SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark one)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 001-12275
COGNIZANT CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 06-1450569
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(State of Incorporation) (I.R.S. Employer Identification No.)
200 Nyala Farms, Westport, CT 06880
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 222-4200
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Title of Class Shares Outstanding
Common Stock, at September 30, 1997
par value $.01 per share 162,162,940
<PAGE>
COGNIZANT CORPORATION
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE(S)
Item 1. Financial Statements
Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended September 30, 1997 and 1996 3
Nine Months Ended September 30, 1997 and 1996 4
Condensed Consolidated Statements of Financial Position (Unaudited)
September 30, 1997 and December 31, 1996 5
Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, 1997 and 1996 6
Notes to Condensed Consolidated Financial Statements (Unaudited) 7-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
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<PAGE>
PART I. FINANCIAL INFORMATION
Item I. FINANCIAL STATEMENTS
COGNIZANT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollar amounts in thousands, except per share data)
<TABLE>
Three Months Ended
September 30,
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<CAPTION>
<S> <C> <C>
1997 1996
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Operating Revenue $ 341,041 $ 424,188
Operating Costs 147,159 208,687
Selling and Administrative Expenses 79,228 121,289
Depreciation and Amortization 27,491 34,017
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Operating Income 87,163 60,195
Interest Income 3,151 1,781
Interest Expense (89) (246)
Gartner Equity Income 14,464 0
Gains from 3,955 0
Dispositions, Net
Other (Expense)/ Income - Net (211) 9,444
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Non-Operating Income - Net 21,270 10,979
Income Before Provision for Taxes 108,433 71,174
Provision for Income Taxes (31,367) (31,316)
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Net Income $ 77,066 $ 39,858
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Earnings Per Share of Common Stock $.47 $.23
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Average Number of Shares Outstanding 163,146,000 170,140,000
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<FN>
See accompanying notes to the condensed consolidated financial statements
(unaudited)
</FN>
</TABLE>
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<PAGE>
COGNIZANT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollar amounts in thousands, except per share data)
<TABLE>
Nine Months Ended
September 30,
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<CAPTION>
<S> <C> <C>
1997 1996
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Operating Revenue $994,877 $ 1,209,910
Operating Costs 442,046 543,369
Selling and Administrative Expenses 260,954 365,623
Depreciation and Amortization 90,126 99,833
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Operating Income 201,751 201,085
Interest Income 8,443 5,483
Interest Expense (670) (657)
Gartner Equity Income 45,135 0
Gains from 9,391 0
Dispositions, Net
Other (Expense)/ Income - Net (2,306) 1,250
---------------- ----------------
Non-Operating Income - Net 59,993 6,076
Income Before Provision for Taxes 261,744 207,161
Provision for Income Taxes (71,718) (91,151)
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Net Income $ 190,026 $ 116,010
================ ================
Earnings Per Share of Common Stock $1.14 $.68
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Average Number of Shares Outstanding 166,148,000 169,916,000
================ ================
<FN>
See accompanying notes to the condensed consolidated financial
statements (unaudited).
</FN>
</TABLE>
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<PAGE>
COGNIZANT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, December 31,
1997 1996
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Assets
Current Assets
Cash and Cash Equivalents $ 283,162 $ 428,520
Accounts Receivable-Net 280,800 453,791
Other Current Assets 56,882 112,151
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Total Current Assets 620,844 994,462
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Investment in Gartner Group 170,195 0
Marketable Securities and Other Investments 96,464 117,706
Property, Plant and Equipment-Net 226,230 268,888
Other Assets-Net
Computer Software 127,932 139,040
Goodwill 88,295 251,483
Other Assets 107,135 103,403
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Total Other Assets-Net 323,362 493,926
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Total Assets $ 1,437,095 $ 1,874,982
=================== ====================
Liabilities and Shareholders' Equity
Current Liabilities
Accounts and Notes Payable 51,282 46,923
Accrued and Other Current Liabilities 180,329 266,932
Accrued Income Taxes 68,205 63,416
Deferred Revenues 133,925 292,970
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Total Current Liabilities 433,741 670,241
Postretirement and Postemployment Benefits 50,449 60,269
Deferred Income Taxes 73,579 105,074
Minority Interests 101,730 90,635
Other Liabilities 71,937 76,150
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Total Liabilities 731,436 1,002,369
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Shareholders' Equity 705,659 872,613
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Total Liabilities and Shareholders' Equity $ 1,437,095 $ 1,874,982
=================== ====================
<FN>
See accompanying notes to the condensed consolidated financial
statements (unaudited).
