SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the registrant [X]
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Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Cognizant Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
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(1) Title of each class of securities to which transaction applies.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
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previously. Identify the previous filing by registration statement number,
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(1) Amount Previously Paid:
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<PAGE>
[COGNIZANT LOGO]
COGNIZANT CORPORATION
200 NYALA FARMS, WESTPORT, CT 06880
March 13, 1998
Dear Shareholder:
You are cordially invited to attend the 1998 Annual Meeting of Shareholders
of Cognizant Corporation on Monday, April 13, 1998 at 9:30 A.M. at 1209 Orange
Street, Wilmington, Delaware.
The Notice of Annual Meeting and Proxy Statement accompanying this letter
describe the business to be acted upon at the meeting.
Please promptly vote, date, sign and return your proxy for the meeting even
if you plan to attend. You may vote in person at that time if you wish.
Sincerely,
/s/ ROBERT E. WEISSMAN
ROBERT E. WEISSMAN
Chairman and Chief Executive Officer
<PAGE>
[COGNIZANT LOGO]
COGNIZANT CORPORATION
200 NYALA FARMS, WESTPORT, CT 06880
----------
NOTICE OF ANNUAL MEETING
----------
The Annual Meeting of Shareholders of Cognizant Corporation will be held on
Monday, April 13, 1998 at 9:30 A.M. at 1209 Orange Street, Wilmington, Delaware,
to take action on the following matters:
1. To elect three Class II directors for a three-year term.
2. To ratify the appointment of Coopers & Lybrand L.L.P. as independent
public accountants to audit the Company's consolidated financial
statements for 1998.
3. To transact such other business as may properly come before the
meeting or any adjournment. The Company knows of no other business to
be brought before the meeting.
The Board of Directors has fixed the close of business on March 3, 1998 as
the record date for determination of Shareholders entitled to notice of, and to
vote at, the meeting.
By Order of the Board of Directors,
KENNETH S. SIEGEL
Senior Vice President, General Counsel
and Secretary
Dated: March 13, 1998
<PAGE>
----------
PROXY STATEMENT
----------
GENERAL
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Cognizant Corporation ("Cognizant") of proxies for the
Annual Meeting of Shareholders to be held on April 13, 1998. These proxy
materials are being mailed to you and the other Shareholders on or about March
13, 1998. The principal executive offices of Cognizant are located at 200 Nyala
Farms, Westport, Connecticut 06880 and its telephone number is (203) 222-4200.
PROXY VOTING
A proxy allows you as a Shareholder to vote on significant matters even if
you cannot attend the Annual Meeting. However, sending in a signed proxy will
not prevent you from attending the meeting and voting in person. You have the
right to revoke a proxy at any time before it is exercised by signing and
returning a proxy bearing a later date, by giving written notice of revocation
to the Secretary of Cognizant, or by attending the meeting and voting in person.
Proxies must be filed with the secretary of the meeting prior to or at the
commencement of the meeting.
All properly signed proxies not revoked will be voted at the meeting in
accordance with your instructions. A proxy which you sign and return as a
Shareholder of record without instructions marked in the boxes will be voted, as
to proposals specified in the proxy, in accordance with the recommendations of
the Board of Directors as outlined in this Proxy Statement. If any other
proposals are brought before the meeting and submitted to a vote, all proxies
will be voted in accordance with the judgment of the persons voting those
proxies.
The previous paragraph does not apply to any Cognizant shares you hold in
the Cognizant Corporation Savings Plan (the "Savings Plan"). If you have Savings
Plan contributions invested in Cognizant Common Stock, the proxy will serve as a
voting instruction for the trustee of the Savings Plan, as well as a proxy for
any shares registered in your own name. If a proxy covering shares in the
Savings Plan has not been received prior to April 3, 1998 or if you sign and
return it without instructions marked in the boxes, the trustee will vote those
Savings Plan shares in the same proportion as the Savings Plan shares for which
it has received instructions, except as otherwise required by law.
RECORD DATE, QUORUM AND VOTING REQUIREMENTS
Only holders of record of Cognizant Common Stock, par value $.01 per share,
at the close of business on March 3, 1998 are eligible to vote at the meeting.
As of the close of business on March 3, 1998, Cognizant had outstanding
163,322,977 shares of Common Stock. Each share of Common Stock is entitled to
one vote per share.
Cognizant's By-Laws provide that a majority of the shares entitled to vote,
present in person or represented by proxy, constitutes a quorum at meetings of
Shareholders. Shares that abstain from voting are counted for purposes of
establishing a quorum, as are shares which a broker holds in "street name" and
votes on some matters but not others ("broker non-votes").
Directors are elected by a plurality of the voting power present in person
or represented by proxy at the meeting and entitled to vote. If you are present
at the meeting but do not vote for a particular nominee, or if you have given a
proxy and properly withhold authority to vote for a nominee, or if there are
broker non-votes, the shares withheld or not voted will have no effect on the
outcome of the vote.
The ratification of the appointment of independent accountants is
determined by the affirmative vote of the majority of the voting power present
in person or represented by proxy at the meeting and entitled to vote on the
matter. If you abstain from voting or direct your proxy to abstain from voting
on this matter, your shares are considered present at the meeting for the matter
but, since they are not votes in favor of the matter, they will have the same
effect as votes against the matter. Broker non-votes are not considered present
and they are, therefore, not counted in respect of this matter.
<PAGE>
PROXY SOLICITATION
Employees of Cognizant may communicate with you and other Shareholders to
solicit your proxies. Cognizant also has retained Georgeson & Company Inc. to
assist in the solicitation of proxies for a fee estimated at $8,000 plus
expenses. Cognizant will pay all expenses related to proxy solicitation.
Cognizant and Georgeson & Company Inc. will request banks and brokers to solicit
proxies from their customers where appropriate and will reimburse them for
reasonable out-of-pocket expenses.
SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth the number of shares of Cognizant Common
Stock, par value $.01 per share, the only outstanding equity security (other
than stock options) or voting security of Cognizant, beneficially owned by each
of the directors, each nominee for director and each of the executive officers
named in the Summary Compensation Table below, and all present directors and
executive officers of Cognizant as a group, at December 31, 1997. The table also
sets forth the name and address of the only person known to Cognizant to be the
beneficial owner of more than 5% of the outstanding Common Stock (the "5%
Owner") and the number of shares so owned, to Cognizant's knowledge, on December
31, 1997. This information is based upon information furnished by each such
person (or, in the case of the 5% Owner, based upon a Schedule 13G filed by the
5% Owner with the Securities and Exchange Commission ("SEC")). Please note that
in certain cases shares required under rules of the SEC to be shown as
beneficially owned are shares as to which the indicated person holds only rights
to acquire within 60 days through exercise of stock options. Unless otherwise
stated, the indicated persons have sole voting and investment power over the
shares listed. All directors and executive officers as a group own less than 1%
of the Common Stock. Percentages are based upon the number of shares of
Cognizant Common Stock outstanding at December 31, 1997, plus, where applicable,
the number of shares that the indicated person or group had a right to acquire
within 60 days of such date.
