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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 10-Q
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(Mark one)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1998
-------------
OR
(_) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ________________________
Commission file number 001-12275
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NIELSEN MEDIA RESEARCH, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 06-1450569
- - ------------------------ -----------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
299 PARK AVENUE NEW YORK, NEW YORK 10171
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 708-7500
--------------
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 July 31, 1998
par value $.01 per share 167,722,935
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<PAGE>
NIELSEN MEDIA RESEARCH, INC.
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE(S)
-------
Item 1. Financial Statements
Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended June 30, 1998 and 1997 ............................. 3
Six Months Ended June 30, 1998 and 1997 ............................... 4
Condensed Consolidated Statements of Financial Position (Unaudited)
June 30, 1998 and December 31, 1997 ................................... 5
Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 1998 and 1997 ............................... 6
Notes to Condensed Consolidated Financial Statements (Unaudited) ........ 7-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................. 11-14
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders ............. 15
Item 6. Exhibits and Reports on Form 8-K ................................ 16
SIGNATURES .............................................................. 17
-2-
<PAGE>
PART I. FINANCIAL INFORMATION
Item I. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
NIELSEN MEDIA RESEARCH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollar amounts in thousands, except per share data)
Three Months Ended
June 30,
----------------------------
1998 1997
------------ -------------
<S> <C> <C>
Operating Revenue ................................................. $ 97,931 $ 87,184
Operating Costs ................................................... 46,118 39,169
Selling and Administrative Expenses ............................... 21,009 18,068
Depreciation and Amortization ..................................... 7,791 6,967
------------ ------------
Operating Income .................................................. 23,013 22,980
Gains from Dispositions ........................................... 2,415 0
------------ ------------
Non-Operating Income .............................................. 2,415 0
------------ ------------
Income Before Provision for Taxes ................................. 25,428 22,980
Provision for Income Taxes ........................................ 10,654 9,629
------------ ------------
Net Income ........................................................ $ 14,774 $ 13,351
============ ============
Earnings Per Share of Common Stock - Basic ........................ $ 0.09 $ 0.08
Earnings Per Share of Common Stock - Diluted ...................... $ 0.08 $ 0.08
============ ============
Average Number of Shares Outstanding - Basic ...................... 163,612,000 165,526,000
============ ============
Dilutive Effect of Shares Issuable as of June 30, 1998 Under Stock
Option Plans .................................................... 9,219,000 1,269,000
Adjustment of Shares to Reflect Options Exercised During the Period 4,528,000 965,000
============ ============
Average Number of Shares Outstanding - Diluted .................... 177,359,000 167,760,000
============ ============
</TABLE>
See accompanying notes to the condensed consolidated
financial statements (unaudited).
-3-
<PAGE>
<TABLE>
<CAPTION>
NIELSEN MEDIA RESEARCH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollar amounts in thousands, except per share data)
Six Months Ended
June 30,
----------------------------
1998 1997
------------- ------------
<S> <C> <C>
Operating Revenue .......................................... $ 193,995 $ 173,455
Operating Costs ............................................ 93,312 78,422
Selling and Administrative Expenses ........................ 41,440 36,543
Depreciation and Amortization .............................. 14,913 13,600
------------ ------------
Operating Income ........................................... 44,330 44,890
Gains from Dispositions .................................... 5,600 0
------------ ------------
Non-Operating Income ....................................... 5,600 0
------------ ------------
Income Before Provision for Taxes .......................... 49,930 44,890
Provision for Income Taxes ................................. 20,921 18,809
------------ ------------
Net Income ................................................. $ 29,009 $ 26,081
============ ============
Earnings Per Share of Common Stock - Basic ................. $ 0.18 $ 0.16
Earnings Per Share of Common Stock - Diluted ............... $ 0.16 $ 0.15
============ ============
Average Number of Shares Outstanding - Basic ............... 163,029,000 167,556,000
============ ============
Dilutive Effect of Shares Issuable as of June 30, 1998 Under
Stock Option Plans ....................................... 9,053,000 768,000
Adjustment of Shares to Reflect Options Exercised During the
Period ................................................... 6,861,000 606,000
============ ============
Average Number of Shares Outstanding - Diluted ............. 178,943,000 168,930,000
============ ============
</TABLE>
See accompanying notes to the condensed
consolidated financial statements (unaudited).
-4-
<PAGE>
NIELSEN MEDIA RESEARCH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)
(Dollar amounts in thousands)
June 30, December 31,
1998 1997
--------- ----------
ASSETS
Current Assets
Cash and Cash Equivalents ........................ $ 17,715 $ 5,993
Marketable Securities ............................ 2,830 0
Accounts Receivable - Net ........................ 58,061 51,986
Other Current Assets ............................. 6,698 4,551
--------- ---------
Total Current Assets .......................... 85,304 62,530
--------- ---------
Property, Plant and Equipment - Net ................. 62,439 55,050
Computer Software ................................... 48,757 43,093
Intangibles ......................................... 15,058 10,649
Other Assets ........................................ 19,997 21,112
--------- ---------
Total Assets ........................................ $ 231,555 $ 192,434
========= =========
LIABILITIES AND SHAREHOLDERS'/DIVISIONAL EQUITY
Current Liabilities
Accounts Payable ................................. $ 16,709 $ 14,355
Accrued and Other Current Liabilities ............ 38,252 23,629
Accrued Income Taxes ............................. 4,696 5,475
Deferred Revenues ................................ 903 1,153
Short-term Debt .................................. 225,000 0
--------- ---------
Total Current Liabilities ..................... 285,560 44,612
--------- ---------
Postretirement Benefits ............................. 8,751 11,845
Deferred Income Taxes ............................... 38,978 34,394
Long-term Debt ...................................... 75,000 0
--------- ---------
Total Liabilities ................................... 408,289 90,851
--------- ---------
Shareholders'/Divisional Equity
Divisional Equity ................................ 0 101,583
Common Stock ..................................... 1,711
Capital Surplus .................................. 0
Distribution in Excess of Net Book Value ......... (160,356)
Treasury Stock ................................... (20,756)
Retained Earnings ................................ 0
Cumulative Translation Adjustment ................ 1,023
Unrealized Gains on Investments - Net ............ 1,644
--------- ---------
Total Shareholders'/Divisional Equity ......... (176,734) 101,583
--------- ---------
Total Liabilities and Shareholders'/
Divisional Equity ................................ $ 231,555 $ 192,434
========= =========
See accompanying notes to the condensed
consolidated financial statements (unaudited).
-5-
<PAGE>
<TABLE>
<CAPTION>
NIELSEN MEDIA RESEARCH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollar amounts in thousands)
Six Months Ended
June 30,
-----------------------
1998 1997
--------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ................................................. $ 29,009 $ 26,081
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization .......................... 14,913 13,600
(Increase)/Decrease in Accounts Receivable ............. (6,075) 593
Increase in Accounts Payable ........................... 2,354 2,779
(Decrease)/Increase in Postretirement Benefits ......... (3,094) 1,240
Increase/(Decrease) in Deferred Income Taxes ........... 4,584 (397)
Decrease in Accrued Income Taxes ....................... (779) (2,742)
Decrease in Other Assets ............................... 1,866 2,994
Decrease/(Increase) in Other Working Capital Items ..... 12,240 (2,273)
- --------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities .................. 55,018 41,875
- --------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures ....................................... (15,839) (13,846)
Additions to Computer Software ............................. (13,292) (7,306)
Additions to Intangibles ................................... (6,024) (3,483)
Other ...................................................... (801) 1,996
- --------------------------------------------------------------------------------------
Net Cash Used in Investing Activities ...................... (35,956) (22,639)
- --------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Third Party Limited Partnership Investment ................. 25,000
Bank Borrowings ............................................ 275,000
Transfers to Cognizant Corporation ......................... (307,326) (15,363)
- --------------------------------------------------------------------------------------
Net Cash Used in Financing Activities ...................... (7,326) (15,363)
- --------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents (14) (15)
- --------------------------------------------------------------------------------------
Increase in Cash and Cash Equivalents ...................... 11,722 3,858
Cash and Cash Equivalents, Beginning of Year ............... 5,993 5,557
- --------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Period ................... $ 17,715 $ 9,415
======================================================================================
</TABLE>
See accompanying notes to the condensed
consolidated financial statements (unaudited).
-6-
<PAGE>
NIELSEN MEDIA RESEARCH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
(UNAUDITED)
Dollar amounts in thousands
NOTE 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
These interim condensed 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
Nielsen Media Research, Inc. (the "Company" or "Nielsen Media Research") in the
Report on Form 8-K dated July 20, 1998. 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 1998 presentation.
NOTE 2. BASIS OF PRESENTATION
Until June 30, 1998, Nielsen Media Research was operated as part of
Cognizant Corporation ("Cognizant"), which also included the business of IMS
Health Incorporated ("IMS HEALTH"). On June 30, 1998, Cognizant (which is now
the Company) distributed to all holders of common stock the shares of IMS HEALTH
(the "Distribution"). Because of the relative significance of the IMS HEALTH
business to Cognizant, IMS HEALTH was treated as the "accounting successor" to
Cognizant and the financial statements of Nielsen Media Research have been
prepared on a standalone basis.
The consolidated 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 consolidated financial statements
include allocations of certain Cognizant corporate headquarters assets and
liabilities and an allocation of Cognizant corporate and other expenses relating
to Nielsen Media Research's business for the three and six months ended June 30,
1998 and 1997. Management believes that these allocations are reasonable.
However, the financial information included herein may not necessarily reflect
the consolidated financial position, results of operations, and cash flows of
the Company in the future or what they would have been if the Company had been a
separate entity during the periods presented.
NOTE 3. RETROACTIVE RESTATEMENT OF DILUTED EARNINGS PER SHARE DATA
In accordance with the methodology provided for in the Distribution, each
unexercised Cognizant stock option held by a Nielsen Media Research employee was
converted into 12.3275 Nielsen Media Research stock options. Diluted earnings
per share data for the three and six-month periods ended June 30, 1998 and 1997
were adjusted to reflect the conversion of the unexercised Cognizant stock
options held by Nielsen Media Research employees.
-7-
<PAGE>
NIELSEN MEDIA RESEARCH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) -
(UNAUDITED)
DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
NOTE 4. PROFORMA EARNINGS PER SHARE DATA
On July 8, 1998, the Board of Directors of Nielsen Media Research approved
a one- for three reverse stock split which is subject to approval by
shareholders of record as of July 31,1998, at a special meeting to be held on
August 26, 1998. If approved, shareholders at the close of business on that date
will receive one new share of Nielsen Media Research common stock in exchange
for three old shares. As a result of the reverse stock split, basic and diluted
earnings per share reflected on a proforma basis would be as follows (after
giving effect to the conversion of the unexercised Cognizant stock options to
Nielsen Media Research stock options referred to above).
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
------------------ ---------------------
1998 1997 1998 1997
------- ------- ------- -------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Proforma Basic Earnings Per Share ....... $ 0.27 $ 0.24 $ 0.53 $0.47
Proforma Diluted Earnings Per Share ...... $ 0.25 $ 0.24 $ 0.49 $0.46
</TABLE>
NOTE 5. ADOPTION OF STATEMENTS OF FINANCIAL ACCOUNTING STANDARDs
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income", which requires presentation
of information on comprehensive income and its components in the financial
statements. Comprehensive income includes net income and changes in foreign
currency translation adjustments and unrealized holding gains on securities.
Total comprehensive income and its components for the three and six months ended
June 30, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30
----------------------- ----------------------
1998 1997 1998 1997
------ ------ ------- -------
<S> <C> <C> <C> <C>
Net Income ................................ $14,774 $13,351 $29,009 $26,081
Foreign Currency Translation Adjustment ... 380 (39) 218 323
Unrealized Gains on Investments ........... 1,644 -- 1,644 --
------- ------- ------- -------
Total Comprehensive Income ................ $16,798 $13,312 $30,871 $26,404
======= ======= ======= =======
</TABLE>
-8-
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) -
(UNAUDITED)
DOLLAR AMOUNTS IN THOUSANDS
NOTE 5. ADOPTION OF STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS (CONTINUED)
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". SFAS 133
establishes accounting and reporting standards for derivative instruments
imbedded in other contracts, (collectively referred to as derivatives) and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value . If certain conditions are met, a derivative
may be specifically designated as (a) a hedge of the exposure to changes in the
fair value of a recognized asset or liability or an unrecognized firm
commitment, (b) a hedge of an exposure to variable cash flows of a forecasted
transaction, or (c) a hedge of the foreign currency exposure of a net investment
in a foreign operation, or an unrecognized foreign-currency-denominated
forecasted transaction. The Company will be required to implement SFAS 133 for
all fiscal quarters of fiscal years beginning after June 15, 1999. The Company
expects that the adoption of this pronouncement will not have a material effect
on the Company's financial position, results of operations or cash flows.
NOTE 6. DISPOSITIONS
During the first quarter of 1998, the Company recorded a $3,185 pre-tax
gain on the sale of an investment in Aspect Development, Inc. During the second
quarter of 1998, the Company recorded a $2,415 pre-tax gain on the sale of
shares in Cognizant Technology Solutions Corporation ("CTS"), a subsidiary of
Cognizant, which had an initial public offering in June 1998.
NOTE 7. DEBT
In connection with the Distribution, the Company borrowed $275,000 under an
unsecured revolving credit facility ("Revolving Credit Facility") provided by a
group of lenders led by The Chase Manhattan Bank. The Revolving Credit Facility
consists of two tranches: a 364-Day $225,000 tranche (all of which was drawn)
and a Three-Year $100,000 tranche ($50,000 of which was drawn). The outstanding
commitments under the Three-Year tranche will mature on June 15, 2001. Interest
under the Revolving Credit Facility is based upon the London Interbank Offered
(LIBO) Rate plus a spread. The weighted average interest rate on the Revolving
Credit Facility was 6.4% on June 30, 1998. The Revolving Credit Facility
contains certain restrictive covenants and requires the Company to maintain
certain specified minimum ratios.
The Company and one of its subsidiaries participate in a limited
partnership, one of which serves as general partner. In June 1998, a third party
investor contributed $25,000 to the partnership in exchange for a limited
partner interest. The investment partnership has committed to make distributions
to the third party limited partner of approximately 6.26% per annum. The third
party limited partner has the ability to terminate the partnership at the end of
December 2000, unless, at that time, one or more of the other partners elect to
purchase the entire limited partner interest of the third party limited partner.
The partnership licenses database assets and computer software.
-9-
<PAGE>
NIELSEN MEDIA RESEARCH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) -
(UNAUDITED)
DOLLAR AMOUNTS IN THOUSANDS
NOTE 8. 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 The Dun & Bradstreet Corporation ("D&B"), A. C. Nielsen Company
and a predecessor of IMS HEALTH (the "IRI Action"). The complaint alleges, among
other things, various violations of the antitrust laws and 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. In light of the
potentially significant liabilities which could arise from the IRI Action and in
order to facilitate the D&B spin-off (as defined below) in 1996, D&B, ACNielsen
Corporation ("ACNielsen") (the parent of A. C. Nielsen Company) and Cognizant
entered into an Indemnity and Joint Defense Agreement (the "Indemnity and Joint
Defense Agreement") pursuant to which ACNielsen agreed 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 agreed 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. Under the terms of the Distribution Agreement dated as of
October 28, 1996, among Cognizant, D&B and ACNielsen ("the 1996 Distribution
Agreement"), pursuant to which shares of Cognizant and ACNielsen were
distributed to the stockholders of D&B (the "D&B spin-off"), as a condition to
the recent Distribution, IMS HEALTH and the Company were required to undertake
to be jointly and severally liable to D&B and ACNielsen for Cognizant's
obligations under the 1996 Distribution Agreement. However, pursuant to the
Distribution Agreement dated as of June 30, 1998, between Cognizant and IMS
HEALTH, IMS HEALTH and the Company have agreed that, as between themselves, IMS
HEALTH will assume 75%, and the Company will assume 25%, of any payments to be
made in respect of the IRI Action under the Indemnity and Joint Defense
Agreement or otherwise, including any legal fees and expenses related thereto
incurred in 1999 or thereafter. IMS HEALTH has agreed to be fully responsible
for any legal fees and expenses incurred during 1998. In certain circumstances,
IMS HEALTH has agreed to permit the Company to defer the payment of a portion of
its obligations for settlements in respect of the IRI Action. The Company's
aggregate liability to IMS HEALTH for payments in respect of the IRI Action and
certain other contingent liabilities shall not exceed $125,000. The Company's
management is unable to predict at this time the final outcome of the IRI Action
or whether the resolution of such matter could materially affect the Company's
results of operations, cash flows or financial position.
-10-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
Revenue for the second quarter increased by 12.3% to $97,931 from $87,184 for
the second quarter of the prior year. National revenues increased due to demand
for custom analyses and the addition of six cable networks subscribing to
ratings services in 1997 and 1998. Local revenues also increased, reflecting the
introduction of metered market measurement in three new markets in the last 12
months. Metered market service was initiated in Greensboro and Jacksonville in
the second quarter of 1998, bringing to 40 the number of markets that employ
meters.
Operating costs and selling and administrative expenses for the second quarter
of 1998 increased by 17.3% to $67,127 from $57,237 for the second quarter of the
prior year. Excluding Year 2000 compliance costs of $2,415, operating costs and
selling and administrative expenses increased 13.1% reflecting increased
investment in the business, including the establishment of two new metered
markets.
Operating income of $23,013 for the second quarter of 1998 was essentially flat
compared with $22,980 for the second quarter of the prior year. Operating income
growth was held down by Year 2000 compliance costs of $2,415. Excluding Year
2000 compliance costs, operating income for the second quarter of 1998 increased
by 10.7%.
Non-operating income for the second quarter of 1998 of $2,415 included gains
from the disposition of investments.
The Company's effective tax rate was 41.9% for the second quarter of 1998 and
1997.
The Company's net income for the second quarter increased 10.7% to $14,774 from
$13,351 in the second quarter of the prior year, reflecting the factors
discussed above.
Basic earnings per share for the second quarter increased 12.5% to $0.09 from
$0.08 for the second quarter of the prior year. Diluted earnings per share were
$.08 in the second quarter of 1998 and 1997.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Revenue for the first six months of 1998 increased by 11.8% to $193,995 from
$173,455 for the first six months of the prior year. National revenues increased
due to demand for custom analyses and the addition of six cable networks
subscribing to ratings services in 1997 and 1998. Local revenues also increased,
reflecting the introduction of metered market measurement in three new markets
in the last 12 months, bringing to 40 the number of markets that employ meters.
Operating costs and selling and administrative expenses for the first six months
of 1998 increased by 17.2% to $134,752 from $114,965 for the first six months of
the prior year. Excluding Year 2000 compliance costs of $5,600, operating costs
and selling and administrative expenses increased 12.3% reflecting increased
investment in the business, including the establishment of two new metered
markets.
-11-
<PAGE>
NIELSEN MEDIA RESEARCH, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
Operating income for the first six months of 1998 decreased by 1.2% to $44,330
from $44,890 for the first six months of the prior year. Operating income growth
was held down by Year 2000 compliance costs of $5,600. Excluding Year 2000
compliance expenses, operating income for the first six months of 1998 increased
by 11.2%.
Nonoperating income for the first six months of 1998 of $5,600 included gains
from the dispostion of investments.
The Company's effective tax rate was 41.9% for the first six months of 1998 and
1997.
The Company's net income for the first six months of 1998 increased 11.2% to
$29,009 from $26,081 in the first six months of the prior year, reflecting the
factors discussed above.
Basic earnings per share for the first six months of 1998 increased 12.5% to
$0.18 from $0.16 for the first six months of the prior year. Diluted earnings
per share for the first six months of 1998 increased 6.7% to $0.16 from $0.15 in
the first six months of the prior year.
CHANGES IN FINANCIAL POSITION AT JUNE 30, 1998 COMPARED WITH DECEMBER 31, 1997
Cash and cash equivalents increased to $17,715 at June 30,1998 from $5,993
at December 31, 1997 primarily due to cash retained by the Company at June 30,
1998 (the "Distribution Date") in order to fund certain liabilities assumed in
connection with the Distribution and for general working capital purposes.
Marketable Securities of $2,830 at June 30, 1998 represent the fair market
value of securities distributed to the Company at the Distribution Date.
Accounts Receivable - Net increased to $58,061 at June 30, 1998 from
$51,986 at December 31, 1997 principally due to increased revenues.
Other Current Assets increased to $6,698 at June 30, 1998 from $4,551 at
December 31, 1997 primarily due to an increase in prepaid insurance.
Property, Plant and Equipment - Net increased to $62,439 at June 30, 1998
from $55,050 at December 31, 1997 principally due to computer equipment
purchases.
Computer Software increased to $48,757 at June 30, 1998 from $43,093 at
December 31, 1997 principally due to increased investment in a new local ratings
reporting system and a new metering system.
Intangibles increased to $15,058 at June 30, 1998 from $10,649 at December
31,1997 principally due to direct costs related to the installation of new
metered markets.
-12-
<PAGE>
NIELSEN MEDIA RESEARCH, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS)
Accrued and Other Current Liabilities increased to $38,252 at June 30, 1998
from $23,629 at December 31, 1997 primarily due to the liabilities assumed by
the Company in connection with the Distribution.
