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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- - ---------- EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
- - ---------- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM___________TO_________________.
COMMISSION FILE NUMBER 1-7155.
THE DUN & BRADSTREET CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-2740040
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
ONE DIAMOND HILL ROAD, MURRAY HILL, NJ 07974
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (908) 665-5000.
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, par value $1 per share. . . . . . . . . . .New York Stock Exchange
Preferred Stock Purchase Rights . . . . . . . . . . . . .New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.___________
As of January 31, 1997, 170,988,313 shares of Common Stock of The Dun &
Bradstreet Corporation were outstanding and the aggregate market value of such
Common Stock held by nonaffiliates* (based upon its closing transaction price on
the Composite Tape on such date) was approximately $4,103.7 million.
*Calculated by excluding all shares held by executive officers and directors of
the registrant without conceding that all such persons are "affiliates" of
registrant for purposes of federal securities laws.
(Continued)
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DOCUMENTS INCORPORATED BY REFERENCE
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PART I
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ITEM 1 -Business Note 16 Segment Information on page 42
and 43, of the 1996 Annual Report.
PART II
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ITEM 5 -Market for the Registrant's Common Page 24, Financial Review, of the 1996
Equity and Related Stockholder Annual Report.
Matters
ITEM 6 -Selected Financial Data Page 46, Five-Year Selected Financial
Data, of the 1996 Annual Report.
ITEM 7 -Management's Discussion and Analysis Pages 20 to 24, Financial Review, of
of Financial Condition and Results of the 1996 Annual Report.
Operations
ITEM 8 -Financial Statements and Supplementary Pages 26 to 46 of the 1996 Annual Report.
Data
PART III
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ITEM 10 -Directors and Executive Officers of the Pages 2 to 4 of the Company's Proxy
Registrant Statement dated March 27, 1997.
ITEM 11 -Executive Compensation Pages 11 to 24 of the Company's Proxy
Statement dated March 27, 1997.
ITEM 12 -Security Ownership of Certain Beneficial Pages 24 to 26 of the Company's Proxy
Owners and Management Statement dated March 27, 1997.
ITEM 13 -Certain Relationships and Related Pages 24 to 26 of the Company's Proxy
Transactions Statement dated March 27, 1997.
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The Index to Exhibits is located on Pages 18 to 20.
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PART I
As used in this report, except where the context indicates otherwise, the
term "Company" means The Dun & Bradstreet Corporation and all subsidiaries
consolidated in the financial statements contained herein.
ITEM 1. BUSINESS
(a)(1) The Dun & Bradstreet Corporation was incorporated under the laws of
the State of Delaware on February 6, 1973 and became the parent holding company
of Dun & Bradstreet, Inc. and its subsidiaries on June 1, 1973. Dun &
Bradstreet, Inc. was incorporated under the laws of the State of Delaware in
1930 and is the successor to a business commenced in 1841.
On November 1, 1996, The Dun & Bradstreet Corporation reorganized into
three publicly traded independent companies by spinning off through a tax-free
distribution two of its businesses to shareholders (the "Distribution"). The
Distribution resulted in the following three companies: (1) The Dun & Bradstreet
Corporation, consisting of Dun & Bradstreet, the operating company ("D&B"),
Moody's Investors Service ("Moody's") and Reuben H. Donnelley; (2) ACNielsen
Corporation ("ACNielsen"); and (3) Cognizant Corporation ("Cognizant"),
consisting of IMS International, Inc. ("IMS"), Gartner Group, Nielsen Media
Research, Pilot Software, Cognizant Technology Solutions Corporation ("CTSC"),
Cognizant Enterprises and Erisco. In connection with the reorganization, Dun &
Bradstreet Software ("DBS"), NCH Promotional Services ("NCH"), and American
Credit Indemnity ("ACI") were divested. On October 10, 1996, following receipt
of a ruling from the Internal Revenue Service that the transaction would be
tax-free to the Company and its U.S. shareholders, the Company's Board of
Directors declared a dividend distribution to shareholders of record on October
21, 1996 consisting of one share of Cognizant common stock for each share of the
Company's common stock and one share of ACNielsen common stock for every three
shares of the Company's common stock held on such record date. The Distribution
was effected on November 1, 1996 (the "Distribution Date"). These transactions
resulted in a noncash dividend which reduced shareholders' equity by $1,240.9
million.
For purposes of effecting the transaction and of governing certain of the
continuing relationships among the Company, Cognizant and ACNielsen after the
Distribution, the three companies have entered into various agreements,
including a Distribution Agreement, Tax Allocation Agreement, Employee Benefits
Agreement and an Indemnity and Joint Defense Agreement.
DISTRIBUTION AGREEMENT
The Company, Cognizant and ACNielsen entered into the Distribution
Agreement providing for, among other things, certain corporate transactions
required to effect the Distribution and other arrangements among the Company,
Cognizant and ACNielsen subsequent to the Distribution.
In particular, the Distribution Agreement defines the assets and
liabilities which are being allocated to and assumed by Cognizant and those
which are being allocated to and assumed by ACNielsen. The Distribution
Agreement also defines what constitutes the "Cognizant Business" and what
constitutes the "ACNielsen Business."
Pursuant to the Distribution Agreement, the Company transferred or caused
to be transferred all its right, title and interest in the assets comprising the
Cognizant business to Cognizant and all its right, title and interest in the
assets comprising the ACNielsen business to ACNielsen; Cognizant is obligated to
transfer or cause to be transferred all its right, title and interest in the
assets comprising the Company's business to the Company; and ACNielsen is
obligated to transfer or cause to be transferred all its right, title and
interest in the assets comprising the Company's business to the Company. All
assets were transferred without any representation or warranty, "as is-where
is," and the relevant transferee bears the risk that any necessary consent to
transfer was not obtained. Each party also agreed to exercise its respective
commercially reasonable efforts promptly to obtain any necessary consents and
approvals and to take such actions as may be reasonably necessary or desirable
to carry out the purposes of the Distribution Agreement and the other agreements
summarized below.
The Distribution Agreement provides for, among other things, assumptions of
liabilities and cross indemnities designed to allocate generally, effective as
of the Distribution Date, financial responsibility for the liabilities arising
out of or in connection with (i) the businesses conducted by IMS, Nielsen Media
Research, Pilot Software, Gartner Group, CTSC, Erisco, and Cognizant Enterprises
to Cognizant, (ii) the businesses conducted by A.C. Nielsen Company, other than
those conducted by Nielsen Media Research, to ACNielsen and (iii) all other
liabilities to the Company. The Distribution Agreement provides for the
allocation generally of the financial responsibility for the liabilities arising
out of or in connection with former businesses, including those formerly
conducted by or associated with Cognizant or ACNielsen, to the Company. The
Distribution Agreement allocates to Cognizant liabilities related to certain
prior business transactions if such liabilities exceed certain specified
amounts.
No party to the Distribution Agreement will have any liability to any other
party for inaccurate forecasts or arising out of any pre-Distribution
arrangement, course of dealing or understanding (other than the Distribution
Agreement or the other agreements as
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described below) unless such arrangement, course of dealing or understanding is
specifically set forth on a schedule to the Distribution Agreement.
The Distribution Agreement includes provisions governing the administration
of certain insurance programs and the procedures for making claims. The
Distribution Agreement also allocates the right to proceeds and the obligation
to incur deductibles under certain insurance policies.
With respect to any transfers contemplated by the Distribution Agreement
that were not effected on or prior to the Distribution Date, the parties are
required to cooperate to effect such transfers as promptly as practicable
following the Distribution Date, and pending any such transfers, to hold any
asset not so transferred in trust for the use and benefit of the party entitled
thereto (at the expense of the party entitled thereto), and to retain any
liability not so transferred for the account of the party by whom such liability
is to be assumed.
The Distribution Agreement provides that neither the Company, Cognizant nor
ACNielsen will take any action that would jeopardize the intended tax
consequences of the Distribution. Specifically, each of the Company, Cognizant
and ACNielsen agrees to maintain its status as a company engaged in the active
conduct of a trade or business, as defined in Section 355(b) of the Internal
Revenue Code, until the second anniversary of the Distribution Date. As part of
the request for a ruling that the Distribution will be tax free for Federal
income tax purposes, each of the Company, Cognizant and ACNielsen has
represented to the Internal Revenue Service that, subject to certain exceptions,
it had no plan or intent to liquidate, merge or sell all or substantially all of
its assets. The Company does not intend to initiate any action leading to a
change of control, and in the case of a change of control, the foregoing
representations, and the ruling based thereon, could be called into question. As
a result, the acquisition of control of the Company prior to the second
anniversary may be more difficult or less likely to occur because of the
potential substantial contractual damages associated with a breach of such
provisions of the Distribution Agreement.
Under the Distribution Agreement, each of the Company, Cognizant and
ACNielsen agrees to provide to the other parties, subject to certain conditions,
access to certain corporate records and information and to provide certain
services on such terms as are set forth in a Transition Services Agreement among
such parties.
The Distribution Agreement also provides that, except as otherwise set
forth therein or in any other agreement, all costs or expenses incurred on or
prior to the Distribution Date in connection with the Distribution will be
charged to and paid by the Company. The Company agreed to be liable for any
claims based upon actual or alleged misstatements or omissions in the
Registration Statements on Form 10 filed with the Securities and Exchange
Commission by each of Cognizant and ACNielsen. Except as set forth in the
Distribution Agreement or any related agreement, each party is to bear its own
costs and expenses incurred after the Distribution Date.
TAX ALLOCATION AGREEMENT
The Company, Cognizant and ACNielsen entered into a Tax Allocation
Agreement to the effect that the Company will pay its entire consolidated tax
liability for the tax years that Cognizant and ACNielsen were included in the
Company's consolidated Federal income tax return. For periods prior to the
Distribution Date, the Company will generally be liable for state and local
taxes measured by income or imposed in lieu of income taxes. The Tax Allocation
Agreement allocates liability to the Company, Cognizant and ACNielsen for their
respective shares of other state and local taxes as well as any foreign taxes
attributable to periods prior to the Distribution Date, as well as certain other
matters.
EMPLOYEE BENEFITS AGREEMENT
The Company, Cognizant and ACNielsen entered into an Employee Benefits
Agreement (the "Employee Benefits Agreement"), which allocates responsibility
for certain employee benefits matters on and after the Distribution Date.
The Employee Benefits Agreement provides that Cognizant and ACNielsen will
adopt new defined benefit pension plans for their employees and that the Company
will continue to sponsor its current plan for the benefit of its employees as
well as former employees who terminated employment on or prior to the
Distribution Date. Assets and liabilities of the current Company pension plan
that are attributable to Cognizant and ACNielsen employees were transferred to
the new Cognizant and ACNielsen plans, respectively.
In addition, Cognizant and ACNielsen are to adopt new savings plans for
their employees, and the Company will continue to sponsor its savings plan for
the benefit of its employees as well as former employees who terminated
employment on or prior to the Distribution Date. Cognizant and ACNielsen
employees are given the right to elect to keep their balances in the Company's
savings
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plan, receive a lump-sum payment of their balances or transfer their balances to
the new Cognizant and ACNielsen plans, respectively.
The Company is required to retain the liability for all benefits under the
Company's nonqualified supplemental pension plans that were vested prior to the
Distribution Date.
The Employee Benefits Agreement also provides that the Company will
continue to sponsor its welfare plans for its employees as well as all former
employees who retired or became disabled on or prior to the Distribution Date.
Cognizant and ACNielsen are required to provide retiree welfare benefits to
their continuing employees who would have been eligible to receive these
benefits from the Company had they retired on or prior to the Distribution Date.
If Cognizant or ACNielsen fails to provide any retiree welfare benefits, the
Company is required to provide such continuing employees with the same level of
retiree welfare benefits that it provides to its retirees generally.
The Company, Cognizant and ACNielsen will each generally retain the
severance liabilities of their respective employees who terminated employment
prior to the Distribution Date.
With respect to equity-based plans, the Employee Benefits Agreement
provides that unexercised Company stock options held by the Company employees,
retirees and disabled employees as of the Distribution Date will be adjusted to
reflect the Distribution.
The Employee Benefits Agreement also provides that the Company will
generally retain all employee benefit litigation liabilities that were asserted
prior to the Distribution Date (but not such liabilities that relate to the
transferred retirement and savings plan assets of Cognizant or ACNielsen
employees). Except as specifically provided therein, nothing in the Employee
Benefits Agreement restricts the Company's ability to amend or terminate any of
its employee benefit plans after the Distribution Date.
INDEMNITY AND JOINT DEFENSE AGREEMENT
The Company, Cognizant and ACNielsen have entered into the Indemnity and
Joint Defense Agreement pursuant to which they have agreed (i) to certain
arrangements allocating potential IRI Liabilities (as defined below) that may
arise out of or in connection with the IRI Action (as defined on Page 9) and
(ii) to conduct a joint defense of such action. See "Legal
Proceedings-Information Resources."
In connection with the IRI Action, the Company, Cognizant and ACNielsen
entered into the Indemnity and Joint Defense Agreement pursuant to which they
agreed (i) to certain arrangements allocating potential liabilities ("IRI
Liabilities") that may arise out of or in connection with the IRI Action and
(ii) to conduct a joint defense of the IRI Action. In particular, the Indemnity
and Joint Defense Agreement provides that ACNielsen will assume exclusive
liability for IRI Liabilities up to a maximum amount to be calculated at such
time such liabilities, if any, become payable (the "ACN Maximum Amount"), and
that the Company and Cognizant will share liability equally for any amounts in
excess of the ACN Maximum Amount. The ACN Maximum Amount will be determined by
an investment banking firm as the maximum amount which ACNielsen is able to pay
after giving effect to (i) any plan submitted by such investment bank which is
designed to maximize the claims paying ability of ACNielsen without impairing
the investment banking firm's ability to deliver a viability opinion (but which
will not require any action requiring stockholder approval), and (ii) payment of
related fees and expenses. For these purposes, financial viability means the
ability of ACNielsen, after giving effect to such plan, the payment of related
fees and expenses, and the payment of the ACN Maximum Amount, to pay its debts
as they become due and to finance the current and anticipated operating and
capital requirements of its business, as reconstituted by such plan, for two
years from the date any such plan is expected to be implemented.
In addition, ACNielsen agreed to certain restrictions on payments of
dividends and share repurchases above specified levels. ACNielsen also agreed
not to engage in mergers, acquisitions or dispositions, including joint venture
investments, if, after giving effect to any such transaction, ACNielsen would be
unable to meet a specified fixed charge coverage ratio, and, if any such
transaction involves aggregate consideration in excess of $50 million, then
ACNielsen will also be required to receive and to cause to be delivered to
Cognizant and the Company an investment banker's fairness opinion.
The Indemnity and Joint Defense Agreement also sets forth certain
provisions governing the defense of the IRI Action pursuant to which the parties
agree to be represented by the same counsel. Legal expenses are to be shared
equally by the three parties.
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(b) The response to this item is incorporated herein by reference to Note
16 Segment Information on Pages 42 to 43 of the 1996 Annual Report.
(c) The Dun & Bradstreet Corporation is a non-operating holding company
whose revenue is derived primarily from dividends received from its
subsidiaries. A descriptive narrative of the Company's business segments follows
item (d).
The number of full-time equivalent employees at December 31, 1996 was
approximately 15,400.
(d) The response to this item is incorporated herein by reference to Note
16 Segment Information on Pages 42 and 43 of the 1996 Annual Report.
The Company is the world's leading marketer of information and services for
business decision-making. Its operations can be divided into two business
segments: Risk Management Services and Directory Information Services. The
businesses formerly comprising the Marketing Information Services, Software
Services and Other Business Services segments were spun-off pursuant to the
reorganization and are treated as discontinued operations. A narrative
description of the Company's operations by business segment follows.
RISK MANAGEMENT SERVICES
DUN & BRADSTREET
D&B is the world's largest supplier of business, commercial-credit and
business-marketing information services, with operations in 37 countries and a
worldwide database covering more than 44 million businesses. Data is gathered
through personal visits, telephone interviews, and third party sources. D&B also
provides receivable management services worldwide. D&B is organized into three
regions: United States, Europe and Asia-Pacific, Canada, Latin America.
DUN & BRADSTREET, U.S.
D&B, U.S. provides business-to-business credit, marketing and receivable
management information and services. The three lines of business are described
below:
Credit Information Services
Credit Information Services provides its customers with access to a
database on more than 10 million U.S. businesses. Its core products include the
Business Information Report, Payment Analysis Report, Credit Scoring Report and
reference services. Value-added solutions are provided through Specialized
Industry Services, Predictive Scoring Services, Industry and Financial
Consulting Services, Business Development Services, Analytical Services and
Monitoring Services. Customers can order and receive information in a variety of
ways, including mail, phone, fax, personal computers and through a variety of
customized high-volume connections between D&B and customer computer systems.
Credit Information Services licenses its data to customers. It also
distributes its information via a number of other firms, including leading
vendors of online services.
Customers of Credit Information Services (approximately 62,000 subscription
customers and over 175,000 non-subscription customers in the U.S.) use this
information in making decisions to extend commercial credit, approve loans and
leases, underwrite insurance, evaluate vendors, and make other financial and
risk assessment decisions. Credit Information Services' largest customers are
major manufacturers and wholesalers, insurance companies, banks and other credit
and financial institutions.
The Business Information Report contains commercial credit information on
specific businesses. This report includes the D&B Rating and the PAYDEX score, a
dollar-weighted numerical score of the company's payment performance. Both the
D&B Rating and the PAYDEX score are based on information in the D&B database.
The Business Information Report also includes summary information and detailed
payment data, as well as financial, banking, public filing, historical and
operational data. The Dun & Bradstreet Reference Book of American Business
contains listings on approximately 3 million businesses in the United States and
Puerto Rico. This book also contains the D&B Rating, which reflects the credit
and financial strength of a business. The Payment Analysis Report provides
information on a company's payment record and includes the current PAYDEX score,
the 90-day PAYDEX score, historical trends and industry comparisons. Predictive
Scoring Services combine advanced statistical modeling with Dun &
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Bradstreet's database to help customers automate their risk management
processes. D&B Express and other mass market services provide non-subscription
customers who have an occasional need for business information with data on a
specific company. Credit Information Services also markets other specialized
reports and business information.
Credit Information Services is the leading commercial credit reporting
agency in the United States. However, it faces competition both from in-house
operations of the businesses it seeks as customers and from other general and
specialized credit reporting and other information services. It believes the
principal attributes in judging the competition are information quality,
availability, service and price.
Receivable Management Services
Receivable Management Services ("RMS") provides its customers with a full
range of accounts receivable management services, including third party
collection of accounts, letter demand services and receivable management
outsourcing programs. These services substitute and/or enhance its customers'
own internal management of accounts receivable.
RMS services and collects delinquent receivables on behalf of 30,000
customers primarily in the business-to-business marketplace. Principal markets
include insurance, telecommunications, and transportation services. Customers
select the applicable RMS service that best meets their receivable portfolio
needs.
RMS uses the Dun & Bradstreet name to correspond with debtors about
delinquent accounts for collection services. Revenues are generally earned on a
contingent fee basis. Letter demand services are purchased for high volume-lower
dollar portfolios with revenues earned on a transactional basis. Receivable
outsourcing programs are selected when customers seek to outsource their
accounts receivable function to a third party vendor. Services include debt
verification and collection, customer service functions and analytical
reporting.
In 1995 and 1996, RMS offered and sold sales franchises covering portions
of 27 states. As a complement to its field and telesales sales forces, these
franchises are located in less concentrated markets where local presence is
preferred. RMS continues to be responsible for all product fulfillment. Customer
ownership remains with RMS with franchisees retaining exclusive access in their
markets.
Certain states require licensing for consumer and commercial debt
collection. RMS, and in some instances the individual collectors, must be
licensed in order to conduct business in applicable states. The laws under which
such licenses are granted generally provide for annual license renewals, as well
as denials, suspensions or revocations for improper actions or other factors.
RMS is considered to be a leader in the commercial receivable management
industry in the U.S. There are several consumer collection agencies that have
larger receivable portfolios, particularly health care and credit card
collection providers. The third party commercial collection market is highly
fragmented with over 5,000 collection agencies. The outsourcing market has
significantly fewer competitors due to the need for larger scale operations by
the receivable providers. Both markets are very price competitive with status
and statistical reporting and speed of service as key qualitative attributes.
Internationally, RMS provides cross-border receivable services in which the
RMS worldwide offices service cross-border claims for one another. This service
has grown significantly but comprises only 2% of total revenue.
Marketing Information Services
Marketing Information Services provides marketing information for
business-to-business and educational marketers. Marketing Information Services
provides comprehensive information and related services used to plan, execute
and evaluate the results of marketing programs; model, target and reach
prospects; and track sales activities. This information is derived from a
proprietary database covering more than 44 million businesses in over 200
countries. Information is delivered in print and on diskette, magnetic tape,
CD-ROM and online formats. Additionally, Marketing Information Services offers a
line of Database marketing products providing solutions for marketing
professionals by organizing various databases into an "information warehouse."
The development of such a "warehouse" facilitates market penetration, market
segmentation, territory alignment and demand estimation analyses as well as the
identification of the best prospective customers. Database marketing products
are available in both a PC desktop version and on a larger computing platform.
Market Data Retrieval offers services that help businesses sell to the
education market. The products provided include information about course
offerings, facilities, teachers and administrators in primary and secondary
schools, school districts, preschools, libraries, colleges and universities.
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Marketing Information Services, while a market leader in its industry,
faces competition from other data providers in competitive distribution
channels, delivery formats and data quality enhancements.
DUN & BRADSTREET EUROPE/MIDDLE EAST/AFRICA AND
DUN & BRADSTREET ASIA-PACIFIC, CANADA, LATIN AMERICA
Dun & Bradstreet Europe/Middle East/Africa and Dun & Bradstreet
Asia-Pacific, Canada, Latin America ("D&B Europe" and "D&B Asia-Pacific, Canada,
Latin America," respectively) opened their first overseas office in 1857 and
today conduct operations in offices and branches located throughout Europe,
Latin America, Africa, the Middle East, Asia, Japan, the Pacific Rim and Canada.
D&B Europe and D&B Asia-Pacific, Canada, Latin America provide
substantially the same business information, marketing information and
receivable management services outside the United States as those provided by
D&B U.S. The Business Information Report contains background and financial
information on businesses located throughout the world obtained from D&B offices
in the 37 countries where there are full operations and from D&B correspondents
in over 150 other countries. D&B Europe and D&B Asia Pacific, Canada, Latin
America's other major products or services include analytical tools to help the
customer make better business decisions, local and international
credit-reference publications, marketing publications, marketing information
systems, consumer-credit information, as well as receivable management services.
Customers can receive information through a direct link to the computer, in
printed form, by fax, on CD-ROM or through third parties.
In 1996, D&B Asia Pacific, Canada, Latin America reorganized its operations
in Brazil, Mexico, Chile and Venezuela. It continues to provide cross-border
services through local affiliates, small local operations centers and an
operations center in Florida.
D&B Europe continues to invest in data systems. Also, in late 1995 a new
range of cross-border products was rolled-out to the European market. D&B Europe
also continued investing heavily in a new technology platform, which will result
in enhanced product/service flexibility as well as opportunities to streamline
operations.
D&B Europe and D&B Asia-Pacific, Canada, Latin America's operations are
subject to the usual risks inherent in carrying on business in certain countries
outside of the U.S., including currency fluctuations, possible nationalization,
expropriation, price controls, changes in the availability of data from public
sector sources, limits on providing information across borders or other
restrictive government action. Management believes that the risk of
nationalization or expropriation is reduced because its basic service is the
delivery of information, rather than the production of products that require
manufacturing facilities or the use of natural resources.
D&B Europe and D&B Asia-Pacific, Canada, Latin America face competition
from banks, consumer information companies, application software developers,
online content providers and in-house operations of businesses as well as direct
competition from businesses providing similar services. D&B Europe is believed
to be the largest single supplier of credit information services in Europe. The
competition is primarily local and there are no competitors offering a
comparable range of global services or capabilities.
MOODY'S INVESTORS SERVICE, INC.
Moody's publishes credit opinions on investment securities, assigning
ratings to fixed-income securities and other credit obligations. It also
provides a broad range of business and financial information. Moody's was
founded in 1900. It now employs approximately 600 analysts and has a total of
more than 1,500 associates located around the world. Moody's provides ratings
and information on governmental and commercial entities in over 70 countries.
Moody's customers include investors (both institutional and individual), banks
and other financial intermediaries, and a wide range of corporate and
governmental issuers of securities.
Moody's publishes rating opinions on a broad range of credit obligations.
These include various United States corporate and governmental obligations,
Eurosecurities, structured finance securities and commercial paper issues. In
recent years, Moody's has moved beyond its traditional core ratings activity,
assigning ratings to insurance companies' obligations, bank loans, derivative
product companies, debt, mutual funds and derivatives. At the end of 1996,
Moody's had outstanding ratings on approximately 70,000 corporate and 60,000
public finance obligations. Ratings are disseminated to the public through a
variety of electronic and print media. Detailed descriptions of both the rated
issue and issuer, along with a summary of the rating rationale for the
assignment of the specific rating, also appear in various Moody's credit
research products.
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The ratings fees charged to most issuers account for a majority of Moody's
revenues. Therefore, a substantial portion of Moody's revenues is dependent upon
the volume of debt securities issued in the global capital markets.
In addition to revenues from its ratings activities, Moody's derives
revenues from its publication of investor-oriented credit research services to
over 30,000 subscribers globally. Moody's publishes more than 100 research
products, including in-depth research on major issuers, industry studies,
special comments and summary credit opinion handbooks. Product selection
includes insurance, utilities, speculative grade instruments, bank and global
credit research.
Moody's also offers current and historical business and financial
information for investment research and reference uses. Moody's publishes more
than 30 different products and services, including manuals, handbooks and
guides, as well as CD-ROM and other electronic formats. These products and
services cover over 46,000 major U.S. and non-U.S. entities, as well as over
22,000 municipalities and governmental entities and their securities.
Moody's international operations have continued to grow as a result of the
expansion and development of international debt markets in recent years. Moody's
maintains offices in ten countries outside of the U.S. Moody's non-U.S.
operations are subject to the usual risks inherent in carrying on business in
countries outside the U.S., including currency fluctuations, possible
nationalization, expropriation, price controls and/or other restrictive
government actions. Management believes that the risks of nationalization or
expropriation are negligible. Moody's international business is not solely
dependent on non-U.S. office staff, as these offices are supported by travel
from Moody's internationally-focused staff.
Moody's is one of the two largest ratings agencies in the world. Both in
the United States and internationally, competition is increasing as the volume
of rateable credit-sensitive instruments increases and additional ratings
agencies are created or existing agencies enter new markets.
Moody's is registered as an investment advisor under the Investment
Advisers Act of 1940.
DIRECTORY INFORMATION SERVICES
THE REUBEN H. DONNELLEY CORPORATION
The Reuben H. Donnelley Corporation ("RHD") provides sales, marketing and
publishing services for yellow pages and other directory products. RHD provides
these services for almost 400 directories in 18 states and the District of
Columbia, and is the largest independent marketer of yellow pages advertising in
the U.S. RHD serves the yellow pages marketing needs of over a half million
small and medium size business and service organizations who purchase yellow
pages advertising.
RHD's major telephone company clients include Ameritech Advertising
Services ("AAS"), NYNEX Information Resources Company ("NIRC") and Sprint
Publishing & Advertising ("Sprint") in addition to other smaller telephone
companies. RHD's client agreements include both partnership and agency
relationships.
DonTech, a partnership between RHD and AAS, is responsible for marketing
and publishing telephone directories throughout Illinois and northwestern
Indiana. DonTech also publishes Street Address Directories in Illinois, Michigan
and Indiana and operates a fulfillment center which markets telephone
directories primarily throughout Illinois. The partnership agreement provides
for a bidding process which permits either partner to purchase the other's
interest in the event of a change in control of either partner. The agreement
also provides for a perpetual partnership.
RHD serves as the sales agent for NIRC for directories published in New
York State. The agreement with NIRC represents the largest sales agency
relationship for RHD. Unless a renewal is successfully negotiated, the agreement
will expire in 2005.
RHD's relationship with Sprint includes the CenDon partnership agreement
with Centel Directory Company, and directory contracts with several of Sprint's
operating subsidiaries to publish, manufacture and distribute telephone
directories in Florida, Illinois, Nevada, North Carolina and Virginia. In
addition, RHD serves as the sales agent for Sprint in central Florida markets.
Unless a renewal is successfully negotiated, these agreements will expire in
2004.
RHD provides both sales and publishing services as part of its agency
relationship with Cincinnati Bell Directory for customers in Ohio and northern
Kentucky. The agreement will expire in August of 1997.
7
<PAGE>
RHD's relationship with Commonwealth Telephone Company includes the C-Don
partnership with Commonwealth Communications Inc., which serves customers in
northeastern Pennsylvania. In addition, RHD has joint venture agreements with
North Pittsburgh Telephone Company, Conestoga Telephone and Telegraph and Denver
and Ephrata Telephone and Telegraph Company in Pennsylvania. RHD also has an
agency agreement to provide sales and publishing services for CFW Telephone
Company in Virginia.
In addition to the services provided to telephone company clients discussed
above, RHD also publishes proprietary yellow pages directories. These
directories are located in Delaware, Maryland, New Jersey, Pennsylvania,
Virginia and the District of Columbia.
RHD's publishing and marketing operations handle a variety of pre-press and
information management services relating to directory publishing. These services
include graphics and ad creation, contract processing, database management and
pagination which RHD provides for both clients and its own proprietary business.
Publishing operations are based in RHD's state-of-the-art facility in Raleigh,
North Carolina which was opened in 1995. Prior to the transition to this new
facility, publishing operations were located in Terre Haute, Indiana. This
facility closed in 1996.
The competitive marketplace for the directory business takes many forms.
Competition from other yellow pages publishers exists in most markets. In
addition, RHD competes for advertising dollars against newspapers, radio, direct
mail, online information services and television. Also, advances in technology
have brought in new industry participants, new products and new channels. In
response, RHD has developed non-traditional relationships with businesses not
formerly associated with the directory industry to develop capabilities in
multi-product selling, including sales of advertising through online products.
The passage of the landmark Telecommunications Act of 1996 has set the
stage for profound change in the telecommunications and directory industries
which will impact RHD. By providing a framework to encourage competition for
local telephone service, mandating non-discriminatory access to listings
databases and eventually allowing Bell Operating Companies to offer long
distance service, this legislation ushers in a new era for directory publishers.
RHD owns and controls a number of trademarks and other intellectual
property rights that, in the aggregate, are of material importance to its
proprietary business. This includes the licensing of its name, The Donnelley
Directory(R), and marketing and licensing of YPTVSM. However, its business is
not dependent on any one intellectual property or group of such properties.
ITEM 2. PROPERTIES
The principal properties of the Company, by business segment, are set forth
below.
The executive offices of the Company are located at One Diamond Hill Road,
Murray Hill, New Jersey in a property owned by D&B.
The other properties of the Company are geographically distributed to meet
sales and operating requirements worldwide. They are generally considered to be
both suitable and adequate to meet current operating requirements and virtually
all space is being utilized.
RISK MANAGEMENT SERVICES
Owned properties located within the U.S. include two buildings in Berkeley
Heights, New Jersey and one each in Murray Hill and Parsippany, New Jersey and
New York, New York.
Owned properties located outside the U.S. are located in Melbourne,
Australia; Curitiba, Brazil; Santiago, Chile; Mexico City, Mexico; Caracas,
Venezuela; High Wycombe, England; Lyon, France and seven properties within
Italy. The operations of this segment are also conducted from 93 leased offices
located throughout the U.S. and 105 leased non-U.S. office locations.
DIRECTORY INFORMATION SERVICES
Operations are conducted from 35 leased locations throughout the U.S.
8
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are involved in legal proceedings and
litigation arising in the ordinary course of business. In the opinion of
management, the outcome of all current proceedings, claims and litigation, if
decided adversely, could have a material effect on quarterly or annual operating
results when resolved in a future period. However, in the opinion of management,
these matters will not materially affect the Company's consolidated financial
position.
Information Resources
Additionally, on July 29, 1996, IRI filed a complaint in the United States
District Court for the Southern District of New York, naming as defendants the
Company, A.C. Nielsen Company (a subsidiary of ACNielsen) and IMS (a subsidiary
of Cognizant).
The complaint (the "IRI Action") alleges various violations of United
States antitrust laws, including alleged violations of Section 1 and 2 of the
Sherman Act. The complaint also alleges a claim of tortious interference with a
contract and a claim of tortious interference with a prospective business
relationship. These claims relate to the acquisition by defendants of Survey
Research Group Limited ("SRG"), prior to the Distribution described in Item 1.
IRI alleges SRG violated an alleged agreement with IRI when it agreed to be
acquired by the defendants and that the defendants induced SRG to breach that
agreement.
IRI's complaint alleges damages in excess of $350 million, which amount IRI
asked to be trebled under antitrust laws. IRI also seeks punitive damages in an
unspecified amount.
In connection with the IRI Action, the Company, Cognizant and ACNielsen and
entered into the Indemnity and Joint Defense Agreement pursuant to which they
agreed (i) to certain arrangements allocating potential liabilities ("IRI
Liabilities") that may arise out of or in connection with the IRI Action and
(ii) to conduct a joint defense of the IRI Action. In particular, the Indemnity
and Joint Defense Agreement provides that ACNielsen will assume exclusive
liability for IRI Liabilities up to a maximum amount to be calculated at such
time such liabilities, if any, become payable (the "ACN Maximum Amount"), and
that the Company and Cognizant will share liability equally for any amounts in
excess of the ACN Maximum Amount. The ACN Maximum Amount will be determined by
an investment banking firm as the maximum amount which ACNielsen is able to pay
after giving effect to (i) any plan submitted by such investment bank which is
designed to maximize the claims paying ability of ACNielsen without impairing
the investment banking firm's ability to deliver a viability opinion (but which
will not require any action requiring stockholder approval), and (ii) payment of
related fees and expenses. For these purposes, financial viability means the
ability of ACNielsen, after giving effect to such plan, the payment of related
fees and expenses, and the payment of the ACN Maximum Amount, to pay its debts
as they become due and to finance the current and anticipated operating and
capital requirements of its business, as reconstituted by such plan, for two
years from the date any such plan is expected to be implemented.
Management is unable to predict at this time the final outcome of the IRI
Action or whether the resolution of the matter could materially affect the
Company's results of operations, cash flows or financial position.
9
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT*
Officers are elected by the Board of Directors to hold office until their
respective successors are chosen and qualified.
Listed below are the executive officers of the registrant at March 27, 1997
and brief summaries of their business experience during the past five years.
<TABLE>
<CAPTION>
Name Title Age
---- ----- ---
<S> <C> <C>
Volney Taylor** Chairman of the Board and Chief Executive Officer 57
Clifford L. Bateman Senior Vice President and Chief Information Officer 51
William F. Doescher Senior Vice President and Chief Communications Officer 59
Nancy L. Henry Senior Vice President and Chief Legal Counsel 51
Frank R. Noonan Senior Vice President and President - The Reuben H. Donnelley Corporation 54
Peter J. Ross Senior Vice President and Chief Human Resources Officer 51
Frank S. Sowinski Senior Vice President and Chief Financial Officer 40
Chester J. Geveda, Jr. Vice President and Controller 50
</TABLE>
* Set forth as a separate item pursuant to Items 401(b) and (e) of Regulation
S-K.