</FN>
</TABLE>
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<PAGE>
COGNIZANT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
Nine Months Ended
September 30,
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1997 1996
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Cash Flows from Operating Activities:
Net Income $ 190,026 $ 116,010
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 90,126 99,833
Gains from Sale of Investments and Businesses, Net (9,391) 0
Write-off of Purchased In-process Research and Development 0 33,233
Restructuring Payments 0 (6,845)
Postemployment Benefits Expense 0 666
Postemployment Benefits Payments (7,186) (7,325)
Payments Related to 1995 Non-recurring Charge (4,332) (10,675)
Net Decrease in Accounts Receivable 21,764 21,239
Net Increase in Deferred Revenues 31,447 57,970
Gartner Group Equity Income, Net of Taxes (26,662) 0
Minority Interest Expense 2,690 2,357
Deferred Income Taxes 7,073 48,523
Net (Decrease) Increase in Accrued Income Taxes (9,756) 15,110
Net Increase in Other Working Capital Items (24,546) (25,327)
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Net Cash Provided by Operating Activities 261,253 344,769
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Cash Flows from Investing Activities:
Proceeds from Maturities of Marketable Securities 0 81,970
Payments for Marketable Securities 0 (113,287)
Payments for Acquisitions of Businesses 0 (24,386)
Proceeds from Sale of Investments 43,601 0
Capital Expenditures (52,650) (51,469)
Additions to Computer Software (37,332) (34,668)
Additions to Deferred Charges (22,261) (16,156)
Increase in Investments (3,086) (20,845)
Deconsolidation of Gartner Group cash (123,697) 0
Payments for Purchase of Gartner Group Stock 0 (42,998)
Other 4,593 14,406
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Net Cash Used in Investing Activities (190,832) (207,433)
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Cash Flows from Financing Activities:
Payments for Purchase of Treasury Shares (302,011) 0
Proceeds from Exercise of Stock Options 11,365 0
Payments of Dividends (15,008) 0
Other Stock Transactions with Employees 0 9,203
Employee Stock Purchase Plan 782 0
Third-Parties Investment in Partnerships 100,000 0
Net Transfers to The Dun & Bradstreet Corporation 0 (122,886)
Other (725) (7,093)
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Net Cash Used in Financing Activities (205,597) (120,776)
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Effect of Exchange Rate Changes on Cash and Cash Equivalents (10,182) (1,450)
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(Decrease) Increase in Cash and Cash Equivalents (145,358) 15,110
Cash and Cash Equivalents, Beginning of Year 428,520 157,105
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Cash and Cash Equivalents, End of Period $ 283,162 $ 172,215
=======================================================================================================================
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 228 $ 782
Cash paid during the period for income taxes $ 65,385 $ 39,066
<FN>
See accompanying notes to the condensed consolidated financial statements
(unaudited).
</FN>
</TABLE>
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<PAGE>
COGNIZANT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands - (Unaudited)
Note 1 - Interim Consolidated Financial Statements
These interim consolidated financial statements have been prepared in accordance
with the instructions to Form 10-Q and should be read in conjunction with the
consolidated financial statements and related notes of Cognizant Corporation
(the "Company") in the 1996 Annual Report on Form 10-K. In the opinion of
management, all adjustments considered necessary for a fair presentation of
financial position, results of operations and cash flows for the periods
presented have been included. Certain prior-period amounts have been
reclassified to conform with the 1997 presentation.
Note 2 - Investments
In the third quarter 1997, the Company's voting interest in Gartner Group, Inc.
("Gartner") fell below 50% to 49.5% based upon the exercise of Gartner employee
stock options and employee stock purchases. Accordingly, as of September 30,
1997 and for the three- and nine-month periods ended September 30, 1997 the
Company has deconsolidated Gartner and is accounting for its ownership interest
on the equity basis.
The Company has restated the first and second quarter Statements of Income to
reflect the change to equity accounting. While net income is unchanged, other
income statement line items will change. Selected financial information, on a
previously reported and restated basis, for the quarters ended March 31 and June
30, 1997 is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the three months ended
Previously Previously
Reported Restated Reported Restated
March 31, 1997 March 31, 1997 June 30,1997 June 30, 1997
-------------- -------------- ------------ -------------
Operating Revenue $ 434,701 $ 315,576 $ 464,609 $ 338,260
Operating Income $ 77,247 $ 47,887 $ 95,159 $ 66,701
Non-Operating Inc./(Exp.)-Net $ 555 $ 23,373 $ (6,841) $ 15,350
Income Before Provision for Taxes $ 77,802 $ 71,260 $ 88,318 $ 82,051
Net Income $ 52,905 $ 52,905 $ 60,055 $ 60,055
</TABLE>
Generally accepted accounting principles do not permit the restatement of prior
year financial statements. However, selected financial information reflecting
the accounting change on a proforma and reported basis for the three- and
nine-month periods ended September 30, 1996 and 1997, respectively, is as
follows:
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<PAGE>
COGNIZANT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands - (Unaudited)
Note 2 - Investments (continued)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Reported Proforma Reported Proforma
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
Sept. 30, 1997 Sept. 30, 1996 Sept. 30, 1997 Sept. 30, 1996
Operating Revenue $ 341,041 $ 314,230 $ 994,877 $ 910,895
Operating Income $ 87,163 $ 71,864 $ 201,751 $ 172,088
Non-Operating Inc./(Exp.)- Net $ 21,270 $ (5,425) $ 59,993 $ 21,024
Income Before Provision for Taxes $ 108,433 $ 66,439 $ 261,744 $ 193,112
Net Income $ 77,066 $ 39,858 $ 190,026 $ 116,010
</TABLE>
The Company recognizes as income any gains or losses related to the sale or
issuance of stock by a consolidated subsidiary or a company accounted for under
the equity basis.
The proceeds from the issuance of approximately 981,000 shares to Gartner
employees, including associated tax benefits, increased Gartner's equity by
$16,800 and reduced the Company's ownership interest by less than 1%. This was
offset, in part, by an increase in treasury stock of $12,000. Accordingly, the
Company recognized within Gartner equity income, a pre-tax unrealized gain on
Gartner stock of $706 corresponding to the net increase in the value of its
investment in Gartner.
Note 3 - Dispositions
During the third quarter, the Company recorded a $33,855 pre-tax gain on the
sale of its investment in Aspect Development, Inc. and TSI International, Inc.
stock. These investments, which were part of Cognizant Enterprises' portfolio,
generated cash proceeds of $36,597. For the nine months ended September 30,
1997, the Company recorded a $39,291 pre-tax gain and generated cash
proceeds of $43,601 related to Cognizant Enterprise portfolio sales.
Additionally, in the third quarter, the Company sold Pilot Software, Inc.
("Pilot"), a wholly-owned subsidiary, to Platinum Equity Holdings and recorded a
non-cash pre-tax loss of $29,900.