Short-Term/Long-Term Debt at June 30, 1998 represents $275,000 borrowings
by Cognizant and the $25,000 third party investment in the limited partnership
used to repay intercompany liabilities. Nielsen Media Research assumed these
obligations at the Distribution Date
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Cash and cash equivalents totaled $17,715 and $9,415 at June 30, 1998 and
1997, respectively. The increase of $8,300 primarily represents cash that was
retained by the Company at the Distribution Date in order to fund certain
liabilities assumed in connection with the Distribution and for general working
capital purposes.
Net cash provided by operating activities was $55,018 and $41,875 for the
six months ended June 30, 1998 and 1997, respectively. The increase of $13,143
represents a decrease in other working capital items ($14,513), which primarily
reflects principally liabilities assumed in connection with the Distribution,
offset, in part, by an increase in accounts receivable ($6,668).
Net cash used in investing activities was $35,956 and $22,639 for the six
months ended June 30, 1998 and 1997, respectively. The increase of $13,317
primarily reflects an increase in additions to computer software ($5,986),
intangibles ($2,541) and property, plant and equipment ($1,993).
Net cash used in financing activities was $7,326 and $15,363 for the six
months ended June 30, 1998 and 1997, respectively. Excluding the $300,000
proceeds from the borrowings and third party limited partnership investment
which were remitted to Cognizant, there was a net decrease in the transfers to
Cognizant due to the cash retained by the Company at the Distribution Date in
order to fund certain liabilities assumed by the Company in connection with the
Distribution and for general working capital purposes.
-13-
<PAGE>
NIELSEN MEDIA RESEARCH, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS)
ADOPTION OF STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". SFAS 133
establishes accounting and reporting standards for derivative instruments
imbedded in other contracts, (collectively referred to as derivatives) and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. If certain conditions are met, a derivative
may be specifically designated as (a) a hedge of the exposure to changes in the
fair value of a recognized asset or liability or an unrecognized firm
commitment, (b) a hedge of an exposure to variable cash flows of a forecasted
transaction, or (c) a hedge of the foreign currency exposure of a net investment
in a foreign operation, or an unrecognized foreign-currency-denominated
forecasted transaction. The Company will be required to implement SFAS 133 for
all fiscal quarters of fiscal years beginning after June 15, 1999. The Company
expects that the adoption of this pronouncement will not have a material effect
on the Company's financial position, results of operations or cash flows.
-14-
<PAGE>
NIELSEN MEDIA RESEARCH, INC.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of Cognizant Corporation ("Cognizant") was
held on April 13, 1998.
The following nominees for director named in the Proxy Statement dated March 13,
1998 were elected at the Meeting by the votes indicated.
For Withheld
------------ -----------
Clifford L. Alexander, Jr. ............ 137,473,843 1,210,300
Robert E. Weissman .................... 137,481,817 1,202,326
William C. Van Faasen ................. 137,558,538 1,125,605
The votes in favor of the election of the nominees represent at least 89.8% of
the shares present at the meeting.
On June 30, 1998, Cognizant (which is now Nielsen Media Research, Inc.)
distributed to all holders of common stock the shares of IMS Health Incorporated
(the "Distribution"), (See Note 2 to the Notes to the Condensed Consolidated
Financial Statements). In connection with the Distribution, six of the eight
members of the Cognizant Board of Directors resigned (including Messrs.
Alexander and Van Faasen) and five new members were appointed to the Nielsen
Media Research, Inc. Board of Directors.
Approval of the appointment of Coopers & Lybrand L.L.P. as Independent
Accountants was approved by the following vote:
For Against Abstain
----------- --------- ---------
Number of Shares ........... 138,270,495 110,528 303,120
-15-
<PAGE>
NIELSEN MEDIA RESEARCH, INC.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
10 Material Contracts
.1 Distribution Agreement between Cognizant Corporation and IMS
Health Incorporated dated June 30, 1998
.2 Tax Allocation Agreement between Cognizant Corporation and IMS
Health Incorporated dated June 30, 1998
.3 Employee Benefits Agreement between Cognizant Corporation and IMS
Health Incorporated dated June 30, 1998
.4 Amended and Restated Transition Services Agreement between The
Dun & Bradstreet Corporation, The New Dun & Bradstreet
Corporation, Cognizant Corporation, IMS Health Incorporated,
ACNielsen Corporation and Gartner Group, Inc. dated June 30, 1998
.5 Undertaking of IMS Health Incorporated dated June 29, 1998
27 Financial Data Schedule
(Filed Electronically)
(b) Reports on Form 8-K:
A report on Form 8-K was filed on June 30, 1998 to report under Item 5,
Other Events, information regarding the distribution of IMS HEALTH shares
and to report under Item 7, Financial Statements certain Proforma Financial
Statement Information and Exhibits.
-16-
<PAGE>
NIELSEN MEDIA RESEARCH, INC.
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.
NIELSEN MEDIA RESEARCH, INC.
Date: August 13, 1998 By: /s/
-----------------------------------------
Thomas W. Young
Executive Vice President & Chief
Financial Officer
/s/
------------------------------------------
Stuart J. Goldshein
Vice President and Controller
-17-
DISTRIBUTION AGREEMENT
between
COGNIZANT CORPORATION
and
IMS HEALTH INCORPORATED
Dated as of June 30, 1998
<PAGE>
TABLE OF CONTENTS
Page
-----
ARTICLE I. DEFINITIONS................................................... 2
SECTION 1.1. General.................................................. 2
SECTION 1.2. References; Interpretation............................... 14
ARTICLE II. DISTRIBUTION AND OTHER TRANSACTIONS;
CERTAIN COVENANTS............................................. 14
SECTION 2.1. The Distribution and Other Transactions.................. 14
SECTION 2.2. Intercompany Accounts.................................... 20
SECTION 2.3. Cash Balances............................................ 20
SECTION 2.4. Assumption and Satisfaction of Liabilities............... 20
SECTION 2.5. Resignations............................................. 20
SECTION 2.6. Further Assurances....................................... 20
SECTION 2.7. Limited Representations or Warranties.................... 21
SECTION 2.8. Guarantees............................................... 21
SECTION 2.9. Witness Services......................................... 22
SECTION 2.10. Certain Post-Distribution Transactions.................. 22
SECTION 2.11. Transfers Not Effected Prior to the Distribution;
Transfers Deemed Effective as of the
Distribution Date ...................................... 23
SECTION 2.12. Conveyancing and Assumption Instruments ................. 23
SECTION 2.13. Ancillary Agreements .................................... 24
SECTION 2.14. Corporate Names ......................................... 24
ARTICLE III. INDEMNIFICATION.............................................. 26
SECTION 3.1. Indemnification by the Corporation....................... 26
SECTION 3.2. Indemnification by IMS HEALTH............................ 26
SECTION 3.3. Procedures for Indemnification........................... 26
SECTION 3.4. Indemnification Payments................................. 28
ARTICLE IV. ACCESS TO INFORMATION......................................... 28
SECTION 4.1. Provision of Corporate Records........................... 28
SECTION 4.2. Access to Information.................................... 29
SECTION 4.3. Reimbursement; Other Matters............................. 29
SECTION 4.4. Confidentiality.......................................... 29
SECTION 4.5. Privileged Matters....................................... 29
SECTION 4.6. Ownership of Information................................. 31
SECTION 4.7. Limitation of Liability.................................. 31
SECTION 4.8. Other Agreements Providing for Exchange of Information... 32
ARTICLE V. ADMINISTRATIVE SERVICES........................................ 32
SECTION 5.1. Performance of Services.................................. 32
SECTION 5.2. Independence............................................. 32
SECTION 5.3. Non-exclusivity.......................................... 32
i
<PAGE>
ARTICLE VI. DISPUTE RESOLUTION............................................ 32
SECTION 6.1. Negotiation.............................................. 32
SECTION 6.2. Arbitration.............................................. 33
SECTION 6.3. Continuity of Service and Performance.................... 34
ARTICLE VII. INSURANCE.................................................... 34
SECTION 7.1. Policies and Rights Included Within Assets;
Assignment of Policies .................................. 34
SECTION 7.2. Post-Distribution Date Claims............................ 34
SECTION 7.3. Administration; Other Matters............................ 35
SECTION 7.4. Agreement for Waiver of Conflict and Shared Defense...... 36
SECTION 7.5. Cooperation.............................................. 36
ARTICLE VIII. MISCELLANEOUS............................................... 36
SECTION 8.1. Complete Agreement; Construction......................... 36
SECTION 8.2. Ancillary Agreements..................................... 37
SECTION 8.3. Counterparts............................................. 37
SECTION 8.4. Survival of Agreements................................... 37
SECTION 8.5. Expenses................................................. 37
SECTION 8.6. Notices.................................................. 37
SECTION 8.7. Waivers.................................................. 38
SECTION 8.8. Amendments............................................... 38
SECTION 8.9. Assignment............................................... 38
SECTION 8.10. Successors and Assigns .................................. 38
SECTION 8.11. Termination ............................................. 38
SECTION 8.12. Subsidiaries ............................................ 39
SECTION 8.13. Third Party Beneficiaries ............................... 39
SECTION 8.14. Title and Headings ...................................... 39
SECTION 8.15. Exhibits and Schedules .................................. 39
SECTION 8.16. GOVERNING LAW ........................................... 39
SECTION 8.17. Consent to Jurisdiction ................................. 39
SECTION 8.18. Severability ............................................ 40
Exhibits
Exhibit 2.1(m) Undertaking of IMS Health Incorporated
ii
<PAGE>
Schedules to Distribution Agreement
Schedules
1.1(m) Conveyance and assumption instruments
1.1(au)(i) Certain Business Entities and Subsidiaries to be included in the NMR
Group
1.1(au)(ii) Pre-Distribution reorganization transactions to transfer assets to
the Corporation or the NMR Group
1.1(au)(x) Certain assets not to be included as NMR Assets
1.1(au)(y) Certain Business Entities or businesses holding assets from
divested, terminated or former businesses which are to be included
as NMR Assets
1.1(av) Combined balance sheet of the NMR Group as of March 31, 1998
1.1(ax)(i) Certain contracts to be included as NMR Contracts
1.1(ax)(ii) Certain contracts in the name of the Corporation or NMR to be
included as IMS HEALTH Contracts
1.1(ax)(iv) Certain federal, state and local government contracts to be included
as NMR Contracts
1.1(ax)(v) Capital or operating lease obligations to be included as NMR
Contracts
1.1(ba)(i) Certain liabilities to be included as NMR Liabilities
1.1(ba)(x) Certain liabilities not to be included as NMR Liabilities
1.1(ba)(y) Certain Business Entities or businesses holding liabilities from
divested, terminated or former businesses which are to be included
as NMR Liabilities
2.1(i) Liabilities from 1996 Distribution to be included as NMR Liabilities
2.1(j)(i) Allocation of Liabilities for certain prior business transactions
2.3 Cash Balances
2.8(a) Guarantees of IMS HEALTH Liabilities from which NMR Group members
are to be removed
2.8(b) Guarantees of NMR Liabilities from which IMS HEALTH Group members are
to be removed
4.7(b) Pre-existing agreements between the parties which continue after the
Distribution
iii
<PAGE>
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT, dated as of June 30, 1998, between COGNIZANT
CORPORATION, a Delaware corporation (the "Corporation") and IMS HEALTH
INCORPORATED, a Delaware corporation ("IMS HEALTH").
WHEREAS, the Corporation acting through its direct and indirect
subsidiaries, currently conducts a number of businesses, including, without
limitation, (i) providing television audience measurement services (the "Nielsen
Media Research Business"), (ii) providing information and decision support
services to the pharmaceutical and healthcare industries (the "IMS Business"),
(iii) providing software-based administrative and analytical solutions to the
managed care industry (the "ERISCO Business"), (iv) making venture capital
investments in emerging healthcare businesses (the "Enterprises Business") and
(v) providing software application and development services specializing in Year
2000 conversion services (the "Technology Solutions Business").
WHEREAS, the Board of Directors of the Corporation has determined
that it is appropriate, desirable and in the best interests of the holders of
shares of common stock, par value $0.01 per share, of the Corporation (the
"Cognizant Common Stock"), as well as of the Corporation and its businesses, to
reorganize the Corporation to separate from the Corporation all businesses
currently conducted by the Corporation other than the Nielsen Media Research
Business and to cause such businesses to be owned and conducted, directly or
indirectly, by IMS HEALTH;
WHEREAS, in order to effect the separation, the Board of Directors
of the Corporation has determined that it is appropriate, desirable and in the
best interests of the holders of Cognizant Common Stock, as well as of the
Corporation and its businesses, for the Corporation (i) to take certain steps to
reorganize the Corporation's Subsidiaries (as defined herein) and businesses,
including prior to the Distribution (as defined herein) (A) causing Media
Licensing Associates, Inc. ("Media Licensing") to withdraw its interest in
Cognizant Licensing Associates, L.P. ("Licensing Associates"), and, in
connection therewith, to receive the shares of common stock of Gartner Group,
Inc. ("Gartner") held by Licensing Associates, (B) upon the completion of the
transaction described in (A), causing Media Licensing to merge with and into
NMR, with NMR as the surviving corporation, (C) upon the completion of the
transaction described in (B), to cause NMR to merge with and into the
Corporation, with the Corporation as the surviving corporation renamed "Nielsen
Media Research, Inc.", (D) causing I.M.S. International, Inc. to merge with and
into IMS HEALTH, with IMS HEALTH as the surviving corporation, (E) upon the
completion of the transaction described in (D), causing IMS America Ltd. to
merge with and into IMS HEALTH, with IMS HEALTH as the surviving corporation,
(F) upon the completion of the transaction described in (E), causing the
Corporation to contribute all of the non-stock assets and liabilities held
directly by the Corporation (other than assets specified herein to remain with
the Corporation after the Distribution) to IMS HEALTH, (G) upon the completion
of the transaction described in (F), causing the Corporation to contribute all
the capital stock held by the Corporation in Cognizant Technology Solutions
Corporation, Cognizant Enterprises Inc., Gartner, Erisco, Inc., I.M.S. Services
Nederland B.V., IMS Italia
<PAGE>
2
S.p.A., IMS Japan K.K., Cognizant India Holdings Corporation, IMS ChinaMetrik
Incorporated, Cognizant Transportation Services Corporation, DBHC Inc., IMS
Holdings (UK) Limited, Sales Technologies, Inc., Walsh International, Inc. and
any other first tier subsidiary of the Corporation not related to the NMR
Business and (ii) upon the completion of such reorganization to distribute to
the holders of the Cognizant Common Stock all the outstanding shares of common
stock of IMS HEALTH (the "IMS HEALTH Common Shares"), together with the
associated Rights (as defined herein), as set forth herein;
WHEREAS, each of the Corporation and IMS HEALTH 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 the Corporation and its current and former
Subsidiaries and other matters; and
WHEREAS, each of the Corporation and IMS HEALTH 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) "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.
(b) "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.
(c) "Agent" shall have the meaning set forth in Section 2.1(b).
(d) "Agreement Disputes" shall have the meaning set forth in Section
6.1.
(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
<PAGE>
3
Conveyancing and Assumption Instruments, the Employee Benefits Agreement, the
Tax Allocation Agreement and the Transition Services Agreement.
(f) "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;
(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,
<PAGE>
4
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 receivable;
(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, choses 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, 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
(xvii) interest rate, currency, commodity or other swap,
collar, cap or other hedging or similar agreements or
arrangements.
(g) "Assignee" shall have the meaning set forth in Section 2.1(f).
(h) "Business Entity" shall mean any corporation, partnership,
limited liability company or other entity which may legally hold title to
Assets.
(i) "Claims Administration" shall mean the processing of claims made
under the Shared Policies, including, without limitation, the reporting of
claims to the insurance carriers and the management of the defense of claims.
(j) "Code" shall mean the Internal Revenue Code of 1986, as amended,
and the Treasury regulations promulgated thereunder, including any successor
legislation.
<PAGE>
5
(k) "Cognizant Common Stock" shall have the meaning set forth in the
recitals hereto.
(l) "Commission" shall mean the U.S. Securities and Exchange
Commission.
(m) "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(m) 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.
(n) the "Corporation" or "Cognizant" shall mean Cognizant
Corporation, a Delaware corporation, which will change its name in connection
with the Distribution to "Nielsen Media Research, Inc.".
(o) "Corporation Debt" shall mean have the meaning set forth in
Section 2.1(n).
(p) "Distribution" shall mean the distribution on the Distribution
Date to holders of record of shares of Cognizant Common Stock as of the
Distribution Record Date of the IMS HEALTH Common Shares owned by the
Corporation on the basis of one IMS HEALTH Common Share for each outstanding
share of Cognizant Common Stock.
(q) "Distribution Date" shall mean June 30, 1998.
(r) "Distribution Record Date" shall mean June 25, 1998.
(s) "Effective Time" shall mean immediately prior to the midnight,
New York time, that ends the 24-hour period comprising June 30, 1998.
(t) "Employee Benefits Agreement" shall mean the Employee Benefits
Agreement between the Corporation and IMS HEALTH.
(u) "Enterprises Business" shall have the meaning set forth in the
recitals hereto.
(v) "ERISCO Business" shall have the meaning set forth in the
recitals hereto.
(w) "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.
(x) "IMS Business" shall have the meaning set forth in the recitals
hereto.
<PAGE>
6
(y) "IMS HEALTH Assets" shall mean, collectively, all the rights and
Assets owned or held by the Corporation or any Subsidiary of the Corporation
immediately prior to the Effective Time, except the NMR Assets.
(z) "IMS HEALTH Business" shall mean each and every business
conducted at any time by the Corporation or any Subsidiary of the Corporation
prior to the Effective Time (including, without limitation, the IMS Business,
the ERISCO Business, the Enterprises Business and the Technology Solutions
Business), except an NMR Business.
(aa) "IMS HEALTH Common Shares" shall have the meaning set forth in
the recitals hereto.
(ab) "IMS HEALTH Contracts" shall mean all the contracts and
agreements to which the Corporation or any of its Affiliates who are not
individuals is a party or by which it or any of its Affiliates who are not
individuals is bound immediately prior to the Effective Time, except the NMR
Contracts.
(ac) "IMS HEALTH Group" shall mean IMS HEALTH and each person (other
than any member of the NMR Group) that is a Subsidiary of the Corporation
immediately prior to the Effective Time.
(ad) "IMS HEALTH Indemnitees" shall mean IMS HEALTH, each member of
the IMS HEALTH Group, each of their respective present and former directors,
officers, employees and agents and each of the heirs, executors, successors and
assigns of any of the foregoing, except the NMR Indemnitees, as well as any
present and former directors, officers, employees and agents of the Corporation
prior to the Effective Time and each of their heirs, executors, successors and
assigns.
(ae) "IMS HEALTH Liabilities" shall mean collectively, all
obligations and Liabilities of the Corporation or any Subsidiary of the
Corporation immediately prior to the Effective Time, except the NMR Liabilities.
(af) "IMS HEALTH Policies" shall mean all Policies, current or past,
which are owned or maintained by or on behalf of the Corporation or any
Subsidiary of the Corporation immediately prior to the Effective Time which do
not relate to the NMR Business and which Policies are either maintained by IMS
HEALTH or a member of the IMS HEALTH Group or are assignable to IMS HEALTH or a
member of the IMS HEALTH Group.
(ag) "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.
(ah) "Indemnifying Party" shall have the meaning set forth in
Section 3.3.
<PAGE>
7
(ai) "Indemnitee" shall have the meaning set forth in Section 3.3.
(aj) "Indemnity and Joint Defense Agreement" shall mean the
Indemnity and Joint Defense Agreement dated as of October 28, 1996 by and among
the Corporation, The Dun & Bradstreet Corporation and ACNielsen Corporation.
(ak) "Information Statement" shall mean the Information Statement
sent to the holders of shares of Cognizant Common Stock in connection with the
Distribution, including any amendment or supplement thereto.
(al) "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.
(am) "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.
(an) "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 not subject to deductibles, co-insurance,
uncollectibility or retrospectively-rated premium adjustments.
(ao) "IRI Action" shall mean the complaint filed in the United
States District Court for the Southern District of New York on July 29, 1996 by
Information Resources, Inc. naming as defendants The Dun & Bradstreet
Corporation, A. C. Nielsen Company and IMS International, Inc.
(ap) "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
<PAGE>
8
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.
(aq) "Nielsen Media Research Business" shall have the meaning set
forth in the recitals hereto.
(ar) "1996 Distribution" shall mean the distribution described in
the 1996 Distribution Agreement.
(as) "1996 Distribution Agreement" shall mean the Distribution
Agreement among the Corporation, The Dun & Bradstreet Corporation and ACNielsen
Corporation dated as of October 28, 1996.
(at) "NMR" shall mean Nielsen Media Research, Inc., a Delaware
corporation and a wholly-owned subsidiary of the Corporation.