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES AND NATURE OF OWNERSHIP
---- ----------------------------------------
<S> <C> <C>
Clifford L. Alexander, Jr. ..... 3,300 Direct
898 Restricted Stock Grant (1)
1,166 Right to Acquire Within 60 Days by Exercise of Options
-------
5,364
Victoria R. Fash ............... 2,304 Direct
6,500 Restricted Stock Grant (2)
91,344 Right to Acquire Within 60 Days by Exercise of Options
-------
100,148(3)
John P. Imlay, Jr. ............. 10,000 Direct
898 Restricted Stock Grant (1)
1,166 Right to Acquire Within 60 Days by Exercise of Options
-------
12,064
William G. Jacobi .............. 6,742 Direct
149,266 Right to Acquire Within 60 Days by Exercise of Options
-------
156,008
Robert Kamerschen .............. 4,000 Direct
898 Restricted Stock Grant (1)
1,166 Right to Acquire Within 60 Days by Exercise of Options
-------
6,064
Alan J. Klutch ................. 12,206 Direct
134,619 Right to Acquire Within 60 Days by Exercise of Options
-------
146,825
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES AND NATURE OF OWNERSHIP
---- ----------------------------------------
<S> <C> <C>
Robert J. Lanigan .............. 7,100 Direct (4)
898 Restricted Stock Grant (1)
1,166 Right to Acquire Within 60 Days by Exercise of Options
-------
9,164
H. Eugene Lockhart ............. 300 Direct
898 Restricted Stock Grant (1)
1,166 Right to Acquire Within 60 Days by Exercise of Options
-------
2,364
James R. Peterson .............. 4,300 Direct
898 Restricted Stock Grant (1)
1,166 Right to Acquire Within 60 Days by Exercise of Options
-------
6,364
M. Bernard Puckett ............. 3,600 Direct
898 Restricted Stock Grant (1)
1,166 Right to Acquire Within 60 Days by Exercise of Options
-------
5,664
Kenneth S. Siegel .............. 31,666 Right to Acquire Within 60 Days by Exercise of Options
William C. Van Faasen 200 Direct
Robert E. Weissman 122,964 Direct
635,621 Right to Acquire Within 60 Days by Exercise of Options
-------
758,585
All Directors and Executive
Officers as a Group 1,251,832(5)
FMR Corp.
82 Devonshire Street
Boston, MA 02109 18,355,768(6)(7)
</TABLE>
- ----------
(1) Represents shares of restricted stock granted under the Non-Employee
Directors' Stock Incentive Plan, which shares are scheduled to vest on
November 15, 2001.
(2) Represents shares of restricted stock granted under the Key Employees'
Stock Incentive Plan, which shares are scheduled to vest on October 21,
1998.
(3) Ms. Fash also owns 5,000 shares of restricted Class A Common Stock of
Cognizant's subsidiary Cognizant Technology Solutions Corporation ("CTS")
purchased pursuant to the CTS Restricted Stock Purchase Plan. These
restricted shares vest upon the occurrence of an initial public offering of
CTS, and represent less than 1% of the outstanding shares of CTS.
(4) These shares are held in two revocable trusts (one trust holding 5,900
shares and the other 1,200 shares) for the benefit of Mr. Lanigan in which
he is the settlor and sole beneficial owner and over which he has sole
investment control.
(5) Includes all shares beneficially owned regardless of nature of ownership,
and all rights to acquire shares within 60 days. Excludes shares owned by
Mr. Jacobi, who was not an executive officer as of the date of this Proxy
Statement.
(6) Represents 11.32% of the total outstanding Common Stock on December 31,
1997.
(7) FMR Corp. and its wholly owned subsidiaries, Fidelity Management & Research
Company ( "Fidelity ") and Fidelity Management Trust Company ( "FMTC "),
jointly filed a Schedule 13G with the SEC on February 14, 1998. This
Schedule 13G shows that Fidelity, a registered investment adviser,
beneficially owned as of December 31, 1997, 17,116,190 shares of Common
Stock. Edward C. Johnson, 3rd, Chairman of FMR Corp., FMR Corp. and the
registered investment companies advised by Fidelity each has sole
dispositive power (but no voting power) over such shares. Voting power with
respect to such shares resides with the respective Boards of Trustees of
each of the Fidelity Funds. Mr. Johnson and FMR Corp. each has sole
dispositive power over 1,239,578 shares of Common Stock held by FMTC, a
bank as defined under the Securities and Exchange Act of 1934, as amended,
which serves as investment manager for institutional accounts, sole voting
power over 749,378 of such shares and no voting power over 490,200 of such
shares.
3
<PAGE>
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
The members of the Board of Directors of Cognizant are grouped into three
classes, one of which is elected at each Annual Meeting of Shareholders to hold
office for a three-year term and until successors are elected and have
qualified.
The Board of Directors has nominated Clifford L. Alexander, Jr., Robert E.
Weissman and William C. Van Faasen for election as Class II Directors at the
1998 Annual Meeting for a three-year term expiring at the 2001 Annual Meeting.
Messrs. Alexander and Weissman have served as directors since October 14, 1996,
shortly before Cognizant became an independent public company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION AS DIRECTORS OF
THE NOMINEES NAMED ABOVE.
James R. Peterson, who was elected as a Class II Director on October 14,
1996 by a Unanimous Written Consent of the Board of Directors of Cognizant, has
reached age 70 and, in accordance with Board policy, will retire from the Board
on April 13, 1998, the date of the 1998 Annual Meeting of Shareholders.
On January 15, 1998, Cognizant announced that it would distribute shares of
a new public company, IMS Health Incorporated ("IMS Health"), to its
Shareholders later in 1998. Although the directors of IMS Health have not yet
been selected, Cognizant expects that one or more of the nominees or other
members of the Board of Directors may be selected as directors of IMS Health
and, if elected, may resign as a director of Cognizant at the time that shares
in IMS Health are distributed. In such event, those directors of Cognizant
remaining in office would select replacement directors in accordance with
Cognizant's By-Laws.
Unless you otherwise instruct, proxies will be voted for election of all
the nominees, of whom Messrs. Alexander and Weissman are now members of the
Board. If any nominee is unwilling or unable to serve as a director and the
Board does not, in that event, choose to reduce the size of the Board and Class
II, the persons voting the proxy will have discretion to vote for the election
of another person in accordance with their judgment.
The following table provides, for each nominee for election as a Class II
Director, the nominee's name, position with Cognizant, the year the nominee
first became a director, principal occupations during the last five years, age,
and other directorships in public companies.
NOMINEES FOR CLASS II DIRECTORS FOR TERMS EXPIRING AT THE 2001 ANNUAL MEETING:
<TABLE>
<CAPTION>
PRINCIPAL
POSITIONS OCCUPATIONS
WITH DIRECTOR DURING LAST OTHER
NAME COGNIZANT SINCE FIVE YEARS AGE DIRECTORSHIPS
---- --------- ----- ---------- --- -------------
<S> <C> <C> <C> <C> <C>
Clifford L. Alexander, Jr. Director 1996 President, Alexander & 64 The Dun &
Associates, Inc., Washington, Bradstreet
DC (consulting firm Corporation; MCI
specializing in workforce Communications
inclusiveness), 1/81 to Corporation;
present. Dreyfus Third
Century Fund;
Dreyfus General
Family of Funds;
Dreyfus Premier
Family of Funds;
Mutual of America
Life Insurance
Company; American
Home Products
Corp.; TLC Beatrice
International
Holdings, Inc.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
POSITIONS OCCUPATIONS
WITH DIRECTOR DURING LAST OTHER
NAME COGNIZANT SINCE FIVE YEARS AGE DIRECTORSHIPS
---- --------- ----- ---------- --- -------------
<S> <C> <C> <C> <C> <C>
Robert E. Weissman Chairman and 1996 Chairman and Chief Executive 57 State Street Boston
Chief Officer, Cognizant, 9/96 to Corporation;
Executive present; Chairman and Chief Gartner Group, Inc.