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<PAGE>
COGNIZANT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands - (Unaudited)
Note 4 - Investment Partnership
Three of the Company's subsidiaries participate in a limited partnership, one of
which serves as general partner. In the second quarter, third party investors
contributed $100,000 to the partnership, in exchange for limited partnership
interests. The partnership, which is a separate and distinct legal entity, is in
the business of licensing database assets and computer software. For financial
reporting purposes, the assets, liabilities, results of operations and cash
flows of the partnership are included in the Company's consolidated financial
statements.
Note 5 - 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 consolidated 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 ("Dun &
Bradstreet"), A.C. Nielsen Company ("A.C. Nielsen") and I.M.S. International,
Inc. ("IMS"), a subsidiary of the Company (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 contract and a
claim of tortious interference with a prospective business relationship. These
latter 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
$350,000, which amount IRI has asked to be trebled under the antitrust laws. IRI
also seeks punitive damages in an unspecified amount.
On October 15, 1996, defendants moved for an order dismissing all claims in the
complaint. On May 6, 1997 the United States District Court for the Southern
District of New York issued a decision dismissing IRI's claim of attempted
monopolization in the United States, with leave to replead within sixty days.
The Court denied defendants' motion with respect to the remaining claims in the
complaint. On June 3, 1997, defendants filed an answer denying the material
allegations in IRI's complaint, and A.C. Nielsen filed a counterclaim alleging
that IRI has made false and misleading statements about its services and
commercial activities. On July 7, 1997, IRI filed an amended complaint
repleading its claim of attempted monopolization in the United States and
realleging its other claims. On August 18, 1997, defendants moved for an order
dismissing IRI's claim of attempted monopolization in the United States. This
motion is under consideration by the Court.
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<PAGE>
COGNIZANT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands - (Unaudited)
Note 5 - Litigation (continued)
In connection with the IRI Action, Dun & Bradstreet, ACNielsen Corporation
("ACNielsen") (the parent company of A.C. Nielsen) and the Company have entered
into an Indemnity and Joint Defense Agreement (the "Indemnity and Joint Defense
Agreement") pursuant to which they have agreed (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 provides 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 Dun & Bradstreet will share
liability equally for any amounts in excess of the ACN Maximum Amount.
The ACN Maximum Amount will be determined by an investment banking firm as the
maximum amount which ACNielsen is able to pay after giving effect to (i) any
plan submitted by such investment bank which is designed to maximize the
claims-paying ability of ACNielsen without impairing the investment banking
firm's ability to deliver a viability opinion (but which will not require any
action requiring 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 the Company is unable to predict at this time the final outcome of
this matter or whether the resolution of the matter could materially affect the
Company's results of operations, cash flows or financial position.
Note 6 - Financial Instruments with Off-Balance-Sheet Risk
IMS used foreign exchange forward contracts which provide for the sale of
foreign currencies to hedge a portion of its committed revenues. While these
hedging instruments are subject to fluctuations in value, such fluctuations are
offset by changes in the value of the underlying exposures being hedged. The
principal currencies hedged were the Japanese Yen, German Mark, Swiss Franc and
Italian Lira. At August 31, 1997, the notional amount hedged was $0. Gains and
losses on forward contracts of committed foreign currency revenues are included
in deferred revenues and are deferred until such revenues are recognized.
In addition, 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. At August 31, 1997, IMS had approximately
$58,000 in foreign exchange forward contracts outstanding with various
expiration dates through September 1997.
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<PAGE>
COGNIZANT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands - (Unaudited)
Note 7 - Adoption of Statements of Financial Accounting Standards
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share", which simplifies existing computational guidelines, revises disclosure
requirements and increases the comparability of earnings-per-share data on an
international basis. The Company is currently evaluating the new statement;
however, the impact of adoption of SFAS No. 128 on the Company's financial
statements is not expected to be significant. This statement is effective for
financial statements for periods ending after December 15, 1997 and requires
restatement of all prior period earnings-per-share data presented.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income",
which requires that changes in comprehensive income be shown in a financial
statement that is displayed with the same prominence as other financial
statements. This statement is effective for periods ending after December 15,
1997. Management has not yet evaluated the effects of this change on the
Company's financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information", which changes the way public companies
report information about segments. SFAS No. 131, which is based on the
management approach to segment reporting, includes requirements to report
selected segment information quarterly and entity-wide disclosures about
products and services, major customers, and the material countries in which the
entity holds assets and reports revenues. This statement is effective for
financial statements for periods ending after December 15, 1997. Management has
not yet evaluated the effects of this change on the Company's financial
statements.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(Dollar amounts in thousands, except per share data)
In September 1997, the Company's voting interest in Gartner fell below 50% to
49.5% based upon the exercise of Gartner employee stock options and employee
stock purchases. Accordingly, as of September 30, 1997 and for the three- and
nine-month periods ended September 30, 1997 the Company has deconsolidated
Gartner (the "Gartner Deconsolidation") and is accounting for its ownership
interest on the equity basis.
Revenue for the third quarter of 1997 decreased by 19.6% to $341,041 from
$424,188 for the third quarter of the prior year. This decrease is related to
the impact of the Gartner Deconsolidation. Adjusting for this item and the
impact of a stronger U.S. dollar, revenue for the third quarter of 1997
increased by 10.3%. The impact of a stronger U.S. dollar decreased reported
revenue by less than 2% in the third quarter, including the impact of gains
related to the Company's hedging strategy.