(au) "NMR Assets" shall mean:
(i) the ownership interests in those Business Entities
listed on Schedule 1.1(au)(i);
(ii) any and all Assets that are expressly contemplated by
this Agreement, including those on the list of
pre-Distribution reorganization transactions attached as
Schedule 1.1(au)(ii) hereto, or any Ancillary Agreement
(or included on any Schedule hereto or thereto) as
Assets which have been or are to be transferred to the
Corporation, NMR or any other member of the NMR Group
prior to the Effective Time or are to remain with the
Corporation, NMR or any member of the NMR Group
subsequent to the Effective Time;
(iii) any Assets reflected on the NMR Balance Sheet or the
accounting records supporting such balance sheet and any
Assets acquired by or for NMR or any member of the NMR
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;
(iv) subject to Article VII, any rights of any member of the
NMR Group under any of the Policies, including any
rights thereunder arising from and after the Effective
Time in respect of any Policies that are occurrence
policies;
(v) any NMR 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 NMR Asset or the NMR Business;
<PAGE>
9
(vi) the minute books and similar corporate records of the
Corporation; and
(vii) any and all Assets of the Corporation from and after the
Effective Time.
Notwithstanding the foregoing, the NMR Assets shall not
in any event include:
(v) the Corporation's rights arising from or related to the
Corporation's agreements to acquire Walsh International
Inc. ("Walsh") or Pharmaceutical Marketing Services Inc.
("PMSI"), or any of the assets of Walsh or PMSI; or
(w) any rights of the Corporation under (i) the 1996
Distribution Agreement or (ii) the Tax Allocation
Agreement, Employee Benefits Agreement or any Ancillary
Agreement referred to in the 1996 Distribution Agreement
(except in each case to the extent provided in this
Agreement or any Ancillary Agreement to this Agreement);
or
(x) the Corporation's interest in the capital stock of the
Gartner Group, Inc. and any other Assets listed or
described on Schedule 1.1(au)(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 the Corporation, NMR or any NMR Business, except
for those Assets primarily relating to or used in those
Business Entities, businesses or operations listed on
Schedule 1.1(au)(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 transferred
or conveyed to any member of the IMS HEALTH 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 NMR Asset, any item explicitly included on a Schedule
referred to in this Section 1.1(au) shall take priority over
any provision of the text hereof, and clause (ii) shall take
priority over clause (iii) hereof of this Section 1.1(au).
(av) "NMR Balance Sheet" shall mean the consolidated balance sheet
of the NMR Group, including the notes thereto, as of March 31, 1998, set forth
as Schedule 1.1(av) hereto.
<PAGE>
10
(aw) "NMR Business" shall mean (i) the Nielsen Media Research
Business, (ii) the businesses of the members of the NMR Group, (iii) any other
business conducted by the Corporation or any Subsidiary of the Corporation
primarily through the use of the NMR Assets, (iv) the businesses of Business
Entities acquired or established by or for NMR or any of its Subsidiaries after
the date of this Agreement and (v) the business of the Corporation from and
after the Effective Time.
(ax) "NMR Contracts" shall mean the following contracts and
agreements to which the Corporation or any of its Affiliates who are not
individuals is a party or by which it or any of its Affiliates who are not
individuals or any of their respective Assets is bound, whether or not in
writing, except for any such contract or agreement that is not expressly
contemplated to be transferred or assigned to the Corporation, NMR or any other
member of the NMR Group prior to the Effective Time, or to remain with the
Corporation, NMR or any other member of the NMR Group subsequent to the
Effective Time, pursuant to any provision of this Agreement or any Ancillary
Agreement:
(i) the TAM Master Agreement (as defined herein), the
Intellectual Property Agreement referred to in the 1996
Distribution Agreement (except to the extent it relates
to intellectual property used by the IMS HEALTH Group)
and any contracts or agreements listed or described on
Schedule 1.1(ax)(i);
(ii) any contract or agreement entered into in the name of
the Corporation, or in the name of, or expressly on
behalf of, any division, business unit or member of the
NMR Group except for those contracts listed or described
on Schedule 1.1(ax)(ii) or which are primarily for the
benefit of any division, business unit or member of the
IMS HEALTH Group;
(iii) any contract or agreement that relates primarily to the
NMR Business;
(iv) federal, state and local government and other contracts
and agreements that are listed or described on Schedule
1.1(ax)(iv) and any other government contracts or
agreements entered into after the date hereof and prior
to the Effective Time that relate primarily to the NMR
Business;
(v) any contract or agreement representing capital or
operating equipment lease obligations reflected on the
NMR Balance Sheet, and obligations as lessee under those
contracts or agreements listed on Schedule 1.1(ax)(v);
(vi) any contract or agreement that is otherwise expressly
contemplated pursuant to this Agreement or any of the
Ancillary Agreements to be transferred or assigned to
the Corporation or any member of the NMR Group prior to
the Effective Time or to remain with the Corporation or
any member of the NMR Group subsequent to the Effective
Time; and
(vii) any guarantee, indemnity, representation or warranty of
any member of the NMR Group.
<PAGE>
11
(ay) "NMR Group" shall mean (i) NMR, (ii) each Business Entity which
is contemplated to become a Subsidiary of the Corporation or NMR hereunder prior
to the Effective Time or to remain a Subsidiary of the Corporation or NMR
hereunder subsequent to the Effective Time, which shall include those identified
as such on Schedule 1.1(au)(i) hereto, which Schedule shall also indicate the
amount of the Corporation's or NMR's direct or indirect ownership interest
therein, and (iii) the Corporation from and after the Effective Time.
(az) "NMR Indemnitees" shall mean NMR, each member of the NMR Group,
each of their respective present and former directors, officers, employees and
agents and each of the heirs, executors, successors and assigns of any of the
foregoing.
(ba) "NMR 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(ba)
hereto) as Liabilities to be assumed by the Corporation
or any member of the NMR Group prior to the Effective
Time or to remain with the Corporation or any member of
the NMR Group subsequent to the Effective Time, and all
agreements, obligations and Liabilities of the
Corporation or any member of the NMR Group under this
Agreement or any of the Ancillary Agreements;
(ii) all Liabilities (other than Taxes and any
employee-related Liabilities which are subject to the
provisions of the Tax Allocation Agreement and the
Employee Benefits Agreement, respectively), primarily
relating to, arising out of or resulting from:
(A) the operation of the NMR Business, as
conducted at any time prior to, on or after the
Effective Time (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 the
Corporation or any Subsidiary of the Corporation at any
time from and after the Effective Time (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 NMR Assets;
whether arising before, on or after the Effective Time;
(iii) all Liabilities reflected as liabilities or obligations
on the NMR Balance Sheet or the accounting records
supporting such balance sheet, and all
<PAGE>
12
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 NMR Balance Sheet; and
(iv) the Corporation Debt.
Notwithstanding the foregoing, the NMR 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 assumed by IMS HEALTH or any
member of the IMS HEALTH Group, including any Liabilities set
forth in Schedule 1.1(ba)(x);
(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 the Corporation or any NMR Business except for
Liabilities primarily relating to, arising out of or resulting
from those Business Entities, businesses or operations listed
in Schedule 1.1(ba)(y); or
(z) all agreements and obligations of any member of the IMS HEALTH
Group under this Agreement or any of the Ancillary Agreements.
(bb) "NMR Policies" shall mean all Policies, current or past, which
are owned or maintained by or on behalf of the Corporation or any Subsidiary of
the Corporation immediately prior to the Effective Time, which do not relate to
the IMS HEALTH Business.
(bc) "person" shall mean any natural person, Business Entity,
corporation, business trust, joint venture, association, company, partnership,
other entity or government, or any agency or political subdivision thereof.
(bd) "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 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.
(be) "Provider" shall have the meaning set forth in Section 5.1.
(bf) "Recipient" shall have the meaning set forth in Section 5.1.
(bg) "Records" shall have the meaning set forth in Section 4.1.
<PAGE>
13
(bh) "Rights" shall have the meaning set forth in Section 2.1(c).
(bi) "Rules" shall have the meaning set forth in Section 6.2.
(bj) "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.
(bk) "Shared Policies" shall mean all Policies, current or past,
which are owned or maintained by or on behalf of the Corporation or any
Subsidiary of the Corporation immediately prior to the Effective Time which
relate to the IMS HEALTH Business and the NMR Business.
(bl) "Shared Transaction Services Agreement" shall mean the Shared
Transaction Services Agreement between the Corporation and IMS HEALTH.
(bm) "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).
(bn) "TAM Master Agreement" shall mean the master agreement between
the Corporation and ACNielsen Corporation dated as of October 28, 1996,
including any agreements ancillary thereto, relating to the conduct of the
television audience measurement business after the 1996 Distribution.
(bo) "Tax" shall have the meaning set forth in the Tax Allocation
Agreement.
(bp) "Tax Allocation Agreement" shall mean the Tax Allocation
Agreement between the Corporation and IMS HEALTH.
(bq) "Technology Solutions Business" shall have the meaning set
forth in the recitals hereto.
(br) "Third Party Claim" shall have the meaning set forth in Section
3.3.
(bs) "Transition Services Agreement" shall mean the Amended and
Restated Transition Services Agreement among the Corporation, IMS HEALTH, The
Dun & Bradstreet Corporation, The New Dun & Bradstreet Corporation, ACNielsen
Corporation and Gartner Group, Inc.
<PAGE>
14
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) the Corporation shall, on behalf of itself and its
Subsidiaries, transfer or cause to be transferred to IMS HEALTH or another
member of the IMS HEALTH Group, effective prior to or as of the Effective
Time, all of the Corporation's and its Subsidiaries' right, title and
interest in the IMS HEALTH Assets.
(ii) IMS HEALTH shall to the extent not already held by the
Corporation or a member of the NMR Group, on behalf of itself and its
Subsidiaries, transfer or cause to be transferred to the Corporation or a
member of the NMR Group, effective prior to or as of the Effective Time,
all of IMS HEALTH's and its Subsidiaries' right, title and interest in the
NMR Assets.
(iii) the Corporation or IMS HEALTH, as applicable, shall be
entitled to designate the Business Entity within the NMR Group or the IMS
HEALTH Group, as applicable, to which any Assets are to be transferred
pursuant to this Section 2.1(a).
(b) Stock Dividend to the Corporation. On or prior to the
Distribution Date, IMS HEALTH shall issue to the Corporation as a stock dividend
(i) such number of IMS HEALTH Common Shares as will be required to effect the
Distribution, as certified by the Corporation's stock transfer agent (the
"Agent"). In connection therewith the Corporation shall deliver to IMS HEALTH
for cancellation the share certificate held by it representing IMS HEALTH Common
Shares and shall receive a new certificate or certificates representing the
total number of IMS HEALTH Common Shares to be owned by the Corporation after
giving effect to such stock dividend.
(c) Charters; By-laws; Rights Plans. On or prior to the Distribution
Date, 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, relating to the preferred share
purchase rights relating to the IMS HEALTH Common Shares (the
<PAGE>
15
"Rights"), filed by IMS HEALTH with the Commission as exhibits to IMS HEALTH's
Registration Statement on Form 10 (or any amendment thereto).
(d) Directors. On or prior to the Distribution Date, the Corporation
as the sole stockholder of IMS HEALTH, shall have taken all necessary action to
cause the Board of Directors of IMS HEALTH to consist of the individuals
identified in the Information Statement as directors of IMS HEALTH.
(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 do not relate primarily to the NMR
Business but which are held in the name of the Corporation or any member
of the NMR Group, or in the name of any employee, officer, director,
stockholder or agent of the Corporation or any such member, or otherwise,
on behalf of a member of the IMS HEALTH Group shall be duly and validly
transferred or caused to be transferred by the Corporation to the
appropriate member of the IMS HEALTH Group; and
(ii) all transferable licenses, permits and authorizations issued
by Governmental Authorities which relate primarily to the NMR Business but
which are held in the name of any member of the IMS HEALTH 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 NMR Group shall be
duly and validly transferred or caused to be transferred by IMS HEALTH to
the Corporation or the appropriate member of the NMR Group.
(f) Transfer of Agreements. Without limiting the generality of the
obligations set forth in Section 2.1(a):
(i) the Corporation 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 NMR Group to, assign, transfer and convey to the
appropriate member of the IMS HEALTH Group all of the Corporation's or
such member of the NMR Group's respective right, title and interest in and
to any and all IMS HEALTH Contracts;
(ii) IMS HEALTH 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 IMS HEALTH Group to, assign, transfer and convey
to the Corporation or the appropriate member of the NMR Group all of IMS
HEALTH's or such member of the IMS HEALTH Group's respective right, title
and interest in and to any and all NMR Contracts;
<PAGE>
16
(iii) 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 both the NMR Business and the IMS
HEALTH 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;
(iv) 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)(iii), such
Assignee's related portion of such obligations as determined in accordance
with the terms of the relevant agreement, where determinable on the face
thereof, and otherwise as determined in accordance with the practice of
the parties prior to the Distribution; and
(v) 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. The Corporation shall deliver to
the Agent the share certificates representing the IMS HEALTH Common Shares
issued to the Corporation by IMS HEALTH pursuant to Section 2.1(b) which are to
be distributed to the holders of Cognizant Common Stock in the Distribution and
shall instruct the Agent to distribute, on or as soon as practicable following
the Distribution Date, certificates representing such IMS HEALTH Common Shares
to holders of record of shares of Cognizant Common Stock on the Distribution
Record Date as further contemplated by the Information Statement and herein. IMS
HEALTH 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, IMS HEALTH agrees with the Corporation that:
(i) any and all Liabilities arising from or related to
Cognizant's agreements to acquire Walsh and PMSI or any filings with the
Commission or any other governmental or regulatory authority related
thereto shall be deemed to be IMS HEALTH Liabilities and not NMR
Liabilities;
<PAGE>
17
(ii) any and all Liabilities arising from or based upon
"controlling person" liability relating to the Form 10 (or any amendment
thereto) filed by IMS HEALTH shall be deemed to be IMS HEALTH Liabilities
and not NMR Liabilities; and
(iii) notwithstanding Section 2.1(m) below, any and all
Liabilities arising from or related to the spin-off of the Corporation and
ACNielsen Corporation from The Dun & Bradstreet Corporation pursuant to
the 1996 Distribution Agreement, other than those set forth on Schedule
2.1(i) or allocated to NMR pursuant to Section 2.1(j), shall be deemed to
be IMS HEALTH Liabilities and not NMR Liabilities.
(j) Certain Contingencies. For purposes of this Agreement, including
Article III hereof, each of IMS HEALTH and the Corporation agrees that:
(i) notwithstanding anything to the contrary herein or in the
Tax Allocation Agreement, each of the Corporation and IMS HEALTH shall be
liable for a portion of the liabilities related to certain prior business
transactions to the extent and in the circumstances described in Schedule
2.1(j)(i);
(ii) subject to Section 2.1(p), any and all Liabilities of
Cognizant under the Indemnity and Joint Defense Agreement or otherwise
related to the IRI Action, including legal fees and expenses related
thereto, shall be allocated 75% to the IMS HEALTH Group (and thereby
become IMS HEALTH Liabilities hereunder) and 25% to the NMR Group (and
thereby become NMR Liabilities hereunder); provided that (X) any such
legal fees and expenses incurred prior to January 1, 1999 shall be IMS
HEALTH Liabilities and not NMR Liabilities and (Y) any such legal fees and
expenses incurred during 1999 that are NMR Liabilities will be reimbursed
to IMS HEALTH on the first business day after January 1, 2000 with respect
to fees incurred through November 30, 1999 and notified to the
Corporation, and within 10 business days after notice to the Corporation
of other such fees incurred in 1999; and provided further that the
aggregate amount of NMR Liabilities under Section 2.1(j)(i) and this
Section 2.1(j)(ii) shall be limited to $125 million, and any amounts in
excess of $125 million shall be IMS HEALTH Liabilities; and
(iii) notwithstanding anything to the contrary herein or in the
Tax Allocation Agreement, each of the Corporation and IMS HEALTH agree
that the Corporation's interests in certain prior business transactions
described on Schedule 2.1(j)(i) of the 1996 Distribution Agreement shall
be held by IMS HEALTH or a member of the IMS HEALTH Group and not by NMR
or any member of the NMR Group and any rights or Liabilities arising in
connection with such interests and any transactions relating thereto shall
be IMS HEALTH rights and Liabilities and not NMR rights and Liabilities.
(k) Matters Relating to Certain Partnerships. Each of the
Corporation and IMS HEALTH agrees that the interests in Cognizant Licensing
Associates, L.P. held by members of the NMR Group will be retired prior to the
Distribution.
<PAGE>
18
(l) Certain Acquisitions. The Corporation shall contribute to IMS
HEALTH any Assets relating to Walsh and PMSI which the Corporation acquires
pursuant to its agreements to acquire such companies.
(m) Undertaking of IMS HEALTH. On or prior to the Distribution Date,
IMS HEALTH will undertake to each of The Dun & Bradstreet Corporation and
ACNielsen Corporation to be jointly and severally liable for all "Cognizant
Liabilities" (as defined in the 1996 Distribution Agreement) under the 1996
Distribution Agreement pursuant to an undertaking substantially in the form of
Exhibit 2.1(m) hereto.
(n) Corporation Debt. In connection with the Distribution, the
Corporation shall borrow an aggregate of $300 million, the proceeds of which
will be used to pay expenses of the Distribution and to repay existing
intercompany indebtedness to certain members of the IMS HEALTH Group. This $300
million of debt shall be an obligation of the Corporation after the
Distribution.
(o) Cognizant Common Stock Held by IMSA. IMS HEALTH agrees that
promptly after the Distribution Date IMS HEALTH will sell the 800,000 shares of
Cognizant Common Stock which IMS HEALTH will own as a result of Cognizant Common
Stock currently held by IMS America Ltd.
(p) 1996 Distribution. The Corporation agrees that it will not take
any action it is required or permitted to take pursuant to the terms of (i) the
1996 Distribution Agreement or (ii) the Indemnity and Joint Defense Agreement,
the Tax Allocation Agreement, the Employee Benefits Agreement or any Ancillary
Agreement referred to in the 1996 Distribution Agreement (other than the TAM
Master Agreement and the Intellectual Property Agreement (to the extent such
action relates to intellectual property used by the NMR Group)), in each such
case without the prior written consent of IMS HEALTH. The Corporation agrees
that it will take any action pursuant to the terms of the agreements referred to
in clauses (i) and (ii) of the preceding sentence that it is requested to take
by IMS HEALTH; provided that IMS HEALTH agrees to consult with the Corporation
regarding the terms and conditions of any settlement agreement relating to the
IRI Action which would require the Corporation to contribute to the amount of
the settlement thereunder; and provided further that if the Corporation
reasonably asserts that such settlement would cause financial hardship to the
Corporation then the obligations of the Corporation under this Agreement with
respect to the payment of its portion of such settlement shall be adjusted as
follows:
(I) if the payment date for the settlement (the "Payment Date")
occurs prior to the second anniversary of the Distribution
Date, then (A) the Corporation shall pay 50% of the amount
that it would otherwise be obligated to pay hereunder in
respect of such settlement on the Payment Date, (B) IMS HEALTH
shall pay the remaining 50% of such amount on behalf of the
Corporation on the Payment Date and (C) the Corporation shall
reimburse IMS HEALTH for the amount IMS HEALTH pays pursuant
to clause (B) (plus interest thereon at the prevailing
three-month
<PAGE>
19
treasury rate) in two equal installments to be paid on each of
the first and second anniversaries of the Payment Date; and
(II) if the Payment Date occurs on or after the second anniversary
of the Distribution Date but prior to the third anniversary of
the Distribution Date, then (A) the Corporation shall pay 66
2/3% of the amount that it would otherwise be obligated to pay
hereunder in respect of such settlement on the Payment Date,
(B) IMS HEALTH shall pay the remaining 33 1/3% of such amount
on behalf of the Corporation on the Payment Date and (C) the
Corporation shall reimburse IMS HEALTH for the amount IMS
HEALTH pays pursuant to clause (B) (plus interest thereon at
the prevailing three-month treasury rate) on the first
anniversary of the Payment Date.
Notwithstanding the foregoing, if the Payment Date occurs on or after the third
anniversary of the Distribution Date, then no adjustment shall be made to the
obligations of the Corporation under this Agreement with respect to the payment
of its portion of such settlement.
(q) Cognizant Restricted Stock. At the time of the Distribution, the
Corporation shall contribute to IMS HEALTH any IMS HEALTH Common Shares received
by the Corporation as a result of the forfeiture of restricted Cognizant Common
Stock by employees of the Corporation in connection with the Distribution.
(r) New Assistance Agreement. As soon as reasonably practicable
after the Distribution Date, the Corporation and IMS HEALTH shall enter into an
amendment to the Assistance Agreement (the "1996 Assistance Agreement") among
the State of Connecticut, acting by the Department of Economic and Community
Development, The Dun & Bradstreet Corporation, ACNielsen Corporation and the
Corporation dated October 30, 1996 pursuant to which the Corporation will be
released from its obligations under the 1996 Assistance Agreement in
consideration for (i) the Corporation's agreement to maintain no less than 170
Full Time Positions (as defined in the 1996 Assistance Agreement) and (ii) IMS
HEALTH's agreement to maintain no less than 17 Full Time Positions (as defined
in the 1996 Assistance Agreement), in each such case for the remainder of the
term of the 1996 Assistance Agreement. The Corporation and IMS HEALTH shall
cooperate with one another in negotiating such amendment and shall use their
respective reasonable efforts to conclude such negotiations on or prior to July
15, 1998.
(s) Other Transactions. On or prior to the Distribution Date, each
of the Corporation and IMS HEALTH shall consummate those other transactions in
connection with the Distribution that are contemplated by the ruling request
submissions by the Corporation to the Internal Revenue Service in respect of the
ruling granted on May 21, 1998, and not specifically referred to in
subparagraphs (a)-(r) above. After the Distribution Date, each of the
Corporation and IMS HEALTH will exercise good faith commercially reasonable
efforts to consummate as promptly as practicable all other transactions which
must be consummated in order fully to complete the Distribution and any of the
transactions contemplated hereby or by any of the Ancillary Agreements.
