SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark one)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 001-12277
ACNIELSEN CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 06-1454128
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(State of Incorporation) (I.R.S. Employer Identification No.)
177 Broad Street, Stamford, CT 06901
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 961-3000
--------------
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:
Shares Outstanding
Title of Class at July 31, 1997
Common Stock,
par value $.01 per share 57,184,580
<PAGE>
ACNIELSEN CORPORATION
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended June 30, 1997 and 1996 3
Condensed Consolidated Statements of Operations (Unaudited)
Six Months Ended June 30, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 1997 and 1996 5
Condensed Consolidated Balance Sheets
June 30, 1997 (Unaudited) and December 31, 1996 6
Notes to Condensed Consolidated Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
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<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item I. FINANCIAL STATEMENTS
ACNIELSEN CORPORATION
Condensed Consolidated Statements Of Operations (Unaudited)
(Amounts in thousands except per share amounts)
<CAPTION>
Three Months Ended
June 30,
-------------------------------------------------
1997 1996
------------------------ ---------------------
<S> <C> <C>
Operating Revenue $356,325 $336,948
Operating Costs 192,062 176,315
Selling and Administrative Expenses 122,548 126,816
Depreciation and Amortization 23,058 22,788
----------------- ----------------
Operating Income 18,657 11,029
Interest Income 1,021 1,586
Interest Expense (384) (1,338)
Other Expense - Net (315) (1,262)
------------------ -----------------
Non-Operating Income (Expense) - Net 322 (1,014)
Income Before Income Tax Provision 18,979 10,015
Income Tax Provision 8,730 8,309
----------------- ----------------
Net Income $10,249 $1,706
================= ================
Net Income Per Share of Common Stock $0.18 $0.03
================= ================
Average Number of Shares Outstanding 57,035 56,686
<FN>
See accompanying notes to the condensed consolidated financial statements
(unaudited).
</FN>
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</TABLE>
<PAGE>
<TABLE>
ACNIELSEN CORPORATION
Condensed Consolidated Statements Of Operations (Unaudited)
(Amounts in thousands except per share amounts)
<CAPTION>
Six Months Ended
June 30,
-------------------------------------------------
1997 1996
------------------------ ---------------------
<S> <C> <C>
Operating Revenue $681,099 $644,240
Operating Costs 382,458 355,585
Selling and Administrative Expenses 242,255 249,088
Depreciation and Amortization 46,907 47,288
---------------- ----------------
Operating Income (Loss) 9,479 (7,721)
Interest Income 3,052 3,282
Interest Expense (1,685) (2,651)
Other Income (Expense) - Net 511 (446)
---------------- ----------------
Non-Operating Income - Net 1,878 185
Income (Loss) Before Income Tax Provision 11,357 (7,536)
Income Tax Provision 5,224 9,948
---------------- ----------------
Net Income (Loss) $6,133 $(17,484)
================ ================
Net Income (Loss) Per Share of Common Stock $0.11 $(0.31)
================ ================
Average Number of Shares Outstanding 56,977 56,603
<FN>
See accompanying notes to the condensed consolidated financial statements
(unaudited).
</FN>
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</TABLE>
<PAGE>
<TABLE>
ACNIELSEN CORPORATION
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Amounts in Thousands)
<CAPTION>
Six Months Ended
June 30,
-------------------------------------------------
1997 1996
-------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss) $6,133 $(17,484)
Reconciliation of Net Income (Loss) to Net Cash Provided by
(Used in) Operating Activities:
Depreciation and Amortization 46,907 47,288
Deferred Income Taxes 2,846 1,597
Restructuring Payments - (342)
Payments Related to 1995 Non-Recurring Charge (21,157) (15,877)
Postemployment Benefit Expense 547 3,333
Postemployment Benefit Payments (5,718) (14,008)
Net (Increase) Decrease in Accounts Receivable (4,082) 15,353
Net Increase in Other Working Capital Items (26,667) (22,963)
Other 2,274 (4,767)
- - --------------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used In) Operating Activities 1,083 (7,870)
- - --------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Proceeds from Marketable Securities 261 141
Payments for Marketable Securities (10) (303)
Capital Expenditures (20,827) (29,786)
Additions to Computer Software (6,719) (10,868)
Payments for Acquisition of Businesses (5,082) -
Decrease (Increase) in Other Investments 1,800 (1,447)
Other (10,360) (1,821)
- - --------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (40,937) (44,084)
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Cash Flows from Financing Activities:
Net Transfers from The Dun & Bradstreet Corporation - 41,876
(Decrease) Increase in Short-Term Borrowings (10,347) 12,924
Common Stock Issuances under Stock Plans 3,892 -
Other 222 (403)
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Net Cash (Used in) Provided by Financing Activities (6,233) 54,397
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Effect of Exchange Rate Changes on Cash and Cash Equivalents (5,171) (49)
- - --------------------------------------------------------------------------------------------------------------
(Decrease) Increase in Cash and Cash Equivalents (51,258) 2,394
Cash and Cash Equivalents, Beginning of Period 185,005 89,568
- - --------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Period $133,747 $91,962
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Supplemental disclosure of cash flow information:
Cash paid during the period for interest $1,751 $2,584
Cash paid during the period for income taxes $19,562 $33,189
<FN>
See accompanying notes to the condensed consolidated financial statements
(unaudited).