Year-to-date revenue decreased by 17.8% to $994,877 from $1,209,910 for the
comparable period of the prior year. The decrease is related to the impact of
the Gartner Deconsolidation. Adjusting for this item and the impact of a
stronger U.S. dollar, year-to-date revenue increased by 11.0%. This increase
reflected double-digit constant dollar revenue growth at IMS and Nielsen Media
Research, Inc. ("Nielsen Media Research"). The impact of a stronger U.S. dollar
decreased reported revenue by less than 2% year-to-date, including the impact of
gains related to the Company's hedging strategy.
Operating income for the third quarter increased by 44.8% to $87,163 from
$60,195 for the third quarter of the prior year. Operating income in 1996
includes an acquisition-related pre-tax charge of $33,233, primarily for
in-process research and development costs associated with Gartner Group's
acquisition of J3 Learning Corporation (the "J3 Acquisition-Related Charge").
Excluding the impact of the J3 Acquisition-Related Charge; discontinued business
units in 1996; and the Gartner Deconsolidation, operating income for the third
quarter increased by 16.5%. As a result of our program to hedge a portion of IMS
committed non-U.S. revenue the stronger U.S. dollar had no significant impact on
operating income in the third quarter. The sale of Pilot during the third
quarter of 1997 enabled the Company to redeploy resources to strategic
technology investments, including an initiative to accelerate Year 2000
compliance. The Company estimates that the impact on operating income of Year
2000 compliance was approximately $5,000 in the third quarter. Management has
not yet completed its assessment of the total Year 2000 compliance expense and
related potential effects on the Company's operating income and earnings.
Year-to-date operating income increased by 0.3% to $201,751 from $201,085 for
the comparable period of the prior year. Excluding the impact of the J3
Acquisition-Related Charge;discontinued business units in 1996; and the Gartner
Deconsolidation, year-to-date operating income for 1997 increased by 16.2%.
Operating income growth outpaced revenue growth primarily due to IMS's ability
to leverage its resources. The impact of a stronger U.S. dollar decreased
operating income by approximately 1% year-to-date, including the impact of
gains related to the Company's hedging strategy.
Non-operating income-net for the third quarter was $21,270 compared with
$10,979 for the third quarter of the prior year. Year-to-date non-operating
income-net was $59,993, $6,076 for the comparable period of the
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued) (Dollar amounts in thousands, except per share data)
prior year. The increase in the quarter and year-to-date non-operating
income-net is primarily related to recording Gartner Equity Income in 1997 as a
result of the Gartner Deconsolidation. The Company recognized within Gartner
Equity Income a pre-tax unrealized gain on Gartner stock of $706
corresponding to the net increase in the value of its investment in Gartner.
In addition, non-operating income-net for the third quarter includes gains
related to the disposition of Cognizant Enterprises' investments in TSI
International, Inc., and Aspect Development, Inc. ($33,855 in total) and a loss
on the sale of Pilot ($29,900).
The Company's effective tax rate was 28.9% for the third quarter and 27.4%
year-to-date in 1997, compared with an effective tax rate of 44.0% in the
comparable periods of the prior year. The Company's lower effective tax rate is
due to the benefits of global tax planning strategies as well as the impact of
the Gartner Deconsolidation.
The Company's net income for the third quarter increased 93.4% to $77,066 from
$39,858 in the third quarter of the prior year. Year-to-date net income
increased 63.8% to $190,026, from $116,010 for the comparable period of the
prior year. Excluding the after-tax impact of the J3 Acquisition-Related
Charge; discontinued business units in 1996; gains associated with the sale of
Cognizant Enterprises' investments and the loss on the sale of Pilot,
net income for the quarter and year-to-date increased 16.6% and 18.1%,
respectively.
Earnings per share for the third quarter increased 104.3% to $.47 from $.23 for
the third quarter of the prior year. Year-to-date earnings per share increased
67.6% to $1.14 from $.68 for the comparable period in the prior year. Excluding
the after-tax impact of the items in the preceding paragraph, earnings per
share for the quarter and year-to-date increased 21.6% and 20.9%, respectively.
On October 21, 1997, the Company announced that its Board of Directors had
authorized a systematic stock repurchase program to buy up to 10.0 million
shares of the Company's outstanding common stock. This is in addition to the
previously approved program to repurchase 8.5 million shares, a portion of which
was intended to cover option exercises. The previously approved program was
completed on September 5, 1997.
Results by Business Segment
As discussed in Note 2, the Company's voting interest in Gartner fell below
50% in September 1997. Accordingly, for the three- and nine-month periods ended
September 30, 1997 the Company has deconsolidated Gartner and is accounting for
its ownership interest on the equity basis. The Information Technology segment,
which consisted solely of Gartner, is therefore no longer being reported.
-13-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued) (Dollar amounts in thousands, except per share
data)
Results by Business Segment- (continued)
The Marketing Information Services segment consists of IMS, Nielsen Media
Research, Pilot (divested during the third quarter), Erisco, Inc., and Cognizant
Technology Solutions Corporation. Marketing Information Services revenue for the
third quarter of 1997 increased 8.5% to $341,041 from $314,230 in the third
quarter of the prior year. Adjusting for the impact of a stronger U.S. dollar,
revenue for the third quarter 1997 increased by 10.3%. IMS had third quarter
revenue in 1997 of $233,196,up 8.0% from $215,907 in the third quarter of 1996.
Excluding the impact of a stronger U.S. dollar and the impact of gains related
to the Company's hedging strategy, IMS revenue increased by 10.5%. IMS revenue
growth benefited from strong performance of its sales management products,
geographic expansion and excellent growth of its electronic territory management
product.
Nielsen Media Research revenue for the third quarter 1997 increased 12.6%
to $89,911 from $79,823 in the third quarter of the prior year. Nielsen Media
Research achieved continuing growth from new metered markets, additional cable
networks, and its local Hispanic and Monitor Plus measurement services.