<PAGE>
20
SECTION 2.2. Intercompany Accounts. The parties acknowledge that the
Corporation has transferred $417 million to IMS HEALTH to repay intercompany
indebtedness to certain members of the IMS HEALTH Group existing as of May 31,
1998. On the Distribution Date, the Corporation shall transfer the remaining
cash balances referred to in Section 2.3 below to IMS HEALTH as a contribution
of capital. If there is a net amount due and payable from either party to the
other for intercompany receivables, payables and loans with respect to the month
of June, 1998, the amount characterized as a capital contribution by the
Corporation to IMS HEALTH shall be adjusted by such net amount due and no cash
payment in respect thereof shall be made.
SECTION 2.3. Cash Balances. In addition to any other obligations
hereunder or under any Ancillary Agreement or otherwise, on the Distribution
Date, the Corporation shall contribute to IMS HEALTH all cash in the
Corporation's accounts other than the estimated cash amounts set forth on
Schedule 2.3. Promptly after the Distribution Date, but no later than July 31,
1998, the Corporation and IMS HEALTH shall determine the actual amounts for each
item on Schedule 2.3. Any net variance between such actual amounts and the
estimated amounts set forth on Schedule 2.3 shall be paid by the appropriate
party to the other party on or promptly after July 31, 1998 (including the
closing market price on June 30, 1998 of the APAC Teleservices, Inc. shares held
pursuant to the Escrow Agreement identified in Schedule 1.1(ax)(ii)). If
additional variances are discovered thereafter and prior to December 31, 1998,
the appropriate party shall pay the amount thereof promptly to the other party.
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) the Corporation
shall, and shall cause each member of the NMR Group to, assume, pay, perform and
discharge all NMR Liabilities and (ii) IMS HEALTH shall, and shall cause each
member of the IMS HEALTH Group to, assume, pay, perform and discharge all IMS
HEALTH 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(b), the
Corporation and NMR shall cause all their employees to resign or be terminated,
effective not later than the Effective Time, from all positions as officers or
directors of any member of the IMS HEALTH Group in which they serve, and IMS
HEALTH shall cause all its employees to resign or be terminated, effective not
later than the Effective Time, from all positions as officers or directors of
the Corporation or any members of the NMR Group in which they serve.
(b) 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
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21
shall take all such necessary action. Without limiting the foregoing, the
Corporation and IMS HEALTH 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
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, the Corporation and IMS HEALTH shall use their commercially
reasonable efforts to have, on or prior to the Distribution Date, or as soon as
practicable thereafter, the Corporation and any member of the NMR Group removed
as guarantor of or obligor for any IMS HEALTH Liability, including, without
limitation, in respect of those guarantees set forth on Schedule 2.8(a) to the
extent that they relate to IMS HEALTH Liabilities.
(b) Except as otherwise specified in any Ancillary Agreement, the
Corporation and IMS HEALTH 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 IMS HEALTH Group removed as guarantor of or
obligor for any NMR Liability, including, without limitation, in respect of
those guarantees set forth on Schedule 2.8(b) to the extent that they relate to
NMR Liabilities.
(c) If the Corporation or IMS HEALTH is unable to obtain, or to
cause to be obtained, any such required removal as set forth in clauses (a) or
(b) 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.
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22
SECTION 2.9. Witness Services. At all times from and after the
Distribution Date, each of the Corporation and IMS HEALTH 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 the Corporation or IMS
HEALTH as applicable. 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) The
Corporation 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 the
Corporation 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, the Corporation 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) IMS HEALTH 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 the Corporation 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, IMS HEALTH 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) The Corporation agrees that until two years after the
Distribution Date, it will not (i) merge or consolidate with or into any other
corporation, (ii) liquidate or partially liquidate, (iii) sell or transfer all
or substantially all of its assets (within the meaning of Rev. Proc. 77-37, 1977
- - 2 C.B. 568) in a single transaction or series of related transactions, (iv)
redeem or otherwise repurchase any Cognizant Common Stock (other than as
described in Section 4.05(1)(b) of Rev. Proc. 96-30, 1996-1 C.B. 696), or (v)
take any other action or actions which in the aggregate would have the effect of
causing or permitting one or more persons to acquire directly or indirectly
stock representing a 50 percent or greater interest (within the meaning of
Section 355(e) of the Code) in the Corporation, unless prior to taking such
action the Corporation has obtained (and provided to IMS HEALTH) a written
opinion of a law firm reasonably acceptable to IMS HEALTH, or a supplemental
ruling from the Internal Revenue Service, that such action or actions will not
result in (i) the Distribution failing to qualify under Section 355(a) of the
Code or (ii) the IMS HEALTH Common Shares failing to qualify as qualified
property for purposes of Section 355(c)(2) of the Code by reason of Section
355(e) of the Code.
(d) Notwithstanding anything to the contrary herein or in the Tax
Allocation Agreement, if the Corporation or IMS HEALTH (or any of their
respective Subsidiaries) fails to comply with any of its obligations under
Sections 2.10(a), 2.10(b) and 2.10(c) above or takes or
<PAGE>
23
fails to take any action on or after the Distribution Date, and such failure to
comply, action or omission contributes to a determination that (i) the
Distribution fails to qualify under Section 355(a) of the Code or (ii) the IMS
HEALTH Common Shares fail to qualify as qualified property for purposes of
Section 355(c)(2) of the Code by reason of Section 355(e) of the Code, then such
party shall indemnify and hold harmless the other party and each member of the
consolidated group of which the other party is a member from and against any and
all federal, state and local taxes, including any interest, penalties or
additions to tax, imposed upon or incurred by such other party, any member of
its group or any stockholder of either party as a result of the failure of the
Distribution to qualify under Section 355(a) of the Code or the application of
Section 355(e). The obligation of the Corporation to indemnify IMS HEALTH
pursuant to the preceding sentence shall not be affected by the delivery of any
legal opinion or supplemental ruling under Section 2.10(c).
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 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
<PAGE>
24
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. On or prior to the Distribution
Date, each of the Corporation and IMS HEALTH shall enter into, and/or (where
applicable) shall cause members of the NMR Group or the IMS HEALTH Group, as
applicable, 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) on or prior to the Distribution Date, the Corporation shall
change its name to remove any reference to "Cognizant" therein;
(ii) as soon as reasonably practicable after the Distribution
Date but in any event within six months thereafter, the Corporation will,
at its own expense, remove (or, if necessary, on an interim basis, cover
up) any and all exterior signs and other identifiers located on any of its
property or premises or on the property or premises used by it or its
Subsidiaries (except property or premises to be shared with IMS HEALTH or
its Subsidiaries after the Distribution) which refer or pertain to
Cognizant or which include the Cognizant name, logo or other trademark or
other intellectual property utilizing Cognizant;
(iii) as soon as reasonably practicable after the Distribution
Date but in any event within six months thereafter, the Corporation will,
and will cause its Subsidiaries to, remove from all letterhead, envelopes,
invoices and other communications media of any kind, all references to
Cognizant, including the "Cognizant" name, logo and any other trademark or
other intellectual property utilizing Cognizant (except that the
Corporation shall not be required to take any such action with respect to
materials in the possession of customers), and neither the Corporation nor
its Subsidiaries shall use or display the "Cognizant" name, logo or other
trademarks or intellectual property utilizing Cognizant without the prior
written consent of any assignee of the Corporation's rights to the
"Cognizant" name, logo or other trademarks or intellectual property
utilizing Cognizant;
(iv) as soon as reasonably practicable after the Distribution
Date, but in any event within six months thereafter, the Corporation will
cause its Subsidiaries to change their corporate names to the extent
necessary to remove and eliminate any reference to Cognizant, including
the "Cognizant" name; provided, however, that notwithstanding the
foregoing requirements of this Section 2.14(a), if the Corporation has
exercised good faith efforts to comply with this clause (iv) but is
unable, due to regulatory or other circumstance beyond its control, to
effect a corporate name change in compliance with applicable law, then the
Corporation or its Subsidiary will not be deemed to be in breach hereof if
it continues to exercise good faith efforts to effectuate such name change
and
<PAGE>
25
does effectuate such name change within nine months after the Distribution
Date, and, in such circumstances, such party may continue to include in
exterior signs and other identifiers and in letterhead, envelopes,
invoices and other communications references to the name which includes
references to Cognizant, but only to the extent necessary to identify such
party and only until such party's corporate name can be changed to remove
and eliminate such references; and
(v) notwithstanding the foregoing clauses (i) through (iv),
nothing herein or in any Ancillary Agreement shall require the Corporation
to take any action to remove any reference to Cognizant, including the
"Cognizant" name, from any stock certificate relating to shares of
Cognizant Common Stock outstanding on or prior to the Effective Time;
provided that from and after the Effective Time, any newly issued stock
certificates representing Cognizant Common Stock (which at the Effective
Time will become NMR Common Stock) shall not have any reference to
Cognizant, including the "Cognizant" name.
(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, IMS HEALTH will, at
its 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 the
Corporation or its Subsidiaries after the Distribution) which refer or
pertain to NMR or which include the "Nielsen Media Research" or "Nielsen"
name, logo or other trademark or other NMR intellectual property;
(ii) as soon as reasonably practicable after the Distribution
Date but in any event within six months thereafter, IMS HEALTH will, and
will cause its respective Subsidiaries to, remove from all letterhead,
envelopes, invoices and other communications media of any kind, all
references to NMR, including the "Nielsen Media Research" or "Nielsen"
name, logo and any other trademark or other NMR intellectual property
(except that IMS HEALTH shall not be required to take any such action with
respect to materials in the possession of customers), and neither IMS
HEALTH nor any of its Subsidiaries shall use or display the "Nielsen Media
Research" or "Nielsen" name, logo or other trademarks or NMR intellectual
property without the prior written consent of the Corporation; and
(iii) as soon as reasonably practicable after the Distribution
Date but in any event within six months thereafter, IMS HEALTH will, and
will cause its Subsidiaries to, change their corporate names to the extent
necessary to remove and eliminate any reference to NMR, including the
"Nielsen Media Research" or "Nielsen" name; provided, however, that
notwithstanding the foregoing requirements of this Section 2.14(b), if IMS
HEALTH has exercised good faith efforts to comply with this clause (iii)
but is unable, due to regulatory or other circumstance beyond its control,
to effect a corporate name change in compliance with applicable law, then
IMS HEALTH or its Subsidiary will not
<PAGE>
26
be deemed to be in breach hereof if it continues to exercise good faith
efforts to effectuate such name change and does effectuate such name
change within nine months after the Distribution Date, and, in such
circumstances, such party may continue to include in exterior signs and
other identifiers and in letterhead, envelopes, invoices and other
communications references to the name which includes references to NMR but
only to the extent necessary to identify such party and only until such
party's corporate name can be changed to remove and eliminate such
references.
ARTICLE III. INDEMNIFICATION
SECTION 3.1. Indemnification by the Corporation. Except as otherwise
specifically set forth in any provision of this Agreement or of any Ancillary
Agreement, the Corporation shall indemnify, defend and hold harmless the IMS
HEALTH Indemnitees from and against any and all Indemnifiable Losses of the IMS
HEALTH Indemnitees arising out of, by reason of or otherwise in connection with
the NMR Liabilities or alleged NMR Liabilities, including any breach by the
Corporation of any provision of this Agreement or any Ancillary Agreement.
SECTION 3.2. Indemnification by IMS HEALTH. Except as otherwise
specifically set forth in any provision of this Agreement or of any Ancillary
Agreement, IMS HEALTH shall indemnify, defend and hold harmless the NMR
Indemnitees from and against any and all Indemnifiable Losses of the NMR
Indemnitees arising out of, by reason of or otherwise in connection with the IMS
HEALTH Liabilities or alleged IMS HEALTH Liabilities, including any breach by
IMS HEALTH of any provision of this Agreement or any Ancillary Agreement.
SECTION 3.3. Procedures for Indemnification.
(a) Third Party Claims. If a claim or demand is made against an NMR
Indemnitee or a IMS HEALTH 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 or Section 3.2 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
<PAGE>
27
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.
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
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28
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.
(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 3.4. 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 IMS
HEALTH for specific and identified agreements, documents, books, records or
files (collectively, "Records") which relate to (x) IMS HEALTH or the conduct of
the IMS HEALTH Business up to the Effective Time, or (y) any Ancillary Agreement
to which the Corporation and IMS HEALTH are parties, as applicable, the
Corporation 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 IMS HEALTH has a reasonable need for such
originals) in the possession or control of the Corporation or any of its
Subsidiaries, but only to the extent such items are not already in the
possession or control of IMS HEALTH.
(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 the
Corporation for specific and identified Records which relate to (x) the
Corporation, NMR or the conduct of the NMR Business up to the Effective
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29
Time, or (y) any Ancillary Agreement to which IMS HEALTH and the Corporation are
parties, as applicable, IMS HEALTH 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 Corporation
has a reasonable need for such originals) in the possession or control of IMS
HEALTH or any of its Subsidiaries, but only to the extent such items are not
already in the possession or control of the Corporation.
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 the Corporation and IMS HEALTH 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) the Corporation and its
Subsidiaries and (ii) IMS HEALTH 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 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 on or
prior to the Distribution Date have been and will be rendered for the benefit of
each of the Corporation, the members of
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30
the NMR Group and the members of the IMS HEALTH Group, and that each of the
Corporation, the members of the NMR Group and the members of the IMS HEALTH
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) The Corporation shall be entitled, in perpetuity, to control the
assertion or waiver of all privileges in connection with privileged information
which relates solely to the NMR Business, whether or not the privileged
information is in the possession of or under the control of the Corporation or
IMS HEALTH. The Corporation 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
NMR Liabilities, now pending or which may be asserted in the future, in any
lawsuits or other proceedings initiated against or by the Corporation, whether
or not the privileged information is in the possession of or under the control
of the Corporation or IMS HEALTH.
(b) IMS HEALTH shall be entitled, in perpetuity, to control the
assertion or waiver of all privileges in connection with privileged information
which relates solely to the IMS HEALTH Business, whether or not the privileged
information is in the possession of or under the control of the Corporation or
IMS HEALTH. IMS HEALTH 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 IMS HEALTH
Liabilities, now pending or which may be asserted in the future, in any lawsuits
or other proceedings initiated against or by IMS HEALTH whether or not the
privileged information is in the possession of or under the control of the
Corporation or IMS HEALTH.
(c) 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) and (b). All privileges relating to any claims,
proceedings, litigation, disputes, or other matters which involve both the
Corporation and IMS HEALTH in respect of which both parties retain any
responsibility or liability under this Agreement, shall be subject to a shared
privilege among them.
(d) No party hereto may waive any privilege which could be asserted
under any applicable law, and in which the 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 (e) 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.
(e) 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
<PAGE>
31
to the litigation or dispute between the parties and/or their Subsidiaries, and
shall not operate as a waiver of the shared privilege with respect to third
parties.
(f) 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 specifically agrees that it will
not withhold consent to waiver for any purpose except to protect its own
legitimate interests.
(g) 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.
(h) The transfer of all Records and other information pursuant to
this Agreement is made in reliance on the agreement of the Corporation and IMS
HEALTH, 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 3.3
hereof, the furnishing of notices and documents and other cooperative efforts
contemplated by Section 3.3 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) Other than in connection with Section 2.2, 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
<PAGE>
32
understanding existing on or prior to the Distribution Date (other than this
Agreement or any Ancillary Agreement or any agreement entered into in connection
herewith or in order to consummate the transactions contemplated hereby or
thereby), 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 Shared Transaction Services Agreement. Except as
otherwise set forth in such 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 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 party from its own employees or from providers
other than the other party.
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, 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
<PAGE>
33
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 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 6.2 hereof, 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 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 parties, after 60 days have elapsed
from the time the parties began such negotiations), such Agreement Dispute shall
be determined, at the request of any 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 the 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. ss.10(a) as in effect on the date
hereof). If the parties are unable to agree on the arbitrator, the arbitrator
shall be selected in accordance with the Rules; provided that the arbitrator
shall be a U.S. national. 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. In resolving any dispute, the parties intend that the arbitrator
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 parties
agree to comply with any award made in any such arbitration proceeding 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 (b) the
United States District Court for the Southern District of New York, in
accordance with Section 8.17 hereof. The arbitrator 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 shall not be entitled to
award punitive damages. Without limiting the provisions of the Rules, unless
otherwise agreed in writing by or among the parties or permitted by this
Agreement, the parties 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
<PAGE>
34
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.
ARTICLE VII. INSURANCE
SECTION 7.1. Policies and Rights Included Within Assets; Assignment
of Policies. (a) Policy Rights. The IMS HEALTH Assets shall include (i) any and
all rights of an insured party under each of the Shared Policies, subject to the
terms of such Shared Policies and any limitations or obligations of IMS HEALTH
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 on or prior to the
Distribution Date by any party in or in connection with the conduct of the IMS
HEALTH Business or, to the extent any claim is made against IMS HEALTH or any of
its Subsidiaries, the conduct of the NMR 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 Shared
Policies.
(b) Assignment of Shared Policies. Subject to the terms and
conditions hereof, the Corporation hereby assigns, transfers and conveys to IMS
HEALTH all of the Corporation's right, title and interest in and to any and all
of the Shared Policies, including, without limitation, the right of indemnity,
the right to be defended by or at the expense of the insurer and the right to
any applicable Insurance Proceeds thereunder; and the Corporation and IMS HEALTH
shall use their commercially reasonable efforts to obtain any required consents
of insurers to the assignment contemplated by this paragraph.
SECTION 7.2. Post-Distribution Date Claims. If, subsequent to the
Distribution Date, any person shall assert a claim against IMS HEALTH or any of
its Subsidiaries (including, without limitation, where IMS HEALTH 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 on or prior to the Distribution Date in or in
connection with the conduct of the IMS HEALTH Business or, to the extent any
claim is made against IMS HEALTH or any of its Subsidiaries (including, without
limitation, where IMS HEALTH or its Subsidiaries are joint defendants with other
persons), in connection with the conduct of the NMR 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 Shared
Policies, the Corporation 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
<PAGE>
35
designate, without need of further documentation, IMS HEALTH as the agent and
attorney-in-fact to assert and to collect any related Insurance Proceeds under
such Shared Policy.
SECTION 7.3. Administration; Other Matters. (a) Administration.
After the Distribution Date, IMS HEALTH shall be responsible for (i) Insurance
Administration of the Shared Policies and (ii) Claims Administration under such
Shared Policies with respect to NMR Liabilities and IMS HEALTH Liabilities;
provided that the assumption of such responsibilities by IMS HEALTH 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; provided further that IMS HEALTH's assumption of the
administrative responsibilities for the Shared Policies shall not relieve the
party submitting any Insured Claim 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; and provided further that all direct or
indirect communication with insurers relating to the Shared Policies shall be
conducted by IMS HEALTH. IMS HEALTH 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 IMS HEALTH 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 the Corporation and IMS HEALTH shall be
responsible for its own Claims Administration and Insurance Administration.
(b) Exceeding Policy Limits. The Corporation and IMS HEALTH shall
not be liable to one another for claims not reimbursed by insurers for any
reason not within the control of the Corporation or IMS HEALTH, 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 the Corporation or IMS HEALTH or any
defect in such claim or its processing.
(c) Allocation of Insurance Proceeds. Insurance Proceeds received
with respect to claims, costs and expenses under the Shared Policies shall be
paid to IMS HEALTH, which shall thereafter administer the Shared Policies by
paying the Insurance Proceeds, as appropriate, to the Corporation with respect
to NMR Liabilities and to IMS HEALTH with respect to IMS HEALTH Liabilities.
Payment of the allocable portions of indemnity costs of Insurance Proceeds
resulting from such Policies will be made by IMS HEALTH 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 both of the parties hereto, the 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
<PAGE>
36
(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 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 both parties have
bona fide claims under any Shared Policy for which an aggregate deductible is
reached, 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 the other party an appropriate amount so that
each party has borne its allocable share of the deductible pursuant hereto.
(e) After the Distribution Date, each of IMS HEALTH and the
Corporation shall be responsible for its applicable deductible for workers'
compensation, general liability and automobile liability claims.
SECTION 7.4. Agreement for Waiver of Conflict and Shared Defense. In
the event that Insured Claims of both of the parties hereto exist relating to
the same occurrence, the parties shall jointly defend and waive any conflict 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 2.1(j), Section 2.7, Section 4.5 and Article VI, which shall
prevail over any inconsistent or conflicting provisions in any Ancillary
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 Agreement,
such Ancillary Agreement shall control.
<PAGE>
37
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.
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.
SECTION 8.5. Expenses. Except as set forth on Schedule 8.5 or as
otherwise set forth in this Agreement or any Ancillary Agreement, all costs and
expenses incurred and for which invoices have been submitted on or prior to the
Distribution Date in connection with the preparation, execution, delivery and
required implementation of this Agreement and any Ancillary Agreement, the
Information Statement (including any registration statement on Form 10 (or any
amendment thereto) 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 the Corporation; provided that if such costs and
expenses are not paid by the Corporation prior to the Effective Time, they shall
be charged to and paid by IMS HEALTH. Except as set forth on Schedule 8.5 or as
otherwise set forth in this Agreement or any Ancillary Agreement, all costs and
expenses incurred or for which invoices are submitted after the Distribution
Date in connection with the required implementation of this Agreement or any
Ancillary Agreement, the consummation of the Distribution or the consummation of
the transactions contemplated by this Agreement or any Ancillary Agreement shall
be charged to and paid by IMS HEALTH. Except as set forth on Schedule 8.5 or 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 Corporation:
Nielsen Media Research, Inc.
