNielsen has used its good faith best efforts to
implement the Recapitalization Plan as promptly as practicable shall be
submitted to and finally determined by the investment banking firm which
prepared and submitted such Recapitalization Plan, in the sole discretion of
such investment banking firm, after giving each of the parties hereto an
opportunity to be heard, and based on its knowledge of the Recapitalization
Plan, the manner and degree to which such plan has actually been implemented
and the goal of the parties to maximize ACN Maximum Amount pursuant hereto. Any
such determination shall be made in writing and delivered to the parties hereto
promptly (i) upon the completion of such Recapitalization Plan or (ii) in
response to a request by any party hereto that such a determination be made.
(h) Without prejudice to such arbitral immunity to which the
arbitrator shall be entitled, each of ACNielsen, Cognizant and D&B agrees to
enter into an indemnification agreement with the investment banking firm engaged
to act as arbitrator to determine the ACN Maximum Amount, to deliver the
Viability Opinion and to make the determination contemplated by Section 2.2(g)
hereof in such form as such investment banking firm may reasonably request and
as may be reasonably customary in the circumstances. Each of the parties further
acknowledges that the fees and expenses of such investment banking firm shall be
included in the expenses used in determining the ACN Maximum Amount, and that
such firm shall look to ACNielsen as the primary obligor for payment of such
fees and expenses and to Cognizant and D&B as secondary obligors. Each of the
parties further agrees that such investment banking firm may retain its own
counsel (the reasonable fees of such counsel to be included in the expenses used
in determining the ACN Maximum Amount) and that such investment banking firm may
rely on such counsel for legal advice and may rely on financial information,
including
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projections, provided by ACNielsen management and may assume the
accuracy and reasonableness of any such projections.
SECTION 2.3. Other Agreements Relating to Allocation of IRI
Liabilities. (a) Each of ACNielsen, Cognizant and D&B agrees not to amend or
waive any provision of this Agreement which would have the effect of releasing
Cognizant or D&B of their obligations under Section 2.1 (a)(ii) above unless, at
such time, A.C. Nielsen Company could pay the maximum possible amount of any IRI
Liabilities and immediately thereafter pay $1.00 of dividends out of surplus in
compliance with Delaware law.
(b) If either D&B or Cognizant acquires beneficial ownership
of 20% or more of the outstanding Voting Stock of IRI or any successor thereof
(an "IRI Investor"), then such IRI Investor shall be deemed to be Withdrawing
Party for purposes of and with the consequences set forth in Section 4.1 (g).
(c) Cognizant and D&B agree that if it shall be necessary to
post any bond pending any appeal of the Lawsuit or otherwise in connection
therewith, Cognizant and D&B shall promptly procure such a bond, and each shall
pay 50% of the cost thereof, provided that such cost shall be added to and be
deemed to be part of the IRI Liabilities hereunder.
(d) The directors of A.C. Nielsen Company immediately prior to
the Distribution shall be third-party beneficiaries of the agreements set forth
in Article II.
ARTICLE III
COVENANTS OF ACNIELSEN
SECTION 3.1. Limitation on Restricted Payments. ACNielsen will
not, directly or indirectly, and will not permit any Subsidiary to, make any
Restricted Payment if, at the time of such Restricted Payment, and giving effect
thereto, the aggregate amount of all Restricted Payments (the amount of such
payments, if other than in cash, having been determined in good faith by the
ACNielsen Board of Directors, whose determination shall be conclusive and
evidenced by a Board resolution certified and delivered to each of Cognizant and
D&B) declared and made after the Distribution Date would exceed the sum of:
(a) $15 million; and
(b) 20% of the aggregate Consolidated Net Income (or, if such
Consolidated Net Income is a negative number, 100% of such consolidated net
loss) of ACNielsen accrued on a cumulative basis during the period beginning on
the Distribution Date and ending on the last day of ACNielsen's last fiscal
quarter ending prior to the date of such proposed Restricted Payment (except
that the amount, if any, of consolidated net loss shall not
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reduce the $15 million amount available pursuant to clause (a) above);
provided, however, that the foregoing provisions will not prevent the payment of
a dividend within 60 days after the date of its declaration if at the date of
declaration such payment was permitted by the foregoing provisions.
SECTION 3.2. Limitation on Transactions with Related Persons.
At any time when the Voting Stock of ACNielsen is not listed and traded on The
New York Stock Exchange, The American Stock Exchange or the National Market
System of the National Association of Securities Dealers Automated Quotation
System, ACNielsen will not, and will not permit any of its Subsidiaries to,
directly or indirectly, enter into or suffer to exist any transaction or series
of related transactions (including, without limitation, the sale, purchase,
exchange or lease of assets, property or services) with any Related Person
(other than a wholly owned Subsidiary) unless such transaction or series of
transactions is on terms that are no less favorable to ACNielsen or such
Subsidiary, as the case may be, than would be available in a comparable
transaction with an unrelated third party and (a) where such transaction or
series of transactions involves aggregate consideration (including, without
limitation, the assumption of indebtedness) in excess of 2.5% of ACNielsen's
Consolidated Net Worth as of the end of the prior fiscal year, such transaction
or series of transactions is approved by a majority of the Board of Directors of
ACNielsen, including the approval of a majority of the independent,
disinterested directors, and (b) where such transaction or series of
transactions involves aggregate consideration (including, without limitation,
the assumption of indebtedness) in excess of 7.5% of ACNielsen's Consolidated
Net Worth as of the end of the prior fiscal year, ACNielsen also delivers to
Cognizant and D&B an opinion from an internationally recognized investment
banking firm as to the fairness of such transaction or series of transactions to
ACNielsen or such Subsidiary from a financial point of view (without
considering, for purposes of such fairness opinion, any impact which such
transaction may have on the ACN Maximum Amount). For purposes of the foregoing,
a series of related transactions will be deemed to include, without limitation,
a series of transactions if, within six months of closing one transaction,
another transaction is entered into with the same Person or with a successor or
affiliate thereof. Notwithstanding the foregoing, this provision will not apply
to (i) any transactions contemplated by the Distribution Agreement or any
Ancillary Agreement; (ii) compensation or employee benefit arrangements with any
officer or director of ACNielsen; and (iii) any transaction entered into in the
ordinary course of business by ACNielsen or a wholly owned Subsidiary with a
wholly owned Subsidiary.
SECTION 3.3. Merger and Consolidation. ACNielsen may not
engage in any Business Combination with any Person, unless
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(a) either (i) ACNielsen shall be the continuing corporation and the Persons who
were ACNielsen stockholders immediately prior to transaction or series of
transactions continue to hold more than 50% of the Voting Stock of the
continuing corporation upon consummation of such transaction or series of
transactions, or (ii) (A) such Person and such Person's Parent, if any, (x)
shall be a corporation, partnership or trust organized and validly existing
under the laws of the United States or any State thereof or the District of
Columbia or (y) shall duly execute and deliver a consent to jurisdiction in
substantially the form of Schedule C hereto, (B) such Person and, if such Person
has a Parent, such Parent shall expressly assume all of ACNielsen's obligations
hereunder, (C) such Person, or such Person's Parent, if any, shall be included
with ACNielsen for purposes of determining the ACN Maximum Amount and (D) in the
event clause (ii)(y) is applicable, a certificate signed by ACNielsen's Chief
Executive Officer and by its General Counsel is delivered to each of Cognizant
and D&B at least 30 days prior to the consummation of the proposed transaction
which certifies that the consent to jurisdiction contemplated by such clause
(ii)(y) has been executed and will take effect on the consummation of such
transaction and which certificate attaches thereto a duly executed copy of such
consent to jurisdiction; (b) immediately after such transaction or each element
of such series, ACNielsen and its Subsidiaries or such Person, or such Person's
Parent, if any, and its Subsidiaries shall have a Consolidated Net Worth equal
to or greater than the Consolidated Net Worth of ACNielsen and its Subsidiaries
immediately prior to such transaction or element; and (c) such transaction or
series of transactions is permitted under Section 3.4 below.
SECTION 3.4. Limitation on Certain Transactions. (a) ACNielsen
will not enter into any Strategic Transaction or engage in any Business
Combination unless the Chief Executive Officer or the Chief Financial Officer of
ACNielsen delivers a certificate to Cognizant and D&B certifying that, after
giving pro forma effect to such Strategic Transaction or Business Combination,
the Fixed Charge Coverage Ratio of ACNielsen, or, in the case of a Business
Combination, the Fixed Charge Coverage Ratio of the continuing corporation
following such Business Combination (ACNielsen or such continuing corporation,
as the case may be, referred to as the "Relevant Party"), in each case
calculated as set forth in Section 3.4(c) below, is greater than 4 to 1, which
certificate shall be accompanied by a letter from the Relevant Party's
independent accountants confirming that such Fixed Charge Coverage Ratio has
been correctly calculated in accordance with the requirements hereof and based
on financial statements prepared in accordance with U.S. generally accepted
accounting principles.
(b) In addition, ACNielsen will not enter into any Strategic
Transaction or engage in any Business Combination involving aggregate
consideration (including, without limitation,
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the assumption of indebtedness) in excess of $50 million, unless
the following conditions are met:
(i) the Board of Directors of each of ACNielsen, Cognizant and
D&B has received an opinion in writing from an internationally
recognized investment bank chosen by ACNielsen, to the effect that such
transaction is fair, from a financial point of view, to ACNielsen
(without considering, for purposes of such fairness opinion, any impact
which such transaction may have on the ACN Maximum Amount); and
(ii) in the case of a disposition of a business, an equity
interest in a business or the disposition of assets comprising a
business, which disposition does not involve the simultaneous equity
investment in a joint venture entity which is the acquirer of such
business, equity investment or assets, the consideration therefor is
limited to cash, Cash Equivalents and/or marketable securities which
are freely tradable on a public stock exchange or inter-dealer
quotation system.
(c) The Fixed Charge Coverage Ratio shall be for the most
recent four consecutive full fiscal quarters ending prior to such certification,
taken as one period, and calculated on the assumptions that (i) any Indebtedness
to be incurred in connection with an acquisition or Business Combination had
been incurred on the first day of such four-quarter period, (ii) any other
Indebtedness incurred, repaid or retired by the Relevant Party and its
Subsidiaries since the beginning of such four-quarter period was incurred,
repaid or retired, as the case may be, on the first day of such four-quarter
period (except that, in making such computation, the amount of Indebtedness
under any revolving credit facility outstanding on the date of such calculation
shall be computed based on (A) the average daily balance of such Indebtedness
during such four-quarter period or during such shorter included period when such
facility was outstanding or (B) if such facility was created after the end of
such four-quarter period, the average daily balance of such Indebtedness during
the period from the date of creation of such facility to the date of the
calculation) and (iii) any acquisition or disposition by the Relevant Party or
its Subsidiaries of any assets out of the ordinary course of business or of any
company, division or line of business, in each case since the first day of its
last four completed fiscal quarters, had been consummated on such first day of
such four-quarter period.
(d) For purposes of the foregoing, any issuance or transfer of
any Capital Stock of a wholly owned Subsidiary which is a holder of obligations
of a Subsidiary that constitute Indebtedness shall be deemed an incurrence of
Indebtedness if such issuance or transfer results in such wholly owned
Subsidiary no longer being a wholly owned Subsidiary.
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(e) Paragraphs (a) and (b) above shall not apply to any
transaction which is contemplated by the Distribution Agreement or any Ancillary
Agreement.
SECTION 3.5. Limitation on Reincorporation. ACNielsen will
not, without the prior written consent of each of Cognizant and D&B,
re-incorporate or re-organize its corporate form under the laws of a
jurisdiction other than the State of Delaware unless ACNielsen, as
re-incorporated or re-organized under the laws of such other jurisdiction, could
take substantially the same actions without stockholder (or equity holder)
consent or approval under the laws of such jurisdiction and ACNielsen's then
applicable certificate of incorporation, charter, by-laws or other
organizational documents as ACNielsen could take without stockholder consent or
approval under the General Corporation Law of the State of Delaware and
ACNielsen's certificate of incorporation and by-laws as of the date hereof, and
counsel reasonably satisfactory to Cognizant and D&B confirms the foregoing in
writing to the reasonable satisfaction of Cognizant and D&B.
ARTICLE IV
JOINT DEFENSE PROVISIONS
SECTION 4.1. Counsel. (a) ACNielsen shall select counsel of
record to represent ACNielsen, D&B and Cognizant (which reference to Cognizant
shall be deemed to include I.M.S. International, Inc.) in the Lawsuit ("Counsel
of Record"). Counsel of Record shall communicate and consult with all parties in
connection with the defense of the Lawsuit, but shall be subject to direction
only from ACNielsen.
(b) D&B and Cognizant shall be free to retain at their own
expense counsel to monitor the Lawsuit ("D&B Counsel" and "Cognizant Counsel"
respectively, and, collectively, "Party Counsel"). Counsel of Record shall
communicate and consult with any Party Counsel. Neither D&B Counsel nor any
other counsel retained by D&B shall appear in the Lawsuit unless D&B shall have
become a Withdrawing Party under Section 4.1(g) hereof. Neither Cognizant
Counsel nor any other counsel retained by Cognizant shall appear in the Lawsuit
unless Cognizant shall have become a Withdrawing Party under Section 4.1(g)
hereof.
(c) Counsel of Record and Party Counsel shall make available
to other such counsel and any party confidential oral information and memoranda
or other documents related to the defense of the Lawsuit ("Defense Materials")
to the extent that they deem it prudent and consistent with the objectives of
the joint defense provided for herein.
(d) The Defense Materials obtained by counsel for any party
shall remain confidential and shall be protected from disclosure to any third
party except as provided herein.
<PAGE> 21
21
(e) Counsel of Record and Party Counsel shall not disclose
Defense Materials or the contents thereof to anyone except their respective
clients, expert witnesses and consultants, counsel for other parties to the
Agreement, or attorneys, paralegals and staff within their firms, without first
obtaining the consent of Counsel of Record and Party Counsel whose clients (or
who themselves) may be entitled to claim any privilege with respect to such
materials. All persons permitted access to Defense Materials shall be
specifically advised that the Defense Materials are privileged and subject to
the terms of this Agreement.
(f) If any other person or entity requests or demands, by
subpoena or otherwise, any Defense Materials from any of the parties or their
counsel, the recipient of the request will immediately notify Counsel of Record
and Party Counsel, and each such counsel shall take all steps necessary to
permit the assertion of all applicable rights and privileges with respect to
such Defense Materials and shall cooperate fully with such other counsel in any
proceeding relating to the disclosure of Defense Materials.
(g) If D&B or Cognizant decides that it no longer wishes to
engage in a joint defense (a "Withdrawing Party"), the Withdrawing Party
immediately shall notify the other parties to the Agreement in writing and shall
simultaneously return to Counsel of Record the originals and all copies of
Defense Materials provided to it. In such event, the Withdrawing Party shall no
longer have any rights to obtain Defense Materials, but shall retain other
rights and obligations set forth in the Agreement, including the obligations to
share Defense Costs pursuant to Section 4.1(h) below, unless otherwise
specifically provided. The Withdrawing Party shall lose its right, if any, to
indemnification by ACNielsen under this Agreement and shall be liable for one
third of the amount of any IRI Liabilities incurred in the Lawsuit. The
Withdrawing Party shall continue to be obligated to pay 50% of any IRI
Liabilities in excess of the amount payable by ACNielsen pursuant to this
Agreement. ACNielsen shall have the absolute right to continue to be represented
in all matters in and affecting the Lawsuit by Counsel of Record. All parties
expressly agree that Counsel of Record may continue to represent parties that
have not withdrawn, and all parties agree and acknowledge that receipt and use
of Defense Materials by Counsel of Record or any action taken or knowledge
gained by Counsel of Record in connection with its representation of a
Withdrawing Party shall not be grounds for disqualification of Counsel of Record
as counsel for any other party to this Agreement in the Lawsuit.
(h) It is the intention of the parties that ACNielsen, D&B and
Cognizant shall share equally the costs of defending the Lawsuit, including
attorneys' fees, expert witness and consultants fees and all other costs and
expenses for the defense of the Lawsuit (or prosecution of any counterclaim to
the
<PAGE> 22
22
Lawsuit) duly incurred by ACNielsen or Counsel of Record ("Defense Costs").
ACNielsen shall forward on a monthly basis a statement of the Defense Costs
incurred in the preceding month and D&B and Cognizant shall each reimburse
ACNielsen for one third of such Defense Costs promptly thereafter. In the event
that ACNielsen obtains reimbursement for Defense Costs from IRI in accordance
with a certain Settlement Agreement and Release between ACNielsen and IRI, dated
as of July 1, 1985, or for any other reason, ACNielsen shall repay to each of
D&B and Cognizant one third of such reimbursement up to the extent of their
respective payments.