Officer, Executive Officer, The Dun &
Director Bradstreet Corporation,
Wilton, CT (information
services) 4/95 to 10/96;
President and Chief Executive
Officer 1/94 to 3/95;
President and Chief Operating
Officer 1/85 to 12/93.
William C. Van Faasen Nominee for -- President and Chief Executive 49 BankBoston
Director Officer, Blue Cross and Blue Corporation.
Shield of Massachusetts,
Boston, MA (health
insurance), 9/92 to
present.
</TABLE>
The following tables provide, for each Class I and Class III Director
continuing in office, the director's name, position with Cognizant, the year the
director first became a director, principal occupations during the last five
years, age, and other directorships in public companies.
CLASS I DIRECTORS HOLDING OFFICE FOR TERMS EXPIRING AT THE 2000 ANNUAL MEETING:
<TABLE>
<CAPTION>
PRINCIPAL
POSITIONS OCCUPATIONS
WITH DIRECTOR DURING LAST OTHER
NAME COGNIZANT SINCE FIVE YEARS AGE DIRECTORSHIPS
---- --------- ----- ---------- --- -------------
<S> <C> <C> <C> <C> <C>
John P. Imlay, Jr. Director 1996 Chairman, Imlay Investments, 61 Gartner Group,
Inc., Atlanta, GA (private Inc.; Metromedia
venture capital investments), International Group.
1990 to present; Chairman,
Dun & Bradstreet Software
Services, Inc., Atlanta, GA
(software company), 3/90 to
11/96; Principal Executive
Officer, 3/90 to 1/93;
President, 3/90 to 3/92.
Robert Kamerschen Director 1996 Chairman and Chief Executive 62 ADVO, Inc.;
Officer, ADVO, Inc., Windsor, Micrografx, Inc.
CT (direct mail marketing
services), 11/88 to present.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
POSITIONS OCCUPATIONS
WITH DIRECTOR DURING LAST OTHER
NAME COGNIZANT SINCE FIVE YEARS AGE DIRECTORSHIPS
---- --------- ----- ---------- --- -------------
<S> <C> <C> <C> <C> <C>
H. Eugene Lockhart Director 1996 President, Retail Banking 48 Niagara Mohawk
Division, BankAmerica Power Corp.; RJR
Corporation, San Francisco, Nabisco Holdings
CA (financial services), 5/97 Corp.
to present; President and
Chief Executive Officer,
MasterCard International
Inc., Purchase, NY (credit
card company), 3/94 to 4/97;
Executive Vice President,
First Manhattan Consulting
Group, New York, NY (banking
consulting firm), 9/92 to
2/94; Chief Executive
Officer, UK Banking and Group
Operations, Midland Bank plc,
London, England, 1986 to 1993.
</TABLE>
CLASS III DIRECTORS HOLDING OFFICE FOR
TERMS EXPIRING AT THE 1999 ANNUAL MEETING:
<TABLE>
<CAPTION>
PRINCIPAL
POSITIONS OCCUPATIONS
WITH DIRECTOR DURING LAST OTHER
NAME COGNIZANT SINCE FIVE YEARS AGE DIRECTORSHIPS
---- --------- ----- ---------- --- -------------
<S> <C> <C> <C> <C> <C>
Robert J. Lanigan Director 1996 Limited Partner, Palladium 69 The Dun &
Equity Partners, New York, NY Bradstreet
(private investment firm), Corporation;
6/97 to present; Chairman Owens-Illinois,
Emeritus, Owens-Illinois, Inc.; Transocean
Inc., Toledo, OH (glass, Offshore Inc.;
plastics and other packaging Sonat, Inc.;
products), 1/92 to present; Chrysler
Chairman of the Board 4/84 to Corporation.
10/91; Chief Executive
Officer, 1/84 to 9/90.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
POSITIONS OCCUPATIONS
WITH DIRECTOR DURING LAST OTHER
NAME COGNIZANT SINCE FIVE YEARS AGE DIRECTORSHIPS
---- --------- ----- ---------- --- -------------
<S> <C> <C> <C> <C> <C>
M. Bernard Puckett Director 1996 Private Investor, 1/96 to 53 P-Com, Inc.; R.R.
present; President and Chief Donnelley & Sons
Executive Officer, Mobile Company; Oacis
Telecommunication HealthCare Holdings
Technologies Corp., Corp.
Jackson, MS
(telecommunications), 5/95
to 1/96; President, Chief
Operating Officer, 1/94 to
5/95; Senior Vice
President-Corporate
Strategy and Development,
International Business
Machines Corporation,
Armonk, NY (computers),
7/93 to 12/93; General
Manager of Applications
Solutions, 1/91 to 7/93.
</TABLE>
COMMITTEES OF THE BOARD AND MEETINGS
The Audit Committee of the Board of Directors reviews the scope of the
audits of Cognizant's internal audit staff and the auditors' evaluation of
internal controls, receives an annual summary of the results of such audits and
reviews the scope of the audit of Cognizant's consolidated financial statements
by independent public accountants and their report on the audit. The committee
also recommends the appointment of Cognizant's independent public accountants to
the full Board. The Audit Committee consists of Messrs. Alexander (Chairman),
Lanigan and Lockhart. The Audit Committee held three meetings during 1997.
The Compensation and Benefits Committee of the Board of Directors
establishes and revises all compensation arrangements for certain executives of
Cognizant consistent with a statement of executive compensation philosophy
adopted by the Board of Directors. The committee also has authority to
administer Cognizant's executive benefit plans and to establish and review the
policies regarding executive and all other benefit programs. The committee
consists of Messrs. Puckett (Chairman), Imlay, Kamerschen and Peterson. The
Compensation and Benefits Committee held four meetings during 1997.
The Nominating Committee of the Board of Directors screens candidates for
membership on the Board of Directors and makes recommendations to the full
Board. Shareholders' recommendations of nominees for membership on the Board of
Directors will be considered by the Nominating Committee; the Nominating
Committee has not adopted formal procedures for the submission of such
recommendations. However, Shareholders may recommend nominees for membership on
the Board of Directors to the Nominating Committee by submitting the names in
writing to: Kenneth S. Siegel, Senior Vice President, General Counsel and
Secretary, Cognizant Corporation, 200 Nyala Farms, Westport, Connecticut 06880.
The Nominating Committee consists of Messrs. Alexander, Imlay, Kamerschen,
Lanigan, Lockhart, Peterson and Puckett. Cognizant's By-Laws specify certain
time limitations, notice requirements and other procedures applicable to the
submission of nominations before an Annual or Special Meeting. The Nominating
Committee was recently established and held no meetings during 1997.
Six meetings of the Board of Directors were held during 1997. No Director
attended fewer than 75% of the total number of meetings of the Board of
Directors and of the Committees of the Board on which the Director serves.
7
<PAGE>
PROPOSAL NO. 2: APPOINTMENT OF AND RELATIONSHIP WITH
INDEPENDENT PUBLIC ACCOUNTANTS
Upon recommendation of the Audit Committee, the Board of Directors has
appointed Coopers & Lybrand L.L.P. ("Coopers & Lybrand") as independent public
accountants to audit the consolidated financial statements of Cognizant for
1998. This appointment is subject to ratification by the Shareholders at the
Annual Meeting.
Coopers & Lybrand also acted as Cognizant's independent public accountants
for 1997. In connection with its audit of the consolidated financial statements,
Coopers & Lybrand also audited the separate financial statements of certain
subsidiaries, reviewed certain filings with the SEC and performed certain
non-audit services.
The Audit Committee has reviewed each professional service provided by
Coopers & Lybrand during 1997 and the types of professional non-audit services
which it may provide in the future, and has concluded that the performance of
non-audit services does not affect the independence of Coopers & Lybrand in its
audit of Cognizant's consolidated financial statements.
