SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the
Commission Only
(as permitted by Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
|_| Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
500 Glenpointe Centre West
Teaneck, New Jersey 07666
April 27, 2000
To Our Stockholders:
You are most cordially invited to attend the 2000 Annual Meeting of
Stockholders of Cognizant Technology Solutions Corporation at 10:00 a.m. local
time, on Tuesday, May 23, 2000, at the Teaneck Marriott at Glenpointe, 100 Frank
W. Burr Boulevard, Teaneck, New Jersey.
The Notice of Meeting and Proxy Statement on the following pages describe
the matters to be presented to the meeting.
It is important that your shares be represented at this meeting to ensure
the presence of a quorum. Whether or not you plan to attend the meeting, we hope
that you will have your shares represented by signing, dating and returning your
proxy in the enclosed envelope, which requires no postage if mailed in the
United States, as soon as possible. Your shares will be voted in accordance with
the instructions you have given in your proxy.
Thank you for your continued support.
Sincerely,
/s/ Wijeyaraj Mahadeva
Wijeyaraj Mahadeva
Chairman of the Board and
Chief Executive Officer
<PAGE>
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
500 Glenpointe Centre West
Teaneck, New Jersey 07666
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 23, 2000
The Annual Meeting of Stockholders (the "Meeting") of COGNIZANT TECHNOLOGY
SOLUTIONS CORPORATION, a Delaware corporation (the "Company"), will be held at
the Teaneck Marriott at Glenpointe, 100 Frank W. Burr Boulevard, Teaneck, New
Jersey on Tuesday, May 23, 2000, at 10:00 a.m. local time, for the following
purposes:
(1) To elect six directors to serve until the next Annual Meeting of
Stockholders and until their respective successors shall have been duly
elected and qualified;
(2) To approve an amendment to the Company's Amended and Restated Certificate
of Incorporation to increase the number of authorized shares of Class B
Common Stock from 15,000,000 shares to 25,000,000 shares;
(3) To amend the Company's 1999 Incentive Compensation Plan (the "Incentive
Plan") to increase the maximum number of shares of Class A Common Stock
available for issuance under the Incentive Plan from 2,000,000 to
3,000,000 shares and to reserve an additional 1,000,000 shares of Class A
Common Stock of the Company for issuance upon the exercise of stock
options granted or for the issuance of other awards granted under the
Incentive Plan;
(4) To ratify the appointment of PricewaterhouseCoopers LLP as independent
accountants for the year ending December 31, 2000; and
(5) To transact such other business as may properly come before the Meeting or
any adjournment or adjournments thereof.
Holders of Common Stock, including holders of the Company's Class A Common
Stock and Class B Common Stock, of record at the close of business on April 7,
2000 are entitled to notice of and to vote at the Meeting, or any adjournment or
adjournments thereof. A complete list of such stockholders will be open to the
examination of any stockholder at the Company's principal executive offices at
500 Glenpointe Centre West, Teaneck, New Jersey 07666 for a period of ten days
prior to the meeting and at the Teaneck Marriott at Glenpointe, 100 Frank W.
Burr Boulevard, Teaneck, New Jersey on the day of the Meeting. The Meeting may
be adjourned from time to time without notice other than by announcement at the
Meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER
OF SHARES YOU MAY HOLD. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON,
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN
THE ENCLOSED RETURN ENVELOPE. THE PROMPT RETURN OF PROXIES WILL ENSURE A QUORUM
AND SAVE THE COMPANY THE EXPENSE OF FURTHER SOLICITATION. EACH PROXY GRANTED MAY
BE REVOKED BY THE STOCKHOLDER APPOINTING SUCH PROXY AT ANY TIME BEFORE IT IS
VOTED. IF YOU RECEIVE MORE THAN ONE PROXY CARD BECAUSE YOUR SHARES ARE
REGISTERED IN DIFFERENT NAMES OR ADDRESSES, OR BECAUSE YOU HOLD BOTH CLASS A
COMMON STOCK AND CLASS B COMMON STOCK, EACH SUCH PROXY CARD SHOULD BE SIGNED AND
RETURNED TO ASSURE THAT ALL OF YOUR SHARES WILL BE VOTED.
By Order of the Board of Directors
/s/ Gordon Coburn
Gordon Coburn
Secretary
Teaneck, New Jersey
April 27, 2000
THE COMPANY'S 1999 ANNUAL REPORT ACCOMPANIES THE PROXY STATEMENT.
<PAGE>
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
500 Glenpointe Centre West
Teaneck, New Jersey 07666
-------------------------------------
PROXY STATEMENT
-------------------------------------
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Cognizant Technology Solutions Corporation (the
"Company") of proxies to be voted at the Annual Meeting of Stockholders of the
Company to be held on Tuesday, May 23, 2000 (the "Meeting"), at the Teaneck
Marriott at Glenpointe, 100 Frank W. Burr Boulevard, Teaneck, New Jersey at
10:00 a.m. local time, and at any adjournment or adjournments thereof. Holders
of record of shares of Class A Common Stock, $.01 par value ("Class A Common
Stock"), and Class B Common Stock, $.01 par value ("Class B Common Stock"), as
of the close of business on April 7, 2000, will be entitled to notice of and to
vote at the Meeting and any adjournment or adjournments thereof. As of that
date, there were 7,228,335 shares of Class A Common Stock and 11,290,900 shares
of Class B Common Stock issued and outstanding and entitled to vote. Each share
of Class A Common Stock is entitled to one vote on any matter presented to
stockholders at the Meeting. Each share of Class B Common Stock is entitled to
ten votes on any matter presented to stockholders at the Meeting. Accordingly,
there are an aggregate of 120,137,335 votes entitled to be cast at the Meeting,
112,909,000 of which are held by the Class B Common Stockholder and 7,228,335 of
which are held by the Class A Common Stockholders. IMS Health Incorporated ("IMS
Health") is the record and beneficial holder of all of the outstanding shares of
Class B Common Stock.
If proxies in the accompanying form are properly executed and returned,
the shares of Common Stock represented thereby will be voted in the manner
specified therein. If not otherwise specified, the shares of Common Stock
represented by the proxies will be voted (i) FOR the election of the six
nominees named below as Directors; (ii) FOR a proposal to approve an amendment
to the Company's Amended and Restated Certificate of Incorporation to increase
the number of authorized shares of Class B Common Stock from 15,000,000 shares
to 25,000,000 shares; (iii) FOR a proposal to amend the Company's 1999 Incentive
Compensation Plan (the "Incentive Plan") to increase the maximum number of
shares of Class A Common Stock available for issuance under the Incentive Plan
from 2,000,000 to 3,000,000 shares and to reserve an additional 1,000,000 shares
of Class A Common Stock of the Company for issuance upon the exercise of stock
options granted or for the issuance of other awards granted under the Incentive
Plan; (iv) FOR the ratification of the appointment of PricewaterhouseCoopers LLP
as independent accountants for the year ending December 31, 2000; and (v) in the
discretion of the persons named in the enclosed form of proxy, on any other
proposals which may properly come before the Meeting or any adjournment or
adjournments thereof. Any stockholder who has submitted a proxy may revoke it at
any time before it is voted, by written notice addressed to and received by the
Secretary of the Company, by submitting a duly executed proxy bearing a later
date or by electing to vote in person at the Meeting. The mere presence at the
Meeting of the person appointing a proxy does not, however, revoke the
appointment.
The presence, in person or by proxy, of holders of the shares of Class A
Common Stock and Class B Common Stock having, in the aggregate, a majority of
the votes entitled to be cast at the Meeting shall constitute a quorum. The
affirmative vote by the holders of a plurality of the shares of Class A Common
Stock and Class B Common Stock represented at the Meeting, voting together as a
single class, is required for the election of Directors, provided a quorum is
present in person or by proxy. All actions proposed herein other than the
election of Directors may be taken upon the affirmative vote of stockholders
possessing a majority of the shares of Class A Common Stock and Class B Common
Stock represented at the Meeting, voting together as a single class, provided a
quorum is present in person or by proxy.
Abstentions are included in the shares present at the Meeting for purposes
of determining whether a quorum is present, and are counted as a vote against
for purposes of determining whether a proposal is approved. Broker non-votes
(when shares are represented at the Meeting by a proxy specifically conferring
only limited authority to vote on certain matters and no authority to vote on
other matters) are included in the determination of the number of shares
represented at the Meeting for purposes of determining whether a quorum is
present but are not counted for purposes of determining whether a proposal has
been approved and thus have no effect on the outcome.
-1-
<PAGE>
This Proxy Statement, together with the related proxy card, is being
mailed to the stockholders of the Company on or about April 27, 2000. The Annual
Report to Stockholders of the Company for the year ended December 31, 1999,
including financial statements (the "Annual Report"), is being mailed together
with this Proxy Statement to all stockholders of record as of April 7, 2000. In
addition, the Company has provided brokers, dealers, banks, voting trustees and
their nominees, at the Company's expense, with additional copies of the Annual
Report so that such record holders could supply such materials to beneficial
owners as of April 7, 2000.
ELECTION OF DIRECTORS
At the Meeting, six Directors are to be elected (which number constitutes
the entire current Board of Directors of the Company) to hold office until the
next Annual Meeting of Stockholders and until their successors shall have been
elected and qualified.
It is the intention of the persons named in the enclosed form of proxy to
vote the shares of Class A Common Stock and Class B Common Stock represented
thereby, unless otherwise specified in the proxy, for the election as Directors
of the persons whose names and biographies appear below. All of the persons
whose names and biographies appear below are at present Directors of the
Company. In the event any of the nominees should become unavailable or unable to
serve as a Director, it is intended that votes will be cast for a substitute
nominee designated by the Board of Directors. The Board of Directors has no
reason to believe that the nominees named will be unable to serve if elected.
Each of the nominees has consented to being named in this Proxy Statement and to
serve if elected.
The current members of the Board of Directors and nominees for election to
the Board are as follows:
SERVED AS A POSITIONS WITH
NAME AGE DIRECTOR SINCE THE COMPANY
---- --- -------------- -----------
Wijeyaraj Mahadeva........ 48 1998 Chairman of the Board and
Chief Executive Officer
Anthony Bellomo........... 46 1998 Director
Victoria Fash............. 49 1997 Director
Robert W. Howe............ 53 1999 Director
John Klein................ 58 1998 Director
Venetia Kontogouris....... 49 1997 Director
The principal occupations and business experience, for at least the past
five years, of each nominee is as follows:
Wijeyaraj (Kumar) Mahadeva was elected Chairman and Chief Executive
Officer of the Company's Indian subsidiary in 1994, and led the team that
established the software development and maintenance business conducted by the
Company. Mr. Mahadeva was elected Vice President of the Company in 1994, and was
elected President on April 17, 1996. Effective in March 1998, Mr. Mahadeva was
elected Chairman and Chief Executive Officer of the Company. Mr. Mahadeva
concurrently served as Chairman of The Dun & Bradstreet Corporation India and
China from 1993 to 1996. Mr. Mahadeva previously served as Vice President,
Corporate Strategy, at The Dun & Bradstreet Corporation from 1989 to 1993, as
Director, Business Markets Group, at AT&T from 1985 to 1989, and as a management
consultant at McKinsey & Company from 1978 to 1985. Mr. Mahadeva holds a Masters
of Business Administration degree from Harvard University and a Masters in
Electrical Engineering from Cambridge University (U.K.).
Anthony Bellomo was elected to the Board of Directors of the Company in
March 1998. He is currently the President of ERISCO Managed Care Technologies,
Inc. ("Erisco"), a subsidiary of IMS Health, a position he has held since 1994.
During his tenure with Erisco, which has spanned over twenty years, Mr. Bellomo
has held various
-2-
<PAGE>
technical and marketing positions, serving at the level of Vice President since
1979. He has always played a key role in the development and progression of
Erisco's business. Mr. Bellomo has most recently applied his technology
expertise as the leader of IMS Health's global Y2K project. Prior to joining
Erisco, Mr. Bellomo was an information technology consultant for various Fortune
500 Companies. He holds a Bachelor of Science degree in Systems Engineering from
the Polytechnic Institute of Brooklyn.
Victoria Fash was elected to the Board of Directors of the Company in
December 1997. Ms. Fash was appointed Chief Executive Officer of IMS Health in
March 1999 and currently is its President and Chief Executive Officer. From 1998
to 1999, she served as President and Chief Operating Officer of IMS Health. From
1996 to 1998, she served as Executive Vice President and Chief Financial Officer
of Cognizant Corporation. From 1991 to 1995, she was the Vice President,
Business Operations, at The Dun & Bradstreet Corporation, and in 1995 was
promoted to Senior Vice President, Business Strategy. Ms. Fash serves on the
board of directors of IMS Health and Edwards Lifesciences. Ms. Fash holds a
Bachelor of Science degree and an MBA from the University of Illinois.
Robert W. Howe was elected to the Board of Directors in April 1999. Mr.
Howe currently serves as Chief Executive Officer and Chairman of the Board of
Directors of Atlantic Data Services, Inc., positions he has held since January
1994 and March 1980, respectively. From March 1980 to January 1994, Mr. Howe
served as President of Atlantic Data Services, Inc. Mr. Howe holds a Bachelor of
Arts degree from Boston College.
John Klein was elected to the Board of Directors in March 1998. Mr. Klein
currently serves as Chief Executive Officer of Polarex Inc., a software and
services consulting company, where he has been employed since November 1994.
From July 1997 to November 1999, Mr. Klein also served as the Chairman and Chief
Executive Officer of Glovia International, a manufacturing resource planning
software and services company. From August 1996 to November 1999, Mr. Klein also
served as the Chairman of PRO IV Limited, a 4GL development tools company. From
November 1995 to November 1999, Mr. Klein also served as Chief Executive Officer
of MDIS Group PLC, a software development and services company headquartered in
the UK. From January 1993 to April 1994, Mr. Klein was the Vice President,
Consumer, Process & Transportation-Customer Business Unit, for Digital Equipment
Corporation. Mr. Klein holds a Bachelor of Science degree from the U.S. Merchant
Marine Academy and a Master of Business Administration degree from New York
University.
Venetia Kontogouris was elected to the Board of Directors of the Company in
December 1997. Ms. Kontogouris is currently Managing Director of Trident
Capital, a venture capital firm. Prior to joining Trident Capital, Ms.
Kontogouris was President of Enterprise Associates, Inc., a subsidiary of IMS
Health. Prior to joining Enterprise Associates, Inc., Ms. Kontogouris was Vice
President of New Product Development for The Dun & Bradstreet Corporation. Ms.
Kontogouris serves on the board of directors of Viant Corporation as well as on
the boards of several private companies. Ms. Kontogouris holds a Bachelor of
Arts degree from Northeastern University and a Master of Business Administration
degree and a Master in International Relations degree from the University of
Chicago.