** Member of the Board of Directors since December 19, 1984.
Mr. Taylor was elected Chairman of the Board and Chief Executive Officer,
The Dun & Bradstreet Corporation, effective November 1, 1996. He served as
Executive Vice President, The Dun & Bradstreet Corporation, from February 1,
1982 to October 31, 1996. He also serves as Chairman, Dun & Bradstreet (formerly
known as Dun & Bradstreet Information Services), to which position he was
appointed, effective January 1, 1991, and as President, Dun & Bradstreet, Inc.,
and President, Dun & Bradstreet International, Ltd., to which offices he was
elected, effective January 1, 1991.
Mr. Bateman was elected Senior Vice President and Chief Information
Officer, The Dun & Bradstreet Corporation, effective November 1, 1996. He also
serves as Executive Vice President - Technology and Business Systems, Dun &
Bradstreet (formerly known as Dun & Bradstreet Information Services), effective
October 1995. From November 1994 until September 1995, Mr. Bateman was Senior
Vice President - Host Technologies, Dun & Bradstreet Software. From September
1993 until October 1994, he served as President and Chief Executive Officer, Dun
& Bradstreet Plan Services, and served as Vice President - Technology Strategy,
The Dun & Bradstreet Corporation, from March 1993 until August 1993. Previously,
Mr. Bateman served as Chairman and Chief Executive Officer, Erisco, from January
1990 until February 1993.
Mr. Doescher was elected Senior Vice President and Chief Communications
Officer, The Dun & Bradstreet Corporation, effective November 1, 1996. He also
serves as Senior Vice President - Global Communications, Dun & Bradstreet
(formerly known as Dun & Bradstreet Information Services), effective April 1992.
Previously, he served as Vice President - Public Relations and Advertising, The
Dun & Bradstreet Corporation, from December 1978 until October 1996.
Ms. Henry was elected Senior Vice President and Chief Legal Counsel, The
Dun & Bradstreet Corporation, effective March 27, 1997. Prior thereto, she was
with the New York City law firm of Skadden, Arps, Slate, Meagher & Flom from
1980.
Mr. Noonan was elected Senior Vice President, The Dun & Bradstreet
Corporation, and President, The Reuben H. Donnelley Corporation, effective
November 1, 1996. He previously served, until October 1996, as Senior Vice
President, The Dun & Bradstreet Corporation, effective February 20, 1995, and as
Chairman, President and Chief Executive Officer, The Reuben H. Donnelley
Corporation, to which offices he was elected, effective August 7, 1991
(President), January 1, 1994 (Chief Executive Officer) and February 20, 1995
(Chairman).
10
<PAGE>
Mr. Ross was elected Senior Vice President and Chief Human Resources
Officer, The Dun & Bradstreet Corporation, effective November 1, 1996. He also
serves as Senior Vice President - Human Resources, Dun & Bradstreet (formerly
known as Dun & Bradstreet Information Services), effective June 1988.
Mr. Sowinski was elected Senior Vice President and Chief Financial Officer,
The Dun & Bradstreet Corporation, effective November 1, 1996. He also serves as
Executive Vice President - Applications, Mass Marketing & Alliances, Dun &
Bradstreet (formerly known as Dun & Bradstreet Information Services), effective
March 1993. He also served as Senior Vice President - Finance and Planning, Dun
& Bradstreet Information Services - U.S., from June 1989 until March 1993.
Mr. Geveda was elected Vice President and Controller, The Dun & Bradstreet
Corporation, effective November 1, 1996. He also serves as Senior Vice President
- - - Finance, Dun & Bradstreet (formerly known as Dun & Bradstreet Information
Services), effective November 1996. From April 1993 until October 1996, he
served as Senior Vice President - Finance and Planning, Dun & Bradstreet
Information Services - U.S. He had previously served as Senior Vice President -
Finance and Administration, Dun & Bradstreet Information Services - Europe, from
September 1990 until March 1993.
11
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Information in response to this Item is set forth under Dividends and
Common Stock Information in the "Financial Review" on Page 24 of the 1996 Annual
Report, which information is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data required by this Item is incorporated herein by
reference to the information relating to the years 1992 through 1996 set forth
in the "Five-Year Selected Financial Data" on Page 46 of the 1996 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information in response to this Item is set forth in the "Financial Review"
on Pages 20 to 24 of the 1996 Annual Report, which information is incorporated
herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements and Schedules under Item 14 on Page 15.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information in response to this Item is incorporated herein by reference to
the section entitled "Election of Directors" in the Company's proxy statement
dated March 27, 1997 filed with the Securities and Exchange Commission, except
that "Executive Officers of the Registrant" on Pages10 and 11 of this report
responds to Item 401(b) and (e) of Regulation S-K.
ITEM 11. EXECUTIVE COMPENSATION
Information in response to this Item is incorporated herein by reference to
the section entitled "Compensation of Executive Officers and Directors" in the
Company's proxy statement dated March 27, 1997 filed with the Securities and
Exchange Commission.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information in response to this Item is incorporated herein by reference to
the section entitled "Security Ownership of Management and Others" in the
Company's proxy statement dated March 27, 1997 filed with the Securities and
Exchange Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information in response to this Item is incorporated herein by reference to
the section entitled "Security Ownership of Management and Others" in the
Company's proxy statement dated March 27, 1997 filed with the Securities and
Exchange Commission.
12
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this report.
(1) Financial Statements.
See Index to Financial Statements and Schedules on Page 15.
(2) Financial Statement Schedule.
See Index to Financial Statements and Schedules on Page 15.
(3) Exhibits.
See Index to Exhibits on Pages 18 to 20.
(b) Reports on Form 8-K.
Filed October 24, 1996, Item 5. Other Events Reported
Financial Statements include:
Consolidated Statement of Income for the six months ended June
30, 1996 and the years ended December 31, 1995, 1994 and 1993.
Consolidated Statement of Financial Position at June 30, 1996
and December 31, 1995 Financial Data Schedules
(d) Separate Financial Statements of Subsidiaries Not Consolidated and
Fifty Percent Owned
(1) Financial Statements of Dontech
See Index on Page 15
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE DUN & BRADSTREET CORPORATION
(Registrant)
By: /s/VOLNEY TAYLOR
-----------------------------
(Volney Taylor,
Chairman and Chief Executive
Officer)
By: /s/FRANK S. SOWINSKI
-----------------------------
(Frank S. Sowinski,
Senior Vice President and
Chief Financial Officer)
By: /s/CHESTER J. GEVEDA, JR.
-----------------------------
(Chester J. Geveda, Jr.
Vice President - Controller)
Date: March 27, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
/s/HALL ADAMS, JR. /s/JOHN R. MEYER
----------------------------------- ----------------------------------
(Hall Adams, Jr., Director) (John R. Meyer, Director)
/s/CLIFFORD L. ALEXANDER, JR., /s/JAMES R. PETERSON
----------------------------------- ----------------------------------
(Clifford L. Alexander, Director) (James R. Peterson, Director)
/s/MARY JOHNSTON EVANS /s/MICHAEL R. QUINLAN
----------------------------------- ----------------------------------
(Mary Johnston Evans, Director) (Michael R. Quinlan, Director)
/s/RONALD L. KUEHN, JR. /s/VOLNEY TAYLOR
----------------------------------- ----------------------------------
(Ronald L. Kuehn, Jr., Director) (Volney Taylor, Director)
/s/ROBERT J. LANIGAN
-----------------------------------
(Robert J. Lanigan, Director)
/s/VERNON R. LOUCKS JR.
-----------------------------------
(Vernon R. Loucks Jr., Director)
Date: March 27 , 1997
14
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
FINANCIAL STATEMENTS:
The Company's consolidated financial statements, the notes thereto and the
related report thereon of Coopers & Lybrand L.L.P., independent accountants, for
the years ended December 31, 1996, 1995 and 1994, appearing on Pages 25 to 46 of
the accompanying 1996 Annual Report, are incorporated by reference into this
Annual Report on Form 10-K (see below). The additional financial data indicated
below should be read in conjunction with such consolidated financial statements.
<TABLE>
<CAPTION>
PAGE
------------------------------------------
10-K 1996 ANNUAL
REPORT
-------------------- ------------------
-------------------- ------------------
<S> <C> <C>
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants ................................... F-6 25
Statement of Management Responsibility
for Financial Statements .......................................... F-6 25
At December 31, 1996 and 1995:
Consolidated Balance Sheets ....................................... F-8 27
For the years ended December 31, 1996, 1995 and 1994:
Consolidated Statement of Operations .............................. F-7 26
Consolidated Statement of Cash Flows .............................. F-9 28
Consolidated Statement of Shareholders' Equity .................... F-10 29
Notes to Consolidated Financial Statements ........................ F-11 to F-24 30 to 45
Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................... F-1 to F-5 20 to 24
Other financial information
Five-year selected financial data ................................. F-27 46
SCHEDULE:
Report of Independent Accountants ................................. 16 --
II-Valuation and Qualifying Accounts for the years ended
December 31, 1996, 1995 and 1994 ................................ 17 --
Schedules other than the one listed above are omitted as not required or
inapplicable or because the required information is provided in the
consolidated financial statements, including the notes thereto.
SEPARATE FINANCIAL STATEMENTS OF FIFTY-PERCENT OWNED UNCONSOLIDATED
SUBSIDIARY
Report of Independent Accountants ................................... S-1 --
At December 31, 1996 and 1995:
Balance Sheets .................................................... S-2 --
For the years ended December 31, 1996, 1995 and 1994:
Statement of Operations ........................................... S-4 --
Statement of Cash Flows ........................................... S-5 --
Statement of Partners' Capital .................................... S-3 --
Notes to Financial Statements ..................................... S-6 to S-10 --
</TABLE>
15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the Board of Directors of
The Dun & Bradstreet Corporation:
Our report on the consolidated financial statements of The Dun & Bradstreet
Corporation at December 31, 1996 and 1995, and for the years ended December 31,
1996, 1995 and 1994, has been incorporated by reference in this Form 10-K from
page 25 of the 1996 Annual Report of The Dun & Bradstreet Corporation. In
connection with our audits of such financial statements, we have also audited
the related financial statement schedule listed in the index on page 15 of this
Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
New York, New York
February 26, 1997
16
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, 1994
(IN MILLIONS)
- - ---------------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- - ---------------------------------------------------------------------------------------------------------------------------------
ADDITIONS
BALANCE CHARGED TO BALANCE
BEGINNING COSTS AND AT END
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS(A) OF PERIOD
----------- --------- -------- ------------- ---------
<S> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
For the Year Ended December 31, 1996.......... $35.7 $25.8 $(23.4) $38.1
======= ====== ========= ============
For the Year Ended December 31, 1995.......... $47.8 $35.2 $(47.3) $35.7
======= ====== ========= ============
For the Year Ended December 31, 1994.......... $52.9 $41.8 $(46.9) $47.8
======= ====== ========= ============
</TABLE>
NOTE:
(a) Represents primarily the charge-off of uncollectible accounts for which a
reserve was provided.
17
<PAGE>
INDEX TO EXHIBITS
REGULATION S-K
EXHIBIT NUMBER
- - --------------
(3) Articles of Incorporation and By-laws.
(a) Restated Certificate of Incorporation of The Dun & Bradstreet
Corporation dated June 15, 1988 (incorporated herein by reference to
Exhibit 4(a) to Registrant's Registration No. 33-25774 on Form S-8 filed
November 25, 1988).
(b) By-laws of Registrant dated December 15, 1993 (incorporated herein by
reference to Exhibit E to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993, file number 1-7155, filed March 25,
1994).
(4) Instruments Defining the Rights of Security Holders, Including Indentures.
*(a)Credit Agreement, dated as of August 30, 1996 among The Dun & Bradstreet
Corporation, The Borrowing Subsidiaries Party Hereto, The Lenders Party
Hereto, The Chase Manhattan Bank, Citibank, N.A. and Morgan Guaranty
Trust Company of New York, $1,000,000,000 Revolving Credit and
Competitive Advance Facility. Another Instrument with respect to an
issue of long term debt has not been filed as an exhibit to this Annual
Report on Form 10-K, as the authorized principal amount of such issue
does not exceed 10% of total assets of registrant and subsidiaries on a
consolidated basis. The Dun & Bradstreet Corporation agrees to furnish a
copy of such instrument to the Commission upon request.
(10) Material Contracts.
*+(a) Nonfunded Deferred Compensation Plan for Non-Employee Directors of
Registrant, as amended November 20, 1996.
+(b) Pension Benefit Equalization Plan, as amended December 21, 1994
(incorporated herein by reference to Exhibit F to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994, file number
1-7155, filed March 27, 1995).
+(c) Profit Participation Benefit Equalization Plan, as amended and restated
effective January 1, 1995 (incorporated herein by reference to Exhibit E
to Registrant's Annual Report on Form 10-K for the year ended December
31, 1995, file number 1-7155, filed March 27, 1995).
+(d) 1982 Key Employees Stock Option Plan for Registrant and Subsidiaries,
as amended April 18, 1995 (incorporated herein by reference to Exhibit F
to Registrant's Annual Report on Form 10-K for the year ended December
31, 1995, file number 1-7155, filed March 27, 1995.)
+(e) 1991 Key Employees Stock Option Plan for Registrant and Subsidiaries,
as amended April 18, 1995 (incorporated herein by reference to Exhibit C
to Registrant's Proxy Statement dated March 10, 1995, file number
1-7155).
+(f) Ten-Year Incentive Stock Option Agreement (incorporated herein by
reference to Exhibit 28(b) to Registrant's Registration No. 33-44551 on
Form S-8, filed December 18, 1991).
+(g) Ten-Year Non-Qualified Stock Option Agreement (incorporated herein by
reference to Exhibit 28(c) to Registrant's Registration No. 33-44551 on
Form S-8, filed December 18, 1991).
+(h) Stock Appreciation Rights Agreement relating to Incentive Stock Options
(incorporated herein by reference to Exhibit 28(d) to Registrant's
Registration No. 33-44551 on Form S-8, filed December 18, 1991).
+(i) Stock Appreciation Rights Agreement relating to Non-Qualified Stock
Options (incorporated herein by reference to Exhibit 28(e) to
Registrant's Registration No. 33-44551 on Form S-8, filed December 18,
1991).
+(j) Limited Stock Appreciation Rights Agreement relating to Incentive Stock
Options (incorporated herein by reference to Exhibit 28(f) to
Registrant's Registration No. 33-44551 on Form S-8, filed December 18,
1991).
18
<PAGE>
REGULATION S-K
EXHIBIT NUMBER
- - --------------
+(k) Limited Stock Appreciation Rights Agreement relating to Non-Qualified
Stock Options (incorporated herein by reference to Exhibit 28(g) to
Registrant's Registration No. 33-44551 on Form S-8, filed December 18,
1991).
+(l) Key Employees Performance Unit Plan for Registrant and Subsidiaries, as
amended October 16, 1996 subject to Shareholder approval on May 1, 1997
(incorporated by reference to Exhibit B to Registrant's Proxy Statement
dated March 27, 1997, file number 1-7155).
+(m) Corporate Management Incentive Plan, as amended October 16, 1996 and
February 19, 1997 (incorporated herein by reference to Exhibit A to
Registrant's Proxy Statement dated March 27, 1997, file number 1-7155).
+(n) 1989 Key Employees Restricted Stock Plan for Registrant and
Subsidiaries, as amended April 18, 1995 (incorporated herein by
reference to Exhibit D to Registrant's Proxy Statement dated March 10,
1995, file number 1-7155).
+(o) Restricted Stock Agreement (incorporated herein by reference to Exhibit
L to Registrant's Annual Report on Form 10-K for the year ended December
31, 1989, file number 1-7155, filed March 26, 1990).
+(p) Form of Change-in-Control Severance Agreement, approved July 19, 1989
(incorporated herein by reference to Exhibit M to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1989, file number
1-7155, filed March 26, 1990).
+(q) Supplemental Executive Benefit Plan, as amended December 21, 1994
(incorporated herein by reference to Exhibit G to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994, file number
1-7155, filed March 27, 1995).
+(r) Restricted Stock Plan for Non-Employee Directors, adopted July 20, 1994
(incorporated by reference to Exhibit E to Registrant's Proxy Statement
dated March 10, 1995, file number 1-7155).
*+(s) Executive Transition Plan, as amended on February 19, 1997.
*+(t) 1996 The Dun & Bradstreet Corporation Non Employee Directors' Stock
Incentive Plan, adopted December 18, 1996 and amended January 15, 1997.
(u) Agreement of Limited Partnership of D&B Investors L.P., dated as of
October 14, 1993 (incorporated herein by reference to Exhibit H to
Registrant's Annual Report on Form 10-K for the year ended December 31,
1993, file number 1-7155, filed March 25, 1994).
(v) Purchase Agreement and Purchase Agreement Amendment dated October 14,
1993 among D&B Investors L.P. and other parties (incorporated herein by
reference to Exhibit I to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993, file number 1-7155, filed March 25,
1994).
*(w) Agreement to Retire General Partner Interest dated October 21, 1996 by
and between D&B Investors L.P. and IMS America, Ltd.
*(x) Distribution Agreement dated as of October 28, 1996, among the Company,
Cognizant Corporation and ACNielsen Corporation .
*(y) Tax Allocation Agreement dated as of October 28, 1996, among the
Company, Cognizant Corporation and ACNielsen Corporation.
*(z) Employee Benefits Agreement dated as of October 28, 1996, among the
Company, Cognizant Corporation and ACNielsen Corporation.
*(aa) Indemnity and Joint Defense Agreement dated as of October 28, 1996,
among the Company, Cognizant Corporation and ACNielsen Corporation.
19
<PAGE>
REGULATION S-K
EXHIBIT NUMBER
- - --------------
*(11) Statement Re Computation of Per Share Earnings.
Computation of Earnings Per Share of Common Stock on a Fully Diluted Basis
*(13) Annual Report to Security Holders.
1996 Annual Report
*(21) Subsidiaries of the Registrant.
List of Active Subsidiaries as of January 31, 1997
*(23) Consents of Experts and Counsel.
Consent of Independent Accountants
*(27) Financial Data Schedules
*Filed herewith
+Represents a management contract or compensatory plan.
20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Partners of AM-DON
We have audited the financial statements of AM-DON (doing business as and
hereafter referred to as "DonTech") listed on the index on page 15. These
financial statements are the responsibility of DonTech's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of DonTech as of December 31, 1996
and 1995, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
Chicago, Illinois
January 3, 1997
S-1
<PAGE>
DONTECH
BALANCE SHEETS
December 31, 1996 and 1995
ASSETS 1996 1995
Current assets:
Cash and cash equivalents $ 4,559,000 $ 2,491,000
Accounts receivable, net of allowances of
$13,908,000 (1996) and $23,106,000 (1995) 261,252,000 240,566,000
Deferred expenses 86,329,000 80,737,000
Other 3,057,000 1,382,000
------------ ------------
Total current assets 355,197,000 325,176,000
Fixed assets, net of accumulated depreciation
and amortization 6,621,000 9,118,000
----------- -----------
Total assets $361,818,000 $334,294,000
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable $ 23,720,000 $ 22,797,000
Accrued liabilities 5,106,000 10,526,000
Deferred sales revenue 174,105,000 168,825,000
------------ ------------
Total current liabilities 202,931,000 202,148,000
Partners' capital 158,887,000 132,146,000
------------ ------------
Total liabilities and partners' capital $361,818,000 $334,294,000
============ ============
The accompanying notes are an integral part of the financial statements.
S-2
<PAGE>
DONTECH
STATEMENTS OF PARTNERS' CAPITAL
for the years ended December 31, 1996, 1995 and 1994
THE AMERITECH
REUBEN H. PUBLISHING
DONNELLEY OF
CORPORATION ILLINOIS, TOTAL
INC.
Balance, December 31, 1993 $58,910,000 $44,205,000 $103,115,000
Net income 109,079,000 85,705,000 194,784,000
Distributions to partners (100,240,000) (78,760,000) (179,000,000)
----------- ---------- -----------
Balance, December 31, 1994 67,749,000 51,150,000 118,899,000
Net income 112,446,000 92,001,000 204,447,000
Distributions to partners (107,525,000) (83,675,000) (191,200,000)
----------- ---------- -----------
Balance, December 31, 1995 72,670,000 59,476,000 132,146,000
Net income 120,039,000 102,255,000 222,294,000
Distributions to partners (106,920,000) (88,633,000) (19,5553,000)
---------- --------- -----------
Balance, December 31, 1996 $85,789,000 $73,098,000 $158,887,000
========== ========== ===========
The accompanying notes are an integral part of the financial statements.
S-3
<PAGE>
DONTECH
STATEMENTS OF OPERATIONS
for the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
Sales $459,083,000 $442,952,000 $436,577,000
Less allowances 50,202,000 51,076,000 50,310,000
------------ ------------ ------------
Net sales 408,881,000 391,876,000 386,267,000
------------ ------------ ------------
Expenses:
Operating expenses 135,136,000 139,447,000 145,257,000
Selling, general & administrative 45,980,000 45,582,000 45,449,000
Occupancy and depreciation 8,148,000 6,175,000 3,587,000
------------ ------------ ------------
Total expenses 189,264,000 191,204,000 194,293,000
------------ ------------ ------------
Income from operations 219,617,000 200,672,000 191,974,000
Other income 2,677,000 3,775,000 2,810,000
------------ ------------ ------------
Net income $222,294,000 $204,447,000 $194,784,000
============ ============ ============
The accompanying notes are an integral part of the financial statements.
S-4
<PAGE>
DONTECH
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
STATEMENTS OF CASH FLOWS
<S> <C> <C> <C>
for Net income $ 222,294,000 $ 204,447,000 $ 194,784,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 3,526,000 2,806,000 1,670,000
Provision for uncollectible accounts 21,307,000 30,189,000 24,566,000
Changes in assets and liabilities:
Increase in accounts receivable (41,993,000) (52,294,000) (59,542,000)
Increase in deferred printing and
manufacturing (5,592,000) (6,855,000) (4,578,000)
(Increase) decrease in other
current assets (1,675,000) 75,000 622,000
Increase (decrease) in accounts
payable 923,000 (3,433,000) 12,983,000
(Decrease) increase in accrued
liabilities (5,420,000) 712,000 (7,167,000)
Increase in deferred sales revenue 5,280,000 17,920,000 13,962,000
------------- --------------- ---------------
Total adjustments (23,644,000) (10,880,000) (17,484,000)
------------- --------------- ---------------
Net cash provided by operating 198,650,000 193,567,000 177,300,000
activities
Cash flows from investing activities:
Purchases of fixed assets (1,029,000) (5,850,000) (3,077,000)
Cash flows from financing activities:
Distributions to partners (195,553,000) (191,200,000) (179,000,000)
------------- --------------- ---------------
Net increase (decrease) in cash and cash
equivalents 2,068,000 (3,483,000) (4,777,000)
Cash and cash equivalents, beginning of
year 2,491,000 5,974,000 10,751,000
------------- --------------- ---------------
Cash and cash equivalents, end of year $ 4,559,000 $ 2,491,000 $ 5,974,000
============= =============== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-5
<PAGE>
DONTECH
1. FORM OF ORGANIZATION AND NATURE OF BUSINESS
AM-DON d.b.a. DonTech (the "Partnership") is a general partnership between
The Reuben H. Donnelley Corporation ("Donnelley"), a wholly owned
subsidiary of The Dun & Bradstreet Corporation, a Delaware corporation, and
Ameritech Publishing of Illinois, Inc. ("API/IL"), a wholly owned
subsidiary of Ameritech, Inc., an Illinois corporation, doing business as
Ameritech Advertising Services. The Partnership will be dissolved only upon
certain events as specified in the amended and restated partnership
agreement dated September 20, 1990, effective January 1, 1991.
The Partnership participates in a Directory Agreement with Donnelley,
Illinois Bell Telephone Company ("IBT"), doing business as Ameritech
Illinois, API/IL and Ameritech Publishing, Inc. ("API"), doing business as
Ameritech Advertising Services. The Partnership also participates in a
Subcontracting Agreement with API to perform certain of API's obligations
under the Publishing Services Contract between API and Indiana Bell
Telephone Company, Incorporated ("Indiana Bell"), doing business as
Ameritech Indiana. The Partnership publishes various directories, as
identified in the Directory Agreements, solicits advertising, its primary
source of revenues, and manufactures and delivers such directories.
A Board of Directors (the "Board") was appointed to administer the
activities of the Partnership. From time to time during the term of the
Partnership, the Board may call for additional capital contributions in
equal amounts from each of the Partners if, in the opinion of the Board,
additional capital is required for the operation of the Partnership. The
Partnership's net income is allocated to each Partner based on a predefined
percentage as set forth in the amended and restated partnership agreement.
In addition, API/IL is required to make an annual contribution to the
Partnership sufficient to maintain this predefined partnership interest
percentage.
2. SIGNIFICANT ACCOUNTING POLICIES
A. CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid investments with an
initial maturity date of three months or less. The carrying value of
cash equivalents estimates fair value due to their short-term nature.
B. SALES AND DEFERRED SALES REVENUE
Substantially all sales made to customers in the cities covered by the
directories are recorded as deferred sales revenue and accounts
receivable in the month of publication. Revenue related to these sales
is recognized over the lives of the directories, generally twelve
months.
Sales made to customers outside the cities covered by the directories
are recognized each quarter. Sales for national accounts are recognized
in full in the month of publication.
C. FIXED ASSETS
Fixed assets are recorded at cost and are depreciated on a straight-line
basis over the estimated useful lives of the assets. Upon asset
retirement or other disposition, cost and the related accumulated
depreciation are removed from the accounts, and gain or loss is included
in the
S-6
<PAGE>
DONTECH
statement of operations. Amounts incurred for repairs and maintenance
are charged to operations.
D. DEFERRED EXPENSES
The printing, manufacturing, compilation, sales, delivery and
administrative costs of publications are deferred and recognized in
proportion to revenue.
E. INCOME TAXES
No provision for income taxes is made as the proportional share of the
Partnership's income is the responsibility of the individual Partners.
F. RECLASSIFICATIONS
Certain reclassifications have been made to the December 31, 1995 and
1994 financial statements to conform with the December 31, 1996
presentation. These reclassifications had no impact on previously
reported net income or partners' capital.
3. DEFERRED EXPENSES
Deferred expenses consist of the following at December 31:
1996 1995
Printing and manufacturing $ 34,720,000 $ 29,260,000
Selling 33,407,000 31,977,000
Other 18,202,000 19,500,000
------------- ------------
$ 86,329,000 $ 80,737,000
============= ============
S-7
<PAGE>
DONTECH
4. FIXED ASSETS
Fixed assets consist of the following at December 31:
1996 1995
Machinery and equipment $ 17,329,000 $ 16,497,000
Furniture and fixtures 3,712,000 3,639,000
Leasehold improvements 974,000 850,000
------------- ------------
22,015,000 20,986,000
Less accumulated depreciation
and amortization 15,394,000 11,868,000
------------- ------------
$ 6,621,000 9,118,000
============= ============
5. RELATED PARTY TRANSACTIONS
Under the Directory Agreement, the Partnership is obligated to pay Illinois
Bell Telephone (IBT) a minimum of $75 million per year in exchange for the
exclusive right to publish certain regional directories and for billing and
collection services performed by IBT. The base fee for these services is
$75 million for each calendar year until the Directory Agreement is
terminated. A termination fee of $37 million is payable in the year
following the date the Directory Agreement terminates. On April 14, 1993,
the Partnership and IBT renewed the Directory Agreement through December
31, 1999, with the anticipation there will be future renewals.
In addition to the base fee, the Partnership has agreed to pay IBT an
amount equal to 7 1/2% of the increase in total revenue received from
certain sources identified in the Directory Agreement over such revenues
received in the immediately preceding calendar year. The additional fee due
to IBT was $1,122,000 in 1996 and $487,000 in 1995. In 1994, no such
additional fee was due.
In addition, Donnelley provides compilation, photocomposition, and data
processing services to the Partnership. The Dun & Bradstreet Corporation
(Donnelley's parent company) provides employee benefits and administrative
services, and certain business insurance coverages for the Partnership. The
amount paid for these services is determined at the beginning of each year
based upon estimated activity and adjusted to actual at the end of each
year. The total amount paid for these services was approximately $22
million in 1996 and 1995 and $21.4 million in 1994. The amount paid for
employee benefits includes the administration of the Partnership's Profit
Sharing and 401(k) Plans as well as its health care, long and short term
disability, dental and pension plans.
The Partnership has also entered into subcontracting agreements for the
publishing of certain Indiana Bell directories and the delivery of
directories for Donnelley. In addition, under a Directory Fulfillment
Memorandum of Understanding, the Partnership is obligated to perform
certain directory fulfillment services for Ameritech Advertising Services
(AAS).
6. CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Partnership to
concentration of credit risk consist principally of commercial paper and
accounts receivables. The Partnership invests its
S-8
<PAGE>
DONTECH
excess cash in commercial paper with an investment rating of AA or higher
and has not experienced any losses on these investments.
The Partnership's trade accounts receivable are primarily composed of
amounts due from customers whose businesses are in the state of Illinois.
Collateral is generally not required from the Partnership's customers.
7. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expense
during the reporting period. Actual results could differ from those
estimates.
8. LEASE COMMITMENTS
The Partnership leases certain office and warehouse facilities under
noncancelable lease arrangements. Rent expense under these operating leases
was approximately $2,564,000 and $2,323,000 and $2,655,000 for 1996, 1995
and 1994, respectively.
The future minimum lease payments required under noncancelable operating
leases that have initial or remaining lease terms in excess of one year as
of December 31, 1996 are as follows:
DECEMBER 31, AMOUNT
1997 $ 2,445,000
1998 2,257,000
1999 2,287,000
2000 2,316,000
2001 2,282,000
Thereafter 3,893,000
------------
$ 15,480,000
============
S-9
<PAGE>
DONTECH
9. EMPLOYEE RETIREMENT AND PROFIT PARTICIPATION PLANS
The Partnership has a defined benefit pension plan covering substantially
all of its employees (the "Principal Plan"). The Principal Plan's assets
are invested in equity funds, fixed income funds and real estate. Total
expense for the Principal Plan was approximately $1,181,000, $1,647,000 and
$1,247,000 in 1996, 1995 and 1994, respectively. The Partnership
contributes amounts to the plan which are actuarially determined to meet
future benefit payments.
Additionally, the Partnership has a Profit Participation Plan (the "Profit
Plan") that covers substantially all its employees. Employees may
voluntarily contribute up to 6% of their salaries to the Profit Plan and
are guaranteed a matching contribution by the Partnership of fifty cents
per dollar contributed. The Partnership also makes contributions to the
Profit Plan based on a formula and contingent upon the attainment of
financial goals set in advance as defined in the plan. The contributions to
the plan by the Partnership were $809,000, $1,025,000, and $760,000 in
1996, 1995 and 1994, respectively.
10. VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31:
Col. A Col B. Col C. Col. D Col. E
- - --------------------- ------------ --------------------- ---------- -----------
Additions
(1) (2)
Balance at Charged Charged
Beginning to Costs to Other Balance
of Period and Accounts at End of
Expenses Period
Description (a) Deductions
(a)
- - --------------------- ------------ ---------- ---------- ---------- -----------
1996:
Allowance for $23,106,000 $21,307,000 - $30,505,000 $13,908,000
doubtful
accounts............
1995:
Allowance for $18,777,000 $30,189,000 - $25,860,000 $23,106,000
doubtful
accounts............
1994:
Allowance for $18,441,000 $24,566,000 - $24,230,000 $18,777,000
doubtful
accounts............
S-10
CONFORMED COPY
=========================================================================
CREDIT AGREEMENT
dated as of
August 30, 1996
among
The Dun & Bradstreet Corporation
The Borrowing Subsidiaries Party Hereto
The Lenders Party Hereto
THE CHASE MANHATTAN BANK,
as Administrative Agent,
CITIBANK, N.A.,
as Syndication Agent,
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Documentation Agent
$1,000,000,000 REVOLVING CREDIT AND COMPETITIVE ADVANCE
FACILITY
=========================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
-----------
SECTION 1.01. Defined Terms................................... 1
SECTION 1.02. Classification of Loans and
Borrowings................................... 22
SECTION 1.03. Terms Generally ................................ 23
SECTION 1.04. Accounting Terms; GAAP.......................... 23
SECTION 1.05. Exchange Rates.................................. 24
ARTICLE II
The Credits
-----------
SECTION 2.01. Commitments..................................... 24
SECTION 2.02. Loans and Borrowings............................ 25
SECTION 2.03. Requests for Revolving Borrowings............... 26
SECTION 2.04. Competitive Bid Procedure....................... 27
SECTION 2.05. Swingline Loans................................. 30
SECTION 2.06. Funding of Borrowings........................... 32
SECTION 2.07. Interest Elections.............................. 33
SECTION 2.08. Termination and Reduction of
Commitments.................................. 35
SECTION 2.09. Repayment of Loans; Evidence of
Debt......................................... 36
SECTION 2.10. Prepayment of Loans............................. 37
SECTION 2.11. Fees............................................ 38
SECTION 2.12. Interest........................................ 39
SECTION 2.13. Alternate Rate of Interest...................... 40
SECTION 2.14. Increased Costs................................. 41
SECTION 2.15. Break Funding Payments.......................... 43
SECTION 2.16. Taxes........................................... 44
SECTION 2.17. Payments Generally; Pro Rata
Treatment; Sharing of Set-offs............... 46
SECTION 2.18. Mitigation Obligations; Replacement of
Lenders....................................... 48
SECTION 2.19. Borrowing Subsidiaries.......................... 49
SECTION 2.20. Adjustment of Applicable Rate................... 49
<PAGE>
2
ARTICLE III
Representations and Warranties
------------------------------
SECTION 3.01. Organization; Powers............................ 50
SECTION 3.02. Authorization; Enforceability................... 50
SECTION 3.03. Governmental Approvals; No Conflicts............ 51
SECTION 3.04. Financial Condition; No Material
Adverse Change............................... 51
SECTION 3.05. Properties...................................... 52
SECTION 3.06. Litigation and Environmental Matters............ 52
SECTION 3.07. Compliance with Laws and Agreements............. 53
SECTION 3.08. Investment and Holding Company Status........... 53
SECTION 3.09. Taxes........................................... 53
SECTION 3.10. ERISA........................................... 53
SECTION 3.11. Disclosure...................................... 54
SECTION 3.12. Subsidiaries.................................... 54
SECTION 3.13. Solvency........................................ 54
ARTICLE IV
Conditions
----------
SECTION 4.01. Effective Date.................................. 55
SECTION 4.02. Each Credit Event............................... 56
SECTION 4.03. Each Borrowing Subsidiary Credit
Event........................................ 57
ARTICLE V
Affirmative Covenants
---------------------
SECTION 5.01. Financial Statements and Other
Information.................................. 58
SECTION 5.02. Notices of Material Events...................... 60
SECTION 5.03. Existence; Conduct of Business.................. 61
SECTION 5.04 Payment of Obligations.......................... 61
SECTION 5.05. Maintenance of Properties; Insurance............ 61
SECTION 5.06. Books and Records; Inspection Rights............ 61
SECTION 5.07. Compliance with Laws............................ 62
SECTION 5.08. Use of Proceeds................................. 62
<PAGE>
3
ARTICLE VI
Negative Covenants
------------------
SECTION 6.01. Liens........................................... 62
SECTION 6.02. Fundamental Changes............................. 64
SECTION 6.03. Transactions with Affiliates.................... 65
SECTION 6.04. Sale and Lease-Back Transactions................ 65
SECTION 6.05. Total Debt to EBITDA Ratio...................... 66
SECTION 6.06. Interest Coverage Ratio......................... 66
SECTION 6.07. Borrowing Subsidiaries.......................... 66
ARTICLE VII
Events of Default......................... 66
-----------------
ARTICLE VIII
The Administrative Agent........................ 70
------------------------
ARTICLE IX
Guarantee....................................... 73
---------
ARTICLE X
Miscellaneous
-------------
SECTION 10.01. Notices......................................... 75
SECTION 10.02. Waivers; Amendments............................. 76
SECTION 10.03. Expenses; Indemnity; Damage Waiver.............. 77
SECTION 10.04. Successors and Assigns.......................... 78
SECTION 10.05. Survival........................................ 81
SECTION 10.06. Counterparts; Integration;
Effectiveness................................ 82
SECTION 10.07. Severability.................................... 82
SECTION 10.08. Right of Setoff................................. 82
SECTION 10.09. Governing Law; Jurisdiction; Consent
to Service of Process........................ 83
SECTION 10.10. WAIVER OF JURY TRIAL............................ 84
SECTION 10.11. Headings........................................ 84
SECTION 10.12. Confidentiality................................. 84
SECTION 10.13. Interest Rate Limitation........................ 85
SECTION 10.14. Conversion of Currencies........................ 85
<PAGE>
4
SCHEDULES:
Schedule 2.01 -- Commitments
Schedule 3.06 -- Disclosed Matters
Schedule 3.12 -- Subsidiaries
Schedule 6.01 -- Existing Liens
EXHIBITS:
Exhibit A -- Form of Assignment and Acceptance
Exhibit B-1 -- Form of Opinion of Company's Counsel
Exhibit B-2 -- Form of Opinion of Simpson Thacher & Bartlett
Exhibit C -- Form of Opinion of Borrowing Subsidiary's
Counsel
Exhibit D -- Form of Borrowing Subsidiary Agreement
Exhibit E -- Form of Borrowing Subsidiary Termination
<PAGE>
CREDIT AGREEMENT dated as of August 30, 1996, among THE
DUN & BRADSTREET CORPORATION, the BORROWING SUBSIDIARIES party
hereto, the LENDERS party hereto, THE CHASE MANHATTAN BANK, as
Administrative Agent, CITIBANK, N.A., as Syndication Agent,
and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Documentation Agent.
The parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the
following terms have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Alternate Base Rate.
"Adjusted LIBO Rate" means, with respect to any Eurocurrency
Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such
Interest Period multiplied by (b) the Statutory Reserve Rate.
"Administrative Agent" means The Chase Manhattan Bank, in its
capacity as administrative agent for the Lenders hereunder.
"Administrative Questionnaire" means an Administrative Questionnaire
in a form supplied by the Administrative Agent.
"Affiliate" means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.
"Agreement Currency" has the meaning assigned to such term in
Section 10.14.
<PAGE>
2
"Alternate Base Rate" means, for any day, a rate per annum equal to
the greater of (a) the Prime Rate in effect on such day and (b) the Federal
Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the
Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective from and including the effective date of such
change in the Prime Rate or the Federal Funds Effective Rate, respectively.
"Applicable Percentage" means, with respect to any Lender, the
percentage of the total Commitments represented by such Lender's Commitment. If
the Commitments have terminated or expired, the Applicable Percentages shall be
determined based upon the Commitments most recently in effect, giving effect to
any assignments.
"Applicable Rate" means, for any day, with respect to any
Eurocurrency Revolving Loan, or with respect to the facility fees payable
hereunder, as the case may be, the applicable rate per annum set forth below
under the caption "Eurocurrency Spread" or "Facility Fee Rate", as the case may
be, based upon the ratings by S&P and Duff & Phelps, respectively, applicable on
such date to the LTD Index Debt or, if no LTD Index Debt is in effect, based
upon the ratings by S&P and Duff & Phelps, respectively, applicable on such date
to the CP Index Debt:
==================================================================
Eurocurrency Facility Fee
LTD Index Debt Ratings Spread Rate
CP Index Debt Ratings:
- - ------------------------------------------------------------------
Category 1 .130% .070%
----------
A or better from S&P and A or
better from Duff &
Phelps/
A-1+ or better from S&P and
D-1+ or better from
Duff & Phelps
- - ------------------------------------------------------------------
Category 2 .145% .080%
----------
A- from S&P and A- from
Duff & Phelps/
A-1 from S&P and D-1 from
Duff & Phelps
- - ------------------------------------------------------------------
Category 3 .160% .090%
----------
BBB+ from S&P and BBB+ from
Duff & Phelps/
A-1 from S&P or D-1 from
Duff & Phelps
- - ------------------------------------------------------------------
Category 4 .175% .125%
----------
BBB or less from S&P and BBB
or less from
Duff & Phelps/
Neither A-1+ or A-1 from S&P
nor D-1+ or D-1
from Duff & Phelps
==================================================================
For purposes of the foregoing, (i) if either S&P or Duff & Phelps
shall not have in effect a rating for the applicable Index Debt (other than by
reason of the circum-
<PAGE>
3
stances referred to in the last sentence of this definition), then such rating
agency shall be deemed to have established a rating in Category 4; (ii) if the
ratings established or deemed to have been established by S&P and Duff & Phelps
for the applicable Index Debt shall fall within different Categories, the
Applicable Rate shall be based on the higher of the two ratings unless one of
the two ratings is two or more Categories lower than the other, in which case
the Applicable Rate shall be based upon the Category next below that of the
higher of the two ratings; and (iii) if the ratings established or deemed to
have been established by S&P and Duff & Phelps for the applicable Index Debt
shall be changed (other than as a result of a change in the rating system of S&P
or Duff & Phelps), such change shall be effective as of the date on which it is
first announced by the applicable rating agency. Each change in the Applicable
Rate shall apply (other than as described in the immediately succeeding
sentence) during the period commencing on the effective date of such change and
ending on the date immediately preceding the effective date of the next such
change. Notwithstanding the foregoing, unless and until the initial ratings of
the LTD Index Debt are obtained, the following shall apply (i) until April 1,
1997, the Applicable Rate shall be based upon Category 3, (ii) after April 1,
1997, and until June 30, 1997, the Applicable Rate shall be based upon Category
3, subject to adjustment (retroactive to April 1, 1997) based upon (x) the
initial ratings of the LTD Index Debt if obtained prior to June 30, 1997, or (y)
if such initial ratings are not obtained by June 30, 1997, then the ratings of
the CP Index Debt as of April 1, 1997, and (iii) thereafter, until the initial
ratings of LTD Index Debt are obtained, the Applicable Rate shall be based on
the ratings of CP Index Debt from time to time in effect. If the rating system
of S&P or Duff & Phelps shall change, or if either such rating agency shall
cease to be in the business of rating corporate debt obligations, the Company
and the Lenders shall negotiate in good faith to amend this definition to
reflect such changed rating system or the unavailability of ratings from such
rating agency and, pending the effectiveness of any such amendment, the
Applicable Rate shall be determined by reference to the rating most recently in
effect prior to such change or cessation.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an assignee (with the consent of any party whose
consent is required by Section 10.04), and accepted by the Administrative Agent,
in
<PAGE>
4
the form of Exhibit A or any other form approved by the Administrative Agent.
"Availability Period" means the period from and including the
Effective Date to but excluding the earlier of the Maturity Date and the date of
termination of the Commitments.
"Board" means the Board of Governors of the Federal Reserve System
of the United States of America.
"Borrower" means the Company or any Borrowing Subsidiary.
"Borrowing" means (a) Revolving Loans of the same Type and currency,
made, converted or continued on the same date and, in the case of Eurocurrency
Loans, as to which a single Interest Period is in effect, (b) a Competitive Loan
or group of Competitive Loans of the same Type made on the same date and as to
which a single Interest Period is in effect or (c) a Swingline Loan.
"Borrowing Date" means any Business Day specified in a notice
pursuant to Section 2.03, 2.04 or 2.05 as a date on which the relevant Borrower
requests Loans to be made hereunder.
"Borrowing Request" means a request for a Revolving Borrowing in
accordance with Section 2.03.
"Borrowing Subsidiary" means, at any time, any Subsidiary of the
Company designated as a Borrowing Subsidiary by the Company pursuant to Section
2.19 that has not ceased to be a Borrowing Subsidiary pursuant to such Section
or Article VII; provided that the Company owns or Controls at least 80% of the
ordinary voting power of such Subsidiary.
"Borrowing Subsidiary Agreement" means a Borrowing Subsidiary
Agreement substantially in the form of Exhibit D.
"Borrowing Subsidiary Termination" means a Borrowing Subsidiary
Termination substantially in the form of Exhibit E.
"Business Day" means any day that is not a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to remain
<PAGE>
5
closed; provided that when used in connection with a Eurocurrency Loan, the term
"Business Day" shall also exclude any day on which banks are not open for
dealings in deposits in the applicable currency in the London interbank market.
"Calculation Date" means the last Business Day of each calendar
month and such other Business Days during such calendar month as may be notified
by the Company to the Administrative Agent, provided that there shall be no more
than three Calculation Dates in any calendar month.
"Capital Lease Obligations" of any Person means the obligations of
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Change in Control" means (a) the acquisition of ownership, directly
or indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the Securities
and Exchange Commission thereunder as in effect on the date hereof), of shares
representing more than 25% of the aggregate ordinary voting power represented by
the issued and outstanding capital stock of the Company; (b) occupation of a
majority of the seats (other than vacant seats) on the board of directors of the
Company by Persons who were neither (i) nominated by the board of directors of
the Company nor (ii) appointed by directors so nominated; or (c) the acquisition
of direct or indirect Control of the Company by any Person or group.
"Change in Law" means (a) the adoption of any law, rule or
regulation after the date of this Agreement, (b) any change in any law, rule or
regulation or in the interpretation or application thereof by any Governmental
Authority after the date of this Agreement or (c) compliance by any Lender (or,
for purposes of Section 2.14(b), by any lending office of such Lender or by such
Lender's holding company, if any) with any request, guideline or directive
(whether or not having the force of law) of any Governmental Authority made or
issued after the date of this Agreement.
<PAGE>
6
"Class", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans,
Competitive
Loans or Swingline Loans.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Commitment" means, with respect to each Lender, the commitment of
such Lender to make Revolving Loans and to acquire participations in Swingline
Loans hereunder, expressed as an amount representing the maximum aggregate
amount of such Lender's Revolving Credit Exposure hereunder, as such commitment
may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or
increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 10.04. The initial amount of each Lender's Commitment is set
forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which
such Lender shall have assumed its Commitment, as applicable.
"Committed Currency" means (a) French Franc, Deutschemark, Japanese
Yen and Pound Sterling and (b) any other Eligible Currency that shall be
designated by the Company in a notice delivered to the Administrative Agent and
has been approved by the Administrative Agent and all the Lenders as a Committed
Currency.
"Company" means The Dun & Bradstreet Corporation, a Delaware
corporation.
"Competitive Bid" means an offer by a Lender to make a Competitive
Loan in accordance with Section 2.04.
"Competitive Bid Rate" means, with respect to any Competitive Bid,
the Margin or the Fixed Rate, as applicable, offered by the Lender making such
Competitive Bid.
"Competitive Bid Request" means a request for Competitive Bids in
accordance with Section 2.04.
"Competitive Loan" means a Loan made pursuant to Section 2.04.
"Competitive Loan Exposure" means, with respect to any Lender at any
time, the sum of the outstanding principal amount of such Lender's Competitive
Loans (or the Dollar
<PAGE>
7
Equivalent thereof in the case of a Competitive Loan in an Eligible Currency) at
such time.
"Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.
"CP Index Debt" means unsecured commercial paper of the Company that
is not guaranteed by any other Person or subject to any other credit
enhancement.
"Default" means any event or condition which constitutes an Event of
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Disclosed Matters" means the actions, suits and proceedings and the
environmental matters disclosed in Schedule 3.06.
"Discontinued Companies" means the collective reference to Cognizant
Corporation, ACNielsen Corporation, American Credit Indemnity Company and Dun &
Bradstreet Software Services, Inc.
"dollars" or "$" refers to lawful money of the United States of
America.
"Dollar Equivalent" means, on any date of determination, with
respect to any amount in any Eligible Currency, the equivalent in dollars of
such amount, determined by the Administrative Agent pursuant to Section 1.05(a)
using the Exchange Rate with respect to such Eligible Currency then in effect.
"Domestic Borrowing Subsidiary" means any Borrowing Subsidiary
organized under the laws of any jurisdiction in the United States.
"Duff & Phelps" means Duff & Phelps Inc.
"Draft Information Statement" means the Company's Draft Information
Statement, as filed with the Securities and Exchange Commission on July 10,
1996.
<PAGE>
8
"EBITDA" means, for any period, the consolidated net income of the
Company and its consolidated Subsidiaries for such period plus, to the extent
deducted in computing such consolidated net income for such period, the sum
(without duplication) of (a) income tax expense, (b) Interest Expense, (c)
depreciation and amortization expense, (d) extraordinary losses, (e) losses
resulting from the operations of the Discontinued Companies (assuming that
Discontinued Companies owned such operations during such period), but only to
the extent that the operations of the Discontinued Companies were designated as
discontinued operations in the Company's Form 8-K to be filed with the
Securities and Exchange Commission prior to the Spin-Off (the "Form 8-K") and
continue to be designated as discontinued operations in the Company's financial
statements, and (f) the Excluded Charges, minus, to the extent added in
computing such consolidated net income for such period, (i) interest income,
(ii) extraordinary gains and (iii) income resulting from the operations of the
Discontinued Companies (assuming the Discontinued Companies owned such
operations during such period), but only to the extent that the operations of
the Discontinued Companies were designated as discontinued operations in the
Company's Form 8-K and continue to be designated as discontinued operations in
the Company's financial statements.
"Effective Date" means the date on which the conditions specified in
Section 4.01 are satisfied (or waived in accordance with Section 10.02).
"Eligible Currency" means at any time any Committed Currency or any
other currency (other than dollars) that is freely tradeable and exchangeable
into dollars in the London market and for which an Exchange Rate can be
determined by reference to the Reuters World currency page or another publicly
available service for displaying exchange rates.
"Environmental Laws" means all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material or to health and safety matters.
<PAGE>
9
"Environmental Liability" means any liability, contingent or
otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of the Company or any Subsidiary
directly or indirectly resulting from or based upon (a) violation of any
Environmental Law, (b) the generation, use, handling, transportation, storage,
treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous
Materials, (d) the release or threatened release of any Hazardous Materials into
the environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with the Company, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by the Company or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by the Company or any ERISA Affiliate
from the PBGC or a plan administrator of any notice relating to an intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f)
the incurrence by the Company or any of its ERISA Affiliates of any liability
with respect to the withdrawal or partial withdrawal from any Plan or
Multiemployer Plan; or (g) the receipt by the Company or any ERISA Affiliate of
any notice, or the receipt by any Multiemployer Plan from the Company or any
ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability
or a determination that a Multiemployer Plan is, or is expected to be,
<PAGE>
10
insolvent or in reorganization, within the meaning of Title IV of ERISA.
"Eurocurrency", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate (or, in the
case of a Competitive Loan, the LIBO Rate).
"Event of Default" has the meaning assigned to such term in Article
VII.
"Exchange Rate" means, on any day, with respect to any Eligible
Currency, the rate at which such Eligible Currency may be exchanged into dollars
(and, for purposes of clause (e) of Section 2.07 and clause (i) of Section 2.13,
the rate at which dollars may be exchanged into such Eligible Currency), as set
forth at approximately 11:00 a.m., London time, on such date on the Reuters
World currency page for such Eligible Currency. In the event that such rate does
not appear on any Reuters World currency page, the Exchange Rate shall be
determined by reference to such other publicly available service for displaying
exchange rates as may be agreed upon by the Administrative Agent and the
Company, or, in the absence of such agreement, such Exchange Rate shall instead
be the arithmetic average of the spot rates of exchange of the Administrative
Agent in the market where its foreign currency exchange operations in respect of
such Eligible Currency are then being conducted, at or about 10:00 a.m., local
time, on such date for the purchase of dollars (or such Eligible Currency, as
the case may be) for delivery two Business Days later; provided that if at the
time of any such determination, for any reason, no such spot rate is being
quoted, the Administrative Agent may use any reasonable method it deems
appropriate to determine such rate, and such determination shall be conclusive
absent manifest error.
"Excluded Charges" means the following charges recorded in
connection with the Spin-Off or the reorganization of the Company: (a)
$206,000,000 recorded in the last quarter of 1995 in connection with the
Spin-Off; (b) $221,000,000 recorded in the second quarter of 1996 in connection
with the sale of certain Subsidiaries and (c) an additional $190,000,000 to be
recorded in connection with the Spin-Off prior to the date thereof.
<PAGE>
11
"Excluded Taxes" means, with respect to the Administrative Agent,
any Lender or any other recipient of any payment to be made by or on account of
any obligation of any Borrower hereunder, (a) income or franchise taxes imposed
on (or measured by) its net income (including branch profits or similar taxes)
imposed as a result of a present or former connection between such Lender or the
Administrative Agent and the Governmental Authority imposing such tax (other
than any such connection arising solely from such Lender or the Administrative
Agent having executed, delivered or performed its obligations or received a
payment under, or enforced, this Agreement) and (b) in the case of a Foreign
Lender (other than an assignee pursuant to a request by a Borrower under Section
2.18(b)), any withholding tax that is imposed on amounts payable to such Foreign
Lender to the extent they are in effect and would apply as of the date such
Foreign Lender becomes a party to this Agreement or designates a new lending
office (including withholding taxes that would be imposed on payments made by a
Borrowing Subsidiary the Relevant Jurisdiction with respect to which is the
United Kingdom, regardless of whether the Company has designated such a
Borrowing Subsidiary) (other than with respect to any Foreign Lender that is a
Foreign Lender with respect to any Borrowing Subsidiary that is designated after
the date of this Agreement (other than a Borrowing Subsidiary the Relevant
Jurisdiction with respect to which is United Kingdom)), or that is attributable
to such Foreign Lender's failure to comply with Section 2.16(e), except to the
extent that such Foreign Lender (or its assignor, if any) was entitled, at the
time of designation of a new lending office (or assignment), to receive
additional amounts from the applicable Borrower with respect to such withholding
tax pursuant to Section 2.16(a).
"Federal Funds Effective Rate" means, for any day, the weighted
average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
<PAGE>
12
"Financial Officer" of any Person means the chief financial officer,
principal accounting officer, treasurer or controller of such Person.
"Fixed Rate" means, with respect to any Competitive Loan (other than
a Eurocurrency Competitive Loan), the fixed rate of interest per annum specified
by the Lender making such Competitive Loan in its related Competitive Bid.
"Fixed Rate Loan" means a Competitive Loan bearing interest at a
Fixed Rate.
"Foreign Lender" means, with respect to any Loan, any Lender making
such Loan that is organized under the laws of a jurisdiction other than the
Relevant Jurisdiction.
"GAAP" means generally accepted accounting principles in the United
States of America.
"Governmental Authority" means the government of the United States
of America, any other nation or any political subdivision thereof, whether state
or local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"Guarantee" of or by any Person (the "guarantor") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation; provided, that the term Guarantee shall not include
<PAGE>
13
endorsements for collection or deposit in the ordinary course of
business.
"Hazardous Materials" means all explosive or radioactive substances
or wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"Hedging Agreement" means any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.
"Indebtedness" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty and (j) all obligations,
contingent or otherwise, of such Person in respect of bankers' acceptances. The
Indebtedness of any Person shall (i) include the Indebtedness of any other
entity (including any partnership in which such Person is a general partner) to
the extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor and
(ii) not include any
<PAGE>
14
obligations insured by American Credit Indemnity Company in the ordinary course
of its credit insurance business.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Index Debt" means LTD Index Debt or CP Index Debt.
"Interest Coverage Ratio" means, for any period, the ratio of (a)
EBITDA for such period to (b) Interest Expense for such period.
"Interest Election Request" means a request by the relevant Borrower
to convert or continue a Revolving Borrowing in accordance with Section 2.07.
"Interest Expense" means, for any period, the interest expense of
the Company and its consolidated Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP including and (i) the amortization of
debt discounts to the extent included in interest expense in accordance with
GAAP, (ii) the amortization of all fees (including fees with respect to Hedging
Agreements) payable in connection with the incurrence of Indebtedness to the
extent included in interest expense in accordance with GAAP, (iii) the portion
of any rents payable under capital leases allocable to interest expense in
accordance with GAAP and (iv) minority interest financing expense of D&B
Investors, L.P. and Duns Licensing Associates, L.P.
"Interest Payment Date" means (a) with respect to any ABR Loan
(other than a Swingline Loan), the last day of each March, June, September and
December, (b) with respect to any Eurocurrency Loan, the last day of the
Interest Period applicable to the Borrowing of which such Loan is a part and, in
the case of a Eurocurrency Borrowing with an Interest Period of more than three
months' duration, each day prior to the last day of such Interest Period that
occurs at intervals of three months' duration after the first day of such
Interest Period, (c) with respect to any Fixed Rate Loan, the last day of the
Interest Period applicable to the Borrowing of which such Loan is a part and, in
the case of a Fixed Rate Borrowing with an Interest Period of more than 90 days'
duration (unless otherwise specified in the applicable Competitive Bid Request),
each day prior to the last day of such Interest Period that
<PAGE>
15
occurs at intervals of 90 days' duration after the first day of such Interest
Period, and any other dates that are specified in the applicable Competitive Bid
Request as Interest Payment Dates with respect to such Borrowing and (d) with
respect to any Swingline Loan, the day that such Loan is required to be repaid.
"Interest Period" means (a) with respect to any Eurocurrency
Borrowing, the period commencing on the date of such Borrowing and ending on the
numerically corresponding day in the calendar month that is one, two, three or
six months thereafter, as the relevant Borrower may elect and (b) with respect
to any Fixed Rate Borrowing, the period (which shall not be less than one day or
more than 360 days) commencing on the date of such Borrowing and ending on the
date specified in the applicable Competitive Bid Request; provided, that (i) if
any Interest Period would end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless, in the case
of a Eurocurrency Borrowing only, such next succeeding Business Day would fall
in the next calendar month, in which case such Interest Period shall end on the
next preceding Business Day and (ii) any Interest Period pertaining to a
Eurocurrency Borrowing that commences on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
last calendar month of such Interest Period) shall end on the last Business Day
of the last calendar month of such Interest Period. For purposes hereof, the
date of a Borrowing initially shall be the date on which such Borrowing is made
and, in the case of a Revolving Borrowing, thereafter shall be the effective
date of the most recent conversion or continuation of such Borrowing.
"Judgment Currency" has the meaning assigned to such term in Section
10.14.
"Lenders" means the Persons listed on Schedule 2.01 and any other
Person that shall have become a party hereto pursuant to an Assignment and
Acceptance, other than any such Person that ceases to be a party hereto pursuant
to an Assignment and Acceptance. Unless the context otherwise requires, the term
"Lenders" includes the Swingline Lender.
"LIBO Rate" means, with respect to any Eurocurrency Borrowing for
any Interest Period, the rate appearing on Page 3750 (or, in the case of a
Multicurrency
<PAGE>
16
Borrowing, the rate appearing on the Page for the applicable Eligible Currency)
of the Telerate Service (or on any successor or substitute page of such Service,
or any successor to or substitute for such Service, providing rate quotations
comparable to those currently provided on such page of such Service, as
determined by the Administrative Agent from time to time for purposes of
providing quotations of interest rates applicable to dollar deposits (or, in the
case of a Multicurrency Borrowing, deposits in the applicable Eligible Currency)
in the London interbank market) at approximately 11:00 a.m., London time, two
Business Days prior to the commencement of such Interest Period, as the rate for
dollar deposits (or the applicable Eligible Currency) with a maturity comparable
to such Interest Period. In the event that such rate is not available at such
time for any reason, then the "LIBO Rate" with respect to such Eurocurrency
Borrowing for such Interest Period shall be the rate at which the Administrative
Agent is offered dollar deposits of $5,000,000 (or, in the case of a
Multicurrency Borrowing, deposits in the applicable Eligible Currency in an
amount the Dollar Equivalent of which is approximately equal to $5,000,000) and
for a maturity comparable to such Interest Period in immediately available funds
in the London interbank market at approximately 11:00 a.m., London time, two
Business Days prior to the commencement of such Interest Period.
"Lien" means, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities (other than
securities issued by the Company or any of its Subsidiaries), any purchase
option, call or similar right of a third party with respect to such securities.
"Loans" means the loans made by the Lenders to the Borrowers
pursuant to this Agreement.
"LTD Index Debt" means senior, unsecured, long-term indebtedness for
borrowed money of the Company that is not guaranteed by any other Person or
subject to any other credit enhancement.
<PAGE>
17
"Margin" means, with respect to any Competitive Loan bearing
interest at a rate based on the LIBO Rate, the marginal rate of interest, if
any, to be added to or subtracted from the LIBO Rate to determine the rate of
interest applicable to such Loan, as specified by the Lender making such Loan in
its related Competitive Bid.
"Material Adverse Effect" means a material adverse effect on (a) the
business, assets, operations or financial condition of the Company and the
Subsidiaries taken as a whole, (b) the ability of the Company to perform any of
its obligations under this Agreement or (c) the rights of or benefits available
to the Lenders under this Agreement.
"Material Indebtedness" means Indebtedness (other than the Loans),
or obligations in respect of one or more Hedging Agreements, of the Company and
its Subsidiaries in an aggregate principal amount exceeding $25,000,000. For
purposes of determining Material Indebtedness, the "principal amount" of the
obligations of the Company or any Subsidiary in respect of any Hedging Agreement
at any time shall be the maximum aggregate amount (giving effect to any netting
agreements) that the Company or such Subsidiary would be required to pay if such
Hedging Agreement were terminated at such time.
"Material Subsidiary" means any Borrowing Subsidiary and any
Subsidiary (a) the Total Assets of which exceed 5% of the Total Assets of the
Company and its consolidated Subsidiaries as of the end of the most recently
completed fiscal year or (b) the Net Revenue of which exceeds 5% of the Net
Revenue of the Company and its consolidated Subsidiaries as of the end of the
most recently completed fiscal year provided, that (i) any Subsidiary that
directly or indirectly owns a Material Subsidiary shall itself be a Material
Subsidiary and (ii) in the event Subsidiaries that would otherwise not be
Material Subsidiaries shall in the aggregate account for a percentage in excess
of 15% of the Total Assets or 15% of the Net Revenue, then one or more of such
Subsidiaries designated by the Company (or, if the Company shall make no
designation, one or more of such Subsidiaries in descending order based on their
respective contributions to Total Assets), shall be included as Material
Subsidiaries to the extent necessary to eliminate such excess.
"Maturity Date" means August 30, 2001.
<PAGE>
18
"Multicurrency Borrowing" means a Borrowing comprised of
Multicurrency Loans.
"Multicurrency Loan" means a Revolving Loan denominated in a
Committed Currency or a Competitive Loan in an Eligible Currency.
"Multiemployer Plan" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Net Revenue" means, with respect to any Person for any period, the
net revenue of such Person and its consolidated subsidiaries, determined on a
consolidated basis in accordance with GAAP for such period.
"Obligations" means the obligations of each of the Borrowing
Subsidiaries under this Agreement and the Borrowing Subsidiary Agreements with
respect to the payment of (i) the principal of and interest on the Loans to each
such Borrowing Subsidiary when and as due, whether at maturity, by acceleration,
upon one or more dates set for prepayment or otherwise and (ii) all other
monetary obligations of each of the Borrowing Subsidiaries hereunder and
thereunder.
"Other Taxes" means any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made hereunder or from the execution, delivery
or enforcement of, or otherwise with respect to, this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation referred to
and defined in ERISA and any successor entity performing similar functions.
"Permitted Encumbrances" means:
(a) Liens imposed by law for taxes that are not yet due or are being
contested in compliance with Section 5.04;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens imposed by law, arising in the ordinary
course of business and securing obligations that are not overdue by more
than 60 days or are being contested in compliance with Section 5.04;
<PAGE>
19
(c) pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other
social security laws or regulations;
(d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature, in each case in the ordinary
course of business and deposits securing liabilities to insurance carriers
under insurance or self-insurance arrangements; and
(e) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do not
materially detract from the value of the affected property or interfere
with the ordinary conduct of business of the Company or any Subsidiary;
provided that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness.
"Person" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Company or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Prime Rate" means the rate of interest per annum publicly announced
from time to time by The Chase Manhattan Bank as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.
"Register" has the meaning set forth in Section 10.04.
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20
"Related Parties" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
"Relevant Jurisdiction" means (i) in the case of any Loan to the
Company or any Domestic Borrowing Subsidiary, the United States of America, and
(ii) in the case of any Loan to any other Borrowing Subsidiary, the jurisdiction
imposing (or having the power to impose) withholding tax on payments by such
Borrowing Subsidiary under this Agreement.
"Required Lenders" means, at any time, Lenders having Revolving
Credit Exposures and unused Commitments representing at least 51% of the sum of
the total Revolving Credit Exposures and unused Commitments at such time;
provided that, for purposes of declaring the Loans to be due and payable
pursuant to Article VII, and for all purposes after the Loans become due and
payable pursuant to Article VII or the Commitments expire or terminate, the
total Competitive Loan Exposures of the Lenders shall be included in their
respective Revolving Credit Exposures in determining the Required Lenders.
"Reset Date" has the meaning set forth in Section 1.05(a).
"Revolving Credit Exposure" means, with respect to any Lender at any
time, the sum of the outstanding principal amount of such Lender's Revolving
Loans (or the Dollar Equivalent thereof, in the case of Multicurrency Loans) and
its Swingline Exposure at such time.
"Revolving Loan" means a Loan made pursuant to Section 2.03.
"S&P" means Standard & Poor's.
"Spin-Off" means the distribution by the Company, to the holders of
its common stock, of all outstanding shares of common stock of each of ACNielsen
Corporation and Cognizant Corporation, and all related transactions, including
execution and delivery of any agreements between the Company or any Subsidiary
on the one hand, and ACNielsen or Cognizant Corporation or any subsidiary
thereof, on the other hand.
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21
"Spin-Off Information" means the Draft Information Statement and the
pro forma financial statements of the Company after the Spin-Off, both of which
have been delivered to the Lenders prior to the date hereof.
"Statutory Reserve Rate" means a fraction (expressed as a decimal),
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject, for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board). Such reserve percentages shall include those imposed
pursuant to such Regulation D. Eurocurrency Loans shall be deemed to constitute
eurocur- rency funding and to be subject to such reserve requirements without
benefit of or credit for proration, exemptions or offsets that may be available
from time to time to any Lender under such Regulation D or any comparable
regulation. The Statutory Reserve Rate shall be adjusted automatically on and as
of the effective date of any change in any reserve percentage.
"subsidiary" means, with respect to any Person (the "parent") at any
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or, in the
case of a partnership, more than 50% of the general partnership interests are,
as of such date, owned, controlled or held, or (b) that is, as of such date,
otherwise Controlled, by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent.
"Subsidiary" means any subsidiary of the Company.
"Swingline Exposure" means, at any time, the aggregate principal
amount of all Swingline Loans outstanding at such time. The Swingline Exposure
of any Lender at any time shall be its Applicable Percentage of the total
Swingline Exposures at such time.
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22
"Swingline Lender" means The Chase Manhattan Bank, in its capacity
as lender of Swingline Loans hereunder.
"Swingline Loan" means a Loan in dollars made pursuant to
Section 2.05.
"Taxes" means any and all present or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Total Assets" means, at any date as to any Person, the total assets
of such Person and its consolidated subsidiaries at such date, determined on a
consolidated basis in accordance with GAAP.
"Total Debt" means, at any date all indebtedness of the Company and
its consolidated Subsidiaries at such date to the extent such items should be
reflected on the consolidated balance sheet of the Company (excluding any such
items which appear only in the notes to such consolidated balance sheet) at such
date in accordance with GAAP.
"Total Debt to EBITDA Ratio" means, at any time, the ratio of (a)
Total Debt at such time to (b) EBITDA for the most recent period of four
consecutive fiscal quarters of the Company ended at or prior to such time.
"Transactions" means the execution, delivery and performance by the
Borrowers of this Agreement and the Borrowing Subsidiary Agreements, the
borrowing of Loans and the use of the proceeds thereof.
"Type", when used in reference to any Loan or Borrowing, refers to
whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBO Rate, the Alternate
Base Rate or, in the case of a Competitive Loan or Borrowing, the LIBO Rate or a
Fixed Rate.
"Withdrawal Liability" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Classification of Loans and Borrowings. For purposes
of this Agreement, Loans may be classified and referred to by Class (e.g., a
"Revolving
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23
Loan") or by Type (e.g., a "Eurocurrency Loan") or by Class and Type (e.g., a
"Eurocurrency Revolving Loan"). Borrowings also may be classified and referred
to by Class (e.g., a "Revolving Borrowing") or by Type (e.g., a "Eurocurrency
Borrowing") or by Class and Type (e.g., a "Eurocurrency Revolving Borrowing").
SECTION 1.03. Terms Generally. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.
SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided
that, if the Company notifies the Administrative Agent that the Company requests
an amendment to any provision hereof to eliminate the effect of any change
occurring after the date hereof in GAAP or in the application thereof on the
operation of such provision (or if the Administrative Agent notifies the Company
that the Required Lenders request an amendment to any provision hereof for such
purpose), regardless of whether any such notice is given before or after such
change in GAAP or in
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24
the application thereof, then such provision shall be interpreted on the basis
of GAAP as in effect and applied immediately before such change shall have
become effective until such notice shall have been withdrawn or such provision
amended in accordance herewith.
SECTION 1.05. Exchange Rates. (a) Not later than 1:00 p.m., New York
City time, on each Calculation Date, the Administrative Agent shall (i)
determine the Exchange Rate as of such Calculation Date with respect to each
Eligible Currency and (ii) give notice thereof to the Lenders and the Company.
The Exchange Rates so determined shall become effective on the first Business
Day immediately following the relevant Calculation Date (a "Reset Date"), shall
remain effective until the next succeeding Reset Date, and shall for all
purposes of this Agreement (other than clause (e) of Section 2.07, clause (i) of
Section 2.13, Section 10.14 or any other provision expressly requiring the use
of a current Exchange Rate) be the Exchange Rates employed in converting any
amounts between dollars and Eligible Currencies.
(b) Not later than 5:00 p.m., New York City time, on each Reset Date
and each Borrowing Date with respect to Multicurrency Loans, the Administrative
Agent shall (i) determine the Dollar Equivalent of the aggregate principal
amount of the Multicurrency Loans then outstanding (after giving effect to any
Multicurrency Loans to be made or repaid on such date) and (ii) notify the
Lenders and the Company of the results of such determination.