A representative of Coopers & Lybrand is expected to be available to answer
questions at the Annual Meeting and is free to make statements during the
meeting.
If the appointment of Coopers & Lybrand is not approved by the
Shareholders, or Coopers & Lybrand ceases to act as Cognizant's independent
accountants, or the Board of Directors removes Coopers & Lybrand as Cognizant's
independent accountants, the Board will appoint other independent accountants.
Any engagement of new accountants for periods following the 1999 Annual Meeting
will be subject to ratification by the Shareholders at that meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF COOPERS & LYBRAND.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
REPORT OF THE COMPENSATION AND BENEFITS COMMITTEE ON EXECUTIVE COMPENSATION
This report provides an explanation of the philosophy underlying
Cognizant's Executive Compensation Program and also describes how decisions were
implemented regarding the compensation paid by Cognizant to Robert E. Weissman,
Chief Executive Officer. The Compensation & Benefits Committee ("Committee") of
the Board of Directors reviews and approves compensation for senior executives
of Cognizant, including the Chief Executive Officer and the other executives
whose compensation is described in this Proxy Statement. The Committee is
composed entirely of outside directors and has been advised by independent
experts experienced in the design and implementation of executive compensation
arrangements.
EXECUTIVE COMPENSATION PHILOSOPHY
The Committee and the Board of Directors of Cognizant believe that a key to
building Shareholder value is to closely align the financial interests of
Shareholders with those of Cognizant's employees, including its senior
executives. Moreover, we believe top-caliber executives and employees who
deliver customer satisfaction are the other key drivers of Shareholder value. We
believe both our Shareholders and Cognizant are best served by operating the
business with a long-term perspective while striving to deliver annual results
that are on par with those of other growth companies. Cognizant relies heavily
on incentive compensation programs to motivate superior performance, both short-
and long-term. These plans, which are paid in cash and stock, place a major
portion of senior executives' compensation at risk to assure a sharp and
continuing focus on building Shareholder value. The cash compensation programs
are variable and are tied to the business unit or corporate performance for
which executives are held directly accountable. The focus of cash compensation
is on improving annual financial results. The stock options focus on creating
and sustaining Shareholder value long-term, and serve as the primary source of
future compensation growth opportunity for executives. Executives are expected
to acquire and hold significant amounts of stock and, in part, Cognizant's
compensation programs are designed to accomplish that objective.
Total compensation opportunities for Cognizant executives are highly
performance-driven in form and nature. They are designed to reward delivery of
Shareholder value with levels of compensation that are consistent with the
8
<PAGE>
practices of high-performing companies that are likely to compete for the
services of our executives. This enables Cognizant to attract the highest
caliber of executive talent in an increasingly competitive market.
COMPONENTS OF THE COMPENSATION PROGRAM
The Committee believes that the form and level of executive compensation
helps Cognizant attract and retain highly motivated and effective executives who
are critical to the future success of the business.
All of the Committee's judgments about the appropriateness of levels of
compensation opportunities and payments to executives are considered in the
context of competitive practices among a comparator group of companies. The
companies used for comparison purposes include several of Cognizant's peer group
of competitors, as well as companies that are not primarily engaged in the
healthcare information services industry. These other companies are comparable
to Cognizant in terms of one or more of the following characteristics: (1)
projected revenue growth, operating income, assets, market value and total
shareholder returns; (2) significant market presence outside the United States;
(3) leading market shares in significant or emerging markets; (4) similarities
in scope of position responsibilities, executive expertise and the magnitude of
performance challenges faced; and (5) direct competitors for executive talent.
Compensation data for the comparator companies are obtained from
benchmarking surveys conducted by independent compensation consultants. These
surveys cover more companies than those used in the peer group comparison shown
in the Total Shareholder Return Graph on page 11. In reviewing the data, the
Committee takes into account how Cognizant's compensation policies and overall
performance compare to similar indices for the comparator group. We do not seek
to position compensation within any particular range of the comparator group.
Our decisions are based on individual, business unit and company performance,
and Shareholder returns.
The compensation package for executives comprises base salary, annual cash
incentives and long-term incentives in the form of stock options and,
occasionally, restricted stock.
BASE SALARY. The base salaries of executives compensate for ongoing
performance of assigned responsibilities. In determining whether to adjust the
base salary of an executive, including the Chief Executive Officer, the
Committee takes into account salaries paid for comparable positions at other
companies, changes in the executive's responsibilities, the individual
performance of the executive and Cognizant's compensation philosophy.
ANNUAL INCENTIVES. The annual incentive plan rewards executives for the
financial results achieved for the year. Bonus awards paid are dependent on the
level of achievement of financial targets set at the beginning of the plan year.
Financial targets for 1998 are based on the performance measures of revenue
growth, operating earnings and cash flow of each executive's business unit or
Cognizant's consolidated results (as were the targets for 1997). Potentially,
qualitative goals such as customer satisfaction may be included as measures of
executive performance. No bonus is earned with respect to a performance measure
unless a performance "floor" for that measure is exceeded; the bonus opportunity
with respect to a measure is earned if the target is achieved; achievement
between the floor and the target results in a lower bonus with respect to that
performance measure. An amount larger than the bonus opportunity for each
performance measure can be earned, up to a specified limit, for exceeding the
target for that measure.
STOCK OPTIONS. Stock options are Cognizant's primary long-term incentive
mechanism and serve to reward executives in the same manner as our Shareholders
benefit. The options only have compensation value when Shareholder value
increases. In 1996 executives were granted options, and offered the opportunity
to purchase additional options by paying ten percent of the option grant value
in 1996. The remaining ninety percent is payable at exercise. All options have a
life of ten years, vest proportionately over six years and have an exercise
price equal to the fair market value of the Common Stock on the grant date. The
only options granted to senior executives in 1997 were to newly hired
executives.
Future grants may be awarded to senior executives and will depend on a
number of factors including: (1) level of responsibility; (2) individual
performance; (3) competitiveness of cash compensation; (4) potential future
contributions; and (5) whether another option grant would provide an appropriate
reward and incentive for the executive to sustain and enhance Shareholder value
longer-term. The Committee believes this approach is the most effective means
for aligning Shareholder and executive interests, reinforcing an entrepreneurial
mindset, building a high-performance culture and increasing the "at risk"
portion of each executive's compensation package.
9
<PAGE>
RESTRICTED STOCK. Certain executive officers were awarded restricted stock
grants in 1997 in connection with receiving additional responsibilities. These
shares vest one year after the date of the grant. Until the shares vest, the
executive is not able to sell or otherwise dispose of them, but is entitled to
vote the shares and receive dividends.
CEO COMPENSATION. Mr. Weissman participates in the executive compensation
program described in this report. Mr. Weissman's 1997 cash compensation level
and opportunities as Chief Executive Officer of Cognizant consisted of a base
salary and a target annual incentive opportunity of $750,000 each, which was the
same annual compensation rate he had for 1996. Mr. Weissman's financial targets
for earning his annual incentive, as determined by the Committee, were based on
the same three measures as for the other senior executives with overall
corporate responsibility -- Cognizant's consolidated revenue, operating income
and cash flow for 1997. The Committee gave different weights to each measure in
determining the bonus to be earned (revenue, 50%; operating income, 40%; and
cash flow, 10%), based on how it viewed their relative importance in rewarding
improvement in annual results. Because Cognizant's results for 1997 were above
the annual incentive targets established at the beginning of the year, the bonus
payment to Mr. Weissman shown in the Summary Compensation Table was higher than
his $750,000 opportunity. Mr. Weissman and the other senior corporate executives
also received a payment in addition to the incentive opportunity based on
Cognizant's achievement of an earnings-per-share target established at the
beginning of 1997. Mr. Weissman received no grant of stock options in 1997.