Marketing Information Services year-to-date revenue increased 9.2% to $994,877
from $910,895 for the comparable period of the prior year. Adjusting for the
impact of a stronger U.S. dollar, year-to-date revenue increased by 11.0%.
Condensed Consolidated Statement of Cash Flows
Nine Months Ended September 30, 1997 and 1996
(Dollar amounts in thousands)
Net cash provided by operating activities totaled $261,253 for the nine months
ended September 30, 1997 compared with $344,769 for the comparable period in
1996. The decrease of $83,516 principally reflects a net decrease in deferred
and accrued income taxes ($66,316), primarily payment of taxes and the Gartner
Deconsolidation; the 1996 J3 Acquisition-Related Charge at Gartner ($33,233);
lower increase in deferred revenues ($26,523), due to the Gartner
Deconsolidation; and the impact of non-cash equity income ($26,662) in 1997.
These decreases were partially offset by an increase in business operating
results ($64,309) (including net income and depreciation and amortization),
reduced restructuring, postemployment benefit and 1995 non-recurring charge
payments ($13,327).
Net cash used in investing activities totaled $190,832 for 1997 compared
with $207,433 for the comparable period in 1996. The decrease in cash used for
investing activities of $16,601 is principally due to the absence of net
payments for marketable securities ($31,317)and payments for the acquisition of
businesses ($24,386) due to the Gartner Deconsolidation; the absence of Gartner
stock purchases ($42,998); and the proceeds from sale of investments
in 1997 ($43,601). These increases were partially offset by the
impact of the deconsolidation of Gartner cash ($123,697).
-14-
<PAGE>
Condensed Consolidated Statement of Cash Flows
Nine Months Ended September 30, 1997 and 1996 - (continued)
(Dollar amounts in thousands)
Net cash used in financing activities totaled $205,597 for the nine months ended
in 1997 compared with $120,776 for the comparable period in 1996. The increase
in cash usage of $84,821 is primarily due to payments for the purchase of
treasury shares ($302,011) and dividends paid ($15,008) in 1997, partially
offset by third party investments in partnerships ($100,000) in 1997 and
transfers to The Dun & Bradstreet Corporation in 1996 ($122,886).
Changes in Financial Position at September 30, 1997 Compared to
December 31, 1996
(Dollar amounts in thousands)
Cash decreased to $283,162 at September 30, 1997, from $428,520 at December 31,
1996, primarily reflecting the Gartner Deconsolidation ($123,697), share
repurchases ($302,011); offset by third-parties investment in partnerships
($100,000).
Accounts Receivable decreased to $280,800 at September 30, 1997, from $453,791
at December 31, 1996, primarily reflecting the Gartner Deconsolidation
($145,905), the sale of Pilot ($13,766) and seasonality within the Company's
business units.
Other Current Assets decreased to $56,882 at September 30, 1997, from $112,151
at December 31, 1996, primarily reflecting the Gartner Deconsolidation.
Gartner Group Investment represents the accounting for Gartner on an equity
basis at September 30, 1997 ($170,195).
Property, Plant and Equipment decreased to $226,230 at September 30, 1997, from
$268,888 at December 31, 1996, primarily reflecting the Gartner Deconsolidation
($32,813) and the sale of the Company's Wilton, CT building ($14,997).
Goodwill decreased to $88,295 at September 30, 1997, from $251,483 at December
31, 1996, primarily reflecting the Gartner Deconsolidation and the
sale of Pilot ($20,590).
Accrued and Other Current Liabilities decreased to $180,329 at September 30,
1997, from $266,932 at December 31, 1996, primarily reflecting the Gartner
Deconsolidation .
Deferred Revenues decreased to $133,925 at September 30,1997, from $292,970 at
December 31, 1996, primarily reflecting the Gartner Deconsolidation
offset by an increase in subscription sales at IMS.
Minority Interests increased to $101,730 at September 30, 1997, from $90,635 at
December 31, 1996, primarily reflecting the third-parties investment in
partnerships ($100,000) and a decrease in minority interest related to the
Gartner Deconsolidation.
Shareholders' Equity decreased to $705,659 at September 30, 1997, from $872,613
at December 31, 1996, primarily reflecting the purchase of treasury shares
($302,011), payments of dividends ($15,008) and the change in cumulative
translation adjustment ($45,449), partially offset by net income ($190,026).
-15-
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
10 Material Contracts
.24 Severance Agreement and Release between Cognizant Corporation
and Dennis G. Sisco dated as of February 28, 1997 (executed in the
third quarter 1997) (management contract and or compensatory
plan or arrangement).
27 Financial Data Schedule
(Filed Electronically)
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter ended
September 30, 1997.
-16-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COGNIZANT CORPORATION
Date: November 14, 1997 By:/S/Victoria R. Fash
==================================================
Victoria R. Fash
Executive Vice President & Chief Financial Officer
Date: November 14, 1997 By:/S/James C. Malone
===============================================
James C. Malone
Senior Vice President - Finance & Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 283,162
<SECURITIES> 0
<RECEIVABLES> 280,800
<ALLOWANCES> 7,456
<INVENTORY> 27,745
<CURRENT-ASSETS> 620,844
<PP&E> 499,095
<DEPRECIATION> 272,865
<TOTAL-ASSETS> 1,437,095
<CURRENT-LIABILITIES> 433,741
<BONDS> 0
0
0
<COMMON> 1,703
<OTHER-SE> 703,956
<TOTAL-LIABILITY-AND-EQUITY> 1,437,095
<SALES> 0
<TOTAL-REVENUES> 994,877
<CGS> 0
<TOTAL-COSTS> 793,126
<OTHER-EXPENSES> 2,306
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 670
<INCOME-PRETAX> 261,744
<INCOME-TAX> 71,718
<INCOME-CONTINUING> 190,026
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 190,026
<EPS-PRIMARY> 1.14
<EPS-DILUTED> 1.14
</TABLE>
EXHIBIT 10.24
THIS SEVERANCE AGREEMENT AND RELEASE, made as of February 28,
1997 by and between DENNIS G. SISCO(hereinafter referred to as "Employee"), and
COGNIZANT CORPORATION (hereinafter deemed to include its worldwide subsidiaries
and affiliates and referred to as "the Company").