ARTICLE II
The Credits
SECTION 2.01. Commitments. Subject to the terms and conditions set
forth herein, each Lender agrees to make Revolving Loans, denominated in dollars
or in any Committed Currency, to any Borrower from time to time during the
Availability Period in an aggregate principal amount that will not result in (a)
such Lender's Revolving Credit Exposure exceeding such Lender's Commitment, (b)
the sum of the total Revolving Credit Exposures plus the total Competitive Loan
Exposures exceeding the total Commitments or (c) the Dollar Equivalent of the
aggregate principal amount of all outstanding Multicurrency Loans exceeding
$250,000,000. Within the foregoing limits and subject to
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25
the terms and conditions set forth herein, the Borrowers may borrow, prepay and
reborrow Revolving Loans.
SECTION 2.02. Loans and Borrowings. (a) Each Revolving Loan shall be
made as part of a Borrowing consisting of Revolving Loans denominated in the
same currency and made by the Lenders ratably in accordance with their
respective Commitments. Each Competitive Loan shall be made in accordance with
the procedures set forth in Section 2.04. The failure of any Lender to make any
Loan required to be made by it shall not relieve any other Lender of its
obligations hereunder; provided that the Commitments and Competitive Bids of the
Lenders are several and no Lender shall be responsible for any other Lender's
failure to make Loans as required.
(b) Subject to Section 2.13, (i) each Revolving Borrowing shall be
comprised entirely of ABR Loans or Eurocurrency Loans as the applicable Borrower
may request in accordance herewith, (ii) each Competitive Borrowing shall be
comprised entirely of Eurocurrency Competitive Loans or Fixed Rate Loans as the
applicable Borrower may request in accordance herewith and (iii) each
Multicurrency Borrowing shall be a Eurocurrency Revolving Borrowing or a
Eurocurrency Competitive Borrowing. Each Swingline Loan shall be an ABR Loan.
Each Lender at its option may make any Eurocurrency Loan by causing any domestic
or foreign branch or Affiliate of such Lender to make such Loan; provided that
any exercise of such option shall not affect the obligation of any Borrower to
repay such Loan in accordance with the terms of this Agreement.
(c) At the commencement of each Interest Period for any Eurocurrency
Revolving Borrowing, such Borrowing shall be in an aggregate amount that is an
integral multiple of $1,000,000 and not less than $10,000,000 (or the Dollar
Equivalent thereof); provided that a Eurocurrency Revolving Borrowing that is a
Multicurrency Borrowing may be continued into a new Interest Period pursuant to
Section 2.07 without regard to the foregoing. At the time that each ABR
Revolving Borrowing is made, such Borrowing shall be in an aggregate amount that
is an integral multiple of $1,000,000 and not less than $10,000,000; provided
that an ABR Revolving Borrowing may be in an aggregate amount that is equal to
the entire unused balance of the total Commitments. Each Competitive Borrowing
shall be in an aggregate amount that is an integral multiple of $1,000,000 and
not less than $10,000,000. Each Swingline Loan shall be in an amount that
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26
is an integral multiple of $500,000 and not less than $500,000. Borrowings of
more than one Type and Class may be outstanding at the same time; provided that
there shall not at any time be more than a total of twenty (but no more than ten
in any one currency) Eurocurrency Revolving Borrowings outstanding.
(d) Notwithstanding any other provision of this Agreement, no
Borrower shall be entitled to request, or to elect to convert or continue, any
Borrowing if the Interest Period requested with respect thereto would end after
the Maturity Date.
SECTION 2.03. Requests for Revolving Borrowings. To request a
Revolving Borrowing, a Borrower shall notify the Administrative Agent of such
request by telephone (a) in the case of a Eurocurrency Borrowing, not later than
11:00 a.m., New York City time, three Business Days before the date of the
proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 11:00
a.m., New York City time, one Business Day before the date of the proposed
Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall
be confirmed promptly by hand delivery or telecopy to the Administrative Agent
of a written Borrowing Request in a form approved by the Administrative Agent
and signed by the applicable Borrower. Each such telephonic and written
Borrowing Request shall specify the following information in compliance with
Section 2.02:
(i) the aggregate amount of the requested Borrowing;
(ii) the date of such Borrowing, which shall be a Business Day;
(iii) whether such Borrowing is to be an ABR Borrowing or a
Eurocurrency Borrowing;
(iv) in the case of a Eurocurrency Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period contemplated by
the definition of the term "Interest Period", and the currency of such
Borrowing, which shall be dollars or a Committed Currency; and
(v) the location and number of the relevant Borrower's account to
which funds are to be disbursed,
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27
which shall comply with the requirements of Section 2.06.
If no election as to the Type of Revolving Borrowing is specified, then the
requested Revolving Borrowing shall be an ABR Borrowing. If no currency is
specified with respect to any requested Eurocurrency Revolving Borrowing, then
the relevant Borrower shall be deemed to have selected dollars. If no Interest
Period is specified with respect to any requested Eurocurrency Revolving
Borrowing, then the relevant Borrower shall be deemed to have selected an
Interest Period of one month's duration. Promptly following receipt of a
Borrowing Request in accordance with this Section, the Administrative Agent
shall advise each Lender of the details thereof and of the amount of such
Lender's Loan to be made as part of the requested Borrowing.
SECTION 2.04. Competitive Bid Procedure. (a) Subject to the terms
and conditions set forth herein, from time to time during the Availability
Period any Borrower may request Competitive Bids and may (but shall not have any
obligation to) accept Competitive Bids and borrow Competitive Loans; provided
that the sum of the total Revolving Credit Exposures plus the total Competitive
Loan Exposures at any time shall not exceed the total Commitments. To request
Competitive Bids, a Borrower shall notify the Administrative Agent of such
request by telephone, in the case of a Eurocurrency Borrowing, not later than
11:00 a.m., New York City time (or, if such request relates to a Borrowing in an
Eligible Currency and is delivered or telecopied to the Administrative Agent in
London, not later than 10:00 a.m., London time), four Business Days before the
date of the proposed Borrowing and, in the case of a Fixed Rate Borrowing, not
later than 10:00 a.m., New York City time, one Business Day before the date of
the proposed Borrowing; provided that the Borrowers may submit jointly up to
(but not more than) three Competitive Bid Requests on the same day, but a
Competitive Bid Request shall not be made within five Business Days after the
date of any previous Competitive Bid Request, unless any and all such previous
Competitive Bid Requests shall have been withdrawn or all Competitive Bids
received in response thereto rejected. Each such telephonic Competitive Bid
Request shall be confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a written Competitive Bid Request in a form approved by
the Administrative Agent and signed by the applicable Borrower.
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Each such telephonic and written Competitive Bid Request shall specify the
following information in compliance with Section 2.02:
(i) the aggregate amount of the requested Borrowing;
(ii) the date of such Borrowing, which shall be a
Business Day;
(iii) whether such Borrowing is to be a Eurocurrency
Borrowing or a Fixed Rate Borrowing;
(iv) the Interest Period to be applicable to such Borrowing, which
shall be a period contemplated by the definition of the term "Interest
Period", and the currency of such Borrowing which shall be dollars or an
Eligible Currency; and
(v) the location and number of the relevant Borrower's account to
which funds are to be disbursed, which shall comply with the requirements
of Section 2.06.
If no currency is specified with respect to any Competitive Bid Request, the
relevant Borrower shall be deemed to have selected dollars. Promptly following
receipt of a Competitive Bid Request in accordance with this Section, the
Administrative Agent shall notify the Lenders of the details thereof by
telecopy, inviting the Lenders to submit Competitive Bids.
(b) Each Lender may (but shall not have any obligation to) make one
or more Competitive Bids to any Borrower in response to a Competitive Bid
Request. Each Competitive Bid by a Lender must be in a form approved by the
Administrative Agent and must be received by the Administrative Agent by
telecopy, in the case of a Eurocurrency Competitive Borrowing, not later than
9:30 a.m., New York City time (or, if the Competitive Bid relates to a Borrowing
in an Eligible Currency and is delivered or telecopied to the Administrative
Agent in London, not later than 10:00 a.m., London time), three Business Days
before the proposed date of such Competitive Borrowing, and in the case of a
Fixed Rate Borrowing, not later than 9:30 a.m., New York City time, on the
proposed date of such Competitive Borrowing. Competitive Bids that do not
conform substantially to the form approved
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29
by the Administrative Agent may be rejected by the Administrative Agent, and the
Administrative Agent shall notify the applicable Lender as promptly as
practicable. Each Competitive Bid shall specify (i) the principal amount (which
shall be a minimum of $5,000,000 (or the Dollar Equivalent thereof) and which
may equal the entire principal amount of the Competitive Borrowing requested by
the applicable Borrower) of the Competitive Loan or Loans that the Lender is
willing to make, (ii) the Competitive Bid Rate or Rates at which the Lender is
prepared to make such Loan or Loans (expressed as a percentage rate per annum in
the form of a decimal to no more than four decimal places), (iii) the Interest
Period applicable to each such Loan and the last day thereof and (iv) the
currency of the Competitive Borrowing.
(c) The Administrative Agent shall promptly notify the relevant
Borrower by telecopy of the Competitive Bid Rate and the principal amount
specified in each Competitive Bid and the identity of the Lender that shall have
made such Competitive Bid.
(d) Subject only to the provisions of this paragraph, a Borrower may
accept or reject any Competitive Bid. The relevant Borrower shall notify the
Administrative Agent by telephone, confirmed by telecopy in a form approved by
the Administrative Agent, whether and to what extent it has decided to accept or
reject each Competitive Bid, in the case of a Eurocurrency Competitive
Borrowing, not later than 10:30 a.m., New York City time (or, if such notice
relates to a Borrowing in an Eligible Currency and is delivered or telecopied in
London, not later than 11:00 a.m., London time), three Business Days before the
date of the proposed Competitive Borrowing, and in the case of a Fixed Rate
Borrowing, not later than 10:30 a.m., New York City time, on the proposed date
of the Competitive Borrowing; provided that (i) the failure of such Borrower to
give such notice shall be deemed to be a rejection of each Competitive Bid, (ii)
such Borrower shall not accept a Competitive Bid made at a particular
Competitive Bid Rate if such Borrower rejects a Competitive Bid made at a lower
Competitive Bid Rate, (iii) the aggregate amount of the Competitive Bids
accepted by such Borrower shall not exceed the aggregate amount of the requested
Competitive Borrowing specified in the related Competitive Bid Request, (iv) to
the extent necessary to comply with clause (iii) above, such Borrower may accept
Competitive Bids at the same Competitive Bid Rate in part, which acceptance, in
the case of multiple
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30
Competitive Bids at such Competitive Bid Rate, shall be made pro rata in
accordance with the amount of each such Competitive Bid, and (v) except pursuant
to clause (iv) above, no Competitive Bid shall be accepted for a Competitive
Loan unless such Competitive Loan is in a minimum principal amount of $5,000,000
(or the Dollar Equivalent thereof); provided further that if a Competitive Loan
must be in an amount less than $5,000,000 (or the Dollar Equivalent thereof)
because of the provisions of clause (iv) above, such Competitive Loan may be for
a minimum of $1,000,000 (or the Dollar Equivalent thereof), and in calculating
the pro rata allocation of acceptances of portions of multiple Competitive Bids
at a particular Competitive Bid Rate pursuant to clause (iv) the amounts shall
be rounded to integral multiples of $1,000,000 in a manner determined by such
Borrower. A notice given by any Borrower pursuant to this paragraph shall be
irrevocable.
(e) The Administrative Agent shall promptly notify each bidding
Lender by telecopy whether or not its Competitive Bid has been accepted (and, if
so, the amount and Competitive Bid Rate so accepted), and each successful bidder
will thereupon become bound, subject to the terms and conditions hereof, to make
the Competitive Loan in respect of which its Competitive Bid has been accepted.
(f) If the Administrative Agent shall elect to submit a Competitive
Bid in its capacity as a Lender, it shall submit such Competitive Bid directly
to the relevant Borrower at least one quarter of an hour earlier than the time
by which the other Lenders are required to submit their Competitive Bids to the
Administrative Agent pursuant to paragraph (b) of this Section.
SECTION 2.05. Swingline Loans. (a) Subject to the terms and
conditions set forth herein, the Swingline Lender agrees to make Swingline Loans
in dollars to any Borrower from time to time during the Availability Period, in
an aggregate principal amount at any time outstanding that will not result in
(i) the aggregate principal amount of outstanding Swingline Loans exceeding
$10,000,000 or (ii) the sum of the total Revolving Credit Exposures plus the
total Competitive Loan Exposures exceeding the total Commitments; provided that
the Swingline Lender shall not be required to make a Swingline Loan to refinance
an outstanding Swingline Loan. Within the foregoing limits and subject to the
terms and conditions set forth herein, any Borrower may borrow, prepay and
reborrow Swingline Loans.
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31
(b) To request a Swingline Loan, a Borrower shall notify the
Administrative Agent of such request by telephone (confirmed by telecopy), not
later than 12:00 noon, New York City time, on the day of a proposed Swingline
Loan. Each such notice shall be irrevocable and shall specify the requested date
(which shall be a Business Day) and amount of the requested Swingline Loan. The
Administrative Agent will promptly advise the Swingline Lender of any such
notice received from any Borrower. The Swingline Lender shall make each
Swingline Loan available to the relevant Borrower by means of a credit to the
general deposit account of the Company with the Swingline Lender by 3:00 p.m.,
New York City time, on the requested date of such Swingline Loan (and if the
applicable Borrower is a Borrowing Subsidiary, the Company shall make such funds
available to such Borrowing Subsidiary) or to such other account as may be
specified in the applicable Borrowing Request.
(c) The Swingline Lender may by written notice given to the
Administrative Agent not later than 10:00 a.m., New York City time, on any
Business Day require the Lenders to acquire participations on such Business Day
in all or a portion of the Swingline Loans outstanding. Such notice shall
specify the aggregate amount of Swingline Loans in which Lenders will
participate. Promptly upon receipt of such notice, the Administrative Agent will
give notice thereof to each Lender, specifying in such notice such Lender's
Applicable Percentage of such Swingline Loan or Loans. Each Lender hereby
absolutely and unconditionally agrees, upon receipt of notice as provided above,
to pay to the Administrative Agent, for the account of the Swingline Lender,
such Lender's Applicable Percentage of such Swingline Loan or Loans. Each Lender
acknowledges and agrees that its obligation to acquire participations in
Swingline Loans pursuant to this paragraph is absolute and unconditional and
shall not be affected by any circumstance whatsoever, including the occurrence
and continuance of a Default or reduction or termination of the Commitments, and
that each such payment shall be made without any offset, abatement, withholding
or reduction whatsoever. Each Lender shall comply with its obligation under this
paragraph by wire transfer of immediately available funds, in the same manner as
provided in Section 2.06 with respect to Loans made by such Lender (and Section
2.06 shall apply, mutatis mutandis, to the payment obligations of the Lenders),
and the Administrative Agent shall promptly pay to the Swingline Lender the
amounts so received by it from the Lenders. The Administrative Agent shall
notify the relevant Borrower of
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32
any participations in any Swingline Loan acquired pursuant to this paragraph,
and thereafter payments in respect of such Swingline Loan shall be made to the
Administrative Agent and not to the Swingline Lender. Any amounts received by
the Swingline Lender from any Borrower (or other party on behalf of such
Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender
of the proceeds of a sale of participations therein shall be promptly remitted
to the Administrative Agent; any such amounts received by the Administrative
Agent shall be promptly remitted by the Administrative Agent to the Lenders that
shall have made their payments pursuant to this paragraph and to the Swingline
Lender, as their interests may appear. The purchase of participations in a
Swingline Loan pursuant to this paragraph shall not relieve the relevant
Borrower of any default in the payment thereof.
SECTION 2.06. Funding of Borrowings. (a) Each Lender shall make each
Loan (other than a Multicurrency Loan) to be made by it hereunder on the
proposed date thereof by wire transfer of immediately available funds by 12:00
noon, New York City time, to the account of the Administrative Agent most
recently designated by it for such purpose by notice to the Lenders; provided
that Swingline Loans shall be made as provided in Section 2.05. The
Administrative Agent will make such Loans available to the relevant Borrower by
promptly crediting the amounts so received, in like funds, to an account of the
Company maintained with the Administrative Agent in New York City and designated
by such Borrower in the applicable Borrowing Request or Competitive Bid Request
(and, if the applicable Borrower is a Borrowing Subsidiary, the Company shall
make such funds available to such Borrowing Subsidiary) or to such other account
as may be specified in the applicable Borrowing Request or Competitive Bid
Request. Each Lender shall make each Multicurrency Loan to be made by it
hereunder on the proposed date thereof by wire transfer of such immediately
available funds as may then be customary for the settlement of international
transactions in the applicable Eligible Currency, by 11:00 a.m., London time, to
the account of the Administrative Agent most recently designated by it for such
purpose by notice to the Lenders. The Administrative Agent will make such
Multicurrency Loans available to the relevant Borrower by promptly crediting the
amounts so received, in like funds, to an account of the Company maintained with
the Administrative Agent in London and designated by such Borrower in the
applicable Borrowing Request or Competitive Bid Request (and, if the applicable
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33
Borrower is a Borrowing Subsidiary, the Company shall make such funds available
to such Borrowing Subsidiary).
(b) Unless the Administrative Agent shall have received notice from
a Lender prior to the proposed date of any Borrowing that such Lender will not
make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
and may, in reliance upon such assumption, make available to the relevant
Borrower a corresponding amount. In such event, if a Lender has not in fact made
its share of the applicable Borrowing available to the Administrative Agent,
then the applicable Lender and each Borrower severally agree to pay to the
Administrative Agent forthwith on demand such corresponding amount with interest
thereon, for each day from and including the date such amount is made available
to the relevant Borrower to but excluding the date of payment to the
Administrative Agent, at (i) in the case of such Lender, (x) the Federal Funds
Effective Rate (in the case of a Borrowing in dollars) and (y) the rate
reasonably determined by the Administrative Agent to be the cost to it of
funding such amount (in the case of a Borrowing in an Eligible Currency) or (ii)
in the case of such Borrower, the interest rate applicable to the subject Loan.
If such Lender pays such amount to the Administrative Agent, then such amount
shall constitute such Lender's Loan included in such Borrowing.
SECTION 2.07. Interest Elections. (a) Each Revolving Borrowing
initially shall be of the Type specified in the applicable Borrowing Request
and, in the case of a Eurocurrency Revolving Borrowing, shall have an initial
Interest Period as specified in such Borrowing Request. Thereafter, the relevant
Borrower may elect to convert such Borrowing to a different Type or to continue
such Borrowing and, in the case of a Eurocurrency Revolving Borrowing, may elect
Interest Periods therefor, all as provided in this Section. A Borrower may elect
different options with respect to different portions of the affected Borrowing,
in which case each such portion shall be allocated ratably among the Lenders
holding the Loans comprising such Borrowing, and the Loans comprising each such
portion shall be considered a separate Borrowing. This Section shall not apply
to Competitive Borrowings or Swingline Borrowings, which may not be converted or
continued. Notwithstanding any contrary provision herein, this Section shall not
be
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34
construed to permit any Borrower to (i) change the currency of any Borrowing or
(ii) convert any Multicurrency Borrowing to an ABR Borrowing.
(b) To make an election pursuant to this Section, a Borrower shall
notify the Administrative Agent of such election by telephone by the time that a
Borrowing Request would be required under Section 2.03 if such Borrower were
requesting a Revolving Borrowing of the Type resulting from such election to be
made on the effective date of such election. Each such telephonic Interest
Election Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Interest Election
Request in a form approved by the Administrative Agent and signed by the
relevant Borrower.
(c) Each telephonic and written Interest Election Request shall
specify the following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request applies
and, if different options are being elected with respect to different
portions thereof, the portions thereof to be allocated to each resulting
Borrowing (in which case the information to be specified pursuant to
clauses (iii) and (iv) below shall be specified for each resulting
Borrowing);
(ii) the effective date of the election made pursuant to such Interest
Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing or a
Eurocurrency Borrowing; and
(iv) if the resulting Borrowing is a Eurocurrency Borrowing, the
Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the
term "Interest Period".
If any such Interest Election Request requests a Eurocurrency Borrowing but does
not specify an Interest Period, then such Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each
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35
Lender of the details thereof and of such Lender's portion of each resulting
Borrowing.
(e) If the relevant Borrower fails to deliver a timely Interest
Election Request with respect to a Eurocurrency Revolving Borrowing prior to the
end of the Interest Period applicable thereto, then, unless such Borrowing is
repaid as provided herein, at the end of such Interest Period such Borrowing
shall be converted to an ABR Borrowing (unless such Borrowing is a Multicurrency
Borrowing, in which case such Borrowing shall become due and payable on the last
day of such Interest Period). Notwithstanding any contrary provision hereof, if
an Event of Default has occurred and is continuing and the Administrative Agent,
at the request of the Required Lenders, so notifies the Company, then, so long
as an Event of Default is continuing (i) no outstanding Revolving Borrowing may
be converted to or continued as a Eurocurrency Borrowing, (ii) unless repaid,
each Eurocurrency Revolving Borrowing (other than a Multicurrency Borrowing)
shall be converted to an ABR Borrowing at the end of the Interest Period
applicable thereto and (iii) each Multicurrency Borrowing shall be converted
into an ABR Loan at the Exchange Rate determined by the Administrative Agent on
the last day of the Interest Period applicable thereto.
SECTION 2.08. Termination and Reduction of Commitments. (a) Unless
previously terminated, the Commitments shall terminate on the Maturity Date.
(b) The Company may at any time terminate, or from time to time
reduce, the Commitments; provided that (i) each reduction of the Commitments
shall be in an amount that is an integral multiple of $1,000,000 and not less
than $5,000,000 and (ii) the Company shall not terminate or reduce the
Commitments if, after giving effect to any concurrent prepayment of the Loans in
accordance with Section 2.10, the sum of the Revolving Credit Exposures plus the
total Competitive Loan Exposures would exceed the total Commitments.
(c) The Company shall notify the Administrative Agent of any
election to terminate or reduce the Commitments under paragraph (b) of this
Section at least three Business Days prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, the Administrative Agent
shall advise the Lenders of the
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36
contents thereof. Each notice delivered by the Company pursuant to this Section
shall be irrevocable; provided that a notice of termination of the Commitments
delivered by the Company may state that such notice is conditioned upon the
effectiveness of other credit facilities, in which case such notice may be
revoked by the Company (by notice to the Administrative Agent on or prior to the
specified effective date) if such condition is not satisfied. Any termination or
reduction of the Commitments shall be permanent. Each reduction of the
Commitments shall be made ratably among the Lenders in accordance with their
respective Commitments.
SECTION 2.09. Repayment of Loans; Evidence of Debt. (a) Each
Borrower hereby unconditionally promises to pay (i) to the Administrative Agent
for the account of each Lender the then unpaid principal amount of each
Revolving Loan of such Borrower on the Maturity Date, (ii) to the Administrative
Agent for the account of each Lender the then unpaid principal amount of each
Competitive Loan of such Borrower on the last day of the Interest Period
applicable to such Loan and (iii) to the Swingline Lender the then unpaid
principal amount of each Swingline Loan of such Borrower on the earlier of the
Maturity Date and the first date after such Swingline Loan is made that is the
15th or last day of a calendar month and is at least two Business Days after
such Swingline Loan is made; provided that on each date that a Revolving
Borrowing in dollars or Competitive Borrowing in dollars is made by a Borrower,
such Borrower shall repay all Swingline Loans of such Borrower then outstanding.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of each Borrower to such
Lender resulting from each Loan made by such Lender, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder.
(c) The Administrative Agent shall maintain accounts in which it
shall record (i) the amount of each Loan made hereunder, the Class and Type
(and, in the case of a Multicurrency Loan, the currency) thereof and the
Interest Period (if any) applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from each Borrower to each
Lender hereunder and (iii) the amount of any sum received by the Administrative
Agent hereunder for the account of the Lenders and each Lender's share thereof.
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37
(d) The entries made in the accounts maintained pursuant to
paragraph (b) or (c) of this Section shall be prima facie evidence of the
existence and amounts of the obligations recorded therein; provided that the
failure of any Lender or the Administrative Agent to maintain such accounts or
any error therein shall not in any manner affect the obligation of any Borrower
to repay the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans made by it be evidenced by a
promissory note. In such event, each Borrower shall prepare, execute and deliver
to such Lender a promissory note payable to the order of such Lender (or, if
requested by such Lender, to such Lender and its registered assigns) and in a
form approved by the Administrative Agent and the Company. Thereafter, the Loans
evidenced by each such promissory note and interest thereon shall at all times
(including after assignment pursuant to Section 10.04) be represented by one or
more promissory notes in such form payable to the order of the payee named
therein (or, if such promissory note is a registered note, to such payee and its
registered assigns).
SECTION 2.10. Prepayment of Loans. (a) Any Borrower shall have the
right at any time and from time to time to prepay any Borrowing of such Borrower
in whole or in part, subject to prior notice in accordance with paragraph (d) of
this Section; provided that no Borrower shall have the right to prepay any
Competitive Loan without the prior consent of the Lender thereof.
(b) If, on the last day of any Interest Period for any Borrowing,
the sum of the total Revolving Credit Exposures plus the total Competitive Loan
Exposures exceeds the total Commitments, the relevant Borrower shall, on such
day, prepay Revolving Loans in an amount equal to the lesser of (i) such excess
and (ii) the amount of such Borrowing. If, on any Reset Date, the sum of the
total Revolving Credit Exposures plus the total Competitive Loan Exposures
exceeds 105% of the total Commitments, then the Borrowers shall, on the next
Reset Date, prepay one or more Revolving Borrowings in an aggregate principal
amount equal to the excess, if any, of the sum of the total Revolving Credit
Exposures plus the total Competitive Loan Exposures (in each case as of such
next Reset Date) over the total Commitments.
(c) If, on the last day of any Interest Period for any Multicurrency
Borrowing, the Dollar Equivalent of
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38
the aggregate principal amount of outstanding Multicurrency Loans exceeds
$250,000,000, the relevant Borrower shall, on such day, prepay such
Multicurrency Borrowing in an amount equal to the lesser of (i) such excess and
(ii) the amount of such Borrowing. If, on any Reset Date, the Dollar Equivalent
of the aggregate principal amount of outstanding Multicurrency Loans exceed 105%
of $250,000,000, then the Borrowers shall, on the next Reset Date, prepay one or
more Multicurrency Borrowings in an aggregate principal amount equal to the
excess, if any, of the Dollar Equivalent of the aggregate principal amount of
outstanding Multicurrency Loans (as of such next Reset Date) over $250,000,000.
(d) The relevant Borrower shall notify the Administrative Agent
(and, in the case of prepayment of a Swingline Loan, the Swingline Lender) by
telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurocurrency Revolving Borrowing, not later than 11:00 a.m., New
York City time (or, if such notice relates to a Multicurrency Loan and is
delivered or telecopied in London, not later than 10:00 a.m., London time),
three Business Days before the date of prepayment, (ii) in the case of
prepayment of an ABR Revolving Borrowing, not later than 11:00 a.m., New York
City time, one Business Day before the date of prepayment or (iii) in the case
of prepayment of a Swingline Loan, not later than 12:00 noon, New York City
time, on the date of prepayment. Each such notice shall be irrevocable and shall
specify the prepayment date and the principal amount of each Borrowing or
portion thereof to be prepaid; provided that, if a notice of prepayment is given
in connection with a conditional notice of termination of the Commitments as
contemplated by Section 2.08, then such notice of prepayment may be revoked if
such notice of termination is revoked in accordance with Section 2.08. Promptly
following receipt of any such notice relating to a Revolving Borrowing, the
Administrative Agent shall advise the Lenders of the contents thereof. Each
partial prepayment of any Revolving Borrowing shall be in an amount that would
be permitted in the case of an advance of a Revolving Borrowing of the same Type
as provided in Section 2.02. Each prepayment of a Revolving Borrowing shall be
applied ratably to the Loans included in the prepaid Borrowing. Prepayments
shall be accompanied by accrued interest to the extent required by Section 2.12.
SECTION 2.11. Fees. (a) The Company agrees to pay to the
Administrative Agent for the account of each
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39
Lender a facility fee, which shall accrue at the Applicable Rate on the daily
amount of the Commitment of such Lender (whether used or unused) during the
period from and including the date hereof to but excluding the date on which
such Commitment terminates; provided that, if such Lender continues to have any
Revolving Credit Exposure after its Commitment terminates, then such facility
fee shall continue to accrue on the daily amount of such Lender's Revolving
Credit Exposure from and including the date on which its Commitment terminates
to but excluding the date on which such Lender ceases to have any Revolving
Credit Exposure. Accrued facility fees shall be payable in arrears on the last
day of March, June, September and December of each year and on the date on which
the Commitments terminate, commencing on the first such date to occur after the
date hereof; provided that any facility fees accruing after the date on which
the Commitments terminate shall be payable on demand. All facility fees shall be
computed on the basis of a year of 360 days and shall be payable for the actual
number of days elapsed (including the first day but excluding the last day).
(b) The Company agrees to pay to the Administrative Agent, for its
own account, fees payable in the amounts and at the times separately agreed upon
between the Company and the Administrative Agent.
(c) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Administrative Agent for distribution, in
the case of facility fees, to the Lenders. Fees paid shall not be refundable
under any circumstances.
SECTION 2.12. Interest. (a) The Loans comprising each ABR Borrowing
(including each Swingline Loan) shall bear interest at a rate per annum equal to
the Alternate Base Rate.
(b) The Loans comprising each Eurocurrency Borrowing shall bear
interest at a rate per annum equal to (i) in the case of a Eurocurrency
Revolving Loan, the Adjusted LIBO Rate for the Interest Period in effect for
such Borrowing plus the Applicable Rate, or (ii) in the case of a Eurocurrency
Competitive Loan, the LIBO Rate for the Interest Period in effect for such
Borrowing plus (or minus, as applicable) the Margin applicable to such Loan.
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40
(c) Each Fixed Rate Loan shall bear interest at a rate per annum
equal to the Fixed Rate applicable to such Loan.
(d) Notwithstanding the foregoing, if any principal of or interest
on any Loan or any fee or other amount payable by any Borrower hereunder is not
paid when due, whether at stated maturity, upon acceleration or otherwise, such
overdue amount shall bear interest, after as well as before judgment, at a rate
per annum equal to (i) n the case of overdue principal of any Loan, 2% plus the
rate otherwise applicable to such Loan as provided above or (ii) in the case of
any other amount, 2% plus the rate applicable to ABR Loans as provided above.
(e) Accrued interest on each Loan shall be payable in arrears on
each Interest Payment Date for such Loan; provided that (i) interest accrued
pursuant to paragraph (d) of this Section shall be payable on demand, (ii) in
the event of any repayment or prepayment of any Loan (other than a prepayment of
an ABR Revolving Loan prior to the end of the Availability Period), accrued
interest on the principal amount repaid or prepaid shall be payable on the date
of such repayment or prepayment, (iii) in the event of any conversion of any
Eurocurrency Revolving Loan prior to the end of the current Interest Period
therefor, accrued interest on such Loan shall be payable on the effective date
of such conversion and (iv) all accrued interest shall be payable upon
termination of the Commitments.
(f) All interest hereunder shall be computed on the basis of a year
of 360 days, except that interest computed by reference to the Alternate Base
Rate at times when the Alternate Base Rate is based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and in
each case shall be payable for the actual number of days elapsed (including the
first day but excluding the last day). The applicable Alternate Base Rate,
Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent,
and such determination shall be conclusive absent manifest error.
SECTION 2.13. Alternate Rate of Interest. If prior to the
commencement of any Interest Period for a Eurocurrency Borrowing:
(a) the Administrative Agent determines (which determination shall
be conclusive absent manifest
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41
error) that adequate and reasonable means do not exist for ascertaining
the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest
Period; or
(b) the Administrative Agent is advised by the Required Lenders (or,
in the case of a Eurocurrency Competitive Loan, the Lender that is
required to make such Loan) that the Adjusted LIBO Rate or the LIBO Rate,
as applicable, for such Interest Period will not adequately and fairly
reflect the cost to such Lenders (or Lender) of making or maintaining
their Loans (or its Loan) included in such Borrowing for such Interest
Period; or
(c) in the case of a Multicurrency Borrowing, the Administrative
Agent determines (which determination shall be conclusive absent manifest
error) that deposits in the applicable Committed Currency are not
generally available in the London interbank market;
then the Administrative Agent shall give notice thereof to the Company and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Company and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Revolving Borrowing to, or
continuation of any Revolving Borrowing as, a Eurocurrency Borrowing shall be
ineffective, and any Eurocurrency Borrowing so requested to be continued shall
be converted to an ABR Borrowing at the Exchange Rate determined by the
Administrative Agent on the last day of the then current Interest Period with
respect thereto, (ii) if any Borrowing Request requests a Eurocurrency Revolving
Borrowing (other than a Multicurrency Borrowing), such Borrowing shall be made
as an ABR Borrowing and (iii) any request by any Borrower for a Eurocurrency
Competitive Borrowing or a Multicurrency Borrowing shall be ineffective;
provided that if the circumstances giving rise to such notice do not affect all
the Lenders, then requests for Eurocurrency Competitive Borrowings may be made
to Lenders that are not affected thereby and, if the circumstances giving rise
to such notice do not affect all applicable currencies, then requests for
Eurocurrency Borrowings may be made in the currencies that are not affected
thereby.
SECTION 2.14. Increased Costs. (a) If any Change in Law shall:
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42
(i) impose, modify or deem applicable any reserve, special deposit
or similar requirement against assets of, deposits with or for the account
of, or credit extended by, any Lender (except any such reserve requirement
reflected in the Adjusted LIBO Rate); or
(ii) impose on any Lender or the London interbank market (or any other
market in which the funding operations of such Lender shall be conducted
with respect to any Committed Currency) any other condition affecting this
Agreement or Eurocurrency Loans or Fixed Rate Loans made by such Lender;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurocurrency Loan or Fixed Rate Loan (or of
maintaining its obligation to make any such Loan) or to reduce the amount of any
sum received or receivable by such Lender hereunder (whether of principal,
interest or otherwise), then the Company will pay to such Lender such additional
amount or amounts as will compensate such Lender for such additional costs
incurred or reduction suffered.
(b) If any Lender determines that any Change in Law regarding
capital requirements has or would have the effect of reducing the rate of return
on such Lender's capital or on the capital of such Lender's holding company, if
any, as a consequence of this Agreement or the Loans made by such Lender to a
level below that which such Lender or such Lender's holding company could have
achieved but for such Change in Law (taking into consideration such Lender's
policies and the policies of such Lender's holding company with respect to
capital adequacy), then from time to time the Company will pay to such Lender
such additional amount or amounts as will compensate such Lender or such
Lender's holding company for any such reduction suffered.
(c) A certificate of a Lender setting forth the amount or amounts
necessary to compensate such Lender or its holding company, as the case may be,
as specified in paragraph (a) or (b) of this Section shall be delivered to the
Company and shall be conclusive absent manifest error. The Company shall pay
such Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.