</FN>
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</TABLE>
<PAGE>
<TABLE>
ACNIELSEN CORPORATION
Condensed Consolidated Balance Sheets
(Amounts in thousands)
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------
June 30 December 31
1997 1996
(Unaudited)
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets
Cash and Cash Equivalents $133,747 $185,005
Accounts Receivable-Net 268,327 270,603
Other Current Assets 34,086 30,822
---------------- -------------
Total Current Assets 436,160 486,430
Marketable Securities and Other Investments 50,875 26,352
Property, Plant and Equipment-Net 170,508 186,053
Other Assets-Net
Prepaid Pension 46,499 46,743
Computer Software 30,547 37,858
Intangibles & Other Assets 51,155 48,610
Goodwill 207,728 204,022
---------------- -------------
Total Other Assets-Net 335,929 337,233
- - --------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $993,472 $1,036,068
- - --------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current Liabilities
Accounts Payable $74,055 $84,680
Short-Term Debt 26,008 36,761
Accrued and Other Current Liabilities 238,176 260,606
Accrued Income Taxes 47,104 64,268
---------------- -------------
Total Current Liabilities 385,343 446,315
Postretirement and Postemployment Benefits 72,985 78,924
Deferred Income Taxes 41,812 32,523
Other Liabilities 26,089 24,360
- - --------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 526,229 582,122
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Commitments and Contingencies
Shareholders' Equity
Common Stock 574 571
Additional Paid-in Capital 465,082 461,193
Retained Earnings 13,856 7,723
Treasury Stock (3,966) (3,966)
Cumulative Translation Adjustment (29,837) (17,658)
Unrealized Gains on Investments, Net 21,534 6,083
---------------- -------------
Total Shareholders' Equity 467,243 453,946
- - --------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $993,472 $1,036,068
- - --------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to the condensed consolidated financial statements
(unaudited).
</FN>
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</TABLE>
<PAGE>
ACNIELSEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Interim Consolidated Financial Statements
These interim consolidated financial statements have been prepared in accordance
with the instructions to Form 10-Q and should be read in conjunction with the
consolidated financial statements and related notes in the ACNielsen Corporation
(the "Company") 1996 Annual Report on Form 10-K. In the opinion of management,
all adjustments (which include only normal recurring adjustments), considered
necessary for a fair presentation of financial position, results of operations
and cash flows at the dates and for the periods presented have been included.
Certain prior year amounts have been reclassified to conform with the 1997
presentation.
Note 2 - Basis of Presentation
Effective on November 1, 1996 (the "Distribution Date"), the Company became an
independent, publicly-owned company as a result of the distribution by The Dun &
Bradstreet Corporation ("D&B") of the Company's $.01 par value Common Stock, at
a distribution ratio of one share for three shares (the "Distribution"). For
purposes of these financial statements, all references to the Company include
the assets and liabilities of the former D&B businesses and operations that were
transferred to the Company prior to the Distribution.
The condensed financial statements for periods prior to the Distribution Date
are presented on a combined basis and have been prepared using D&B's historical
basis of accounting for the assets and liabilities and historical results of
operations related to the Company's businesses, except for accounting for income
taxes. For the six months ended June 30, 1996, the Company had not recognized
benefits for U.S. losses since the Company did not believe that it was more
likely than not that such benefits could be recognized on a separate-company
basis.
For the period prior to November 1, 1996, the condensed financial statements
generally reflect the results of operations and cash flows of the Company as if
it were a separate entity. The condensed financial statements include
allocations of certain D&B Corporate expenses relating to the Company's
businesses that were transferred to the Company from D&B. Management believes
these allocations are reasonable. However, the financial information included
herein may not necessarily reflect the results of operations, and cash flows of
the Company in the future or what they would have been had the Company been a
separate entity during the periods prior to the Distribution.
The computation of net income (loss) per share of common stock for the periods
prior to November 1, 1996 is based on the average number of shares of D&B common
stock outstanding, adjusted for the one for three distribution ratio.
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<PAGE>
Note 3 - Financial Instruments with Off-Balance-Sheet Risk
During the first half of 1997, the Company entered into foreign currency forward
contracts to reduce the effect of fluctuating European currencies on certain
known transactional exposures. At June 30, 1997, the Company had approximately
$18.9 million of foreign exchange forward contracts outstanding, which mature on
various dates over the next nine months. Any gain or loss on the forward
contract is deferred and included in the measurement of the related foreign
currency transaction.
Note 4 - New Accounting Pronouncement
Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"), Earnings
Per Share ("EPS"), which establishes standards for computing and presenting EPS,
is effective for both interim and annual periods ending after December 15, 1997.
SFAS No. 128 does not permit early application of its provisions. The Statement
replaces the presentation of primary EPS with a presentation of basic EPS, as
defined. Had EPS been determined in accordance with SFAS No. 128, the Company's
basic and diluted income (loss) per share for the three months and six months
ended June 30, 1997 and 1996 would be unchanged from the reported net income
(loss) per share.
Note 5 - Litigation
On July 29, 1996, Information Resources, Inc. ("IRI") filed a complaint in the
United States District Court for the Southern District of New York, naming as
defendants D&B, A.C. Nielsen Company (which is a subsidiary of the Company) and
I.M.S. International, Inc., a subsidiary of Cognizant Corporation ("IMS") (the
"IRI Action").
The complaint alleges various violations of the United States antitrust laws,
including alleged violations of Sections 1 and 2 of the Sherman Act. The
complaint also alleges a claim of tortious interference with a contract and a
claim of tortious interference with a prospective business relationship. These
claims relate to the acquisition by defendants of Survey Research Group Limited
("SRG"). IRI alleges that SRG violated an alleged agreement with IRI when it
agreed to be acquired by the defendants and that the defendants induced SRG to
breach that agreement.
IRI's complaint alleges damages in excess of $350 million, which amount IRI has
asked to be trebled under the antitrust laws. IRI also seeks punitive damages in
an unspecified amount.
By notice of motion dated October 15, 1996, defendants moved for an order
dismissing all claims in the complaint. On May 6, 1997 the United States
District Court for the Southern District of New York issued a decision on the
motion to dismiss. The Court dismissed IRI's claim of attempted monopolization
in the United States, with leave to replead within sixty days. The Court denied
defendants' motion with respect to the remaining claims in the complaint.
-8-
<PAGE>
On June 3, 1997, defendants filed an answer and counterclaims. Defendants denied
all material allegations of the complaint. In addition, A.C. Nielsen Company
asserted counterclaims against IRI alleging that IRI has made false and
misleading statements about A.C. Nielsen's services and commercial activities
and that such conduct constitutes a violation of Section 43(a) of the Lanham Act
and unfair competition. A.C. Nielsen seeks injunctive relief and damages.
On July 7, 1997, IRI filed an amended complaint seeking to replead the claim of
attempted monopolization in the United States, which had been dismissed by the
Court in its May 6, 1997 decision. The parties have agreed that defendants shall
have until August 18, 1997 to move to dismiss this amended claim.