299 Park Avenue
New York, NY 10171
Telecopy: (212) 708-6927
<PAGE>
38
Attn: Chief Legal Officer
To IMS HEALTH:
IMS Health Incorporated
200 Nyala Farms
Westport, CT 06880
Telecopy: (203) 222-4313
Attn: General Counsel
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) The Corporation will not distribute to its stockholders any
interest in any NMR Business Entity, by way of a spin-off distribution,
split-off or exchange of interests in a NMR Business Entity for any interest in
the Corporation held by NMR stockholders, or any similar transaction or
transactions, unless the distributed NMR Business Entity undertakes to IMS
HEALTH to be jointly and severally liable for all NMR Liabilities hereunder.
(c) IMS HEALTH will not distribute to its stockholders any interest
in any IMS HEALTH Business Entity, by way of a spin-off distribution, split-off
or exchange of interests in a IMS HEALTH Business Entity for any interest in IMS
HEALTH held by IMS HEALTH stockholders, or any similar transaction or
transactions, unless the distributed IMS HEALTH Business Entity undertakes to
the Corporation to be jointly and severally liable for all IMS HEALTH
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 the Corporation without the approval of IMS HEALTH or the
shareholders of the Corporation. In the event of
<PAGE>
39
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 or 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. 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
<PAGE>
40
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>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the day and year first above written.
COGNIZANT CORPORATION
By: /s/ Robert E. Weissman
------------------------------------
Name: Robert E. Weissman
Title: Chairman and Chief Executive
Officer
IMS HEALTH INCORPORATED
By: /s/ Victoria R. Fash
------------------------------------
Name: Victoria R. Fash
Title: President and Chief Operating
Officer
<PAGE>
EXHIBIT 2.1(m)
IMS Health Incorporated
200 Nyala Farms
Westport, CT 06880
June 29, 1998
Nancy Henry, Esq.
The Dun & Bradstreet Corporation
One Diamond Hill Road
Murray Hill, NJ 07974
Earl Doppelt, Esq.
ACNielsen Corporation
177 Broad Street
Stamford, CT 06901
Dear Ms. Henry and Mr. Doppelt:
Reference is made to the Distribution Agreement (the "1996 Distribution
Agreement"), dated as of October 28, 1996, among Cognizant Corporation
("Cognizant"), The Dun & Bradstreet Corporation ("D&B") and ACNielsen
Corporation ("ACNielsen"). Cognizant has announced its intention to separate
into two separate companies through a distribution (the "IMS HEALTH
Distribution") to its stockholders of all of the shares of common stock of its
subsidiary IMS Health Incorporated ("IMS HEALTH"). In Section 8.9(c) of the 1996
Distribution Agreement, Cognizant agreed not to make a distribution such as the
IMS HEALTH Distribution unless it caused the distributed entity to undertake to
both D&B and ACNielsen to be jointly and severally liable for all Cognizant
Liabilities (as defined in the 1996 Distribution Agreement). Therefore, in
accordance with Section 8.9(c) of the 1996 Distribution Agreement and intending
to be legally bound hereby, from and after the effective time of the IMS HEALTH
Distribution, IMS HEALTH undertakes to each of D&B and ACNielsen to be jointly
and severally liable with Cognizant for all Cognizant Liabilities under the 1996
Distribution Agreement.
Very truly yours,
IMS HEALTH INCORPORATED
By:_____________________________
Name:
Title:
TAX ALLOCATION AGREEMENT
This TAX ALLOCATION AGREEMENT is dated as of June 30, 1998,
between COGNIZANT CORPORATION, a Delaware corporation (the "Corporation") and
IMS HEALTH INCORPORATED, a Delaware corporation ("IMS HEALTH") (collectively,
the "Parties").
WHEREAS, the Corporation acting through its direct and
indirect subsidiaries, currently conducts a number of businesses, including,
without limitation, providing television audience measurement services (the
"Nielsen Media Research Business");
WHEREAS, the Board of Directors of the Corporation has
determined that it is appropriate, desirable and in the best interests of the
holders of shares of common stock, par value $0.01 per share, of the Corporation
(the "Cognizant Common Stock"), as well as of the Corporation and its
businesses, to reorganize the Corporation to separate from the Corporation all
businesses currently conducted by the Corporation other than the Nielsen Media
Research Business and to cause such businesses to be owned and conducted,
directly or indirectly, by IMS HEALTH;
WHEREAS, in order to effect the separation, the Board of
Directors of the Corporation has determined that it is appropriate, desirable
and in the best interests of the holders of Cognizant Common Stock, as well as
of the Corporation and its businesses, for the Corporation (i) to take certain
steps to reorganize the Corporation's Subsidiaries (as defined herein) and
businesses, including prior to the Distribution (as defined herein) merging
I.M.S. International, Inc. and IMS America, Inc. with and into IMS HEALTH and
(ii) upon the completion of such reorganization to distribute to the holders of
the Cognizant Common Stock all the outstanding shares of common stock of IMS
HEALTH (the "IMS HEALTH Common Shares"), together with the associated Rights;
WHEREAS, as of the date hereof, the Corporation is the common
parent of an affiliated group of domestic corporations within the meaning of
Section 1504(a) of the Code (as defined herein), including members of the IMS
HEALTH Group (as defined herein), and the members of the affiliated group have
heretofore joined in filing consolidated federal Income Tax Returns (as defined
herein);
WHEREAS, as a result of the Distribution, the IMS HEALTH Group
will not be included in the consolidated federal Income Tax Return of the
Corporation for the portion of the year following the Distribution and in future
years; and
WHEREAS, the Corporation and IMS HEALTH desire to allocate the
Tax (as defined herein) burdens and benefits of transactions which occurred on
or prior to the Distribution Date (as defined herein) and to provide for certain
other Tax matters, including the assignment of responsibility for the
preparation
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2
and filing of Tax Returns (as defined herein), 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. Capitalized terms used in this Agreement
and not defined herein shall have the meanings that such terms have in the
Distribution Agreement. As used in this Agreement, the following terms shall
have the following meanings:
(a) "Code" shall mean the Internal Revenue Code of 1986, as
amended, and the Treasury regulations promulgated thereunder, including any
successor legislation.
(b) "Combined Returns" shall mean all state Income Tax Returns
with respect to which the Corporation files on a combined or unitary basis with
some or all of its Subsidiaries for taxable periods beginning November 1, 1996,
January 1, 1997 and January 1, 1998.
(c) "Consolidated Returns" shall mean all consolidated federal
Income Tax Returns of the affiliated group of which the Corporation is the
common parent for taxable periods beginning November 1, 1996, January 1, 1997
and January 1, 1998.
(d) "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).
(e) "D&B Tax Allocation Agreement" shall mean the Tax
Allocation Agreement dated October 28, 1996 among The Dun & Bradstreet
Corporation, the Corporation and ACNielsen Corporation.
(f) "Deferred Compensation Deduction" shall mean any deduction
with respect to (i) compensation payments made by any member of the IMS HEALTH
Group or the NMR Group, as the case may be, if such deduction is disallowed for
any member of the payor's group and may be claimed by any member of the other
group and/or (ii) the exercise of stock options in IMS HEALTH or the
Corporation, as the case may be, by any former employee of the Pre-Distribution
Cognizant Group if such deduction is disallowed
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3
for any member of the IMS HEALTH Group or the NMR Group, as the case may be, and
may be claimed by any member of the other group.
(g) "Distribution" shall mean the distribution on the
Distribution Date to holders of record of shares of Cognizant Common Stock as of
the Distribution Record Date of the IMS HEALTH Common Shares owned by the
Corporation on the basis of one IMS HEALTH Common Share for each outstanding
share of Cognizant Common Stock.
(h) "Distribution Agreement" shall mean the distribution
agreement, dated as of June 30, 1998, between the Corporation and IMS HEALTH.
(i) "Distribution Date" shall mean June 30, 1998.
(j) "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.
(k) "Franchise Tax Returns" shall mean all franchise Tax
Returns of the Pre-Distribution Cognizant Group or any member thereof for
taxable periods beginning November 1, 1996, January 1, 1997, January 1, 1998
and, solely for purposes of Sections 2.1(a) and 2.2(a), on or the day after the
Distribution Date.
(l) "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.
(m) "IMS HEALTH Business" shall mean each and every business
conducted at any time by the Corporation or any Subsidiary of the Corporation
prior to the Effective Time, including, without limitation, (i) providing
information and decision support services to the pharmaceutical and healthcare
industries (the "IMS Business"), (ii) providing software-based administrative
and analytical solutions to the managed care industry (the "ERISCO Business"),
(iii) making venture capital investments in emerging healthcare businesses (the
"Enterprises Business"), (iv) supplying research and analysis to the information
technology industry (the "Gartner Business") and (v) providing software
applications and development services
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4
specializing in Year 2000 conversion services (the "Technology Solutions
Business"), but excluding the NMR Business.
(n) "IMS HEALTH Group" shall mean IMS HEALTH and each Business
Entity (other than any member of the NMR Group) that is a Subsidiary of the
Corporation immediately prior to the Effective Time.
(o) "Included Party" shall have the meaning as defined in
Section 2.3.
(p) "Income Tax Return" shall mean any Tax Return relating to
Income Taxes.
(q) "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.
(r) "Indemnifying Party" shall have the meaning as defined in
Section 3.5(c).
(s) "Indemnitee" shall have the meaning as defined in Section
3.5(c).
(t) "IRS" shall mean the Internal Revenue Service.
(u) "NMR" shall mean Nielsen Media Research, Inc., a Delaware
corporation.
(v) "NMR Assets" shall have the same meaning as such term has
in the Distribution Agreement.
(w) "NMR Business" shall mean (i) the Nielsen Media Research
Business, (ii) the businesses of the members of the NMR Group, (iii) any other
business conducted by the Corporation or any Subsidiary of the Corporation
primarily through the use of the NMR Assets, (iv) the businesses of any Business
Entity acquired or established by or for NMR or any of its Subsidiaries after
the date of this Agreement and (v) the business of the Corporation from and
after the Effective Time.
(x) "NMR Group" shall mean NMR, each Business Entity which is
contemplated to remain or become a Subsidiary of the Corporation or NMR
hereunder, which shall include those identified as such on Schedule 1.1(au)(i)
to the Distribution Agreement, and the Corporation from and after the Effective
Time.
(y) "Non-Combined Returns" shall mean all state and local
Income Tax Returns (other than Combined Returns and any foreign Tax Returns), of
the Pre-Distribution Cognizant Group or any member thereof for taxable periods
beginning November 1, 1996, January 1, 1997, January 1, 1998 and, solely for
purposes
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5
of Sections 2.1(a) and 2.2(a), on or the day after the
Distribution Date.
(z) "Nonperforming Party" shall have the meaning as defined in
Section 5.2.
(aa) "Other Taxes" shall mean all Taxes other than Taxes
covered by a Consolidated Return, a Combined Return, a Non- Combined Return or a
Franchise Tax Return.
(ab) "Parties" shall have the meaning as defined in
the recitals hereto.
(ac) "Person" shall mean any natural person, corporation,
business trust, joint venture, association, company, partnership or government,
or any agency or political subdivision thereof.
(ad) "Post-Distribution Expense Deduction" shall mean any
deduction with respect to an expense or indemnity paid by a member of the IMS
HEALTH Group or the NMR Group after the Distribution Date if such deduction is
disallowed or not allowable for any member of the payor's group and may be
claimed by any member of the other group.
(ae) "Pre-Distribution Cognizant Group" shall mean the
Corporation and all of its Subsidiaries (direct and indirect, domestic and
foreign) prior to the Distribution.
(af) "Preparing Party" shall have the meaning as
defined in Section 2.3.
(ag) "Reorganization Tax Payment" shall mean the payment of
any Tax for which IMS HEALTH is liable pursuant to Section 3.3(a) of this
Agreement.
(ah) "Reorganizations" shall mean the series of contributions
and distributions of Controlled Entities and assets, transfers and assumptions
of liabilities, and other transactions whereby the NMR Group and the IMS HEALTH
Group are formed and all other Controlled Entities of the Corporation prior to
the Distribution are placed under the control of the appropriate parent
corporation(s) in preparation for the Distribution.
(ai) "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.
(aj) "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,
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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.
(ak) "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.
(al) "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.
(am) "Tax Matters Partner" shall mean the tax matters partner
as defined in section 6231(a)(7) of the Code.
(an) "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).
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. PREPARATION AND FILING OF TAX RETURNS
SECTION 2.1. Predistribution Tax Returns.
(a) IMS HEALTH (or its relevant Controlled Entity) shall
prepare, and the Corporation (or its relevant Controlled Entity) shall file, (i)
all Consolidated Returns, Combined
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7
Returns, Non-Combined Returns, and Franchise Tax Returns that are not filed
prior to the Distribution Date and (ii) any Tax Returns of any partnership
(other than NMR Licensing Associates LP) of which the Corporation or any
Subsidiary is the Tax Matters Partner if a distributive share of partnership
income or loss is included in any such Return.
(b) All Tax Returns for Other Taxes for periods beginning
prior to the Distribution Date that are not subject to the D&B Tax Allocation
Agreement shall be prepared and filed by IMS HEALTH if they relate to any member
of the IMS HEALTH Group and, otherwise, by the Corporation.
SECTION 2.2. Post-Distribution Tax Returns.
(a) The filing of all Tax Returns for periods beginning on or
after the Distribution Date (other than Non- Combined Returns and Franchise Tax
Returns covered by Section 2.1(a)) shall be the responsibility of the
Corporation if they relate to the NMR Group or any member thereof and shall be
the responsibility of IMS HEALTH if they relate to the IMS HEALTH Group or any
member thereof.
(b) In the case of any partnership in which a member of the
Pre-Distribution Cognizant 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.
SECTION 2.3. Manner of Preparation.
(a) To the extent any Tax Return includes Taxes relating to a
Party (or any of its Subsidiaries) other than the Party preparing such Tax
Return (the "Preparing Party"), the Party not responsible for preparing the Tax
Return (the "Included Party"), shall prepare and deliver to the Preparing Party,
at least 120 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 (and any of its Subsidiaries) for the taxable period.
(b) All Tax Returns filed on or 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 the other Party, all Tax
Returns filed within three years after the Distribution Date 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
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8
similar Tax Items have been filed; provided, however, that a Party preparing 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) 30 days prior to the filing of such Tax
Return, the Party preparing such Tax Return notifies the other Party if such
other Party may be adversely affected; and (ii) the Party preparing 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 the "Included Party" shall have the
right to review and comment on such Tax Return prior to the filing thereof in
the following manner:
The Preparing Party shall submit any part of such Tax Return
relating to the Included Party (or any of its Subsidiaries) to the Included
Party at least 28 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 14 days of receipt of the relevant portions of such Tax
Return. The Preparing Party shall alter such Tax Return to reflect the
reasonable comments of the Included Party unless the Preparing Party reasonably
believes that such alteration would have an adverse impact upon the Preparing
Party.
(c) 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
Distribution Date is the last day on which any member of the IMS HEALTH Group
was included in the Pre-Distribution Cognizant Group. 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
Pre-Distribution Cognizant Group and any group of such members shall be treated
as ending on the Distribution Date.
ARTICLE III. PAYMENT OF TAXES
SECTION 3.1. Predistribution Taxes
(a) The Party responsible for the filing of any Tax Return
pursuant to Sections 2.1 and 2.2 shall pay to the relevant taxing authority all
Taxes due or payable in connection therewith; provided, that if, pursuant to
this Article III, one Party is liable for any Taxes relating to a Tax Return
filed by the other Party, such non-filing Party shall pay the filing Party the
amount of such Taxes at least 5 days prior to the due date (including
extensions) of such Tax Return.
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9
(b) With respect to any Consolidated Return, Combined Return,
Non-Combined Return or Franchise Tax Return for a taxable period ending before
January 1, 1998 that is not filed prior to the Distribution Date, IMS HEALTH
shall be liable for all Taxes payable with such Return and shall be entitled to
any refund or credit for an overpayment of Taxes shown on such Return. With
respect to any Consolidated Return, Combined Return, Non-Combined Return or
Franchise Tax Return for a taxable period beginning on or after January 1, 1998,
IMS HEALTH (i) shall only be liable for Taxes payable with such Return that are
attributable to the portion of such taxable period up to and including the
Distribution Date and that exceed the amount of Taxes paid in respect of such
taxable period (as estimated Taxes or otherwise) on or prior to the Distribution
Date and (ii) shall be entitled to any refund or credit of Taxes to the extent
Taxes paid in respect of such taxable period (as estimated Taxes or otherwise)
on or prior to the Distribution Date exceed the amount of Taxes attributable to
the portion of the period up to and including the Distribution Date. The
determination of the amount of Taxes attributable to the portion of such taxable
period up to and including the Distribution Date shall be done on a closing of
the books basis, except that Tax Items calculated on an annual basis shall be
apportioned on a time basis.
(c) In the event of any Final Determination adjusting the
amount of any Taxes that are the subject of a Consolidated Return, Combined
Return, Non-Combined Return or Franchise Tax Return, IMS HEALTH shall be liable
for its share of any increases in Taxes and shall be entitled to its share of
any refunds or credits of Taxes, and the Corporation shall be liable for all
other increases in Taxes and shall be entitled to all other refunds or credits
of Taxes. IMS HEALTH's share of any Taxes, credits or refunds shall be
determined in accordance with the following principles:
(i) IMS HEALTH shall be liable for any increase in Taxes, and
shall be entitled to all refunds or credits of Taxes, that are attributable to a
Tax Return that relates solely to the IMS HEALTH Business; and
(ii) In the case of any Tax Return that relates to both the
IMS HEALTH Business and the NMR Business, IMS HEALTH's share of any increase in
Taxes, or refunds or credits of Taxes, shall be determined on a pro forma basis
as if IMS HEALTH filed a separate Tax Return for the taxable period that (i)
included only (x) the Tax Items attributable to the IMS HEALTH Business
otherwise included in the Tax Return and (y) an appropriate allocation of Tax
Items not specifically attributable to either the IMS HEALTH Business or the NMR
Business (including, without limitation, corporate overhead) and (ii) credits
IMS HEALTH with its share of Taxes previously paid by the Corporation or IMS
HEALTH with respect to such taxable period;
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10
provided, that, in the case of a Consolidated Return, Combined Return,
Non-Combined Return or Franchise Tax Return, IMS HEALTH shall be liable for and
shall pay all increases in Taxes, and shall be entitled to receive all refunds
or credits of Taxes, that result from a Tax Item or position determined by the
corporate office.
(d) The Corporation shall be liable for all Other Taxes that
are attributable to the NMR Business and IMS HEALTH shall be liable for all
Other Taxes that are attributable to the IMS HEALTH Business.
(e) In the case of any Consolidated Return, Combined Return,
Non-Combined Return or Franchise Tax Return with respect to which IMS HEALTH has
responsibility for any Taxes or is entitled to any refunds or credits of Taxes
pursuant to Section 3.1(c) above, IMS HEALTH shall have the right to prepare an
amended Tax Return. The Corporation shall have the right to review any such
amended Tax Return and shall be required to sign and file any such amended Tax
Return unless it reasonably determines that the filing of such amended Tax
Return would create a significant risk of a material increase in the Taxes
payable by the NMR Group or any member thereof for any taxable period beginning
on or after the Distribution Date. IMS HEALTH shall be entitled to any refunds
or credits of Taxes relating to any such amended Tax Return.
(f) If the Corporation is liable for any Taxes or entitled to
any refunds or credits of Taxes pursuant to the D&B Tax Allocation Agreement,
such Taxes, refunds or credits shall be allocated between the Corporation and
IMS HEALTH in accordance with the principles of this Section 3.1.
(g) Notwithstanding any statement herein to the contrary, any
Taxes covered by Section 2.1(j)(i) of the Distribution Agreement shall be
governed by Schedule 2.1(j)(i) to the Distribution Agreement.
SECTION 3.2. Post-Distribution Taxes. Unless otherwise
provided in this Agreement:
(a) The Corporation shall pay all Taxes and shall be entitled
to receive and retain all refunds of Taxes attributable to the NMR Group or any
member thereof:
(i) with respect to a Consolidated Return,
Combined Return, Non-Combined Return or Franchise Tax Return for a taxable
period that begins prior to the Distribution Date and includes but does not end
on the Distribution Date to the extent such Taxes or refunds are attributable to
the portion of such period after the Distribution Date; and
(ii) with respect to periods beginning on or
after the Distribution Date.
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(b) IMS HEALTH 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 IMS HEALTH Group or any
member thereof.
SECTION 3.3. Restructuring Taxes.
(a) 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 IMS HEALTH; provided, however, that to the extent
specific cash allocations for such Taxes are made in connection with the
Distribution, IMS HEALTH shall be relieved of its liability for such Taxes to
the extent covered by such cash.