All Directors hold office until the next Annual Meeting of Stockholders and
until their successors are duly elected and qualified. There are no family
relationships among any of the executive officers, Directors and key employees
of the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR EACH OF THE
NOMINEES FOR THE BOARD OF DIRECTORS.
COMMITTEES AND MEETINGS OF THE BOARD
The Board of Directors has an Audit Committee and a Compensation Committee.
The Audit Committee, which is comprised of Messrs. Howe and Klein, is
responsible for reviewing with management the financial controls and accounting
and reporting activities of the Company. The Audit Committee reviews the
qualifications of the Company's independent accountants, makes recommendations
to the Board of Directors regarding the selection of independent accountants,
reviews the scope, fees and results of any audit and reviews non-audit services
and related fees. The Audit Committee held two meetings during 1999. The
Compensation Committee, which is comprised of Messrs. Bellomo, Howe and Klein,
is responsible for the administration of all salary and incentive compensation
plans for the officers and key employees of the Company, including bonuses. The
Compensation Committee also administers the Company's Employee Stock Purchase
Plan and stock option plans, including the 1999 Incentive Compensation Plan, and
establishes the terms and conditions of all stock options granted thereunder.
The
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<PAGE>
Compensation Committee held four meetings during 1999. There were five meetings
of the Board of Directors during 1999. Each incumbent Director attended at least
75% of the aggregate of all meetings of the Board of Directors held during the
period in which he or she served as a Director and the total number of meetings
held by the committee on which he or she served during the period, if
applicable, with the exception of Ms. Fash who attended none of the five
meetings of the Board of Directors.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company and its subsidiaries or of IMS
Health and its subsidiaries receive no cash remuneration for serving as
directors. All other non-employee directors receive $2,000 for attendance at
each meeting of the Board of Directors and $1,000 for attendance at each meeting
of a committee of the Board of Directors. All Directors who are not employees of
the Company and its subsidiaries are eligible to participate in the Company's
Non-Employee Directors' Stock Option Plan (the "Director Plan"). All directors
of the Company are eligible to participate in the Company's 1999 Incentive
Compensation Plan.
The Director Plan became effective in December 1997 and was amended in
March 1998. The aggregate number of shares of Class A Common Stock reserved for
issuance under the Director Plan is 143,000 shares, as adjusted to reflect the
Company's two-for-one forward stock split recapitalization effected in March
2000. The Director Plan, which is administered by the Compensation Committee,
provides for the issuance of non-qualified stock options to purchase up to
30,000 shares of Class A Common Stock in any year to any Director of the Company
who is not an employee of the Company or any subsidiary of the Company. Subject
to the provisions of the Director Plan, the Compensation Committee has the
authority to interpret the provisions of the Director Plan, to determine the
persons to whom options will be granted, the number of shares to be covered by
each option and the terms and conditions upon which an option may be granted.
The option price for options granted under the Director Plan shall be determined
by the Compensation Committee and may be granted at an exercise price greater
than, less than or equal to the fair market value of the underlying shares on
the date of grant. Options granted under the Director Plan become exercisable as
to 50% on each of the first and second anniversaries of the date of initial
grant. Options granted under the Director Plan expire after 10 years, are
nontransferable and, with certain exceptions in the event of a death of a
participant, may be exercised by the optionee only during service. In the event
of an optionee's death or disability, the unexercised portion of an option
immediately vests in full and may be exercised until (i) the earlier of the
remaining stated term of the option or five years after the date of death with
respect to a termination due to death or (ii) the earlier of the remaining
stated term of the option and the longer of five years after the date of
termination due to disability or one year after the date of death, in the case
of a termination due to disability. In the case of a termination for any other
reason, the unexercised portion of an option may be exercised for the period
ending ninety days after termination, but only to the extent such option was
exercisable at the time of termination.
During 1999, the following Directors were granted options to purchase
shares of Class A Common Stock under the Company's Director Plan.
NUMBER OF
SHARES UNDERLYING EXERCISE PRICE
DIRECTOR OPTIONS GRANTED (1) GRANT DATE PER SHARE (1)
-------- --------------- ---------- ---------
Mr. Howe 30,000 4/13/99 $10.75
Mr. Klein 10,000 8/6/99 $12.375
(1) As adjusted to reflect the Company's two-for-one forward stock split
recapitalization effected in March 2000.
-4-
<PAGE>
EXECUTIVE OFFICERS
The following table identifies the current executive officers of the
Company:
CAPACITIES IN IN CURRENT
NAME AGE WHICH SERVED POSITION SINCE
- ---- --- ------------ --------------
Wijeyaraj Mahadeva......... 48 Chairman of the Board and 1998
Chief Executive Officer
Lakshmi Narayanan (1)...... 47 President and Chief 1998
Operating Officer
Gordon Coburn (2).......... 36 Senior Vice President, 1999
Chief Financial Officer,
Treasurer and Secretary
Francisco D'Souza (3)...... 31 Senior Vice President, 1999
North American Operations
and Business Development
- -------------
(1) Lakshmi Narayanan was elected President and Chief Operating Officer of the
Company in March 1998. Mr. Narayanan joined the Indian subsidiary of the
Company as Chief Technology Officer in 1994 and was elected President of
such subsidiary on January 1, 1996. Prior to joining the Company, from
1975 to 1994 Mr. Narayanan was the regional head of Tata Consultancy
Services, a large consulting and software services company located in
India. Mr. Narayanan holds a Bachelor of Science degree, a Master of
Science degree and a Master of Business Administration degree from the
Indian Institute of Science.
(2) Gordon Coburn was elected Senior Vice President of the Company in March
1999. Mr. Coburn continues to serve as the Company's Chief Financial
Officer, Treasurer and Secretary, positions he has held since his election
in March 1998. He previously was Vice President of the Company from
September 1996. From 1990, Mr. Coburn held key financial positions with
Cognizant Corporation and The Dun & Bradstreet Corporation, including
serving as Senior Director-Group Finance & Operations for Cognizant
Corporation from November 1996 to December 1997. Mr. Coburn holds a
Bachelor of Arts degree from Wesleyan University and a Master of Business
Administration degree from the Amos Tuck School at Dartmouth College.
(3) Francisco D'Souza was elected Senior Vice President, North American
Operations and Business Development of the Company in November 1999.
Prior to that, from March 1998 to November 1999, he served as the
Company's Vice President, North American Operations and Business
Development and as the Company's Director-North American Operations and
Business Development from June 1997 to March 1998. From January 1996 to
June 1997, Mr. D'Souza was employed as a consultant to the Company. From
February 1995 to December 1995, Mr. D'Souza was employed as Product
Manager at Pilot Software. Between 1992 and 1995, Mr. D'Souza held various
marketing, business development and technology management positions as a
Management Associate at The Dun & Bradstreet Corporation. While working at
The Dun & Bradstreet Corporation, Mr. D'Souza was part of the team that
established the software development and maintenance business conducted by
the Company. Mr. D'Souza holds a Bachelor of Business Administration
degree from the University of East Asia and a Master of Science degree in
Industrial Administration from Carnegie-Mellon University.
None of the Company's executive officers is related to any other executive
officer or to any Director of the Company. Executive officers of the Company are
elected annually by the Board of Directors and serve until their successors are
duly elected and qualified.
-5-
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION IN 1997, 1998 AND 1999
The following Summary Compensation Table sets forth information concerning
compensation for services in all capacities awarded to, earned by or paid to
each person who served as the Company's Chief Executive Officer at any time
during 1999 and each other executive officer of the Company whose aggregate cash
compensation exceeded $100,000 (collectively, the "Named Executives") during the
years ended December 31, 1997, 1998 and 1999.
<TABLE>
SUMMARY COMPENSATION TABLE
- ---------------------------------------------------------------------------------------------------
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-----------------------------------------------------------
AWARDS
-----------------------------------------------------------
OTHER
ANNUAL SECURITIES ALL OTHER
COMPEN- UNDERLYING COMPEN-
NAME AND PRINCIPAL POSITION(1) YEAR SALARY BONUS(2) SATION(3) OPTIONS (4) SATION
($) ($) ($) (#) ($)
(a) (b) (c) (d) (e) (g) (i)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Wijeyaraj Mahadeva............. 1999 300,000 450,000 -- 470,250 16,716(5)
Chairman of the Board, and 1998 235,000 237,952 -- 97,500 14,396(5)
Chief Executive Officer 1997 235,000 228,136 -- 260,000 14,717(5)
Lakshmi Narayanan.............. 1999 100,000 120,000 -- 82,500 6,500(6)
President and Chief Operating 1998 54,118 96,471 -- -- 7,500(6)
Officer 1997 57,566 60,440 -- 117,000 1,372(6)
Gordon Coburn (7).............. 1999 170,000 170,000 -- 74,500 7,551(5)
Chief Financial Officer, 1998 133,250 77,626 -- -- 5,951(5)
Treasurer and Secretary 1997 -- -- -- 52,000 --
Francisco D'Souza (8).......... 1999 170,000 170,000 -- 72,750 --
Senior Vice President, North 1998 123,000 70,000 -- 13,000 --
American Operations and 1997 120,000 35,000 -- 65,000 --
Business Development
</TABLE>
- -----------
(1) Each of the Named Executives has entered into a Severance and
Noncompetition agreement with the Company. See " - Severance and
Noncompetition Agreements."
(2) The bonus awards were earned in the year indicated and were paid in the
following year.
(3) The value of certain personal benefits is not included since the aggregate
amount of such compensation did not exceed the lesser of either $50,000 or
10% of the total of annual salary and bonus reported for such named
executive officer in columns (c) and (d).
(4) Such awards have been adjusted to reflect the Company's two-for-one
forward stock split recapitalization effected in March 2000.
(5) Represents a 401(k) plan matching contribution.
(6) Consists of interest savings on a loan made to Mr. Narayanan by the
Company in October 1997, which bears interest at 2% per annum. See
"Transactions with IMS Health and other Affiliates."
-6-
<PAGE>
(7) Mr. Coburn was employed by Cognizant Corporation during 1997 and his
responsibilities included significant activities unrelated to the
Company's business as well as services provided to the Company on behalf
of Cognizant Corporation. Mr. Coburn's compensation expenses for 1997 were
an unallocated component of the aggregate costs allocated to the Company
by Cognizant Corporation based upon assets employed by the Company in
proportion to Cognizant Corporation's total assets.
(8) With respect to 1997, reflects compensation received in all capacities
from the Company during that year. Mr. D'Souza worked as an independent
consultant to the Company until June 1, 1997, when he became a full-time
employee of the Company.
OPTION GRANTS IN 1999
The following table sets forth information concerning individual grants of
stock options during 1999 by the Company to each of the Named Executives.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
Individual Grants
- -----------------------------------------------------------------------------------------------------------
Number of Percent of
Securities Total Options Potential Realizable Value At
Underlying Granted to Exercise Assumed Annual Rates of Stock
Options Employees in or Base Expiration Price Appreciation For Option
Name Granted(1) Fiscal Year(2) Price Date Term(3)
(#) ($/SH)(3) 5%($) 10%($)
(a) (b) (c) (d) (e) (f) (g)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Wijeyaraj Mahadeva (4).. 470,250 33.6 12.219 5/14/09 3,613,650 9,157,376
Lakshmi Narayanan (4)... 82,500 5.9 12.219 5/14/09 633,974 1,606,557
Gordon Coburn (4)....... 74,500 5.3 12.219 5/14/09 572,497 1,450,770
Francisco D'Souza (4).. 72,750 5.2 12.219 5/14/09 559,049 1,416,691
</TABLE>
- ----------------
(1) Adjusted to reflect the Company's two-for-one forward stock split
recapitalization effected in March 2000.
(2) Based on an aggregate of 1,339,400 options granted to employees in 1999,
including options granted to the Named Executives.
(3) Based on a grant date fair market value of $12.219, as adjusted to reflect
the Company's two-for-one forward stock split recapitalization effected in
March 2000.
(4) The options disclosed herein were granted on May 14, 1999 pursuant to the
Company's 1999 Incentive Compensation Plan and have been adjusted to
reflect the Company's two-for-one forward stock split in March 2000.
One-quarter of such options become exercisable on May 14, 2000 and an
additional one-quarter of such options become exercisable on the first,
second and third anniversary of such date. The options terminate on the
expiration date, subject to earlier termination on the optionee's death,
disability or termination of employment with the Company. Such options are
not assignable or otherwise transferable except by will or the laws of
descent and distribution.
-7-
<PAGE>
AGGREGATED OPTION EXERCISES IN 1999 AND YEAR-END OPTION VALUES
The following table sets forth information concerning each exercise of
options during 1999 by each of the Named Executives and the year-end number and
value of unexercised options held by each of the Named Executives.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
- --------------------------------------------------------------------------------
Number of Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Fiscal Fiscal
Shares Year-End Year-End
Acquired on Value (#) ($)
Name Exercise Realized Exercisable/ Exercisable/
(#) ($) Unexercisable Unexercisable
(a) (b)(1) (c) (d)(1) (e)(2)
- --------------------------------------------------------------------------------
Wijeyaraj Mahadeva. -- -- 118,750 / 649,000 6,186,975/
29,306,834
Lakshmi Narayanan.. -- -- 58,500 / 141,000 3,084,763/
6,585,815
Gordon Coburn...... 26,000 662,481 -- / 100,500 -- / 4,532,563
Francisco D'Souza. 15,000 377,063 20,750 / 115,000 1,084,174/
5,285,194
- ------------
(1) Such numbers of shares have been adjusted to reflect the Company's
two-for-one forward stock split recapitalization effected in March 2000.
(2) Based on a year-end fair market value of the underlying securities equal
to $54.656, as adjusted to reflect the Company's two-for-one forward stock
split recapitalization effected in March 2000, less the exercise price for
such shares, which exercise price also has been adjusted to reflect such
stock split recapitalization.
SEVERANCE AND NONCOMPETITION AGREEMENTS
The Company has entered into a Severance and Noncompetition Agreement
(collectively, the "Severance and Noncompetition Agreements") with each of the
Named Executives. The Severance and Noncompetition Agreements provide that each
Named Executive will receive one year's base salary and a full annual bonus upon
termination of employment, other than in the case of a termination for cause. In
addition, such agreements provide that all options held by the Named Executives
will vest in full immediately upon a change of control. Pursuant to such
agreements, each Named Executive has agreed not to engage in any competitive
business in any capacity for one year following termination of employment and
not to solicit any of the Company's employees to leave the Company within the
one-year period following termination of employment. Finally, such agreements
include customary proprietary rights assignment and confidentiality provisions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of Messrs. Bellomo, Howe and
Klein. There are no, and during 1999 there were no, Compensation Committee
Interlocks.
In 1999, the Company granted options to purchase Class A Common Stock
of the Company to each of Mr. Mr. Howe and Mr. Klein. See "Election of
Directors - Compensation of Directors."