In connection with the IRI Action, D&B, Cognizant Corporation (the parent
company of IMS) and the Company have entered into an Indemnity and Joint Defense
Agreement (the "Indemnity and Joint Defense Agreement") pursuant to which they
have agreed (i) to certain arrangements allocating potential liabilities ("IRI
Liabilities") that may arise out of or in connection with the IRI Action and
(ii) to conduct a joint defense of such action. In particular, the Indemnity and
Joint Defense Agreement provides that the Company will assume exclusive
liability for IRI Liabilities up to a maximum amount to be calculated at the
time such liabilities, if any, become payable (the "ACN Maximum Amount"), and
that Cognizant and D&B will share liability equally for any amounts in excess of
the ACN Maximum Amount. The ACN Maximum Amount will be determined by an
investment banking firm as the maximum amount which the Company is able to pay
after giving effect to (i) any plan submitted by such investment bank which is
designed to maximize the claims paying ability of the Company without impairing
the investment banking firm's ability to deliver a viability opinion (but which
will not require any action requiring stockholder approval), and (ii) payment of
related fees and expenses. For these purposes, financial viability means the
ability of the Company, after giving effect to such plan, the payment of related
fees and expenses and the payment of the ACN Maximum Amount, to pay its debts as
they become due and to finance the current and anticipated operating and capital
requirements of its business, as reconstituted by such plan, for two years from
the date any such plan is expected to be implemented.
The Indemnity and Joint Defense Agreement also imposes certain restrictions on
the payment of cash dividends and the ability of the Company to purchase its
stock.
Management of ACNielsen is unable to predict at this time the final outcome of
the IRI Action or whether its resolution could materially affect the Company's
results of operations, cash flows or financial position.
The Company and its subsidiaries are also involved in other legal proceedings
and litigation arising in the ordinary course of business. In the opinion of
management, the outcome of such current legal proceedings, claims and
litigation, if decided adversely, could have a material effect on quarterly or
annual operating results or cash flows when resolved in a future period.
However, in the opinion of management, these matters will not materially affect
the Company's consolidated financial position.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Dollar amounts in thousands, except per share data)
The Company's second-quarter net income was $10,249, or $0.18 per share, an
$8,543 improvement over the second quarter 1996 income of $1,706 or $0.03 per
share. The 1996 second-quarter net income excludes the impact of a tax benefit
recorded in the third quarter of 1996 to reduce the Company's full year
effective tax rate to 48%. Had the Company provided for a 48% effective tax rate
in the second quarter of 1996, net income for the period would have been $5,208
or $0.09 per share.
Second-quarter revenue rose 5.8% to $356,325 from $336,948, reflecting the
negative impact of a strong U.S. dollar. Driven by growth in the Americas and
Asia Pacific regions, second-quarter revenue advanced 11.3% in local currency.
The Company's operating income in the second quarter increased by $7,628, to
$18,657, reflecting profit improvement in the United States.
Non-operating income-net in the second quarter was $322, compared with a
non-operating expense- net of $1,014, in the second quarter of 1996, partially
as a result of lower interest expense on lower borrowings.
The Company's operating results by geographic region for the quarters ended June
30, 1997 and 1996 are set forth in the table below.
<TABLE>
(in thousands)
<CAPTION>
Revenues Operating Income (Loss)
----------------------------- ---------------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
United States $78,206 $69,645 $4,268 $(3,088)
Canada/ Latin America 52,499 44,812 7,065 7,427
------ ------ ------ ------
Total Americas 130,705 114,457 11,333 4,339
Europe, Middle East & Africa 149,374 151,434 8,243 9,231
Asia Pacific 68,171 62,548 1,751 1,449
ACN Japan 8,075 8,509 (2,670) (3,990)
------ ------ ------ ------
Total $356,325 $336,948 $18,657 $11,029
======== ======== ======= =======
</TABLE>
The following discusses second quarter results on a geographic basis:
Total Americas revenue increased 14.2% to $130,705 from $114,457. Excluding the
impact of currency translation, revenue grew 15.9%. Operating income was
$11,333, compared with $4,339 in the second quarter of 1996. In the United
States, revenue grew 12.3% to $78,206, led by increased sales of key-account
information in the retail measurement business, as well as consumer panel
services. The U.S. recorded its fourth consecutive profitable quarter, as
operating income reached $4,268, a $7,356 improvement over 1996's $3,088
operating loss. The gain was the result of higher revenue, coupled with
increased operating efficiency.
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<PAGE>
In Canada and Latin America, revenue increased 17.2%, to $52,499, driven by
growth in each of Canada's core businesses - retail measurement, consumer panels
and customized research - as well as higher retail tracking and customized
research revenue in several Latin American markets. Operating income decreased
$362 to $7,065 from $7,427 due to higher costs associated with improving the
Company's business in Argentina and the impact of the strong U.S. dollar,
particularly in Mexico and Brazil, which reduced operating income by $400.
Revenue for the Europe, Middle East & Africa ("EMEA") region declined 1.4%, to
$149,374, due to the impact of the strong U.S. dollar. Revenue for EMEA grew
7.8% in local currency, resulting from improved results in the U.K., France and
Ireland; strong growth in Eastern Europe and the addition of recently acquired
businesses in Turkey, South Africa and Israel. However, EMEA operating income
decreased $988, to $8,243, for the quarter, primarily the result of an
unfavorable currency translation impact of $1,858, and costs associated with
improving the Company's European operations.
Asia Pacific's revenue increased 9% to $68,171, led by improved results in
China, Hong Kong, Taiwan, Thailand, Korea, Singapore and the Philippines.
Revenue for Asia Pacific grew 11.4% in local currency. The region's operating
income increased $302 to $1,751, as improved operating efficiency and lower
costs began to take hold across the region.
ACNielsen Japan reported revenue of $8,075, down slightly from the prior year.
Excluding the impact of the strong U.S. dollar, revenue grew 9.5%. Japan reduced
its operating loss by $1,320, to $2,670, as it continued to more closely align
its operating costs with revenue.