(i) No party may enter into any settlement agreement in the
Lawsuit without express consent in writing of the other parties, except that
ACNielsen may, if it so chooses, enter into a full and final settlement of the
Lawsuit if ACNielsen agrees to pay the full amount of the settlement and obtains
a full and final release of D&B and Cognizant with respect to the Lawsuit. Such
a settlement shall impose no obligation on any other party to this Agreement
without the party's express consent in writing. In the event that any party
receives a settlement proposal with respect to the Lawsuit, it shall immediately
communicate the substance of the offer to the Counsel of Record.
(j) All other parties to this Agreement shall cooperate with
ACNielsen in the defense of the Lawsuit and the prosecution of any counterclaim
therein, including providing, or causing to be provided, records or witnesses as
soon as practicable after receipt of any request therefor from or on behalf of
ACNielsen.
ARTICLE V
MISCELLANEOUS
SECTION 5.1. Complete Agreement; Construction. This Agreement,
including the Exhibit hereto, shall constitute the entire agreement between the
parties with respect to the subject matter hereof and shall supersede all
previous negotiations, commitments and writings with respect to such subject
matter. In the event and to the extent that there shall be a conflict between
the provisions of this Agreement and the provisions of the Distribution
Agreement or any other agreement, this Agreement shall control.
SECTION 5.2. Ancillary Agreements. This Agreement is not
intended to address, and should not be interpreted to address, the matters
specifically and expressly covered by the Ancillary Agreements.
SECTION 5.3. Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective
<PAGE> 23
23
when one or more such counterparts have been signed by each of the parties and
delivered to the other parties.
SECTION 5.4. Survival of Agreements. Except as otherwise
contemplated by this Agreement, all covenants and agreements of the parties
contained in this Agreement shall survive the Distribution Date.
SECTION 5.5. 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:
To The Dun & Bradstreet Corporation:
One Diamond Hill Road
Murray Hill, NJ 07974
Telecopy: (908) 665-5803
Attn: General Counsel
To Cognizant Corporation:
200 Nyala Farms
Westport, Connecticut 06880
Telecopy: (203) 222-4201
Attn: General Counsel
To ACNielsen Corporation:
177 Broad Street
Stamford, Connecticut 06901
Telecopy: (203) 961-3190
Attn: General Counsel
SECTION 5.6. Waivers. The failure of any party to require
strict performance by any other party of any provision in this Agreement will
not waive or diminish that party's right to demand strict performance thereafter
of that or any other provision hereof.
SECTION 5.7. Amendments. Subject to the terms of Sections
2.3(a) and 5.10 hereof, this Agreement may not be modified or amended except by
an agreement in writing signed by each of the parties hereto.
<PAGE> 24
24
SECTION 5.8. Assignment. This Agreement shall not be
assignable, in whole or in part, directly or indirectly, by any party hereto
without the prior written consent of the other parties hereto, and any attempt
to assign any rights or obligations arising under this Agreement without such
consent shall be void.
SECTION 5.9. Successors and Assigns. The provisions to this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and permitted assigns.
SECTION 5.10. Termination. Subject to the terms of Section
2.3(a), this Agreement may be terminated and may be amended, modified or
abandoned at any time prior to the Distribution by and in the sole discretion of
D&B. In the event of such termination, no party shall have any liability of any
kind to any other party or any other person. Subject to Section 2.3(a), after
the Distribution, this Agreement may not be terminated except by an agreement in
writing signed by the parties.
SECTION 5.11. Third Party Beneficiaries. Except as provided in
Article II, this Agreement is solely for the benefit of the parties hereto and
their respective Subsidiaries and Affiliates and should not be deemed to confer
upon third parties any remedy, claim, liability, reimbursement, claim of action
or other right in excess of those existing without reference to this Agreement.
SECTION 5.12. Title and Headings. Titles and headings to
sections herein are inserted for the convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
SECTION 5.13. Exhibits. The Exhibit shall be construed with
and as an integral part of this Agreement to the same extent as if the same had
been set forth verbatim herein.
SECTION 5.14. GOVERNING LAW. THIS AGREEMENT 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.
SECTION 5.15. Consent to Jurisdiction. Each of the parties
irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of
the State of New York, New York County, and (b) the United States District Court
for the Southern District of New York, for the purposes of any suit, action or
other proceeding arising out of this Agreement or any transaction contemplated
hereby. Each of the parties agrees to commence any action, suit or proceeding
relating hereto either in the United States District Court for the Southern
District of New York or if such suit, action or other proceeding may not be
brought in such
<PAGE> 25
25
court for jurisdictional reasons, in the Supreme Court of the State of New York,
New York County. Each of the parties further agrees that service of any process,
summons, notice or document by U.S. registered mail to such party's respective
address set forth above shall be effective service of process for any action,
suit or proceeding in New York with respect to any matters to which it has
submitted to jurisdiction in this Section 5.15. Each of the parties irrevocably
and unconditionally waives any objection to the laying of venue of any action,
suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in (i) the Supreme Court of the State of New York, New York
County, or (ii) the United States District Court for the Southern District of
New York, and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum. This
consent to jurisdiction shall not be construed to be and is not in any way an
exception to the agreement of the parties to resolve any dispute concerning the
determination ACN Maximum Amount exclusively through the arbitration procedures
set forth in Article II hereof.
SECTION 5.16. Dispute Resolution. The investment banking firm
engaged pursuant to Section 2.2 shall have the authority to act as an arbitrator
to resolve any dispute concerning the ACN Maximum Amount or any other provision
contained in Article II, except in the limited circumstance explicitly set forth
in Section 2.2(a). Any dispute or disputes arising out of or in connection with
Articles III, IV or V of this Agreement shall be settled in accordance with the
dispute resolution mechanisms set forth in Article VI of the Distribution
Agreement.
SECTION 5.17. Severability. In the event any one or more of
the provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
SECTION 5.18. Further Assurances. From time to time, as and
when reasonably requested by any other party hereto, each party hereto shall
execute and deliver, or cause to be executed and delivered, all such documents
and instruments and shall take, or cause to be taken, all such further or other
actions as such other party may reasonably deem necessary or desirable to effect
the purposes of this Agreement and the transactions contemplated hereunder.
<PAGE> 26
26
IN WITNESS WHEREOF, the parties have duly executed and entered
into this Agreement, as of the date first above written.
THE DUN & BRADSTREET CORPORATION
by
-----------------------
Name:
Title:
COGNIZANT CORPORATION
by
-----------------------
Name:
Title:
ACNIELSEN CORPORATION
by
-----------------------
Name:
Title:
<PAGE> 1
EXHIBIT 21
COGNIZANT CORPORATION
LIST OF ACTIVE SUBSIDIARIES
<TABLE>
<CAPTION>
STATE OR OTHER % OWNERSHIP
JURISDICTION OF 100% EXCEPT
NAME INCORPORATION AS NOTED
- ------------------------------------------------------------- ------------------- ------------
<S> <C> <C>
COGNIZANT ENTERPRISES, INC................................... Delaware
Information Associates, L.P................................ Delaware 50.00
COGNIZANT JAPAN K.K. ........................................ Japan
D&B Technology Asia K.K. .................................. Japan
IMS Japan Ltd. KK.......................................... Japan
Nippon Computer Services, Inc. ............................ Japan
COGNIZANT SOFTWARE SOLUTIONS CORPORATION..................... Delaware
Cognizant India Holding Corporation........................ Delaware
CZT India Corporation...................................... Delaware
Dun & Bradstreet India Private Limited.................. India
Dun & Bradstreet Marketing Research Private Limited... India 70.00
CSS Investment Corporation................................. Delaware
Dun & Bradstreet-Satyam Software Private Limited........ India 76.00
COGNIZANT TRANSPORTATION SERVICES
CORPORATION................................................ Delaware
DBHC, INC. .................................................. Delaware
Dun & Bradstreet HealthCare Information Inc. .............. Illinois
ERISCO, INC. ................................................ New York
GARTNER GROUP, INC. ......................................... Delaware 52.30
Gartner Group Pacific Pty Limited.......................... Australia
Gartner Group Scandinavia, A/S............................. Denmark
Gartner Group UK Ltd....................................... England
Gartner Group France S.A.R.L............................... France
Gartner Group, GMBH........................................ Germany
Gartner Group Italia S.R.L................................. Italy
Nomos Ricerca S.r.1..................................... Italy
Nomos Ricerca Services.................................. Italy
Nomos Ricerca Telecomunicazioni......................... Italy
Gartner Group Japan KK..................................... Japan
Gartner Group Nederland BV................................. The Netherlands
Gartner Group Norge, A/S................................... Norway
Gartner Group Sverige, AB.................................. Sweden
Decision Drivers, Inc. .................................... Delaware 85.00
Gartner Group Asia, Inc. .................................. Delaware
Gartner Group Credit Corporation........................... Delaware
Gartner Group Europe, Inc. ................................ Delaware
Gartner Group Investment Corporation....................... Delaware
RCI, LP................................................. Massachusetts 58.00
Gartner Group Sales, Inc................................... Delaware
GG Hong Kong, Inc.......................................... Delaware
</TABLE>
<PAGE> 2
EXHIBIT 21 -- (CONTINUED)
<TABLE>
<CAPTION>
STATE OR OTHER % OWNERSHIP
JURISDICTION OF 100% EXCEPT
NAME INCORPORATION AS NOTED
- ------------------------------------------------------------- ------------------- ------------
<S> <C> <C>
GARTNER GROUP, INC. (CONTINUED)
GG Investment Management, Inc.............................. Delaware
Gartner Enterprises, Ltd................................ Delaware
G.G. West Corporation................................... Delaware
New Science Associates Inc................................. Delaware
New Science Associates, Ltd............................. England
RCI Management Corporation................................. Delaware
Real Decisions, Inc........................................ Connecticut
Dataquest Incorporated..................................... California
Dataquest Europe S.A.................................... France
DATAQUEST Japan Limited................................. Japan
Dataquest Asia Pacific Limited.......................... Hong Kong
DQ Research Pte. Ltd.................................. Singapore
Dataquest Taiwan Limited.............................. Taiwan
Dataquest Research (Thailand) Limited................. Thailand
Gartner Group FSC, Inc..................................... Virgin Islands
IMS HOLDINGS (U.K.) LIMITED.................................. England
Intercontinental Medical Statistics Ltd.................... England
Imsworld Publications Ltd............................... England
IMS Nominees Limited....................................... England
IMS Sold Out Limited....................................... England
Medical Direct Mail Organisation Ltd....................... England
PMS International Limited.................................. England
Pharma Strategy Group Limited.............................. England
ST Europe Ltd.............................................. England
I.M.S. INTERNATIONAL, INC.................................... Delaware
IMS Australia Pty. Ltd..................................... Australia
Amfac Pty. Limited...................................... Australia
Chemdata Pty. Limited................................... Australia
Data Design Hisoft Pty. Limited....................... Australia
Medrecord Australia Pty. Limited...................... Australia
Permail Pty. Limited.................................... Australia
IMS of Canada, Ltd......................................... Canada
Informations Medicales Et Statistiques SA.................. France
IMS Pacific Limited........................................ Hong Kong
IMS HK Investments Ltd.................................. Hong Kong
IMS (NZ) Limited........................................... New Zealand
IMS Investments (NZ) Limited............................ New Zealand
I.M.S. Portugal-Consultores Internacionais de Marketung
Farmaceutico, Lda....................................... Portugal
IMS International (South Africa) (Pty.) Ltd................ South Africa
</TABLE>
<PAGE> 3
EXHIBIT 21 -- (CONTINUED)
<TABLE>
<CAPTION>
STATE OR OTHER % OWNERSHIP
JURISDICTION OF 100% EXCEPT
NAME INCORPORATION AS NOTED
- ------------------------------------------------------------- ------------------- ------------
<S> <C> <C>
I.M.S. INTERNATIONAL, INC. (CONTINUED)
I.M.S. Financial, Inc...................................... Delaware
Dun & Bradstreet Germany Holding GmbH................... Germany
IMS-MIDOC Medizinische Informations, Dokumentations
und Consultinggesellschaft mbH..................... Germany
IMS Holding Deutschland GmbH....................... Germany
IFNS Marktforschung GmbH......................... Germany
IMS GmbH Institut fur Medizinische Statistik..... Germany
IMS Data GmbH................................. Germany
I.M.S. Hellas Ltd............................. Greece
GPI Krankenhausforschung Gesellschaft......... Germany 60.00
Fur Pharminformations Systems mbH
MedVantage GmbH Integriertes..................... Germany 60.00
Datenmanagement im Health Care-Markt
Data Coordination (Israel) Ltd.......................... Israel
IMS Italia S.p.A........................................ Italy
IMS Holding (Belgium) S.A............................. Belgium
IMS Asia (1989) Pte. Ltd................................ Singapore
IMS Pharminform Holding AG................................. Switzerland
Pharmadat Marktforschungs-Gesellschaft m.b.H............ Austria
Pharmacall Statistik Ges. m.b.H....................... Austria
Informations Medicales Et Statistiques S.A.............. Belgium
IMS Servicos Ltda....................................... Brazil
Intercomunicaciones Y Servicio de Datos S.A.
[k/a Interdata S.A.].................................. Colombia
IMS Medinform A.S....................................... Czech Republic
Interdata Dominicana, S.A............................... Dominican Republic
Datandina Ecuador S.A................................... Ecuador
IMS Egypt Limited....................................... Egypt
Institute for Medical Statistics Oy..................... Finland
Asserta Centroamerica Medicion de Mercados, S.A......... Guatemala
IMS Medinform Hungaria Market Research Services Ltd..... Hungary
Interdata S.A. de C.V................................... Mexico
Informations Medicales & Statistiques S.A.R.L........... Morocco
I.M.S. (Nederland) B.V.................................. The Netherlands
IMS Denmark ApS....................................... Denmark
I.M.S. Finance Nederland B.V............................ The Netherlands
Institute for Medical Statistics Norge A/S.............. Norway
Pharma Data Paraguaya S.R.L............................. Paraguay
Datandina S.A........................................... Peru
IMS Philippines, Inc.................................... Philippines
Intercontinental Marketing Services Iberica, S.A........ Spain
Mercados Y Analisis, S.A. [k/a M.A.S.A.]................ Spain
IMS Sweden AB........................................... Sweden
</TABLE>
<PAGE> 4
EXHIBIT 21 -- (CONTINUED)
<TABLE>
<CAPTION>
STATE OR OTHER % OWNERSHIP
JURISDICTION OF 100% EXCEPT
NAME INCORPORATION AS NOTED
- ------------------------------------------------------------- ------------------- ------------
<S> <C> <C>
I.M.S. INTERNATIONAL, INC. (CONTINUED)
IMS Pharminform Holding AG (Continnued)
Data Coordination AG.................................... Switzerland
PMA Sociedad Anonima.................................. Argentina
IMS AG.................................................. Switzerland
IMS Information Medical Statistics AG................... Switzerland
IMS Poland Limited Sp. z.o.o. ........................ Poland
RCI Research Consultants AG............................. Switzerland
Marketing Y Datos Limitada (k/a Markdata Ltda.)....... Chile
Interstatistik AG....................................... Switzerland
I M S Ges.m.b.H. ..................................... Austria
Datec Industria e Comercio, Distribuidora Grafica e
Mala Direta Ltda. ................................. Brazil
IMS Tunisia............................................. Tunisia
IMS Tibbi Istatistik Ticaret ve Musavirlik Ltd
Sirketi............................................... Turkey
Pharma Data Uruguaya S.A. .............................. Uruguay
PMV De Venezuela, C.A. ................................. Venezuela
Clark-O'Neill, Inc. ....................................... New Jersey
IMS America, Ltd. ......................................... New Jersey
Coordinated Management Systems, Inc. ................... Delaware
Emron, Inc. ............................................ New Jersey
IMS Software Services, Ltd. ............................... Delaware
Intercontinental Medical Statistics International, Ltd. ... Delaware
Intercontinental Medical Statistics International, Ltd.