-8-
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on
the Company's Class A Common Stock with the cumulative total return on the S&P
SmallCap 600 Index and a Peer Group Index (capitalization weighted) for the
period beginning on the date on which the SEC declared effective the Company's
Form 8-A Registration Statement pursuant to Section 12 of the Exchange Act and
ending on the last day of the Company's last completed fiscal year. The stock
performance shown on the graph below is not indicative of future price
performance.
COMPARISON OF CUMULATIVE TOTAL RETURN(1)(2)
Among the Company, the S&P SmallCap 600 Index
and a Peer Group Index(3)
(Capitalization Weighted)
[Graph inserted here]
6/19/98 12/31/98 12/31/99
------- -------- --------
Cognizant Technology Solutions Corporation.. $100.00 $303.75 $1,093.12
S&P SmallCap 600 Index...................... $100.00 $ 97.53 $109.63
Peer Group Index (Capitalization Weighted).. $100.00 $ 83.25 $121.41
(1) Graph assumes $100 invested on June 19, 1998 in the Company's Class A
Common Stock, the S&P SmallCap 600 Index and the Peer Group Index
(capitalization weighted).
(2) Cumulative total return assumes reinvestment of dividends.
(3) The Company has constructed a Peer Group Index consisting of other
information technology consulting firms consisting of Cambridge Technology
Partners, Inc., Complete Business Solutions, Inc., Computer Horizons Corp.,
Computer Task Group, Inc., Igate Capital Corp., Information Architects
Corp., Infosys Technologies Ltd., IMRglobal Corp., Keane, Inc., Marchfirst,
Inc., Sapient Corp., Syntel, Inc., and Tanning Technology Corp. The Company
believes that these companies most closely resemble the Company's business
mix and that their performance is representative of the industry.
-9-
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee has furnished the following report:
The Company's executive compensation policy is designed to attract and
retain highly qualified individuals for its executive positions and to provide
incentives for such executives to achieve maximum Company performance by
aligning the executives' interest with that of stockholders by basing a portion
of compensation on corporate performance.
The Compensation Committee reviews and determines base salary levels for
executive officers of the Company on an annual basis and determines actual
bonuses after the end of the fiscal year based upon Company and individual
performance. Additionally, the Compensation Committee administers all of the
Company's stock option plans.
The Company's executive officer compensation program is comprised of base
salary, discretionary annual cash bonuses, stock options and various other
benefits, including medical insurance and a 401(k) Plan, which are generally
available to all employees of the Company.
Salaries are established in accordance with industry standards through
review of publicly available information concerning the compensation of officers
of comparable companies. Consideration is also given to relative responsibility,
seniority, individual experience and performance. Salary increases are generally
made based on increases in the industry for similar companies with similar
performance profiles and/or attainment of certain division or Company goals.
Bonuses are paid on an annual basis and are discretionary. The amount of
bonus is based on criteria designed to effectively measure a particular
executive's attainment of goals which relate to his or her duties and
responsibilities as well as overall Company performance. In general, the annual
incentive bonus is based on operational and financial results of the Company and
the executive's individual performance in achieving the results.
The stock option program is designed to relate executives' and certain
middle managers' and other key personnel's long-term interests to stockholders'
long-term interests. In general, stock option awards are granted if warranted by
the Company's growth and profitability. Stock options are awarded on the basis
of individual performance and/or the achievement of internal strategic
objectives.
The Committee established the Chief Executive Officer's total annual
compensation based on the size, complexity and historical performance of the
Company's business, the Company's position as compared to its peers in the
industry, and the specific challenges faced by the Company during the year, such
as changes in the market for computer products and services and other industry
factors. No specific weight was assigned to any of the criteria relative to the
Chief Executive Officer's compensation.
Compensation Committee Members
Anthony Bellomo
Robert W. Howe
John Klein
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
COMMON STOCK
There are, as of April 7, 2000, approximately 25 holders of record and
4,750 beneficial holders of the Company's Class A Common Stock, including one
holder of record, beneficially owning all of the shares of the Company's Class B
Common Stock. Such shares of Class B Common Stock are convertible, on a
share-for-share basis, into shares of Class A Common Stock(1). The holder of
record of all of the shares of the Company's Class B Common Stock, IMS Health,
acquired its ownership as a result of a spin-off (the "spin-off") of IMS Health
from Cognizant Corporation. Prior to the spin-off, all of the shares of the
Company's Class B Common Stock were held by Cognizant Corporation. The following
table sets forth certain information, as of April 7, 2000, with respect to
holdings of the Company's Class A Common Stock by (i) each person known by the
Company to beneficially own more than 5% of the total number of shares of Common
Stock outstanding as of such date, (ii) each of the Company's Directors (which
includes all nominees), each of the Company's Named Executives, and (iii) all
Directors and officers as a group. Unless otherwise indicated, the address for
the individuals below is that of the Company address.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(2) OF CLASS(3)
- ------------------------------------ -------------------- --------
<S> <C> <C>
(i) Certain Beneficial Owners:
IMS Health (4) ................................... 11,290,900 61.0%
(ii) Directors (which includes all nominees) and
Named Executives who are not set forth above:
Wijeyaraj Mahadeva (5)............................ 371,300 2.0%
Lakshmi Narayanan (6)............................. 68,000 *
Gordon Coburn (7)................................. 20,400 *
Francisco D'Souza (8)............................. 54,800 *
Anthony Bellomo (9)............................... 14,050 *
Victoria Fash (10)................................ 19,500 *
Robert W. Howe (11) .............................. 40,000 *
John Klein (12)................................... 65,000 *
Venetia Kontogouris (13).......................... 29,500 *
(iii) All Directors and officers as a
group (9 persons) (14)...................... 682,550 3.6%
</TABLE>
- --------------
* Less than one percent.
(1) Except as provided below, each outstanding share of Class B Common Stock
shall convert automatically to a share of Class A Common Stock upon a
transfer, other than a tax-free spin-off, to any person other than IMS
Health or any of its subsidiaries or successors. In addition, prior to a
tax-free spin-off, each outstanding share of Class B Common Stock is
convertible at the holder's option into one share of Class A Common Stock.
If a tax-free spin-off occurs, the stockholders of IMS Health will receive
Class B Common Stock, which will continue to have ten votes per share.
Thereafter, shares of Class B Common Stock shall convert to Class A Common
Stock automatically only upon a transfer of Class B Common Stock and shall
no longer be convertible into shares of Class A Common Stock at the option
of the holder thereof. Additionally, each share of Class B Common Stock
shall convert automatically into one share of Class A Common Stock if at
any time the number of outstanding shares of Class B Common Stock
represents less than 35% of the economic ownership of the Company
represented by the aggregate number of shares of Common Stock then
outstanding. In the event of a tax-free spin-off, and to the extent there
are shares of Class B Common Stock that have not been converted to Class A
Common Stock, such shares of Class B Common Stock shall automatically
convert into shares of Class A Common Stock on the fifth anniversary of
the tax-free spin-off, unless prior to such tax-free spin-off, IMS Health
delivers to the Company written
-11-
<PAGE>
advice of counsel reasonably satisfactory to the Company to the effect that
(i) such conversion could adversely affect the ability of IMS Health to
obtain a favorable ruling from the Internal Revenue Service that the
distribution would be a tax-free spin-off or (ii) the Internal Revenue
Service has adopted a general non-ruling policy on tax-free spin-offs and
that such conversion could adversely affect the status of the transaction
as a tax-free spin-off. If such written advice is received, approval of
such conversion shall be submitted to a vote of the holders of the Common
Stock as soon as practicable after the fifth anniversary of the tax-free
spin-off, unless IMS Health delivers to the Company written advice of
counsel reasonably satisfactory to the Company prior to such anniversary
that such vote could adversely affect the status of the distribution as a
tax-free spin-off, including the ability to obtain a favorable ruling from
the Internal Revenue Service. If such written advice is delivered, such
vote shall not be held. Approval of such conversion will require the
affirmative vote of the holders of a majority of the shares of both Class A
Common Stock and Class B Common Stock present and voting, voting together
as a single class, with each share entitled to one vote for such purpose.
No assurance can be given that such conversion would be consummated. The
foregoing requirements are intended to ensure that tax-free treatment of a
tax-free spin-off is preserved should the Internal Revenue Service
challenge such automatic conversion as violating the 80% vote requirement
currently required by the Code for a tax-free spin-off.
(2) Except as set forth in the footnotes to this table and subject to
applicable community property law, the persons named in the table have sole
voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by such stockholder. Additionally, the number
of such shares has been adjusted to reflect the Company's two-for-one
forward stock split recapitalization effected in March 2000.
(3) Applicable percentage of ownership is based on an aggregate of 18,519,235
shares of Common Stock outstanding on April 7, 2000 (consisting of
7,228,335 shares of Class A Common Stock and 11,290,900 shares of Class B
Common Stock), plus any presently exercisable stock options held by each
such holder, and options which will become exercisable within 60 days after
April 7, 2000.
(4) The address for IMS Health is 200 Nyala Farms, Westport, Connecticut 06880.
Represents 11,290,900 shares of Class B Common Stock held of record and
beneficially by IMS Health.
(5) Includes 158,500 shares of Class A Common Stock owned of record and 212,800
shares of Class A Common Stock subject to options which were exercisable as
of April 7, 2000 or sixty (60) days after such date. Excludes 554,950
shares of Class A Common Stock underlying options which become exercisable
over time after such period.
(6) Represents 68,000 shares of Class A Common Stock underlying options which
were exercisable as of April 7, 2000 or sixty (60) days after such date.
Excludes 124,500 shares of Class A Common Stock underlying options which
become exercisable over time after such period.
(7) Includes 5,500 shares of Class A Common Stock owned of record and 14,900
shares of Class A Common Stock subject to, options which were exercisable
as of April 7, 2000 or sixty (60) days after such date. Excludes 85,600
shares of Class A Common Stock underlying options which become exercisable
over time after such period.
(8) Includes 19,500 shares of Class A Common Stock owned of record and 35,300
shares of Class A Common Stock subject to options which were exercisable as
of April 7, 2000 or sixty (60) days after such date. Excludes 100,450
shares of Class A Common Stock underlying options which become exercisable
over time after such period.
(9) Includes 7,000 shares of Class A Common Stock owned of record, 550 shares
of Class A Common Stock owned indirectly by Mr. Bellomo through his wife
and son jointly and 6,500 shares of Class A Common Stock subject to options
which were exercisable as of April 7, 2000 or sixty (60) days after such
date. Excludes 33,500 shares of Class A Common Stock underlying options
which become exercisable over time after such period.
(10) Includes 6,500 shares of Class A Common Stock owned of record and 13,000
shares of Class A Common Stock subject to options which were exercisable
as of April 7, 2000 or sixty (60) days after such date. Excludes 27,000
shares of Class A Common Stock underlying options which become exercisable
over time after such period.
(11) Includes 10,000 shares of Class A Common Stock owned of record and 30,000
shares of Class A Common Stock subject to option which were exercisable as
of April 7, 2000 or sixty (60) days after such date.
-12-
<PAGE>
(12) Represents 40,000 shares of Class A Common Stock owned of record and 25,000
shares of Class A Common Stock subject to options which were exercisable as
of April 7, 2000 or sixty (60) days after such date. Excludes 15,000 shares
of Class A Common Stock underlying options which become exercisable over
time after such period.
(13) Includes 16,500 shares of Class A Common Stock owned of record and 13,000
shares of Class A Common Stock subject to options which were exercisable
as of April 7, 2000 or sixty (60) days after such date. Excludes 27,000
shares of Class A Common Stock underlying options which become exercisable
over time after such period.
(14) Includes an aggregate of 418,500 shares of Class A Common Stock underlying
options granted to Directors and officers listed in the table which are
exercisable as of April 7, 2000 or within sixty (60) days after such date.
Excludes 968,000 shares of Class A Common Stock underlying options granted
to executive officers and Directors, which become exercisable over time
after such period.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From November 30, 1996 through June 30, 1998, the Company was a subsidiary
of Cognizant Corporation. In June 1998, Cognizant spun off (the "Spin-Off") IMS
Health and Cognizant Corporation was renamed Nielsen Media Research, Inc. IMS
Health consisted of all of Cognizant Corporation's businesses other than the
business conducted by Nielsen Media Research. Therefore, all shares of the
Company held by Cognizant Corporation immediately prior to the Spin-Off are now
held by IMS Health.
AGREEMENTS WITH IMS HEALTH AND ITS PREDECESSORS
The Company and IMS America, IMS International and Nielsen Media Research,
then operating subsidiaries of Cognizant Corporation, have entered into Master
Services Agreements and the Company and IMS Health are parties to the
Intercompany Agreement and the Intercompany Services Agreement. Cognizant
Corporation and the Company entered into the License Agreement. The material
terms of these agreements are summarized below. Because the Company was
controlled by Cognizant Corporation at the time these agreements were executed,
none of these agreements resulted from arms-length negotiations and, therefore,
the terms thereof may be more or less favorable to the Company than those
obtainable from unaffiliated third parties. Upon the consummation of the
Spin-Off of IMS Health, the Master Services Agreements remained in effect and
the Intercompany Agreement and the Intercompany Services Agreement were assigned
to IMS Health.
Master Services Agreement. Pursuant to a Master Services Agreement the
Company continues to provide software development and maintenance services to
IMS Health and its subsidiaries. During 1999, such services resulted in revenue
to the Company in the amount of $14.8 million. The Master Service Agreement
provides that it and any work order issued thereunder may be terminated by IMS
Health with or without cause on 30 days' prior written notice.
Intercompany Agreement. The Intercompany Agreement provides that until IMS
Health and its affiliates cease to control at least 50% of the combined voting
power of the outstanding voting stock of the Company, the prior written consent
of IMS Health will be required for (i) any acquisition of capital stock or
assets by the Company or any of its subsidiaries or disposition of assets of the
Company or any of its subsidiaries (other than transactions to which the Company
and its subsidiaries are the only parties), or any series of related
acquisitions or dispositions, involving gross consideration (including the
assumption of indebtedness) in excess of the greater of $10.0 million and six
percent of the Company's total equity market capitalization, (ii) any issuance
by the Company or any subsidiary of the Company of any equity securities or
rights, warrants or options to purchase such equity securities, except for
equity securities issued to directors, employees and consultants pursuant to the
Employee Plan and the Director Plan and other outstanding options and equity
securities issued in connection with acquisitions approved by IMS Health and
(iii) the creation or incurrence by the Company or any of its subsidiaries of
indebtedness for borrowed money in excess of $10.0 million, except for
indebtedness incurred to finance any acquisition approved by IMS Health.
Pursuant to the Intercompany Agreement, the Company has granted to IMS
Health certain demand and "piggyback" registration rights with respect to shares
of Common Stock owned by IMS Health. IMS Health has the right to request up to
two demand registrations in each calendar year, but not more than six in any
five-year period.