Net income for the six months ended June 30, 1997 was $6,133 or $0.11 per share,
compared with a year-ago net loss of $17,484, or $0.31 per share. The 1996 net
loss excludes the impact of a tax benefit recorded in the third quarter of 1996
to reduce the Company's full year effective tax rate to 48%. Had the Company
provided for the 48% effective tax rate in the first half of 1996, the net loss
for the period would have been $3,918 or $0.07 per share.
Revenue for the six months ended June 30, 1997 was $681,099, an increase of 5.7%
from the six-month period of 1996, reflecting the negative impact of a strong
U.S. dollar. Driven by growth in the Americas and Asia Pacific regions, revenue
advanced 10% in local currency. The Company increased its operating income in
the first half of the year by $17,200, to $9,479, reflecting profit improvements
in the United States.
Non-operating income-net was $1,878, compared with $185 in the first half of
1996, primarily reflecting lower interest expense.
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<PAGE>
The Company's operating results by geographic region for the six months ended
June 30, 1997 and 1996 are set forth in the table below.
<TABLE>
(in thousands)
<CAPTION>
Revenues Operating Income (Loss)
----------------------------- --------------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
United States $151,513 $136,418 $4,718 $(10,552)
Canada/ Latin America 100,558 85,673 9,896 9,412
------ ------ ------ ------
Total Americas 252,071 222,091 14,614 (1,140)
Europe, Middle East & Africa 282,999 286,393 1,245 1,160
Asia Pacific 129,736 119,148 (642) 1,181
ACN Japan 16,293 16,608 (5,738) (8,922)
------ ------ ------ ------
Total $681,099 $644,240 $9,479 $(7,721)
======== ======== ====== ========
</TABLE>
The following discusses first half results on a geographic basis:
Year-to-date total Americas revenue increased 13.5% to $252,071 from $222,091.
Excluding the impact of currency translation, revenue grew 14.9%. Operating
income was $14,614, compared with an operating loss of $1,140 in the first half
of 1996.
In the United States, revenue grew 11.1% to $151,513, led by strong performances
in Retail Management Services and Consumer Panels. Operating income reached
$4,718, a $15,270 improvement over the first half of 1996's $10,552 operating
loss. The gain was the result of increased operating efficiency and revenue
growth.
In Canada and Latin America, year-to-date revenue grew 17.4%, led by an
increase in Latin America, and combined growth in all of Canada's businesses.
Operating income increased 5.1% to $9,896 from the prior year.
Revenue for the first half of 1997 in the Europe, Middle East & Africa ("EMEA")
region declined 1.2% to $282,999, due to the impact of the strong U.S. dollar.
Revenue for EMEA grew 6.1% in local currency, resulting from gains in Eastern
Europe and France and the new acquisitions in South Africa, Turkey and Israel.
Operating income increased $85, to $1,245 for the year.
Asia Pacific's year-to-date revenue increased 8.9% to $129,736, led by increased
sales in North Asia and Southeast Asia. Revenue for Asia Pacific grew 10.0% in
local currency. The region's operating loss was $642 compared with operating
income of $1,181 in 1996, due to higher overall operating expenses in the first
quarter of 1997.
Revenue for ACNielsen Japan was down slightly from 1996 to $16,293. Excluding
the impact of the strong U.S. dollar in the first half of the year, revenue in
local currency was up 12.1%. Japan reduced its operating loss by $3,184, to
$5,738, as higher revenue and cost control efforts continued the operating
improvement.
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<PAGE>
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 1997 and 1996
Net cash provided by operating activities for the six months ended June 30,
1997, totaled $1,083 compared with net cash used of $7,870 for the comparable
period in 1996. The change primarily is the result of improved operating results
(net income of $6,133 in 1997 as compared to a net loss of $17,484 in 1996) and
lower postemployment benefit payments ($8,290), offset by an increase in
accounts receivable ($19,435) and increased payments related to the 1995
non-recurring charge ($5,280).
Net cash used in investing activities totaled $40,937 for the six months ended
June 30, 1997 compared with $44,084 for the comparable period in 1996. The
decrease in cash used in investing activities primarily represents lower capital
expenditures ($8,959) and lower additions to computer software ($4,149), offset
by increased project costs included in other investing and the payments for
acquisition of businesses ($5,082).
Net cash used in financing activities for the six months ended June 30, 1997,
totaled $6,233 compared with cash provided by financing activities of $54,397
for the comparable period in 1996. The decrease in the cash provided of $60,630
primarily reflected the absence of remittances from D&B of $41,876 and a
decrease in borrowings in the current year of $10,347 as compared with increases
in borrowings of $12,924 during the comparable period in 1996.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Information required by this item is contained in Note 5 -
Litigation, which is incorporated herein by reference.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of the ACNielsen Corporation was held
on April 16, 1997.
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<PAGE>
The following nominees for director named in the Proxy Statement dated
March 11, 1997 were elected at the Meeting by the votes indicated.
For Withheld
Donald W. Griffin 44,132,880 7,005,407
Robert M. Hendrickson 44,143,052 6,995,235
Brian B. Pemberton 44,142,711 6,995,576
Nicholas L. Trivisonno 44,146,806 6,991,481
The votes in favor of the election of the nominees represent at least
86.3% of the shares voted for each of the nominees.
The ratification of the selection of Arthur Andersen LLP as
Independent Public Accountants for 1997 was approved by the following
vote:
For Against Abstain
Number of shares 50,963,943 113,590 60,653
The proposal to approve the Company's 1996 Key Employees' Stock
Incentive Plan was approved by the following vote:
Broker
For Against Abstain Non-Votes
Number of shares 32,820,922 14,324,939 235,523 3,756,802
The proposal to approve the Company's 1996 Senior Executive Incentive
Plan was approved by the following vote:
Broker
For Against Abstain Non-Votes
Number of shares 44,601,307 2,485,809 294,268 3,756,802
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
(10) Material Contracts
(i) 1996 ACNielsen Corporation Key Employees Stock Incentive Plan
(As amended April 17, 1997)
(27) Financial Data Schedule (filed electronically)
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the quarter ended
June 30, 1997.