....................................................... New York
PJH Technology Solutions, Ltd. ............................ Delaware
Decision Surveys International (Pty.) Ltd. ............. South Africa
IMSA (Pty.) Ltd. ..................................... South Africa
IPRA (Pty.) Ltd. ..................................... South Africa
PMSA (Pty.) Ltd. ..................................... South Africa
PILOT SOFTWARE, INC. ........................................ Delaware
PES (Amsterdam) Holding en Finance B.V. ................... The Netherlands
Pilot Software Pty. Ltd. ............................... Australia
Pilot Software Ltd. .................................... England
Thorn EMI Computer Software Ltd. ..................... England
Pilot Software S.A.R.L. ................................ France
Pilot Software GmbH..................................... Germany
Pilot Software S.R.L. .................................. Italy
Pilot Software B.V. .................................... The Netherlands
Pilot Software Pte. Ltd. ............................... Singapore
Pilot Software AB....................................... Sweden
IMS SERVICES NEDERLAND B.V. ................................. The Netherlands
NIELSEN MEDIA RESEARCH, INC. ................................ Delaware
Nielsen Media Research Ltd. ............................... Canada
SALES TECHNOLOGIES, INC. .................................... Georgia
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> JUN-30-1996 DEC-31-1995
<CASH> 184,052 157,105
<SECURITIES> 0 0
<RECEIVABLES> 415,478 432,957
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 743,207 704,239
<PP&E> 557,488 545,050
<DEPRECIATION> 300,759 297,923
<TOTAL-ASSETS> 1,475,125 1,442,090
<CURRENT-LIABILITIES> 630,803 666,909
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 627,687 604,588
<TOTAL-LIABILITY-AND-EQUITY> 1,475,125 1,442,090
<SALES> 0 0
<TOTAL-REVENUES> 785,722 1,542,340
<CGS> 0 0
<TOTAL-COSTS> 644,832 1,387,663
<OTHER-EXPENSES> 8,194 1,905
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (3,291) (9,785)
<INCOME-PRETAX> 135,987 162,557
<INCOME-TAX> 59,835 73,676
<INCOME-CONTINUING> 76,152 88,881
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 76,152 88,881
<EPS-PRIMARY> 0.45 0.52
<EPS-DILUTED> 0.45 0.52
</TABLE>
<PAGE> 1
EXHIBIT 99.1
October __, 1996
To all Dun & Bradstreet Shareholders:
On October __, 1996, the Board of Directors of Dun & Bradstreet declared a
dividend of shares of Cognizant Corporation and ACNielsen Corporation to
achieve the reorganization of D&B, Cognizant and ACNielsen as three separate
companies.
If you are a shareholder on October __, 1996, the record date for the dividend,
shares in the new companies will be mailed to you automatically. For each share
of Dun & Bradstreet you hold, you will receive one share of Cognizant
Corporation and, for each three shares of Dun & Bradstreet you hold, you will
receive one share of ACNielsen Corporation. No fractional shares of ACNielsen
will be issued; instead, you will be paid for such fractional shares in cash.
Stock certificates representing your shares in the two new companies will be
sent to you on November __. The D&B certificates you currently hold will
represent your investment in 'new' Dun & Bradstreet.
Shares of each of the companies will trade on the New York Stock Exchange
beginning in November. The symbol for 'new' Dun & Bradstreet will continue to
be 'DNB'; the symbol for Cognizant will be 'CZT'; and the symbol for ACNielsen
will be 'ART'.
Detailed information on the reorganization plan and the businesses of Cognizant
and ACNielsen is contained in the accompanying document, which we urge you to
read carefully.
The Board believes the reorganization will allow the three companies to pursue
opportunities that will improve their competitive position, enhance their
valuation and create wealth for shareholders.
Sincerely,
------------------------------------
Robert E. Weissman
Chairman and Chief Executive Officer
The Dun & Bradstreet Corporation
<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1. Certain Definitions........................................ 2
Section 2. Appointment of Rights Agent................................ 9
Section 3. Issue of Right Certificates................................ 9
Section 4. Form of Right Certificates................................. 12
Section 5. Countersignature and Registration.......................... 13
Section 6. Transfer, Split Up, Combination and Exchange of
Right Certificates; Mutilated, Destroyed, Lost or
Stolen Right Certificates.................................. 14
Section 7. Exercise of Rights, Purchase Price; Expiration
Date of Rights............................................. 16
Section 8. Cancellation and Destruction of Right
Certificates............................................... 18
Section 9. Availability of Shares of Preferred Stock.................. 19
Section 10. Preferred Stock Record Date................................ 22
Section 11. Adjustment of Purchase Price, Number of Shares
and Number of Rights....................................... 22
Section 12. Certificate of Adjusted Purchase Price or Number
of Shares.................................................. 42
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earnings Power................................... 42
Section 14. Fractional Rights and Fractional Shares.................... 50
Section 15. Rights of Action........................................... 53
Section 16. Agreement of Right Holders................................. 54
Section 17. Right Certificate Holder Not Deemed a
Stockholder................................................ 55
Section 18. Concerning the Rights Agent................................ 55
Section 19. Merger or Consolidation or Change of Name of
Rights Agent............................................... 56
Section 20. Duties of Rights Agent..................................... 57
Section 21. Change of Rights Agent..................................... 62
Section 22. Issuance of New Right Certificates......................... 64
</TABLE>
- i -
<PAGE> 2
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 23. Redemption................................................. 64
Section 24. Exchange................................................... 66
Section 25. Notice of Certain Events................................... 68
Section 26. Notices.................................................... 70
Section 27. Supplements and Amendments................................. 70
Section 28. Successors................................................. 72
Section 29. Benefits of this Agreement................................. 72
Section 30. Determinations and Actions by the Board of
Directors.................................................. 72
Section 31. Severability............................................... 73
Section 32. Governing Law.............................................. 73
Section 33. Counterparts............................................... 73
Section 34. Descriptive Headings....................................... 73
</TABLE>
- ii -
<PAGE> 3
RIGHTS AGREEMENT
Agreement, dated as of ____________, 1996 between ACNielsen
Corporation, a Delaware corporation (the "Company"), and First Chicago Trust
Company of New York (the "Rights Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one preferred share purchase right (a "Right") for each share of
Common Stock (as hereinafter defined) of the Company outstanding as of the close
of business (as defined below) on _________ __, 1996 (the "Record Date") each
Right representing the right to purchase one-thousandth (subject to adjustment)
of a share of Preferred Stock (as hereinafter defined), upon the terms and
subject to the conditions herein set forth, and the Board of Directors has
further authorized and directed the issuance of one Right (subject to adjustment
as provided herein) with respect to each share of Common Stock that shall become
outstanding between the Record Date and the earliest of the Distribution Date,
the Redemption Date and the Final Expiration Date (as such terms are hereinafter
defined); provided, however, that Rights may be issued with respect to shares of
Common Stock that shall become outstanding after the Distribution Date and prior
to the Redemption Date and the Final Expiration Date in accordance with Section
22.
Accordingly, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
<PAGE> 4
2
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meaning indicated:
(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which shall be the Beneficial Owner (as such
term is hereinafter defined) of 15% or more of the shares of Common Stock
then outstanding, but shall not include an Exempt Person (as such term is
hereinafter defined); provided, however, that if the Board of Directors of
the Company determines in good faith that a Person who would otherwise be
an "Acquiring Person" has become such inadvertently (including, without
limitation, because (i) such Person was unaware that it beneficially owned
a percentage of Common Stock that would otherwise cause such Person to be
an "Acquiring Person" or (ii) such Person was aware of the extent of its
Beneficial Ownership of Common Stock but had no actual knowledge of the
consequences of such Beneficial Ownership under this Rights Agreement) and
without any intention of changing or influencing control of the Company,
and such Person, as promptly as practicable after being advised of such
determination divested or divests himself or itself of Beneficial
Ownership of a sufficient number of shares of Common Stock so that such
Person would no longer be an Acquiring Person, then such Person shall not
be deemed to be or to have become an "Acquiring Person" for any purposes
of this Agreement. Notwithstanding the foregoing, (i) the sole stockholder
of the Company at the time of the adoption of
<PAGE> 5
3
this Agreement will not be deemed an Acquiring Person for any purposes of
this Agreement prior to the distribution by such Person of the Company's
outstanding Common Stock to the stockholders of such Person, and (ii) no
Person shall become an "Acquiring Person" as the result of an acquisition
of shares of Common Stock by the Company which, by reducing the number of
shares outstanding, increases the proportionate number of shares
beneficially owned by such Person to 15% or more of the shares of Common
Stock then outstanding, provided, however, that if a Person shall become
the Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding by reason of such share acquisitions by the Company and
thereafter becomes the Beneficial Owner of any additional shares of Common
Stock (other than pursuant to a dividend or distribution paid or made by
the Company on the outstanding Common Stock in shares of Common Stock or
pursuant to a split or subdivision of the outstanding Common Stock), then
such Person shall be deemed to be an "Acquiring Person" unless upon the
consummation of the acquisition of such additional shares of Common Stock
such Person does not own 15% or more of the shares of Common Stock then
outstanding. For all purposes of this Agreement, any calculation of the
number of shares of Common Stock outstanding at any particular time,
including for purposes of determining the particular percentage of such
outstanding shares of Common Stock of which any Person is the Beneficial
Owner, shall be made in accordance with the last sentence of
<PAGE> 6
4
Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in
effect on the date hereof.
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as in effect on the date of this Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of, shall be
deemed to have "Beneficial Ownership" of and shall be deemed to
"beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates is deemed to beneficially own, directly or indirectly
within the meaning of Rule 13d-3 of the General Rules and
Regulations under the Exchange Act as in effect on the date of this
Agreement;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant
to any agreement, arrangement or understanding (other than customary
agreements with and between underwriters and selling group members
with respect to a bona fide public offering of securities), or upon
the exercise of conversion rights, exchange rights, rights, warrants
or options, or otherwise; provided, however, that a Person shall not
be deemed the Beneficial Owner of, or to
<PAGE> 7
5
beneficially own, (x) securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such
Person's Affiliates or Associates until such tendered securities are
accepted for purchase, (y) securities which such Person has a right
to acquire on the exercise of Rights at any time prior to the time a
Person becomes an Acquiring Person or (z) securities issuable upon
exercise of Rights from and after the time a Person becomes an
Acquiring Person if such Rights were acquired by such Person or any
of such Person's Affiliates or Associates prior to the Distribution
Date or pursuant to Section 3(a) or Section 22 hereof ("original
Rights") or pursuant to Section 11(i) or Section 11(n) with respect
to an adjustment to original Rights; or (B) the right to vote
pursuant to any agreement, arrangement or understanding; provided,
however, that a Person shall not be deemed the Beneficial Owner of,
or to beneficially own, any security by reason of such agreement,
arrangement or understanding if the agreement, arrangement or
understanding to vote such security (1) arises solely from a
revocable proxy or consent given to such Person in response to a
public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable rules and regulations promulgated
under the Exchange Act and (2) is not also
<PAGE> 8
6
then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person with which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or
understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide
public offering of securities) for the purpose of acquiring,
holding, voting (except to the extent contemplated by the proviso to
Section 1(c)(ii)(B)) or disposing of any securities of the Company.
(d) "Business Day" shall mean any day other than a Saturday, a
Sunday, or a day on which banking institutions in the State of New York,
or the State in which the principal office of the Rights Agent is located,
are authorized or obligated by law or executive order to close.
(e) "close of business" on any given date shall mean 5:00 P.M., New
York City time, on such date; provided, however, that if such date is not
a Business Day it shall mean 5:00 P.M., New York City time, on the next
succeeding Business Day.
(f) "Common Stock" when used with reference to the Company shall
mean the common stock, par value $.01, of the Company (but shall not
include the Series Common Stock, par value $.01 of the Company). "Common
Stock" when used with reference to any Person other than the Company shall
mean
<PAGE> 9
7
the capital stock (or, in the case of an unincorporated entity, the
equivalent equity interest) with the greatest voting power of such other
Person or, if such other Person is a subsidiary of another Person, the
Person or Persons which ultimately control such first-mentioned Person.
(g) "Distribution Date" shall have the meaning set forth in Section
3 hereof.
(h) "equivalent preferred shares" shall have the meaning set forth
in Section 11(b) hereof.
(i) "Exempt Person" shall mean the Company, any Subsidiary (as such
term is hereinafter defined) of the Company, in each case including,
without limitation, in its fiduciary capacity, or, any employee benefit
plan of the Company or of any Subsidiary of the Company, or any entity or
trustee holding Common Stock for or pursuant to the terms of any such plan
or for the purpose of funding any such plan or funding other employee
benefits for employees of the Company or of any Subsidiary of the Company.
(j) "Final Expiration Date" shall have the meaning set forth in
Section 7 hereof.
(k) "New York Stock Exchange" shall mean the New York Stock
Exchange, Inc.
(l) "Person" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such
entity.
(m) "Preferred Stock" shall mean the Series A Junior Participating
Preferred Stock, without par value, of the
<PAGE> 10
8
Company having the rights and preferences set forth in the Form of
Certificate of Designation attached to this Agreement as Exhibit A.
(n) "Record Date" shall have the meaning set forth in the preamble
to this Agreement.
(o) "Redemption Date" shall have the meaning set forth in Section 7
hereof.
(p) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(q) "Stock Acquisition Date" shall mean the first date of public
announcement (which for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) of the
Exchange Act) by the Company or an Acquiring Person that an Acquiring
Person has become such or such earlier date as a majority of the Board of
Directors shall become aware of the existence of an Acquiring Person.
(r) "Subsidiary" of any Person shall mean any corporation or other
entity of which securities or other ownership interests having ordinary
voting power sufficient to elect a majority of the board of directors or
other persons performing similar functions are beneficially owned,
directly or indirectly, by such Person, and any corporation or other
entity that is otherwise controlled by such Person.
Section 2. Appointment of Rights Agent. The Company hereby appoints
the Rights Agent to act as agent for the Company and the holders of the Rights
(who, in accordance with Section 3
<PAGE> 11
9
hereof, shall prior to the Distribution Date also be the holders of Common
Stock) in accordance with the terms and conditions hereof, and the Rights Agent
hereby accepts such appointment. The Company may from time to time appoint such
co-Rights Agents as it may deem necessary or desirable.
Section 3. Issue of Right Certificates. (a) Until the earlier of (i)
the tenth day after the Stock Acquisition Date or (ii) the tenth business day
(or such later date as may be determined by action of the Board of Directors
prior to such time as any Person becomes an Acquiring Person) after the date of
the commencement by any Person (other than an Exempt Person) of, or of the first
public announcement of the intention of such Person (other than an Exempt
Person) to commence, a tender or exchange offer the consummation of which would
result in any Person (other than an Exempt Person) becoming the Beneficial Owner
of shares of Common Stock aggregating 15% or more of the Common Stock then
outstanding (including any such date which is after the date of this Agreement
and prior to the issuance of the Rights), the earlier of such dates being herein
referred to as the "Distribution Date"), (x) the Rights will be evidenced
(subject to the provisions of Section 3(b) hereof) by the certificates for
Common Stock registered in the names of the holders thereof and not by separate
Right Certificates, and (y) the Rights will be transferable only in connection
with the transfer of Common Stock. As soon as practicable after the Distribution
Date, the Company will prepare and execute, the Rights Agent will countersign,
and the Company will send or cause to be sent (and
<PAGE> 12
10
the Rights Agent will, if requested, send) by first-class, insured,
postage-prepaid mail, to each record holder of Common Stock as of the close of
business on the Distribution Date (other than any Acquiring Person or any
Associate or Affiliate of an Acquiring Person), at the address of such holder
shown on the records of the Company, a Right Certificate, in substantially the
form of Exhibit B hereto (a "Right Certificate"), evidencing one Right (subject
to adjustment as provided herein) for each share of Common Stock so held. As of
the Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the
Company will send a copy of a Summary of Rights to Purchase Shares of Preferred
Stock, in substantially the form of Exhibit C hereto (the "Summary of Rights"),
by first-class, postage-prepaid mail, to each record holder of Common Stock as
of the close of business on the Record Date (other than any Acquiring Person or
any Associate or Affiliate of any Acquiring Person), at the address of such
holder shown on the records of the Company. With respect to certificates for
Common Stock outstanding as of the Record Date, until the Distribution Date, the
Rights will be evidenced by such certificates registered in the names of the
holders thereof together with the Summary of Rights. Until the Distribution Date
(or the earlier of the Redemption Date or the Final Expiration Date), the
surrender for transfer of any certificate for Common Stock outstanding on the
Record Date, with or without a copy of the Summary of Rights, shall also
<PAGE> 13
11
constitute the transfer of the Rights associated with the Common Stock
represented thereby.