(b) Notwithstanding any statement herein to the contrary, any
Taxes relating to or arising out of the Distribution shall be governed by
Section 2.10 of the Distribution Agreement.
SECTION 3.4. Gain Recognition Agreements. IMS HEALTH
shall assume all of the Corporation's responsibilities with
respect to gain recognition agreements pursuant to the D&B Tax
Allocation Agreement.
SECTION 3.5. Indemnification.
(a) Indemnification by the Corporation. The Corporation shall
indemnify, defend and hold harmless IMS HEALTH (and its affiliates) from and
against any and all Tax liabilities allocated to the Corporation by this
Agreement.
(b) Indemnification by IMS HEALTH. IMS HEALTH shall indemnify,
defend and hold harmless the Corporation (and its affiliates) from and against
any and all Tax liabilities allocated to IMS HEALTH by this Agreement.
(c) Indemnity Payments.
(i) To the extent that one Party (the "Indemnifying Party")
owes money to another Party (the "Indemnitee") pursuant to this Section 3.5, the
Party (the "Notifying Party") having knowledge of such obligation shall notify
the other Party and shall provide such other Party with its calculations of such
obligation (as specified in Article II and Article III). The other Party, within
14 days after receiving the Notifying Party's calculations, shall submit to the
Notifying Party such other Party's calculations of the amount required to be
paid pursuant to this Section 3.5, showing such calculations in sufficient
detail so as to permit the Notifying Party to understand the calculations. The
Indemnifying Party shall pay the Indemnitee, no later than the later of 5 days
prior to the due date
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(including extensions) of the relevant Tax Returns and 14 days after the
Notifying Party receives the other Party's calculations, the amount for which
the Indemnifying Party is required to pay or indemnify the Indemnitee under this
Section 3.5. 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 reductions of
assets previously contributed and/or dividends immediately prior to the
Distribution.
ARTICLE IV. TAX ATTRIBUTES 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 to either carry back or carry forward such deduction, loss or credit.
Any refund attributable to such carryback shall be allocable to such Party. In
the event both Parties elect to carry back an amount to the same taxable period
beginning prior to the Distribution Date, any refund shall be apportioned
between the Parties based on the relative carryback amounts.
SECTION 4.2. Reorganization Tax Payments, Deferred
Compensation Deductions and Post-Distribution Expense Deductions.
(a) If an audit or other examination of any federal, state or
local Tax Return for any taxable period shall result (by settlement or
otherwise) in a Deferred Compensation Deduction or Post-Distribution Expense
Deduction in favor of the NMR Group or any member thereof or if any
Reorganization Tax Payment is made by IMS HEALTH, then:
(i) If necessary, IMS HEALTH shall notify the Corporation and
shall provide the Corporation 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) The Corporation shall pay IMS HEALTH the amount of any
Tax Benefit that relates to any adjustments arising from or connected with such
Reorganization Tax Payment or that results from such Deferred Compensation
Deduction or Post-Distribution Expense Deduction within 30 days of the date such
Tax Benefits are realized;
(iii) Notwithstanding the foregoing, the Corporation shall
only be required to take steps to obtain such Tax Benefit or to pay IMS HEALTH
if, in the opinion of the Corporation's Tax
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13
counsel, which counsel shall be reasonably acceptable to IMS HEALTH, the
reporting of such Tax Benefit shall not subject the Corporation to the
imposition of a penalty unless IMS HEALTH agrees to indemnify the Corporation
for such penalty.
(b) If an audit or other examination of any federal, state or
local Tax Return for any taxable period shall result (by settlement or
otherwise) in a Deferred Compensation Deduction or Post-Distribution Expense
Deduction in favor of the IMS HEALTH Group or any member thereof, then:
(i) If necessary, the Corporation shall notify IMS HEALTH and
shall provide IMS HEALTH 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) IMS HEALTH shall pay the Corporation the amount of any
Tax Benefit that results from such Deferred Compensation Deduction or
Post-Distribution Expense Deduction within 30 days of the date such Tax
Benefits are realized;
(iii) Notwithstanding the foregoing, IMS HEALTH shall only be
required to take steps to obtain such Tax Benefit or to pay the Corporation if,
in the opinion of IMS HEALTH's Tax counsel, which counsel shall be reasonably
acceptable to the Corporation, the reporting of such Tax Benefit shall not
subject IMS HEALTH to the imposition of a penalty unless the Corporation agrees
to indemnify IMS HEALTH for such penalty.
(c) Realization of Tax Benefits.
(i) For purposes of this Section 4.2, 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 may be applied prior to the use of any adjustments relating to a
Reorganization Tax Payment or any Deferred Compensation Deduction or
Post-Distribution Expense Deduction.
(ii) Either Party may, at its election, pay the amount of any
Tax Benefit to the other Party 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.
<PAGE>
14
(d) Tax Benefits Subsequently Denied. If any Tax Benefit
realized pursuant to Section 4.2(b)(i) is subsequently denied, then IMS HEALTH
or the Corporation, as the case may be, shall refund the amount of any payment
for such Tax Benefit within 30 days of its notification by the other Party that
a Final Determination has been reached denying the claimed Tax Benefit.
SECTION 4.3. 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 the other Party (or Subsidiary) to obtain competent
authority relief as a result thereof, then the 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.
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 a Party
(or Subsidiary) with respect to Taxes for which the other Party is or may be
liable pursuant to this Agreement, the Party subject to such Proceeding shall
promptly inform such 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 Party with respect to any issue
that may affect the other 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 the other 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. The Corporation and IMS
HEALTH shall cooperate with each other in the filing of any Tax
<PAGE>
15
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,
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 Party of any audit adjustment that does not
result in Tax liability but can reasonably be expected to affect Tax Returns of
the other Party or any of its 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, the Corporation and IMS HEALTH 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
Pre-Distribution Cognizant 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 Pre-Distribution Cognizant Group or any combination of such
members; and
(b) give to the other Party 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
<PAGE>
16
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 between the Parties in carrying out the intent of this
Agreement.
ARTICLE VI. MISCELLANEOUS
SECTION 6.1. Complete Agreement; Construction. This Agreement,
including the Exhibits and Schedules, 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.
SECTION 6.2. 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 Party.
SECTION 6.3. Survival of Agreements. Except as otherwise
provided by this Agreement, all covenants and agreements of the Parties
contained in this Agreement shall survive the Distribution Date.
SECTION 6.4. Expenses. Except as otherwise set forth in this
Agreement, all costs and expenses in connection with the preparation, execution,
delivery and required implementation of this Agreement shall be charged to and
paid by the Parties in accordance with Section 8.5 of the Distribution
Agreement.
SECTION 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 the Corporation:
Nielsen Media Research, Inc.
299 Park Avenue
New York, NY 10171
Telecopy:
Attn: Chief Legal Officer
<PAGE>
17
To IMS HEALTH:
200 Nyala Farms
Westport, CT 06880
Telecopy: (203) 222-4313
Attn: General Counsel
and
Vice President - Taxes
SECTION 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.
SECTION 6.7. Amendments. This Agreement may not be
modified or amended except by an agreement in writing signed by
each of the Parties hereto.
SECTION 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 Party hereto, and any attempt to
assign any rights or obligations arising under this Agreement without such
consent shall be void.
SECTION 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.
SECTION 6.10. Termination. This Agreement may be terminated,
amended, modified or abandoned at any time prior to the Distribution by and in
the sole discretion of the Corporation without the approval of IMS HEALTH or the
stockholders of the Corporation. In the event of such termination, neither Party
shall have any liability of any kind to the 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 6.11. 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 6.12. 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.
<PAGE>
18
SECTION 6.13. 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 6.14. 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 6.15. 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 6.16. 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, 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 6.17. 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>
IN WITNESS WHEREOF, the Parties have caused this Agreement to
be duly executed as of the day and year first above written.
COGNIZANT CORPORATION
By: /s/ Robert E. Weissman
-----------------------------------
Name: Robert E. Weissman
Title: Chairman and Chief
Executive Officer
IMS HEALTH INCORPORATED
By: /s/ Victoria R. Fash
-----------------------------------
Name: Victoria R. Fash
Title: President and Chief
Operating Officer
EMPLOYEE BENEFITS AGREEMENT
This EMPLOYEE BENEFITS AGREEMENT is dated as of June 30, 1998
(the "Agreement"), between COGNIZANT CORPORATION, a Delaware corporation
("Corporation") and IMS HEALTH INCORPORATED, a Delaware corporation ("IMS
Health").
WHEREAS, the Board of Directors of Corporation has determined
that it is appropriate, desirable and in the best interests of the holders of
shares of common stock, par value $.01 per share, of Corporation (the
"Corporation Common Stock") to take certain steps to reorganize Corporation's
Subsidiaries (as defined herein) and businesses and then to distribute to the
holders of the Corporation Common Stock all the outstanding shares of common
stock of IMS Health (the "IMS Health Common Stock"); and
WHEREAS, Corporation and IMS Health have 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, Corporation and IMS Health 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.
"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, 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
<PAGE>
2
contemplated by this Agreement and the Distribution Agreement, including,
without limitation, the Conveyancing and Assumption Instruments, the Shared
Transaction Services Agreement, the Tax Allocation Agreement and the Transition
Services Agreement.
"Assets" shall have the meaning set forth in Section
1.1(f) 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.
"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.
"Cognizant" shall mean Cognizant Corporation, a
Delaware corporation.
"Corporate Staff Employees" shall mean Corporation Pre-
Distribution Employees who performed administrative functions generally for the
Corporation Group prior to the Effective Time and who were based at the
Corporation headquarters in Westport, CT, aviation department in Purchase, NY or
STS department in Allentown, PA.
"Corporation" shall mean Cognizant Corporation, a
Delaware corporation.
"Corporation Committee" shall mean the Compensation and
Benefits Committee of the Board of Directors of Corporation.
"Corporation Common Stock" shall have the meaning set
forth in the recitals hereto.
<PAGE>
3
"Corporation Disabled Employees" shall mean all employees of
the Corporation Group who are receiving benefits under the Corporation Long-Term
Disability Plan as of the Effective Time, as in effect from time to time.
"Corporation Employee Stock Purchase Plan" shall mean
the 1997 Cognizant Corporation Employee Stock Purchase Plan, as in effect from
time to time.
"Corporation Executive Annual Incentive Plan" shall mean the
Cognizant Corporation Executive Annual Incentive Plan, as in effect from time to
time.
"Corporation Group" shall mean Cognizant Corporation and each
Business Entity that is a Subsidiary of Corporation, except that Corporation
Group shall not include Walsh International Inc. or any of its Subsidiaries.
"Corporation Long-Term Disability Plan" shall mean The
Cognizant Long Term Disability Plan or any other long-term disability plan
sponsored by Corporation or any Subsidiary of Corporation prior to the Effective
Time.
"Corporation LSARs" shall have the meaning set forth in
Section 6.2 of this Agreement.
"Corporation Nonqualified Plans" shall have the meaning as set
forth in Section 4.1 of this Agreement.
"Corporation Nonqualified Plan Participants" shall have the
meaning set forth in Section 4.1.
"Corporation Pension REP" shall mean the Cognizant Retirement
Excess Plan, as in effect from time to time.
"Corporation Post-Distribution Employees" shall mean persons
who, immediately after the Effective Time, are employed by the Corporation 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) other
than IMS Health Transitional Employees.
"Corporation Pre-Distribution Employees" shall mean persons
who, at any time prior to the Effective Time, were employed by the Corporation
Group.
"Corporation Ratio" shall have the meaning set forth in
Section 6.1(a) of this Agreement.
"Corporation Restricted Stock" shall have the meaning set
forth in Section 6.3 of this Agreement.
"Corporation Retirees" shall mean persons who (i) were
Corporation Pre-Distribution Employees, (ii) terminated
<PAGE>
4
employment from the Corporation Group prior to the Effective Time or, with
respect to Corporate Staff Employees, terminated employment prior to or as a
result of the Distribution, (iii) are not IMS Health Employees or IMS Health
Transitional Employees after the Effective Time and (iv) would have been
Corporation Post-Distribution Employees had they remained employed, after the
Distribution, by the same employer from which they terminated employment or were
Corporate Staff Employees; but shall not include any person on Schedule 1.1.
"Corporation Retirement Plan" shall mean the Cognizant
Retirement Plan, as in effect from time to time.
"Corporation Savings BEP" shall mean the Cognizant Corporation
Savings Benefit Equalization Plan, as in effect from time to time.
"Corporation Savings Plan" shall mean the Cognizant
Corporation Savings Plan, as in effect from time to time.
"Corporation Stock Option" shall have the meaning set forth in
Section 6.1 of this Agreement.
"Corporation Stock Option Plans" shall mean the 1996 Key
Employees' Stock Incentive Plan, the 1996 Replacement Plan for Certain Employees
Holding The Dun & Bradstreet Corporation Equity-Based Awards or any other stock
option plan established by the Corporation prior to the Effective Time.
"Corporation SERP" shall mean the Cognizant Corporation
Supplemental Executive Retirement Plan, as in effect from time to time.
"Corporation Transition Plans" shall mean The Cognizant
Corporation Executive Transition Plan and The Cognizant Corporation Career
Transition Plan.
"D&B" shall mean The Dun & Bradstreet Corporation, a Delaware
corporation.
"Distribution" shall mean the distribution on the Distribution
Date to holders of record of shares of Corporation Common Stock as of the
Distribution Record Date of the IMS Health Common Stock owned by Corporation on
the basis of one IMS Health Common Share for each outstanding share of
Corporation Common Stock.
"Distribution Agreement" shall mean the Distribution Agreement
between Corporation and IMS Health, dated as of June 30, 1998.
"Distribution Date" shall mean June 30, 1998.
<PAGE>
5
"Distribution Record Date" shall mean such date as may be
determined by Corporation's Board of Directors as the record date for the
Distribution.
"Effective Time" shall mean immediately prior to the midnight,
New York time, ending the 24-hour period comprising June 30, 1998.
"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,
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,
worker's 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
Corporation and IMS Health.
"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.
"Employer Stock" shall mean, after the Distribution Date, IMS
Health Common Stock credited to the account of an IMS Health Employee and
Corporation Common Stock credited to the account of a Corporation
Post-Distribution Employee in the pooled
<PAGE>
6
stock fund of the respective savings plan in which such employee participates,
pursuant to Section 3.4.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and the regulations promulgated thereunder, including any
successor legislation.
"Final IMS Health Retirement Plan Transfer Date" shall have
the meaning set forth in Section 2.2(d) of this Agreement.
"IMS Health" shall mean IMS Health Incorporated, a
Delaware corporation.
"IMS Health Committee" shall mean the Compensation and
Benefits Committee of the Board of Directors of IMS Health.
"IMS Health Common Stock" shall have the meaning set forth in
the recitals hereto.
"IMS Health Disabled Employees" shall mean all employees of
the IMS Health Group who are receiving benefits or are in the waiting period to
receive benefits under the Corporation Long-Term Disability Plan immediately
prior to the Effective Time.
"IMS Health Employees" shall mean persons who, immediately
after the Effective Time, are employed by the IMS Health 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).
"IMS Health Employee Stock Purchase Plan" shall mean the
Employee Stock Purchase Plan to be adopted by IMS Health pursuant to Section
6.5.
"IMS Health Group" shall mean IMS Health and each Business
Entity which is contemplated to remain or become a Subsidiary of IMS Health
pursuant to the Distribution Agreement.
"IMS Health Nonqualified Plans" shall mean the nonqualified
plans to be adopted by IMS Health pursuant to Section 4.2.
"IMS Health Nonqualified Plan Participants" shall have the
meaning set forth in Section 4.2.
"IMS Health Pension REP" shall mean the IMS Health Retirement
Excess Plan to be adopted by IMS Health pursuant to Section 4.2.
"IMS Health Ratio" shall have the meaning set forth in Section
6.1(b) of this Agreement.
<PAGE>
7
"IMS Health Replacement Plans" shall mean the replacement
plans to be adopted by IMS Health pursuant to Section 6.1(b) of this Agreement.
"IMS Health Restricted Stock" shall have the meaning set forth
in Section 6.3 of this Agreement.
"IMS Health Retirees" shall mean persons who (i) were
Corporation Pre-Distribution Employees, (ii) terminated employment from the IMS
Health Group prior to the Effective Time (iii) are not Corporation
Post-Distribution Employees after the Effective Time and (iv) would have been
IMS Health Employees had they remained employed, after the Distribution, by the
same employer from which they terminated employment but shall not include
Corporate Staff Employees included in the definition of Corporation Retirees;
and shall include any person on Schedule 1.1.
"IMS Health Retirement Plan" shall mean the defined benefit
plan to be adopted by IMS Health pursuant to Section 2.2(a) of this Agreement.
"IMS Health Retirement Plan Effective Date" shall have the
meaning set forth in Section 2.2(a) of this Agreement.
"IMS Health 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 IMS
Health Transferred Retirement Plan Employees under the Corporation 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 Corporation Pre-Distribution Employees under the
Corporation Retirement Plan at the Effective Time.
"IMS Health Savings BEP" shall mean the IMS Health Savings
Benefit Equalization Plan to be adopted by IMS Health pursuant to Section 4.2.
"IMS Health Savings Plan" shall mean the defined contribution
plan to be adopted by IMS Health pursuant to Section 3.2(a) of this Agreement.
"IMS Health Savings Plan Transfer Date" shall have the meaning
set forth in Section 3.2(b) of this Agreement.
"IMS Health SERP" shall mean the IMS Health Supplemental
Executive Retirement Plan to be adopted by IMS Health pursuant to Section 4.2.
"IMS Health Transferred Retirement Plan Employees" shall have
the meaning set forth in Section 2.2(a) of this Agreement.
<PAGE>
8
"IMS Health Transferred Savings Plan Employees" shall have the
meaning set forth in Section 3.2(a) of this Agreement.
"IMS Health Transitional Employees" shall mean Corporate Staff
Employees who are under an agreement to remain employed by the Corporation after
the Effective Time for a fixed period of time either to perform services in
connection with the Distribution or to perform services primarily for the IMS
Health Group.
"Information Statement" shall mean the Information Statement
sent to the holders of shares of Corporation Common Stock in connection with the
Distribution, including any amendment or supplement thereto.
"Initial IMS Health Retirement Plan Transfer Date" shall have
the meaning set forth in Section 2.2(a) of this Agreement.
"Initial Transferred Assets" shall have the meaning set forth
in Section 2.2(b) of this Agreement.
"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.
"Nonemployer Stock" shall mean, after the Distribution Date,
IMS Health Common Stock credited to the account of a Corporation
Post-Distribution Employee and Corporation Common Stock credited to an account
of an IMS Health Employee in the
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9
pooled stock fund of the respective savings plan in which such employee
participates, pursuant to Section 3.4.
"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 between Corporation and IMS Health.
"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 between Corporation and IMS Health.
"Transition Services Agreement" shall mean the Amended
and Restated Transition Services Agreement among Corporation, IMS
Health, ACNielsen, D&B and R.H. Donnelley Corporation.
"Walsh" shall mean Walsh International Inc., a Delaware
corporation.
"Walsh Optionees" shall mean individuals whose options to
purchase the common stock of Walsh were converted into options to purchase
Corporation Common Stock (other than those individuals who are IMS Health
Employees).
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10
ARTICLE II
CORPORATION RETIREMENT PLAN
SECTION 2.1. Corporation Retirement Plan. From and after the
Effective Time, Corporation shall continue to sponsor the Corporation Retirement
Plan. Active participation of IMS Health Transferred Retirement Plan Employees
in the Corporation Retirement Plan shall cease immediately after the Effective
Time. Nothing contained in this Article II shall have the effect of accelerating
the degree to which any individual has a vested interest in or eligibility for
the Corporation Retirement Plan or the IMS Health Retirement Plan.
SECTION 2.2. IMS Health Retirement Plan. (a) As of the
Effective Time, (herein referred to as the "IMS Health Retirement Plan Effective
Date"), IMS Health shall establish the IMS Health Retirement Plan for the
benefit of IMS Health Employees, IMS Disabled Employees, IMS Health Retirees and
IMS Health Transitional Employees who were participants in the Corporation
Retirement Plan immediately prior to the Effective Time (the "IMS Health
Transferred Retirement Plan Employees"). On the first business day after the
Effective Time (the "Initial IMS Health Retirement Plan Transfer Date"),
Corporation shall cause the trustee of the Corporation Retirement Plan to
segregate, based on a good faith estimate made in accordance with the spinoff
provisions set forth under Section 414(l) of the Code, the assets of the
Corporation Retirement Plan allocable to IMS Health Transferred Retirement Plan
Employees in an amount equal to the sum of (i) and (ii), as follows:
(i) the amount allocable to IMS Health 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
Corporation Retirement Plan over the Present Value of the
vested and nonvested benefits accrued thereunder for all the
Corporation Pre-Distribution Employees as of the Effective
Time, multiplied by the IMS Health Retirement Plan Segregation
Ratio.
(b) On the Initial IMS Health Retirement Plan Transfer Date,
90% of the segregated assets determined under Section 2.2(a) of this Agreement
(the "Initial Transferred Assets") shall be transferred to a separate trust
established under the IMS Health Retirement Plan.
(c) From the Effective Time until the Final IMS Health
Retirement Transfer Date (as defined below), the remaining 10% of the segregated
assets determined under Section 2.2(a) of this Agreement shall be invested by
the trustee of the Corporation Retirement Plan with the same investment managers
and in the same
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11
proportions as such assets were invested immediately prior to the Effective
Time, which are set forth in Schedule 2.2 hereof.