The Committee believes Mr. Weissman's current compensation is fully
consistent with Cognizant's philosophy on executive compensation, and
appropriate in view of Cognizant's performance as indicated in the Total
Shareholder Return graph shown below. The graph compares Cognizant's cumulative
total return, since Cognizant's shares began trading independently in October
1996, to a performance peer group of eight business information and service
providers. While Cognizant's cumulative total return to Shareholders was
slightly less than the Standard & Poor's 500 Index over that period, its return
to Shareholders was significantly higher than that of the performance peer
group.
TAX DEDUCTIBILITY. The Internal Revenue Code (the "Code") has set certain
limitations on the deductibility of compensation paid to a public company's
Chief Executive Officer and the other four most highly compensated senior
executives (the "highly-compensated executives"). For 1997, the compensation
paid to the highly-compensated executives by Cognizant is expected to qualify
for tax deductibility under transition rules applicable to spin-offs, as a
result of Cognizant's 1996 spin-off from The Dun & Bradstreet Corporation. For
1998, none of the compensation paid to the highly-compensated executives is
expected to exceed the Code limitations, as a result of Cognizant's planned
spin-off of IMS Health. The Committee plans to address the issue of qualifying
subsequent years' compensation for deductibility under the Code in the future.
COMPENSATION AND BENEFITS COMMITTEE
M. Bernard Puckett, Chairman
John P. Imlay, Jr.
Robert Kamerschen
James R. Peterson
10
<PAGE>
COMPARISON OF TOTAL SHAREHOLDER RETURN OF
COGNIZANT, S&P 500 AND COGNIZANT PEER GROUP
--GRAPHICAL REPRESENTATION OF DATA TABLE BELOW--
This graph compares total shareholder return of Cognizant, the Standard &
Poor's 500 Index and a group of Cognizant peer companies from October 17, 1996,
the first day of when-issued trading in Cognizant Common Stock, until December
31, 1997. Since there is no widely recognized standard industry group comprising
Cognizant and peer companies, a group of companies representing a broad range of
business information and service providers was used. The performance peer group
includes Automatic Data Processing, Inc., Ceridian Corp., Dow Jones & Company,
Inc., Forrester Research, Inc., Medaphis Corporation, Policy Management Systems
Corporation, Reuters Holding PLC and Shared Medical Systems Corporation.
EXECUTIVE COMPENSATION TABLES
SUMMARY COMPENSATION TABLE
Four of the executive officers named in the Summary Compensation Table
below were employed by The Dun & Bradstreet Corporation ("Dun & Bradstreet")
until November 1, 1996, the date Cognizant was spun-off from Dun & Bradstreet
(the "Spin-off Date"). Accordingly, for 1996 the Summary Compensation Table
shows separately the amounts paid by Cognizant (indicated as "CZT") starting on
the Spin-off Date and the amounts paid by Dun & Bradstreet (indicated as "D&B")
before the Spin-off Date.
In particular, Dun & Bradstreet's 1996 payments include acceleration of
certain long-term awards (as described in the footnotes to the Summary
Compensation Table) upon the Spin-off as required by the applicable Dun &
Bradstreet compensation plans. In addition, Cognizant has discontinued the
performance unit component of Dun & Bradstreet's compensation program.
All 1995 compensation amounts were paid by Dun & Bradstreet.
11
<PAGE>
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------
(a) (b) (c) (d) (e)
OTHER
ANNUAL
COMPENSA-
NAME AND PRINCIPAL SALARY BONUS (1) TION (2)
POSITION YEAR ($) ($) ($)
------------------ ---- ------ --------- ------
<S> <C> <C> <C> <C> <C>
Robert E. Weissman ........... 1997 CZT 750,000 1,007,100 1,006
----------------------------------------------------------
Chairman and Chief 1996 CZT 125,000 125,000 0
Executive Officer
D&B 720,833 1,887,500 89
------- --------- -----
Total 845,833 2,012,500 89
----------------------------------------------------------
1995 D&B 830,000 802,095 216
----------------------------------------------------------
----------------------------------------------------------
William G. Jacobi(7) ......... 1997 CZT 400,000 375,984 4,352
----------------------------------------------------------
Executive Vice 1996 CZT 66,667 46,667 0
President
D&B 333,333 615,000 2,921
------- --------- -----
Total 400,000 661,667 2,921
----------------------------------------------------------
1995 D&B 377,315 277,557 3,448
----------------------------------------------------------
----------------------------------------------------------
Victoria R. Fash ............. 1997 CZT 375,000 349,128 0
----------------------------------------------------------
Executive Vice President & 1996 CZT 62,500 43,333 0
Chief Financial Officer
D&B 245,833 462,500 4,825
------- --------- -----
Total 308,333 505,833 4,825
----------------------------------------------------------
1995 D&B 258,359 250,901 0
----------------------------------------------------------
----------------------------------------------------------
Alan J. Klutch ............... 1997 CZT 325,000 303,473 0
----------------------------------------------------------
Senior Vice President 1996 CZT 54,167 33,333 0
--Finance
D&B 270,833 450,000 30,116
------- --------- -----
Total 325,000 483,333 30,116
----------------------------------------------------------
1995 D&B 312,500 224,772 34,778
----------------------------------------------------------
----------------------------------------------------------
Kenneth S. Siegel(8) ......... 1997 CZT 299,045 222,905 127,388
----------------------------------------------------------
Senior Vice President,
Secretary and General Counsel
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------------
AWARDS PAYOUTS
------------------------ ---------
(a) (f) (g) (h) (i)
SECURITIES
RESTRICTED UNDERLYING LONG-TERM ALL OTHER
STOCK OPTIONS/ INCENTIVE COMPENSA-
NAME AND PRINCIPAL WARD (S)(3) SARS (4) PAYOUTS (5) TION (6
POSITION ($) (#) ($) ($)
------------------ ---------- ---------- ----------- -------
Robert E. Weissman ........... 0 0 0 72,568 CZT
--------------------------------------------------------------
Chairman and Chief 0 575,000* 0 3,750 CZT
Executive Officer 400,000**
568,721***
0 0 4,432,257 65,313 D&B
--------- --------- --------- ------
0 1,543,721 4,432,257 69,063
--------------------------------------------------------------
443,895 34,823 887,800 55,063 D&B
--------------------------------------------------------------
--------------------------------------------------------------
William G. Jacobi(7) ......... 0 0 0 28,944 CZT
--------------------------------------------------------------
Executive Vice 0 275,000* 0 2,000 CZT
President 125,000**
114,842***
0 0 996,459 25,502 D&B
--------- --------- --------- ------
0 514,842 996,459 27,502
--------------------------------------------------------------
277,964 13,813 155,996 21,217 D&B
--------------------------------------------------------------
--------------------------------------------------------------
Victoria R. Fash ............. 268,938 0 0 19,655 CZT
--------------------------------------------------------------
Executive Vice President & 0 275,000* 0 1,875 CZT
Chief Financial Officer 125,000**
34,617***
0 0 383,002 16,777 D&B
--------- --------- --------- ------
0 434,617 383,002 18,652
--------------------------------------------------------------
219,283 8,788 38,600 4,176 D&B
--------------------------------------------------------------
--------------------------------------------------------------
Alan J. Klutch ............... 0 0 0 22,637 CZT
--------------------------------------------------------------
Senior Vice President 0 175,000* 0 1,625 CZT
--Finance 50,000**
122,451***
0 0 869,045 19,868 D&B
--------- --------- --------- ------
0 347,451 869,045 21,493
--------------------------------------------------------------
101,303 6,588 202,650 6,795 D&B
--------------------------------------------------------------
--------------------------------------------------------------
Kenneth S. Siegel(8) ......... 0 190,000 0 4,800 CZT
--------------------------------------------------------------
Senior Vice President,
Secretary and General Counsel
</TABLE>
- ----------
* Effective Date Stock Options
** Effective Date Purchased Options
*** D&B Substitute Options
12
<PAGE>
(1) The 1997 bonus awards were earned in 1997 and paid in 1998. The 1996
Cognizant bonus amounts were earned in 1996 and paid in 1997 while the 1996
Dun & Bradstreet bonus amounts were earned and paid in 1996. The 1995 bonus
amounts were earned in 1995 and paid in 1996.