Certificates issued for Common Stock (including, without limitation,
upon transfer of outstanding Common Stock, disposition of Common Stock out of
treasury stock or issuance or reissuance of Common Stock out of authorized but
unissued shares) after the Record Date but prior to the earliest of the
Distribution Date, the Redemption Date or the Final Expiration Date shall have
impressed on, printed on, written on or otherwise affixed to them the following
legend:
This certificate also evidences and entitles the holder hereof to
certain rights as set forth in a Rights Agreement between ACNielsen
Corporation and _____________________ dated as of ____________, 1996
as the same may be amended from time to time (the "Rights
Agreement"), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal executive
offices of ACNielsen Corporation. Under certain circumstances, as
set forth in the Rights Agreement, such Rights will be evidenced by
separate certificates and will no longer be evidenced by this
certificate. ACNielsen Corporation will mail to the holder of this
certificate a copy of the Rights Agreement without charge after
receipt of a written request therefor. Under certain circumstances,
as set forth in the Rights Agreement, Rights owned by or transferred
to any Person who becomes an Acquiring Person (as defined in the
Rights Agreement) and certain transferees thereof will become null
and void and will no longer be transferable.
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Stock represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate, except as otherwise provided
<PAGE> 14
12
herein, shall also constitute the transfer of the Rights associated with the
Common Stock represented thereby. In the event that the Company purchases or
otherwise acquires any Common Stock after the Record Date but prior to the
Distribution Date, any Rights associated with such Common Stock shall be deemed
cancelled and retired so that the Company shall not be entitled to exercise any
Rights associated with the Common Stock which are no longer outstanding.
Notwithstanding this paragraph (c), the omission of a legend shall
not affect the enforceability of any part of this Agreement or the rights of any
holder of the Rights.
Section 4. Form of Right Certificates. The Right Certificates (and
the forms of election to purchase shares and of assignment to be printed on the
reverse thereof) shall be substantially in the form set forth in Exhibit B
hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of the New York
Stock Exchange or of any other stock exchange or automated quotation system on
which the Rights may from time to time be listed, or to conform to usage.
Subject to the provisions of Sections 11, 13 and 22 hereof, the Right
Certificates shall entitle the holders thereof to purchase such number of one
one-thousandths of a share of Preferred Stock as shall be set forth
<PAGE> 15
13
therein at the price per one one-thousandth of a share of Preferred Stock set
forth therein (the "Purchase Price"), but the number of such one one-thousandths
of a share of Preferred Stock and the Purchase Price shall be subject to
adjustment as provided herein.
Section 5. Countersignature and Registration. (a) The Right
Certificates shall be executed on behalf of the Company by the Chairman of the
Board of Directors, the President, any of the Vice Presidents, the Treasurer or
the Controller of the Company, either manually or by facsimile signature, shall
have affixed thereto the Company's seal or a facsimile thereof, and shall be
attested by the Secretary or an Assistant Secretary of the Company, either
manually or by facsimile signature. The Right Certificates shall be manually
countersigned by the Rights Agent and shall not be valid for any purpose unless
countersigned. In case any officer of the Company who shall have signed any of
the Right Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the Person who signed such Right Certificates had not ceased to be such officer
of the Company; and any Right Certificate may be signed on behalf of the Company
by any Person who, at the actual date of the execution of such Right
Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the
<PAGE> 16
14
execution of this Agreement any such Person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at an office or agency designated for such purpose, books for
registration and transfer of the Right Certificates issued hereunder. Such books
shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. (a)
Subject to the provisions of Sections 7(e), 11(a)(ii) and 14 hereof, at any time
after the close of business on the Distribution Date, and prior to the close of
business on the earlier of the Redemption Date or the Final Expiration Date, any
Right Certificate or Right Certificates may be transferred, split up, combined
or exchanged for another Right Certificate or Right Certificates, entitling the
registered holder to purchase a like number of one one-thousandths of a share of
Preferred Stock as the Right Certificate or Right Certificates surrendered then
entitled such holder to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Right Certificate or Right Certificates shall
make such request in writing delivered to the Rights Agent, and shall surrender
the Right Certificate or Right Certificates to be transferred, split up,
combined or exchanged
<PAGE> 17
15
at the office or agency of the Rights Agent designated for such purpose.
Thereupon the Rights Agent shall countersign and deliver to the Person entitled
thereto a Right Certificate or Right Certificates, as the case may be, as so
requested. The Company may require payment of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any transfer,
split up, combination or exchange of Right Certificates.
(b) Subject to the provisions of Section 11(a)(ii) hereof, at any
time after the Distribution Date and prior to the close of business on the
earlier of the Redemption Date or the Final Expiration Date, upon receipt by the
Company and the Rights Agent of evidence reasonably satisfactory to them of the
loss, theft, destruction or mutilation of a Right Certificate, and, in case of
loss, theft or destruction, of indemnity or security reasonably satisfactory to
them, and, at the Company's request, reimbursement to the Company and the Rights
Agent of all reasonable expenses incidental thereto, and upon surrender to the
Rights Agent and cancellation of the Right Certificate if mutilated, the Company
will make and deliver a new Right Certificate of like tenor to the Rights Agent
for delivery to the registered holder in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights, Purchase Price; Expiration Date of
Rights. (a) Except as otherwise provided herein, the Rights shall become
exercisable on the Distribution Date, and thereafter the registered holder of
any Right
<PAGE> 18
16
Certificate may, subject to Section 11(a)(ii) hereof and except as otherwise
provided herein, exercise the Rights evidenced thereby in whole or in part upon
surrender of the Right Certificate, with the form of election to purchase on the
reverse side thereof duly executed, to the Rights Agent at the office or agency
of the Rights Agent designated for such purpose, together with payment of the
Purchase Price for each one one-thousandth of a share of Preferred Stock as to
which the Rights are exercised, at any time which is both after the Distribution
Date and prior to the earliest of (i) the close of business on ________, 2006
(the "Final Expiration Date"), (ii) the time at which the Rights are redeemed as
provided in Section 23 hereof (the "Redemption Date") or (iii) the time at which
such Rights are exchanged as provided in Section 24 hereof.
(b) The Purchase Price shall be initially $______ for each one
one-thousandth of a share of Preferred Stock purchasable upon the exercise of a
Right. The Purchase Price and the number of one one-thousandths of a share of
Preferred Stock or other securities or property to be acquired upon exercise of
a Right shall be subject to adjustment from time to time as provided in Sections
11 and 13 hereof and shall be payable in lawful money of the United States of
America in accordance with paragraph (c) of this Section 7.
(c) Except as otherwise provided herein, upon receipt of a Right
Certificate representing exercisable Rights, with the form of election to
purchase duly executed, accompanied by payment of the aggregate Purchase Price
for the shares of
<PAGE> 19
17
Preferred Stock to be purchased and an amount equal to any applicable transfer
tax required to be paid by the holder of such Right Certificate in accordance
with Section 9 hereof, in cash or by certified check, cashier's check or money
order payable to the order of the Company, the Rights Agent shall thereupon
promptly (i) (A) requisition from any transfer agent of the Preferred Stock
certificates for the number of shares of Preferred Stock to be purchased and the
Company hereby irrevocably authorizes its transfer agent to comply with all such
requests, or (B) requisition from the depositary agent depositary receipts
representing interests in such number of one one-thousandths of a share of
Preferred Stock as are to be purchased (in which case certificates for the
Preferred Stock represented by such receipts shall be deposited by the transfer
agent with the depositary agent) and the Company hereby directs the depositary
agent to comply with such request, (ii) when appropriate, requisition from the
Company the amount of cash to be paid in lieu of issuance of fractional shares
in accordance with Section 14 hereof, (iii) promptly after receipt of such
certificates or depositary receipts, cause the same to be delivered to or upon
the order of the registered holder of such Right Certificate, registered in such
name or names as may be designated by such holder and (iv) when appropriate,
after receipt, promptly deliver such cash to or upon the order of the registered
holder of such Right Certificate.
(d) Except as otherwise provided herein, in case the registered
holder of any Right Certificate shall exercise less
<PAGE> 20
18
than all the Rights evidenced thereby, a new Right Certificate evidencing Rights
equivalent to the exercisable Rights remaining unexercised shall be issued by
the Rights Agent to the registered holder of such Right Certificate or to his
duly authorized assigns, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder of Rights upon the occurrence of any
purported transfer or exercise of Rights pursuant to Section 6 hereof or this
Section 7 unless such registered holder shall have (i) completed and signed the
certificate contained in the form of assignment or election to purchase set
forth on the reverse side of the Rights Certificate surrendered for such
transfer or exercise and (ii) provided such additional evidence of the identity
of the Beneficial Owner (or former Beneficial Owner) thereof as the Company
shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates. All
Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel
<PAGE> 21
19
and retire, any other Right Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Right Certificates to the Company, or shall, at the written request of
the Company, destroy such cancelled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. Availability of Shares of Preferred Stock.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock or any shares of Preferred Stock held in its treasury, the
number of shares of Preferred Stock that will be sufficient to permit the
exercise in full of all outstanding Rights.
(b) So long as the shares of Preferred Stock (and, following the
time that a Person becomes an Acquiring Person, shares of Common Stock and other
securities) issuable upon the exercise of Rights may be listed or admitted to
trading on the New York Stock Exchange or listed on any other national
securities exchange or quotation system, the Company shall use its best efforts
to cause, from and after such time as the Rights become exercisable, all shares
reserved for such issuance to be listed or admitted to trading on the New York
Stock Exchange or listed on any other exchange or quotation system upon official
notice of issuance upon such exercise.
(c) From and after such time as the Rights become exercisable, the
Company shall use its best efforts, if then necessary to permit the issuance of
shares of Preferred Stock
<PAGE> 22
20
(and following the time that a Person first becomes an Acquiring Person, shares
of Common Stock and other securities) upon the exercise of Rights, to register
and qualify such shares of Preferred Stock (and following the time that a Person
first becomes an Acquiring Person, shares of Common Stock and other securities)
under the Securities Act and any applicable state securities or "Blue Sky" laws
(to the extent exemptions therefrom are not available), cause such registration
statement and qualifications to become effective as soon as possible after such
filing and keep such registration and qualifications effective until the earlier
of the date as of which the Rights are no longer exercisable for such securities
and the Final Expiration Date. The Company may temporarily suspend, for a period
of time not to exceed 90 days, the exercisability of the Rights in order to
prepare and file a registration statement under the Securities Act and permit it
to become effective. Upon any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is no
longer in effect. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction unless the
requisite qualification in such jurisdiction shall have been obtained and until
a registration statement under the Securities Act (if required) shall have been
declared effective.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all shares of
<PAGE> 23
21
Preferred Stock (and, following the time that a Person becomes an Acquiring
Person, shares of Common Stock and other securities) delivered upon exercise of
Rights shall, at the time of delivery of the certificates therefor (subject to
payment of the Purchase Price), be duly and validly authorized and issued and
fully paid and nonassessable shares.
(e) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges which
may be payable in respect of the issuance or delivery of the Right Certificates
or of any shares of Preferred Stock (or shares of Common Stock or other
securities) upon the exercise of Rights. The Company shall not, however, be
required to pay any transfer tax which may be payable in respect of any transfer
or delivery of Right Certificates to a Person other than, or the issuance or
delivery of certificates or depositary receipts for the Preferred Stock (or
shares of Common Stock or other securities) in a name other than that of, the
registered holder of the Right Certificate evidencing Rights surrendered for
exercise or to issue or deliver any certificates or depositary receipts for
Preferred Stock (or shares of Common Stock or other securities) upon the
exercise of any Rights until any such tax shall have been paid (any such tax
being payable by that holder of such Right Certificate at the time of surrender)
or until it has been established to the Company's reasonable satisfaction that
no such tax is due.
Section 10. Preferred Stock Record Date. Each Person in whose name
any certificate for Preferred Stock is issued upon
<PAGE> 24
22
the exercise of Rights shall for all purposes be deemed to have become the
holder of record of the shares of Preferred Stock represented thereby on, and
such certificate shall be dated, the date upon which the Right Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and any applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Preferred Stock
transfer books of the Company are closed, such Person shall be deemed to have
become the record holder of such shares on, and such certificate shall be dated,
the next succeeding Business Day on which the Preferred Stock transfer books of
the Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Right Certificate shall not be entitled to any rights of a holder of
Preferred Stock for which the Rights shall be exercisable, including, without
limitation, the right to vote or to receive dividends or other distributions,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares and
Number of Rights. The Purchase Price, the number of shares of Preferred Stock or
other securities or property purchasable upon exercise of each Right and the
number of Rights outstanding are subject to adjustment from time to time as
provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Stock payable
in shares of Preferred
<PAGE> 25
23
Stock, (B) subdivide the outstanding Preferred Stock, (C) combine
the outstanding Preferred Stock into a smaller number of Preferred
Stock or (D) issue any shares of its capital stock in a
reclassification of the Preferred Stock (including any such
reclassification in connection with a consolidation or merger in
which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a), the Purchase
Price in effect at the time of the record date for such dividend or
of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of capital stock
issuable on such date, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock
which, if such Right had been exercised immediately prior to such
date and at a time when the Preferred Stock transfer books of the
Company were open, the holder would have owned upon such exercise
and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification; provided, however,
that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the
shares of capital stock of the Company issuable upon exercise of one
Right.
<PAGE> 26
24
(ii) Subject to Section 24 of this Agreement, in the event
that any Person becomes an Acquiring Person, then (A) the Purchase
Price shall be adjusted to be the Purchase Price in effect
immediately prior to such Person becoming an Acquiring Person
multiplied by the number of one one-thousandths of a share of
Preferred Stock for which a Right was exercisable immediately prior
to such Person becoming an Acquiring Person, whether or not such
Right was then exercisable, and (B) each holder of a Right, except
as otherwise provided in this Section 11(a)(ii) and Subsection
11(a)(iii), hereof, shall thereafter have the right to receive, upon
exercise at a price equal to the Purchase Price (as so adjusted), in
accordance with the terms of this Agreement and in lieu of shares of
Preferred Stock, such number of shares of Common Stock (or at the
option of the Company, such number of one one-thousandths of shares
of Preferred Stock) as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the number of one
one-thousandths of a share of Preferred Stock for which a Right is
then exercisable and dividing that product by (y) 50% of the then
current per share market price of the Company's Common Stock
(determined pursuant to Section 11(d) hereof) on the date such
Person became an Acquiring Person; provided, however, that the
Purchase Price and the number of shares of Common Stock so
receivable upon
<PAGE> 27
25
exercise of a Right shall thereafter be subject to further
adjustment as appropriate in accordance with Section 11(f)
hereof. Notwithstanding anything in this Agreement to the
contrary, however, from and after the time (the "invalidation
time") when any Person first becomes an Acquiring Person, any
Rights that are beneficially owned by (x) any Acquiring Person
(or any Affiliate or Associate of any Acquiring Person), (y) a
transferee of any Acquiring Person (or any such Affiliate or
Associate) who becomes a transferee after the invalidation
time or (z) a transferee of any Acquiring Person (or any such
Affiliate or Associate) who became a transferee prior to or
concurrently with the invalidation time pursuant to either (I)
a transfer from the Acquiring Person to holders of its equity
securities or to any Person with whom it has any continuing
agreement, arrangement or understanding regarding the
transferred Rights or (II) a transfer which the Board of
Directors has determined is part of a plan, arrangement or
understanding which has the purpose or effect of avoiding the
provisions of this paragraph, and subsequent transferees of
such Persons, shall be void without any further action and any
holder of such Rights shall thereafter have no rights
whatsoever with respect to such Rights under any provision of
this Agreement. The Company shall use all reasonable efforts
to ensure that the provisions of
<PAGE> 28
26
this Section 11(a)(ii) are complied with, but shall have no
liability to any holder of Right Certificates or other Person
as a result of its failure to make any determinations with
respect to an Acquiring Person or its Affiliates, Associates
or transferees hereunder. From and after the invalidation
time, no Right Certificate shall be issued pursuant to Section
3 or Section 6 hereof that represents Rights that are or have
become void pursuant to the provisions of this paragraph, and
any Right Certificate delivered to the Rights Agent that
represents Rights that are or have become void pursuant to the
provisions of this paragraph shall be cancelled. From and
after the occurrence of an event specified in Section 13(a)
hereof, any Rights that theretofore have not been exercised
pursuant to this Section 11(a)(ii) shall thereafter be
exercisable only in accordance with Section 13 and not
pursuant to this Section 11(a)(ii).