-13-
<PAGE>
The Company may postpone such a demand under certain circumstances. IMS Health
also has the right, which it may exercise at any time and from time to time, to
include the shares of Common Stock held by it in any registration of common
equity securities of the Company initiated by the Company on its own behalf or
on behalf of any other stockholders of the Company. Such registration rights are
transferable by IMS Health. The Company agrees to pay all costs and expenses in
connection with each such registration, except underwriting discounts and
commissions applicable to the shares of Common Stock sold by IMS Health. The
Intercompany Agreement contains customary terms and provisions with respect to,
among other things, registration procedures and certain rights to
indemnification granted by parties thereunder in connection with the
registration of Common Stock on behalf of IMS Health.
Pursuant to the Intercompany Agreement, the Company will indemnify IMS
Health and its subsidiaries (other than the Company) and their respective
officers, directors, employees and agents against certain losses based on,
arising out of or resulting from the conduct of the Company's business and IMS
Health will similarly indemnify the Company and its subsidiaries and their
respective officers, directors, employees and agents against certain losses
based on, arising out of or resulting from IMS Health's other businesses. In
addition, Cognizant Corporation assigned to the Company certain rights to
indemnification from The Dun & Bradstreet Corporation and certain of its former
affiliates.
The Intercompany Agreement may not be amended without the approval of a
majority of the Independent Directors.
Intercompany Services Agreement. Pursuant to the Intercompany Services
Agreement, IMS Health provides certain services to the Company, including
payroll and payables processing, e-mail, tax, finance, personnel administration,
real estate and risk management services, and the Company and its employees
continue to be covered by IMS Health's insurance policies and certain IMS Health
employee benefit plans. The Intercompany Services Agreement's initial term
extended through December 31, 1998. Subsequent to December 31, 1998, the
Intercompany Services Agreement continues for successive one-year terms unless
terminated by either party on not less than 60 days' written notice prior to the
end of the initial term or any renewal term. Any change in the fees provided for
under the terms of the Intercompany Services Agreement will be subject to the
approval of a majority of the Independent Directors.
License Agreement. Pursuant to the License Agreement, Cognizant
Corporation transferred all rights to the use of the "Cognizant" trade name and
certain other trade and service marks (the "Marks") to the Company upon the
consummation in mid-1998 of the previously announced spin-off of IMS Health.
TRANSACTIONS WITH IMS HEALTH AND OTHER AFFILIATES
Prior to the consummation of the Company's initial public offering in June
1998 ("IPO"), Cognizant Corporation and The Dun & Bradstreet Corporation
provided the Company with certain administrative services, including financial
planning and administration, legal, tax planning and compliance, treasury and
communications, and permitted the Company to participate in Cognizant
Corporation's insurance and employee benefit plans. Costs for these services for
all periods prior to the IPO were allocated to the Company based on utilization
of certain specific services. All subsequent services were performed under the
Intercompany Services Agreement with Cognizant Corporation and subsequent to the
Spin-Off, IMS Health. Total costs in connection with these services were
$350,493 for the year ended December 31, 1999.
Certain employees of the Company, including Mr. Mahadeva and Mr. Coburn,
participate in IMS Health's defined benefit pension plans. The plans are cash
balance pension plans under which six percent of creditable compensation plus
interest is credited to the employee's retirement account on a monthly basis.
The cash balance earns monthly investment credits based on the 30-year Treasury
bond yield. At the time of retirement, the vested employee's account balance is
actuarially converted into an annuity. The Company's cost for these plans is
included in the allocation of expense from IMS Health for employee benefits
plans.
In October 1997, the Company loaned $63,300 to Mr. Narayanan for the
purchase of a residence. The loan is secured by the residence and bears interest
at the rate of two percent per annum. Principal and interest on the loan is
payable over a ten-year period. The loan matures in October 2007. In the event
of termination of employment, Mr. Narayanan must repay the outstanding balance
of the loan, plus interest at a higher rate under certain circumstances. As of
December 31, 1999, the outstanding balance of the loan, including principal and
accrued interest, was $45,019.
-14-
<PAGE>
PROPOSED AMENDMENT TO THE COMPANY'S
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
DESCRIPTION OF PROPOSAL
Article IV A of the Amended and Restated Certificate of Incorporation
authorizes the Company to issue 15,000,000 shares of Class B Common Stock. As of
April 17, 2000, 11,290,900 shares of Class B Common Stock (as adjusted to
reflect the Company's two-for-one forward stock split recapitalization effected
in March 2000) were outstanding. Accordingly, the Company has 3,709,100 shares
remaining available for issuance. If the proposed amendment is approved,
10,000,000 additional shares of Class B Common Stock would be authorized but
unissued.
Upon approval by the stockholders, Article IV A of the Amended and
Restated Certificate of Incorporation would read in its entirety as follows:
"ARTICLE IV
A. The total number of shares of stock that the Corporation shall have
authority to issue is One Hundred Forty Million (140,000,000) of which
(i) One Hundred Million (100,000,000) shares shall be shares of Class A
Common Stock, $.01 par value per share (the "Class A Common Stock"),
and Twenty-five Million (25,000,000) shares shall be shares of Class B
Common Stock, $.01 par value per share (the "Class B Common Stock")
(the Class A common Stock and the Class B Common Stock being
collectively referred to herein as the "Common Stock"), and (ii)
Fifteen Million (15,000,000) shares shall be shares of Preferred Stock,
$.10 par value per share (the "Preferred Stock")."
PROPOSED AMENDMENT
Stockholders are being asked to consider and vote upon a proposed
amendment to the Company's Amended and Restated Certificate of Incorporation to
increase the number of authorized shares of Class B Common Stock from 15,000,000
to 25,000,000 shares. Although the Company has no present intent to issue any
additional shares of Class B Common Stock, the Board of Directors believes that
these additional shares would provide the Company with added flexibility in
connection with its future financing and stock issuance requirements, including
with respect to possible future stock splits, if any.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT
TO THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF CLASS B COMMON STOCK FROM 15,000,000 TO
25,000,000 SHARES.
PROPOSED AMENDMENT TO THE 1999 INCENTIVE COMPENSATION PLAN
The Incentive Plan was adopted by Board of Directors on April 13, 1999 and
approved by the Stockholders of the Company on May 25, 1999. Currently there are
2,000,000 shares of Class A Common Stock reserved for issuance upon the exercise
of stock options or other awards granted under the Incentive Plan.
GENERAL
The purpose of the Incentive Plan is to:
o aid the Company in motivating certain employees, non-employee directors
and independent contractors to put forth maximum efforts toward the
growth, profitability and success of the Company; and
o provide incentives which will attract and retain highly qualified
individuals as employees and non-employee directors and to assist in
aligning the interests of such employees and non-employee directors
with those of the Company's stockholders.
Pursuant to the Incentive Plan, awards may be stock-based or payable in
cash. Subject to adjustment, for among other things, a merger, consolidation,
reorganization, stock split, or other change in capital structure, an
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<PAGE>
individual is limited to a maximum of 1,500,000 shares during the life of the
Incentive Plan. Additionally, the maximum dollar amount paid in cash to any
individual during the life of the Incentive Plan is $10,000,000. The Incentive
Plan terminates on April 13, 2009, unless sooner terminated by the Board of
Directors. The Board may amend the Incentive Plan, except that no such action
can adversely affect awards previously granted. Without stockholder approval,
the Board may not
o increase the total amount of the Common Stock allocated to the
Incentive Plan (except for permitted capital adjustments);
o increase the maximum amount of the Common Stock with respect to all
awards measured in common stock that may be granted to any individual
under the Incentive Plan;
o increase the maximum dollar amount that may be paid with respect to
all awards measured in cash; or
o modify the requirements as to eligibility for awards;
Additionally, stockholder approval is necessary if an amendment (1) is
required by the stock exchange or national market system on which the Common
Stock is listed or (2) will disqualify any incentive stock option granted under
the Incentive Plan.
The Incentive Plan is administered by the Compensation Committee. Subject
to the provisions of the Incentive Plan, the Compensation Committee has the
authority, among other things, to do the following:
o determine eligibility for participation;
o determine eligibility for and the type and size of awards;
o issue administrative guidelines and make rules as an aid to administer
the Incentive Plan;
o grant waivers of terms, conditions, restrictions and limitations; and
o accelerate the vesting of any award.
TYPES OF AWARDS
Several types of awards are provided for by the Incentive Plan. The awards
may be measured in stock or in cash. An award may be designated as a stock
option, stock appreciation right, stock award, stock unit, performance share,
performance unit or cash.
Stock Options. The Incentive Plan provides for the granting of options
intended to qualify as incentive stock options, or ISOs, as defined in Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"). The Incentive
Plan also provides for the granting of non-qualified stock options, or NQSOs.
ISOs or NQSOs may be granted to employees, while only NQSOs may be granted to
non-employee directors and independent contractors. ISOs granted under the
Incentive Plan may not be granted at an exercise price less than fair market
value of the underlying shares on the date of grant. NQSOs granted under the
Incentive Plan may not be granted at an exercise price less than fair market
value of the underlying shares on the date of grant unless the Compensation
Committee determines otherwise on the date of grant. Unless the Compensation
Committee specifies otherwise, options granted under the Incentive Plan become
exercisable to the extent of 25% of the grant on each of the first, second,
third and fourth anniversary of the grant. Under the Incentive Plan, ISOs and
NQSOs expire 10 years after the grant.
Stock Appreciation Rights. Stock appreciation rights ("SARs") entitle
their recipients to receive payments in cash, Common Stock or a combination as
determined by the Compensation Committee. Any such payments will represent the
appreciation in the market value of a specified number of shares from the date
of grant until the date of exercise. Such appreciation will be measured by the
excess of the fair market value on the exercise date over the fair market value
of the Common Stock, or other valuation (which shall be no less than the fair
market value of the Common Stock) on the effective date of grant of SARs or the
grant of an award which the SAR replaced.
-16-
<PAGE>
Stock Awards. A stock award consists of shares of Common Stock, subject to
such terms and conditions as determined by the Compensation Committee. A grantee
of a stock award has all of the rights of a holder of shares of Common Stock
unless otherwise determined by the Compensation Committee on the date of grant.
Stock Units. A stock unit is a hypothetical share of Common Stock
represented by a notional account established and maintained or caused to be
established and maintained by the Company for a grantee of a stock unit. Stock
units are subject to such terms and conditions as determined by the Compensation
Committee. A stock unit shall provide for payment in shares of Common Stock at
such time as the award agreement shall specify. The Compensation Committee has
the sole discretion to pay the stock unit in Common Stock, cash or a
combination.
Performance Shares. A performance share consists of a share or shares of
Common Stock, subject to such terms and conditions as determined by the
Compensation Committee. Such terms and conditions may include, among other
things, a determination of performance goals which will determine the number
and/or value of the performance shares that will be paid out or distributed. The
Compensation Committee has the sole discretion to pay the performance share in
Common Stock, cash or a combination.
Performance Unit. A performance unit is a hypothetical share or shares of
Common Stock represented by a notional account established and maintained or
caused to be established and maintained by the Company for a grantee of a
performance unit. Performance units are subject to such terms and conditions as
determined by the Compensation Committee. Such terms and conditions may include,
among other things, a determination of performance goal or goals which will
determine the number and/or value of the performance units that will be accrued.
The Compensation Committee has the sole discretion to pay the performance share
in Common Stock, cash or a combination.
Cash Awards. The Compensation Committee may grant cash awards subject
to such terms and conditions as it determines appropriate.
Subject to certain criteria, Compensation Committee has the sole
discretion to designate awards as performance-based awards if it determines that
such compensation might not be tax deductible by the Company under Section
162(m) of the Code. The Compensation Committee may use the following performance
measures (either individually or in any combination) to set performance goals
with respect to awards intended to qualify as performance-based awards: net
sales; pretax income before allocation of corporate overhead and bonus; budget;
cash flow; earnings per share; net income; division, group or corporate
financial goals; return on stockholders' equity; return on assets; attainment of
strategic and operational initiatives; appreciation in and/or maintenance of the
price of the Common Stock or any other publicly-traded securities of the
Company; market share; gross profits; earnings before interest and taxes;
earnings before interest, taxes, depreciation and amortization; economic
value-added models; comparisons with various stock market indices; increase in
number of customers; and/or reductions in costs. The material terms of
performance goals must be approved by the Company's stockholders. Additionally,
the material terms of performance goals must be disclosed and reapproved by the
Company's stockholders no later than the first stockholder meeting that occurs
in the fifth year following the year in which the Company's stockholders
previously approved such performance goals.
In the event a grantee's employment with the Company is terminated due to
death or disability, all non-vested portions of awards are forfeited. All vested
portions of stock options or SARs remain exercisable during the shorter of the
remaining stated term of the stock option or SAR or twelve months following the
date of death or disability. If a grantee's employment is terminated for cause,
as defined in the Incentive Plan, all awards, whether vested or non-vested, are
forfeited. If a grantee's employment is terminated any other reason other than
for cause or due to death or disability, all non-vested portions of awards are
forfeited and all vested portions of stock options or SARs remain exercisable
during the shorter of the remaining stated term of the award or 90 days
following the date of termination. Notwithstanding the above, the Compensation
Committee may, in its discretion, provide that:
o the vesting of any or all non-vested portions of stock options or SARs
held by a grantee on the date of his or her death or termination shall
be accelerated and remain exercisable for the term of the stock option
or SAR;
-17-
<PAGE>
o any or all vested portions of non-qualified stock options or SARs held
by a grantee on the date of his or her death or termination shall
remain exercisable until a date that occurs on or prior to the date the
stock option or SAR is scheduled to expire; and/or
o any or all non-vested portions of stock awards, stock units,
performance shares, performance units and/or cash awards held by a
grantee on the date of his or her death or termination shall become
vested on a date that occurs on or prior to the date the award is
scheduled to vest.
Generally, all awards under the Incentive Plan are nontransferable except
by will or in accordance with the laws of descent and distribution. Stock
options and SARs are exercisable only by the grantee during his or her lifetime.
The Compensation Committee, in its discretion, may permit the transferability of
a stock option (other than an ISO) by a grantee to members of his or her
immediate family or trusts or other similar entities for the benefit of such
person.
CHANGE IN CONTROL
Upon the occurrence of a change in control of the Company, as defined in
the Incentive Plan, with certain exceptions, the Compensation Committee has the
discretion to, among other things, accelerate the vesting and payout of
outstanding awards or provide that an award be assumed by the entity which
acquires control of the Company or be substituted by a similar award under such
entity's compensation plan.