(2) Amounts shown for those other than Mr. Siegel represent reimbursement for
taxes paid by the named executive officers with respect to company-directed
travel and certain other expenses. The value of certain personal benefits
is not included since it does not exceed $50,000 for any named executive
officer. Amounts shown for Mr. Siegel include reimbursement of relocation
expenses in connection with his joining Cognizant and related tax
obligations.
(3) The amount shown for Ms. Fash represents the dollar value of restricted
stock on the date of the grant. This grant was a special one-time award and
will vest one year following the date of the award. Dividends are paid at
the rate established from time to time for Cognizant Common Stock. In 1996,
no restricted stock was granted and there were no restricted stock holdings
outstanding for the named executive officers at December 31, 1996. Previous
Dun & Bradstreet restricted stock awards either vested or were paid in cash
in connection with the Spin-off. Amounts shown for 1995 represent the
dollar value on the date of grant of Dun & Bradstreet restricted stock
granted that year.
(4) Only the amounts designated as Effective Date Stock Options reflect new
Cognizant option grants for 1996. Those designated as Effective Date
Purchased Options are options that were purchased by the named executive
officers for cash at a price of 10% of the exercise price. The remaining
90% is payable if and when the options are exercised. The 10% purchase
price is forfeited if the options expire without being exercised, and the
portion of the purchase price attributable to vested options is also
forfeitable upon termination of employment in certain circumstances. The
new grants were designed to implement a front-loaded equity-based incentive
covering several years. Accordingly, while the grants are larger than
typical annual grants, none of the named executive officers who received
options in 1996 received options in 1997. The options designated as
Substitute Options were issued in substitution of Dun & Bradstreet options
that were canceled as of the Spin-off Date. Amounts granted in 1995
represent the original number of Dun & Bradstreet stock options granted in
1995. These shares are among the Dun & Bradstreet options that were
replaced by the Substitute Options shown in the 1996 grant. All the options
in this table are without tandem stock appreciation rights, except for the
Limited SARs described under the "Option/SAR Grants in Last Fiscal Year"
table below. In addition, Ms. Fash received a grant of options for 10,000
shares (without tandem stock appreciation rights) of Cognizant's subsidiary
Cognizant Technology Solutions Corporation, as described under the
"Option/SAR Grants in Last Fiscal Year" table below.
(5) Amounts shown for 1995 represent payments made under the Dun & Bradstreet
Key Employees Performance Unit Plan ("PUP"). The amounts shown for 1996
represent a cash payout of the cash and restricted stock components of the
1993, 1994 and 1995 PUP awards. The 1994 and 1995 PUP awards would normally
have been paid in future years, but were accelerated pursuant to the terms
of the PUP as a result of the Spin-off. Cognizant does not have an
incentive plan equivalent to the PUP.
(6) Amounts shown represent aggregate annual company contributions for the
account of each named executive officer under the Dun & Bradstreet Profit
Participation Plan ( "PPP ") and Profit Participation Benefit Equalization
Plan ( "PPBEP "), and the Cognizant Corporation Savings Plan ( "Savings
Plan ") and Savings Benefit Equalization Plan ( "SBEP "), plans which are
open to employees of Dun & Bradstreet or Cognizant and certain
subsidiaries. The PPP and Savings Plan are tax-qualified defined
contribution plans and the PPBEP and SBEP are non-qualified plans which
provide a benefit to participants in the PPP and Savings Plan equal to the
amount of company contributions that would have been made to the
participant's PPP and Savings Plan accounts but for certain Federal tax
laws.
(7) Mr. Jacobi ceased being an executive officer on December 31, 1997.
(8) Mr. Siegel joined Cognizant on January 31, 1997.
13
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------------------------------------------------------
(A) (B) (C) (D) (E) (F)
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS EXERCISE GRANT DATE
OPTIONS/SARS GRANTED TO OR BASE PRESENT
GRANTED (1) EMPLOYEES IN PRICE EXPIRATION VALUE (2)
NAME (#) FISCAL YEAR ($/SHARE) DATE ($)
---- ----------- ------------ --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Robert E. Weissman ..................... 0 NA NA NA NA
William G. Jacobi(3) ................... 0 NA NA NA NA
Victoria R. Fash(4) .................... 0 NA NA NA NA
Alan J. Klutch ......................... 0 NA NA NA NA
Kenneth S. Siegel(5) ................... 190,000 4.9% $33.0625 01/30/07 $1,678,032
</TABLE>
- ----------
(1) Amount shown represents the number of non-qualified stock options, without
tandem stock appreciation rights ("SARs"), granted in 1997. The option may
not be exercised for at least one year after grant and may then be
exercised in installments of one-sixth of the grant amount each year until
they are 100% vested. Payment must be made in full upon exercise in cash or
Common Stock. The option holder may elect to have shares of Common Stock
issuable upon exercise withheld by Cognizant to pay withholding taxes due.
The option shown includes Limited SARs in tandem with the option. Limited
SARs are exercisable only if and to the extent that the related option is
exercisable and are exercisable only during the 30-day period following the
acquisition of at least 20% of the outstanding Common Stock pursuant to a
tender or exchange offer not made by Cognizant. Each Limited SAR permits
the holder to receive cash equal to the excess over the related option
exercise price or the highest price paid pursuant to a tender or exchange
offer for Common Stock which is in effect at any time during the 60 days
preceding the date upon which the Limited SAR is exercised. Limited SARs
can be exercised regardless of whether Cognizant supports or opposes the
offer.
(2) Grant date present value is based on the Black-Scholes option valuation
model, which makes the following material assumptions for the January 31,
1997 grant: an expected stock-price volatility factor of 25%, a risk-free
rate of return of 6.23%, an annual dividend yield of 0.30%, an assumed time
of exercise of 4.5 years from grant date, and a reduction of approximately
15.4% to reflect the probability of forfeiture due to termination prior to
vesting. These assumptions may or may not be fulfilled. The amount shown
cannot be considered predictions of future value. In addition, the option
will gain value only to the extent the stock price exceeds the option
exercise price during the life of the option.
(3) Mr. Jacobi ceased being an executive officer on December 31, 1997.
(4) In 1997, Ms. Fash was granted options for 10,000 shares of Class A Common
Stock of Cognizant's subsidiary Cognizant Technology Solutions Corporation
("CTS") in her capacity as a director of CTS. This represents 1.2% of the
total CTS options granted in 1997. The options' exercise price approximates
fair market value on the date of grant and they expire on December 31,
2007. The options become exercisable on the first and second anniversary of
an initial public offering or controlling interest sale of CTS. The
potential realizable value of this grant assuming annual rates of
appreciation of the Class A Common Stock, from the grant date until the
expiration date, of 5% and 10% is calculated at $51,105 and$108,031,
respectively.