(iii) The Company may at its option substitute for a
share of Common Stock issuable upon the exercise of Rights
in accordance with the foregoing subparagraph (ii) such
number or fractions of shares of Preferred Stock having an
aggregate current market value equal to the current per
share market price of a share of Common Stock. In the event
that there shall not be sufficient shares of Common Stock
issued but not outstanding or authorized but unissued to
permit the exercise in full
<PAGE> 29
27
of the Rights in accordance with the foregoing subparagraph
(ii), the Board of Directors shall, to the extent permitted by
applicable law and any material agreements then in effect to
which the Company is a party (A) determine the excess of (1)
the value of the shares of Common Stock issuable upon the
exercise of a Right in accordance with the foregoing
subparagraph (ii) (the "Current Value") over (2) the then
current Purchase Price multiplied by the number of one one-
thousandths of shares of Preferred Stock for which a Right was
exercisable immediately prior to the time that the Acquiring
Person became such (such excess, the "Spread"), and (B) with
respect to each Right (other than Rights which have become
void pursuant to Section 11(a)(ii)), make adequate provision
to substitute for the shares of Common Stock issuable in
accordance with subparagraph (ii) upon exercise of the Right
and payment of the applicable Purchase Price, (1) cash, (2) a
reduction in the Purchase Price, (3) shares of Preferred Stock
or other equity securities of the Company (including, without
limitation, shares or fractions of shares of preferred stock
which, by virtue of having dividend, voting and liquidation
rights substantially comparable to those of the shares of
Common Stock, are deemed in good faith by the Board of
Directors to have substantially the same value as the shares
of Common Stock (such shares of preferred stock
<PAGE> 30
28
and shares or fractions of shares of preferred stock are
hereinafter referred to as "Common Stock equivalents"), (4)
debt securities of the Company, (5) other assets, or (6) any
combination of the foregoing, having a value which, when added
to the value of the shares of Common Stock actually issued
upon exercise of such Right, shall have an aggregate value
equal to the Current Value (less the amount of any reduction
in the Purchase Price), where such aggregate value has been
determined by the Board of Directors upon the advice of a
nationally recognized investment banking firm selected in good
faith by the Board of Directors; provided, however, if the
Company shall not make adequate provision to deliver value
pursuant to clause (B) above within thirty (30) days following
the date that the Acquiring Person became such (the "Section
11(a)(ii) Trigger Date"), then the Company shall be obligated
to deliver, to the extent permitted by applicable law and any
material agreements then in effect to which the Company is a
party, upon the surrender for exercise of a Right and without
requiring payment of the Purchase Price, shares of Common
Stock (to the extent available), and then, if necessary, such
number or fractions of shares of Preferred Stock (to the
extent available) and then, if necessary, cash, which shares
and/or cash have an aggregate value equal to the Spread. If,
upon the date any Person becomes an
<PAGE> 31
29
Acquiring Person, the Board of Directors shall determine in
good faith that it is likely that sufficient additional shares
of Common Stock could be authorized for issuance upon exercise
in full of the Rights, then, if the Board of Directors so
elects, the thirty (30) day period set forth above may be
extended to the extent necessary, but not more than ninety
(90) days after the Section 11(a)(ii) Trigger Date, in order
that the Company may seek stockholder approval for the
authorization of such additional shares (such thirty (30) day
period, as it may be extended, is herein called the
"Substitution Period"). To the extent that the Company
determines that some action need be taken pursuant to the
second and/or third sentence of this Section 11(a)(iii), the
Company (x) shall provide, subject to Section 11(a)(ii) hereof
and the last sentence of this Section 11(a)(iii) hereof, that
such action shall apply uniformly to all outstanding Rights
and (y) may suspend the exercisability of the Rights until the
expiration of the Substitution Period in order to seek any
authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such
second sentence and to determine the value thereof. In the
event of any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has
been temporarily suspended, as well as a
<PAGE> 32
30
public announcement at such time as the suspension is no
longer in effect. For purposes of this Section 11(a)(iii), the
value of the shares of Common Stock shall be the current per
share market price (as determined pursuant to Section
11(d)(i)) on the Section 11(a)(ii) Trigger Date and the per
share or fractional value of any "Common Stock equivalent"
shall be deemed to equal the current per share market price of
the Common Stock. The Board of Directors of the Company may,
but shall not be required to, establish procedures to allocate
the right to receive shares of Common Stock upon the exercise
of the Rights among holders of Rights pursuant to this Section
11(a)(iii).
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred
Stock entitling them (for a period expiring within 45 calendar days
after such record date) to subscribe for or purchase Preferred Stock
(or shares having similar rights, privileges and preferences as the
Preferred Stock ("equivalent preferred shares")) or securities
convertible into Preferred Stock or equivalent preferred shares at a
price per share of Preferred Stock or equivalent preferred shares (or
having a conversion price per share, if a security convertible into
shares of Preferred Stock or equivalent preferred shares) less than the
then current per share market price of the Preferred Stock (determined
pursuant to Section 11(d) hereof) on such record date, the
<PAGE> 33
31
Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall
be the number of shares of Preferred Stock and equivalent preferred
shares outstanding on such record date plus the number of shares of
Preferred Stock and equivalent preferred shares which the aggregate
offering price of the total number of shares of Preferred Stock and/or
equivalent preferred shares so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be
offered) would purchase at such current market price, and the
denominator of which shall be the number of shares of Preferred Stock
and equivalent preferred shares outstanding on such record date plus
the number of additional shares of Preferred Stock and/or equivalent
preferred shares to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially
convertible); provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right. In case such subscription price
may be paid in a consideration part or all of which shall be in a form
other than cash, the value of such consideration shall be as determined
in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights
Agent.
<PAGE> 34
32
Shares of Preferred Stock and equivalent preferred shares owned by or
held for the account of the Company shall not be deemed outstanding for
the purpose of any such computation. Such adjustment shall be made
successively whenever such a record date is fixed; and in the event
that such rights, options or warrants are not so issued, the Purchase
Price shall be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making
of a distribution to all holders of the Preferred Stock (including any
such distribution made in connection with a consolidation or merger in
which the Company is the continuing or surviving corporation) of
evidences of indebtedness or assets (other than a regular quarterly
cash dividend or a dividend payable in Preferred Stock) or subscription
rights or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of
which shall be the then current per share market price of the Preferred
Stock (determined pursuant to Section 11(d) hereof) on such record
date, less the fair market value (as determined in good faith by the
Board of Directors of the Company whose determination shall be
described in a statement filed with the Rights Agent) of the portion of
the assets or evidences of indebtedness so to be distributed or of such
subscription
<PAGE> 35
33
rights or warrants applicable to one share of Preferred Stock, and the
denominator of which shall be such current per share market price
(determined pursuant to Section 11(d) hereof) of the Preferred Stock;
provided, however, that in no event shall the consideration to be paid
upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Company to be issued upon exercise
of one Right. Such adjustments shall be made successively whenever such
a record date is fixed; and in the event that such distribution is not
so made, the Purchase Price shall again be adjusted to be the Purchase
Price which would then be in effect if such record date had not been
fixed.
(d) (i) Except as otherwise provided herein, for the purpose
of any computation hereunder, the "current per share market price" of
any security (a "Security" for the purpose of this Section 11(d)(i)) on
any date shall be deemed to be the average of the daily closing prices
per share of such Security for the 30 consecutive Trading Days (as such
term is hereinafter defined) immediately prior to such date; provided,
however, that in the event that the current per share market price of
the Security is determined during a period following the announcement
by the issuer of such Security of (A) a dividend or distribution on
such Security payable in shares of such Security or securities
convertible into such shares, or (B) any subdivision, combination or
reclassification of such Security, and prior to the
<PAGE> 36
34
expiration of 30 Trading Days after the ex-dividend date for such
dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the
current per share market price shall be appropriately adjusted to
reflect the current market price per share equivalent of such Security.
The closing price for each day shall be the last sale price, regular
way, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as
reported by the principal consolidated transaction reporting system
with respect to securities listed or admitted to trading on the New
York Stock Exchange or, if the Security is not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the
Security is listed or admitted to trading or, if the Security is not
listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and
low asked prices in the over-the-counter market, as reported by NASDAQ
or such other system then in use, or, if on any such date the Security
is not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a
market in the Security selected by the Board of Directors of the
Company. The term "Trading Day" shall mean a day on
<PAGE> 37
35
which the principal national securities exchange on which the Security
is listed or admitted to trading is open for the transaction of
business or, if the Security is not listed or admitted to trading on
any national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, if the
Preferred Stock is publicly traded, the "current per share market
price" of the Preferred Stock shall be determined in accordance with
the method set forth in Section 11(d)(i). If the Preferred Stock is not
publicly traded but the Common Stock is publicly traded, the "current
per share market price" of the Preferred Stock shall be conclusively
deemed to be the current per share market price of the Common Stock as
determined pursuant to Section 11(d)(i) multiplied by one thousand
(appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof). If neither the
Common Stock nor the Preferred Stock is publicly traded, "current per
share market price" shall mean the fair value per share as determined
in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights
Agent.
(e) No adjustment in the Purchase Price shall be required
unless such adjustment would require an increase or decrease of at
least 1% in the Purchase Price; provided, however, that any adjustments
which by reason of this Section 11(e) are not required to be made shall
be carried
<PAGE> 38
36
forward and taken into account in any subsequent adjustment. All
calculations under this Section 11 shall be made to the nearest cent or
to the nearest one ten-thousandth of a share of Preferred Stock or
share of Common Stock or other share or security as the case may be.
Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than the
earlier of (i) three years from the date of the transaction which
requires such adjustment or (ii) the date of the expiration of the
right to exercise any Rights.
(f) If as a result of an adjustment made pursuant to Section
11(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock of the Company other
than the Preferred Stock, thereafter the Purchase Price and the number
of such other shares so receivable upon exercise of a Right shall be
subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the
Preferred Stock contained in Sections 11(a), 11(b), 11(c), 11(e),
11(h), 11(i) and 11(m) and the provisions of Sections 7, 9, 10, 13 and
14 hereof with respect to the Preferred Stock shall apply on like terms
to any such other shares.
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the
right to purchase, at the adjusted Purchase Price, the number of one
one-thousandths
<PAGE> 39
37
of a share of Preferred Stock purchasable from time to time hereunder
upon exercise of the Rights, all subject to further adjustment as
provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price
as a result of the calculations made in Sections 11(b) and (c), each
Right outstanding immediately prior to the making of such adjustment
shall thereafter evidence the right to purchase, at the adjusted
Purchase Price, that number of one one-thousandths of a share of
Preferred Stock (calculated to the nearest one ten-thousandth of a
share of Preferred Stock) obtained by (i) multiplying (x) the number of
one one-thousandths of a share covered by a Right immediately prior to
such adjustment by (y) the Purchase Price in effect immediately prior
to such adjustment of the Purchase Price and (ii) dividing the product
so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in
substitution for any adjustment in the number of one one-thousandths of
a share of Preferred Stock purchasable upon the exercise of a Right.
Each of the Rights outstanding after such adjustment of the number of
Rights shall be exercisable for the number of one one-thousandths of a
share of Preferred Stock for which a Right was exercisable immediately
prior to such adjustment.
<PAGE> 40
38
Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest
one ten-thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase
Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the
number of Rights, indicating the record date for the adjustment, and,
if known at the time, the amount of the adjustment to be made. This
record date may be the date on which the Purchase Price is adjusted or
any day thereafter, but, if the Right Certificates have been issued,
shall be at least 10 days later than the date of the public
announcement. If Right Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(i), the
Company may, as promptly as practicable, cause to be distributed to
holders of record of Right Certificates on such record date Right
Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be
distributed to such holders of record in substitution and replacement
for the Right Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new
Right Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Right Certificates
<PAGE> 41
39
so to be distributed shall be issued, executed and countersigned in the
manner provided for herein and shall be registered in the names of the
holders of record of Right Certificates on the record date specified in
the public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of one one-thousandths of a share of Preferred
Stock issuable upon the exercise of the Rights, the Right Certificates
theretofore and thereafter issued may continue to express the Purchase
Price and the number of one one-thousandths of a share of Preferred
Stock which were expressed in the initial Right Certificates issued
hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then par value, if any, of the
Preferred Stock or other shares of capital stock issuable upon exercise
of the Rights, the Company shall take any corporate action which may,
in the opinion of its counsel, be necessary in order that the Company
may validly and legally issue fully paid and nonassessable shares of
Preferred Stock or other such shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date
for a specified event, the Company may elect to defer until the
occurrence of such event the issuing to the holder of any Right
exercised after such
<PAGE> 42
40
record date of the Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise over and
above the Preferred Stock and other capital stock or securities of the
Company, if any, issuable upon such exercise on the basis of the
Purchase Price in effect prior to such adjustment; provided, however,
that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such
additional shares upon the occurrence of the event requiring such
adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions
in the Purchase Price, in addition to those adjustments expressly
required by this Section 11, as and to the extent that it in its sole
discretion shall determine to be advisable in order that any
consolidation or subdivision of the Preferred Stock, issuance wholly
for cash of any shares of Preferred Stock at less than the current
market price, issuance wholly for cash or Preferred Stock or securities
which by their terms are convertible into or exchangeable for Preferred
Stock, dividends on Preferred Stock payable in shares of Preferred
Stock or issuance of rights, options or warrants referred to
hereinabove in Section 11(b), hereafter made by the Company to holders
of its Preferred Stock shall not be taxable to such stockholders.
<PAGE> 43
41
(n) Anything in this Agreement to the contrary
notwithstanding, in the event that at any time after the date of this
Agreement and prior to the Distribution Date, the Company shall (i)
declare or pay any dividend on the Common Stock payable in Common Stock
or (ii) effect a subdivision, combination or consolidation of the
Common Stock (by reclassification or otherwise than by payment of a
dividend payable in Common Stock) into a greater or lesser number of
Common Stock, then in any such case, the number of Rights associated
with each share of Common Stock then outstanding, or issued or
delivered thereafter, shall be proportionately adjusted so that the
number of Rights thereafter associated with each share of Common Stock
following any such event shall equal the result obtained by multiplying
the number of Rights associated with each share of Common Stock
immediately prior to such event by a fraction the numerator of which
shall be the total number of shares of Common Stock outstanding
immediately prior to the occurrence of the event and the denominator of
which shall be the total number of shares of Common Stock outstanding
immediately following the occurrence of such event.
(o) The Company agrees that, after the earlier of the
Distribution Date or the Stock Acquisition Date, it will not, except as
permitted by Sections 23, 24 or 27 hereof, take (or permit any
Subsidiary to take) any action if at the time such action is taken it
is reasonably foreseeable that
<PAGE> 44
42
such action will diminish substantially or eliminate the benefits
intended to be afforded by the Rights.