(d) Failure or delay on the part of any Lender to demand
compensation pursuant to this Section shall not constitute a waiver of such
Lender's right to demand such
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43
compensation; provided that the Company shall not be required to compensate a
Lender pursuant to this Section for any increased costs or reductions incurred
more than six months prior to the date that such Lender notifies the Company of
the Change in Law giving rise to such increased costs or reductions and of such
Lender's intention to claim compensation therefor; provided further that, if the
Change in Law giving rise to such increased costs or reductions is retroactive,
then the six-month period referred to above shall be extended to include the
period of retroactive effect thereof.
(e) Notwithstanding the foregoing provisions of this Section, a
Lender shall not be entitled to compensation pursuant to this Section in respect
of any Competitive Loan if the Change in Law that would otherwise entitle it to
such compensation shall have been publicly announced or be otherwise known to it
prior to submission of the Competitive Bid pursuant to which such Loan was made.
SECTION 2.15. Break Funding Payments. In the event of (a) the
payment of any principal of any Eurocurrency Loan or Fixed Rate Loan other than
on the last day of an Interest Period applicable thereto (including as a result
of an Event of Default), (b) the conversion of any Eurocurrency Loan other than
on the last day of the Interest Period applicable thereto, (c) the failure to
borrow, convert, continue or prepay any Eurocurrency Loan on the date specified
in any notice delivered pursuant hereto (regardless of whether such notice is
permitted to be revocable under Section 2.10(d) and is revoked in accordance
herewith), (d) the failure to borrow any Eurocurrency Competitive Loan after
accepting the Competitive Bid to make such Loan, or (e) the assignment of any
Eurocurrency Loan or Fixed Rate Loan other than on the last day of the Interest
Period applicable thereto as a result of a request by the Company pursuant to
Section 2.18, then, in any such event, the Company shall compensate each Lender
for the loss, cost and expense attributable to such event. In the case of a
Eurocurrency Loan, the loss to any Lender attributable to any such event shall
be deemed to include an amount determined by such Lender to be equal to the
excess, if any, of (i) the amount of interest that such Lender would pay for a
deposit equal to the principal amount of such Loan (and in the same currency as
such Loan) for the period from the date of such payment, conversion, failure or
assignment to the last day of the then current Interest Period for such Loan
(or, in the case of a failure to borrow, convert or
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44
continue, the duration of the Interest Period that would have resulted from such
borrowing, conversion or continuation) if the interest rate payable on such
deposit were equal to the Adjusted LIBO Rate (or, in the case of a Eurocurrency
Competitive Loan, the LIBO Rate) for such Interest Period, over (ii) the amount
of interest that such Lender would earn on such principal amount for such period
if such Lender were to invest such principal amount for such period at the
interest rate that would be bid by such Lender (or an affiliate of such Lender)
for deposits in the same currency from other banks in the eurodollar market at
the commencement of such period. A certificate of any Lender setting forth any
amount or amounts that such Lender is entitled to receive pursuant to this
Section shall be delivered to the Company and shall be conclusive absent
manifest error. The Company shall pay such Lender the amount shown as due on any
such certificate within 10 days after receipt thereof.
SECTION 2.16. Taxes. (a) Any and all payments by or an account of
any obligation of any Borrower hereunder shall be made free and clear of and
without deduction for any Indemnified Taxes or Other Taxes; provided that if any
Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from
such payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent or Lender
(as the case may be) receives an amount equal to the sum it would have received
had no such deductions been made, (ii) such Borrower shall make such deductions
and (iii) such Borrower shall pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law.
(b) In addition, the Borrowers shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) The relevant Borrower shall indemnify the Administrative Agent
and each Lender, within 10 days after written demand therefor, for the full
amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent
or such Lender, as the case may be, on or with respect to any payment by or on
account of any obligation of any Borrower hereunder (including Indemnified Taxes
or Other Taxes imposed or asserted on or attributable to amounts payable under
this Section), and any penalties, interest and
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45
reasonable expenses arising therefrom or with respect thereto, whether or not
such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority. A certificate as to the amount
of such payment or liability delivered to the Company by a Lender, or by the
Administrative Agent on its own behalf or on behalf of a Lender, shall be
conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by any Borrower to a Governmental Authority, such Borrower shall
deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax with respect to payments under this Agreement
pursuant to the law of the Relevant Jurisdiction or any treaty to which the
Relevant Jurisdiction is a party shall deliver to the Company (with a copy to
the Administrative Agent), at the time or times prescribed by applicable law,
such properly completed and executed documentation prescribed by applicable law
or reasonably requested by the Company as will permit such payments to be made
without withholding or at a reduced rate.
If the Company determines in good faith that a reasonable basis
exists for contesting an Indemnified Tax, the relevant Lender or the
Administrative Agent, as applicable, shall cooperate with the Company in
challenging such Tax at the Company's expense if requested by the Company. If
any Lender or the Administrative Agent, as applicable, receives a refund
(whether by way of a direct payment or by offset) of any Indemnified Tax for
which a payment has been made pursuant to Section 2.16 or realizes any credit or
other tax benefit as a result of the payment of such Tax by any Borrower, which
refund, credit or tax benefit in the good faith judgment of such Lender or the
Administrative Agent, as the case may be, is allocable to such payment made
under Section 2.16, the amount of such refund, credit or tax benefit (together
with any interest received from the applicable Governmental Authority thereon)
shall be paid to such Borrower.
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46
SECTION 2.17. Payments Generally; Pro Rata Treatment; Sharing of
Set-offs. (a) Each Borrower shall make each payment required to be made by it
hereunder (whether of principal, interest or fees or under Section 2.14, 2.15 or
2.16, or otherwise) prior to 1:00 p.m., New York City time (or 1:00 p.m., London
time, in respect of principal of or interest on any Multicurrency Loan), on the
date when due, in immediately available funds, without set-off or counterclaim.
Any amounts received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments
shall be made in dollars to the Administrative Agent at its offices at 270 Park
Avenue, New York, New York (or in the applicable Eligible Currency to the
Administrative Agent at its offices at Trinity Tower, 9 Thomas Moore Street,
London, in respect of principal of or interest on any Multicurrency Loan),
except payments to be made directly to the Swingline Lender as expressly
provided herein and except that payments pursuant to Sections 2.14, 2.15, 2.16
and 10.03 shall be made directly to the Persons entitled thereto. The
Administrative Agent shall distribute any such payments received by it for the
account of any other Person to the appropriate recipient promptly following
receipt thereof. If any payment hereunder shall be due on a day that is not a
Business Day, the date for payment shall be extended to the next succeeding
Business Day, and, in the case of any payment accruing interest, interest
thereon shall be payable for the period of such extension. All Loans hereunder
shall be denominated and made, and all payments hereunder (whether of principal,
interest or otherwise) shall be made, in dollars, except that Eurocurrency
Revolving Loans may be denominated and made in Eligible Currencies as expressly
provided herein and principal of and interest on any Eurocurrency Revolving Loan
made in an Eligible Currency shall be paid in such Eligible Currency.
(b) If at any time insufficient funds are received by and available
to the Administrative Agent to pay fully all amounts of principal, interest and
fees then due hereunder, such funds shall be applied (i) first, to pay interest
and fees then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of interest and fees then due to such parties, and
(ii) second, to pay principal then due hereunder, ratably among the parties
entitled thereto in accordance with the amounts of principal then due to such
parties.
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47
(c) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Revolving Loans or participations in Swingline Loans
resulting in such Lender receiving payment of a greater proportion of the
aggregate amount of its Revolving Loans and participations in Swingline Loans
and accrued interest thereon than the proportion received by any other Lender,
then the Lender receiving such greater proportion shall purchase (for cash at
face value) participations in the Revolving Loans and participations in
Swingline Loans of other Lenders to the extent necessary so that the benefit of
all such payments shall be shared by the Lenders ratably in accordance with the
aggregate amount of principal of and accrued interest on their respective
Revolving Loans and participations in Swingline Loans; provided that (i) if any
such participations are purchased and all or any portion of the payment giving
rise thereto is recovered, such participations shall be rescinded and the
purchase price restored to the extent of such recovery, without interest, and
(ii) the provisions of this paragraph shall not be construed to apply to any
payment made by any Borrower pursuant to and in accordance with the express
terms of this Agreement or any payment obtained by a Lender as consideration for
the assignment of or sale of a participation in any of its Loans to any assignee
or participant, other than to any Borrower or any Subsidiary or Affiliate
thereof (as to which the provisions of this paragraph shall apply). Each
Borrower consents to the foregoing and agrees, to the extent it may effectively
do so under applicable law, that any Lender acquiring a participation pursuant
to the foregoing arrangements may exercise against such Borrower rights of
set-off and counterclaim with respect to such participation as fully as if such
Lender were a direct creditor of such Borrower in the amount of such
participation.
(d) Unless the Administrative Agent shall have received notice from
the Company or the relevant Borrower prior to the date on which any payment is
due to the Administrative Agent for the account of the Lenders hereunder that
such Borrower will not make such payment, the Administrative Agent may assume
that such Borrower has made such payment on such date in accordance herewith and
may, in reliance upon such assumption, distribute to the Lenders the amount due.
In such event, if such Borrower has not in fact made such payment, then each of
the Lenders severally agrees to repay to the Administrative Agent forthwith on
demand the
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48
amount so distributed to such Lender with interest thereon, for each day from
and including the date such amount is distributed to it to but excluding the
date of payment to the Administrative Agent, (i) in the case of a Borrowing in
dollars, at the Federal Funds Effective Rate and (ii) in the case of a Borrowing
in an Eligible Currency, at the rate reasonably determined by the Administrative
Agent to be the cost to it of funding such amount.
(e) If any Lender shall fail to make any payment required to be made
by it pursuant to Section 2.05(c), 2.06(b) or 2.17(d), then the Administrative
Agent may, in its discretion (notwithstanding any contrary provision hereof),
apply any amounts thereafter received by the Administrative Agent for the
account of such Lender to satisfy such Lender's obligations under such Sections
until all such unsatisfied obligations are fully paid.
SECTION 2.18. Mitigation Obligations; Replacement of Lenders. (a) If
any Lender requests compensation under Section 2.14, or if any Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.16, then such
Lender shall use reasonable efforts to designate a different lending office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the judgment
of such Lender, such designation or assignment (i) would eliminate or reduce
amounts payable pursuant to Section 2.14 or 2.16, as the case may be, in the
future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Company
hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 2.14, or if
any Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.16,
or if any Lender defaults in its obligation to fund Loans hereunder, then the
Company may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 10.04), all its interests, rights and obligations under this Agreement
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49
(other than any outstanding Competitive Loans held by it) to an assignee that
shall assume such obligations (which assignee may be another Lender, if a Lender
accepts such assignment); provided that (i) the Company shall have received the
prior written consent of the Administrative Agent (and, if a Commitment is being
assigned, the Swingline Lender), which consent shall not unreasonably be
withheld, (ii) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans (other than Competitive Loans) and
participations in Swingline Loans, accrued interest thereon, accrued fees and
all other amounts payable to it hereunder, from the assignee (to the extent of
such outstanding principal and accrued interest and fees) or the Company (in the
case of all other amounts) and (iii) in the case of any such assignment
resulting from a claim for compensation under Section 2.14 or payments required
to be made pursuant to Section 2.16, such assignment will result in a reduction
in such compensation or payments. A Lender shall not be required to make any
such assignment and delegation if, prior thereto, as a result of a waiver by
such Lender or otherwise, the circumstances entitling such Borrower to require
such assignment and delegation cease to apply.
SECTION 2.19. Borrowing Subsidiaries. On or after the Effective
Date, the Company may designate any Subsidiary of the Company (of which the
Company owns or Controls at least 80% of the ordinary voting power) as a
Borrowing Subsidiary by delivery to the Administrative Agent of a Borrowing
Subsidiary Agreement executed by such Subsidiary and the Company, and upon such
delivery such Subsidiary shall for all purposes of this Agreement be a Borrowing
Subsidiary and a party to this Agreement until the Company shall have executed
and delivered to the Administrative Agent a Borrowing Subsidiary Termination
with respect to such Subsidiary, whereupon such Subsidiary shall cease to be a
Borrowing Subsidiary and a party to this Agreement. Notwithstanding the
preceding sentence, no Borrowing Subsidiary Termination will become effective as
to any Borrowing Subsidiary at a time when any principal of or interest on any
Loan to such Borrowing Subsidiary shall be outstanding hereunder, provided that
such Borrowing Subsidiary Termination shall be effective to terminate such
Borrowing Subsidiary's right to make further Borrowings under this Agreement.
SECTION 2.20. Adjustment of Applicable Rate. As provided in the
definition of the term "Applicable Rate",
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50
the Applicable Rate may be adjusted in certain circumstances after April 1,
1997, with retroactive effect to April 1, 1997. In such event (a) the
Administrative Agent shall determine such retroactive adjustment and notify the
Company and the Lenders thereof and of the difference, if any, between (i) the
amounts paid by or to any party hereto prior to such determination and (ii) the
amounts that would have been so paid if such adjustment had been made on April
1, 1997 (the Administrative Agent's determinations thereof being conclusive and
binding absent manifest error) and (b) promptly following receipt of such
notice, any party hereto that received any excess payment shall refund the same
to the party that made such payment and any party hereto that made an
insufficient payment shall make payment to the party or parties entitled thereto
in an amount equal to such insufficiency, in each case without interest.
ARTICLE III
Representations and Warranties
The Company represents and warrants to the Lenders that:
SECTION 3.01. Organization; Powers. Each of the Company and its
Material Subsidiaries is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization, has all requisite power
and authority to carry on its business as now conducted and, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, is qualified to do business in,
and is in good standing in, every jurisdiction where such qualification is
required.
SECTION 3.02. Authorization; Enforceability. The Transactions are
within the Company's (and, as applicable, each Borrowing Subsidiary's) corporate
powers and have been duly authorized by all necessary corporate and, if
required, stockholder action. This Agreement has been duly executed and
delivered by the Company and constitutes a legal, valid and binding obligation
of the Company, and each Borrowing Subsidiary Agreement with respect to any
Borrowing Subsidiary (as to which a Borrowing Subsidiary Termination has not
become effective) has been duly executed and delivered by the Company and such
Borrowing Subsidiary and constitutes a legal, valid and binding obligation of
the
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51
Borrowing Subsidiary thereunder, in each case enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors' rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in equity
or at law. After giving effect to each Borrowing, the total of all notes, credit
arrangements, guarantees of indebtedness and/or other instruments of
indebtedness issued and outstanding by the Company and/or any subsidiary and/or
affiliate (within the meaning of the most recent resolutions of the Board of
Directors of the Company) will not exceed the amount duly authorized by the
resolutions of the Board of Directors of the Company at the time of such
Borrowing.
SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions
(a) do not require any consent or approval of, registration or filing with, or
any other action by, any Governmental Authority, except such as have been
obtained or made and are in full force and effect and except for such consents,
approvals, registrations, filings and other actions the failure to obtain or
make could not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect, (b) will not violate any applicable law or
regulation or the charter, by-laws or other organizational documents of the
Company or any of its Subsidiaries or any order of any Governmental Authority,
except for such violations which, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, (c) will not
violate or result in a default under any indenture, agreement or other
instrument binding the Company or any of its Subsidiaries or its assets, or give
rise to a right thereunder to require any payment to be made by the Company or
any of its Subsidiaries, except for such violations and defaults which,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect, and (d) will not result in the creation or imposition
of any Lien on any asset of the Company or any of its Material Subsidiaries.
SECTION 3.04. Financial Condition; No Material Adverse Change. (a)
The Company has heretofore furnished to the Lenders its consolidated balance
sheet and statements of income, shareholders' equity and cash flows (i) as of
and for the fiscal year ended December 31, 1995, reported on by Coopers &
Lybrand L.L.P., independent public accountants, and (ii) as of and for the
fiscal quarter and the portion of
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52
the fiscal year ended June 30, 1996, certified by its chief financial officer.
Such financial statements present fairly, in all material respects, the
financial position and results of operations and cash flows of the Company and
its consolidated Subsidiaries as of such dates and for such periods in
accordance with GAAP, subject to year-end audit adjustments and the absence of
footnotes in the case of the statements referred to in clause (ii) above.
(b) Except as may otherwise be disclosed in the Spin-Off
Information, since December 31, 1995, there has been no material adverse change
in the business, assets, operations, prospects or financial condition, of the
Company and its Subsidiaries, taken as a whole.
SECTION 3.05. Properties. (a) Each of the Company and its Material
Subsidiaries has good title to, or valid leasehold interests in, all its real
and personal property material to the business of the Company and its
Subsidiaries, taken as a whole, except for minor defects in title that do not
interfere with its ability to conduct its business as currently conducted or to
utilize such properties for their intended purposes.
(b) Each of the Company and its Subsidiaries owns, or is licensed to
use, all trademarks, tradenames, copyrights, patents and other intellectual
property material to the business of the Company and its Subsidiaries taken as a
whole, and the use thereof by the Company and its Subsidiaries does not infringe
upon the rights of any other Person, except for any such infringements that,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.
SECTION 3.06. Litigation and Environmental Matters. (a) There are no
actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries (i) as to which
there is a reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect (other than the Disclosed
Matters) or (ii) that involve this Agreement, any Borrowing Subsidiary Agreement
or the Transactions.
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53
(b) Except for the Disclosed Matters and except with respect to any
other matters that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, neither the Company nor any of
its Subsidiaries (i) has failed to comply with any Environmental Law or to
obtain, maintain or comply with any permit, license or other approval required
under any Environmental Law, (ii) has become subject to any Environmental
Liability, (iii) has received notice of any claim with respect to any
Environmental Liability or (iv) knows of any basis for any Environmental
Liability.
(c) Since the date of this Agreement, there has been no change in
the status of the Disclosed Matters that, individually or in the aggregate, has
resulted in a Material Adverse Effect.
SECTION 3.07. Compliance with Laws and Agreements. Each of the
Company and its Subsidiaries is in compliance with all laws, regulations and
orders of any Governmental Authority applicable to it or its property and all
indentures, agreements and other instruments binding upon it or its property,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect. No Default has
occurred and is continuing.
SECTION 3.08. Investment and Holding Company Status. Neither the
Company nor any of its Material Subsidiaries is (a) an "investment company" as
defined in, or subject to regulation under, the Investment Company Act of 1940
or (b) a "holding company" as defined in, or subject to regulation under, the
Public Utility Holding Company Act of 1935.
SECTION 3.09. Taxes. Each of the Company and each of its
Subsidiaries has timely filed or caused to be filed all Tax returns and reports
required to have been filed and has paid or caused to be paid all Taxes required
to have been paid by it, except (a) Taxes that are being contested in good faith
by appropriate proceedings and for which the Company or such Subsidiary, as
applicable, has set aside on its books adequate reserves or (b) to the extent
that the failure to do so could not reasonably be expected to result in a
Material Adverse Effect.
SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably
expected to occur that, when taken together
<PAGE>
54
with all other such ERISA Events for which liability is reasonably expected to
occur, could reasonably be expected to result in a Material Adverse Effect. The
present value of all accumulated benefit obligations under each Plan (based on
the assumptions used for purposes of Statement of Financial Accounting Standards
No. 87) did not, as of the date of the most recent financial statements
reflecting such amounts, exceed the fair market value of the assets of such Plan
by an amount that could reasonably be expected to result in a Material Adverse
Effect, and the present value of all accumulated benefit obligations of all
underfunded Plans (based on the assumptions used for purposes of Statement of
Financial Accounting Standards No. 87) did not, as of the date of the most
recent financial statements reflecting such amounts, exceed the fair market
value of the assets of all such underfunded Plans by an amount that could
reasonably be expected to result in a Material Adverse Effect.
SECTION 3.11. Disclosure. None of the reports, financial statements,
certificates or other information furnished by or on behalf of any Borrower to
the Administrative Agent or any Lender in connection with the negotiation of
this Agreement or any Borrowing Subsidiary Agreement or delivered hereunder or
thereunder (as modified or supplemented by other information so furnished)
contains any material misstatement of fact or omits to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided that, with respect to
projected financial information, the Company represents only that such
information was prepared in good faith based upon assumptions believed to be
reasonable at the time.
SECTION 3.12. Subsidiaries. Schedule 3.12 sets forth as of the
Effective Date a list of all Subsidiaries and the percentage ownership interest
of the Company therein. As of the Effective Date, the shares of capital stock of
such Subsidiaries will be fully paid and non-assessable and such shares and
other ownership interests so indicated by Schedule 3.12 will be owned by the
Company, directly or indirectly, free and clear of all Liens.
SECTION 3.13. Solvency. On the Effective Date and immediately after
the consummation of the Spin-Off, (a) the fair value of the assets of the
Company, at a fair valuation, will exceed its debts and liabilities,
subordinated, contingent or otherwise; (b) the present fair
<PAGE>
55
saleable value of the property of the Company will be greater than the amount
that will be required to pay the probable liability of its debts and other
liabilities, subordinated, contingent or otherwise, as such debts and other
liabilities become absolute and matured; (c) the Company does not intend to
incur or does not believe it will incur debts and liabilities, subordinated,
contingent or otherwise, beyond its ability to pay such debts and liabilities as
they become absolute and matured; and (d) the Company will not have unreasonably
small capital with which to conduct the business in which it is engaged as such
business is now conducted and is proposed to be conducted following the
Effective Date and the Spin-Off.
ARTICLE IV
Conditions
SECTION 4.01. Effective Date. The obligations of the Lenders to make
Loans hereunder shall not become effective until the date on which each of the
following conditions is satisfied (or waived in accordance with Section 10.02):
(a) The Administrative Agent (or its counsel) shall have received
from each party hereto either (i) a counterpart of this Agreement signed
on behalf of such party or (ii) written evidence satisfactory to the
Administrative Agent (which may include telecopy transmission of a signed
signature page of this Agreement) that such party has signed a counterpart
of this Agreement.
(b) The Administrative Agent shall have received favorable written
opinions (addressed to the Administrative Agent and the Lenders and dated
the Effective Date) of Steven Boatti, Associate General Counsel to the
Company, and Simpson Thacher & Bartlett, counsel for the Company,
substantially in the form of Exhibit B-1 and B-2, respectively, and
covering such other matters relating to the Company, this Agreement or the
Transactions as the Required Lenders shall reasonably request. The Company
hereby requests such counsel to deliver such opinion.
(c) The Administrative Agent shall have received such documents and
certificates as the Administrative
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56
Agent or its counsel may reasonably request relating to the organization,
existence and good standing of the Company, the authorization of the
Transactions and any other legal matters relating to the Company, this
Agreement or the Transactions, all in form and substance satisfactory to
the Administrative Agent and its counsel.
(d) The Administrative Agent shall have received a certificate,
dated the Effective Date and signed by the Chairman, the President, a Vice
President or a Financial Officer of the Company, confirming compliance
with the conditions set forth in paragraphs (a) (including the
representations and warranties set forth in Section 3.04) and (b) of
Section 4.02.
(e) The Administrative Agent shall have received all fees and other
amounts due and payable on or prior to the Effective Date, including, to
the extent invoiced, reimbursement or payment of all out-of-pocket
expenses required to be reimbursed or paid by the Company hereunder.
(f) The Administrative Agent shall have received evidence
satisfactory to it that the Company's existing loan agreements have been
terminated and all loans and obligations thereunder have been paid in
full.
(g) The Lenders shall have received copies of the financial
statements referred to in Section 3.04 and the pro forma financial
statements of the Company as of June 30, 1996, giving effect to the
Spin-Off as if it had occurred on such date.
The Administrative Agent shall notify the Company and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans hereunder shall not
become effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 10.02) at or prior to 3:00 p.m., New York City time, on
September 5, 1996 (and, in the event such conditions are not so satisfied or
waived, the Commitments shall terminate at such time).
SECTION 4.02. Each Credit Event. The obligation of each Lender to
make a Loan on the occasion of any Borrowing is subject to the satisfaction of
the following conditions:
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57
(a) The representations and warranties of the Company set forth in
this Agreement (other than the representations and warranties set forth in
Section 3.04) and, in the case of a Borrowing by a Borrowing Subsidiary,
the representations and warranties of such Borrowing Subsidiary in its
Borrowing Subsidiary Agreement shall be true and correct on and as of the
date of such Borrowing.
(b) At the time of and immediately after giving effect to such
Borrowing, no Default shall have occurred and be continuing.
(c) The Administrative Agent shall have received a certificate,
dated the date of such Borrowing and signed by a Financial Officer of the
Company, confirming that after giving effect to such Borrowing, the total
of all notes, credit arrangements, guarantees of indebtedness and/or other
instruments of indebtedness issued and outstanding by the Company and/or
any subsidiary and/or affiliate (within the meaning of the most recent
resolutions of the Board of Directors of the Company) will not exceed the
amount duly authorized by the resolutions of the Board of Directors of the
Company at the time of such Borrowing.
Each Borrowing shall be deemed to constitute a representation and warranty by
the Company and, if applicable, the relevant Borrowing Subsidiary on the date
thereof as to the matters specified in paragraphs (a) and (b) of this Section.
SECTION 4.03. Each Borrowing Subsidiary Credit Event. The obligation
of each Lender to make Loans hereunder to any Borrowing Subsidiary is subject to
the satisfaction of the following conditions:
(a) The Administrative Agent (or its counsel) shall have received
from each party thereto either (i) a counterpart of such Borrowing
Subsidiary's Borrowing Subsidiary Agreement or (ii) written evidence
satisfactory to the Administrative Agent (which may include telecopy
transmission of a signed signature page thereof) that such party has
signed a counterpart of such Borrowing Subsidiary Agreement.
(b) The Administrative Agent shall have received a favorable written
opinion of counsel for such
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58
Borrowing Subsidiary (which counsel shall be reasonably acceptable to the
Administrative Agent), substantially in the form of Exhibit C, and
covering such other matters relating to such Borrowing Subsidiary or its
Borrowing Subsidiary Agreement as the Required Lenders
shall reasonably request.
(c) The Administrative Agent shall have received such documents and
certificates as the Administrative Agent or its counsel may reasonably
request relating to the organization, existence and good standing of such
Borrowing Subsidiary, the authorization of the Transactions relating to
such Borrowing Subsidiary and any other legal matters relating to such
Borrowing Subsidiary, its Borrowing Subsidiary Agreement or such
Transactions, all in form and substance satisfactory to the Administrative
Agent and its counsel.
ARTICLE V
Affirmative Covenants
Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full, the Company covenants and agrees with the Lenders that:
SECTION 5.01. Financial Statements and Other Information. The
Company will furnish to the Administrative Agent (with a copy for each Lender):
(a) within 90 days after the end of each fiscal year of the Company,
its audited consolidated balance sheet and related statements of income,
shareholders' equity and cash flows as of the end of and for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year (such comparison to be included for the first time in
the financial statements delivered with respect to the 1997 fiscal year),
all reported on by Coopers & Lybrand L.L.P. or other independent public
accountants of recognized national standing (without a "going concern" or
like qualification or exception and without any qualification or exception
as to the scope of such audit) to the effect that such consolidated
financial statements present fairly in all material respects the financial
condition and results of operations of the
<PAGE>
59
Company and its consolidated Subsidiaries on a consolidated basis in
accordance with GAAP consistently applied;
(b) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of the Company, its consolidated balance
sheet and related statements of income, shareholders' equity and cash
flows as of the end of and for such fiscal quarter and the then elapsed
portion of the fiscal year, setting forth in each case in comparative form
the figures for the corresponding period or periods of (or, in the case of
the balance sheet, as of the end of) the previous fiscal year (such
comparison to be included for the first time in the financial statements
delivered with respect to the 1997 fiscal year), all certified by one of
its Financial Officers as presenting fairly in all material respects the
financial condition and results of operations of the Company and its
consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes;
(c) prior to consummation of the Spin-Off, copies of the final form
of the Information Statement relating to the Spin-Off and copies of the
Company's pro forma consolidated balance sheet and related statements of
income, shareholders' equity (if any) and cash flow (if any) as of and for
the most recent date/dates and period/periods, prepared giving effect to
the Spin-Off as if it had occurred on such date/dates and for such
period/periods;
(d) concurrently with any delivery of financial statements under
clause (a), (b) or (c) above, a certificate of a Financial Officer of the
Company (i) certifying as to whether a Default has occurred and, if a
Default has occurred, specifying the details thereof and any action taken
or proposed to be taken with respect thereto, (ii) setting forth
reasonably detailed calculations demonstrating compliance with Sections
6.05 and 6.06 and (iii) stating whether any material change in GAAP or in
the application thereof has occurred since the date of the audited
financial statements referred to in Section 3.04 affecting the Company
and, if any such change has occurred, specifying the effect of such change
on the financial statements accompanying such certificate;
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60
(e) concurrently with any delivery of financial statements under
clause (a) above, a certificate of the accounting firm that reported on
such financial statements stating whether they obtained knowledge during
the course of their examination of such financial statements of any
Default (which certificate may be limited to the extent required by
accounting rules or guidelines);
(f) promptly after the same become publicly available, copies of all
periodic and other material reports, proxy statements and other materials
filed by the Company or any Subsidiary with the Securities and Exchange
Commission, or any Governmental Authority succeeding to any or all of the
functions of said Commission, or with any national securities exchange, or
distributed by the Company to its shareholders generally, as the case may
be, and all amendments to any of the foregoing; and
(g) promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of the
Company or any Subsidiary, or compliance with the terms of this Agreement,
as the Administrative Agent may reasonably request.
SECTION 5.02. Notices of Material Events. The Company will furnish
to the Administrative Agent and each Lender prompt written notice of the
following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or proceeding by
or before any arbitrator or Governmental Authority against or affecting
the Company or any Subsidiary thereof that, if adversely determined, could
reasonably be expected to result in a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together with
any other ERISA Events that have occurred, could reasonably be expected to
result in liability of the Company and its Subsidiaries in an aggregate
amount that could reasonably be expected to result in a Material Adverse
Effect; and
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61
(d) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Company setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.
SECTION 5.03. Existence; Conduct of Business. The Company will, and
will cause each of its Material Subsidiaries to, do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges and franchises material
to the conduct of the business of the Company and its Subsidiaries, taken as a
whole; provided that the foregoing shall not prohibit any merger, consolidation,
liquidation or dissolution permitted under Section 6.02.
SECTION 5.04. Payment of Obligations. The Company will, and will
cause each of its Subsidiaries to, pay its obligations, including Tax
liabilities, that, if not paid, could result in a Material Adverse Effect before
the same shall become delinquent or in default, except where (a) the validity or
amount thereof is being contested in good faith by appropriate proceedings, (b)
the Company or such Subsidiary has set aside on its books adequate reserves with
respect thereto in accordance with GAAP and (c) the failure to make payment
pending such contest could not reasonably be expected to result in a Material
Adverse Effect.
SECTION 5.05. Maintenance of Properties; Insurance. The Company
will, and will cause each of its Material Subsidiaries to, (a) keep and maintain
all property material to the conduct of its business in good working order and
condition, ordinary wear and tear excepted, and (b) maintain, with financially
sound and reputable insurance companies, insurance in such amounts and against
such risks as are customarily maintained by companies engaged in the same or
similar businesses operating in the same or similar locations; provided that any
such insurance may be maintained through a program of self-insurance to the
extent customary among such companies.
SECTION 5.06. Books and Records; Inspection Rights. The Company
will, and will cause each of its
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Material Subsidiaries to, keep proper books of record and account in accordance
with GAAP (or, the case of a foreign Subsidiary, generally accepted accounting
principles in the jurisdiction of organization of such foreign Subsidiary). The
Company will, and will cause each of its Material Subsidiaries to, permit any
representatives designated by the Administrative Agent on its own initiative or
at the request of the Required Lenders, upon reasonable prior notice, to visit
and inspect its properties, to examine and make extracts from its books and
records, and to discuss its affairs, finances and condition with its officers
and independent accountants, all at such reasonable times and as often as
reasonably requested.
SECTION 5.07. Compliance with Laws. The Company will, and will cause
each of its Subsidiaries to, comply with all laws, rules, regulations and orders
of any Governmental Authority applicable to it or its property (including
ERISA), except where the failure to do so, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect.
SECTION 5.08. Use of Proceeds. The proceeds of the Loans will be
used only for general corporate purposes, including back-up for the Company's
commercial paper program. No part of the proceeds of any Loan will be used,
whether directly or indirectly, for any purpose that entails a violation of any
of the Regulations of the Board, including Regulations G, U and X.
ARTICLE VI
Negative Covenants
Until the Commitments have expired or terminated and the principal
of and interest on each Loan and all fees payable hereunder have been paid in
full, the Company covenants and agrees with the Lenders that:
SECTION 6.01. Liens. The Company will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Lien on any property
or asset now owned
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or hereafter acquired by it, or assign or sell any income or revenues (including
accounts receivable) or rights in respect of any thereof, except:
(a) Permitted Encumbrances;
(b) any Lien on any property or asset of the Company or any
Subsidiary existing on the date hereof and set forth in Schedule 6.01;
provided that (i) such Lien shall not apply to any other property or asset
of the Company or any Subsidiary and (ii) such Lien shall secure only
those obligations which it secures on the date hereof and extensions,
renewals, refinancings and replacements thereof that do not increase the
outstanding principal amount thereof (other than by an amount equal to any
costs and expenses incurred in connection with such extension, renewal,
refinancing or replacement);
(c) any Lien existing on any property or asset prior to the
acquisition thereof by the Company or any Subsidiary or existing on any
property or asset of any Person that becomes a Subsidiary after the date
hereof prior to the time such Person becomes a Subsidiary or any Lien on
any asset of any Person existing at the time such Person is merged into or
consolidated with the Company or a Subsidiary; provided that (i) such Lien
is not created in contemplation of or in connection with such acquisition
or such Person becoming a Subsidiary or such merger, as the case may be,
(ii) such Lien shall not apply to any other property or assets of the
Company or any Subsidiary and (iii) such Lien shall secure only those
obligations which it secures on the date of such acquisition or the date
such Person becomes a Subsidiary or the date of such merger, as the case
may be, and extensions, renewals, refinancings and replacements thereof
that do not increase the outstanding principal amount thereof (other than
by an amount equal to any costs and expenses incurred in connection with
such extension, renewal, refinancing or replacement);
(d) any Lien on any asset (i) initially securing Indebtedness
incurred or assumed for the purpose of financing all or any part of the
cost of acquiring or constructing such asset or (ii) securing Indebtedness
incurred to extend, renew, refinance or replace the Indebtedness then
secured by such Lien, provided that
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(x) such Lien attaches to such asset concurrently with or within 90 days
after the acquisition thereof and (y) the principal amount of Indebtedness
secured by such Lien shall not be increased in connection with any
extension, renewal, refinancing or replacement of such Indebtedness (other
than by an amount equal to any costs and expenses incurred in connection
with such extension, renewal, refinancing or replacement);
(e) any Lien arising in connection with the sale or financing of
accounts receivable by the Company or any of its Subsidiaries provided
that the uncollected amount of account receivables subject at any time to
any such sale or financing shall not exceed $150,000,000;
(f) any Lien in favor of the Company or any Subsidiary granted by
the Company or any Subsidiary in order to secure any intercompany
obligations; and
(g) any Lien to secure Indebtedness and other obligations if,
immediately after the incurrence thereof, the sum (without duplication) of
all amounts secured by Liens which would not be permitted but for this
clause (g) does not exceed $150,000,000.