WITNESSETH THAT:
WHEREAS, Employee has been employed by the Company since the
date specified in Appendix I; and
WHEREAS, the parties to this Agreement desire to enter into an
agreement in order to provide certain benefits and salary continuation to
Employee;
NOW, THEREFORE, in consideration of the mutual covenants and
promises hereinafter provided and of the actions taken pursuant thereto, the
parties agree as follows:
1. Employee shall assume inactive employee status with the Company
effective on the date specified in Appendix I. From and after that date,
Employee shall have no further responsibilities as an officer or employee of the
Company. Effective on the "Effective Date of Resignation" specified in Appendix
I, Employee's employment with the Company shall terminate. In furtherance of the
foregoing, Employee agrees, upon request of the Company, to execute such written
resignations as the Company may require in order that Employee's positions with
the Company, its subsidiaries and affiliates, may be terminated as of the
Effective Date of Resignation. Notwithstanding the foregoing, Employee shall be
entitled to remain on the Boards of Directors of the companies identified in
Appendix I unless and until removed by their respective shareholders. Employee
shall not be acting as a representative of the Company on any of the Boards of
Directors identified on Appendix I.
2. Effective on the date set forth in Appendix I, Employee will have
the status of an inactive employee within the meaning of Section 2.4 of the
Cognizant Corporation Executive Transition Plan (the "Plan"), a summary plan
description of which Employee hereby acknowledges receipt. On the Effective Date
of Resignation, Employee shall incur an "Eligible Termination" under the Plan
and will, accordingly, be entitled to the benefits set forth therein subject to
the terms and conditions of such Plan. In accordance with Section 2.4 of the
Plan, amounts paid to Employee during his period of inactive status will offset
any benefits payable under the Plan. A summary of the benefits to which Employee
is entitled under the Plan is set forth in Appendix I.
3. Through the Termination Date specified in Appendix I, Employee will
be reasonably available to consult on matters, and will cooperate fully with
respect to any claims, litigation or investigations, relating to the Company. No
reimbursement for expenses incurred after the commencement of a period of
inactive employee status, or if there is no such period, after termination of
employment, shall be made to Employee unless authorized in advance by the
Company.
4. Employee agrees that until the Termination Date Employee will not
become a stockholder (unless such stock is listed on a national securities
exchange or traded on a daily basis in the over-the-counter market and the
Employee's ownership interest is not in excess of 5% of the company whose shares
are being purchased), member, employee, officer, director or consultant of or to
a Competing Business (as defined below); nor if Employee becomes associated with
a company, partnership or individual which company, partnership or individual
acts as a consultant to a Competing Business will Employee provide services to
such Competing Business. The restrictions contained in this paragraph shall
apply whether or not Employee accepts any form of compensation from such
competing entity or consultant. The foregoing provisions shall not prohibit
Employee from becoming a stockholder, employee, officer, director or consultant
of or to a corporation, or a member or an employee of or a consultant to a
partnership or other business or firm, primarily engaged in venture capital,
equity or debt-based investing so long as the Employee does not act as an
executive officer (or member of senior management) of any Competing Business in
which such corporation, partnership, business or firm invests. Employee also
agrees that, until the Termination Date, Employee will not recruit or solicit
any customers of the Company to become customers of any Competing Business. In
addition, Employee agrees that until the Termination Date neither Employee nor
any company or entity Employee controls or manages, shall recruit or solicit any
employee of the Company to become an employee of any business entity. As used in
this paragraph 4, the term "Competing Business" shall mean any corporation,
partnership, business or entity which competes with any business in which the
Company owns, directly or indirectly, a controlling interest as of the Effective
Date of Resignation.
5. If Employee performs services for an entity other than the Company
at any time prior to the Termination Date (whether or not such entity is in
competition with the Company), Employee shall notify the Company on or prior to
the commencement thereof. To "perform services" shall mean employment or
services as a full-time employee, consultant, owner, partner, associate, agent
or otherwise on behalf of any person, principal, partnership, firm or
corporation. For purposes of this paragraph 5 only, "Company" shall mean
Cognizant Corporation and any other affiliated entity which has been designated
to participate in The Cognizant Corporation Career Transition Plan.
6. Employee agrees that Employee will not directly or indirectly
disclose any proprietary or confidential information, records, data, formulae,
specifications and other trade secrets owned by the Company, whether oral or
written, to any person or use any such information, except pursuant to court
order (in which case Employee will first provide the Company with written notice
of such). All records, files, drawings, documents, models, disks, equipment and
the like relating to the businesses of the Company shall remain the sole
property of the Company and shall not be removed from the premises of the
Company. Employee further agrees to return to the Company any property of the
Company which Employee may have, no matter where located, and not to keep any
copies or portions thereof. However, Employee may retain his Company-provided
Macintosh personal computer system and related software, cellular telephone and
pager.
7. Neither Employee nor the Company shall make any derogatory
statements about the other. Employee shall not make any written or oral
statement, news release or other announcement relating to Employee's employment
by the Company or relating to the Company, its subsidiaries, customers or
personnel, which is designed to embarrass or criticize any of the foregoing. The
Company shall not make any written or oral statement, news release or other
announcement relating to Employee or Employee's employment by the Company which
is designed to embarrass or criticize Employee.