Section 12. Certificate of Adjusted Purchase Price or Number
of Shares. Whenever an adjustment is made as provided in Section 11 or 13
hereof, the Company shall promptly (a) prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the Common Stock
or the Preferred Stock a copy of such certificate and (c) mail a brief summary
thereof to each holder of a Right Certificate in accordance with Section 25
hereof (if so required under Section 25 hereof). The Rights Agent shall be fully
protected in relying on any such certificate and on any adjustment therein
contained and shall not be deemed to have knowledge of any such adjustment
unless and until it shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earnings Power. (a) In the event, directly or indirectly, at any time
after any Person has become an Acquiring Person, (i) the Company shall merge
with and into any other Person, (ii) any Person shall consolidate with the
Company, or any Person shall merge with and into the Company and the Company
shall be the continuing or surviving corporation of such merger and, in
connection with such merger, all or part of the Common Stock shall be changed
into or exchanged for stock or other securities of any other Person (or of the
Company) or cash or any other property, or (iii) the Company shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or
<PAGE> 45
43
otherwise transfer), in one or more transactions, assets or earning power
aggregating 50% or more of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person (other than the Company or
one or more of its wholly-owned Subsidiaries), then upon the first occurrence of
such event, proper provision shall be made so that: (A) each holder of record of
a Right (other than Rights which have become void pursuant to Section 11(a)(ii))
shall thereafter have the right to receive, upon the exercise thereof at a price
equal to the then current Purchase Price multiplied by the number of one
one-thousandths of a share of Preferred Stock for which a Right was exercisable
(whether or not such Right was then exercisable) immediately prior to the time
that any Person first became an Acquiring Person (each as subsequently adjusted
thereafter pursuant to Sections 11(a)(i), 11(b), 11(c), 11(h), 11(i) and 11(m)),
in accordance with the terms of this Agreement and in lieu of Preferred Stock,
such number of validly issued, fully paid and non-assessable and freely
tradeable shares of Common Stock of the Principal Party (as defined herein) not
subject to any liens, encumbrances, rights of first refusal or other adverse
claims, as shall be equal to the result obtained by (1) multiplying the then
current Purchase Price by the number of one one-thousandths of a share of
Preferred Stock for which a Right was exercisable immediately prior to the time
that any Person first became an Acquiring Person (as subsequently adjusted
thereafter pursuant to Sections 11(a)(i), 11(b), 11(c), 11(h), 11(i) and 11(m))
and (2) dividing that product by 50% of the then
<PAGE> 46
44
current per share market price of the Common Stock of such Principal Party
(determined pursuant to Section 11(d)(i) hereof) on the date of consummation of
such consolidation, merger, sale or transfer; provided that the Purchase Price
and the number of shares of Common Stock of such Principal Party issuable upon
exercise of each Right shall be further adjusted as provided in Section 11(f) of
this Agreement to reflect any events occurring in respect of such Principal
Party after the date of the such consolidation, merger, sale or transfer; (B)
such Principal Party shall thereafter be liable for, and shall assume, by virtue
of such consolidation, merger, sale or transfer, all the obligations and duties
of the Company pursuant to this Agreement; (C) the term "Company" shall
thereafter be deemed to refer to such Principal Party; and (D) such Principal
Party shall take such steps (including, but not limited to, the reservation of a
sufficient number of its shares of Common Stock in accordance with Section 9
hereof) in connection with such consummation of any such transaction as may be
necessary to assure that the provisions hereof shall thereafter be applicable,
as nearly as reasonably may be, in relation to the shares of its Common Stock
thereafter deliverable upon the exercise of the Rights; provided that, upon the
subsequent occurrence of any consolidation, merger, sale or transfer of assets
or other extraordinary transaction in respect of such Principal Party, each
holder of a Right shall thereupon be entitled to receive, upon exercise of a
Right and payment of the Purchase Price as provided in this Section 13(a), such
cash, shares, rights, warrants and other
<PAGE> 47
45
property which such holder would have been entitled to receive had such holder,
at the time of such transaction, owned the Common Stock of the Principal Party
receivable upon the exercise of a Right pursuant to this Section 13(a), and such
Principal Party shall take such steps (including, but not limited to,
reservation of shares of stock) as may be necessary to permit the subsequent
exercise of the Rights in accordance with the terms hereof for such cash,
shares, rights, warrants and other property.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in (i)
or (ii) of the first sentence of Section 13(a) hereof: (A) the Person
that is the issuer of the securities into which the shares of Common
Stock are converted in such merger or consolidation, or, if there is
more than one such issuer, the issuer the shares of Common Stock of
which have the greatest aggregate market value of shares outstanding,
or (B) if no securities are so issued, (x) the Person that is the other
party to the merger, if such Person survives said merger, or, if there
is more than one such Person, the Person the shares of Common Stock of
which have the greatest aggregate market value of shares outstanding or
(y) if the Person that is the other party to the merger does not
survive the merger, the Person that does survive the merger (including
the Company if it survives) or (z) the Person resulting from the
consolidation; and
<PAGE> 48
46
(ii) in the case of any transaction described in
(iii) of the first sentence in Section 13(a) hereof, the Person that is
the party receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions, or, if each
Person that is a party to such transaction or transactions receives the
same portion of the assets or earning power so transferred or if the
Person receiving the greatest portion of the assets or earning power
cannot be determined, whichever of such Persons as is the issuer of
Common Stock having the greatest aggregate market value of shares
outstanding;
provided, however, that in any such case described in the foregoing clause
(b)(i) or (b)(ii), if the Common Stock of such Person is not at such time or has
not been continuously over the preceding 12-month period registered under
Section 12 of the Exchange Act, then (1) if such Person is a direct or indirect
Subsidiary of another Person the Common Stock of which is and has been so
registered, the term "Principal Party" shall refer to such other Person, or (2)
if such Person is a Subsidiary, directly or indirectly, of more than one Person,
and the Common Stocks of all of such persons have been so registered, the term
"Principal Party" shall refer to whichever of such Persons is the issuer of
Common Stock having the greatest aggregate market value of shares outstanding,
or (3) if such Person is owned, directly or indirectly, by a joint venture
formed by two or more Persons that are not owned, directly or indirectly, by the
same Person, the rules set forth in clauses (1) and (2) above shall apply to
<PAGE> 49
47
each of the owners having an interest in the venture as if the Person owned by
the joint venture was a Subsidiary of both or all of such joint venturers, and
the Principal Party in each such case shall bear the obligations set forth in
this Section 13 in the same ratio as its interest in such Person bears to the
total of such interests.
(c) The Company shall not consummate any consolidation,
merger, sale or transfer referred to in Section 13(a) hereof unless prior
thereto the Company and the Principal Party involved therein shall have executed
and delivered to the Rights Agent an agreement confirming that the requirements
of Sections 13(a) and (b) hereof shall promptly be performed in accordance with
their terms and that such consolidation, merger, sale or transfer of assets
shall not result in a default by the Principal Party under this Agreement as the
same shall have been assumed by the Principal Party pursuant to Sections 13(a)
and (b) hereof and providing that, as soon as practicable after executing such
agreement pursuant to this Section 13, the Principal Party will:
(i) prepare and file a registration statement under
the Securities Act, if necessary, with respect to the Rights and the
securities purchasable upon exercise of the Rights on an appropriate
form, use its best efforts to cause such registration statement to
become effective as soon as practicable after such filing and use its
best efforts to cause such registration statement to remain effective
(with a prospectus at all times meeting the requirements of the
<PAGE> 50
48
Securities Act) until the Final Expiration Date, and similarly comply
with applicable state securities laws;
(ii) use its best efforts, if the Common Stock of the
Principal Party shall be listed or admitted to trading on the New York
Stock Exchange or on another national securities exchange, to list or
admit to trading (or continue the listing of) the Rights and the
securities purchasable upon exercise of the Rights on the New York
Stock Exchange or such securities exchange, or, if the Common Stock of
the Principal Party shall not be listed or admitted to trading on the
New York Stock Exchange or a national securities exchange, to cause the
Rights and the securities receivable upon exercise of the Rights to be
reported by such other system then in use;
(iii) deliver to holders of the Rights historical
financial statements for the Principal Party which comply in all
respects with the requirements for registration on Form 10 (or any
successor form) under the Exchange Act; and
(iv) obtain waivers of any rights of first refusal or
preemptive rights in respect of the Common Stock of the Principal Party
subject to purchase upon exercise of outstanding Rights.
(d) In case the Principal Party has provision in any of its
authorized securities or in its certificate of incorporation or by-laws or other
instrument governing its corporate affairs, which provision would have the
effect of (i) causing such Principal Party to issue (other than to holders of
<PAGE> 51
49
Rights pursuant to this Section 13), in connection with, or as a consequence of,
the consummation of a transaction referred to in this Section 13, shares of
Common Stock of such Principal Party at less than the then current market price
per share thereof (determined pursuant to Section 11(d) hereof) or securities
exercisable for, or convertible into, Common Stock of such Principal Party at
less than such then current market price, or (ii) providing for any special
payment, tax or similar provision in connection with the issuance of the Common
Stock of such Principal Party pursuant to the provisions of Section 13, then, in
such event, the Company hereby agrees with each holder of Rights that it shall
not consummate any such transaction unless prior thereto the Company and such
Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing that the provision in question of such
Principal Party shall have been cancelled, waived or amended, or that the
authorized securities shall be redeemed, so that the applicable provision will
have no effect in connection with, or as a consequence of, the consummation of
the proposed transaction.
(e) The Company covenants and agrees that it shall not, at any
time after a Person first becomes an Acquiring Person enter into any transaction
of the type contemplated by (i) - (iii) of Section 13(a) hereof if (x) at the
time of or immediately after such consolidation, merger, sale, transfer or other
transaction there are any rights, warrants or other instruments or securities
outstanding or agreements in effect
<PAGE> 52
50
which would substantially diminish or otherwise eliminate the benefits intended
to be afforded by the Rights, (y) prior to, simultaneously with or immediately
after such consolidation, merger, sale, transfer of other transaction, the
stockholders of the Person who constitutes, or would constitute, the Principal
Party for purposes of Section 13(a) hereof shall have received a distribution of
Rights previously owned by such Person or any of its Affiliates or Associates or
(z) the form or nature of organization of the Principal Party would preclude or
limit the exercisability of the Rights.
Section 14. Fractional Rights and Fractional Shares. (a) The
Company shall not be required to issue fractions of Rights or to distribute
Right Certificates which evidence fractional Rights (except prior to the
Distribution Date in accordance with Section 11(n) hereof). In lieu of such
fractional Rights, there shall be paid to the registered holders of the Right
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price for any day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction
<PAGE> 53
51
reporting system with respect to securities listed or admitted to trading on the
New York Stock Exchange or, if the Rights are not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Rights are listed or admitted to
trading or, if the Rights are not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported by
NASDAQ or such other system then in use or, if on any such date the Rights are
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the Rights
selected by the Board of Directors of the Company. If on any such date no such
market maker is making a market in the Rights, the fair value of the Rights on
such date as determined in good faith by the Board of Directors of the Company
shall be used.
(b) The Company shall not be required to issue fractions of
Preferred Stock (other than fractions which are integral multiples of one
one-thousandth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock). Interests in fractions of Preferred Stock in integral
multiples of one one-thousandth of a share of Preferred Stock may, at the
election of the Company, be evidenced
<PAGE> 54
52
by depositary receipts, pursuant to an appropriate agreement between the Company
and a depositary selected by it; provided, that such agreement shall provide
that the holders of such depositary receipts shall have all the rights,
privileges and preferences to which they are entitled as beneficial owners of
the Preferred Stock represented by such depositary receipts. In lieu of
fractional shares of Preferred Stock that are not integral multiples of one
one-thousandth of a share of Preferred Stock, the Company shall pay to the
registered holders of Right Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of one share of Preferred Stock. For the purposes of this Section
14(b), the current market value of a share of Preferred Stock shall be the
closing price of a share of Preferred Stock (as determined pursuant to Section
11(d)(i) hereof) for the Trading Day immediately prior to the date of such
exercise.
(c) The Company shall not be required to issue fractions of
shares of Common Stock or to distribute certificates which evidence fractional
shares of Common Stock upon the exercise or exchange of Rights. In lieu of such
fractional shares of Common Stock, the Company shall pay to the registered
holders of the Right Certificates with regard to which such fractional shares of
Common Stock would otherwise be issuable in an amount in cash equal to the same
fraction of the current market value of a whole share of Common Stock (as
determined in
<PAGE> 55
53
accordance with Section 14(a) hereof) for the Trading Day immediately prior to
the date of such exercise or exchange.
(d) The holder of a Right by the acceptance of the Right
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right (except as provided above).
Section 15. Rights of Action. All rights of action in respect
of this Agreement, excepting the rights of action given to the Rights Agent
under Section 18 hereof, are vested in the respective registered holders of the
Right Certificates (and, prior to the Distribution Date, the registered holders
of the Common Stock); and any registered holder of any Right Certificate (or,
prior to the Distribution Date, of the Common Stock), without the consent of the
Rights Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Stock), on his own behalf and for his own
benefit, may enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Right Certificate (or, prior to
the Distribution Date, such Common Stock) in the manner provided in such Right
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under, and
<PAGE> 56
54
injunctive relief against actual or threatened violations of, the obligations of
any Person subject to this Agreement.
Section 16. Agreement of Right Holders. Every holder of a
Right, by accepting the same, consents and agrees with the Company and the
Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the
Common Stock;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if
surrendered at the office or agency of the Rights Agent designated for
such purpose, duly endorsed or accompanied by a proper instrument of
transfer; and
(c) the Company and the Rights Agent may deem and treat the
Person in whose name the Right Certificate (or, prior to the
Distribution Date, the Common Stock certificate) is registered as the
absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Right
Certificates or the Common Stock certificate made by anyone other than
the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent shall be affected by any
notice to the contrary.
Section 17. Right Certificate Holder Not Deemed a
Stockholder. No holder, as such, of any Right Certificate shall
be entitled to vote, receive dividends or be deemed for any
<PAGE> 57
55
purpose the holder of the Preferred Stock or any other securities of the Company
which may at any time be issuable on the exercise of the Rights represented
thereby, nor shall anything contained herein or in any Right Certificate be
construed to confer upon the holder of any Right Certificate, as such, any of
the rights of a stockholder of the Company or any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action, or to receive
notice of meetings or other actions affecting stockholders (except as provided
in this Agreement), or to receive dividends or subscription rights, or
otherwise, until the Rights evidenced by such Right Certificate shall have been
exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent. (a) The Company
agrees to pay to the Rights Agent reasonable compensation for all services
rendered by it hereunder and, from time to time, on demand of the Rights Agent,
its reasonable expenses and counsel fees and other disbursements incurred in the
administration and execution of this Agreement and the exercise and performance
of its duties hereunder. The Company also agrees to indemnify the Rights Agent
for, and to hold it harmless against, any loss, liability or expense, incurred
without negligence, bad faith or willful misconduct on the part of the Rights
Agent, for anything done or omitted by the Rights Agent in connection with the
acceptance and administration of this
<PAGE> 58
56
Agreement, including the costs and expenses of defending against any claim of
liability arising therefrom, directly or indirectly.
(b) The Rights Agent shall be protected and shall incur no
liability for, or in respect of any action taken, suffered or omitted by it in
connection with, its administration of this Agreement in reliance upon any Right
Certificate or certificate for the Preferred Stock or Common Stock or for other
securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper Person or Persons, or otherwise upon the advice of counsel as set
forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of
Rights Agent. (a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the stock transfer or corporate trust powers of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto; provided, that such corporation would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time
<PAGE> 59
57
such successor Rights Agent shall succeed to the agency created by this
Agreement, any of the Right Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Right Certificates so countersigned;
and in case at that time any of the Right Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Right Certificates
shall have the full force provided in the Right Certificates and in this
Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered the Rights Agent may adopt the countersignature
under its prior name and deliver Right Certificates so countersigned; and in
case at that time any of the Right Certificates shall not have been
countersigned, the Rights Agent may countersign such Right Certificates either
in its prior name or in its changed name and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and in
this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Right Certificates, by their acceptance thereof, shall be bound:
<PAGE> 60
58
(a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Company), and the opinion of such counsel
shall be full and complete authorization and protection to the Rights
Agent as to any action taken or omitted by it in good faith and in
accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that
any fact or matter be proved or established by the Company prior to
taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically prescribed)
may be deemed to be conclusively proved and established by a
certificate signed by any one of the Chairman of the Board of
Directors, the President, any Vice President, the Treasurer, the
Controller or the Secretary of the Company and delivered to the Rights
Agent; and such certificate shall be full authorization to the Rights
Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company
and any other Person only for its own negligence, bad faith or wilful
misconduct.
(d) The Rights Agent shall not be liable for or by
reason of any of the statements of fact or recitals
contained in this Agreement or in the Right Certificates
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59
(except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery
hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Right Certificate (except
its countersignature thereof); nor shall it be responsible for any
breach by the Company of any covenant or condition contained in this
Agreement or in any Right Certificate; nor shall it be responsible for
any change in the exercisability of the Rights (including the Rights
becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment
in the terms of the Rights (including the manner, method or amount
thereof) provided for in Sections 3, 11, 13, 23 and 24, or the
ascertaining of the existence of facts that would require any such
change or adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after receipt of a certificate
furnished pursuant to Section 12, describing such change or
adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of
any shares of Preferred Stock or other securities to be issued pursuant
to this Agreement or any Right Certificate or as to whether any shares
of Preferred Stock or other securities
<PAGE> 62
60
will, when issued, be validly authorized and issued, fully
paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts, instruments
and assurances as may reasonably be required by the Rights Agent for
the carrying out or performing by the Rights Agent of the provisions of
this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties
hereunder from any person reasonably believed by the Rights Agent to be
one of the Chairman of the Board of Directors, the President, the Chief
Financial Officer or the Secretary of the Company, and to apply to such
officers for advice or instructions in connection with its duties, and
it shall not be liable for any action taken or suffered by it in good
faith in accordance with instructions of any such officer or for any
delay in acting while waiting for those instructions. Any application
by the Rights Agent for written instructions from the Company may, at
the option of the Rights Agent, set forth in writing any action
proposed to be taken or omitted by the Rights Agent under this
Agreement and the date on and/or after which such action shall be taken
or such omission shall be effective. The Rights Agent shall not be
liable for any action taken by, or omission of, the Rights Agent in
accordance with a proposal included in any such application on or after
the date
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61
specified in such application (which date shall not be less than five
Business Days after the date any officer of the Company actually
receives such application, unless any such officer shall have consented
in writing to an earlier date) unless, prior to taking any such action
(or the effective date in the case of an omission), the Rights Agent
shall have received written instructions in response to such
application specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights
or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract
with or lend money to the Company or otherwise act as fully and freely
as though it were not Rights Agent under this Agreement. Nothing herein
shall preclude the Rights Agent from acting in any other capacity for
the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorneys or agents, and the Rights
Agent shall not be answerable or accountable for any act, default,
neglect or misconduct of any such attorneys or agents or for any loss
to the Company resulting from any such act, default, neglect or
misconduct, provided reasonable care was exercised in the selection and
continued employment thereof.