-14-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ACNIELSEN CORPORATION
(Registrant)
Date: August 12, 1997 By: /s/ROBERT J. CHRENC
===========================
Robert J. Chrenc
Executive Vice President
and Chief Financial Officer
Date: August 12, 1997 By: /s/WILLIAM R. HICKS
===========================
William R. Hicks
Vice President and Controller
-15-
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Exhibit 10(i)
1996 ACNIELSEN CORPORATION
KEY EMPLOYEES' STOCK INCENTIVE PLAN
1. Purpose of the Plan
The purpose of the Plan is to aid the Company and its
Subsidiaries in securing and retaining key employees of outstanding ability and
to motivate such employees to exert their best efforts on behalf of the Company
and its Subsidiaries by providing incentives through the granting of Awards. The
Company expects that it will benefit from the added interest which such key
employees will have in the welfare of the Company as a result of their
proprietary interest in the Company's success.
2. Definitions
The following capitalized terms used in the Plan have the respective
meanings set forth in this Section:
(a) Act: The Securities Exchange Act of 1934, as
amended, or any successor thereto.
(b) Award: An Option, Stock Appreciation Right or Other
Stock-Based Award granted pursuant to the Plan.
(c) Beneficial Owner: As such term is defined in Rule
13d-3 under the Act (or any successor rule thereto).
(d) Board: The Board of Directors of the Company.
(e) Change in Control: The occurrence of any of the
following events:
(i) any Person (other than the Company, any trustee
or other fiduciary holding securities under an
employee benefit plan of the Company, or any company
owned, directly or indirectly, by the stockholders of
the Company in substantially the same proportions as
their ownership of stock of the Company), becomes the
Beneficial Owner, directly or indirectly, of
<PAGE>
securities of the Company representing 20% or more of
the combined voting power of the Company's
then-outstanding securities;
(ii) during any period of twenty-four months (not
including any period prior to the Effective Date),
individuals who at the beginning of such period
constitute the Board, and any new director (other
than (A) a director nominated by a Person who has
entered into an agreement with the Company to effect
a transaction described in Sections 2(e)(i), (iii) or
(iv) of the Plan, (B) a director nominated by any
Person (including the Company) who publicly announces
an intention to take or to consider taking actions
(including, but not limited to, an actual or
threatened proxy contest) which if consummated would
constitute a Change in Control or (C) a director
nominated by any Person who is the Beneficial Owner,
directly or indirectly, of securities of the Company
representing 10% or more of the combined voting power
of the Company's securities) whose election by the
Board or nomination for election by the Company's
stockholders was approved in advance by a vote of at
least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of
the period or whose election or nomination for
election was previously so approved, cease for any
reason to constitute at least a majority thereof;
(iii) the stockholders of the Company approve any
transaction or series of transactions under which the
Company is merged or consolidated with any other
company, other than a merger or consolidation (A)
which would result in the voting securities of the
Company outstanding immediately prior thereto
continuing to represent (either by remaining
outstanding or by being converted into voting
securities of the surviving entity) more than 66 2/3%
of the combined voting power of the voting securities
of the Company or such surviving entity outstanding
immediately after such merger or consolidation and
(B) after which no Person holds 20% or more of the
combined voting power of the then-outstanding
securities of the Company or such surviving entity;
or
<PAGE>
(iv) the stockholders of the Company approve a plan
of complete liquidation of the Company or an
agreement for the sale or disposition by the Company
of all or substantially all of the Company's assets.
(f) Code: The Internal Revenue Code of 1986, as amended,
or any successor thereto.
(g) Committee: The Compensation Committee of the Board.
(h) Company: ACNielsen Corporation, a Delaware
corporation.
(i) D&B: The Dun & Bradstreet Corporation, a Delaware
corporation.
(j) Disability: Inability to engage in any substantial
gainful activity by reason of a medically
determinable physical or mental impairment which
constitutes a permanent and total disability, as
defined in Section 22(e)(3) of the Code (or any
successor section thereto). The determination
whether a Participant has suffered a Disability
shall be made by the Committee based upon such
evidence as it deems necessary and appropriate. A
Participant shall not be considered disabled unless
he or she furnishes such medical or other evidence
of the existence of the Disability as the Committee,
in its sole discretion, may require.
(k) Effective Date: The date on which the Plan takes
effect, as defined pursuant to Section 17 of the
Plan.
(l) Fair Market Value: On a given date, the arithmetic
mean of the high and low prices of the Shares as
reported on such date on the Composite Tape of the
<PAGE>
principal national securities exchange on which such
Shares are listed or admitted to trading, or, if no
Composite Tape exists for such national securities
exchange on such date, then on the principal national
securities exchange on which such Shares are listed
or admitted to trading, or, if the Shares are not
listed or admitted on a national securities exchange,
the arithmetic mean of the per Share closing bid
price and per Share closing asked price on such date
as quoted on the National Association of Securities
Dealers Automated Quotation System (or such market in
which such prices are regularly quoted), or, if
there is no market on which the Shares are regularly
quoted, the Fair Market Value shall be the value
established by the Committee in good faith. If no
sale of Shares shall have been reported on such
Composite Tape or such national securities exchange
on such date or quoted on the National Association
of Securities Dealers Automated Quotation System on
such date, then the immediately preceding date on
which sales of the Shares have been so reported or
quoted shall be used.
(m) LSAR: A limited stock appreciation right granted
pursuant to Section 8(d) of the Plan.
(n) Other Stock-Based Awards: Awards granted pursuant to
Section 9 of the Plan.
(o) Option: A stock option granted pursuant to Section 7
of the Plan.
(p) Option Price: The purchase price per Share of an
Option, as determined pursuant to Section 7(a) of the
Plan.
(q) Participant: An individual who is selected by the
Committee to participate in the Plan pursuant to
Section 5 of the Plan.
<PAGE>
(r) Performance-Based Awards: Certain Other Stock-Based
Awards granted pursuant to Section 9(b) of the Plan.
(s) Person: As such term is used for purposes of Section
13(d) or 14(d) of the Act (or any successor section
thereto).
(t) Plan: The 1996 ACNielsen Corporation Key Employees'
Stock Incentive Plan.
(u) Retirement: Termination of employment with the
Company or a Subsidiary after such Participant has
attained age 55 and ten years of service with the
Company; or, with the prior written consent of the
Committee that such termination be treated as a
Retirement hereunder, termination of employment under
other circumstances.