(d) As soon as practicable after the Effective Time, the
remaining assets allocable to the IMS Health Transferred Retirement Plan
Employees shall be transferred to a separate trust established under the IMS
Health Retirement Plan (such date herein referred to as the "Final IMS Health
Retirement Plan Transfer Date"); provided, however, that in no event shall such
transfer take place until Corporation shall make all required amendments to the
Corporation Retirement Plan and related trust agreement necessary to provide for
the segregation and transfer of assets described in this Section 2.2. The value
of such assets to be transferred shall equal the value of segregated assets
determined based on same methodology as in Section 2.2(a) of this Agreement,
reduced by an amount equal to the Initial Transferred Assets, adjusted as
follows:
(i) reduced by the amount of benefit payments made under the
Corporation Retirement Plan with respect to IMS Health
Transferred Retirement Plan Employees from the Effective Time
to the Final IMS Health Retirement Plan Transfer Date; and
(ii) increased (or decreased) by the share of the net investment
income (or loss) and expenses incurred or for which invoices
are submitted after the Effective Time to the IMS Health
Retirement Plan Transfer Date attributable to the value of
such segregated assets.
(e) Unless otherwise agreed to by Corporation and IMS Health,
the form of the assets to be transferred shall consist of an undivided
percentage interest in each asset that is held by the Corporation Retirement
Plan on the IMS Health Retirement Plan Transfer Date, such undivided percentage
interest being equal to the value of assets allocable to the IMS Health
Transferred Retirement Plan Employees, divided by the fair market value of plan
assets.
(f) If the amount of the Initial Transferred Assets exceeds
the value of the assets to be transferred as determined under Section 2.2(d) of
this Agreement, such excess amount shall promptly be transferred from the IMS
Health Retirement Plan trust to the Corporation Retirement Plan trust.
SECTION 2.3. Allocation of Liabilities. The IMS Health Group
shall assume all Liabilities relating to the participation of IMS Health
Transferred Retirement Plan Employees in the Corporation Retirement Plan. The
Corporation Group shall retain all other Liabilities relating to the Corporation
Retirement Plan.
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12
ARTICLE III
CORPORATION SAVINGS PLAN
SECTION 3.1. Corporation Savings Plan. From and after the
Effective Time, Corporation shall continue to sponsor the Corporation Savings
Plan. Active participation of IMS Health Transferred Savings Plan Employees in
the Corporation Savings Plan shall cease immediately after the Effective Time.
Nothing contained in this Article III shall have the effect of accelerating the
degree to which any individual has a vested interest in the Corporation Savings
Plan or the IMS Health Savings Plan.
SECTION 3.2. IMS Health Savings Plan. (a) As of the Effective
Time, IMS Health shall adopt the IMS Health Savings Plan for the benefit of IMS
Health Employees, IMS Health Disabled Employees, IMS Health Transitional
Employees and IMS Health Retirees who were participants in the Corporation
Savings Plan immediately prior to the Effective Time (the "IMS Health
Transferred Savings Plan Employees").
(b) Prior to the date on which the transfer of assets and
liabilities to the IMS Health Savings Plan shall occur (the "IMS Health Savings
Plan Transfer Date"), which date shall occur as promptly as practicable
following the Effective Time, Corporation shall (A) cause the trustee of the
Corporation Savings Plan to segregate, in accordance with the spinoff provisions
set forth under Section 414(l) of the Code, the assets of the Corporation
Savings Plan representing the full account balances of IMS Health 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 Corporation
Savings Plan and related trust agreement necessary to provide for the
segregation and transfer of assets described in this Section 3.2.
(c) On the IMS Health Savings Plan Transfer Date, IMS Health
shall cause the trustee of the Corporation Savings Plan to transfer to the
trustee of the IMS Health Savings Plan the full account balances (inclusive of
loans) of IMS Health 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 described in Section 3.4); provided,
however, that loans to IMS Health Transferred Savings Plan Employees shall be
transferred in the form of notes. In consideration of the segregation and
transfer of assets described herein, the IMS Health Savings Plan shall, as of
the IMS Health Savings Plan Transfer Date, assume all Liabilities attributable
to such assets, whether incurred prior to or after the Effective Time. If the
account balances of the IMS Health Transferred Savings Plan that are transferred
on the IMS Health Savings Plan Transfer Date are thereafter determined to have
been incorrect,
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13
the parties agree to make appropriate payments or asset transfers to correct
such error (appropriately adjusted for subsequent investment experience and
expenses incurred).
SECTION 3.3. Outstanding Loans. During their employment with
Corporation, IMS Health Transferred Savings Plan Employees who have outstanding
loans originally made from the Corporation Savings Plan shall be permitted to
repay such loans by way of regular deductions from their paychecks, and, prior
to the IMS Health Savings Plan Transfer Date, Corporation or IMS Health (as the
case may be) shall cause all such deductions to be forwarded to the Corporation
Savings Plan as promptly as practicable.
SECTION 3.4. Employer Stock Fund. (a) Participants in the
Corporation Savings Plan who, immediately prior to the Effective Time, have
balances in the Corporation Common Stock fund shall have such balances
converted, as of the Effective Time, to the extent applicable, to units in a
pooled stock fund consisting of Corporation Common Stock and IMS Health Common
Stock. The initial ratio of stock in the pooled stock fund shall be one share of
Corporation Common Stock to one share of IMS Health Common Stock. 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 Corporation Common
Stock fund immediately prior to the Effective Time. The IMS Health Savings Plan
shall maintain a pooled stock fund, to which the pooled stock fund assets of IMS
Health Transferred Savings Plan Employees in the Corporation Savings Plan shall
be transferred on the IMS Health Savings Plan Transfer Date. Notwithstanding the
foregoing, the Corporation Savings Plan shall transfer the units of Corporation
Common Stock from the pooled stock fund into the Corporation Common Stock fund
and the IMS Health Savings Plan shall transfer the units of IMS Health Common
Stock from the pooled stock fund into the IMS Health Common Stock fund.
(b) Within nine months after the Distribution Date, each
participant shall liquidate his or her units of Nonemployer Stock in the pooled
stock fund and invest the proceeds thereof in any other investment option
available under the applicable plan. If the participant does not liquidate such
units, such units shall be liquidated and invested in a fixed income investment
option available under the applicable plan.
(c) A participant may not acquire additional units in the
pooled stock fund from or after the Effective Time.
SECTION 3.5. Allocation of Liabilities. The IMS Health Group
shall assume all Liabilities relating to the participation of IMS Health
Transferred Savings Plan Employees in the Corporation Savings Plan. The
Corporation Group shall retain all other Liabilities relating to the Corporation
Savings Plan.
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14
ARTICLE IV
NONQUALIFIED PLANS
SECTION 4.1. Corporation Nonqualified Plans. From and after
the Effective Time, Corporation shall continue to sponsor the Corporation SERP,
the Corporation Pension REP and the Corporation Savings BEP (collectively, the
"Corporation Nonqualified Plans") for the benefit of Corporation Post-
Distribution Employees and Corporation Retirees who, prior to the Effective
Time, were participants thereunder ("Corporation Nonqualified Plan
Participants").
SECTION 4.2. IMS Health Nonqualified Plans. As of the
Effective Time, IMS Health shall (i) adopt the IMS Health SERP, the IMS Health
Pension REP and the IMS Health Savings BEP (collectively, the "IMS Health
Nonqualified Plans") for the benefit of IMS Health Employees and IMS Health
Retirees who were participants in the Corporation Nonqualified Plans immediately
prior to the Effective Time ("IMS Health Nonqualified Plan Participants") and
(ii) assume the Liabilities for benefits under the Corporation Nonqualified
Plans with respect to such employees.
SECTION 4.3. Joint and Several Liability. Corporation and IMS
Health acknowledge joint and several liability under the Employee Benefits
Agreement dated as of October 28, 1996 among D&B, Corporation and ACNielsen with
respect to certain nonqualified plans maintained by D&B prior to such date. To
the extent such joint and several liability is imposed on Corporation in respect
of a liability assumed by IMS Health under this Agreement, Corporation shall be
entitled to contribution from IMS Health for the amount of such liability
imposed. To the extent joint and several liability is imposed on IMS Health in
respect of a liability assumed by Corporation under this Agreement, IMS Health
shall be entitled to contribution from Corporation for the amount of such
liability imposed.
SECTION 4.4. Third-Party Beneficiaries. It is the intention of
the parties to this Agreement that the provisions of Section 4.3 shall be
enforceable by (a) Corporation and IMS Health Nonqualified Plan Participants and
(b) their respective surviving beneficiaries.
ARTICLE V
WELFARE PLANS
SECTION 5.1. Employee Benefit Welfare Plans. Prior to the
Effective Time, the Corporation shall continue to sponsor its Employee Benefit
Welfare Plans for the benefit of Corporation Pre-Distribution Employees. Except
as provided in Section 5.4 and Section 5.5 below, from and after the Effective
Time, Corporation shall sponsor its Employee Benefit Welfare Plans solely for
the benefit of Corporation Post-Distribution Employees, Corporation Disabled
Employees and Corporation
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15
Retirees. From and after Effective Time, IMS Health shall sponsor its Employee
Benefit Welfare Plans solely for the benefit of IMS Health Employees, IMS Health
Retirees and IMS Health Disabled Employees. Notwithstanding the foregoing,
neither Corporation nor IMS Health shall have any obligation to sponsor any
Employee Benefit Welfare Plan from or after Effective Time.
SECTION 5.2. Dollar Limits. With respect to any medical and
dental plan that may be sponsored by IMS Health after the Effective Time, IMS
Health shall give effect, in determining any deductible, maximum out-of-pocket
limitations and annual plan maximums, to claims incurred during 1998 prior to
the Effective Time by IMS Health Employees, IMS Health Retirees and IMS Health
Disabled Employees under similar plans maintained by Corporation (or any
Affiliate thereof) for their benefit immediately prior to the Effective Time.
SECTION 5.3. Severance Plans. The Corporation Group shall
retain all Liabilities with respect to severance payments made or to be made to
Corporation Retirees including any liabilities for severance payments under the
Corporation Transition Plans. The IMS Health Group shall retain all Liabilities
with respect to severance payments made or to be made to IMS Health Retirees
including any liabilities for severance payments under the Corporation
Transition Plans. 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, 1998, Corporation shall continue to sponsor its flexible
spending accounts for all Corporation Pre-Distribution Employees; provided,
however, that IMS Health shall cause all deductions from participant paychecks
to be forwarded to Corporation within two business days thereafter; provided,
further, that IMS Health shall reimburse Corporation for the administrative
costs incurred with respect to IMS Health Employees. All unused funds remaining
in the flexible spending accounts of IMS Health Employees after April 30, 1999
shall be paid to IMS Health.
SECTION 5.5. Allocation of Liabilities. (a) The IMS Health
Group shall retain responsibility for and continue to pay all claims relating to
the Corporation self-insured Medical and Dental Plans with respect to claims
incurred prior to the Effective Time, but which are paid after the Effective
Time, by IMS Health Employees, IMS Health Disabled Employees, IMS Health COBRA
participants, IMS Health Transitional Employees and IMS Health Retirees as well
as their covered dependents. Any claims relating to the Corporation self-insured
Medical and Dental Plans with respect to claims incurred prior to the Effective
Time, but which are paid after the Effective Time, by Corporation Pre-
Distribution Employees who are not IMS Health Employees will remain the
responsibility of The Corporation Group.
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16
(b) The Corporation Group shall retain responsibility for and
continue to pay all premiums, expenses and benefits relating to the Corporation
Employee Welfare Plans with respect to claims incurred (for self-insured plans)
or premiums due (for insured plans) from and after the Effective Time by
Corporation Post-Distribution Employees, Corporation Disabled Employees,
Corporation COBRA participants and Corporation Retirees as well as their covered
dependents.
(c) The IMS Health Group shall retain responsibility for and
continue to pay all premiums, expenses and benefits relating to the Employee
Welfare Plans with respect to claims incurred (for self-insured plans) or
premiums due (for insured plans) from and after the Effective Time by IMS Health
Employees, IMS Health Disabled Employees, IMS Health COBRA participants, IMS
Health Transitional Employees and IMS Health Retirees as well as their covered
dependents.
(d) For the purposes of this Section 5.5, 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 Corporation
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.
(e) The Corporation Group shall be responsible for all COBRA
coverage for any Corporation Retiree and his or her covered dependents who
participated in a Corporation 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 IMS Health Group shall be responsible for all COBRA coverage
for any IMS Health Retiree and his or her covered dependents who participated in
a Corporation 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 Corporation
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 Corporation Post-Distribution Employee is entitled as
a result of a qualifying event occurring at or after the Effective Time shall be
the responsibility of the Corporation Group.
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17
SECTION 5.6. Allocation of the Corporation's Self- Insured
Medical and Dental Plans Reserve for Claims Incurred But Not Yet Reported
(IBNR). The IBNR reserve of which is estimated to be approximately $2.5 million
as of June 30, 1998 will be allocated 61.9% to the Corporation Group and 38.1%
to IMS Health.
SECTION 5.7. Retiree Welfare Plans. The Corporation Group
shall be responsible for providing retiree welfare benefits, where applicable,
to Corporation Retirees and Corporation Post-Distribution Employees. The IMS
Health Group shall be responsible for providing retiree welfare benefits, where
applicable, to IMS Health Retirees and IMS Health Employees.
ARTICLE VI
EQUITY-BASED PLANS
SECTION 6.1. Corporation Stock Options. Stock options
awarded under the Corporation Stock Option Plans ("Corporation Stock Options")
shall be treated as follows:
(a) Corporation Post-Distribution Employees; and Corporation
Disabled Employees. From and after the Effective Time, each unexercised
Corporation Stock Option held by Corporation Post-Distribution Employees,
Corporation Disabled Employees and the specified options held by the persons
listed on Schedule 6.1 shall remain outstanding pursuant to the terms of the
award agreements and the Corporation Stock Option Plans; provided, however, that
from and after such time, each unexercised Corporation Stock Option shall be
adjusted as follows: (i) the number of shares of Corporation Common Stock
covered by the adjusted stock option shall be determined by (A) multiplying the
number of shares of Corporation Common Stock covered by the Corporation Stock
Option by a fraction, the numerator of which equals the average of high and low
trading prices of a share of Corporation Common Stock for the five trading days
immediately preceding the ex-dividend date, and the denominator of which equals
the average of high and low trading prices of a share of Corporation Common
Stock for the five trading days starting on the ex-dividend trading Date
("Corporation Ratio") and (B) rounding down the result to a whole number of
shares and (ii) the exercise price of the adjusted stock option shall equal the
original exercise price divided by the Corporation Ratio.
(b) IMS Health Employees; IMS Health Transitional Employees;
IMS Health Disabled Employees; and Walsh Optionees. As of the Effective Time,
(i) each unexercised Corporation Stock Option held by IMS Health Employees, IMS
Health Transitional Employees, IMS Health Disabled Employees and Walsh Optionees
shall be cancelled except as provided in Schedule 6.1 and (ii) such individuals
shall except as provided in Schedule 6.1 receive replacement stock options
awarded under the IMS Health
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18
Replacement Plans, which shall be adopted by IMS Health prior to the Effective
Time. The number of shares of IMS Health Common Stock covered by each
replacement stock option shall be determined by (i) multiplying the number of
shares of Corporation Common Stock covered by the cancelled Corporation Stock
Option by a fraction, the numerator of which equals the average of high and low
trading prices of a share of Corporation Common Stock for the five trading days
immediately preceding the ex-dividend date, and the denominator of which equals
the average of high and low trading prices of an IMS Health Common Share for the
five trading days starting on the regular way trading date ("IMS Health Ratio")
and (ii) rounding down the result to a whole number of shares. The exercise
price of each replacement stock option shall be determined by dividing the
exercise price of the cancelled Corporation Stock Option by the IMS Health
ratio. Except as otherwise provided in the IMS Health Replacement Plans, all
other terms of the replacement stock options shall remain substantially
identical to the terms of the cancelled Corporation Stock Options.
(c) IMS Health Retirees; and Corporation Retirees. As of the
Effective Time, (i) each unexercised Corporation Stock Option held by IMS Health
Retirees and Corporation Retirees shall be adjusted in substantially the same
manner as employees of the Corporation Group and (ii) IMS Health may offer to
such IMS Health Retirees and Corporation Retirees, and the IMS Health Committee
may determine, alternative adjustments or substitutions, provided such Retirees
agree to surrender their adjusted Corporation Stock Options.
SECTION 6.2. Corporation LSARs. All limited stock appreciation
rights awarded under the Corporation Stock Option Plans ("Corporation LSARs")
shall be adjusted or substituted (as the case may be) in substantially the same
manner as the Corporation Stock Options described in Section 6.1 above.
SECTION 6.3. Restricted Stock Plan. Restricted stock awarded
under the Corporation Stock Option Plans ("Corporation Restricted Stock") and
restricted stock received as a result of the Distribution ("IMS Health
Restricted Stock") shall be treated as follows:
(a) Corporation Post-Distribution Employees. As of Effective
Time, IMS Health Restricted Stock credited to Corporation Post-Distribution
Employees shall be adjusted pursuant to the Corporation Stock Option Plans and
each such individual shall receive a number of additional shares of Corporation
Restricted Stock, determined by multiplying the number of shares of forfeited
IMS Health Restricted Stock by the Corporation Ratio and the reciprocal of the
IMS Health Ratio, having the same terms as the Corporation Restricted Stock from
which they arose.
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19
(b) IMS Health Employees. As of the Effective Time,
Corporation Restricted Stock and IMS Health Restricted Stock credited to IMS
Health Employees and IMS Health Transitional Employees shall be forfeited and
such individuals shall receive replacement IMS Health Restricted Stock equal to
(i) the number of shares of forfeited IMS Health Restricted Stock plus (ii) the
number of shares of forfeited Corporation Restricted Stock multiplied by the IMS
Health Ratio and the reciprocal of the Corporation Ratio, such replacement
shares of IMS Health Restricted Stock to have the same terms as the Corporation
Restricted Stock from which they arose.
SECTION 6.4. Executive Annual Incentive Plan. Outstanding
awards under the Corporation Executive Annual Incentive Plan shall be treated as
determined by the Corporation and IMS Health, respectively.
SECTION 6.5. Corporation Employee Stock Purchase Plan.
(a) From and after the Effective Time, Corporation shall
continue to sponsor the Corporation Employee Stock Purchase Plan.
(b) As of the Effective Time, IMS Health shall adopt the IMS
Health Employee Stock Purchase Plan for the benefit of IMS Health Employees.
SECTION 6.6. Allocation of Liabilities. The IMS Health Group
shall assume all Liabilities with respect to awards granted to IMS Health
Employees, IMS Health Retirees, Corporation Retirees and IMS Health Disabled
Employees pursuant to the IMS Health Replacement Option Plan. The Corporation
Group shall retain all other Liabilities with respect to awards granted pursuant
to the Corporation Stock Option Plans (including, but not limited to, awards
granted to Corporation Post-Distribution Employees).
ARTICLE VII
FOREIGN EMPLOYEE BENEFIT PLANS
SECTION 7.1. Foreign Plans. Except as set forth in Schedule
7.1, Corporation and IMS Health shall continue to sponsor and retain liability
for any Employee Benefits Plans maintained outside the United States with
respect to their respective employees.
ARTICLE VIII
OTHER EMPLOYEE BENEFIT ISSUES
SECTION 8.1. Employee Benefit Litigation Liabilities. Except
as otherwise expressly provided in this agreement, the IMS Health Group shall
assume all Employee Benefit Litigation Liabilities that are asserted by
Corporation Pre-Distribution Employees who were employees of the IMS Health
Group or Corporate
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Staff Employees and the Corporation Group shall assume all Employee Benefit
Litigation Liabilities that are asserted by all other Corporation
Pre-Distribution Employees.
SECTION 8.2. Indemnification. To the extent that any claim or
litigation is asserted against Corporation by a Corporation Retiree who was a
Corporate Staff Employee prior to the Distribution, Corporation shall be
entitled to indemnification from IMS Health for the amount of any liability
imposed.
SECTION 8.3. Workers' Compensation. The Corporation Group
shall retain all Liabilities relating to workers' compensation claims that were
incurred (a) prior to the Effective Time with respect to Corporation
Pre-Distribution Employees who were employed by the Corporation Group (not
including the IMS Health Group) and Corporate Staff Employees allocated to
Corporation as a result of the Distribution and (b) on and after the Effective
Time with respect to Corporation Post-Distribution Employees. The IMS Health
Group shall retain all Liabilities relating to workers' compensation claims that
were incurred (a) prior to the Effective Time with respect to Corporation Pre-
Distribution Employees who were employed by the IMS Health Group and Corporate
Staff Employees allocated to IMS Health as a result of the Distribution and (b)
on and after the Effective Time with respect to IMS Health Employees. For
purposes of this paragraph, a claim is deemed incurred when the injury that is
the subject of the claim occurs.