<PAGE> 64
62
(j) If, with respect to any Rights Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate contained in
the form of assignment or the form of election to purchase set forth on
the reverse thereof, as the case may be, has not been completed to
certify the holder is not an Acquiring Person (or an Affiliate or
Associate thereof), the Rights Agent shall not take any further action
with respect to such requested exercise or transfer without first
consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' notice in writing mailed to the Company and to each
transfer agent of the Common Stock or Preferred Stock by registered or certified
mail, and, following the Distribution Date, to the holders of the Right
Certificates by first-class mail. The Company may remove the Rights Agent or any
successor Rights Agent upon 30 days' notice in writing, mailed to the Rights
Agent or successor Rights Agent, as the case may be, and to each transfer agent
of the Common Stock or Preferred Stock by registered or certified mail, and,
following the Distribution Date, to the holders of the Right Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of 30 days after giving notice of such removal or after
<PAGE> 65
63
it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Right Certificate
(who shall, with such notice, submit his Right Certificate for inspection by the
Company), then the registered holder of any Right Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be (A) a corporation organized and doing business under the laws of the
United States or any State thereof, which is authorized under such laws to
exercise corporate trust or stock transfer powers and is subject to supervision
or examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least $50
million or (B) an affiliate of a corporation described in clause A of this
sentence. After appointment, the successor Rights Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent any property at
the time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Common Stock or
Preferred Stock, and, following the Distribution Date, mail a notice thereof in
writing to the registered holders
<PAGE> 66
64
of the Right Certificates. Failure to give any notice provided for in this
Section 21, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates.
Notwithstanding any of the provisions of this Agreement or of the Rights to the
contrary, the Company may, at its option, issue new Right Certificates
evidencing Rights in such forms as may be approved by its Board of Directors to
reflect any adjustment or change in the Purchase Price and the number or kind or
class of shares or other securities or property purchasable under the Right
Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of Common Stock following the
Distribution Date and prior to the earlier of the Redemption Date and the Final
Expiration Date, the Company may with respect to shares of Common Stock so
issued or sold pursuant to (i) the exercise of stock options, (ii) under any
employee plan or arrangement, (iii) upon the exercise, conversion or exchange of
securities, notes or debentures issued by the Company or (iv) a contractual
obligation of the Company in each case existing prior to the Distribution Date,
issue Rights Certificates representing the appropriate number of Rights in
connection with such issuance or sale.
Section 23. Redemption. (a) The Board of Directors of
the Company may, at any time prior to such time as any Person
first becomes an Acquiring Person, redeem all but not less than
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65
all the then outstanding Rights at a redemption price of $.01 per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (the redemption price being
hereinafter referred to as the "Redemption Price"). The redemption of the Rights
may be made effective at such time, on such basis and with such conditions as
the Board of Directors in its sole discretion may establish. The Company may, at
its option, pay the Redemption Price in cash, shares of Common Stock (based on
the current market price of the Common Stock at the time of redemption) or any
other form of consideration deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of Directors
ordering the redemption of the Rights pursuant to paragraph (a) of this Section
23 (or at such later time as the Board of Directors may establish for the
effectiveness of such redemption), and without any further action and without
any notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price.
The Company shall promptly give public notice of any such redemption; provided,
however, that the failure to give, or any defect in, any such notice shall not
affect the validity of such redemption. Within 10 days after such action of the
Board of Directors ordering the redemption of the Rights (or such later time as
the Board of Directors may establish for the effectiveness of such redemption),
the Company shall mail a notice of redemption to all the holders of the then
outstanding Rights at their last addresses as they appear upon
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66
the registry books of the Rights Agent or, prior to the Distribution Date, on
the registry books of the transfer agent for the Common Stock. Any notice which
is mailed in the manner herein provided shall be deemed given, whether or not
the holder receives the notice. Each such notice of redemption shall state the
method by which the payment of the Redemption Price will be made.
Section 24. Exchange. (a) The Board of Directors of the
Company may, at its option, at any time after any Person first becomes an
Acquiring Person, exchange all or part of the then outstanding and exercisable
Rights (which shall not include Rights that have not become effective or that
have become void pursuant to the provisions of Section 11(a)(ii) hereof) for
shares of Common Stock at an exchange ratio of one share of Common Stock per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such amount per Right being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing,
the Board of Directors shall not be empowered to effect such exchange at any
time (1) after any Person (other than an Exempt Person), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of shares
of Common Stock aggregating 50% or more of the shares of Common Stock then
outstanding. From and after the occurrence of an event specified in Section
13(a) hereof, any Rights that theretofore have not been exchanged pursuant to
this Section 24(a) shall thereafter be exercisable only in accordance with
Section 13 and may not be
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67
exchanged pursuant to this Section 24(a). The exchange of the Rights by the
Board of Directors may be made effective at such time, on such basis and with
such conditions as the Board of Directors in its sole discretion may establish.
(b) Immediately upon the effectiveness of the action of the
Board of Directors of the Company ordering the exchange of any Rights pursuant
to paragraph (a) of this Section 24 and without any further action and without
any notice, the right to exercise such Rights shall terminate and the only right
thereafter of a holder of such Rights shall be to receive that number of shares
of Common Stock equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio. The Company shall promptly give public notice
of any such exchange; provided, however, that the failure to give, or any defect
in, such notice shall not affect the validity of such exchange. The Company
shall promptly mail a notice of any such exchange to all of the holders of the
Rights so exchanged at their last addresses as they appear upon the registry
books of the Rights Agent. Any notice which is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the notice.
Each such notice of exchange will state the method by which the exchange of the
shares of Common Stock for Rights will be effected and, in the event of any
partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other than
Rights which have become void pursuant to the provisions of Section 11(a)(ii)
hereof) held by each holder of Rights.
<PAGE> 70
68
(c) The Company may at its option and, in the event that there
shall not be sufficient shares of Common Stock issued but not outstanding or
authorized but unissued to permit an exchange of Rights as contemplated in
accordance with this Section 24, the Company shall substitute to the extent of
such insufficiency, for each share of Common Stock that would otherwise be
issuable upon exchange of a Right, a number of shares of Preferred Stock or
fraction thereof (or equivalent preferred shares as such term is defined in
Section 11(b)) such that the current per share market price (determined pursuant
to Section 11(d) hereof) of one share of Preferred Stock (or equivalent
preferred share) multiplied by such number or fraction is equal to the current
per share market price of one share of Common Stock (determined pursuant to
Section 11(d) hereof) as of the date of such exchange).
Section 25. Notice of Certain Events. (a) In case the Company
shall at any time after the earlier of the Distribution Date or the Stock
Acquisition Date propose (i) to pay any dividend payable in stock of any class
to the holders of its Preferred Stock or to make any other distribution to the
holders of its Preferred Stock (other than a regular quarterly cash dividend),
(ii) to offer to the holders of its Preferred Stock rights or warrants to
subscribe for or to purchase any additional shares of Preferred Stock or shares
of stock of any class or any other securities, rights or options, (iii) to
effect any reclassification of its Preferred Stock (other than a
reclassification involving only the subdivision or combination of
<PAGE> 71
69
outstanding Preferred Stock), (iv) to effect the liquidation, dissolution or
winding up of the Company, or (v) to declare or pay any dividend on the Common
Stock payable in Common Stock or to effect a subdivision, combination or
consolidation of the Common Stock (by reclassification or otherwise than by
payment of dividends in Common Stock), then, in each such case, the Company
shall give to each holder of a Right Certificate, in accordance with Section 26
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, or distribution of rights or warrants,
or the date on which such liquidation, dissolution or winding up is to take
place and the date of participation therein by the holders of the Common Stock
and/or Preferred Stock, if any such date is to be fixed, and such notice shall
be so given in the case of any action covered by clause (i) or (ii) above at
least 10 days prior to the record date for determining holders of the Preferred
Stock for purposes of such action, and in the case of any such other action, at
least 10 days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the Common Stock and/or
Preferred Stock, whichever shall be the earlier.
(b) In case any event described in Section 11(a)(ii) or
Section 13 shall occur then the Company shall as soon as practicable thereafter
give to each holder of a Right Certificate (or if occurring prior to the
Distribution Date, the holders of the Common Stock) in accordance with Section
26 hereof, a notice of the occurrence of such event, which notice shall describe
such
<PAGE> 72
70
event and the consequences of such event to holders of Rights under Section
11(a)(ii) and Section 13 hereof.
Section 26. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
ACNielsen Corporation
177 Broad Street
Stamford, CT 06901
Attention: General Counsel
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
First Chicago Trust Company of New York
525 Washington Boulevard - Suite 4660
Jersey City, NJ 07310
Attention: Tenders and Exchanges Administration
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments. Except as
otherwise provided in this Section 27, for so long as the Rights
<PAGE> 73
71
are then redeemable, the Company may in its sole and absolute discretion, and
the Rights Agent shall if the Company so directs, supplement or amend any
provision of this Agreement in any respect without the approval of any holders
of the Rights. At any time when the Rights are no longer redeemable, except as
otherwise provided in this Section 27, the Company may, and the Rights Agent
shall, if the Company so directs, supplement or amend this Agreement without the
approval of any holders of Rights Certificates in order to (i) cure any
ambiguity, (ii) correct or supplement any provision contained herein which may
be defective or inconsistent with any other provisions herein, (iii) shorten or
lengthen any time period hereunder, or (iv) change or supplement the provisions
hereunder in any manner which the Company may deem necessary or desirable;
provided that no such supplement or amendment shall adversely affect the
interests of the holders of Rights as such (other than an Acquiring Person or an
Affiliate or Associate of an Acquiring Person), and no such amendment may cause
the rights again to become redeemable or cause the Agreement again to become
amendable other than in accordance with this sentence. Notwithstanding anything
contained in this Agreement to the contrary, no supplement or amendment shall be
made which decreases the Redemption Price. Upon the delivery of a certificate
from an appropriate officer of the Company which states that the proposed
supplement or amendment is in compliance with the terms of this Section 27, the
Rights Agent shall execute such supplement or amendment.
<PAGE> 74
72
Section 28. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 29. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the Common Stock) any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Distribution Date, the Common Stock).
Section 30. Determinations and Actions by the Board of
Directors. The Board of Directors of the Company shall have the exclusive power
and authority to administer this Agreement and to exercise the rights and powers
specifically granted to the Board of Directors of the Company or to the Company,
or as may be necessary or advisable in the administration of this Agreement,
including, without limitation, the right and power to (i) interpret the
provisions of this Agreement and (ii) make all determinations deemed necessary
or advisable for the administration of this Agreement (including, without
limitation, a determination to redeem or not redeem the Rights or to amend this
Agreement). All such actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, all omissions with respect to the
foregoing) that are done or
<PAGE> 75
73
made by the Board of Directors of the Company in good faith, shall (x) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights, as such, and all other parties, and (y) not subject the Board of
Directors to any liability to the holders of the Rights.
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement or applicable to this Agreement is held by a court
of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
Section 32. Governing Law. This Agreement and each Right
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
<PAGE> 76
74
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and attested, all as of the day and year first
above written.
Attest: ACNIELSEN CORPORATION
By By
--------------------------- -----------------------------
Name: Name:
Title: Title:
Attest: FIRST CHICAGO TRUST COMPANY
OF NEW YORK
By By
--------------------------- -----------------------------
Name: Name:
Title: Title:
<PAGE> 77
Exhibit A
FORM
OF
CERTIFICATE OF DESIGNATION
OF
Series A JUNIOR PARTICIPATING PREFERRED STOCK
OF
ACNielsen Corporation
(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
-------------------
ACNielsen Corporation, a corporation organized and existing
under the General Corporation Law of the State of Delaware (hereinafter called
the "Company"), hereby certifies that the following resolution was duly adopted
by the Board of Directors of the Company as required by Section 151 of the
General Corporation Law of the State of Delaware at a meeting duly called and
held on ______________, 1996:
RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors of the Company (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the Company's
Certificate of Incorporation, as amended to date (hereinafter called the
"Certificate of Incorporation"), the Board of Directors hereby creates a series
of Preferred Stock, par value $.01 per share, of the Company and hereby states
the designation and number of shares, and fixes the relative rights, powers and
preferences thereof, and the limitations thereof, as follows:
Section 1. Designation and Amount. The shares of such series
shall be designated as "Series A Junior Participating Preferred Stock" (the
"Series A Preferred Stock") and the number of shares constituting the Series A
Preferred Stock shall be __________. Such number of shares may be increased or
decreased by resolution of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Series A Preferred Stock to a number less
than the number of shares then outstanding plus the number of shares reserved
for issuance upon the exercise of outstanding options, rights or warrants or
upon the conversion of any outstanding securities issued by the Company
convertible into Series A Preferred Stock.
A-1
<PAGE> 78
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any
series of Preferred Stock of the Company (the "Preferred Stock") (or any similar
stock) ranking prior and superior to the Series A Preferred Stock with respect
to dividends, the holders of shares of Series A Preferred Stock, in preference
to the holders of Common Stock, par value $.01 per share, of the Company (the
"Common Stock") and of any other stock of the Company ranking junior to the
Series A Preferred Stock, shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the last day of January, April, July, and
October in each year (each such date being referred to herein as a "Dividend
Payment Date"), commencing on the first Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the greater of (a) $10
or (b) subject to the provision for adjustment hereinafter set forth, 1000 times
the aggregate per share amount of all cash dividends, and 1000 times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock, declared
on the Common Stock since the immediately preceding Dividend Payment Date or,
with respect to the first Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Preferred Stock. In the event the
Company shall at any time after ____________, 1996 declare or pay any dividend
on the Common Stock payable in shares of Common Stock, or effect a subdivision
or combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Company shall declare a dividend or distribution on
the Series A Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Dividend Payment Date and the next subsequent
Dividend Payment Date, a dividend of $10 per share on the Series A Preferred
Stock shall nevertheless be payable, when, as and if declared, on such
subsequent Dividend Payment Date.
A-2
<PAGE> 79
(C) Dividends shall begin to accrue and be cumulative, whether
or not earned or declared, on outstanding shares of Series A Preferred Stock
from the Dividend Payment Date next preceding the date of issue of such shares,
unless the date of issue of such shares is prior to the record date for the
first Dividend Payment Date, in which case dividends on such shares shall begin
to accrue from the date of issue of such shares, or unless the date of issue is
a Dividend Payment Date or is a date after the record date for the determination
of holders of shares of Series A Preferred Stock entitled to receive a quarterly
dividend and before such Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on
the shares of Series A Preferred Stock in an amount less than the total amount
of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series A Preferred Stock entitled to receive payment of
a dividend or distribution declared thereon, which record date shall be not more
than 60 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of
Series A Preferred Stock shall have the following voting rights;
(A) Subject to the provision for adjustment hereinafter set
forth and except as otherwise provided in the Certificate of
Incorporation or required by law, each share of Series A Preferred
Stock shall entitle the holder thereof to 1000 votes on all matters
upon which the holders of the Common Stock of the Company are entitled
to vote. In the event the Company shall at any time after ____________,
1996 declare or pay any dividend on the Common Stock payable in shares
of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the number of votes per share to which
holders of shares of Series A Preferred Stock were entitled immediately
prior to such event shall be adjusted by multiplying such number by a
fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) Except as otherwise provided herein, in the Certificate of
Incorporation or in any other Certificate of Designations creating a
series of Preferred Stock or any similar stock, and except as otherwise
required by law, the holders of shares of Series A Preferred Stock and
the
A-3
<PAGE> 80
holders of shares of Common Stock and any other capital stock of the
Company having general voting rights shall vote together as one class
on all matters submitted to a vote of stockholders of the Company.