(v) Shares: Shares of common stock, par value $0.01 per
Share, of the Company.
(w) Spinoff Date: The date on which the Shares that are
owned by D&B are distributed to the holders of
record of shares of D&B.
(x) Stock Appreciation Right: A stock appreciation right
granted pursuant to Section 8 of the Plan.
(y) Subsidiary: A subsidiary corporation, as defined in
Section 424(f) of the Code (or any successor section
thereto).
3. Shares Subject to the Plan
The total number of Shares which may be issued under the Plan
is 12,000,000. The maximum number of Shares for which Awards may be granted
during a calendar year to any Participant shall be 700,000. The Shares may
consist, in whole or in part, of unissued Shares or treasury Shares. The
issuance of Shares or the payment of cash upon the exercise of an Award shall
reduce the total number of Shares available under the Plan, as applicable.
<PAGE>
Shares which are subject to Awards which terminate or lapse may be granted again
under the Plan.
4. Administration
The Plan shall be administered by the Committee, which may
delegate its duties and powers in whole or in part to any subcommittee thereof
consisting solely of at least two individuals who are each "non-employee
directors" within the meaning of Rule 16b-3 under the Act (or any successor rule
thereto) and "outside directors" within the meaning of Section 162(m) of the
Code (or any successor section thereto). The Committee is authorized to
interpret the Plan, to establish, amend and rescind any rules and regulations
relating to the Plan, and to make any other determinations that it deems
necessary or desirable for the administration of the Plan. The Committee may
correct any defect or supply any omission or reconcile any inconsistency in the
Plan in the manner and to the extent the Committee deems necessary or desirable.
Any decision of the Committee in the interpretation and administration of the
Plan, as described herein, shall lie within its sole and absolute discretion and
shall be final, conclusive and binding on all parties concerned (including, but
not limited to, Participants and their beneficiaries or successors). The
Committee shall require payment of any amount it may determine to be necessary
to withhold for federal, state, local or other taxes as a result of the exercise
of an Award. Unless the Committee specifies otherwise, the Participant may elect
to pay a portion or all of such withholding taxes by (a) delivery in Shares or
(b) having Shares withheld by the Company from any Shares that would have
otherwise been received by the Participant. The number of Shares so delivered or
withheld shall have an aggregate Fair Market Value sufficient to satisfy the
applicable withholding taxes. If the chief executive officer of the Company is a
member of the Board, the Board by specific resolution may constitute such chief
executive officer as a committee of one which shall have the authority to grant
Awards of up to an aggregate of 10,000 Shares in each calendar year to each
Participant who is not subject to the rules promulgated under Section 16 of the
Act (or any successor section thereto); provided, however, that (a) such chief
executive officer shall notify the Committee of any such grants made pursuant to
this Section 4 and (b) the chairman of the Committee shall approve any such
grants made pursuant to this Section 4.
<PAGE>
5. Eligibility
Key employees (but not members of the Committee or any person
who serves only as a director) of the Company and its Subsidiaries, who are from
time to time responsible for the management, growth and protection of the
business of the Company and its Subsidiaries, are eligible to be granted Awards
under the Plan. Participants shall be selected from time to time by the
Committee, in its sole discretion, from among those eligible, and the Committee
shall determine, in its sole discretion, the number of Shares to be covered by
the Awards granted to each Participant.
6. Limitations
No Award may be granted under the Plan after the tenth
anniversary of the Effective Date, but Awards theretofore granted may extend
beyond that date.
7. Terms and Conditions of Options
Options granted under the Plan shall be, as determined by the
Committee, non-qualified, incentive or other stock options for federal income
tax purposes, as evidenced by the related Award agreements, and shall be subject
to the foregoing and the following terms and conditions and to such other terms
and conditions, not inconsistent therewith, as the Committee shall determine:
(a) Option Price. The Option Price per Share shall be
determined by the Committee, but shall not be less than 100% of the Fair Market
Value of the Shares on the date an Option is granted.
(b) Exercisability. Options granted under the Plan shall be
exercisable at such time and upon such terms and conditions as may be determined
by the Committee, but in no event shall an Option be exercisable more than ten
years after the date it is granted.
<PAGE>
(c) Exercise of Options. Except as otherwise provided in the
Plan or in an Award agreement, an Option may be exercised for all, or from time
to time any part, of the Shares for which it is then exercisable. For purposes
of Section 7 of the Plan, the exercise date of an Option shall be the later of
the date a notice of exercise is received by the Company and, if applicable, the
date payment is received by the Company pursuant to clauses (i), (ii) or (iii)
in the following sentence. The purchase price for the Shares as to which an
Option is exercised shall be paid to the Company in full at the time of exercise
at the election of the Participant (i) in cash, (ii) in Shares having a Fair
Market Value equal to the aggregate Option Price for the Shares being purchased
and satisfying such other requirements as may be imposed by the Committee, (iii)
partly in cash and partly in such Shares, (iv) through the withholding of Shares
(which would otherwise be delivered to the Participant) with an aggregate Fair
Market Value on the exercise date equal to the aggregate Option Price or (v)
through the delivery of irrevocable instructions to a broker to deliver promptly
to the Company an amount equal to the aggregate Option Price for the Shares
being purchased. No Participant shall have any rights to dividends or other
rights of a stockholder with respect to Shares subject to an Option until the
Participant has given written notice of exercise of the Option, paid in full for
such Shares and, if applicable, has satisfied any other conditions imposed by
the Committee pursuant to the Plan.
(d) Exercisability Upon Termination of Employment by Death. If
a Participant's employment with the Company and its Subsidiaries terminates by
reason of death after the date of grant of an Option, (i) the unexercised
portion of such Option shall immediately vest in full and (ii) such portion may
thereafter be exercised during the shorter of (A) the remaining stated term of
the Option or (B) five years after the date of death.