SECTION 8.4. Cash Funding. Sufficient cash shall be left with
Corporation upon the Distribution, based on a good faith estimate, to fund all
severance (and related benefits) Liabilities of Corporate Staff Employees
retained by Corporation Group pursuant to Section 5.3(a) hereof as well as the
unfunded amounts payable by Corporation to Corporation Retirees hereunder who
were Corporate Staff Employees (including the actuarially determined value of
payments under non-qualified plans pursuant to Section 4.1 hereof and the value
of retiree welfare benefits pursuant to Section 5.7 hereof). Such cash amount
shall include amounts sufficient to fund all such payments as well as any
related tax, social security and similar government-mandated payments and
employee plan contributions, (i) without giving effect to any present-value
calculation and (ii) with respect to severance (and related benefits)
liabilities, net of tax benefits calculated at a 40% rate. If the estimated cash
amounts result in an excess or deficit over or under the amounts actually
expended by Corporation for such items, appropriate payments will be made
between the parties to eliminate any such excess or deficit no later than
December 31, 1998.
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ARTICLE IX
BENEFIT PLAN PARTICIPATION
SECTION 9.1. Corporation Plans. Except as specifically
provided herein, all IMS Health Employees shall cease participation in all
Corporation Employee Benefit Plans as of the Effective Time.
SECTION 9.2. IMS Health Plans. Except as provided in Section
5.7 herein, (a) with respect to any newly created Employee Benefit Plan
sponsored by the IMS Health Group after the Effective Time, the IMS Health Group
shall cause to be recognized (to the extent applicable) each IMS Health
Employee's (i) past service with the Corporation Group to the extent recognized
under similar plans maintained by the Corporation Group immediately prior to the
Effective Time and (ii) accrued but unused vacation time and sick days, and (b)
any IMS Health Employee who participated in a Corporation Employee Benefit Plan
immediately prior to the Effective Time shall be entitled to immediate
participation in a similar newly created Employee Benefit Plan sponsored by the
IMS Health Group.
SECTION 9.3. Subsequent Employer. Except as provided in
Section 5.6 herein, if, during the one-year period following the Effective Time,
a Corporation Post-Distribution Employee or a IMS Health Employee terminates
employment with his or her employer and then immediately commences employment
with the Corporation Group or the IMS Health Group, the subsequent employer
shall cause to be recognized (to the extent applicable) such employee's past
service with the Corporation Group or the IMS Health 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 9.4. Right to Amend or Terminate. Except as
specifically provided herein, nothing in this Agreement shall be construed or
interpreted to restrict the Corporation Group's or the IMS Health Group's right
or authority to amend or terminate any of their Employee Benefit Plans following
the Effective Time.
ARTICLE X
ACCESS TO INFORMATION
SECTION 10.1. Access to Information. Article IV of the
Distribution Agreement shall govern the rights of the Corporation Group and the
IMS Health Group with respect to access to information. The term "Records" in
that Article shall be read to include all Employee Benefit Records.
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ARTICLE XI
INDEMNIFICATION
SECTION 11.1. Indemnification. Article III of the Distribution
Agreement shall govern the rights of the Corporation Group and the IMS Health
Group with respect to indemnification. The term "Corporation Liabilities" in
that Article shall be read to include all Liabilities assumed or retained by the
Corporation Group pursuant to this Agreement. The term "IMS Health Liabilities"
in that Article shall be read to include all Liabilities assumed or retained by
the IMS Health Group pursuant to this Agreement.
ARTICLE XII
DISPUTE RESOLUTION
SECTION 12.1. Dispute Resolution. Article VI of the
Distribution Agreement shall govern the rights of the Corporation Group and the
IMS Health Group with respect to dispute resolution. The term "Agreement
Dispute" in that Article shall be read to include all Employee Benefit Disputes.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. 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 13.2. 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 13.3. 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.
<PAGE>
23
SECTION 13.4. 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 13.5. Expenses. Except as otherwise set forth in this
Agreement, the Distribution Agreement or any Ancillary Agreement, all costs and
expenses incurred and for which invoices have been submitted on or prior to the
Effective Time (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, as well as all administrative costs,
fees or expenses relating to any Employee Benefit Plan, shall be charged to and
paid by Corporation, provided that, if such expenses are not paid by Corporation
prior to the Effective Time, they shall be charged to and paid by IMS Health.
Except as otherwise set forth in this Agreement, the Distribution Agreement or
any Ancillary Agreement, all such costs, fees and expenses incurred or for which
invoices are submitted after the Effective Time shall be charged to and paid by
IMS Health. 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.
SECTION 13.6. 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 Nielsen Media Research, Inc.:
299 Park Avenue
New York, NY 10171
Telecopy: (212) 708-6927
Attn: Chief Legal Officer
To IMS Health Incorporated:
200 Nyala Farms
Westport, CT 06880
Telecopy: (203) 222-4313
Attn: General Counsel
<PAGE>
24
SECTION 13.7. 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 13.8. Amendments. Subject to the terms of
Section 13.11 hereof, this Agreement may not be modified or
amended except by an agreement in writing signed by each of the
parties hereto.
SECTION 13.9. 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 13.10. 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 13.11. Termination. This Agreement (including, without
limitation, Section 4.4 and Article XI 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 Corporation without the approval of the shareholders of
Corporation. 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 4.4 and Article XI shall not be
terminated or amended after the Distribution in respect of the third party
beneficiaries thereto without the consent of such persons.
SECTION 13.12. 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 13.13. Third Party Beneficiaries. Except as provided
in Section 4.4 and Article XI, 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 13.14. Title and Headings. Titles and headings to
sections herein are inserted for the convenience of
<PAGE>
25
reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
SECTION 13.15. 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 13.16. 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 13.17. Consent to Jurisdiction. Without limiting the
provisions of Article XII 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 13.17. 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 13.18. 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>
26
SECTION 13.19. 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 Corporation and IMS Health 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 13.20. 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>
IN WITNESS WHEREOF, the parties have duly executed and entered
into this Agreement, as of the date first above written.
COGNIZANT CORPORATION
by
/s/ ROBERT E. WEISSMAN
------------------------------
Name: Robert E. Weissman
Title: Chairman and Chief
Executive Officer
IMS HEALTH INCORPORATED
by
/s/ VICTORIA R. FASH
--------------------------------
Name: Victoria R. Fash
Title: Chief Operating Officer
AMENDED AND RESTATED
TRANSITION SERVICES AGREEMENT
This AMENDED AND RESTATED TRANSITION SERVICES AGREEMENT dated as of
June 30, 1998, among THE DUN & BRADSTREET CORPORATION, a Delaware corporation
(the "Corporation"), THE NEW DUN & BRADSTREET CORPORATION, a Delaware
corporation ("New D&B"), COGNIZANT CORPORATION, a Delaware corporation
("Cognizant"), IMS HEALTH INCORPORATED, a Delaware corporation ("IMS Health"),
ACNIELSEN CORPORATION, a Delaware corporation ("ACNielsen"), and GARTNER GROUP,
INC., a Delaware Corporation ("Gartner") amends and restates in its entirety the
Transition Services Agreement dated as of October 28, 1996 (the "1996 Transition
Services Agreement") among the Corporation, Cognizant and ACNielsen.
W I T N E S S E T H
-------------------
WHEREAS, pursuant to a Distribution Agreement dated as of October
28, 1996 (the "1996 Distribution Agreement") among the Corporation, Cognizant
and ACNielsen, each party agreed to provide to the other parties certain
transitional, administrative and support services, including insurance and risk
management services, on the terms set forth in the 1996 Transition Services
Agreement and the Appendix thereto.
WHEREAS, each of the Corporation, Cognizant and ACNielsen desires to
amend and restate the 1996 Transition Services Agreement as set forth in this
Agreement and to include New D&B, IMS Health and Gartner as parties hereto; and
each of New D&B, IMS Health and Gartner desires to become a party to this
Agreement.
NOW, THEREFORE, in consideration of the agreements, covenants and
provisions in this Agreement and intending to be legally bound hereby, each of
the Corporation, New D&B, Cognizant, IMS Health, ACNielsen and Gartner mutually
covenant and agree as follows:
ARTICLE I
SERVICES PROVIDED
1.1 Transition Services. New D&B (the "Provider") shall provide
comprehensive insurance and risk management services to the Corporation,
Cognizant, IMS Health, ACNielsen and Gartner (each a "Recipient"; collectively,
the "Recipients"). Such services shall include risk identification, development
of appropriate insurance programs, loss prevention initiatives, accounting for
premiums, deductibles, retentions and defense costs, claims management
(including coordination with insurance carriers), the collection and
distribution of insurance proceeds and such other services as the Corporation's
Risk
<PAGE>
2
Management staff has been providing to the Corporation, Cognizant and ACNielsen
as of the date hereof (all such services, collectively, the "Transition
Services").
1.2 Personnel. In providing the Transition Services, the Provider 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
Recipient may retain at its own expense its own consultants and other
professional advisers.
1.3 Representatives. Each of the Corporation, New D&B, Cognizant,
IMS Health, ACNielsen and Gartner 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 Frank Colarusso, Treasurer, for the Corporation, John Riley, Director
of Risk Management, for New D&B, Stuart Goldshein, Controller, for Cognizant,
Matthew Friedman, Assistant Treasurer, for IMS Health, John Forster for
ACNielsen and Andrea Tarbox for Gartner. Each party may treat an act of a
Primary Coordinator of another party as being authorized by such other party
without inquiring behind such act or ascertaining whether such Primary
Coordinator had authority to so act. The Provider and the relevant Recipient of
a Transition Service shall advise each other in writing of any change in the
Primary Coordinators for such Transition Service, setting forth the name of the
Primary Coordinator to be replaced and the name of the replacement, and
certifying that the replacement Primary Coordinator is authorized to act for
such party in all matters relating to this Agreement. Each of the Corporation,
New D&B, Cognizant, IMS Health, ACNielsen and Gartner 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) The 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 the Provider to favor the
businesses of any Recipient over its own businesses or those of any of its
Affiliates, Subsidiaries or divisions.
(b) The Provider shall not be required to provide any 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 by the
Provider.
<PAGE>
3
(c) In addition to being subject to the terms and conditions of this
Agreement for the provision of the Transition Services, each Recipient agrees
that the Transition Services provided by third parties shall be subject to the
terms and conditions of any agreements between the Provider and such third
parties. The Provider shall consult with the relevant Recipient concerning the
terms and conditions of any such agreements to be 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 the Provider, and whether or not the 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 the
Provider commits an error with respect to or incorrectly performs or fails to
perform any Transition Service, at the relevant Recipient's request, the
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 the 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. The 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, the Provider shall not implement any
substantial changes affecting a Recipient of the relevant Transition Services
unless:
(a) the Provider has furnished such Recipient notice (which shall be
the same notice the Provider shall provide its own businesses) thereof;
<PAGE>
4
(b) the Provider changes such procedures for its own businesses at
the same time; and
(c) the 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 the
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 Recipient shall
have any obligation to continue to use the Transition Services and may terminate
the Transition Services that the Provider is providing to such Recipient by
giving the Provider 180 days notice thereof.
1.9 Provider Access. To the extent reasonably required for personnel
of the Provider to perform the Transition Services for which the Provider is
responsible hereunder, the Recipient of such Transition Services shall provide
personnel of the Provider with access to its equipment, office space, plants,
telecommunications and computer equipment and systems, and any other areas and
equipment.
1.10 Performance Reviews. The Primary Coordinators for each
Recipient shall meet during the fourth quarter of each calendar year with the
Primary Coordinator for the Provider for the purpose of reviewing the
performance of the Provider's Risk Management staff. Any disputes relating to
the quality of such performance shall be brought to the attention of the
respective Chief Financial Officers (or person holding an equivalent title) of
the Provider and the Recipients.
ARTICLE II
COMPENSATION
2.1 Consideration. As consideration for the Transition Services,
each Recipient of Transition Services shall pay to the Provider a portion of the
costs and expenses incurred by the Provider relating to the Risk Management
staff as follows: each Recipient shall pay (i) a base charge of $50,000 per year
plus (ii) a proportionate share of any additional costs and expenses (i.e., not
covered by the total base charge) based on such Recipient's proportion of total
revenue as a percentage of the aggregate total revenue of all parties to this
Agreement. For purposes of calculating any additional amount payable pursuant to
clause (ii) of the preceding sentence, a party's revenue shall be that set forth
on its audited financial statements for the most recent fiscal year-end. Such
costs and expenses shall be calculated in accordance with generally accepted
accounting principles applied
<PAGE>
5
consistently and billed in twelve monthly installments. Notwithstanding the
foregoing, however, any services provided by the Provider's Risk Management
staff to the Provider or the Recipients that are not in the ordinary course (all
such services being "extraordinary services") shall be borne by the company or
companies for whom such extraordinary service was provided. No extraordinary
service shall be provided without the specific approval of the company to be
charged. The costs and expenses to be borne by each Recipient will be in
accordance with the annual Risk Management budget to be provided by the Primary
Coordinator for the Provider during the preceding calendar year by May 1 of each
year. The Risk Management budget may increase each year in an amount equal to 5%
over the prior year's budget; increases in excess of 5% must be approved by the
respective Primary Coordinators for each Recipient.
2.2 Invoices. After the end of each month, the Provider, together
with its 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 the 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 invoices shall be sent
to the attention of the Primary Coordinator of the applicable Recipient at the
address set forth in Section 6.5 hereof or to such other address as such
Recipient shall have specified by notice in writing to the Provider.
2.3 Payment of Invoices. (a) Payment of all invoices in respect of
Transition Services 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. All payments shall be made to the account
designated by the Provider to the relevant Recipient, with written confirmation
of payment sent by facsimile to the Primary Coordinator or other person
designated thereby.
(b) If any payment is not paid when due, the Provider shall have the
right, without any liability to any Recipient of Transition Services, or anyone
claiming by or through such Recipient, upon five days' notice, to cease
providing any or all of the Transition Services provided by the Provider to such
Recipient, which right may be exercised by the Provider in its sole and absolute
discretion.
<PAGE>
6
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. Additionally, any information which is
identified by a party as being "highly sensitive" (in connection with a
contemplated acquisition or otherwise) shall not be disclosed outside of the
Provider's Risk Management staff.
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
(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 June 30, 1998 and
shall remain in force for a period of three years (or in the case of ACNielsen,
IMS Health and Gartner until November 1, 1999). After such initial period, this
Agreement shall automatically be renewed for successive one-year periods as to
each party unless such party provides at least 180-days notice to the other
parties of its intention not to renew; provided that this Agreement may be
terminated at such other times as are set forth in Sections 1.6, 1.8 and 4.3.
4.2 Reserved.
4.3 Default. 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
<PAGE>
7
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 fifteen days of
such written notice. If any failure or default so specified is not cured within
such fifteen 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.
4.4 Termination of Obligations. Each Recipient specifically agrees
and acknowledges that all obligations of the Provider to provide the Transition
Services shall immediately cease, with respect to such Recipient, upon the
termination of this Agreement as to such Recipient. Upon the cessation of the
Provider's obligation to provide any Transition Service to a Recipient, such
Recipient shall immediately cease using, directly or indirectly, the Transition
Services (including, without limitation, any and all software of the Provider or
third party software provided through the 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, Sections 1.5, 2.1 (with respect
to services provided prior to the effective time of the termination), 3.1, 3.2,
4.4, 4.5, 5.1, 6.10, 6.13 and 6.14 shall survive any termination of this
Agreement.
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 1996 Distribution Agreement, with each
of the parties hereto being deemed a party to that agreement for this purpose.
ARTICLE VI
MISCELLANEOUS
6.1 Complete Agreement; Construction. This 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.
<PAGE>
8
6.2 Other Agreements. This Agreement is not intended to address, and
should not be interpreted to address, the matters specifically and expressly
covered by other agreements between or among the parties.
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 has been signed by
each of the parties and delivered to the other parties.
6.4 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 the Corporation:
R.H. Donnelley Corporation
One Manhattanville Road
Purchase, New York 10577
Telecopy: (914) 933-6899
Attn: Treasurer
With a copy to:
R.H. Donnelley Corporation
One Manhattanville Road
Purchase, New York 10577
Telecopy: (914) 933-6899
Attn: General Counsel
To New D&B:
The Dun & Bradstreet Corporation
220 East 42 Street
New York, New York 10017
Telecopy: (212) 883-3403
Attn: Director of Risk Management
<PAGE>
9
With a copy to:
The Dun & Bradstreet Corporation
One Diamond Hill Road
Murray Hill, New Jersey 07974
Telecopy: (908) 665-5803
Attn: Chief Legal Counsel
To Cognizant:
Nielsen Media Research, Inc.
299 Park Avenue
New York, New York 10171
Telecopy: (212) 708-7504
Attn: Controller
With a copy to:
Nielsen Media Research, Inc.
299 Park Avenue
New York, New York 10171
Telecopy: 212-708-6927
Attn: Chief Legal Officer
To IMS Health:
IMS Health Incorporated
200 Nyala Farms
Westport, Connecticut 06880
Telecopy: (203) 222-4201
Attn: Treasurer
With a copy to:
IMS Health Incorporated
200 Nyala Farms
Westport, Connecticut 06880
Telecopy: (203) 222-4201
Attn: General Counsel
<PAGE>
10
To ACNielsen:
ACNielsen Corporation
177 Broad Street
Stamford, Connecticut 06901
Telecopy: (203) 961-3177
Attn: John Forster
With a copy to:
ACNielsen Corporation
177 Broad Street
Stamford, Connecticut 06901
Telecopy: (203) 961-3179
Attn: General Counsel
To Gartner:
Gartner Group, Inc.
P.O. Box 10212
56 Top Gallant Road
Stamford, Connecticut 06904
Telecopy: (203) 316-6525
Attn: Andrea Tarbox
With a copy to:
Gartner Group, Inc.
P.O. Box 10212
56 Top Gallant Road
Stamford, Connecticut 06904
Telecopy: (203) 316-6525
Attn: General Counsel
6.5 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.
6.6 Amendments. This Agreement may not be modified or amended except
by an agreement in writing signed by each of the parties hereto.
6.7 Assignment. This Agreement may not be assigned by any party,
other than to an Affiliate of such party or pursuant to a corporate
reorganization or merger, without
<PAGE>
11
the consent of the other party. Any assignment in contravention of this Section
6.7 shall be void.
6.8 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.
6.9 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 and after
the applicable Distribution Date.
6.10 Third Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto 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.
6.11 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.
6.12 Reserved.
6.13 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.
6.14 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 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 6.14. 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
<PAGE>
12
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.
6.15 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.
6.16 Laws and Government Regulations. Each 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 the Provider shall not have any responsibility for the
compliance by the Recipient of such Transition Services with such laws and
regulations, the 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.
6.17 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.
6.18 Definitions. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in the applicable
Distribution Agreement governing the relevant parties.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Transition Services Agreement to be executed the day and year first
above written.
THE DUN & BRADSTREET CORPORATION
By: /s/ Frank R. Noonan
-------------------------------
Name: Frank R. Noonan
Title: Senior Vice President
THE NEW DUN & BRADSTREET
CORPORATION
By: /s/ Volney Taylor
-------------------------------
Name: Volney Taylor
Title: Chairman and Chief Executive
Officer
COGNIZANT CORPORATION
By: /s/ Kenneth Siegel
-------------------------------
Name: Kenneth Siegel
Title: Senior Vice President, General
Counsel and Secretary
IMS HEALTH INCORPORATED
By: /s/ Kenneth Siegel
-------------------------------
Name: Kenneth Siegel
Title: Senior Vice President, General
Counsel and Secretary
<PAGE>
ACNIELSEN CORPORATION
By: /s/ John A. Forster
-------------------------------
Name: John A. Forster
Title: Vice President and Treasurer
GARTNER GROUP, INC.
By: /s/ George C. Roy, Jr.
-------------------------------
Name: George C. Roy, Jr.
Title: Senior Vice President - Finance
IMS Health Incorporated
200 Nyala Farms
Westport, CT 06880
June 29, 1998
Nancy Henry, Esq.
The Dun & Bradstreet Corporation
One Diamond Hill Road
Murray Hill, NJ 07974
Earl Doppelt, Esq.
ACNielsen Corporation
177 Broad Street
Stamford, CT 06901
Dear Ms. Henry and Mr. Doppelt:
Reference is made to the Distribution Agreement (the "1996
Distribution Agreement"), dated as of October 28, 1996, among Cognizant
Corporation ("Cognizant"), The Dun & Bradstreet Corporation ("D&B") and
ACNielsen Corporation ("ACNielsen"). Cognizant has announced its intention to
separate into two separate companies through a distribution (the "IMS HEALTH
Distribution") to its stockholders of all of the shares of common stock of its
subsidiary IMS Health Incorporated ("IMS HEALTH"). In Section 8.9(c) of the 1996
Distribution Agreement, Cognizant agreed not to make a distribution such as the
IMS HEALTH Distribution unless it caused the distributed entity to undertake to
both D&B and ACNielsen to be jointly and severally liable for all Cognizant
Liabilities (as defined in the 1996 Distribution Agreement). Therefore, in
accordance with Section 8.9(c) of the 1996 Distribution Agreement and intending
to be legally bound hereby, from and after the effective time of the IMS HEALTH
Distribution, IMS HEALTH undertakes to each of D&B and ACNielsen to be jointly
and severally liable with Cognizant for all Cognizant Liabilities under the 1996
Distribution Agreement.
Very truly yours,
IMS HEALTH INCORPORATED
By: /s/ Kenneth S. Siegel
--------------------------------
Name: Kenneth S. Siegel
Title: Senior Vice President,
General Counsel and
Secretary
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