SECTION 6.02. Fundamental Changes. (a) The Company will not, and
will not permit any of its Material Subsidiaries to, merge into or consolidate
with any other Person, or permit any other Person to merge into or consolidate
with it, or sell, transfer, lease or otherwise dispose of (in one transaction or
in a series of transactions) all or substantially all of its assets, or all or
substantially all of the stock of any of its Subsidiaries (in each case, whether
now owned or hereafter acquired), or liquidate or dissolve, except that, if at
the time thereof and immediately after giving effect thereto no Default shall
have occurred and be continuing (i) any Subsidiary may merge into the Company in
a transaction in which the Company is the surviving corporation, (ii) any
Subsidiary may merge into any Subsidiary in a transaction in which the surviving
entity is a Subsidiary, (iii) any Subsidiary may sell, transfer, lease or
otherwise dispose of its assets to the Company or to another Subsidiary, (iv)
any Subsidiary may liquidate or dissolve if the Company determines in good faith
that such liquidation or dissolution is in the best interests of the Company and
would not result in a Material Adverse Effect; provided that a Borrowing
Subsidiary may not
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merge, consolidate, liquidate or dissolve unless, in addition to the foregoing
conditions, the surviving entity, or the entity into which such Borrowing
Subsidiary liquidates or dissolves, is a Borrower and assumes all Obligations of
such Borrowing Subsidiary and (v) the Spin-Off may be consummated if (A) the
Company has delivered to the Lenders the pro forma financial statements required
by clause (c) of Section 5.01 and such pro forma financial statements do not
differ in any material respect with respect to the Company from the financial
statements contained in the Spin-Off Information, (B) the Spin-Off is
consummated in all material respects with respect to the Company in accordance
with the Spin-Off Information and all applicable laws, (C) immediately prior to
the Spin-Off, no material adverse change in the business, assets, operations or
financial condition of the Company and its Subsidiaries, taken as a whole, shall
have occurred and (D) immediately after giving effect to the Spin-Off, no
Default shall have occurred and be continuing.
(b) The Company will not, and will not permit any of its
Subsidiaries to, engage to any material extent in any business other than
businesses of the type conducted by the Company and its Subsidiaries on the date
of execution of this Agreement and businesses reasonably related thereto.
SECTION 6.03. Transactions with Affiliates. The Company will not,
and will not permit any of its Subsidiaries to, sell, lease or otherwise
transfer any property or assets to, or purchase, lease or otherwise acquire any
property or assets from, or otherwise engage in any other transactions with, any
of its Affiliates, except (a) in the ordinary course of business at prices and
on terms and conditions not less favorable to the Company or such Subsidiary
than could be obtained on an arm's-length basis from unrelated third parties,
(b) transactions between or among the Company and its wholly owned Subsidiaries
not involving any other Affiliate and (c) transactions described in the Spin-Off
Information.
SECTION 6.04. Sale and Lease-Back Transactions. The Company will
not, and will not permit any of its Subsidiaries to, directly or indirectly,
enter into any arrangement with any Person (other than a Subsidiary) whereby it
shall sell or transfer any property used or useful in its business, whether now
owned or hereafter acquired, and thereafter rent or lease such property or other
property which it intends to use for substantially the
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same purpose or purposes as the property being sold or transferred, except for
any such arrangement or arrangements with an aggregate sale price not exceeding
at any time $150,000,000.
SECTION 6.05. Total Debt to EBITDA Ratio. The Total Debt to EBITDA
Ratio will not exceed 4.0 to 1.0 at any time. Following the consummation of the
Spin-Off, for purposes of calculating EBITDA for any relevant period prior to
the Spin-Off, EBITDA for such period shall be determined on a pro forma basis
adjusted to give effect to the Spin-Off as if the Spin-Off had occurred at the
beginning of such period.
SECTION 6.06. Interest Coverage Ratio. The Interest Coverage Ratio
for any period of four consecutive fiscal quarters of the Company will not be
less than 3.0 to 1.0. Following the consummation of the Spin-Off, for purposes
of calculating EBITDA and Interest Expense for any relevant period prior to the
Spin-Off, EBITDA and Interest Expense for such period shall be determined on a
pro forma basis adjusted to give effect to the Spin-Off as if the Spin-Off had
occurred at the beginning of such period.
SECTION 6.07. Borrowing Subsidiaries. The Company will not cease to
own or Control at least 80% of the ordinary voting power of any Borrowing
Subsidiary.
ARTICLE VII
Events of Default
If any of the following events ("Events of Default") shall occur and
be continuing:
(a) any Borrower shall fail to pay any principal of any Loan of such
Borrower when and as the same shall become due and payable, whether at the
due date thereof or at a date fixed for prepayment thereof or otherwise;
(b) any Borrower shall fail to pay any interest on any Loan of such
Borrower or any fee or any other amount (other than an amount referred to
in clause (a) of this Article) payable by such Borrower under this
Agreement, when and as the same shall become due
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and payable, and such failure shall continue unremedied for a period
of three Business Days;
(c) any representation or warranty made or deemed made by or on
behalf of the Company or any Subsidiary in or in connection with this
Agreement, any Borrowing Subsidiary Agreement or any amendment or
modification hereof or thereof, or in any report, certificate, financial
statement or other document furnished pursuant to or in connection with
this Agreement, any Borrowing Subsidiary Agreement or any amendment or
modification hereof or thereof, shall prove to have been incorrect when
made or deemed made;
(d) the Company shall fail to observe or perform any covenant,
condition or agreement contained in Section 5.02(a), 5.03 (with respect to
the Company's existence), 5.08 or in Article VI;
(e) the Company shall fail to observe or perform any covenant,
condition or agreement contained in this Agreement or any Borrowing
Subsidiary Agreement (other than those specified in clause (a), (b), (c)
or (d) of this Article), and such failure shall continue unremedied for a
period of 30 days after notice thereof from the Administrative Agent
(given at the request of any Lender) to the Company;
(f) the Company or any Subsidiary shall fail to make any payment
(whether of principal or interest and regardless of amount) in respect of
any Material Indebtedness, when and as the same shall become due and
payable;
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables
or permits (with or without the giving of notice, the lapse of time or
both) the holder or holders of any Material Indebtedness or any trustee or
agent on its or their behalf to cause any Material Indebtedness to become
due, or to require the prepayment, repurchase, redemption or defeasance
thereof, prior to its scheduled maturity; provided that this clause (g)
shall not apply to secured Indebtedness that becomes due as a result of
the voluntary sale or transfer of the property or assets securing such
Indebtedness;
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(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other
relief in respect of the Company or any Material Subsidiary or its debts,
or of a substantial part of its assets, under any Federal, state or
foreign bankruptcy, insolvency, receivership or similar law now or
hereafter in effect or (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the Company
or any Material Subsidiary or for a substantial part of its assets, and,
in any such case, such proceeding or petition shall continue undismissed
for 60 days or an order or decree approving or ordering any of the
foregoing shall be entered;
(i) the Company or any Material Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation,
reorganization or other relief under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in
effect, (ii) consent to the institution of, or fail to contest in a timely
and appropriate manner, any proceeding or petition described in clause (h)
of this Article, (iii) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar
official for the Company or any Material Subsidiary or for a substantial
part of its assets, (iv) file an answer admitting the material allegations
of a petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors or (vi) take any action for the
purpose of effecting any of the foregoing;
(j) the Company or any Material Subsidiary shall become unable,
admit in writing or fail generally to pay its debts as they become due;
(k) one or more judgments for the payment of money in an aggregate
amount in excess of $25,000,000 shall be rendered against the Company, any
Subsidiary or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken by a
judgment creditor to attach or levy upon any assets of the Company or any
Subsidiary to enforce any such judgment;
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(l) an ERISA Event shall have occurred that, in the opinion of the
Required Lenders, when taken together with all other ERISA Events that
have occurred, could reasonably be expected to result in liability of the
Company and its Subsidiaries in an aggregate amount that could reasonably
be expected to result in a Material Adverse Effect;
(m) the Company shall fail to observe or perform any covenant,
condition or agreement contained in Article IX or the guarantee of the
Company hereunder shall not be (or shall be claimed by any Person not to
be) valid or in full force and effect; or
(n) a Change in Control shall occur;
then, and in every such event (other than an event with respect to any Borrower
described in clause (h) or (i) of this Article), and at any time thereafter
during the continuance of such event, the Administrative Agent may, and at the
request of the Required Lenders shall, by notice to the Company, take either or
both of the following actions, at the same or different times: (i) terminate the
Commitments, and thereupon the Commitments shall terminate immediately, and (ii)
declare the Loans then outstanding to be due and payable in whole (or in part,
in which case any principal not so declared to be due and payable may thereafter
be declared to be due and payable), and thereupon the principal of the Loans so
declared to be due and payable, together with accrued interest thereon and all
fees and other obligations of the Borrowers accrued hereunder, shall become due
and payable immediately, without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by each Borrower; and in case of any
event with respect to the Company described in clause (h) or (i) of this
Article, the Commitments shall automatically terminate and the principal of the
Loans then outstanding, together with accrued interest thereon and all fees and
other obligations of the Borrowers accrued hereunder, shall automatically become
due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by each Borrower; and in the case of any
event with respect to any Borrowing Subsidiary described in clause (h) or (i) of
this Article, (i) the eligibility of such Borrowing Subsidiary to borrow shall
thereupon terminate and (ii) the Loans of such Borrowing Subsidiary shall become
immediately due and payable, together with accrued interest thereon and all fees
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and other obligations thereunder of such Borrowing Subsidiary accrued
thereunder, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by each Borrowing Subsidiary.
ARTICLE VIII
The Administrative Agent
Each of the Lenders hereby irrevocably appoints the Administrative
Agent as its agent and authorizes the Administrative Agent to take such actions
on its behalf and to exercise such powers as are delegated to the Administrative
Agent by the terms hereof, together with such actions and powers as are
reasonably incidental thereto.
The bank serving as the Administrative Agent hereunder shall have
the same rights and powers in its capacity as a Lender as any other Lender and
may exercise the same as though it were not the Administrative Agent, and such
bank and its Affiliates may accept deposits from, lend money to and generally
engage in any kind of business with the Company or any Subsidiary or other
Affiliate thereof as if it were not the Administrative Agent hereunder.
The Administrative Agent shall not have any duties or obligations
except those expressly set forth herein. Without limiting the generality of the
foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or
other implied duties, regardless of whether a Default has occurred and is
continuing, (b) the Administrative Agent shall not have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated hereby that the Administrative Agent is
required to exercise in writing by the Required Lenders, and (c) except as
expressly set forth herein, the Administrative Agent shall not have any duty to
disclose, and shall not be liable for the failure to disclose, any information
relating to the Company or any of its Subsidiaries that is communicated to or
obtained by the bank serving as Administrative Agent or any of its Affiliates in
any capacity. The Administrative Agent shall not be liable for any action taken
or not taken by it with the consent or at the request of the Required Lenders or
in the absence of its own gross negligence or wilful misconduct. The
Administrative Agent shall be deemed not to have knowledge of any Default unless
and until written
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notice thereof is given to the Administrative Agent by a Borrower or a Lender,
and the Administrative Agent shall not be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or representation made in
or in connection with this Agreement or any Borrowing Subsidiary Agreement, (ii)
the contents of any certificate, report or other document delivered hereunder or
thereunder or in connection herewith or therewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth herein, (iv) the validity, enforceability, effectiveness or genuineness of
this Agreement or any Borrowing Subsidiary Agreement or any other agreement,
instrument or document, or (v) the satisfaction of any condition set forth in
Article IV or elsewhere herein, other than to confirm receipt of items expressly
required to be delivered to the Administrative Agent.
The Administrative Agent shall be entitled to rely upon, and shall
not incur any liability for relying upon, any notice, request, certificate,
consent, statement, instrument, document or other writing believed by it to be
genuine and to have been signed or sent by the proper Person. The Administrative
Agent also may rely upon any statement made to it orally or by telephone and
believed by it to be made by the proper Person, and shall not incur any
liability for relying thereon. The Administrative Agent may consult with legal
counsel (who may be counsel for any Borrower), independent accountants and other
experts selected by it, and shall not be liable for any action taken or not
taken by it in accordance with the advice of any such counsel, accountants or
experts.
The Administrative Agent may perform any and all of its duties and
exercise its rights and powers by or through any one or more sub-agents
appointed by the Administrative Agent. The Administrative Agent and any such
sub-agent may perform any and all of its duties and exercise its rights and
powers through their respective Related Parties. The exculpatory provisions of
the preceding paragraphs shall apply to any such sub-agent and to the Related
Parties of the Administrative Agent and any such sub-agent, and shall apply to
their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Administrative Agent.
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Subject to the appointment and acceptance of a successor
Administrative Agent as provided in this paragraph, the Administrative Agent may
resign at any time by notifying the Lenders and the Company. Upon any such
resignation, the Required Lenders shall have the right, in consultation with the
Company, to appoint a successor (and, at any time when no Default shall have
occurred and is continuing, with the prior written consent of the Company). If
no successor shall have been so appointed by the Required Lenders and shall have
accepted such appointment within 30 days after the retiring Administrative Agent
gives notice of its resignation, then the retiring Administrative Agent may, on
behalf of the Lenders, appoint a successor Administrative Agent which shall be a
bank with an office in New York, New York, or an Affiliate of any such bank.
Upon the acceptance of its appointment as Administrative Agent hereunder by a
successor, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. The fees payable by the Company to a successor
Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between the Company and such successor. After the
Administrative Agent's resignation hereunder, the provisions of this Article and
Section 10.03 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Administrative Agent.
Each Lender acknowledges that it has, independently and without
reliance upon the Administrative Agent or any other Lender and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any related agreement or any document furnished hereunder or thereunder.
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ARTICLE IX
Guarantee
In order to induce the Lenders to extend credit hereunder, the
Company hereby irrevocably and unconditionally guarantees, as a primary obligor
and not merely as a surety, the Obligations. The Company further agrees that the
due and punctual payment of the Obligations may be extended or renewed, in whole
or in part, without notice to or further assent from it, and that it will remain
bound upon its Guarantee hereunder notwithstanding any such extension or renewal
of any Obligation.
The Company waives presentment to, demand of payment from and
protest to any Borrowing Subsidiary of any of the Obligations, and also waives
notice of acceptance of its obligations and notice of protest for nonpayment.
The obligations of the Company hereunder shall not be affected by (a) the
failure of any Lender or the Administrative Agent to assert any claim or demand
or to enforce any right or remedy against any Borrowing Subsidiary under the
provisions of this Agreement or otherwise; (b) any rescission, waiver, amendment
or modification of any of the terms or provisions of this Agreement, any
Borrowing Subsidiary Agreement or any other agreement; or (c) the failure of any
Lender to exercise any right or remedy against any Borrowing Subsidiary.
The Company further agrees that its agreement hereunder constitutes
a promise of payment when due (whether or not any bankruptcy or similar
proceeding shall have stayed the accrual or collection of any of the Obligations
or operated as a discharge thereof) and not merely of collection, and waives any
right to require that any resort be had by any Lender to any balance of any
deposit account or credit on the books of any Lender in favor of any Borrower or
any other person.
The obligations of the Company hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, and shall not
be subject to any defense or setoff, counterclaim, recoupment or termination
whatsoever, by reason of the invalidity, illegality or unenforceability of the
Obligations, any impossibility in the performance of the Obligations or
otherwise. Without limiting the generality of the foregoing, the obligations of
the Company hereunder shall not be discharged or impaired or
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otherwise affected by the failure of the Administrative Agent or any Lender to
assert any claim or demand or to enforce any remedy under this Agreement or any
other agreement, by any waiver or modification in respect of any thereof, by any
default, failure or delay, wilful or otherwise, in the performance of the
Obligations, or by any other act or omission which may or might in any manner or
to any extent vary the risk of the Company or otherwise operate as a discharge
of the Company or any other Borrower as a matter of law or equity.
The Company further agrees that its obligations hereunder shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any Obligation is rescinded or must otherwise
be restored by the Administrative Agent or any Lender upon the bankruptcy or
reorganization of any Borrower or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which the Administrative Agent or any Lender may have at law or in equity
against the Company by virtue hereof, upon the failure of any Borrowing
Subsidiary to pay any Obligation when and as the same shall become due, whether
at maturity, by acceleration, after notice of prepayment or otherwise, the
Company hereby promises to and will, upon receipt of written demand by the
Administrative Agent, forthwith pay, or cause to be paid, in cash the amount of
such unpaid Obligation. The Company further agrees that if payment in respect of
any Obligation shall be due in a currency other than dollars and/or at a place
of payment other than New York and if, by reason of any Change in Law,
disruption of currency or foreign exchange markets, war or civil disturbance or
similar event, payment of such Obligation in such currency or at such place of
payment shall be impossible or, in the judgment of any applicable Lender, not
consistent with the protection of its rights or interests, then, at the election
of any applicable Lender, the Company shall make payment of such Obligation in
dollars (based upon the applicable Exchange Rate in effect on the date of
payment) and/or in New York, and shall indemnify such Lender against any losses
or expenses that it shall sustain as a result of such alternative payment.
Upon payment by the Company of any Obligation, each Lender shall, in
a reasonable manner, assign the amount of such Obligation owed to it and so paid
to the Company, such assignment to be pro tanto to the extent to which the
Obligation in question was discharged by the Company, or
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make such disposition thereof as the Company shall direct (all without recourse
to any Lender and without any representation or warranty by any Lender).
Upon payment by the Company of any sums as provided above, all
rights of Company against any Borrowing Subsidiary arising as a result thereof
by way of right of subrogation or otherwise shall in all respects be
subordinated and junior in right of payment to the prior indefeasible payment in
full of all the Obligations owed by such Borrowing Subsidiary to the Lenders.
ARTICLE X
Miscellaneous
SECTION 10.01. Notices. Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to any Borrower, to it in care of the Company at 187 Danbury
Road, Wilton, CT 06897, Attention of Treasurer (Telecopy No. (203)
834-4422);
(b) if to the Administrative Agent, to The Chase Manhattan Bank,
Agent Bank Services Group, Grand Central Tower, 140 East 45th Street, New
York, New York 10017, Attention of Sandra Miklave (Telecopy No. (212)
270-0002), with a copy to The Chase Manhattan Bank, One Chase Manhattan
Plaza, New York 10081, Attention of Bruce Langenkamp (Telecopy No. (212)
552-0259);
(c) if to the Swingline Lender, to The Chase Manhattan Bank, Agent
Bank Services Group, Grand Central Tower, 140 East 45th Street, New York,
New York 10017, Attention of Sandra Miklave (Telecopy No. (212) 270-0002),
with a copy to The Chase Manhattan Bank, One Chase Manhattan Plaza, New
York 10081, Attention of Bruce Langenkamp (Telecopy No. (212) 552-0259);
and
(d) if to any other Lender, to it at its address (or telecopy
number) set forth in its Administrative Questionnaire.
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Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
SECTION 10.02. Waivers; Amendments. (a) No failure or delay by the
Administrative Agent or any Lender in exercising any right or power hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or
the exercise of any other right or power. The rights and remedies of the
Administrative Agent and the Lenders hereunder are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provision of this Agreement or consent to any departure by any Borrower
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) of this Section, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given.
Without limiting the generality of the foregoing, the making of a Loan shall not
be construed as a waiver of any Default, regardless of whether the
Administrative Agent or any Lender may have had notice or knowledge of such
Default at the time.
(b) Neither this Agreement nor any Borrowing Subsidiary Agreement
nor any provision hereof or thereof may be waived, amended or modified except
pursuant to an agreement or agreements in writing entered into by the Company
and the Required Lenders or by the Company and the Administrative Agent with the
consent of the Required Lenders (and, in the case of a Borrowing Subsidiary
Agreement, the applicable Borrowing Subsidiary); provided that no such agreement
shall (i) increase the Commitment of any Lender without the written consent of
such Lender, (ii) reduce the principal amount of any Loan or reduce the rate of
interest thereon, or reduce any fees payable hereunder, without the written
consent of each Lender affected thereby, (iii) postpone the scheduled date of
payment of the principal amount of any Loan, or any interest thereon, or any
fees payable hereunder, or reduce the amount of, waive or excuse any such
payment, or postpone the scheduled date of expiration of any Commitment, without
the written consent of each Lender affected thereby, (iv) change Section 2.17(b)
or (c) in a manner that would alter the pro rata sharing of payments required
thereby, without the written consent of each Lender, (v) change any of the
<PAGE>
77
provisions of this Section or the definition of "Required Lenders" or any other
provision hereof specifying the number or percentage of Lenders required to
waive, amend or modify any rights hereunder or make any determination or grant
any consent hereunder, without the written consent of each Lender or (vi)
release the Company from, or limit or condition, its obligations under Article
IX, without the written consent of each Lender; provided further that no such
agreement shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent or the Swingline Lender hereunder without the prior written
consent of the Administrative Agent or the Swingline Lender, as the case may be.
SECTION 10.03. Expenses; Indemnity; Damage Waiver. (a) The Company
shall pay (i) all reasonable out-of-pocket expenses incurred by the
Administrative Agent and its Affiliates, including the reasonable fees, charges
and disbursements of counsel for the Administrative Agent, in connection with
the syndication of the credit facilities provided for herein, the preparation
and administration of this Agreement or any Borrowing Subsidiary Agreement or
any amendments, modifications or waivers of the provisions hereof or thereof
(whether or not the transactions contemplated hereby or thereby shall be
consummated) and (ii) all reasonable out-of-pocket expenses incurred by the
Administrative Agent or any Lender, including the fees, charges and
disbursements of any counsel for the Administrative Agent or any Lender, in
connection with the enforcement or protection of its rights in connection with
this Agreement or any Borrowing Subsidiary Agreement, including its rights under
this Section, or in connection with the Loans made hereunder, including in
connection with any workout, restructuring or negotiations in respect thereof.
(b) The Company shall indemnify the Administrative Agent and each
Lender, and each Related Party of any of the foregoing Persons (each such Person
being called an "Indemnitee") against, and hold each Indemnitee harmless from,
any and all losses, claims, damages, liabilities and related expenses, including
the fees, charges and disbursements of any counsel for any Indemnitee, incurred
by or asserted against any Indemnitee arising out of, in connection with, or as
a result of (i) the execution or delivery of this Agreement or any Borrowing
Subsidiary Agreement or any agreement or instrument contemplated hereby or
thereby, the performance by the parties hereto or thereto of their respective
obligations hereunder or thereunder or the consummation of the Transactions or
any other transactions contemplated hereby, (ii) any Loan or the use
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78
of the proceeds therefrom, (iii) any actual or alleged presence or release of
Hazardous Materials on or from any property owned or operated by the Company or
any of its Subsidiaries, or any Environmental Liability related in any way to
the Company or any of its Subsidiaries, or (iv) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory and regardless of whether
any Indemnitee is a party thereto; provided that such indemnity shall not, as to
any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction to have resulted from the gross negligence or wilful misconduct of
such Indemnitee.
(c) To the extent that the Company fails to pay any amount required
to be paid by it to the Administrative Agent or the Swingline Lender under
paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the
Administrative Agent or the Swingline Lender, as the case may be, such Lender's
Applicable Percentage (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid amount;
provided that the unreimbursed expense or indemnified loss, claim, damage,
liability or related expense, as the case may be, was incurred by or asserted
against the Administrative Agent or the Swingline Lender in its capacity as
such.
(d) To the extent permitted by applicable law, no Borrower shall
assert, and each Borrower hereby waives, any claim against any Indemnitee, on
any theory of liability, for special, indirect, consequential or punitive
damages (as opposed to direct or actual damages) arising out of, in connection
with, or as a result of, this Agreement or any Borrowing Subsidiary Agreement or
any agreement or instrument contemplated hereby or thereby, the Transactions,
any Loan or the use of the proceeds thereof.
(e) All amounts due under this Section shall be payable promptly
after written demand therefor.
SECTION 10.04. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
(including any Borrowing Subsidiaries) and their respective successors and
assigns permitted hereby, except that no Borrower may assign or otherwise
transfer any of its rights or obligations hereunder or under any Borrowing
Subsidiary Agreement without the prior written consent of each Lender (and any
attempted assignment or transfer by any Borrower without such consent shall be
null and void). Nothing in this
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79
Agreement, expressed or implied, shall be construed to confer upon any Person
(other than the parties hereto, their respective successors and assigns
permitted hereby and, to the extent expressly contemplated hereby, the Related
Parties of each of the Administrative Agent and the Lenders) any legal or
equitable right, remedy or claim under or by reason of this Agreement.
(b) Any Lender may assign to one or more assignees all or a portion
of its rights and obligations under this Agreement (including all or a portion
of its Commitment and the Loans at the time owing to it); provided that (i)
except in the case of an assignment to a Lender or an Affiliate of a Lender,
each of the Company and the Administrative Agent (and, in the case of an
assignment of all or a portion of a Commitment or any Lender's obligations in
respect of its Swingline Exposure, the Swingline Lender) must give their prior
written consent to such assignment (which consent shall not be unreasonably
withheld), (ii) except in the case of an assignment to a Lender or an Affiliate
of a Lender or an assignment of the entire remaining amount of the assigning
Lender's Commitment, the amount of the Commitment of the assigning Lender
subject to each such assignment (determined as of the date the Assignment and
Acceptance with respect to such assignment is delivered to the Administrative
Agent) shall not be less than $10,000,000 unless each of the Company and the
Administrative Agent otherwise consent, (iii) each partial assignment shall be
made as an assignment of a proportionate part of all the assigning Lender's
rights and obligations under this Agreement, except that this clause (iii) shall
not apply to rights in respect of outstanding Competitive Loans, (iv) the
parties to each assignment shall execute and deliver to the Administrative Agent
an Assignment and Acceptance, together with a processing and recordation fee of
$3,500, and (v) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire; provided further that any
consent of the Company otherwise required under this paragraph shall not be
required if an Event of Default under clause (h) or (i) of Article VII has
occurred and is continuing with respect to the Company. Upon acceptance and
recording pursuant to paragraph (d) of this Section, from and after the
effective date specified in each Assignment and Acceptance, the assignee
thereunder shall be a party hereto and, to the extent of the interest assigned
by such Assignment and Acceptance, have the rights and obligations of a Lender
under this Agreement, and the assigning Lender thereunder shall, to the extent
of the interest assigned by such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an
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80
Assignment and Acceptance covering all of the assigning Lender's rights and
obligations under this Agreement, such Lender shall cease to be a party hereto
but shall continue to be entitled to the benefits of Sections 2.14, 2.15, 2.16
and 10.03). Any assignment or transfer by a Lender of rights or obligations
under this Agreement that does not comply with this paragraph shall be treated
for purposes of this Agreement as a sale by such Lender of a participation in
such rights and obligations in accordance with paragraph (e) of this Section.
(c) The Administrative Agent, acting for this purpose as an agent of
the Borrowers shall maintain at one of its offices in The City of New York a
copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
and principal amount of the Loans owing to, each Lender pursuant to the terms
hereof from time to time (the "Register"). The entries in the Register shall be
conclusive, and the Borrowers, the Administrative Agent and the Lenders may
treat each Person whose name is recorded in the Register pursuant to the terms
hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding
notice to the contrary. The Register shall be available for inspection by the
Company and any Lender, at any reasonable time and from time to time upon
reasonable prior notice.
(d) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the assignee's completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b) of
this Section and any written consent to such assignment required by paragraph
(b) of this Section, the Administrative Agent shall accept such Assignment and
Acceptance and record the information contained therein in the Register. No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph.
(e) Any Lender may, without the consent of any Borrower, the
Administrative Agent or the Swingline Lender, sell participations to one or more
banks or other entities (a "Participant") in all or a portion of such Lender's
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it); provided that (i) such Lender's
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (iii) the Borrowers,
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81
the Administrative Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement. Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided that such
agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver
described in the first proviso to Section 10.02(b) that affects such
Participant. Subject to paragraph (f) of this Section, each Borrower agrees that
each Participant shall be entitled to the benefits of Sections 2.14, 2.15 and
2.16 to the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to paragraph (b) of this Section.
(f) A Participant shall not be entitled to receive any greater
payment under Section 2.15 or 2.16 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with the
Company's prior written consent. A Participant that would be a Foreign Lender if
it were a Lender shall not be entitled to the benefits of Section 2.16 unless
the Company is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Borrowers, to comply with Section
2.16(e) as though it were a Lender.
(g) Any Lender may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement to secure obligations
of such Lender, including any such pledge or assignment to a Federal Reserve
Bank, and this Section shall not apply to any such pledge or assignment of a
security interest; provided that no such pledge or assignment of a security
interest shall release a Lender from any of its obligations hereunder or
substitute any such assignee for such Lender as a party hereto.
SECTION 10.05. Survival. All covenants, agreements, representations
and warranties made by the Borrowers herein and in the Borrowing Subsidiary
Agreements and the certificates or other instruments delivered in connection
with or pursuant to this Agreement shall be considered to have been relied upon
by the other parties hereto and shall survive the execution and delivery of this
Agreement and the making of any Loans, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that the
Administrative Agent or any
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82
Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any fee or any other amount payable under this
Agreement is outstanding and unpaid and so long as the Commitments have not
expired or terminated. The provisions of Sections 2.14, 2.15, 2.16 and 10.03 and
Article VIII shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Commitments or the termination of
this Agreement or any provision hereof.
SECTION 10.06. Counterparts; Integration; Effectiveness. This
Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This Agreement and
any separate letter agreements with respect to fees payable to the
Administrative Agent constitute the entire contract among the parties relating
to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Except
as provided in Section 4.01, this Agreement shall become effective when it shall
have been executed by the Administrative Agent and when the Administrative Agent
shall have received counterparts hereof which, when taken together, bear the
signatures of each of the other parties hereto (excluding any Borrowing
Subsidiaries), and thereafter shall be binding upon and inure to the benefit of
the parties hereto (including any Borrowing Subsidiaries) and their respective
successors and assigns. Delivery of an executed counterpart of a signature page
of this Agreement by telecopy shall be effective as delivery of a manually
executed counterpart of this Agreement.
SECTION 10.07. Severability. Any provision of this Agreement held to
be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 10.08. Right of Setoff. If an Event of Default shall have
occurred and be continuing, each Lender
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83
is hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by such Lender to or for the credit or the account of any
Borrower against any of and all the obligations of such Borrower now or
hereafter existing under this Agreement held by such Lender, irrespective of
whether or not such Lender shall have made any demand under this Agreement and
although such obligations may be unmatured. The rights of each Lender under this
Section are in addition to other rights and remedies (including other rights of
setoff) which such Lender may have.
SECTION 10.09. Governing Law; Jurisdiction; Consent to Service of
Process. (a) This Agreement shall be construed in accordance with and governed
by the law of the State of New York.
(b) Each Borrower hereby irrevocably and unconditionally submits,
for itself and its property, to the nonexclusive jurisdiction of the Supreme
Court of the State of New York sitting in New York County and of the United
States District Court of the Southern District of New York, and any appellate
court from any thereof, in any action or proceeding arising out of or relating
to this Agreement, or for recognition or enforcement of any judgment, and each
of the parties hereto hereby irrevocably and unconditionally agrees that all
claims in respect of any such action or proceeding may be heard and determined
in such New York State or, to the extent permitted by law, in such Federal
court. Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that the Administrative Agent
or any Lender may otherwise have to bring any action or proceeding relating to
this Agreement against any Borrower or its properties in the courts of any
jurisdiction.
(c) Each Borrower hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any court referred to
in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
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84
(d) Each party to this Agreement (including any Borrowing
Subsidiaries) irrevocably consents to service of process in the manner provided
for notices in Section 10.01. Nothing in this Agreement will affect the right of
any party to this Agreement to serve process in any other manner permitted by
law.
SECTION 10.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 10.11. Headings. Article and Section headings and the Table
of Contents used herein are for convenience of reference only, are not part of
this Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
SECTION 10.12. Confidentiality. Each of the Administrative Agent and
the Lenders agrees to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to its and its
Affiliates' directors, officers, employees and agents, including accountants,
legal counsel and other advisors (it being understood that the Persons to whom
such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the
extent requested by any regulatory authority, (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process, (d)
to any other party to this Agreement, (e) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to this Agreement
or the enforcement of rights hereunder, (f) subject to an agreement containing
provisions substantially the same as those of this Section, to any assignee of
or Participant in, or any prospective assignee of or Participant in, any of its
rights or obligations under this Agreement, (g) with the consent of the Company
or (h) to the extent such Information (i) becomes publicly available other than
as a result of a breach of this Section or (ii) becomes available to the
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85
Administrative Agent or any Lender on a nonconfidential basis from a source
other than the Company. For the purposes of this Section, "Information" means
all information received from the Company relating to the Company or its
business, other than any such information that is available to the
Administrative Agent or any Lender on a nonconfidential basis prior to
disclosure by the Company; provided that, in the case of information received
from the Company after the date hereof, such information is identified at the
time of delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section shall be considered
to have complied with its obligation to do so if such Person has exercised the
same degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.
SECTION 10.13. Interest Rate Limitation. Notwithstanding anything
herein to the contrary, if at any time the interest rate applicable to any Loan,
together with all fees, charges and other amounts which are treated as interest
on such Loan under applicable law (collectively the "Charges"), shall exceed the
maximum lawful rate (the "Maximum Rate") which may be contracted for, charged,
taken, received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.
SECTION 10.14. Conversion of Currencies. (a) If, for the purpose of
obtaining judgment in any court, it is necessary to convert a sum owing
hereunder in one currency into another currency, each party hereto (including
any Borrowing Subsidiary) agrees, to the fullest extent that it may effectively
do so, that the rate of exchange used shall be that at which in accordance with
normal banking procedures in the relevant jurisdiction the first currency could
be purchased with such other currency on the Business
<PAGE>
86
Day immediately preceding the day on which final judgment is given.