8. (a) (i) The stock options granted to Employee pursuant to the
Company's Replacement Plan For Certain Employees Holding The Dun & Bradstreet
Corporation Equity Based Awards (the "Replacement Plan") which are listed on
Appendix II shall be cancelled and replaced with options ("Substitute Options")
to purchase an equivalent number of shares of the Company's Common Stock under
the Company's Key Employees Stock Incentive Plan (the "Stock Incentive Plan").
Such Substitute Options shall be granted at the prices set forth in Appendix II
(which prices are not less than the fair market value on April 15, 1997, the
date of the approval of such reissuance by the Compensation and Benefits
Committee of the Company's Board of Directors) but shall otherwise have
substantially the same terms as the options they replace.
(ii) Employees' termination under this Agreement shall be
deemed to be a "Retirement" under the Stock Incentive Plan and that portion of
Employee's stock options granted pursuant to the Stock Incentive Plan that would
otherwise vest on November 6, 2002, shall be accelerated so as to vest ratably
on each of the five preceding November 6ths. The foregoing provisions shall not
apply to any other health, welfare or other benefit plan of the Company.
(iii) Notwithstanding the provisions of clauses (i) and (ii)
of this paragraph, the Employee hereby elects to forfeit options to purchase an
aggregate of 54,615 shares of the Company's Common Stock at an exercise price of
$33.375 per share which were purchased by the Employee on or about November 15,
1996. By virtue of such forfeiture, the Employee shall be entitled to a refund
by the Company of $182,278 representing the purchase price of the options being
forfeited.
(iv) For purposes of the Company's Supplemental Executive
Retirement Plan, the Employee shall be deemed to have completed 10 years of
service as of the date of his termination of employment. Amounts paid or payable
to the Employee pursuant to this Agreement or the Plan shall not be included for
purposes of computing any benefits under any benefit plan of the Company or any
of its predecessors (including the Supplemental Executive Retirement Plan). The
amount of the Employee's benefits payable at age 55 are set forth in Appendix
IV.
(b) For purposes of the acceleration provisions of Employee's stock
options granted pursuant to the Stock Incentive Plan, "Change in Control" shall
mean:
(i) any "Person," as such term is defined in Section 3(a)(9)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other
than the Company, any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, or any company owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), becomes the "Beneficial
Owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding securities;
(ii) during any period of twenty-four months (not including
any period prior to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board, and any new director (other than
(A) a director nominated by a Person who has entered into an agreement with the
Company to effect a transaction described in Section (8)(b)(i), (iii) or (iv)
hereof, (B) a director nominated by any Person (including the Company) who
publicly announces an intention to take or to consider taking actions
(including, but not limited to, an actual or threatened proxy contest) which if
consummated would constitute a Change in Control or (C) a director nominated by
any Person who is the Beneficial Owner, directly or indirectly, of securities of
the Company representing 10% or more of the combined voting power of the
Company's securities) whose election by the Board or nomination for election by
the Company's stockholders was approved in advance by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at least a majority
thereof;
(iii) the stockholders of the Company approve any transaction
or series of transactions under which the Company is merged or consolidated with
any other company, other than a merger or consolidation (A) which would result
in the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 66 2/3% of the
combined voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation and (B) after
which no Person holds 20% or more of the combined voting power of the
then-outstanding securities of the Company or such surviving entity; or
(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets.
(c) Employee has served at the request of the Company as a director of
certain companies in which the Company has an investment. While Employee will no
longer serve as the Company's representative with respect to those Companies,
Employee agrees that any stock options or other remuneration received prior to
the date he assumed inactive employment status in the course of such
representation will continue to be held by Employee on behalf of the Company in
accordance with the Company's policies. Specifically, in the case of options
granted to Employee by Aspect Development, Inc. and Oacis Healthcare Systems,
Inc., Employee will exercise such options only upon the instruction of the
Company and the advance by the Company of the exercise price therefor and will
surrender to the Company any shares so acquired on exercise. Employee also will
not to take any action which would cause such options to terminate without the
prior consent of the Company. To the extent Employee is treated as having
received taxable income with respect to any cash or property he is required to
surrender to the Company, the Company will indemnify and hold Employee harmless
for any taxes due as a result thereof.
9. The Company shall also reimburse Employee for the reasonable costs
of seeking and securing new employment. Such costs may include telephone, travel
and lodging not reimbursed by others, mail and courier services, secretarial
services, legal services, and career counselling (collectively, and together
with office space "Outplacement Services"). The aggregate value of Outplacement
Services shall not exceed $60,000.
10. Employee agrees that in the event of any material breach of the
covenants contained in paragraphs 3, 4, 5, 6 or 7, in addition to any remedies
that may be available to the Company, the Company may cease all payments
required to be made to Employee under the Plan, recover all such payments
previously made to Employee pursuant to the Plan and treat options granted
pursuant to the Stock Incentive Plan and the Replacement Plan as expiring
pursuant to Sections 7(f) and 6(g) thereof, respectively. The parties agree that
any such breach would cause injury to the Company which cannot reasonably or
adequately be quantified and that such relief does not constitute in any way a
penalty or a forfeiture.
11. Employee, for Employee, Employee's family, representatives,
successors and assigns releases and forever discharges the Company and its
successors, assigns, subsidiaries, affiliates, directors, officers, employees,
attorneys, agents and trustees or administrators of any Company plan from any
and all claims, demands, debts, damages, injuries, actions or rights of action
of any nature whatsoever, whether known or unknown, which Employee had, now has
or may have against the Company, its successors, assigns, subsidiaries,
affiliates, directors, officers, employees, attorneys, agents and trustees or
administrators of any Company plan, from the beginning of Employee's employment
to and including the date of this Agreement relating to or arising out of
Employee's employment with the Company or the termination of such employment
other than a claim with respect to a vested right Employee may have to receive
benefits under any plan maintained by the Company or any of Employee's rights or
the Company's obligations under this Agreement. Employee represents that
Employee has not filed any action, complaint, charge, grievance or arbitration
against the Company or any of its successors, assigns, subsidiaries, affiliates,
directors, officers, employees, attorneys, agents and trustees or administrators
of any Company plan.