(C) Except as set forth herein, or as otherwise provided by
law, holders of Series A Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not earned or declared, on
shares of Series A Preferred Stock outstanding shall have been paid in
full, the Company shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (as to
dividends) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (as
to dividends) with the Series A Preferred Stock, except
dividends paid ratably on the Series A Preferred Stock and all
such parity stock on which dividends are payable or in arrears
in proportion to the total amounts to which the holders of all
such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to
the Series A Preferred Stock, provided that the Company may at
any time redeem, purchase or otherwise acquire shares of any
such junior stock in exchange for shares of any stock of the
Company ranking junior (as to dividends and upon dissolution,
liquidation or winding up) to the Series A Preferred Stock or
rights, warrants or options to acquire such junior stock;
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock, or any
shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board
of
A-4
<PAGE> 81
Directors) to all holders of such shares upon such terms as
the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and
preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(B) The Company shall not permit any subsidiary of the Company
to purchase or otherwise acquire for consideration any shares of stock
of the Company unless the Company could, under paragraph (A) of this
Section 4, purchase or otherwise acquire such shares at such time and
in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred
Stock purchased or otherwise acquired by the Company in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their retirement become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
any conditions and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Company, no distribution shall be
made (A) to the holders of the Common Stock or of shares of any other stock of
the Company ranking junior, upon liquidation, dissolution or winding up, to the
Series A Preferred Stock unless, prior thereto, the holders of shares of Series
A Preferred Stock shall have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not earned or
declared, to the date of such payment, provided that the holders of shares of
Series A Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
1000 times the aggregate amount to be distributed per share to holders of shares
of Common Stock, or (B) to the holders of shares of stock ranking on a parity
upon liquidation, dissolution or winding up with the Series A Preferred Stock,
except distributions made ratably on the Series A Preferred Stock and all such
parity stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up. In the
event, however, that there are not sufficient assets available to permit payment
in full of the Series A liquidation preference and the liquidation preferences
of all other classes and series of stock of the Company, if any, that rank on a
parity with the Series A Preferred Stock in respect thereof, then the assets
available for such distribution shall be distributed ratably to the holders of
the Series A Preferred Stock and the holders of such parity shares in the
proportion to their respective liquidation preferences. In the event the Company
shall at any time after ___________, 1996 declare or pay any
A-5
<PAGE> 82
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the aggregate amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under the proviso
in clause (A) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
Section 7. Consolidation, Merger, etc. In case the Company
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are converted into, exchanged for or changed
into other stock or securities, cash and/or any other property, then in any such
case each share of Series A Preferred Stock shall at the same time be similarly
converted into, exchanged for or changed into an amount per share (subject to
the provision for adjustment hereinafter set forth) equal to 1000 times the
aggregate amount of stock, securities, cash and/or any other property (payable
in kind), as the case may be, into which or for which each share of Common Stock
is converted, exchanged or converted. In the event the Company shall at any time
after ____________, 1996 declare or pay any dividend on the Common Stock payable
in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the conversion,
exchange or change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Preferred
Stock shall not be redeemable from any holder.
Section 9. Rank. The Series A Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets upon
liquidation, dissolution or winding up of the Company, junior to all other
series of Preferred Stock and senior to the Common Stock.
Section 10. Amendment. If any proposed amendment to the
Certificate of Incorporation (including this Certificate of Designations) would
alter, change or repeal any of the preferences, powers or special rights given
to the Series A
A-6
<PAGE> 83
Preferred Stock so as to affect the Series A Preferred Stock adversely, then the
holders of the Series A Preferred Stock shall be entitled to vote separately as
a class upon such amendment, and the affirmative vote of two-thirds of the
outstanding shares of the Series A Preferred Stock, voting separately as a
class, shall be necessary for the adoption thereof, in addition to such other
vote as may be required by the General Corporation Law of the State of Delaware.
Section 11. Fractional Shares. Series A Preferred Stock may be
issued in fractions of a share that shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
A-7
<PAGE> 84
IN WITNESS WHEREOF, this Certificate of Designations is
executed on behalf of the Company by its Chairman of the Board of Directors and
attested by its Secretary this _____ day of ____________, 1996.
_____________________________________________
[Title]
Attest:
______________________
Secretary
A-8
<PAGE> 85
Exhibit B
Form of Right Certificate
Certificate No. R- ____ ___ Rights
NOT EXERCISABLE AFTER _____________, 2006 OR EARLIER IF REDEMPTION OR
EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT
AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER
CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS
OWNED BY OR TRANSFERRED TO ANY PERSON WHO BECOMES AN ACQUIRING PERSON
(AS DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES THEREOF
WILL BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.
Right Certificate
ACNielsen Corporation
This certifies that ___________ or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of ____________, 1996 as the same may be amended from time
to time (the "Rights Agreement"), between ACNielsen Corporation, a Delaware
corporation (the "Company"), and First Chicago Trust Company of New York (the
"Rights Agent"), to purchase from the Company at any time after the Distribution
Date (as such term is defined in the Rights Agreement) and prior to 5:00 P.M.,
New York City time, on ________________, 2006 at the office or agency of the
Rights Agent designated for such purpose, or of its successor as Rights Agent,
one one-thousandth of a fully paid non-assessable share of Series A Junior
Participating Preferred Stock, par value $.01 per share (the "Preferred Stock"),
of the Company, at a purchase price of $______ per one one-thousandth of a share
of Preferred Stock (the "Purchase Price"), upon presentation and surrender of
this Right Certificate with the Form of Election to Purchase duly executed. The
number of Rights evidenced by this Rights Certificate (and the number of one
one-thousandths of a share of Preferred Stock which may be purchased upon
exercise hereof) set forth above, and the Purchase Price set forth above, are
the number and Purchase Price as of ________________, 1996 based on the
Preferred Stock as constituted at such date. As provided in the Rights
Agreement, the Purchase Price, the number of one one-thousandths of a share of
Preferred Stock (or other securities or property) which may be purchased upon
the exercise of the Rights and the number of Rights evidenced by this Right
Certificate are subject to modification and adjustment upon the happening of
certain events.
B-1
<PAGE> 86
This Right Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder
of the Rights Agent, the Company and the holders of the Right Certificates.
Copies of the Rights Agreement are on file at the principal executive offices of
the Company and the above-mentioned office or agency of the Rights Agent. The
Company will mail to the holder of this Right Certificate a copy of the Rights
Agreement without charge after receipt of a written request therefor.
This Right Certificate, with or without other Right
Certificates, upon surrender at the office or agency of the Rights Agent
designated for such purpose, may be exchanged for another Right Certificate or
Right Certificates of like tenor and date evidencing Rights entitling the holder
to purchase a like aggregate number of shares of Preferred Stock as the Rights
evidenced by the Right Certificate or Right Certificates surrendered shall have
entitled such holder to purchase. If this Right Certificate shall be exercised
in part, the holder shall be entitled to receive upon surrender hereof another
Right Certificate or Right Certificates for the number of whole Rights not
exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate (i) may be redeemed by the Company at a redemption
price of $.01 per Right or (ii) may be exchanged in whole or in part for shares
of Preferred Stock or shares of the Company's Common Stock, par value $.01 per
share.
No fractional shares of Preferred Stock or Common Stock will
be issued upon the exercise or exchange of any Right or Rights evidenced hereby
(other than fractions of Preferred Stock which are integral multiples of one
one-thousandth of a share of Preferred Stock, which may, at the election of the
Company, be evidenced by depositary receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate, as such, shall be
entitled to vote or receive dividends or be deemed for any purpose the holder of
the Preferred Stock or of any other securities of the Company which may at any
time be issuable on the exercise or exchange hereof, nor shall anything
contained in the Rights Agreement or herein be construed to confer upon the
holder hereof, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement) or to
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<PAGE> 87
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by this Right certificate shall have been exercised as provided
in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.
B-3
<PAGE> 88
WITNESS the facsimile signature of the proper officers
of the Company and its corporate seal. Dated as of _____________.
ATTEST: ACNielsen Corporation
By __________________ By __________________
Countersigned:
_______________________,
as Rights Agent
By _________________________
Authorized Signature
B-4
<PAGE> 89
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate)
FOR VALUE RECEIVED _________________________ hereby sells,
assigns and transfer unto ______________________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
Rights represented by this Right Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint
___________________ Attorney, to transfer said Rights on the books of the
within-named Company, with full power of substitution.
Dated: _________________
________________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a bank, trust company,
broker, dealer or other eligible institution participating in a recognized
signature guarantee medallion program
- --------------------------------------------------------------------------------
(To be completed)
The undersigned hereby certifies that the Rights evidenced by
this Right Certificate are not beneficially owned by, were not acquired by the
undersigned from, and are not being assigned to, an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
________________________________________
Signature
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Form of Reverse Side of Right Certificate - continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate)
To ACNielsen Corporation:
The undersigned hereby irrevocably elects to exercise
__________________ Rights represented by this Right Certificate to purchase the
shares of Preferred Stock (or other securities or property) issuable upon the
exercise of such Rights and requests that certificates for such shares of
Preferred Stock (or such other securities) be issued in the name of:
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivery to:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated: ____________________
___________________________________
Signature
(Signature must conform to holder specified on Right Certificate)
Signature Guaranteed:
Signature must be guaranteed by bank, trust company, broker,
dealer or other eligible institution participating in a recognized signature
guarantee medallion program.
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<PAGE> 91
Form of Reverse Side of Right Certificate -- continued
- --------------------------------------------------------------------------------
(To be completed)
The undersigned certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by, and were not acquired by the
undersigned from, an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement)
----------------------
Signature
- --------------------------------------------------------------------------------
NOTICE
The signature in the Form of Assignment or Form of Election to
Purchase, as the case may be, must conform to the name as written upon the face
of this Right Certificate in every particular, without alteration or enlargement
or any change whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, such Assignment or Election to Purchase will not be honored.
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Exhibit C
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT,
RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO BECOMES AN ACQUIRING
PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES
THEREOF WILL BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.
SUMMARY OF RIGHTS TO PURCHASE
Shares of Preferred Stock
On _______________, 1996 the Board of Directors of ACNielsen
Corporation (the "Company") declared a dividend of one preferred share purchase
right (a "Right") for each outstanding share of common stock, par value $.01 per
share of the Company (the "Common Stock"). The dividend is payable on
_____________, 1996 (the "Record Date") to the stockholders of record on that
date. Each Right entitles the registered holder to purchase from the Company one
one-thousandth of a share of Series A Junior Participating Preferred Stock, par
value $.01 per share (the "Preferred Stock") of the Company at a price of
$______ per one one-thousandth of a share of Preferred Stock (as the same may be
adjusted, the "Purchase Price"), subject to adjustment. The description and
terms of the Rights are set forth in a Rights Agreement dated as of
______________, 1996 as the same may be amended from time to time (the "Rights
Agreement"), between the Company and First Chicago Trust Company of New York, as
Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (with
certain exceptions an "Acquiring Person") have acquired beneficial ownership of
15% or more of the outstanding shares of Common Stock or (ii) 10 business days
(or such later date as may be determined by action of the Board of Directors
prior to such time as any person or group of affiliated persons becomes an
Acquiring Person) following the commencement of, or announcement of an intention
to make, a tender offer or exchange offer the consummation of which would result
in the beneficial ownership by a person or group of 15% or more of the
outstanding shares of Common Stock (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced by such Common Stock
certificate.
The Rights Agreement provides that, until the Distribution
Date (or earlier redemption or expiration of the Rights), the Rights will be
transferred with and only with the Common Stock. Until the Distribution Date (or
earlier redemption or expiration of the Rights), Common Stock certificates will
contain a notation incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any certificates for shares of Common Stock
outstanding as of the Record Date, even without such notation or a copy of this
Summary of Rights, will also constitute the transfer of the Rights
<PAGE> 93
associated with the shares of Common Stock represented by such certificate. As
soon as practicable following the Distribution Date, separate certificates
evidencing the Rights ("Right Certificates") will be mailed to holders of record
of the Common Stock as of the close of business on the Distribution Date and
such separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date.
The Rights will expire on ______________, 2006 (the "Final Expiration Date"),
unless the Final Expiration Date is advanced or extended or unless the Rights
are earlier redeemed or exchanged by the Company, in each case as described
below.
The Purchase Price payable, and the number of shares of
Preferred Stock or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Stock, (ii) upon the grant to holders of the
Preferred Stock of certain rights or warrants to subscribe for or purchase
Preferred Stock at a price, or securities convertible into Preferred Stock with
a conversion price, less than the then-current market price of the Preferred
Stock or (iii) upon the distribution to holders of the Preferred Stock of
evidences of indebtedness or assets (excluding regular periodic cash dividends
or dividends payable in Preferred Stock) or of subscription rights or warrants
(other than those referred to above).
The Rights are also subject to adjustment in the event of a
stock dividend on the Common Stock payable in shares of Common Stock or
subdivisions, consolidations or combinations of the Common Stock occurring, in
any such case, prior to the Distribution Date.
Shares of Preferred Stock purchasable upon exercise of the
Rights will not be redeemable. Each share of Preferred Stock will be entitled,
when, as and if declared, to a minimum preferential quarterly dividend payment
of $10 per share but will be entitled to an aggregate dividend of 1000 times the
dividend declared per share of Common Stock. In the event of liquidation,
dissolution or winding up of the Company, the holders of the Preferred Stock
will be entitled to a minimum preferential liquidation payment of $100 per share
(plus any accrued but unpaid dividends) but will be entitled to an aggregate
payment of 1000 times the payment made per share of Common Stock. Each share of
Preferred Stock will have 1000 votes, voting together with the Common Stock.
Finally, in the event of any merger, consolidation or other transaction in which
shares of Common Stock are converted or exchanged, each share of Preferred Stock
will be entitled to receive 1000 times the amount received per share of Common
Stock. These rights are protected by customary antidilution provisions.
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<PAGE> 94
Because of the nature of the Preferred Stock's dividend,
liquidation and voting rights, the value of the one one-thousandth interest in a
share of Preferred Stock purchasable upon exercise of each Right should
approximate the value of one share of Common Stock.
In the event that any person or group of affiliated or
associated persons becomes an Acquiring Person, each holder of a Right, other
than Rights beneficially owned by the Acquiring Person (which will thereupon
become void), will thereafter have the right to receive upon exercise of a Right
and payment of the Purchase Price, that number of shares of Common Stock having
a market value of two times the Purchase Price.
In the event that, after a person or group has become an
Acquiring Person, the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold, proper provision will be made so that each holder of a Right
(other than Rights beneficially owned by an Acquiring Person which will have
become void) will thereafter have the right to receive, upon the exercise
thereof at the then current exercise price of the Right, that number of shares
of common stock of the person with whom the Company has engaged in the foregoing
transaction (or its parent), which number of shares at the time of such
transaction will have a market value of two times the Purchase Price.
At any time after any person or group becomes an Acquiring
Person and prior to the acquisition by such person or group of 50% or more of
the outstanding shares of Common Stock or the occurrence of an event described
in the prior paragraph, the Board of Directors of the Company may exchange the
Rights (other than Rights owned by such person or group which will have become
void), in whole or in part, at an exchange ratio of one share of Common Stock,
or a fractional share of Preferred Stock (or of a share of a class or series of
the Company's preferred stock having similar rights, preferences and privileges)
of equivalent value, per Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price
will be required until cumulative adjustments require an adjustment of at least
1% in such Purchase Price. No fractional shares of Preferred Stock will be
issued (other than fractions which are integral multiples of one one-thousandth
of a share of Preferred Stock, which may, at the election of the Company, be
evidenced by depositary receipts) and in lieu thereof, an adjustment in cash
will be made based on the market price of the Preferred Stock on the last
trading day prior to the date of exercise.
At any time prior to the time an Acquiring Person becomes
such, the Board of Directors of the Company may redeem the Rights in whole, but
not in part, at a price of $.01 per Right (the "Redemption Price"). The
redemption of the Rights may
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<PAGE> 95
be made effective at such time, on such basis and with such conditions as the
Board of Directors in its sole discretion may establish. Immediately upon any
redemption of the Rights, the right to exercise the Rights will terminate and
the only right of the holders of Rights will be to receive the Redemption Price.
For so long as the Rights are then redeemable, the Company
may, except with respect to the redemption price, amend the Rights in any
manner. After the Rights are no longer redeemable, the Company may, except with
respect to the redemption price, amend the Rights in any manner that does not
adversely affect the interests of holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Company, including, without limitation,
the right to vote or to receive dividends.
A copy of the Rights Agreement has been filed with the
Securities and Exchange Commission as an Exhibit to a Registration Statement on
Form 8-A dated ________________, 1996. A copy of the Rights Agreement is
available free of charge from the Company. This summary description of the
Rights does not purport to be complete and is qualified in its entirety by
reference to the Rights Agreement, as the same may be amended from time to time,
which is hereby incorporated herein by reference.
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