(e) Exercisability Upon Termination of Employment by
Disability or Retirement. If a Participant's employment with the Company and its
Subsidiaries terminates by reason of Disability or Retirement after the date of
grant of an Option, (i) the unexercised portion of such Option shall immediately
vest in full and (ii) such portion may thereafter be exercised during the
shorter of (A) the remaining stated term of the Option or (B) five years after
the date of such termination of employment; provided, however, that if a
Participant dies within a period of five years after such termination of
employment, an unexercised Option may thereafter be exercised, during the
shorter of (i) the remaining stated term of the Option or (ii) the period that
is the longer of (A) five years after the date of such termination of employment
or (B) one year after the date of death.
<PAGE>
(f) Effect of Other Termination of Employment. Except as
otherwise provided in an Award agreement, if a Participant's employment with the
Company and its Subsidiaries terminates for any reason other than death,
Disability or Retirement after the date of grant of an Option as described
above, an unexercised Option may thereafter be exercised during the period
ending 90 days after the date of such termination of employment, but only to the
extent to which such Option was exercisable at the time of such termination of
employment.
8. Terms and Conditions of Stock Appreciation Rights
(a) Grants. The Committee also may grant (i) a Stock
Appreciation Right independent of an Option or (ii) a Stock Appreciation Right
in connection with an Option, or a portion thereof. A Stock Appreciation Right
granted pursuant to clause (ii) of the preceding sentence (A) may be granted at
the time the related Option is granted or at any time prior to the exercise or
cancellation of the related Option, (B) shall cover the same Shares covered by
an Option (or such lesser number of Shares as the Committee may determine) and
(C) shall be subject to the same terms and conditions as such Option except for
such additional limitations as are contemplated by this Section 8 (or such
additional limitations as may be included in an Award agreement).
(b) Terms. The exercise price per Share of a Stock
Appreciation Right shall be an amount determined by the Committee but in no
event shall such amount be less than the greater of (i) the Fair Market Value of
a Share on the date the Stock Appreciation Right is granted or, in the case of a
Stock Appreciation Right granted in conjunction with an Option, or a portion
thereof, the Option Price of the related Option and (ii) an amount permitted by
applicable laws, rules, by-laws or policies of regulatory authorities or stock
exchanges. Each Stock Appreciation Right granted independent of an Option shall
entitle a Participant upon exercise to an amount equal to (i) the excess of (A)
the Fair Market Value on the exercise date of one Share over (B) the exercise
price per Share, times (ii) the number of Shares covered by the Stock
Appreciation Right. Each Stock Appreciation Right granted in conjunction with an
<PAGE>
Option, or a portion thereof, shall entitle a Participant to surrender to the
Company the unexercised Option, or any portion thereof, and to receive from the
Company in exchange therefor an amount equal to (i) the excess of (A) the Fair
Market Value on the exercise date of one Share over (B) the Option Price per
Share, times (ii) the number of Shares covered by the Option, or portion
thereof, which is surrendered. The date a notice of exercise is received by the
Company shall be the exercise date. Payment shall be made in Shares or in cash,
or partly in Shares and partly in cash, valued at such Fair Market Value, all as
shall be determined by the Committee. Stock Appreciation Rights may be exercised
from time to time upon actual receipt by the Company of written notice of
exercise stating the number of Shares subject to an exercisable Option with
respect to which the Stock Appreciation Right is being exercised. No fractional
Shares will be issued in payment for Stock Appreciation Rights, but instead cash
will be paid for a fraction or, if the Committee should so determine, the number
of Shares will be rounded downward to the next whole Share.
(c) Limitations. The Committee may impose, in its discretion,
such conditions upon the exercisability or transferability of Stock Appreciation
Rights as it may deem fit.
(d) Limited Stock Appreciation Rights. The Committee may grant
LSARs that are exercisable upon the occurrence of specified contingent events.
Such LSARs may provide for a different method of determining appreciation, may
specify that payment will be made only in cash and may provide that any related
Awards are not exercisable while such LSARs are exercisable. Unless the context
otherwise requires, whenever the term "Stock Appreciation Right" is used in the
Plan, such term shall include LSARs.
9. Other Stock-Based Awards
(a) Generally. The Committee, in its sole discretion, may
grant Awards of Shares, Awards of restricted Shares and Awards that are valued
in whole or in part by reference to, or are otherwise based on the Fair Market
Value of, Shares ("Other Stock-Based Awards"). Such Other Stock-Based Awards
<PAGE>
shall be in such form, and dependent on such conditions, as the Committee shall
determine, including, without limitation, the right to receive one or more
Shares (or the equivalent cash value of such Shares) upon the completion of a
specified period of service, the occurrence of an event and/or the attainment of
performance objectives. Other Stock-Based Awards may be granted alone or in
addition to any other Awards granted under the Plan. Subject to the provisions
of the Plan, the Committee shall determine to whom and when Other Stock-Based
Awards will be made, the number of Shares to be awarded under (or otherwise
related to) such Other Stock-Based Awards; whether such Other Stock-Based Awards
shall be settled in cash, Shares or a combination of cash and Shares; and all
other terms and conditions of such Awards (including, without limitation, the
vesting provisions thereof). Notwithstanding the foregoing: (i) any Other
Stock-Based Awards consisting of restricted Shares or phantom Shares that are
payable in Shares, and which are not identified by the Committee as being
granted in lieu of salary or a cash bonus, shall become fully vested no sooner
than the earlier of (A) the death or Disability of the Participant to whom such
Other Stock-Based Award was made or (B) either (I) three years after the date of
grant thereof, if vesting is based solely upon the lapse of time or (II) one
year after the date of grant thereof, if vesting is based on performance
criteria; and (ii) any Other Stock-Based Awards, other than restricted Shares or
phantom Shares described in Section 9(a)(i) above, shall be identified by the
Committee as being granted in lieu of salary or a cash bonus; provided, however,
that the Committee may grant Other Stock-Based Awards that do not comply with
the foregoing provisions of this sentence if such Other Stock-Based Awards in
the aggregate do not exceed five percent of the total number of Shares that may
be issued under the Plan.