12. Employee covenants that neither Employee, nor any of Employee's
respective heirs, representatives, successors or assigns, will commence,
prosecute or cause to be commenced or prosecuted against the Company or any of
its successors, assigns, subsidiaries, affiliates, directors, officers,
employees, attorneys, agents and trustees or administrators of any Company plan
any action or other proceeding based upon any claims, demands, causes of action,
obligations, damages or liabilities which are being released by this Agreement,
nor will Employee seek to challenge the validity of this Agreement, except that
this covenant not to sue does not affect Employee's future right to enforce
appropriately the terms of this Agreement in a court of competent jurisdiction.
13. Employee acknowledges that (a) Employee has been advised to consult
with an attorney at Employee's own expense before executing this Agreement and
that Employee has been advised by an attorney or has knowingly waived Employee's
right to do so, (b) Employee has had a period of at least twenty-one (21) days
within which to consider this Agreement, (c) Employee has a period of seven (7)
days from the date that Employee signs this Agreement within which to revoke it
and that this Agreement will not become effective or enforceable until the
expiration of this seven (7) day revocation period, (d) Employee fully
understands the terms and contents of this Agreement and freely, voluntarily,
knowingly and without coercion enters into this Agreement, (e) Employee is
receiving greater consideration hereunder than Employee would receive had
Employee not signed this Agreement and that the consideration hereunder is given
in exchange for all of the provisions hereof and (f) the waiver or release by
Employee of rights or claims Employee may have under Title VII of the Civil
Rights Act of 1964, The Employee Retirement Income Security Act of 1974, the Age
Discrimination in Employment Act of 1967, the Older Workers Benefit Protection
Act, the Fair Labor Standards Act, the Americans with Disabilities Act, the
Rehabilitation Act, the Worker Adjustment and Retraining Notification Act (all
as amended) and/or any other local, state or federal law dealing with employment
or the termination thereof is knowing and voluntary and, accordingly, that it
shall be a breach of this Agreement to institute any action or to recover any
damages that would be in conflict with or contrary to this acknowledgment or the
releases Employee has granted hereunder. Employee understands and agrees that
the Company's payment of money and other benefits to Employee and Employee's
signing of this Agreement does not in any way indicate that Employee has any
viable claims against the Company or that the Company admits any liability
whatsoever.
14. This Agreement constitutes the entire agreement of the parties and
all prior negotiations or representations are merged herein. It shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors, assigns, heirs and legal representatives but neither this Agreement
nor any rights hereunder shall be assignable by Employee without the Company's
written consent. In addition, this Agreement supersedes any prior employment or
compensation agreement, whether written, oral or implied in law or implied in
fact between Employee and the Company, other than those contracts and agreements
excepted from the application of section 5.7 of the Plan pursuant to the terms
of such section, which prior agreements are hereby terminated.
15. If for any reason any one or more of the provisions of this
Agreement shall be held or deemed to be inoperative, unenforceable or invalid by
a court of competent jurisdiction, such circumstances shall not have the effect
of rendering such provision invalid in any other case or rendering any other
provisions of this Agreement inoperative, unenforceable or invalid.
16. This Agreement shall be construed in accordance with the laws of
the State of Connecticut, except to the extent superseded by applicable federal
law.
17. This Agreement shall terminate in its entirety the Change in
Control Severance Agreement between the Company and Employee.
IN WITNESS WHEREOF, Employee and Cognizant Corporation, by its
duly authorized agent, have hereunder executed this Agreement.
--------------------------------
Employee
COGNIZANT CORPORATION
--------------------------------
Title:
<PAGE>
Appendix I
Summary of Benefit Entitlements
Under The Cognizant Corporation
Executive Transition Plan
Employment with December 19, 1989
Company Since:
Effective Date of February 28, 1997
Inactive Status:
Effective Date April 18, 1997
of Resignation:
Positions Resigned: See Appendix III
Retained Board Seats Gartner Group, Inc.
Aspect Development, Inc.
Oacis Healthcare Systems, Inc.
Paragren Technologies
TSI International
Effective Date of April 18, 1997
Eligible Termination:
Termination Date: February 28, 1999
Salary Continuation: $12,538.46 per week for 104 weeks
Welfare Benefit Continuation: Medical Plan (safety net)
Dental Plan
Life Insurance
(coverage in
effect as of
effective date of
inactive status)
Health Care
Spending Account
Annual Bonus Payment: 2/12 of the annual bonus otherwise payable to you at
time of normal payment.
Executive Outplacement: As provided by the Company.
Financial Planning/ As provided by the Company.
Counseling:
The description of benefits contained in this Appendix is only a
summary and is subject to the terms and conditions of the Plan. Refer to your
summary plan description for more detail.
<PAGE>
Appendix III
Directorships and Officerships
Corporation/Title
Cognizant Corporation
Executive Vice President
Cognizant Enterprises Corporation
Director
President
Cognizant Enterprises, Inc.
Director
President
Dataquest (Korea), Inc.
Director
Chairman
Dun & Bradstreet HealthCare Information, Inc.
Director
Dun & Bradstreet-Satyam Software Private Limited
Director
LexHealth, Inc.
Director
Pilot Software, Inc.
Director
Chairman