(5) Mr. Siegel joined Cognizant on January 31, 1997.
14
<PAGE>
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
The following table provides information as to option exercises by each of
the named executive officers during 1997 and the value of unexercised
in-the-money stock options at year-end.
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED VALUE OPTIONS/SARS AT FISCAL OPTIONS/SARS
ON EXERCISE REALIZED YEAR-END (1) (#) AT FISCAL YEAR-END (2) ($)
-------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Weissman Effective Date Options 0 0 162,499 812,501 $1,767,177 $8,835,948
Substitute Options 3,256 $ 6,756 473,122 49,985 $7,160,966 $ 546,848
15,813 $ 32,809
26,545 $430,483
William G. Jacobi(3) Effective Date Options 0 $ 0 66,666 333,334 $ 724,993 $3,625,007
Substitute Options 3,256 $ 5,535 82,600 16,479 $1,087,499 $ 189,244
3,588 $ 6,099
8,919 $124,015
Victoria R. Fash(4) Effective Date Options 0 $ 0 66,666 333,334 $ 724,993 $3,625,007
Substitute Options 0 $ 0 24,678 9,939 $ 300,235 $ 109,811
Alan J. Klutch Effective Date Options 0 $ 0 37,499 187,501 $ 407,802 $2,039,073
Substitute Options 3,256 $ 6,756 97,120 9,456 $1,491,515 $ 103,451
2,119 $ 4,397
7,803 $126,542
2,697 $ 39,256
Kenneth S. Siegel(5) Stock Options 0 $ 0 0 190,000 $ 0 $2,125,625
</TABLE>
- ----------
(1) No SARs were outstanding at December 31, 1997.
(2) The values shown equal the difference between the exercise price of
unexercised in-the-money options and the fair market value of the
underlying Common Stock at December 31, 1997. Options are in-the-money if
the fair market value of the Common Stock exceeds the exercise price of the
option.
(3) Mr. Jacobi ceased being an executive officer on December 31, 1997.
(4) The value at year-end of in-the-money options held by Ms. Fash for shares
of Class A Common Stock of CTS, a subsidiary of Cognizant, none of which
are presently exercisable, was zero.
(5) Mr. Siegel joined Cognizant on January 31, 1997.
15
<PAGE>
RETIREMENT BENEFITS
The following table sets forth the estimated aggregate annual benefits
payable under the Cognizant Retirement Plan, the Cognizant Corporation
Supplemental Executive Retirement Plan and the Cognizant Retirement Excess Plan
to persons in specified average final compensation and credited service
classifications upon retirement at age 65. Amounts shown in the table include
U.S. Social Security benefits and benefits payable under predecessor plans of
Dun & Bradstreet which would be deducted in calculating benefits payable under
these plans. These aggregate annual retirement benefits do not increase as a
result of additional credited service after 15 years.
Benefits vest after five years of credited service and are calculated as 5%
of average final compensation per year for the first 10 years of credited
service, and 2% per year for the next five years, up to a maximum of 60% of
average final compensation after 15 years of credited service.
ESTIMATED AGGREGATE ANNUAL RETIREMENT BENEFIT
AVERAGE ASSUMING CREDITED SERVICE OF:
FINAL ----------------------------------------------------------------
COMPENSATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS
- ------------ ---------- ----------- ---------- ----------
$ 550,000 $ 330,000 $ 330,000 $ 330,000 $ 330,000
700,000 420,000 420,000 420,000 420,000
850,000 510,000 510,000 510,000 510,000
1,000,000 600,000 600,000 600,000 600,000
1,300,000 780,000 780,000 780,000 780,000
1,600,000 960,000 960,000 960,000 960,000
1,900,000 1,140,000 1,140,000 1,140,000 1,140,000
The number of years of credited service for Messrs. Weissman and Jacobi and
Ms. Fash are, respectively, 18, 18 and 6.
Compensation, for the purpose of determining retirement benefits, consists
of base salary, annual bonuses, commissions and overtime pay. Severance pay,
income derived from equity-based awards, contingent payments and other forms of
special remuneration are excluded. A portion of the bonuses included in the
Summary Compensation Table above were not paid until the year following the year
in which they were accrued and expensed; therefore, compensation for purposes of
determining retirement benefits varies from the Summary Compensation Table
amounts in that bonuses expensed in the previous year but paid in the current
year are part of retirement compensation in the current year and any unpaid
current year's bonuses accrued and included in the Summary Compensation Table
are not. For 1997, compensation for purposes of determining retirement benefits
for Messrs. Weissman and Jacobi and Ms. Fash was, respectively, $875,000,
$446,667 and $418,333.
Average final compensation is defined as the highest average annual
compensation during five consecutive twelve-month periods in the last ten
consecutive twelve-month periods of the member's credited service. Members vest
in their accrued retirement benefit upon completion of five years' service. The
benefits shown in the table above are calculated on a straight-life annuity
basis.
Retirement benefits for Messrs. Klutch and Siegel are determined solely
under the Cognizant Retirement Plan and the Retirement Excess Plan. Under these
plans, Cognizant contributes 6% of the participant's compensation monthly to the
participant's cash balance in the plan. The cash balance earns monthly
investment credits based on the yield on 30-year Treasury bonds from time to
time. These plans also include a minimum monthly benefit for certain employees
who had attained age 50 and had earned 10 years of service as of October 31,
1996, including Mr. Klutch. The minimum benefit is equal to the excess of (i)
1.7% of final average compensation multiplied by years of credited service not
in excess of 25, plus 1.0% of average final compensation multiplied by years of
credited service in excess of 25, over (ii) 1.7% of the primary Social Security
insurance benefits multiplied by years of credited service not in excess of 25,
plus 0.5% of the primary Social Security insurance benefits multiplied by years
of credited service in excess of 25. Mr. Klutch's estimated annual benefits upon
retirement at age 65 are $202,828, based upon his credited service to date for
these plans of 23.5 years. This amount includes benefits payable under
predecessor plans of Dun & Bradstreet which would be deducted from the amount
payable under these plans. In 1997, Mr. Siegel was not eligible to participate
in the Cognizant Retirement Plan and the Cognizant Retirement Excess Plan.
CHANGE-IN-CONTROL AGREEMENTS
Cognizant has entered into agreements with the executive officers named in
the Summary Compensation Table above (as well as with other officers and key
employees of Cognizant and its subsidiaries), providing for certain benefits
upon termination of employment in the event of a Change in Control (as defined
below) of Cognizant. If, following a Change in Control, the employment of a
named executive officer is terminated without cause or he or she terminates
employment for "good reason"
16
<PAGE>
(generally, an adverse change in employment status, compensation or benefits, a
required relocation or the lapse of 12 months following the Change in Control),
the officer will receive a lump sum payment equal to three times base salary and
annual target bonus, reimbursement for outplacement expenses, life and health
insurance coverage for 36 months after termination, retiree medical coverage,
the accelerated vesting of stock options and the accelerated payment of prorated
annual and other bonuses. Messrs. Weissman and Jacobi and Ms. Fash will also
receive full vesting under the Supplemental Executive Retirement Plan and
crediting of the maximum years of service for purposes of determining the amount
of retirement benefits. A Change in Control will generally have occurred under
the following circumstances: (i) an acquisition by any person of 20% of the
combined voting power of Cognizant's securities, (ii) during any period of
twenty-four months a majority of the Board ceases to consist of (x) directors in
office at the beginning of such period or (y) directors whose election was
approved by two-thirds of the directors in office at the beginning of the period
or by directors whose election was so approved, (iii) Cognizant's merger or
consolidation with another entity (other than one in which Cognizant's shares
outstanding prior to the merger represent 66 2/3% of the voting power of the
surviving company and no shareholder holds 20% or more of such remaining voting
power) or (iv) the liquidation or sale of substantially all of Cognizant's
assets.