(b) The obligations of each Borrower in respect of any sum due to
any party hereto or any holder of the obligations owing hereunder (the
"Applicable Creditor") shall, notwithstanding any judgment in a currency (the
"Judgment Currency") other than the currency in which such sum is stated to be
due hereunder (the "Agreement Currency"), be discharged only to the extent that,
on the Business Day following receipt by the Applicable Creditor of any sum
adjudged to be so due in the Judgment Currency, the Applicable Creditor may in
accordance with normal banking procedures in the relevant jurisdiction purchase
the Agreement Currency with the Judgment Currency; if the amount of the
Agreement Currency so purchased is less than the sum originally due to the
Applicable Creditor in the Agreement Currency, such Borrower agrees, as a
separate obligation and notwithstanding any such judgment, to indemnify the
Applicable Creditor against such loss. The obligations of the Borrowers
contained in this Section 10.14 shall survive the termination of this Agreement
and the payment of all other amounts owing hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
THE DUN & BRADSTREET CORPORATION,
by
/s/ P. C. Danford
------------------------
Name: P. C. Danford
Title: Vice President &
Treasurer
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87
THE CHASE MANHATTAN BANK,
individually and as
Administrative Agent,
by
/s/ Marian N. Schulman
-----------------------------
Name: Marian N. Schulman
Title: Attorney-in-Fact
CITIBANK, N.A., individually and as
Syndication Agent,
by
/s/ William G. Martens III
-----------------------------
Name: William G. Martens III
Title: Attorney-in-Fact
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, individually and as
Documentation Agent,
by
/s/ Sandra J. S. Kurek
-----------------------------
Name: Sandra J. S. Kurek
Title: Associate
BANK OF MONTREAL,
by
/s/ Brian L. Banke
-----------------------------
Name: Brian L. Banke
Title: Director
SUNTRUST BANK, ATLANTA,
by
/s/ Craig W. Farnsworth
-----------------------------
Name: Craig W. Farnsworth
Title: Vice President &
Manager
THE DUN & BRADSTREET CORPORATION
NONFUNDED DEFERRED COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
(AS AMENDED EFFECTIVE NOVEMBER 20, 1996)
- - --------------------------------------------------------------------------------
1. Directors who are not employees of The Dun & Bradstreet Corporation (the
"Company") or any of its subsidiaries may elect on or before December 31 of any
year to have payment of all or a specified part of all fees payable to them for
their services as Directors (including fees payable to them for services as
members of a committee of the Board) during the calendar year following such
election and succeeding calendar years deferred until they cease to be Directors
of the Company. Any person, not an employee, who shall become a Director during
any calendar year, and who was not a Director of the Company on the preceding
December 31, may elect, before the term as a Director begins, to have payment of
all or a specified part of such fees for the remainder of such calendar year and
for succeeding calendar years so deferred. Any such election shall be made by
written notice delivered to the Secretary of the Company.
2. All deferred fees shall be held in the general funds of the Company, shall be
credited to the Director's account and shall be deemed to have been invested in
one or more of the funds (as set forth on the Deferred Compensation Election
Form attached hereto as Exhibit A) in the Addendum to the Company's Profit
Participation Plan as such Director shall have most recently elected. Such
election shall be made on a Deferred Compensation Election Form filed with the
Secretary of the Company. The Director's account shall be credited on a monthly
basis with the investment performance of the respective funds in which the
account is invested. Directors may
<PAGE>
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elect to have deferred amounts held and invested in one or more of the funds in
multiples of 10%, except that no Director may elect to have more than 50% of his
or her account invested in the Dun & Bradstreet Common Stock Fund. Subject to
the foregoing investment limitation in the Dun & Bradstreet Common Stock Fund
and to the limitation on multiples of 10%, each Director may, at any time, make
a revised investment election applicable to amounts deferred, or elect to have
the amount credited to his or her account reallocated among the investment
funds, such revised election or reallocation to be effective from and after the
first day of the month following receipt of a Deferred Compensation Election
Form by the Secretary of the Company. In the event a Director fails to make an
investment election, his or her entire account shall be credited to the Special
Fixed Income Fund.
3. The aggregate balance in the Director's account, giving effect to the
investment performance of the fund(s) to which deferred fees were credited,
shall be paid to the Director in five or ten annual installments or in a lump
sum, as the Director shall elect in the notice referred to in Paragraph 1 above.
The first installment (or lump sum payment if the Director so elects) shall be
paid on the tenth day of the calendar year immediately following the calendar
year in which the Director ceases to be a Director of the Company, and
subsequent installments shall be made on the tenth day of each succeeding
calendar year until the entire amount credited to the Director's account shall
have been paid. The amount of each installment shall be determined by
multiplying the balance credited to the Director's account as of the December 31
immediately preceding the installment payment date by a fraction, the numerator
of
<PAGE>
-3-
which shall be one and the denominator of which shall be the number of
installment payments over which payment of such amount is to be made, less the
number of installments 7 made. Thus, if payment is to be made in ten
installments, the fraction for the first installment shall be 1/10th, for the
second installment 1/9th, and so on.
4. If a Director should die before full payment of all amounts credited to the
Director's account, the full amount credited to the account as of December 31 of
the year of the Director's death shall be paid on the tenth day of the calendar
year following the year of death to the Director's estate or to such beneficiary
or beneficiaries as previously designated by the Director in a written notice
delivered to the Secretary of the Company.
5. A Director's election to defer compensation shall continue until a Director
ceases to be a Director or until the Director changes or terminates such
election by written notice delivered to the Secretary of the Company. Any such
notice of change or termination shall become effective as of the end of the
calendar year in which such notice is given. Amounts credited to the account of
a Director prior to the effective date of such change or termination shall not
be affected thereby and shall be paid to the Director only in accordance with
paragraph 3 (or Paragraph 4 in the event of death) above.
6. The right of a Director to any deferred fees and/or the interest thereon
shall not be subject to assignment by the Director. If a Director does make an
assignment of any
<PAGE>
-4-
deferred fees and/or the interest thereon, the Company may
disregard such assignment and discharge its obligation hereunder by making
payment as though no such assignment has been made.
7. If there is a "Change in Control" of the Company, as defined in Paragraph 8:
a) The total amount to the credit of each Director's account under the
Plan shall be paid to the Director in a lump sum within 30 days from the
date of such Change in Control; provided, however, if such payment is not
made within such 30-day period, the amount to the credit of the Director's
account shall be credited with interest from the date of such Change in
Control until the actual payment date at an annual rate equal to the yield
on 90-day U.S. Treasury Bills plus one percentage point. For this purpose
the yield on U.S. Treasury Bills shall be the rate published in The Wall
Street Journal on the first business day of the calendar month in which the
Change in Control occurred.
b) The total amount credited to each Director's account under the Plan
from the date of the Change in Control until the date the Director ceases
to be a Director shall be paid to the Director in a lump sum within 30 days
from the date the Director ceases to be a Director.
c) If a Director elects to change or terminate an election with
respect to the deferral of fees by written notice delivered to the
Secretary of the Company, and such notice is given during the calendar year
in which a Change in Control occurs and on or before the date of the Change
in Control, the change or termination of election shall become effective as
of the date of the Change in Control. If such notice is given subsequent to
the date of the Change in Control, it shall become effective as of the end
of the calendar year in which the notice is given.
8. A "Change in Control" of the Company shall mean the occurrence of any of the
following events:
a) Any "person," as such term is used in Section 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other
than the Company, any trustee or other fiduciary holding securities under
an employee benefit plan of the Company, or any corporation owned, directly
or indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities
<PAGE>
-5-
of the Company representing 30% or more of the combined voting power of the
Company's then outstanding securities;
b) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board, and any new Director (other
than a Director designated by a person who has entered into an agreement
with the Company to effect a transaction described in clause (a), (c) or
(d) of this Section) whose election by the Board or nomination for election
by the Company's stockholders 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 stockholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than (1) a merger or
consolidation 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 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation or (2) a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no "person" (as hereinabove defined) acquires more
than 50% of the combined voting power of the Company's then outstanding
securities;
d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets.
9. Notwithstanding any provision herein to the contrary, amounts payable under
this Plan shall not be funded and shall be made out of the general funds of the
Company; provided, however, that the Company reserves the right to establish one
or more trusts to provide alternate sources of benefit payments under this Plan;
provided, further, however, that upon the occurrence of a "Potential Change in
Control" of the Company, as defined below, the appropriate officers of the
Company are authorized to make transfers to such a trust fund, established as an
alternate source of benefits payable under the Plan, as are necessary to fund
the lump sum payments to Directors required
<PAGE>
-6-
pursuant to Paragraph 7 of this Plan in the event of a Change in Control of the
Company; provided, further, however, that if payments are made from such trust
fund, such payments will satisfy the Company's obligations under this Plan to
the extent made from such trust fund.
For the purposes of this Plan, "Potential Change in Control" means:
a) the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control of the Company;
b) any person (including the Company) publicly announces an intention
to take or to consider taking actions which if consummated would constitute
a Change in Control of the Company;
c) any person, other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company (or a company
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company), who is or becomes the beneficial owner, directly or indirectly,
of securities of the Company representing 9.5% or more of the combined
voting power of the Company's then outstanding securities, increases such
person's beneficial ownership of such securities by 5% or more over the
percentage so owned by such person; or
d) the Board of Directors of the Company adopts a resolution to the
effect that, for purposes of this Plan, a Potential Change in Control of
the Company has occurred.
10. The Executive Compensation and Stock Option Committee of the Board (the
"Committee") shall be responsible for the administration of the Plan and may
delegate to any management committee, employee, Director or agent its
responsibility to perform any act hereunder, including without limitation those
matters involving the exercise of discretion, provided that such delegation
shall be subject to revocation at any time at its discretion. The Committee
shall have full authority to interpret the provisions of the Plan and construe
all of its terms, to adopt, amend and rescind rules and regulations for the
administration of the Plan, and generally to conduct and administer the Plan and
<PAGE>
-7-
to make all determinations in connection with the Plan as may be necessary or
advisable, other than those determinations delegated to management employees or
independent third parties by the Board. All of its rules, interpretations and
decisions shall be applied in a uniform manner to all Directors similarly
situated and decisions of the Committee shall be conclusive and binding on all
persons.
11. The Plan may be modified, amended or revoked at any time by the Board of
Directors of the Company.
Adopted by Executive
Committee: December 23, 1975
Amended by Board of
Directors effective: January 1, 1977
January 1, 1982
September 20, 1989
December 19, 1990
April 21, 1993
November 20, 1996
<PAGE>
THE DUN & BRADSTREET CORPORATION
NONFUNDED DEFERRED COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
DEFERRED COMPENSATION ELECTION FORM
The completed form should be forwarded to: The Office of the Corporate
Secretary, attention William H. Buchanan, Jr., One Diamond Hill Road, Murray
Hill, NJ 07974.
INVESTMENT ELECTION
I wish to have the investment experience for the following Funds used as the
basis for the interest rate to be credited on my deferred account balance.
Investments must be made in 10% increments:
% S&P 500 Index Fund
- - -----------
% Mid- and Small-Capitalization Equity Index Fund
- - -----------
% International Equity Index Fund
- - -----------
% Dun & Bradstreet Common Stock Fund (% in fund
- - ----------- cannot exceed 50%)
% Special Fixed Income Fund
- - -----------
% Balanced Index Fund
- - -----------
100 %
===========
Signature:_____________________________________ Date:___________________
THE DUN & BRADSTREET EXECUTIVE TRANSITION PLAN
(AS AMENDED AND RESTATED)
The Dun & Bradstreet Corporation (the "Company") wishes to define
those circumstances under which it will provide assistance to an Eligible
Employee in the event of his or her Eligible Termination (as such terms are
defined herein). Accordingly, the Company hereby establishes The Dun &
Bradstreet Executive Transition Plan (the "Plan").
SECTION 1 - DEFINITIONS
1.1 "Administrative Committee" shall mean a committee of Company
management employees heretofore established by the Committee.
1.2 "Cause" shall mean (a) willful malfeasance or willful misconduct
by the Eligible Employee in connection with his or her employment, (b)
continuing failure to perform such duties as are requested by any employee to
whom the Eligible Employee reports or the Company's board of directors, (c)
failure by the Eligible Employee to observe material policies of the Company
applicable to the Eligible Employee or (d) the commission by an Eligible
Employee of (i) any felony or (ii) any misdemeanor involving moral turpitude.
1.3 "Committee" shall mean the Executive Compensation and Stock
Option Committee of the Board of Directors of the Company.
1.4 "Eligible Employee" shall mean the Chief Executive Officer of
the Company and such other executive officers of the Company or its affiliates
as are designated in writing by the Chief Executive Officer.
1.5 "Eligible Termination" shall mean (a) an involuntary termination
of employment with the Company by reason of a reduction in force program, job
elimination or unsatisfactory performance in the execution of an Eligible
Employee's duties or (b) a resignation mutually agreed to in writing by the
Company and the Eligible Employee. Notwithstanding the foregoing, an Eligible
Termination shall not include (w) a unilateral resignation, (x) a termination by
the Company for Cause, (y) a termination as a result of a sale (whether in whole
or in part, of stock or assets), merger or other combination, spinoff,
reorganization or liquidation, dissolution or other winding up or other similar
transactions involving the Company; provided however, that a termination of
employment as a result of a Change in Control and during the Change in Control
Period shall not be covered by this clause (y), or (z) any termination where an
offer of employment is made to the Eligible Employee of a comparable position at
the Company.
<PAGE>
1.6 "Salary" shall mean an Eligible Employee's annual base salary at
the time his or her employment terminates, except as otherwise provided in
Schedule A hereto.
1.7 "Severance and Release Agreement" shall mean an agreement signed
by the Eligible Employee substantially in the form attached hereto as Exhibit 1.
Notwithstanding the foregoing, the Company may, by action of its chief human
resources officer or chief legal counsel, modify the form of Severance and
Release Agreement to be signed by any Eligible Employee in a manner approved by
the Administrative Committee.
SECTION 2 - SEVERANCE BENEFITS
2.1 Subject to the provisions of this Section 2, in the event of an
Eligible Termination, an Eligible Employee shall be entitled to receive from the
Company the benefits set forth on Schedule A hereto.
2.2 The grant of severance benefits pursuant to Section 2.1 hereof
is conditioned upon an Eligible Employee's (a) signing a Severance and Release
Agreement and the expiration of any revocation period set forth therein and, (b)
relinquishment of any right to benefits under the Dun & Bradstreet Career
Transition Plan.
2.3 Notwithstanding any other provision contained herein (except as
set forth in this Section 2.3), the Chief Executive Officer of the Company may,
at any time, take such action as such officer, in such officer's sole
discretion, deems appropriate to reduce or increase by any amount the benefits
otherwise payable to an Eligible Employee pursuant to Schedule A or otherwise
modify the terms and conditions applicable to an Eligible Employee under this
Plan provided that the Chief Executive Officer reports any reduction or increase
in benefits or other modification of the terms and conditions hereof to the
Committee and provided further that with respect to benefits payable, or other
modifications applicable, to the Chief Executive Officer, only the Committee may
take such action. Benefits granted hereunder may not exceed an amount nor be
paid over a period which would cause the Plan to be other than a "welfare
benefit plan" under section 3(1) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA").
2.4 In the event the Company, in its sole discretion, grants an
Eligible Employee a period of inactive employee status, then, in such event, any
amounts paid to such Eligible Employee during any such period shall offset the
benefits payable under this Plan. For this purpose, a period of inactive
employee status shall mean the period beginning on the date such status
commences (of which the Eligible Employee shall be notified) and ending on the
date of such Eligible Employee's termination of employment.
- 2 -
<PAGE>
SECTION 3 - AMENDMENT AND TERMINATION
3.1 The Company reserves the right to terminate the Plan at any time
and without any further obligation by action of its board of directors or such
other person or persons to whom the board properly delegates such authority.
3.2 The Company shall have the right to modify or amend the terms of
the Plan at any time, or from time to time, to any extent that it may deem
advisable by action of its board of directors, the Committee or such other
person or persons to whom the board or the Committee properly delegates such
authority.
3.3 All modifications of or amendments to the Plan shall be in
writing.
SECTION 4 - ADMINISTRATION OF THE PLAN
4.1 The Committee shall be the Plan Administrator and shall have the
exclusive right, power and authority to:
(a) interpret, in its sole discretion, any and all of the provisions
of the Plan;
(b) establish a claims and appeals procedure; and
(c) consider and decide conclusively any questions (whether of fact
or otherwise) arising in connection with the administration of the Plan or any
claim for severance benefits arising under the Plan.
Any decision or action of the Committee pursuant to this Section 4.1 shall be
conclusive and binding on any affected person.
4.2 The Committee may, in its sole discretion, cause the
Administrative Committee or its designee to function as the Committee for
purposes of this Section 4.
4.3 The Company shall indemnify any individual who is a director,
officer or employee of the Company or any affiliate, or his or her heirs and
legal representatives, against all liability and reasonable expense, including
counsel fees, amounts paid in settlement and amounts of judgments, fines or
penalties, incurred or imposed upon him or her in connection with any claim,
action, suit or proceeding, whether civil, criminal, administrative or
investigative, in connection with his or her duties with respect to the Plan,
provided that any act or omission giving rise to such claim, action, suit or
proceeding does not constitute willful misconduct or is not performed or omitted
in bad faith.
- 3 -
<PAGE>
SECTION 5 - MISCELLANEOUS
5.1 Neither the establishment of the Plan nor any action of the
Company, the Committee, or any fiduciary shall be held or construed to confer
upon any person any legal right to continue employment with the Company. The
Company expressly reserves the right to discharge any employee whenever the
interest of the Company, in its sole judgment, may so require, without any
liability on the part of the Company, the Committee, or any fiduciary.
5.2 Benefits payable under the Plan shall be paid out of the general
assets of the Company or an affiliate. The Company need not fund the benefits
payable under this Plan; however, nothing in this Section 5.2 shall be
interpreted as precluding the Company from funding or setting aside amounts in
anticipation of paying such benefits. Any benefits payable to an Eligible
Employee under this Plan shall represent an unsecured claim by such Eligible
Employee against the general assets of the Company that employed such Eligible
Employee.
5.3 The Company shall deduct from the amount of any severance
benefits payable hereunder the amount required by law to be withheld for the
payment of any taxes and any other amount, properly to be withheld.
5.4 Benefits payable under the Plan shall not be subject to
assignment, alienation, transfer, pledge, encumbrance, commutation or
anticipation by the Eligible Employee. Any attempt to assign, alienate,
transfer, pledge, encumber, commute or anticipate Plan benefits shall be void.
5.5 This Plan shall be interpreted and applied in accordance with
the laws of the State of New York, except to the extent superseded by applicable
federal law.
5.6 This Plan will be of no force or effect to the extent superseded
by foreign law.
5.7 This Plan supersedes any and all prior severance arrangements,
policies, plans or practices of the Company (whether written or unwritten).
Notwithstanding the preceding sentence, the Plan does not affect the severance
provisions of any written individual employment contracts or written agreements
between an Eligible Employee and the Company. Benefits payable under the Plan
shall be offset by any other severance or termination payment made by the
Company including, but not limited to, amounts paid pursuant to any agreement or
law.
5.8 This Plan, as amended and restated, shall be effective as of
February 19, 1997.
- 4 -
<PAGE>
SCHEDULE A
An Eligible Employee entitled to benefits hereunder shall, subject
to Section 2 of the Plan, receive the following:
1. Salary Continuation
The Eligible Employee shall receive 104 weeks of Salary
continuation, provided, however, that for purposes of determining the Salary
continuation amount, in the event the Eligible Employee has incurred an Eligible
Termination other than by reason of unsatisfactory performance, "Salary" shall
include the Eligible Employee's guideline annual bonus opportunity under the
applicable Annual Incentive Plan (as defined in paragraph 3 hereof) for the year
of termination, payment of which will be prorated annually over a period equal
to the number of weeks of Salary continuation (the "Salary Continuation Period")
and made at the same time as other Salary continuation amounts. Salary
continuation hereunder shall be paid at the times the Eligible Employee's Salary
would have been paid if employment had not terminated, over the Salary
Continuation Period. In the event the Eligible Employee performs services for an
entity other than the Company or a Participating Company during the Salary
Continuation Period, such employee shall notify the Company on or prior to the
commencement thereof. For purposes of this Schedule A, to "perform services"
shall mean employment or services as a full-time employee, consultant, owner,
partner, associate, agent or otherwise on behalf of any person, principal,
partnership, firm or corporation (other than the Company or a Participating
Company). All Salary continuation payments shall cease upon re-employment by the
Company or a Participating Company. For purposes of this paragraph 1, a
"Participating Company" shall mean the Company or any other affiliated entity
more than 50% of the voting interests of which are owned, directly or
indirectly, by the Company and which has elected to participate in The Dun &
Bradstreet Corporation Career Transition Plan.
2. Welfare Benefit Continuation
Medical, dental and life insurance benefits shall be provided
throughout the Salary Continuation Period at the levels in effect for the
Eligible Employee immediately prior to termination of employment but in no event
greater than the levels in effect for active employees generally during the
Salary Continuation Period, provided that the Eligible Employee shall pay the
employee portion of any required premium payments at the level in effect for
employees generally of the Company for such benefits. For purposes of
determining an Eligible Employee's entitlement to continuation coverage as
required by Title I, Subtitle B, Part 6 of ERISA, such employee's 18-month or
other period of coverage shall commence on his or her termination of employment.
<PAGE>
3. Annual Bonus Payment
Subject to the provisions of this paragraph 3, a cash bonus for the
calendar year of termination may be paid in an amount equal to the actual bonus
which would have been payable to the Eligible Employee under the annual bonus
plan in which he or she participates (the "Annual Incentive Plan") had such
employee remained employed through the end of the year of such termination
multiplied by a fraction the numerator of which is the number of full months of
employment during the calendar year of termination and the denominator of which
is 12. Such bonus shall be payable at the time otherwise payable under the
Annual Incentive Plan had employment not terminated. Notwithstanding the
foregoing, no amount shall be paid under this paragraph in the event the
Eligible Employee incurred an Eligible Termination by reason of unsatisfactory
performance. The foregoing provisions of this paragraph 3 shall be appropriately
modified in the case of any plan not on a calendar year basis.
4. Long-Term Awards
Cash payments shall be made to an Eligible Employee as set forth in
this paragraph in respect of "Units" (as such term is defined in the Key
Employees Performance Unit Plan for The Dun & Bradstreet Corporation and
Subsidiaries (the "PUP")) otherwise payable under the PUP had the Eligible
Employee remained employed through the end of the applicable "Award Period" (as
defined in the PUP) in the event the Eligible Employee was employed by a
Participating Company for at least half the applicable Award Period. In such
event, cash payments shall be made to an Eligible Employee in amounts equal to
the value of the Units, as earned, otherwise payable under the PUP had the
employee remained employed through the end of the applicable Award Period
multiplied by a fraction the numerator of which is the number of full months of
employment with a Participating Company from the beginning of the Award Period
to termination of employment, and the denominator of which is the number of full
months in the Award Period. Such payments shall be made at the times the Units
in respect of which such payments are made would otherwise be payable under the
PUP had employment not terminated. Notwithstanding the foregoing, no amount
shall be paid under this paragraph in the event the Eligible Employee incurred
an Eligible Termination by reason of unsatisfactory performance. Nothing
contained herein shall reduce any amounts otherwise required to be paid under
the PUP except to the extent such amounts are paid hereunder.
5. Death
Upon the death of an Eligible Employee during the Salary
Continuation Period, the benefits described in paragraphs 1, 3 and 4 of this
Schedule shall continue to be paid to his or her estate, as applicable, at the
time or times otherwise provided for herein.
6. Other Benefits
The Eligible Employee shall be entitled to such executive
outplacement services during the Salary Continuation Period as shall be provided
by the Company.
- 2 -
<PAGE>
During the Salary continuation period, financial planning/counseling shall be
afforded to the Eligible Employee to the same extent afforded immediately prior
to termination of employment in the event the Eligible Employee incurred an
Eligible Termination other than by reason of unsatisfactory performance.
7. No Further Grants, Etc.
Following an Eligible Employee's termination of employment, no
further grants, awards, contributions, accruals or continued participation
(except as otherwise provided for herein) shall be made to or on behalf of such
employee under any plan or program maintained by the Company including, but not
limited to, any Annual Incentive Plan, any PUP, or any qualified or nonqualified
retirement, profit sharing, stock option or restricted stock plan of the
Company. Any unvested or unexercised options, unvested restricted stock and all
other benefits under any plan or program maintained by the Company (including,
but not limited to, any Annual Incentive Plan, any Long-Term Plan or any
qualified or nonqualified retirement, profit sharing, stock option or restricted
stock plan) which are held or accrued by an Eligible Employee at the time of his
or her termination of employment, shall be treated in accordance with the terms
of such plans and programs under which such options, restricted stock or other
benefits were granted or accrued.
- 3 -
<PAGE>
Exhibit 1
SEVERANCE AGREEMENT AND RELEASE
THIS SEVERANCE AGREEMENT AND RELEASE, made by and between
______________________________________(hereinafter referred to as "Employee"),
and The Dun & Bradstreet Corporation (hereinafter deemed to include its
worldwide subsidiaries and affiliates and referred to as "the Company").
WITNESSETH THAT:
WHEREAS, Employee has been employed by the Company since the date
specified in the Appendix; and
WHEREAS, the parties to this Agreement desire to enter into an
agreement in order to provide certain benefits and salary continuation to
Employee;
NOW, THEREFORE, in consideration of the mutual covenants and
promises hereinafter provided and of the actions taken pursuant thereto, the
parties agree as follows:
1. Employee's employment with the Company, and Employee's membership
on any committees, is terminated effective on the date specified in the
Appendix.
2. Effective on the date set forth in the Appendix, Employee will
incur an "Eligible Termination" under The Dun & Bradstreet Executive Transition
Plan (the "Plan"), a summary plan description of which Employee hereby
acknowledges receipt, and will, accordingly, be entitled to the benefits set
forth therein subject to the terms and conditions of such Plan. A summary of the
benefits to which Employee is entitled under the Plan is set forth in the
Appendix.
3. Through the Termination Date specified in the Appendix, Employee
will be reasonably available to consult on matters, and will cooperate fully
with respect to any claims, litigations or investigations, relating to the
Company. No reimbursement for expenses incurred after the commencement of a
period of inactive employee status, or if there is no such period, after
termination of employment, shall be made to Employee unless authorized in
advance by the Company.
4. Employee agrees that until the Termination Date Employee will not
become a stockholder (unless such stock is listed on a national securities
exchange or traded on a daily basis in the over-the-counter market and the
Employee's ownership interest is not in excess of 2% of the company whose shares
are being purchased), employee, officer, director or consultant of or to a
corporation, or a member or an
<PAGE>
employee of or a consultant to a partnership or any other business or firm,
which competes with any of the businesses owned or operated by the Company; nor
if Employee becomes associated with a company, partnership or individual which
company, partnership or individual acts as a consultant to businesses in
competition with the Company will Employee provide services to such competing
businesses. The restrictions contained in this paragraph shall apply whether or
not Employee accepts any form of compensation from such competing entity or
consultant. Employee also agrees that until the Termination Date Employee will
not recruit or solicit any customers of the Company to become customers of any
business entity which competes with any of the businesses owned or operated by
the Company. In addition, Employee agrees that until the Termination Date
neither Employee nor any company or entity Employee controls or manages, shall
recruit or solicit any employee of the Company to become an employee of any
business entity.
5. If Employee performs services for an entity other than the
Company at any time prior to the Termination Date (whether or not such entity is
in competition with the Company), Employee shall notify the Company on or prior
to the commencement thereof. To "perform services" shall mean employment or
services as a full-time employee, consultant, owner, partner, associate, agent
or otherwise on behalf of any person, principal, partnership, firm or
corporation. For purposes of this paragraph 5 only, "Company" shall mean The Dun
& Bradstreet Corporation and any other affiliated entity more than 50% of the
voting interests of which are owned, directly or indirectly, by The Dun &
Bradstreet Corporation and which has elected to participate in The Dun &
Bradstreet Career Transition Plan by action of its board of directors.
6. Employee agrees that Employee will not directly or indirectly
disclose any proprietary or confidential information, records, data, formulae,
specifications and other trade secrets owned by the Company, whether oral or
written, to any person or use any such information, except pursuant to court
order (in which case Employee will first provide the Company with written notice
of such). All records, files, drawings, documents, models, disks, equipment and
the like relating to the businesses of the Company shall remain the sole
property of the Company and shall not be removed from the premises of the
Company. Employee further agrees to return to the Company any property of the
Company which Employee may have, no matter where located, and not to keep any
copies or portions thereof.
7. Employee shall not make any derogatory statements about the
Company and shall not make any written or oral statement, news release or other
announcement relating to Employee's employment by the Company or relating to the
Company, its subsidiaries, customers or personnel, which is designed to
embarrass or criticize any of the foregoing.
8. Employee agrees that in the event of any breach of the covenants
contained in paragraphs 3, 4, 5, 6 or 7 in addition to any remedies that may be
available to the Company, the Company may cease all payments required to be made
to Employee under the Plan and recover all such payments previously made to
Employee pursuant to the Plan. The parties agree that any such breach would
cause injury to the Company which cannot reasonably or adequately be quantified
and that such relief does not constitute in any way a penalty or a forfeiture.
- 2 -
<PAGE>
9. Employee, for Employee, Employee's family, representatives,
successors and assigns releases and forever discharges the Company and its
successors, assigns, subsidiaries, affiliates, directors, officers, employees,
attorneys, agents and trustees or administrators of any Company plan from any
and all claims, demands, debts, damages, injuries, actions or rights of action
of any nature whatsoever, whether known or unknown, which Employee had, now has
or may have against the Company, its successors, assigns, subsidiaries,
affiliates, directors, officers, employees, attorneys, agents and trustees or
administrators of any Company plan, from the beginning of Employee's employment
to and including the date of this Agreement relating to or arising out of
Employee's employment with the Company or the termination of such employment
other than a claim with respect to a vested right Employee may have to receive
benefits under any plan maintained by the Company. Employee represents that
Employee has not filed any action, complaint, charge, grievance or arbitration
against the Company or any of its successors, assigns, subsidiaries, affiliates,
directors, officers, employees, attorneys, agents and trustees or administrators
of any Company plan.
10. Employee covenants that neither Employee, nor any of Employee's
respective heirs, representatives, successors or assigns, will commence,
prosecute or cause to be commenced or prosecuted against the Company or any of
its successors, assigns, subsidiaries, affiliates, directors, officers,
employees, attorneys, agents and trustees or administrators of any Company plan
any action or other proceeding based upon any claims, demands, causes of action,
obligations, damages or liabilities which are being released by this Agreement,
nor will Employee seek to challenge the validity of this Agreement, except that
this covenant not to sue does not affect Employee's future right to enforce
appropriately the terms of this Agreement in a court of competent jurisdiction.
11. Employee acknowledges that (a) Employee has been advised to
consult with an attorney at Employee's own expense before executing this
Agreement and that Employee has been advised by an attorney or has knowingly
waived Employee's right to do so, (b) Employee has had a period of at least
twenty-one (21) days within which to consider this Agreement, (c) Employee has a
period of seven (7) days from the date that Employee signs this Agreement within
which to revoke it and that this Agreement will not become effective or
enforceable until the expiration of this seven (7) day revocation period, (d)
Employee fully understands the terms and contents of this Agreement and freely,
voluntarily, knowingly and without coercion enters into this Agreement, (e)
Employee is receiving greater consideration hereunder than Employee would
receive had Employee not signed this Agreement and that the consideration
hereunder is given in exchange for all of the provisions hereof and (f) the
waiver or release by Employee of rights or claims Employee may have under Title
VII of the Civil Rights Act of 1964, The Employee Retirement Income Security Act
of 1974, the Age Discrimination in Employment Act of 1967, the Older Workers
Benefit Protection Act, the Fair Labor Standards Act, the Americans with
Disabilities Act, the Rehabilitation Act, the Worker Adjustment and Retraining
Act (all as amended) and/or any other local, state or federal law dealing with
employment or the termination thereof is knowing and voluntary and, accordingly,
that it shall be a breach of this Agreement to institute any action or to
recover any damages that would be in conflict with or contrary to this
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<PAGE>
acknowledgment or the releases Employee has granted hereunder. Employee
understands and agrees that the Company's payment of money and other benefits to
Employee and Employee's signing of this Agreement does not in any way indicate
that Employee has any viable claims against the Company or that the Company
admits any liability whatsoever.
12. This Agreement constitutes the entire agreement of the parties
and all prior negotiations or representations are merged herein. It shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors, assigns, heirs and legal representatives but neither this
Agreement nor any rights hereunder shall be assignable by Employee without the
Company's written consent. In addition, this Agreement supersedes any prior
employment or compensation agreement, whether written, oral or implied in law or
implied in fact between Employee and the Company, other than those contracts and
agreements excepted from the application of section 5.7 of the Plan pursuant to
the terms of such section, which prior agreements are hereby terminated.
13. If for any reason any one or more of the provisions of this
Agreement shall be held or deemed to be inoperative, unenforceable or invalid by
a court of competent jurisdiction, such circumstances shall not have the effect
of rendering such provision invalid in any other case or rendering any other
provisions of this Agreement inoperative, unenforceable or invalid.
14. This Agreement shall be construed in accordance with the laws of
the State of New Jersey, except to the extent superseded by applicable federal
law.
15. This Agreement shall terminate in its entirety any Change in
Control Agreement between the Company and Employee.
IN WITNESS WHEREOF, Employee and The Dun & Bradstreet Corporation,
by its duly authorized agent, have hereunder executed this Agreement.
Dated:
________________________________
Employee
THE DUN & BRADSTREET CORPORATION
________________________________
Title:
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<PAGE>
Appendix
Summary of Benefit Entitlements
Under The Dun & Bradstreet
Executive Transition Plan
Employment with ______________________________
Company Since:
Effective Date ______________________________
of Eligible Termination:
Positions Terminated: ______________________________
Salary Continuation: $____ per week for 104 weeks
Welfare Benefit Continuation: [LIST NAMES OF MEDICAL, DENTAL,
LIFE PLANS UNDER WHICH
EMPLOYEE COVERED]
Annual Bonus Payment: [x] of the annual bonus otherwise
--
12
payable to you at time of normal
payment.
Long-Term Bonus Payments: [x] of the long-term bonus otherwise
--
[y]
payable to you for the _______ cycles
at time of normal payment.
Executive Outplacement: As provided by the Company.
Financial Planning/Counseling:
THE DESCRIPTION OF BENEFITS CONTAINED IN THIS APPENDIX IS ONLY A
SUMMARY AND IS SUBJECT TO THE TERMS AND CONDITIONS OF THE PLAN. REFER
TO YOUR SUMMARY PLAN DESCRIPTION FOR MORE DETAIL.
1996 THE DUN & BRADSTREET CORPORATION
NON-EMPLOYEE DIRECTORS' STOCK INCENTIVE PLAN
1. PURPOSE OF THE PLAN
The purpose of the Plan is to aid the Company in attracting, retaining and
compensating non-employee directors and to enable them to increase their
ownership of Shares. The Plan will be beneficial to the Company and its
shareholders since it will allow non-employee directors to have a greater
personal financial stake in the Company through the ownership of Shares, in
addition to underscoring their common interest with shareholders in increasing
the value of the Shares on a long-term basis.
2. DEFINITIONS
The following capitalized terms used in the Plan have the respective
meanings set forth in this Section:
(a) Act: The Securities Exchange Act of 1934, as amended, or any
successor thereto.
(b) Awards: Options, Shares of Restricted Stock, Phantom Stock Units
or Performance Shares granted pursuant to the Plan.
(c) Beneficial Owner: As defined in Rule 13d-3 under the Act (or any
successor rule thereto).
(d) Board: The Board of Directors of the Company.
(e) Change in Control: The occurrence of any of the following events:
(i) any Person (other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of the
Company, or any company owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions as
their ownership of stock of the Company), is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the Company's
then outstanding securities;
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(ii) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board, and any new
director (other than a director designated by a Person who has entered
into an agreement with the Company to effect a transaction described
in Sections 2(e)(i), (iii) or (iv) of the Plan) whose election by the
Board or nomination for election by the Company's shareholders 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;
(iii) the shareholders of the Company approve a merger or
consolidation of the Company with any other company, other than (A) a
merger or consolidation 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 50% of the
combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation or (B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no
Person acquires more than 50% of the combined voting power of the
Company's then outstanding securities; or
(iv) 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.
(f) Code: The Internal Revenue Code of 1986, as amended, or any
successor thereto.