FEDERAL TAX ASPECTS OF THE INCENTIVE PLAN
The Company believes that, under the present law, the following are the
federal tax consequences generally arising with respect to awards granted under
the Incentive Plan. The grant of an option or SAR will create no tax
consequences for an optionee or the Company. The optionee will have no taxable
income upon exercising an ISO (except that the alternative minimum tax may
apply), and the Company will receive no deduction when an ISO is exercised. Upon
exercising an option other than an ISO, the optionee must recognize ordinary
income equal to the difference between the exercise price and the fair market
value of the stock on the date of exercise; the Company will be entitled to a
deduction for the same amount. The treatment of an optionee on a disposition of
shares acquired through the exercise of an option depends on how long the shares
have been held and on whether such shares were acquired by exercising an ISO or
by exercising an option other than an ISO. Generally, there will be no tax
consequences to the Company in connection with a disposition of shares acquired
under an option except that the Company may be entitled to a deduction in the
case of a disposition of shares acquired under an ISO before the applicable ISO
holding periods have been satisfied.
With respect to other awards granted under the Incentive Plan that are
settled either in cash or in stock or other property that is either transferable
or not subject to substantial risk of forfeiture, the participant must recognize
ordinary income equal to the cash or the fair market value of shares or other
property received; the Company will be entitled to a deduction for the same
amount. With respect to awards that are settled in stock or other property that
is restricted as to transferability and subject to substantial risk of
forfeiture, the participant must recognize ordinary income equal to the fair
market value of the shares or other property received at the time the shares or
other property become transferable or not subject to substantial risk of
forfeiture, whichever occurs earlier; the Company will be entitled to a
deduction for the same amount. Different tax rules may apply with respect to
participants who are subject to Section 16 of the 1934 Act.
PREVIOUSLY GRANTED OPTIONS UNDER THE INCENTIVE PLAN
The following table sets forth certain information as of April 7, 2000
with respect to options granted under the Incentive Plan since inception to (i)
the Named Executives; (ii) all current executive officers as a group; (iii) each
nominee for election as a Director; (iv) all current Directors who are not
executive officers as a group; (v) each associate of any of such Directors,
executive officers or nominees; (vi) each person who has received or is to
receive 5% of such options or rights; and (vii) all employees, including all
current officers who are not executive officers, as a group:
-18-
<PAGE>
<TABLE>
<CAPTION>
OPTIONS GRANTED WEIGHTED AVERAGE
NAME THROUGH APRIL 7, 2000 (1) EXERCISE PRICE (1)
- ---- --------------------- --------------
<S> <C> <C>
Wijeyaraj Mahadeva.................................... 470,250 $12.219
Lakshmi Narayanan..................................... 82,500 12.219
Gordon Coburn......................................... 74,500 12.219
Francisco D'Souza..................................... 72,750 12.219
Anthony Bellomo....................................... 27,000 54.563
Victoria Fash......................................... 27,000 54.563
Robert W. Howe........................................ -- --
John Klein............................................ -- --
Venetia Kontogouris................................... 27,000 65.00
All current executive officers as a group (4 persons). 700,000 12.219
All current Directors who are not executive
officers as a group (5 persons)...................... 81,000 58.04
All employees, including all current officers who
are not executive officers as a group (104 persons)... 685,500 20.03
</TABLE>
As of April 7, 2000, the market value of the Common Stock underlying the
Incentive Plan was $52.25 per share.
- ---------------
(1) Adjusted to reflect the Company's two-for-one forward stock split
recapitalization effected in March 2000.
-19-
<PAGE>
PROPOSED AMENDMENT
Stockholders are being asked to consider and vote upon a proposed
amendment to the Incentive Plan to increase the maximum number of shares of
Class A Common Stock available for issuance under the Incentive Plan from
2,000,000 to 3,000,000 shares and to reserve an additional 1,000,000 shares of
Class A Common Stock of the Company for issuance upon the exercise of stock
options or other awards granted under the Incentive Plan.
The Board of Directors believes that the amendment provides an important
inducement to recruit and retain the best available personnel and will assist in
aligning the interests of such personnel with those of the Company.
The Board of Directors recommends a vote FOR the approval of the Amendment
to the Incentive Plan to increase the maximum number of shares of Class A Common
Stock available for issuance under the Incentive Plan from 2,000,000 to
3,000,000 shares and to reserve an additional 1,000,000 shares of Class A Common
Stock of the Company for issuance upon the exercise of stock options granted or
for the issuance of other awards granted under the Incentive Plan.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has, subject to stockholder
approval, retained PricewaterhouseCoopers LLP as independent accountants of the
Company for the year ending December 31, 2000. PricewaterhouseCoopers LLP also
served as independent accountants of the Company for 1999. Neither the
accounting firm nor any of its members has any direct or indirect financial
interest in or any connection with the Company in any capacity other than as
accountants.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT ACCOUNTANTS OF THE
COMPANY FOR THE YEAR ENDING DECEMBER 31, 2000.
One or more representatives of PricewaterhouseCoopers LLP is expected to
attend the Meeting and to have an opportunity to make a statement and/or respond
to appropriate questions from stockholders.
STOCKHOLDERS' PROPOSALS
Stockholders who wish to submit proposals for inclusion in the Company's
proxy statement and form of proxy relating to the 2001 Annual Meeting of
Stockholders must advise the Secretary of the Company of such proposals in
writing by December 29, 2000.
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented for
action at the Meeting other than the matters referred to above and does not
intend to bring any other matters before the Meeting. However, if other matters
should come before the Meeting, it is intended that holders of the proxies will
vote thereon in their discretion.
GENERAL
The accompanying proxy is solicited by and on behalf of the Board of
Directors of the Company, whose notice of meeting is attached to this Proxy
Statement, and the entire cost of such solicitation will be borne by the
Company.
In addition to the use of the mails, proxies may be solicited by personal
interview, telephone and telegram by Directors, officers and other employees of
the Company who will not be specially compensated for these services. The
Company will also request that brokers, nominees, custodians and other
fiduciaries forward soliciting materials to the beneficial owners of shares held
of record by such brokers, nominees, custodians and other fiduciaries. The
Company will reimburse such persons for their reasonable expenses in connection
therewith.
-20-
<PAGE>
Certain information contained in this Proxy Statement relating to the
occupations and security holdings of Directors and officers of the Company is
based upon information received from the individual Directors and officers.
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION WILL FURNISH, WITHOUT CHARGE, A
COPY OF ITS REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999, INCLUDING
FINANCIAL STATEMENTS AND SCHEDULES THERETO BUT NOT INCLUDING EXHIBITS, TO EACH
OF ITS STOCKHOLDERS OF RECORD ON APRIL 7, 2000, AND TO EACH BENEFICIAL
STOCKHOLDER ON THAT DATE UPON WRITTEN REQUEST MADE TO THE SECRETARY OF THE
COMPANY. A REASONABLE FEE WILL BE CHARGED FOR COPIES OF REQUESTED EXHIBITS.
PLEASE DATE, SIGN AND RETURN THE PROXY CARD AT YOUR EARLIEST CONVENIENCE
IN THE ENCLOSED RETURN ENVELOPE. A PROMPT RETURN OF YOUR PROXY CARD WILL BE
APPRECIATED AS IT WILL SAVE THE EXPENSE OF FURTHER MAILINGS.
By Order of the Board of Directors
/s/ Gordon Coburn
Gordon Coburn,
Secretary
Teaneck, New Jersey
April 27, 2000.
-21-
<PAGE>
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY FOR THE ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby constitutes and appoints Wijeyaraj Mahadeva and
Gordon Coburn, and each of them, his or her true and lawful agent and proxy with
full power of substitution in each, to represent and to vote on behalf of the
undersigned all of the shares of CLASS A Common Stock of Cognizant Technology
Solutions Corporation (the "Company") which the undersigned is entitled to vote
at the Annual Meeting of Stockholders of the Company to be held at the Teaneck
Marriott at Glenpointe, 100 Frank W. Burr Boulevard, Teaneck, New Jersey at
10:00 A.M., local time, on Tuesday, May 23, 2000 and at any adjournment or
adjournments thereof, upon the following proposals more fully described in the
Notice of Annual Meeting of Stockholders and Proxy Statement for the Meeting
(receipt of which is hereby acknowledged).
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
(CONTINUED FROM REVERSE SIDE)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2, 3 AND 4.
1. ELECTION OF DIRECTORS.
Nominees: Wijeyaraj Mahadeva
Anthony Bellomo
VOTE FOR all nominees | | Victoria Fash
Robert W. Howe
FOR, except vote withheld from the following John Klein and
nominees, (if any): Venetia Kontogouris
- ------------------------------------
VOTE WITHHELD from all nominees | |
2. APPROVAL OF PROPOSAL TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF CLASS B
COMMON STOCK FROM 15,000,000 TO 25,000,000.
FOR | | AGAINST | | ABSTAIN | |
3. APPROVAL OF PROPOSAL TO AMEND THE COMPANY'S 1999 INCENTIVE COMPENSATION
PLAN TO INCREASE THE MAXIMUM NUMBER OF SHARES AVAILABLE UNDER THE PLAN FROM
2,000,000 TO 3,000,000.
FOR | | AGAINST | | ABSTAIN | |
4. APPROVAL OF PROPOSAL TO RATIFY THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT ACCOUNTANTS OF THE COMPANY FOR THE
YEAR ENDING DECEMBER 31, 2000.
FOR | | AGAINST | | ABSTAIN | |
5. In his discretion, the proxy is authorized to vote upon other matters as may
properly come before the Meeting.
Dated: NOTE: This proxy must be signed
--------------------------- exactly as the name appears hereon.
When shares are held by joint
-------------------------------- tenants, both should sign. If the
Signature of Stockholder signer is a corporation, please sign
full corporate name by duly authorized
-------------------------------- officer, giving full title as such. If
Signature of Stockholder if held the signer is a partnership, please
jointly sign in partnership name by authorized
person.
I will | | will not | | attend the
Meeting.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE.
<PAGE>
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY FOR THE ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby constitutes and appoints Wijeyaraj Mahadeva and
Gordon Coburn, and each of them, his or her true and lawful agent and proxy with
full power of substitution in each, to represent and to vote on behalf of the
undersigned all of the shares of CLASS B Common Stock of Cognizant Technology
Solutions Corporation (the "Company") which the undersigned is entitled to vote
at the Annual Meeting of Stockholders of the Company to be held at the Teaneck
Marriott at Glenpointe, 100 Frank W. Burr Boulevard, Teaneck, New Jersey at
10:00 A.M., local time, on Tuesday, May 23, 2000 and at any adjournment or
adjournments thereof, upon the following proposals more fully described in the
Notice of Annual Meeting of Stockholders and Proxy Statement for the Meeting
(receipt of which is hereby acknowledged).
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
(CONTINUED FROM REVERSE SIDE)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2, 3 AND 4.
1. ELECTION OF DIRECTORS.
Nominees: Wijeyaraj Mahadeva
Anthony Bellomo
VOTE FOR all nominees | | Victoria Fash
Robert W. Howe
FOR, except vote withheld from the following John Klein and
nominees, (if any): Venetia Kontogouris
- ------------------------------------
VOTE WITHHELD from all nominees | |
2. APPROVAL OF PROPOSAL TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF CLASS B
COMMON STOCK FROM 15,000,000 TO 25,000,000.
FOR | | AGAINST | | ABSTAIN | |
3. APPROVAL OF PROPOSAL TO AMEND THE COMPANY'S 1999 INCENTIVE COMPENSATION
PLAN TO INCREASE THE MAXIMUM NUMBER OF SHARES AVAILABLE UNDER THE PLAN FROM
2,000,000 TO 3,000,000.
FOR | | AGAINST | | ABSTAIN | |
4. APPROVAL OF PROPOSAL TO RATIFY THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT ACCOUNTANTS OF THE COMPANY FOR THE
YEAR ENDING DECEMBER 31, 2000.
FOR | | AGAINST | | ABSTAIN | |
5. In his discretion, the proxy is authorized to vote upon other matters as may
properly come before the Meeting.
Dated: NOTE: This proxy must be signed
--------------------------- exactly as the name appears hereon.
When shares are held by joint
-------------------------------- tenants, both should sign. If the
Signature of Stockholder signer is a corporation, please sign
full corporate name by duly authorized
-------------------------------- officer, giving full title as such. If
Signature of Stockholder if held the signer is a partnership, please
jointly sign in partnership name by authorized
person.
I will | | will not | | attend the
Meeting.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE.
Appendix A
----------
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
1999 INCENTIVE COMPENSATION PLAN
1.0 DEFINITIONS
The following terms shall have the following meanings unless the context
indicates otherwise:
1.1 "Award" shall mean either a Stock Option, an SAR, a Stock Award, a Stock
Unit, a Performance Share, a Performance Unit, or a Cash Award.
1.2 "Award Agreement" shall mean a written agreement between the Company and
the Participant that establishes the terms, conditions, restrictions and/or
limitations applicable to an Award in addition to those established by the
Plan and by the Committee's exercise of its administrative powers.
1.3 "Board" shall mean the Board of Directors of the Company.
1.4 "Cash Award" shall mean the grant by the Committee to a Participant of an
award of cash as described in Section 11 below.
1.5 "Cause" shall mean (i) willful malfeasance or willful misconduct by the
Employee in connection with his employment, (ii) continuing failure to
perform such duties as are requested by the Company and/or its
subsidiaries, (iii) failure by the Employee to observe material policies of
the Company and/or its subsidiaries applicable to the Employee or (iv) the
commission by the Employee of (x) any felony or (y) any misdemeanor
involving moral turpitude.
1.6 "Change in Control of the Company" shall mean the occurrence of any of the
following events:
(a) any Person, as such term is used for purposes of Section 13(d) or
14(d) of the Exchange Act, or any successor section thereto, (other
than (i) the Company, (ii) any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, (iii) any
Subsidiaries of the Company, (iv) 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 or (v) IMS
Health Incorporated or its Subsidiaries), becomes the beneficial
owner, directly or indirectly, of securities of the Company
representing 35% or more of the combined voting power of the Company's
then-outstanding securities; provided however, that the acquisition of
securities in a bona fide public offering or private placement of
securities by an investor who is acquiring such securities for passive
investment purposes only shall not constitute a "Change in Control".
(b) during any period of twenty-four months, individuals who at the
beginning of such period constitute the Board, and any new director
(other than (i) a director nominated by a Person who has entered into
an agreement with the Company to effect a transaction described in
Sections 1.6 (a), (c) or (d) of the Plan, (ii) 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 (iii) a director nominated by any
Person who is the beneficial owner, directly or indirectly, of
securities of the Company
-1-
<PAGE>
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 shareholders is or was approved 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;
(c) the effective date or date of consummation of any transaction or
series of transactions (other than a transaction to which only the
Company and one or more of its subsidiaries are parties) under which
the Company is merged or consolidated with any other company, other
than a merger or consolidation (i) 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 (ii) after which no Person holds 35% or
more of the combined voting power of the then-outstanding securities
of the Company or such surviving entity; or
(d) the shareholders 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;
1.7 "Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
1.8 "Committee" shall mean (i) the Board or (ii) a committee or subcommittee
of the Board appointed by the Board from among its members. The Committee
may be the Board's Compensation Committee. Unless the Board determines
otherwise, the Committee shall be comprised solely of not less than two
members who each shall qualify as:
(a) a "Non-Employee Director" within the meaning of Rule 16b-3(b)(3)
(or any successor rule) under the Exchange Act, and
(b) an "outside director" within the meaning of Code Section 162(m)
and the Treasury Regulations thereunder.