EXECUTIVE TRANSITION PLAN
The Cognizant Executive Transition Plan (the "ETP") provides severance
benefits to executive officers of Cognizant (including those named in the
Summary Compensation Table above) and certain of its subsidiaries, selected by
the Chief Executive Officer. The ETP generally provides for the payment of
severance benefits if the employment of a covered executive terminates by reason
of a reduction in force, job elimination, unsatisfactory job performance or a
mutually acceptable resignation. In the event of an eligible termination, the
executive will be paid 104 weeks of salary continuation consisting of annual
base salary and annual bonus opportunity for the year of termination. However,
if the executive is terminated by reason of unsatisfactory performance, the
bonus opportunity will not be included.
In addition, the ETP provides to eligible terminated executives (i)
continued medical, dental and life insurance coverage throughout the salary
continuation period; (ii) payment of the annual bonus for the year of
termination that would have been paid if employment continued, prorated based on
the number of months worked during that year; and (iii) in certain instances,
outplacement services and financial counseling. The Chief Executive Officer may
increase or decrease ETP benefits for executives other than the Chief Executive
Officer, provided such decision is reported to the Compensation and Benefits
Committee of the Board, and that Committee may increase or decrease ETP benefits
for the Chief Executive Officer.
Neither the prorated annual bonus nor the financial counseling is provided
if employment terminates due to unsatisfactory performance.
COMPENSATION OF DIRECTORS
CASH COMPENSATION. During 1997, each director not employed by Cognizant was
paid a retainer at an annual rate of $25,000 in quarterly installments and each
non-employee director who was Chairman of a committee of the Board of Directors
was paid an additional retainer at an annual rate of $3,000 in quarterly
installments. In addition, each non-employee director was paid a fee of $1,000
for each Board or Committee meeting attended in 1997. Directors who were
employed by Cognizant received no retainers or fees.
Each non-employee director may elect to have all or a specified part of the
retainer and fees deferred until he or she ceases to be a director. Deferred
amounts may be credited to the account of directors as deferred cash, which
bears interest at prescribed rates, or as deferred share units in an amount
equal to the amount of deferred compensation divided by the fair market value of
a share of Common Stock on the date the compensation would otherwise have been
paid. Deferred share units are credited with dividend equivalents. Fair market
value is the average of the high and low trading prices of the Common Stock on
the date of determination. Deferred amounts and accrued interest and dividend
equivalents are paid in the form of cash or stock, as appropriate, on the first
business day of the calendar year following the date of the director's
termination of service on Cognizant's Board.
Upon the occurrence of a Change in Control (as defined above under
"Change-in-Control Agreements") of Cognizant, the Compensation and Benefits
Committee may take such action as it deems necessary or desirable with respect
to deferred amounts.
NON-EMPLOYEE DIRECTORS' STOCK INCENTIVE PLAN. This plan provides for the
granting of stock options and restricted stock to non-employee directors of
Cognizant on such terms as are determined by the Compensation and Benefits
Committee of the Board of Directors. No grants under this plan were made in
1997.
Upon the occurrence of a Change in Control (as defined above under
"Change-in-Control Agreements") of Cognizant, the Compensation and Benefits
Committee may take such action as it deems necessary or desirable with respect
to awards, including
17
<PAGE>
acceleration of an award, payment of cash in exchange for cancellation of an
award, and/or issuing substitute awards that substantially preserve the value,
rights and benefits of previously granted awards.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Cognizant knows of no person who did not file on a timely basis reports
required by Section 16(a) of the Securities Exchange Act of 1934 during 1997.
OTHER MATTERS
Cognizant knows of no matters, other than those referred to herein, which
will be presented at the Annual Meeting. If, however, any other appropriate
business should properly be presented at the meeting, the persons named in the
enclosed form of proxy will vote the proxies in accordance with their best
judgment.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Shareholder proposals intended to be presented at the Cognizant Annual
Meeting of Shareholders in 1999 must be received by Cognizant no later than
November 12, 1998.
March 13, 1998
18
<PAGE>
APPENDIX
(Pursuant to Rule 304 of Regulation S-T)
1. Page 11 contains a description in tabular form of a graph entitled
"Performance Graph" which represents the comparison of the cumulative total
stockholder return on the Company's Common Stock against the cumulative total
return of the Standard & Poor's 500 Index and the Cognizant Peer Group Index for
the period of each of the years commencing October 17, 1996 and ending December
31, 1997, which graph is contained in the paper format of this Proxy Statement
being sent to Stockholders.
<PAGE>
COGNIZANT CORPORATION
PROXY/VOTING INSTRUCTIONS FOR THE ANNUAL MEETING TO BE HELD APRIL 13, 1998
AT 9:30 A.M. AT 1209 ORANGE STREET, WILMINGTON, DELAWARE
ROBERT E. WEISSMAN, VICTORIA R. FASH and KENNETH S. SIEGEL, or any of them,
with full power of substitution, are hereby authorized and/or instructed to
represent and/or vote all the shares of Common Stock of Cognizant Corporation
which the undersigned is entitled to vote at the Annual Meeting of Shareholders
on April 13, 1998, and at any adjournment thereof:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF ALL NOMINEES
IDENTIFIED IN ITEM (1) AND FOR ITEM (2).
(1) Election of Class II Directors for a three-year term expiring at the 2001
Annual Meeting of Shareholders. Nominees: Clifford L. Alexander, Jr.,
Robert E. Weissman and William C. Van Faasen.
[ ] FOR all nominees listed above, except [ ] WITHHOLD authority to
vote withheld from the following vote for all nominees
nominees (if any):
----------------------------------
(2) Ratification of the appointment of Coopers & Lybrand L.L.P. as independent
public accountants to audit the Company's consolidated financial statements
for 1998. Mark only one.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Please Turn Over and Sign)
<PAGE>
COGNIZANT CORPORATION
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. A PROXY WHICH IS SIGNED
AND RETURNED BY A SHAREHOLDER OF RECORD WITHOUT SPECIFICATION MARKED IN THE
INSTRUCTION BOXES WILL BE VOTED FOR ELECTION OF ALL NOMINEES IDENTIFIED IN ITEM
(1), AND FOR ITEM (2).
Notice to Participants in the Savings Plan.
- -------------------------------------------
The trustee of the Cognizant Corporation Savings Plan has agreed that this
proxy will also serve as voting instructions from participants in the plan who
have plan contributions for their account invested in Common Stock. Proxies
covering shares in the plan must be received prior to April 3, 1998. If a proxy
covering shares in the plan has not been received prior to April 3, 1998 or if
it is signed and returned without specification marked in the instruction boxes,
the trustee of the plan will vote the plan shares in the same proportion as the
respective shares in the plan for which it has received instructions.
PLEASE INDICATE WHETHER YOU EXPECT TO ATTEND THE ANNUAL MEETING:
[ ] Yes [ ] No
Date ____________________________, 1998
_______________________________________
_______________________________________
Signature(s)
Please sign exactly as name appears at
left. Joint owners should each sign.
Executors, administrators, trustees,
etc. should so indicate when signing
and sign as required by the authority
held.
Proxy form begins on the reverse side.
Please vote, date, sign and return
immediately.