(b) Performance-Based Awards. Notwithstanding anything to the
contrary herein, certain Other Stock-Based Awards granted under this Section 9
may be granted in a manner which is deductible by the Company under Section
162(m) of the Code (or any successor section thereto) ("Performance-Based
Awards"). A Participant's Performance-Based Award shall be determined based on
the attainment of written performance goals approved by the Committee for a
performance period established by the Committee (i) while the outcome for that
performance period is substantially uncertain and (ii) no more than 90 days
after the commencement of the performance period to which the performance goal
<PAGE>
relates or, if less, the number of days which is equal to 25 percent of the
relevant performance period. The performance goals, which must be objective,
shall be based upon one or more of the following criteria: (i) consolidated
earnings before or after taxes (including earnings before interest, taxes,
depreciation and amortization); (ii) net income; (iii) operating income; (iv)
earnings per Share; (v) book value per Share; (vi) return on stockholders'
equity; (vii) expense management; (viii) return on investment; (ix) improvements
in capital structure; (x) profitability of an identifiable business unit or
product; (xi) maintenance or improvement of profit margins; (xii) stock price;
(xiii) market share; (xiv) revenues or sales; (xv) costs; (xvi) cash flow;
(xvii) working capital and (xviii) return on assets. The foregoing criteria may
relate to the Company, one or more of its Subsidiaries or one or more of its
divisions or units, or any combination of the foregoing, and may be applied on
an absolute basis and/or be relative to one or more peer group companies or
indices, or any combination thereof, all as the Committee shall determine. In
addition, to the degree consistent with Section 162(m) of the Code (or any
successor section thereto), the performance goals may be calculated without
regard to extraordinary items. The maximum amount of a Performance-Based Award
to any Participant with respect to a fiscal year of the Company shall be
$6,000,000. The Committee shall determine whether, with respect to a performance
period, the applicable performance goals have been met with respect to a given
Participant and, if they have, to so certify and ascertain the amount of the
applicable Performance-Based Award. No Performance-Based Awards will be paid for
such performance period until such certification is made by the Committee. The
amount of the Performance-Based Award actually paid to a given Participant may
be less than the amount determined by the applicable performance goal formula,
at the discretion of the Committee. The amount of the Performance-Based Award
determined by the Committee for a performance period shall be paid to the
Participant at such time as determined by the Committee in its sole discretion
after the end of such performance period; provided, however, that a Participant
may, if and to the extent permitted by the Committee and consistent with the
provisions of Section 162(m) of the Code, elect to defer payment of a
Performance-Based Award.
<PAGE>
10. Adjustments Upon Certain Events
Notwithstanding any other provisions in the Plan to the
contrary, the following provisions shall apply to all Awards granted under the
Plan:
(a) Generally. In the event of any change in the outstanding
Shares after the Effective Date by reason of any Share dividend or split,
reorganization, recapitalization, merger, consolidation, spin-off, combination
or exchange of Shares or other corporate exchange, or any distribution to
stockholders of Shares other than regular cash dividends, the Committee in its
sole discretion and without liability to any person may make such substitution
or adjustment, if any, as it deems to be equitable, as to (i) the number or kind
of Shares or other securities issued or reserved for issuance pursuant to the
Plan or pursuant to outstanding Awards, (ii) the Option Price and/or (iii) any
other affected terms of such Awards.
(b) Change in Control. Except as otherwise provided in an
Award agreement, in the event of a Change in Control, the Committee in its sole
discretion and without liability to any person may take such actions, if any, as
it deems necessary or desirable with respect to any Award (including, without
limitation, (i) the acceleration of an Award, (ii) the payment of a cash amount
in exchange for the cancellation of an Award and/or (iii) the requiring of the
issuance of substitute Awards that will substantially preserve the value, rights
and benefits of any affected Awards previously granted hereunder) as of the date
of the consummation of the Change in Control.
11. No Right to Employment
The granting of an Award under the Plan shall impose no
obligation on the Company or any Subsidiary to continue the employment of a
Participant and shall not lessen or affect the Company's or Subsidiary's right
to terminate the employment of such Participant.
12. Successors and Assigns
The Plan shall be binding on all successors and assigns of the
Company and a Participant, including without limitation, the estate of such
Participant and the executor, administrator or trustee of such estate, or any
receiver or trustee in bankruptcy or representative of the Participant's
creditors.
<PAGE>
13. Nontransferability of Awards
An Award shall not be transferable or assignable by the
Participant otherwise than by will or by the laws of descent and distribution.
During the lifetime of a Participant, an Award shall be exercisable only by such
Participant. An Award exercisable after the death of a Participant may be
exercised by the legatees, personal representatives or distributees of the
Participant. Notwithstanding anything to the contrary herein, the Committee, in
its sole discretion, shall have the authority to waive this Section 13 (or any
part thereof) to the extent that this Section 13 (or any part thereof) is not
required under the rules promulgated under any law, rule or regulation
applicable to the Company.
14. Amendments or Termination
The Board may amend, alter or discontinue the Plan, but no
amendment, alteration or discontinuation shall be made which, (a) without the
approval of the stockholders of the Company, would (except as is provided in
Section 10 of the Plan), (i) increase the total number of Shares reserved for
the purposes of the Plan, (ii) change the maximum number of Shares for which
Awards may be granted to any Participant, (iii) materially increase the benefits
accruing to Participants under the Plan or (iv) materially modify the
eligibility requirements for participation in the Plan, or (b) without the
consent of a Participant, would impair any of the rights or obligations under
any Award theretofore granted to such Participant under the Plan; provided,
however, that the Committee may amend the Plan in such manner as it deems
necessary to permit the granting of Awards meeting the requirements of the Code
or other applicable laws. Notwithstanding anything to the contrary herein, the
Board may not amend, alter or discontinue the provisions relating to Section
10(b) of the Plan after the occurrence of a Change in Control.
15. International Participants
With respect to Participants who reside or work outside the
United States of America and who are not (and who are not expected to be)
"covered employees" within the meaning of Section 162(m) of the Code, the
Committee may, in its sole discretion, amend the terms of the Plan or Awards
with respect to such Participants in order to conform such terms with the
requirements of local law.
<PAGE>
16. Choice of Law
The Plan shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts made and to be
performed in the State of New York.
17. Effectiveness of the Plan
The Plan shall be effective as of the Spinoff Date. If the
Plan is not approved by the stockholders of the Company prior to the first
anniversary of the Spinoff Date, no Awards may be granted thereafter.