1.9 "Common Stock" shall mean the Class A common stock, $.01 par value per
share, of the Company.
1.10 "Company" shall mean Cognizant Technology Solutions Corporation, a
Delaware corporation.
1.11 "Disability" shall mean shall mean the 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, and shall be conclusive and binding on
the Participant. A Participant shall not be considered disabled unless he
or she
-2-
<PAGE>
furnishes such medical or other evidence of the existence of the
Disability as the Committee, in its sole discretion, may require.
1.12 "Dividend Equivalent Right" shall mean the right to receive an amount
equal to the amount of any dividend paid with respect to a share of Common
Stock multiplied by the number of shares of Common Stock underlying or
with respect to a Stock Option, a SAR, a Stock Unit or a Performance Unit,
and which shall be payable in cash, in Common Stock, in the form of Stock
Units or Performance Units, or a combination of any or all of the
foregoing.
1.13 "Effective Date" shall mean the date on which the Plan is adopted by the
Board.
1.14 "Employee" shall mean an employee of the Company or any Subsidiary as
described in Treasury Regulation Section 1.421-7(h).
1.15 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time, including applicable regulations thereunder.
1.16 "Fair Market Value of the Common Stock" shall mean:
(a) if the Common Stock is readily tradable on a national securities
exchange or other market system, the closing price of the Common Stock
on the date of calculation (or on the last preceding trading date if
Common Stock was not traded on such date), or
(b) if the Common Stock is not readily tradable on a national
securities exchange or other market system:
(i) the book value of a share of Common Stock as of the last day
of the last completed fiscal quarter preceding the date of
calculation; or
(ii) any other value as otherwise determined in good faith by the
Board.
1.17 "Independent Contractor" shall mean a person (other than a person who is
an Employee or a Nonemployee Director) or an entity that renders services
to the Company.
1.18 "ISO" shall mean an "incentive stock option" as such term is used in Code
Section 422.
1.19 "Nonemployee Director" shall mean a member of the Board who is not an
Employee.
1.20 "Nonqualified Stock Option" shall mean a Stock Option that does not
qualify as an ISO.
1.21 "Participant" shall mean any Employee, Nonemployee Director or Independent
Contractor to whom an Award has been granted by the Committee under the
Plan.
1.22 "Performance-Based Award" shall mean an Award subject to the achievement
of certain performance goal or goals as described in Section 12 below.
-3-
<PAGE>
1.23 "Performance Share" shall mean the grant by the Committee to a Participant
of an Award as described in Section 10.1 below.
1.24 "Performance Unit" shall mean the grant by the Committee to a Participant
of an Award as described in Section 10.2 below.
1.25 "Plan" shall mean the Cognizant Technology Solutions Corporation 1999
Incentive Compensation Plan.
1.26 "SAR" shall mean the grant by the Committee to a Participant of a stock
appreciation right as described in Section 8 below.
1.27 "Stock Award" shall mean the grant by the Committee to a Participant of an
Award of Common Stock as described in Section 9.1 below.
1.28 "Stock Option" shall mean the grant by the Committee to a Participant of
an option to purchase Common Stock as described in Section 7 below.
1.29 "Stock Unit" shall mean the grant by the Committee to a Participant of an
Award as described in Section 9.2 below.
1.30 "Subsidiary" shall mean a corporation of which the Company directly or
indirectly owns more than 50 percent of the Voting Stock or any other
business entity in which the Company directly or indirectly has an
ownership interest of more than 50 percent.
1.31 "Treasury Regulations" shall mean the regulations promulgated under the
Code by the United States Department of the Treasury, as amended from time
to time.
1.32 "Vest" shall mean:
(a) with respect to Stock Options and SARs, when the Stock Option or
SAR (or a portion of such Stock Option or SAR) first becomes
exercisable and remains exercisable subject to the terms and
conditions of such Stock Option or SAR; or
(b) with respect to Awards other than Stock Options and SARs, when
the Participant has:
(i) an unrestricted right, title and interest to receive the
compensation (whether payable in Common Stock, cash or a
combination of both) attributable to an Award (or a portion of
such Award) or to otherwise enjoy the benefits underlying such
Award; and
(ii) a right to transfer an Award subject to no Company-imposed
restrictions or limitations other than restrictions and/or
limitations imposed by Section 14 below.
1.33 "Vesting Date" shall mean the date or dates on which an Award Vests.
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1.34 "Voting Stock" shall mean the capital stock of any class or classes having
general voting power under ordinary circumstances, in the absence of
contingencies, to elect the directors of a corporation.
2.0 PURPOSE AND TERM OF PLAN
2.1 Purpose. The purpose of the Plan is to motivate certain Employees,
Nonemployee Directors and Independent Contractors to put forth maximum
efforts toward the growth, profitability, and success of the Company and
Subsidiaries by providing incentives to such Employees, Nonemployee
Directors and Independent Contractors either through cash payments and/or
through the ownership and performance of the Common Stock. In addition,
the Plan is intended to provide incentives which will attract and retain
highly qualified individuals as Employees and Nonemployee Directors and to
assist in aligning the interests of such Employees and Nonemployee
Directors with those of its stockholders.
2.2 Term. The Plan shall be effective as of the Effective Date; provided,
however, that the Plan shall be approved by the stockholders of the
Company at an annual meeting or any special meeting of stockholders of the
Company within 12 months before or after the Effective Date, and such
approval by the stockholders of the Company shall be a condition to the
right of each Participant to receive Awards hereunder. Any Award granted
under the Plan prior to the approval by the stockholders of the Company
shall be effective as of the date of grant (unless the Committee specifies
otherwise at the time of grant), but no such Award may Vest, be paid out,
or otherwise be disposed of prior to such stockholder approval. If the
stockholders of the Company fail to approve the Plan in accordance with
this Section 2.2, any Award granted under the Plan shall be cancelled. The
Plan shall terminate on the 10th anniversary of the Effective Date (unless
sooner terminated by the Board under Section 16.1 below.
3.0 ELIGIBILITY AND PARTICIPATION
3.1 Eligibility. All Employees of the Company, all Nonemployee Directors and
all Independent Contractors shall be eligible to participate in the Plan
and to receive Awards.
3.2 Participation. Participants shall consist of such Employees, Nonemployee
Directors and Independent Contractors as the Committee in its sole
discretion designates to receive Awards under the Plan. Designation of a
Participant in any year shall not require the Committee to designate such
person or entity to receive an Award in any other year or, once
designated, to receive the same type or amount of Award as granted to the
Participant in any other year. The Committee shall consider such factors
as it deems pertinent in selecting Participants and in determining the
type and amount of their respective Awards.
4.0 ADMINISTRATION
4.1 Responsibility. The Committee shall have the responsibility, in its sole
discretion, to control, operate, manage and administer the Plan in
accordance with its terms.
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4.2 Award Agreement. Each Award granted under the Plan shall be evidenced by an
Award Agreement which shall be signed by the Committee and the Participant;
provided, however, that in the event of any conflict between a provision of
the Plan and any provision of an Award Agreement, the provision of the Plan
shall prevail.
4.3 Authority of the Committee. The Committee shall have all the discretionary
authority that may be necessary or helpful to enable it to discharge its
responsibilities with respect to the Plan, including but not limited to the
following:
(a) to determine eligibility for participation in the Plan;
(b) to determine eligibility for and the type and size of an Award
granted under the Plan;
(c) to supply any omission, correct any defect, or reconcile any
inconsistency in the Plan in such manner and to such extent as it
shall deem appropriate in its sole discretion to carry the same into
effect;
(d) to issue administrative guidelines as an aid to administer the
Plan and make changes in such guidelines as it from time to time deems
proper;
(e) to make rules for carrying out and administering the Plan and
make changes in such rules as it from time to time deems proper;
(f) to the extent permitted under the Plan, grant waivers of Plan
terms, conditions, restrictions, and limitations;
(g) to accelerate the Vesting of any Award when such action or
actions would be in the best interest of the Company;
(h) to grant Award in replacement of Awards previously granted under
this Plan or any other executive compensation plan of the Company; and
(i) to take any and all other actions it deems necessary or advisable
for the proper operation or administration of the Plan.
4.4 Action by the Committee. The Committee may act only by a majority of its
members. Any determination of the Committee may be made, without a meeting,
by a writing or writings signed by all of the members of the Committee. In
addition, the Committee may authorize any one or more of its members to
execute and deliver documents on behalf of the Committee.
4.5 Delegation of Authority. The Committee may delegate to one or more of its
members, or to one or more agents, such administrative duties as it may
deem advisable; provided, however, that any such delegation shall be in
writing. In addition, the Committee, or any person to whom it has delegated
duties under this Section 4.5, may employ one or more persons to render
advice with respect to any responsibility the Committee or such person may
have under the Plan. The Committee may employ such legal or other counsel,
consultants and agents as it may deem
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desirable for the administration of the Plan and may rely upon any opinion
or computation received from any such counsel, consultant or agent.
Expenses incurred by the Committee in the engagement of such counsel,
consultant or agent shall be paid by the Company, or the Subsidiary whose
employees have benefited from the Plan, as determined by the Committee.
4.6 Determinations and Interpretations by the Committee. All determinations and
interpretations made by the Committee shall be binding and conclusive on
all Participants and their heirs, successors, and legal representatives.
4.7 Liability. No member of the Board, no member of the Committee and no
employee of the Company shall be liable for any act or failure to act
hereunder, except in circumstances involving his or her bad faith, gross
negligence or willful misconduct, or for any act or failure to act
hereunder by any other member or employee or by any agent to whom duties in
connection with the administration of the Plan have been delegated.
4.8 Indemnification. The Company shall indemnify members of the Committee and
any agent of the Committee who is an employee of the Company, against any
and all liabilities or expenses to which they may be subjected by reason of
any act or failure to act with respect to their duties on behalf of the
Plan, except in circumstances involving such person's bad faith, gross
negligence or willful misconduct.
5.0 SHARES SUBJECT TO PLAN
5.1 Available Shares. The aggregate number of shares of Common Stock which
shall be available for grants or payments of Awards under the Plan during
its term shall be 3,000,000 shares. Such shares of Common Stock available
for issuance under the Plan may be either authorized but unissued shares,
shares of issued stock held in the Company's treasury, or both, at the
discretion of the Company, and subject to any adjustments made in
accordance with Section 5.2 below. Any shares of Common Stock underlying
Awards which terminate by expiration, forfeiture, cancellation or otherwise
without the issuance of such shares shall again be available for grants of
Awards under the Plan. Awards that are payable only in cash are not subject
to this Section 5.1.
5.2 Adjustment to Shares. If there is any change in the Common Stock of the
Company, through merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, reverse stock split, split-up, split-off,
spin-off, combination of shares, exchange of shares, dividend in kind or
other like change in capital structure or distribution (other than normal
cash dividends) to stockholders of the Company, an adjustment shall be made
to each outstanding Award so that each such Award shall thereafter be with
respect to or exercisable for such securities, cash and/or other property
as would have been received in respect of the Common Stock subject to such
Award had such Award been paid, distributed or exercised in full
immediately prior to such change or distribution. Such adjustment shall be
made successively each time any such change shall occur. In addition, in
the event of any such change or distribution, in order to prevent dilution
or enlargement of Participants' rights under the Plan, the Committee shall
have the authority to adjust, in an equitable manner, the number and kind
of shares that may be issued under the Plan, the number and kind of shares
subject to outstanding Awards, the exercise price applicable to outstanding
Stock Options, and the Fair Market Value of the Common Stock and other
value determinations applicable to outstanding Awards. Appropriate
adjustments may also be made by
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the Committee in the terms of any Awards granted under the Plan to reflect
such changes or distributions and to modify any other terms of outstanding
Awards on an equitable basis, including modifications of performance goals
and changes in the length of performance periods; provided, however, that
with respect to Performance-Based Awards, such modifications and/or changes
do not disqualify compensation attributable to such Awards as
"performance-based compensation" under Code Section 162(m). In addition,
the Committee is authorized to make adjustments to the terms and conditions
of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events affecting the Company or the financial statements of
the Company, or in response to changes in applicable laws, regulations, or
accounting principles. Notwithstanding anything contained in the Plan, any
adjustment with respect to an ISO due to a change or distribution described
in this Section 5.2 shall comply with the rules of Code Section 424(a), and
in no event shall any adjustment be made which would render any ISO granted
hereunder other than an incentive stock option for purposes of Code Section
422.
6.0 MAXIMUM INDIVIDUAL AWARDS
6.1 Maximum Aggregate Number of Shares Underlying Stock-Based Awards Granted
Under the Plan to Any Single Participant. The maximum aggregate number of
shares of Common Stock underlying all Awards measured in shares of Common
Stock (whether payable in Common Stock, cash or a combination of both) that
may be granted to any single Participant during the life of the Plan shall
be 750,000 shares, subject to adjustment as provided in Section 5.2 above.
For purposes of the preceding sentence, such Awards that are cancelled or
repriced shall continue to be counted in determining such maximum aggregate
number of shares of Common Stock that may be granted to any single
Participant during the life of the Plan.
6.2 Maximum Dollar Amount Underlying Cash-Based Awards Granted Under the Plan
to Any Single Participant. The maximum dollar amount that may be paid to
any single Participant with respect to all Awards measured in cash (whether
payable in Common Stock, cash or a combination of both) during the life of
the Plan shall be $10,000,000.
7.0 STOCK OPTIONS
7.1 In General. The Committee may, in its sole discretion, grant Stock Options
to Employees, Nonemployee Directors and Independent Contractors on or after
the Effective Date. The Committee shall, in its sole discretion, determine
the Employees, the Nonemployee Directors and Independent Contractors who
will receive Stock Options and the number of shares of Common Stock
underlying each Stock Option. With respect to Employees who become
Participants, the Committee may grant such Participants ISOs or
Nonqualified Stock Options or a combination of both. With respect to
Nonemployee Directors and Independent Contractors who become Participants,
the Committee may grant such Participants only Nonqualified Stock Options.
Each Stock Option shall be subject to such terms and conditions consistent
with the Plan as the Committee may impose from time to time. In addition,
each Stock Option shall be subject to the following terms and conditions
set forth in Sections 7.2 through 7.8 below.
7.2 Exercise Price. The Committee shall specify the exercise price of each
Stock Option in the Award Agreement; provided, however, that (i) the
exercise price of any ISO shall not be less than 100 percent of the Fair
Market Value of the Common Stock on the date of grant, and (ii) the
exercise
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price of any Nonqualified Stock Option shall not be less than 100 percent
of the Fair Market Value of the Common Stock on the date of grant unless
the Committee in its sole discretion and due to special circumstances
determines otherwise on the date of grant.
7.3 Term of Stock Option. The Committee shall specify the term of each Stock
Option in the Award Agreement; provided, however, that (i) no ISO shall be
exercised after the 10th anniversary of the date of grant of such ISO and
(ii) no Nonqualified Stock Option shall be exercised after the 10th
anniversary of the date of grant of such Nonqualified Stock Option. Each
Stock Option shall terminate at such earlier times and upon such conditions
or circumstances as the Committee shall, in its sole discretion, set forth
in the Award Agreement on the date of grant.
7.4 Vesting Date. The Committee shall specify the Vesting Date with respect to
each Stock Option in the Award Agreement. The Committee may grant Stock
Options that are Vested, either in whole or in part, on the date of grant.
If the Committee fails to specify a Vesting Date in the Award Agreement, 25
percent of such Stock Option shall become exercisable on each of the first
4 anniversaries of the date of grant and shall remain exercisable following
such anniversary date until the Stock Option expires in accordance with its
terms under the Award Agreement or under the terms of the Plan. The Vesting
of a Stock Option may be subject to such other terms and conditions as
shall be determined by the Committee, including, without limitation,
accelerating the Vesting if certain performance goals are achieved.
7.5 Exercise of Stock Options. The Stock Option exercise price may be paid in
cash or, in the sole discretion of the Committee, by the delivery of shares
of Common Stock then owned by the Participant, by the withholding of shares
of Common Stock for which a Stock Option is exercisable, or by a
combination of these methods. In the sole discretion of the Committee,
payment may also be made by delivering a properly executed exercise notice
to the Company together with a copy of irrevocable instructions to a broker
to deliver promptly to the Company the amount of sale or loan proceeds to
pay the exercise price. To facilitate the foregoing, the Company may enter
into agreements for coordinated procedures with one or more brokerage
firms. The Committee may prescribe any other method of paying the exercise
price that it determines to be consistent with applicable law and the
purpose of the Plan, including, without limitation, in lieu of the exercise
of a Stock Option by delivery of shares of Common Stock then owned by a
Participant, providing the Company with a notarized statement attesting to
the number of shares owned by the Participant, where upon verification by
the Company, the Company would issue to the Participant only the number of
incremental shares to which the Participant is entitled upon exercise of
the Stock Option. In determining which methods a Participant may utilize to
pay the exercise price, the Committee may consider such factors as it
determines are appropriate; provided, however, that with respect to ISOs,
all such discretionary determinations by the Committee shall be made at the
time of grant and specified in the Award Agreement.
7.6 Restrictions Relating to ISOs. In addition to being subject to the terms
and conditions of this Section 7, ISOs shall comply with all other
requirements under Code Section 422. Accordingly, ISOs may be granted only
to Participants who are employees (as described in Treasury Regulation
Section 1.421-7(h)) of the Company or of any "Parent Corporation" (as
defined in Code Section 424(e)) or of any "Subsidiary Corporation" (as
defined in Code Section 424(f)) on the date of grant. The aggregate market
value (determined as of the time the ISO is granted) of the Common Stock
with respect to which ISOs (under all option plans of the Company and of
any Parent
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Corporation and of any Subsidiary Corporation) are exercisable for the
first time by a Participant during any calendar year shall not exceed
$100,000. For purposes of the preceding sentence, (i) ISOs shall be taken
into account in the order in which they are granted and (ii) ISOs granted
before 1987 shall not be taken into account. ISOs shall not be transferable
by the Participant otherwise than by will or the laws of descent and
distribution and shall be exercisable, during the Participant's lifetime,
only by such Participant. The Committee shall not grant ISOs to any
Employee who, at the time the ISO is granted, owns stock possessing (after
the application of the attribution rules of Code Section 424(d)) more than
10 percent of the total combined voting power of all classes of stock of
the Company or of any Parent Corporation or of any Subsidiary Corporation
unless the exercise price of the ISO is fixed at not less than 110 percent
of the Fair Market Value of the Common Stock on the date of grant and the
exercise of such ISO is prohibited by its terms after the 5th anniversary
of the ISO's date of grant. In addition, no ISO shall be issued to a
Participant in tandem with a Nonqualified Stock Option issued to such
Participant in accordance with Treasury Regulation Section 14a.422A-1,
Q/A-39.
7.7 Additional Terms and Conditions. The Committee may, by way of the Award
Agreements or otherwise, establish such other terms, conditions,
restrictions and/or limitations, if any, of any Stock Option, provided they
are not inconsistent with the Plan, including, without limitation, the
requirement that the Participant not engage in competition with the
Company.
7.8 Conversion Stock Options. The Committee may, in its sole discretion, grant
a Stock Option to any holder of an option (hereinafter referred to as an
"Original Option") to purchase shares of the stock of any corporation:
(a) the stock or assets of which were acquired, directly or
indirectly, by the Company or any Subsidiary, or
(b) which was merged with and into the Company or a Subsidiary,
so that the Original Option is converted into a Stock Option (hereinafter
referred to as a "Conversion Stock Option"); provided, however, that such
Conversion Stock Option as of the date of its grant (the "Conversion Stock
Option Grant Date") shall have the same economic value as the Original
Option as of the Conversion Stock Option Grant Date. In addition, unless
the Committee, in its sole discretion determines otherwise, a Conversion
Stock Option which is converting an Original Option intended to qualify as
an ISO shall have the same terms and conditions as applicable to the
Original Option in accordance with Code Section 424 and the Treasury
Regulations thereunder so that the conversion (x) is treated as the
issuance or assumption of a stock option under Code Section 424(a) and (y)
is not treated as a modification, extension or renewal of a stock option
under Code Section 424(h).
8.0 SARS
8.1 In General. The Committee may, in its sole discretion, grant SARs to
Employees, Nonemployee Directors, and/or Independent Contractors. An SAR is
a right to receive a payment in cash, Common Stock or a combination of
both, in an amount equal to the excess of (x) the Fair Market Value of the
Common Stock, or other specified valuation, of a specified number of shares
of Common Stock on the date the SAR is exercised over (y) the Fair Market
Value of the Common
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Stock, or other specified valuation (which shall be no less than the Fair
Market Value of the Common Stock), of such shares of Common Stock on the
date the SAR is granted, all as determined by the Committee; provided,
however, that if a SAR is granted retroactively in tandem with or in
substitution for a Stock Option, the designated Fair Market Value of the
Common Stock in the Award Agreement may be the Fair Market Value of the
Common Stock on the date such Stock Option was granted. Each SAR shall be
subject to such terms and conditions, including, but not limited to, a
provision that automatically converts a SAR into a Stock Option on a
conversion date specified at the time of grant, as the Committee shall
impose from time to time in its sole discretion and subject to the terms of
the Plan.
9.0 STOCK AWARDS AND STOCK UNITS
9.1 Stock Awards. The Committee may, in its sole discretion, grant Stock Awards
to Employees, Nonemployee Directors, and/or Independent Contractors as
additional compensation or in lieu of other compensation for services to
the Company. A Stock Award shall consist of shares of Common Stock which
shall be subject to such terms and conditions as the Committee in its sole
discretion determines appropriate including, without limitation,
restrictions on the sale or other disposition of such shares, the Vesting
Date with respect to such shares, and the right of the Company to reacquire
such shares for no consideration upon termination of the Participant's
employment within specified periods. The Committee may require the
Participant to deliver a duly signed stock power, endorsed in blank,
relating to the Common Stock covered by such Stock Award and/or that the
stock certificates evidencing such shares be held in custody or bear
restrictive legends until the restrictions thereon shall have lapsed. With
respect to the shares of Common Stock subject to a Stock Award, the
Participant shall have all of the rights of a holder of shares of Common
Stock, including the right to receive dividends and to vote the shares,
unless the Committee determines otherwise on the date of grant.
9.2 Stock Units. The Committee may, in its sole discretion, grant to Employees,
Nonemployee Directors, and/or Independent Contractor Stock Units as
additional compensation or in lieu of other compensation for services to
the Company. A Stock Unit is a hypothetical share of Common Stock
represented by a notional account established and maintained (or caused to
be established or maintained) by the Company for such Participant who
receives a grant of Stock Units. Stock Units shall be subject to such terms
and conditions as the Committee, in its sole discretion, determines
appropriate including, without limitation, determinations of the Vesting
Date with respect to such Stock Units and the criteria for the Vesting of
such Stock Units. A Stock Unit granted by the Committee shall provide for
payment in shares of Common Stock at such time or times as the Award
Agreement shall specify. The Committee shall determine whether a
Participant who has been granted a Stock Unit shall also be entitled to a
Dividend Equivalent Right.
9.3 Payout of Stock Units. Subject to a Participant's election to defer in
accordance with Section 17.3 below, upon the Vesting of a Stock Unit, the
shares of Common Stock representing the Stock Unit shall be distributed to
the Participant, unless the Committee, in its sole discretion, provides for
the payment of the Stock Unit in cash (or partly in cash and partly in
shares of Common Stock) equal to the value of the shares of Common Stock
which would otherwise be distributed to the Participant.
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10.0 PERFORMANCE SHARES AND PERFORMANCE UNITS
10.1 Performance Shares. The Committee may, in its sole discretion, grant
Performance Shares to Employees, Nonemployee Directors, and/or Independent
Contractors as additional compensation or in lieu of other compensation
for services to the Company. A Performance Share shall consist of a share
or shares of Common Stock which shall be subject to such terms and
conditions as the Committee, in its sole discretion, determines
appropriate including, without limitation, determining the performance
goal or goals which, depending on the extent to which such goals are met,
will determine the number and/or value of the Performance Shares that will
be paid out or distributed to the Participant who has been granted
Performance Shares. Performance goals may be based on, without limitation,
Company-wide, divisional and/or individual performance, as the Committee,
in its sole discretion, may determine, and may be based on the performance
measures listed in Section 12.3 below.
10.2 Performance Units. The Committee may, in its sole discretion, grant to
Employees, Nonemployee Directors, and/or Independent Contractors
Performance Units as additional compensation or in lieu of other
compensation for services to the Company. A Performance Unit is a
hypothetical share or shares of Common Stock represented by a notional
account which shall be established and maintained (or caused to be
established or maintained) by the Company for such Participant who
receives a grant of Performance Units. Performance Units shall be subject
to such terms and conditions as the Committee, in its sole discretion,
determines appropriate including, without limitation, determining the
performance goal or goals which, depending on the extent to which such
goals are met, will determine the number and/or value of the Performance
Units that will be accrued with respect to the Participant who has been
granted Performance Units. Performance goals may be based on, without
limitation, Company-wide, divisional and/or individual performance, as the
Committee, in its sole discretion, may determine, and may be based on the
performance measures listed in Section 12.3 below.
10.3 Adjustment of Performance Goals. With respect to those Performance Shares
or Performance Units that are not intended to qualify as Performance-Based
Awards (as described in Section 12 below), the Committee shall have the
authority at any time to make adjustments to performance goals for any
outstanding Performance Shares or Performance Units which the Committee
deems necessary or desirable unless at the time of establishment of the
performance goals the Committee shall have precluded its authority to make
such adjustments.
10.4 Payout of Performance Shares or Performance Units. Subject to a
Participant's election to defer in accordance with Section 17.3 below,
upon the Vesting of a Performance Share or a Performance Unit, the shares
of Common Stock representing the Performance Share or the Performance Unit
shall be distributed to the Participant, unless the Committee, in its sole
discretion, provides for the payment of the Performance Share or a
Performance Unit in cash (or partly in cash and partly in shares of Common
Stock) equal to the value of the shares of Common Stock which would
otherwise be distributed to the Participant.
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11.0 CASH AWARDS
11.1 In General. The Committee may, in its sole discretion, grant Cash Awards
to Employees, Nonemployee Directors, and/or Independent Contractors as
additional compensation or in lieu of other compensation for services to
the Company. A Cash Award shall be subject to such terms and conditions as
the Committee, in its sole discretion, determines appropriate including,
without limitation, determining the Vesting Date with respect to such Cash
Award, the criteria for the Vesting of such Cash Award, and the right of
the Company to require the Participant to repay the Cash Award (with or
without interest) upon termination of the Participant's employment within
specified periods.
12.0 PERFORMANCE-BASED AWARDS
12.1 In General. The Committee, in its sole discretion, may designate Awards
granted under the Plan as Performance-Based Awards (as defined below) if
it determines that such compensation might not be tax deductible by the
Company due to the deduction limitation imposed by Code Section 162(m).
Accordingly, an Award granted under the Plan may be granted in such a
manner that the compensation attributable to such Award is intended by the
Committee to qualify as "performance-based compensation" (as such term is
used in Code Section 162(m) and the Treasury Regulations thereunder) and
thus be exempt from the deduction limitation imposed by Code Section
162(m) ("Performance-Based Awards").
12.2 Qualification of Performance-Based Awards. Awards shall only qualify as
Performance-Based Awards under the Plan if:
(a) at the time of grant the Committee is comprised solely of two or
more "outside directors" (as such term is used in Code Section 162(m)
and the Treasury Regulations thereunder);
(b) with respect to either the granting or Vesting of an Award (other
than (i) a Nonqualified Stock Option or (ii) an SAR, which are granted
with an exercise price at or above the Fair Market Value of the Common
Stock on the date of grant), such Award is subject to the achievement
of a performance goal or goals based on one or more of the performance
measures specified in Section 12.3 below;
(c) the Committee establishes in writing (i) the objective
performance-based goals applicable to a given performance period and
(ii) the individual employees or class of employees to which such
performance-based goals apply no later than 90 days after the
commencement of such performance period (but in no event after 25
percent of such performance period has elapsed);
(d) no compensation attributable to a Performance-Based Award will be
paid to or otherwise received by a Participant until the Committee
certifies in writing that the performance goal or goals (and any other
material terms) applicable to such performance period have been
satisfied; and
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(e) after the establishment of a performance goal, the Committee
shall not revise such performance goal (unless such revision will not
disqualify compensation attributable to the Award as
"performance-based compensation" under Code Section 162(m)) or
increase the amount of compensation payable with respect to such Award
upon the attainment of such performance goal.
12.3 Performance Measures. The Committee may use the following performance
measures (either individually or in any combination) to set performance
goals with respect to Awards intended to qualify as Performance-Based
Awards: net sales; pretax income before allocation of corporate overhead
and bonus; budget; cash flow; earnings per share; net income; division,
group or corporate financial goals; return on stockholders' equity; return
on assets; attainment of strategic and operational initiatives;
appreciation in and/or maintenance of the price of the Common Stock or any
other publicly-traded securities of the Company; market share; gross
profits; earnings before interest and taxes; earnings before interest,
taxes, depreciation and amortization; economic value-added models;
comparisons with various stock market indices; increase in number of
customers; and/or reductions in costs.
12.4 Stockholder Reapproval. As required by Treasury Regulation Section
1.162-27(e)(vi), the material terms of performance goals as described in
this Section 12 shall be disclosed to and reaaproved by the Company's
stockholders no later than the first stockholder meeting that occurs in
the 5th year following the year in which the Company's stockholders
previously approved such performance goals.
13.0 CHANGE IN CONTROL
13.1 Accelerated Vesting. Notwithstanding any other provision of this Plan to
the contrary, if there is a Change in Control of the Company, the
Committee, in its sole discretion, may take such actions as it deems
appropriate with respect to outstanding Awards, including, without
limitation, accelerating the Vesting Date and/or payout of such Awards;
provided, however, that such action shall not conflict with any provision
contained in an Award Agreement unless such provision is amended in
accordance with Section 16.3 below.
13.2 Cashout. The Committee, in its sole discretion, may determine that, upon
the occurrence of a Change in Control of the Company, all or a portion of
certain outstanding Awards shall terminate within a specified number of
days after notice to the holders, and each such holder shall receive an
amount equal to the value of such Award on the date of the change in
control, and with respect to each share of Common Stock subject to a Stock
Option or SAR, an amount equal to the excess of the Fair Market Value of
such shares of Common Stock immediately prior to the occurrence of such
change in control over the exercise price per share of such Stock Option
or SAR. Such amount shall be payable in cash, in one or more kinds of
property (including the property, if any, payable in the transaction) or
in a combination thereof, as the Committee, in its sole discretion, shall
determine.
13.3 Assumption or Substitution of Awards. Notwithstanding anything contained
in the Plan to the contrary, the Committee may, in its sole discretion,
provide that an Award may be assumed by any entity which acquires control
of the Company or may be substituted by a similar award under such
entity's compensation plans.
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14.0 TERMINATION OF EMPLOYMENT IF PARTICIPANT IS AN EMPLOYEE
14.1 Termination of Employment Due to Death or Disability. Subject to any
written agreement between the Company and a Participant, if a
Participant's employment is terminated due to death or Disability:
(a) all non-Vested portions of Awards held by the Participant on the
date of the Participant's death or the date of the termination of his
or her employment, as the case may be, shall immediately be forfeited
by such Participant as of such date; and
(b) all Vested portions of Stock Options and SARs held by the
Participant on the date of the Participant's death or the date of the
termination of his or her employment, as the case may be, shall remain
exercisable until the earlier of:
(i) the end of the 12-month period following the date of the
Participant's death or the date of the termination of his or her
employment, as the case may be, or
(ii) the date the Stock Option or SAR would otherwise expire.
14.2 Termination of Employment for Cause. Subject to any written agreement
between the Company and a Participant, if a Participant's employment is
terminated by the Company for cause, all Awards held by a Participant on
the date of the termination of his or her employment for cause, whether
Vested or non-Vested, shall immediately be forfeited by such Participant
as of such date.
14.3 Other Terminations of Employment. Subject to any written agreement between
the Company and a Participant, if a Participant's employment is terminated
for any reason other than for cause or other than due to death or
Disability:
(a) all non-Vested portions of Awards held by the Participant on the
date of the termination of his or her employment shall immediately be
forfeited by such Participant as of such date; and
(b) all Vested portions of Stock Options and/or SARs held by the
Participant on the date of the termination of his or her employment
shall remain exercisable until the earlier of (i) the end of the
90-day period following the date of the termination of the
Participant's employment or (ii) the date the Stock Option or SAR
would otherwise expire.
14.4 Committee Discretion. Notwithstanding anything contained in the Plan to
the contrary, the Committee may, in its sole discretion, provide that:
(a) any or all non-Vested portions of Stock Options and/or SARs held
by the Participant on the date of the Participant's death and/or the
date of the termination of his or her employment shall immediately
become exercisable as of such date and, except with respect to ISOs,
shall remain exercisable until a date that occurs on or prior to the
date the Stock Option or SAR is scheduled to expire;
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(b) any or all Vested portions of Nonqualified Stock Options and/or
SARs held by the Participant on the date of the Participant's death
and/or the date of the termination of his or her employment shall
remain exercisable until a date that occurs on or prior to the date
the Stock Option or SAR is scheduled to expire; and/or
(c) any or all non-Vested portions of Stock Awards, Stock Units,
Performance Shares, Performance Units, and/or Cash Awards held by the
Participant on the date of the Participant's death and/or the date of
the termination of his or her employment shall immediately Vest or
shall become Vested on a date that occurs on or prior to the date the
Award is scheduled to vest.
14.5 ISOs. Notwithstanding anything contained in the Plan to the contrary, (i)
the provisions contained in this Section 14 shall be applied to an ISO
only if the application of such provision maintains the treatment of such
ISO as an ISO and (ii) the exercise period of an ISO in the event of a
termination of the Participant's employment due to Disability provided in
Section 14.1 above shall be applied only if the Participant is
"permanently and totally disabled" (as such term is defined in Code
Section 22(e)(3)).
15.0 TAXES
15.1 Withholding Taxes. With respect to Employees, the Company, or the
applicable Subsidiary, may require a Participant who has become vested in
his or her Stock Award, Stock Unit, Performance Share or Performance Unit
granted hereunder, or who exercises a Stock Option or SAR granted
hereunder to reimburse the corporation which employs such Participant for
any taxes required by any governmental regulatory authority to be withheld
or otherwise deducted and paid by such corporation or entity in respect of
the issuance or disposition of such shares or the payment of any amounts.
In lieu thereof, the corporation or entity which employs such Participant
shall have the right to withhold the amount of such taxes from any other
sums due or to become due from such corporation or entity to the
Participant upon such terms and conditions as the Committee shall
prescribe. The corporation or entity that employs such Participant may, in
its discretion, hold the stock certificate to which such Participant is
entitled upon the vesting of a Stock Award, Stock Unit, Performance Share
or Performance Unit or the exercise of a Stock Option or SAR as security
for the payment of such withholding tax liability, until cash sufficient
to pay that liability has been accumulated.
15.2 Use of Common Stock to Satisfy Withholding Obligation. With respect to
Employees, at any time that the Company, Subsidiary or other entity that
employs such Participant becomes subject to a withholding obligation under
applicable law with respect to the vesting of a Stock Award, Stock Unit,
Performance Share or Performance Unit or the exercise of a Nonqualified
Stock Option (the "Tax Date"), except as set forth below, a holder of such
Award may elect to satisfy, in whole or in part, the holder's related
personal tax liabilities (an "Election") by (i) directing the Company,
Subsidiary or other entity that employs such Participant to withhold from
shares issuable in the related vesting or exercise either a specified
number of shares or shares of Common Stock having a specified value (in
each case equal to the related minimum statutory personal withholding tax
liabilities with respect to the applicable taxing jurisdiction in order to
comply with
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the requirements for a "fixed plan" under Accounting Principals Board
Opinion No. 25), (ii) tendering shares of Common Stock previously issued
pursuant to the exercise of a Stock Option or other shares of the Common
Stock owned by the holder, or (iii) combining any or all of the foregoing
Elections in any fashion. An Election shall be irrevocable. The withheld
shares and other shares of Common Stock tendered in payment shall be
valued at their Fair Market Value of the Common Stock on the Tax Date. The
Committee may disapprove of any Election, suspend or terminate the right
to make Elections or provide that the right to make Elections shall not
apply to particular shares or exercises. The Committee may impose any
additional conditions or restrictions on the right to make an Election as
it shall deem appropriate, including conditions or restrictions with
respect to Section 16 of the Exchange Act.
15.3 No Guarantee of Tax Consequences. No person connected with the Plan in any
capacity, including, but not limited to, the Company and any Subsidiary
and their directors, officers, agents and employees makes any
representation, commitment, or guarantee that any tax treatment,
including, but not limited to, federal, state and local income, estate and
gift tax treatment, will be applicable with respect to amounts deferred
under the Plan, or paid to or for the benefit of a Participant under the
Plan, or that such tax treatment will apply to or be available to a
Participant on account of participation in the Plan.
16.0 AMENDMENT AND TERMINATION
16.1 Termination of Plan. The Board may suspend or terminate the Plan at any
time with or without prior notice; provided, however, that no action
authorized by this Section 16.1 shall reduce the amount of any outstanding
Award or change the terms and conditions thereof without the Participant's
consent.
16.2 Amendment of Plan. The Board may amend the Plan at any time with or
without prior notice; provided, however, that no action authorized by this
Section 16.2 shall reduce the amount of any outstanding Award or change
the terms and conditions thereof without the Participant's consent. No
amendment of the Plan shall, without the approval of the stockholders of
the Company:
(a) increase the total number of shares which may be issued under the
Plan;
(b) increase the maximum number of shares with respect to all Awards
measured in Common Stock that may be granted to any individual under
the Plan;
(c) increase the maximum dollar amount that may be paid with respect
to all Awards measured in cash; or
(d) modify the requirements as to eligibility for Awards under the
Plan.
In addition, the Plan shall not be amended without the approval of such
amendment by the Company's stockholders if such amendment (i) is required
under the rules and regulations of the stock exchange or national market
system on which the Common Stock is listed or (ii) will disqualify any ISO
granted hereunder.
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16.3 Amendment or Cancellation of Award Agreements. The Committee may amend or
modify any Award Agreement at any time by mutual agreement between the
Committee and the Participant or such other persons as may then have an
interest therein. In addition, by mutual agreement between the Committee
and a Participant or such other persons as may then have an interest
therein, Awards may be granted to an Employee, Nonemployee Director or
Independent Contractor in substitution and exchange for, and in
cancellation of, any Awards previously granted to such Employee,
Nonemployee Director or Independent Contractor under the Plan, or any
award previously granted to such Employee, Nonemployee Director or
Independent Contractor under any other present or future plan of the
Company or any present or future plan of an entity which (i) is purchased
by the Company, (ii) purchases the Company, or (iii) merges into or with
the Company.
17.0 MISCELLANEOUS
17.1 Other Provisions. Awards granted under the Plan may also be subject to
such other provisions (whether or not applicable to the Award granted to
any other Participant) as the Committee determines on the date of grant to
be appropriate, including, without limitation, for the installment
purchase of Common Stock under Stock Options, to assist the Participant in
financing the acquisition of Common Stock, for the forfeiture of, or
restrictions on resale or other disposition of, Common Stock acquired
under any Stock Option, for the acceleration of Vesting of Awards in the
event of a change in control of the Company, for the payment of the value
of Awards to Participants in the event of a change in control of the
Company, or to comply with federal and state securities laws, or
understandings or conditions as to the Participant's employment in
addition to those specifically provided for under the Plan.
17.2 Transferability. Each Award granted under the Plan to a Participant shall
not be transferable otherwise than by will or the laws of descent and
distribution, and Stock Options and SARs shall be exercisable, during the
Participant's lifetime, only by the Participant. In the event of the death
of a Participant, each Stock Option or SAR theretofore granted to him or
her shall be exercisable during such period after his or her death as the
Committee shall, in its sole discretion, set forth in the Award Agreement
on the date of grant and then only by the executor or administrator of the
estate of the deceased Participant or the person or persons to whom the
deceased Participant's rights under the Stock Option or SAR shall pass by
will or the laws of descent and distribution. Notwithstanding the
foregoing, the Committee, in its sole discretion, may permit the
transferability of a Stock Option (other than an ISO) by a Participant
solely to members of the Participant's immediate family or trusts or
family partnerships or other similar entities for the benefit of such
persons, and subject to such terms, conditions, restrictions and/or
limitations, if any, as the Committee may establish and include in the
Award Agreement.
17.3 Election to Defer Compensation Attributable to Award. The Committee may,
in its sole discretion, allow a Participant to elect to defer the receipt
of any compensation attributable to an Award under guidelines and
procedures to be established by the Committee after taking into account
the advice of the Company's tax counsel.
17.4 Listing of Shares and Related Matters. If at any time the Committee shall
determine that the listing, registration or qualification of the shares of
Common Stock subject to any Award on any securities exchange or under any
applicable law, or the consent or approval of any governmental regulatory
authority, is necessary or desirable as a condition of, or in connection
with, the granting
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of an Award or the issuance of shares of Common Stock thereunder, such
Award may not be exercised, distributed or paid out, as the case may be,
in whole or in part, unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any
conditions not acceptable to the Committee.
17.5 No Right, Title, or Interest in Company Assets. Participants shall have no
right, title, or interest whatsoever in or to any investments which the
Company may make to aid it in meeting its obligations under the Plan.
Nothing contained in the Plan, and no action taken pursuant to its
provisions, shall create or be construed to create a trust of any kind, or
a fiduciary relationship between the Company and any Participant,
beneficiary, legal representative or any other person. To the extent that
any person acquires a right to receive payments from the Company under the
Plan, such right shall be no greater than the right of an unsecured
general creditor of the Company. All payments to be made hereunder shall
be paid from the general funds of the Company and no special or separate
fund shall be established and no segregation of assets shall be made to
assure payment of such amounts except as expressly set forth in the Plan.
The Plan is not intended to be subject to the Employee Retirement Income
Security Act of 1974, as amended.
17.6 No Right to Continued Employment or Service or to Grants. The
Participant's rights, if any, to continue to serve the Company as a
director, officer, employee, independent contractor or otherwise, shall
not be enlarged or otherwise affected by his or her designation as a
Participant under the Plan, and the Company or the applicable Subsidiary
reserves the right to terminate the employment of any Employee or the
services of any Independent Contractor or director at any time. The
adoption of the Plan shall not be deemed to give any Employee, Nonemployee
Director, Independent Contractor or any other individual any right to be
selected as a Participant or to be granted an Award.
17.7 Awards Subject to Foreign Laws. The Committee may grant Awards to
individual Participants who are subject to the tax laws of nations other
than the United States, and such Awards may have terms and conditions as
determined by the Committee as necessary to comply with applicable foreign
laws. The Committee may take any action which it deems advisable to obtain
approval of such Awards by the appropriate foreign governmental entity;
provided, however, that no such Awards may be granted pursuant to this
Section 16.6 and no action may be taken which would result in a violation
of the Exchange Act or any other applicable law.
17.8 Governing Law. The Plan, all Awards granted hereunder, and all actions
taken in connection herewith shall be governed by and construed in
accordance with the laws of the State of Delaware without reference to
principles of conflict of laws, except as superseded by applicable federal
law.
17.9 Other Benefits. No Award granted under the Plan shall be considered
compensation for purposes of computing benefits under any retirement plan
of the Company or any Subsidiary nor affect any benefits or compensation
under any other benefit or compensation plan of the Company or any
Subsidiary now or subsequently in effect.
17.10 No Fractional Shares. No fractional shares of Common Stock shall be issued
or delivered pursuant to the Plan or any Award. The Committee shall
determine whether cash, Common Stock, Stock Options, or other property
shall be issued or paid in lieu of fractional shares or whether such
fractional shares or any rights thereto shall be forfeited or otherwise
eliminated.
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