(g) Committee: The Executive Compensation and Stock Option Committee
of the Board.
(h) Company: The Dun & Bradstreet Corporation, a Delaware corporation.
(i) Disability: Inability to continue to serve as a non-employee
director of the Board due to a medically determinable physical or
mental impairment which constitutes a permanent and total disability,
as determined by the Committee (excluding any member thereof whose own
Disability is at issue in a given case) based upon such evidence as it
deems necessary and appropriate. A Participant shall not be considered
disabled unless he or she furnishes such medical or other evidence of
the existence of the Disability as the Committee, in its sole
discretion, may require.
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(j) Determination Date: As such term is defined in Section 8(b) of the
Plan.
(k) Effective Date: The date on which the Plan takes effect, as
defined pursuant to Section 15 of the Plan.
(l) Fair Market Value: On a given date, the average of the high and
low prices of the Shares as reported on such date on the Composite Tape of
the principal national securities exchange on which such Shares are listed
or admitted to trading, or, if no Composite Tape exists for such national
securities exchange on such date, then on the principal national securities
exchange on which such Shares are listed or admitted to trading, or, if the
Shares are not listed or admitted on a national securities exchange, the
average of the per Share closing bid price and per Share closing asked
price on such date as quoted on the National Association of Securities
Dealers Automated Quotation System (or such market in which such prices are
regularly quoted), or, if there is no market on which the Shares are
regularly quoted, the Fair Market Value shall be the value established by
the Committee in good faith. If no sale of Shares shall have been reported
on such Composite Tape or such national securities exchange on such date or
quoted on the National Association of Securities Dealers Automated
Quotation System on such date, then the immediately preceding date on which
sales of the Shares have been so reported or quoted shall be used.
(m) Option: A stock option granted pursuant to Section 6 of the Plan.
(n) Option Price: The purchase price per Share of an Option, as
determined pursuant to Section 6(b) of the Plan.
(o) Participant: Any director of the Company who is not an employee of
the Company or any Subsidiary of the Company as of the date that an Award
is granted.
(p) Performance Period: The calendar year.
(q) Performance Share: An annual bonus award, payable in unrestricted
Shares, granted pursuant to Section 9(a) of the Plan.
(r) Person: As such term is used in Section 13(d) or 14(d) of the Act
(or any successor section thereto).
(s) Phantom Stock Unit: A bookkeeping entry, equivalent in value to
one Share, credited in accordance with Section 8(a) of the Plan.
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(t) Plan: The 1996 The Dun & Bradstreet Corporation Non-Employee
Directors' Stock Incentive Plan.
(u) Restricted Stock: A Share of restricted stock granted pursuant to
Section 7 of the Plan.
(v) Retirement: Termination of service with the Company after such
Participant has attained age 70, regardless of the length of such
Participant's service.
(w) S&P Index: The Standard & Poor's 500 Index.
(x) Service Date: The first date on which a Participant commences
service as a director of the Company.
(y) Shares: Shares of common stock, par value $1.00 per share, of the
Company.
(z) Subsidiary: A subsidiary corporation, as defined in Section 424(f)
of the Code (or any successor section thereto).
3. SHARES SUBJECT TO THE PLAN
The total number of Shares which may be issued under the Plan is 200,000.
Shares may consist, in whole or in part, of unissued Shares or treasury Shares.
The issuance of Awards shall reduce the total number of Shares available under
the Plan.
4. ADMINISTRATION
The Plan shall be administered by the Committee, which may delegate its
duties and powers in whole or in part to any subcommittee thereof consisting
solely of at least two "non-employee directors" within the meaning of Rule 16b-3
under the Act (or any successor rule thereto). The Committee is authorized to
interpret the Plan, to establish, amend and rescind any rules and regulations
relating to the Plan, and to make any
<PAGE>
-5-
other determinations that it deems necessary or desirable for the administration
of the Plan. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan in the manner and to the extent the
Committee deems necessary or desirable. Any decision of the Committee in the
interpretation and administration of the Plan, as described herein, shall lie
within its sole and absolute discretion and shall be final, conclusive and
binding on all parties concerned (including, but not limited to, Participants
and their beneficiaries or successors).
5. ELIGIBILITY
All Participants shall be eligible to participate under the Plan.
6. TERMS AND CONDITIONS OF OPTIONS
Options granted under the Plan shall be non-qualified stock options for
federal income tax purposes, as evidenced by the related Option agreements, and
shall be subject to the foregoing and the following terms and conditions and to
such other terms and conditions, not inconsistent therewith, as the Committee
shall determine:
(a) Annual Grant of Options. At each December meeting of the Board,
each Participant who is expected to serve on the Board for the following
calendar year shall receive an Option to purchase a number of Shares with a
nominal grant value based on competitive pay levels, as determined by the
Board in its sole discretion.
(b) Option Price. The Option Price per Share shall equal the Fair
Market Value of one Share on the date on which an Option is granted.
(c) Exercisability of Options. An Option granted under the Plan shall
be fully exercisable on the first anniversary of the date on which such
Option is granted. An Option shall expire on the tenth anniversary of the
date on which it is granted.
<PAGE>
-6-
(d) Exercise of Options. Except as otherwise provided in the Plan or
in a related Option agreement, an Option may be exercised for all, or from
time to time any part, of the Shares for which it is then exercisable. The
purchase price for the Shares as to which an Option is exercised shall be
paid to the Company in full at the time of exercise at the election of the
Participant (i) in cash, (ii) in Shares having a Fair Market Value equal to
the aggregate Option Price for the Shares being purchased and satisfying
such other requirements as may be imposed by the Committee or (iii) partly
in cash and partly in such Shares. No Participant shall have any rights to
dividends or other rights of a shareholder with respect to Shares subject
to an Option until the Participant has given written notice of exercise of
the Option, paid in full for such Shares and, if applicable, has satisfied
any other conditions imposed by the Committee pursuant to the Plan.
(e) Exercisability Upon Termination of Service by Death. If a
Participant's service with the Company and its Subsidiaries terminates by
reason of death after the first anniversary of the date on which an Option
is granted, the unexercised portion of such Option may thereafter be
exercised during the shorter of (A) the remaining term of the Option or (B)
five years after the date of death.
(f) Exercisability Upon Termination of Service by Disability or
Retirement. If a Participant's service with the Company and its
Subsidiaries terminates by reason of Disability or Retirement after the
first anniversary of the date on which an Option is granted, the
unexercised portion of such Option may thereafter be exercised during the
shorter of (A) the remaining term of the Option or (B) five years after the
date of such termination of service; provided, however, that if a
Participant dies within a period of five years after such termination of
service, the unexercised portion of the Option may thereafter be exercised,
during the shorter of (i) the remaining term of the Option or (ii) the
period that is the longer of (A) five years after the date of such
termination of service or (B) one year after the date of death.
(g) Effect of Other Termination of Service. If a Participant's service
with the Company and its Subsidiaries terminates for any reason prior to
the first anniversary of the date on which an Option is granted (as
described above), such Option shall thereupon terminate. If a Participant's
service with the Company and its Subsidiaries terminates for any reason
other than death, Disability or Retirement after the first anniversary of
the date on which an Option is granted (as described above), the
unexercised portion of such Option shall thereupon terminate.
<PAGE>
-7-
7. TERMS AND CONDITIONS OF RESTRICTED STOCK
Restricted Stock granted under the Plan shall be subject to the following
terms and conditions and to such other terms and conditions, not inconsistent
therewith, as the Committee shall determine:
(a) One-Time Grant of Restricted Stock to New Directors. Each
Participant who commences service with the Company on or after November 1,
1996 shall, on his or her Service Date, receive a one-time grant of
Restricted Stock consisting of a number of Shares equal to (i) the annual
retainer in effect on such Participant's Service Date, divided by (ii) the
Fair Market Value of one Share on such Participant's Service Date.
(b) Restrictions. Restricted Stock granted under the Plan may not be
sold, transferred, pledged, assigned or otherwise disposed of under any
circumstances; provided, however, that the foregoing restrictions shall
elapse on the fifth anniversary of a Participant's Service Date.
(c) Forfeiture of Grants. All Shares of Restricted Stock as to which
restrictions have not previously elapsed pursuant to Section 7(b) of the
Plan shall be forfeited upon the termination of a Participant's service
with the Company for any reason (including, without limitation, by reason
of death, Disability or Retirement).
(d) Other Provisions. During the period prior to the date on which the
foregoing restrictions elapse, (i) Shares of Restricted Stock shall be
registered in the Participant's name and (ii) such Participant shall have
voting rights and receive dividends with respect to such Restricted Stock.
8. TERMS AND CONDITIONS OF PHANTOM STOCK UNITS
(a) One-Time Conversion of Accrued Benefits into Phantom Stock Units.
Each Participant who serves on the Board as of January 1, 1997 shall have
Phantom Stock Units credited to a Phantom Stock Unit account maintained for
him or her on the books of the Company. The number of Phantom Stock Units
to be credited shall equal (i) the present value as of December 31, 1996 of
the Participant's accrued future retirement benefit under the Company's
Plan for Compensating Directors for Post Retirement Availability and
Service (calculated in accordance with (A) the assumptions used to
calculate lump-sum distributions under such plan, (B) an interest rate
equal to 85% of the three-month average yield on 15-year Treasury bonds and
(C) information from the 1983 Group Annuity Mortality table),
<PAGE>
-8-
divided by (ii) the average Fair Market Value of one Share during the last
ten trading days of 1996, rounded down to the nearest whole number of
Phantom Stock Units. For purposes of the foregoing calculation, the
non-accrued future retirement benefits of Participants with more than three
but less than five years of service shall be accelerated to December 31,
1996. Phantom Stock units shall be credited with dividend equivalents when
dividends are paid on Shares, and such dividend equivalents shall be
converted into additional Phantom Stock Units (including fractional Phantom
Stock Units) based on the Fair Market Value of Shares on the date credited.
(b) Payment in Cash Upon Termination of Service. No later than the
first business day of the calendar year immediately following the date on
which a Participant terminates service with the Company (the "Determination
Date"), the Participant shall receive a lump sum payment in cash equal to
the Fair Market Value of the number of Phantom Stock Units (including
fractional Phantom Stock Units) credited to the Participant's Phantom Stock
Unit account on the Determination Date. Alternatively, the Participant may
elect to receive his or her payment in such forms of payments (and on such
terms and conditions) as are established by the Committee in its sole
discretion.
9. TERMS AND CONDITIONS OF PERFORMANCE SHARES
(a) Establishment of Annual Performance Target Levels and Number of
Performance Shares. In the December immediately preceding a given
Performance Period, the Board shall establish performance target levels of
total shareholder return for the Company for such Performance Period,
expressed as target percentiles of the total shareholder return of the S&P
Index. The Board shall also establish the number of Performance Shares that
would be payable to Participants upon the attainment of various performance
target levels during such Performance Period. The Board, in its sole
discretion, may adjust performance target levels and the number of
Performance Shares payable upon attainment of such target levels in
December of each year with respect to the subsequent Performance Period to
reflect changes in Share prices and/or competitive pay levels.
(b) Payment in Unrestricted Shares. On the first trading day following
the third Wednesday in February in the year following a given Performance
Period, Participants shall receive unrestricted Shares equal to the number
of Performance Shares earned by such Participant during such Performance
Period. A Participant who did not serve on the Board during an entire
Performance Period shall receive a prorated number of Shares (rounded down
to the nearest whole number of Shares) based upon (i) the number of days
during the Performance Period during
<PAGE>
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which such Participant served on the Board and (ii) the actual total
shareholder return results.
(c) Authorization for Committee to Permit Deferral. Notwithstanding
Section 9(b) of the Plan, a Participant may, if and to the extent permitted
by the Board, elect to defer payment of any unrestricted Shares payable as
a result of any Performance Shares earned by such Participant; provided,
however, that any such election must be made (i) no later than June 30 of
the year immediately preceding the year in which any such unrestricted
Shares are to be paid and (ii) in accordance with such terms and conditions
as are established by the Committee in its sole discretion.
10. ADJUSTMENTS UPON CERTAIN EVENTS
Notwithstanding any other provisions in the Plan to the contrary, the
following provisions shall apply to all Awards granted under the Plan:
(a) Generally. In the event of any change in the outstanding Shares
after the Effective Date by reason of any Share dividend or split,
reorganization, recapitalization, merger, consolidation, spin-off,
combination or exchange of Shares or other corporate exchange, or any
distribution to shareholders of Shares other than regular cash dividends,
the Committee, in its sole discretion and without liability to any person,
may make such substitution or adjustment, if any, as it deems to be
equitable, as to (i) the number or kind of Shares or other securities
issued or reserved for issuance pursuant to the Plan or pursuant to
outstanding Awards, (ii) the Option Price and/or (iii) any other affected
terms of such Awards.
(b) Change in Control. Upon the occurrence of a Change in Control, (i)
all restrictions on Shares of Restricted Stock shall lapse, (ii) all
Phantom Stock Units shall become payable to Participants in cash, (iii)
each Participant shall receive the target number of Performance Shares for
the Performance Period in which the Change in Control occurs (or, if no
target number has been established for such Performance Period, the target
number for the immediately preceding Performance Period shall be used) and
(iv) all Stock Options shall vest and become exercisable.
<PAGE>
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11. SUCCESSORS AND ASSIGNS
The Plan shall be binding on all successors and assigns of the Company and
a Participant, including without limitation, the estate of such Participant and
the executor, administrator or trustee of such estate, or any receiver or
trustee in bankruptcy or representative of the Participant's creditors.
12. AMENDMENTS OR TERMINATION
The Board may amend, alter or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would impair the rights of any
Participant under any Award theretofore granted without such Participant's
consent.
13. NONTRANSFERABILITY OF AWARDS
An Award shall not be transferable or assignable by the Participant
otherwise than by will or by the laws of descent and distribution. During the
lifetime of a Participant, an Award shall be exercisable only by such
Participant. An Award exercisable after the death of a Participant may be
exercised by the legatees, personal representatives or distributees of the
Participant. Notwithstanding anything to the contrary herein, the Committee, in
its sole discretion, shall have the authority to waive this Section 13 (or any
part thereof) to the extent that this Section 13 (or any part thereof) is not
required under the rules promulgated under any law, rule or regulation
applicable to the Company.
<PAGE>
-11-
14. CHOICE OF LAW
The Plan shall be governed by and construed in accordance with the laws of
the State of New York applicable to contracts made and to be performed in the
State of New York.
15. EFFECTIVENESS OF THE PLAN
The Plan shall be effective as of November 1, 1996.
Adopted by the
Board of Directors: December 18, 1996
Amended by the Board
of Directors effective: January 15, 1997
AGREEMENT TO RETIRE
GENERAL PARTNER INTEREST
(IMS AMERICA, LTD)
THIS AGREEMENT TO RETIRE GENERAL PARTNER INTEREST (this "Agreement"), is
entered into and effective this 21st day of October, 1996, by and between D&B
Investors L.P., a Delaware limited partnership (the "Partnership"), and IMS
America, Ltd., a New Jersey corporation (the "Retiring General Partner").
WHEREAS, the Retiring General Partner, The Reuben H. Donnelley
Corporation, a Delaware corporation, Dun & Bradstreet, Inc., a Delaware
corporation, and RBDB, LLC, a Delaware limited liability company, formed the
Partnership pursuant to that certain Agreement of Limited Partnership of D&B
Investors L.P., dated October 14, 1993, as amended by that certain Partnership
Agreement Amendment No. 1, dated as of October 14, 1993, and that certain
Amendment No. 2 to the Agreement of Limited Partnership of D&B Investors L.P.,
dated October 5, 1995 (collectively the "Partnership Agreement," terms not
otherwise defined herein are used herein as therein defined); and
WHEREAS, on October 5, 1995, the Reuben H. Donnelley Corporation retired
from the Partnership, and on October 1, 1996, Duns Investing VII Corporation, a
Delaware corporation, was assigned a portion of the interest of Dun &
Bradstreet, Inc. and admitted to the Partnership as a Limited Partner, and RBDB,
LLC retired from the Partnership, and on October 18, 1996, Utrecht-America
Finance Co., a Delaware corporation, was assigned a portion of the interest of
Dun & Bradstreet, Inc. and admitted to the Partnership as a Limited Partner; and
WHEREAS, the Retiring General Partner has elected to withdraw from the
Partnership and to require its entire Interest in the Partnership (the
"Redemption Interest") to be retired and redeemed by the Partnership in
accordance with the terms of this Agreement and Section 11.2 of the Partnership
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby agree
as follows:
<PAGE>
ARTICLE I
RETIREMENT, REDEMPTION AND ASSIGNMENT; CLOSING
SECTION 1.01. RETIREMENT AND REDEMPTION Subject to the terms and
conditions set forth herein and Section 11.2 of the Partnership Agreement, the
Retiring General Partner hereby assigns and transfers to the Partnership, and
the Partnership hereby retires and redeems, the Redemption Interest. The closing
of the transactions contemplated hereby (the "Closing") shall take place on the
date first set forth above (the "Retirement Date") at 4:00 p.m. (Delaware time).
SECTION 1.02. REDEMPTION CONSIDERATION. The assets to be conveyed by the
Partnership to the Retiring General Partner as consideration for the retirement
and redemption of the Redemption Interest shall be (a) 800,000 shares of common
stock of The Dun & Bradstreet Corporation and (b) warrants representing the
right to purchase 2,214,799 shares of common stock of The Dun & Bradstreet
Corporation (collectively the "REDEMPTION CONSIDERATION"). In addition, the
Retiring General Partner shall assume the UAF Obligation (as defined and further
described in Section 2.01 hereof). The parties hereto acknowledge that the
Redemption Consideration has been determined in accordance with Section 11.2(b)
of the Partnership Agreement and further acknowledge that the aggregate fair
market value of the Redemption Consideration (net of the UAF Obligation, as
hereafter defined) equals the positive balance in the Retiring General Partner's
Capital Account (taking into account the adjustments and allocations required by
the first sentence of Section 11.2(b)(x) of the Partnership Agreement).
SECTION 1.03. DELIVERIES AT CLOSING. At the Closing, (a) each of the
parties hereto shall deliver an executed counterpart of this Agreement, (b) the
Partnership shall deliver the Redemption Consideration to the Retiring General
Partner, including such documents and instruments as may be necessary to
effectuate the transfer of the stock and warrants that comprise the Redemption
Consideration to the Retiring General Partner as of the Retirement Date, and (c)
the Retiring General Partner shall deliver to the Partnership such documents and
instruments as may be necessary to effectuate the assumption of the UAF
Obligation by the Retiring General Partner in accordance with Section 2.01
hereof.
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<PAGE>
ARTICLE II
ASSUMPTION OF UAF OBLIGATION;
CONTINUING LIABILITY
2.01. ASSUMPTION OF UAF OBLIGATION. The parties acknowledge that the
Partnership's outstanding liabilities consist solely of an obligation to
Utrecht-America Finance Co. in the amount of $50 million Investment Principal
and accrued Investment Return thereon (the "UAF Obligation"), which is governed
by that certain Purchase Agreement, dated October 14, 1993, as amended, by that
certain Purchase Agreement Amendment, dated as of October 14, 1993, that certain
Amendment and Waiver to Purchase Agreement, dated April 15, 1994, that certain
Third Amendment to Purchase Agreement, dated September 18, 1995, and that
certain Fourth Amendment to Purchase Agreement dated October 3, 1996. In
connection with the redemption and retirement of the Redemption Interest, the
Partnership hereby assigns to the Retiring General Partner and the Retiring
General Partner hereby assumes from the Partnership, as of the Retirement Date,
the UAF Obligation. The Retiring General Partner hereby agrees, as of the
Retirement Date, to indemnify, defend, protect and hold harmless the
Partnership, the other original General Partners, and the Parent from any loss
or liability relating to the UAF Obligation.
SECTION 2.02. CONTINUING LIABILITY. As among the Partners, the Retiring
General Partner shall be relieved of all liabilities and obligations of the
Partnership, whether contingent or otherwise, as of the Retirement Date,
excluding only (a) the UAF Obligation and (b) any liability or obligation owing
to the fraud, bad faith, wilful misconduct, or gross negligence of the Retiring
Limited Partner. The Partnership and its remaining General Partner shall, as of
the Retirement Date, indemnify, defend, protect, and hold harmless the Retiring
General Partner from all liabilities and obligations from which the Retiring
General Partner is, or is intended to be, relieved under this Section 2.02.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF PARTIES. Each party
hereto represents and warrants to each of the other parties as follows:
(a) ORGANIZATION AND AUTHORIZATION. Such party is duly organized,
validly existing and in good standing under the laws of the state of its
organization and has all necessary power and authority to enter into this
Agreement, to carry out its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the performance by such party of the transactions contemplated hereby have
been duly authorized by all requisite action
- 3 -
<PAGE>
on the part of such party. This Agreement has been duly executed and delivered
by such party. Assuming due authorization, execution and delivery by the other
parties, this Agreement constitutes a legal, valid and binding obligation of
such party enforceable against such party in accordance with its terms, subject
to applicable bankruptcy, insolvency or other laws affecting creditors' rights
generally and to general equity principles.
(b) NO CONFLICT; REQUIRED FILINGS AND CONSENTS. The execution and
delivery of this Agreement by such party does not, and the performance of this
Agreement by such party will not conflict with or violate any law, rule or
regulation applicable to such party or by which any of such party's properties
is bound or affected, the result of which would have a material adverse effect
on such party's ability to perform its obligations under this Agreement, (i)
result in any breach of or constitute a default under any note, bond, mortgage,
indenture, contract or other instrument or obligation to which such party is a
party or by which any of its properties is bound or affected, the result of
which would have a material adverse effect on such party's ability to perform
its obligations under this Agreement, or (ii) require any consent, approval,
exemption, authorization or permit of, or filing with or notification to, or
other action by, any court, administrative agency, or governmental or regulatory
authority.
(c) ABSENCE OF LITIGATION. There is no pending or, to the best knowledge
of such party, threatened claim, action, litigation, arbitration or governmental
investigation or legal, administrative or regulatory proceeding against such
party which purports to affect or challenge the legality, validity or
enforceability of this Agreement or the consummation of the transactions
contemplated hereunder.
SECTION 3.02 ADDITIONAL REPRESENTATION AND WARRANTY OF RETIRING GENERAL
PARTNER. The Retiring General Partner represents and warrants to each of the
other parties hereto that it is the legal and beneficial owner of the Redemption
Interest, that such ownership will be conveyed to the Partnership hereunder, and
that such ownership is free and clear of any security interest, pledge,
mortgage, lien (including environmental and tax liens), charge, adverse claim,
option or other right to purchase, or other encumbrance (collectively an
"Encumbrance").
- 4 -
<PAGE>
SECTION 3.03. ADDITIONAL REPRESENTATION AND WARRANTY OF PARTNERSHIP. The
Partnership represents and warrants to the Retiring General Partner that it is
the legal and beneficial owner of the stock and warrants that comprise the
Redemption Consideration, and that such ownership will be conveyed to the
Retiring General Partner hereunder free and clear of any Encumbrance other than
the UAF Obligation that the Retiring General Partner has assumed hereunder.
ARTICLE IV
INDEMNIFICATION; SURVIVAL
SECTION 4.01 INDEMNIFICATION. Each of the parties hereto thereby agrees
to indemnify each other party against, and hold each other party harmless from,
any and all damage, loss, liability, tax, interest, penalties, and any other
expense (including, without limitation, investigation and attorneys' fees and
expenses in connection with any action, suit, proceeding, claim, investigation,
or other loss) arising out of any inaccuracy or omission in any representation
or warranty made by such party, any violation or breach of any covenant or
agreement of such party, or any default with respect to any obligation of such
party, under this Agreement, which, in the case of any of the foregoing, has a
material adverse effect on the economic benefits to the other party of the
transactions contemplated hereby.
SECTION 4.01. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations, warranties, covenants and agreement of each of the parties
hereto shall survive and remain in full force and effect until performance in
accordance with the terms hereof.
ARTICLE V
MISCELLANEOUS
SECTION 5.01 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be made in accordance with the provisions of the
Partnership Agreement, as amended from time to time.
SECTION 5.02 FURTHER ASSURANCES. Each party hereto agrees to execute and
deliver, at its own expense, such other documents and instruments, including,
without limitation, an amendment to or restatement of the Partnership Agreement,
and take such other action, as any other party requests, to (a) consummate more
effectively the transactions contemplated hereby, (b) carry out the terms and
purposes of this Agreement, and (c) respond to or cooperate with any court,
administrative agency, or governmental or regulatory authority.
- 5 -
<PAGE>
SECTION 5.03 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the transferees, successors, assigns, heirs,
beneficiaries, executors, administrators, partners, agents, employees, and
representatives of each party hereto.
SECTION 5.04 NO THIRD-PARTY BENEFICIARIES. Nothing in this Agreement,
expressed or implied, is intended or shall be construed to confer upon any
person other than the parties hereto, and their successors and assigns, heirs,
beneficiaries, executors, administrators, partners, agents, employees, and
representatives, any rights, remedies, or claims under or by reason of this
Agreement.
SECTION 5.05 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to the conflict of laws provisions thereof. Any and all suits, legal
actions or proceedings against any party hereto arising out of this Agreement
shall be brought in the state courts of the State of Delaware, or, if such court
shall not have jurisdiction, the court of appropriate jurisdiction sitting in
Wilmington, Delaware, and each party hereby submits to and accepts the exclusive
jurisdiction of such courts for the purpose of such suits, legal action or
proceedings. Each party hereto hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any such suit, legal action
or proceeding in any such court and hereby further waives any claim that any
suit, legal action or proceeding brought in any such court has been brought in
an inconvenient forum.
SECTION 5.06 MODIFICATIONS AND WAIVERS. No supplement, modification,
waiver or termination of this Agreement or any provisions hereof shall be
binding unless executed in writing by all parties hereto. No waiver of any of
the provisions of this Agreement shall constitute a waiver of any other
provision (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided
SECTION 5.07 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one agreement.
SECTION 5.08 SEVERABILITY. Each provision of this Agreement is intended
to be severable. If any term or provision hereof is illegal or invalid for any
reason whatsoever, such illegality or invalidity shall not affect the legality
or validity of the remainder of this Agreement.
- 6 -
<PAGE>
SECTION 5.09 INCORPORATION BY REFERENCE. Every schedule attached to this
Agreement and referred to herein is hereby incorporated in this Agreement by
reference.
SECTION 5.10 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements and undertakings, both written and oral, between
the parties with respect to the subject matter hereof.
- 7 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
PARTNERSHIP:
D&B INVESTORS L.P.
By: Dun & Bradstreet, Inc.
Title: Managing General Partner
By: /s/ [ILLEGIBLE]
--------------------------------
Title:
---------------------------
RETIRING GENERAL PARTNER:
By: IMS America, Ltd.
Title: General Partner
By: /s/ [ILLEGIBLE]
--------------------------------
Title: Asst. V.P.
---------------------------
SIGNATURE PAGE TO AGREEMENT TO RETIRE GENERAL PARTNER INTEREST
(IMS AMERICA, LTD.)
- 8 -
<PAGE>
OFFICER'S CERTIFICATE
The undersigned, Stephen J. Boatti, Assistant Vice President of IMS
AMERICA, LTD. (the "Company"), hereby certifies that the Company is within the
definition of a qualified institutional buyer as defined in Rule 144A of the
Securities Act of 1933, as amended.
IN WITNESS WHEREOF, I have hereunto signed my name on the 21st day of
October, 1996.
/s/ Stephen J. Boatti
-------------------------------
Name: Stephen J. Boatti
Title: Assistant Vice President
<PAGE>
WARRANT ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby assigns and tranfers unto IMS
AMERICA, LTD., 100 Campus Road, Totown, New Jersey, 07512, the within Warrant,
hereby irrevocably constituting and appointing the appropriate officer of The
Dun & Bradstreet Corporation as attorney to transfer said Warrant on the books
of The Dun & Bradstreet Corporation, with full power of substitution in the
premises.
DATED: October 21, 1996
Signature of Registered Holder:
D&B INVESTORS L.P.
By: DUN & BRADSTREET, INC.
its Managing General Partner
By: /s/ [ILLEGIBLE]
---------------------------
Name:
Title:
<PAGE>
IMS AMERICA, LTD.
September 30, 1996
To: Dun & Bradstreet, Inc.,
General Partner
RBDB, LLC, Limited Partner
Re: D&B Investors L.P.
Dear Sirs:
Pursuant to Section 11.2 of the Agreement of Limited Partnership of D&B
Investors L.P. (the "Partnership"), dated October 14, 1993, as amended (the
"Partnership Agreement"), we hereby elect to withdraw from the Partnership and
require that our entire Interest be retired.
The General Partnership Withdrawal Date shall be a date in early October
1996 mutually agreeable to you and to us.
Capitalized terms not defined herein shall have the meanings assigned to
them in the Partnership Agreement.
IMS AMERICA, LTD.
By: /s/ Alan J. Klutch
--------------------------
Alan J. Klutch
Vice President
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT is dated as of October 28, 1996, among
THE DUN & BRADSTREET CORPORATION, a Delaware corporation ("D&B"), COGNIZANT
CORPORATION, a Delaware corporation ("Cognizant"), and ACNIELSEN CORPORATION, a
Delaware corporation ("ACNielsen").
WHEREAS, D&B, acting through its direct and indirect subsidiaries,
currently conducts a number of businesses, including, without limitation, (i)
providing information and decision support services to the pharmaceutical and
healthcare industries, and providing sales automation solutions and developing,
installing and supporting networked systems for pharmaceutical, healthcare and
consumer packaged goods organizations (the "IMS Business"), (ii) measuring
television audiences and Internet usage and reporting of the results thereof and
related information to advertisers, advertising agencies, syndicators, broadcast
networks, cable networks, cable operators, television stations and/or station
representatives, both in the United States and Canada (the "Nielsen Media
Research Business") and elsewhere (the "Non-U.S. Media Business"), (iii)
providing research and analysis of the computer hardware, software,
communications and related technology industries (the "Gartner Group Business"),
(iv) providing client/server decision support solutions for medium and large
scale enterprises (the "Pilot Business"), (v) developing and marketing
proprietary software applications and services used primarily in the
administration of health care benefits and the support of managed care services
(the "Erisco Business"), (vi) developing other software (the "Saytam Software
Business"), (vii) providing information and analytic support services focusing
on healthcare providers (the "DBHC Business"), (viii) providing financial
application software products and services to the Japanese markets (the "DBTA
Business"), (ix) delivering market research, information and analysis to the
consumer products services industry (the "Nielsen Marketing Business"), and (x)
investing in emerging and established businesses in the information industry
(the "Cognizant Enterprises Business");
WHEREAS, the Board of Directors of D&B has determined that it is
appropriate, desirable and in the best interests of the holders of shares of
common stock, par value $1.00 per share, of D&B (the "D&B Common Stock") to
reorganize D&B to separate from D&B (i) the IMS Business, the Nielsen Media
Research Business, the Gartner Group Business, the Pilot Business, the Erisco
Business, the Saytam Software Business, the DBHC Business, the DBTA Business and
the Cognizant Enterprises Business, and to cause such businesses to be owned and
conducted, directly or
<PAGE>
2
indirectly, by Cognizant, and (ii) the Nielsen Marketing Business and the
Non-U.S. Media Business and to cause such businesses to be owned and conducted,
directly or indirectly, by ACNielsen;
WHEREAS, in order to effect such separations, the Board of Directors
of D&B has determined that it is appropriate, desirable and in the best
interests of the holders of D&B Common Stock to take certain steps to reorganize
D&B's Subsidiaries and businesses and then to distribute to the holders of the
D&B Common Stock all the outstanding shares of common stock of Cognizant,
together with the appurtenant share purchase rights (the "Cognizant Common
Shares"), and all the outstanding shares of common stock of ACNielsen, together
with the appurtenant share purchase rights (the "ACNielsen Common Shares");
WHEREAS, each of D&B, Cognizant and ACNielsen has determined that it
is necessary and desirable, on or prior to the Distribution Date (as defined
herein), to allocate and transfer those assets and to allocate and assign
responsibility for those liabilities in respect of the activities of the
businesses of such entities and those assets and liabilities in respect of other
businesses and activities of D&B and its current and former Subsidiaries and
other matters; and
WHEREAS, each of D&B, Cognizant and ACNielsen has determined that it
is necessary and desirable to set forth the principal corporate transactions
required to effect such Distribution and to set forth other agreements that will
govern certain other matters following the Distribution.
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained in this Agreement, the parties hereby agree
as follows:
ARTICLE I. DEFINITIONS
SECTION 1.1. General. As used in this Agreement, the following terms
shall have the following meanings:
(a) "ACNielsen" shall mean ACNielsen Corporation, a
Delaware corporation.
(b) "ACNielsen Assets" shall mean:
(i) any and all Assets that are expressly contemplated by this
Agreement, including the list of pre-Distribution
reorganization steps attached as Schedule 1.1(b)(i)(1) hereto,
or any Ancillary Agreement (or included on Schedule
1.1(b)(i)(2) or any other Schedule hereto or thereto) as
Assets which have been or are to be transferred to
<PAGE>
3
ACNielsen or any other member of the ACNielsen Group;
(ii) the ownership interests in those Business Entities listed on
Schedule 1.1(b)(ii);
(iii) subject to Article VII, any rights of any member of the
ACNielsen Group under any of the Policies, including any
rights thereunder arising after the Distribution Date in
respect of any Policies that are occurrence policies;
(iv) any ACNielsen Contracts, any rights or claims arising
thereunder, and any other rights or claims or contingent
rights or claims primarily relating to or arising from any
ACNielsen Asset or the ACNielsen Business;
(v) any Assets reflected on the ACNielsen Balance Sheet or the
accounting records supporting such balance sheet and any
Assets acquired by or for ACNielsen or any member of the
ACNielsen Group subsequent to the date of such balance sheet
which, had they been so acquired on or before such date and
owned as of such date, would have been reflected on such
balance sheet if prepared on a consistent basis, subject to
any dispositions of any of such Assets subsequent to the date
of such balance sheet; and
(vi) any and all Assets owned or held immediately prior to the
Distribution Date by D&B or any of its Subsidiaries (including
Cognizant or any of its Subsidiaries) primarily relating to or
used in the ACNielsen Business. The intention of this clause
(vi) is only to rectify any inadvertent omission of transfer
or conveyance of any Asset that, had the parties given
specific consideration to such Asset as of the date hereof,
would have otherwise been classified as an ACNielsen Asset. No
Asset shall be deemed to be an ACNielsen Asset solely as a
result of this clause (vi) if such Asset is within the
category or type of Asset expressly covered by the subject
matter of an Ancillary Agreement. In addition, no Asset shall
be deemed an ACNielsen Asset solely as a result of this clause
(vi) unless a claim with respect thereto is made by ACNielsen
on or prior to the first anniversary of the Distribution Date.
Notwithstanding the foregoing, the ACNielsen Assets
shall not in any event include:
<PAGE>
4
(x) the Assets listed or described on Schedule 1.1(b)(x); or
(y) any Assets primarily relating to or used in any
terminated or divested Business Entity, business or
operation formerly owned or managed by or associated
with ACNielsen or any ACNielsen Business, except for
those Assets primarily relating to or used in those
Business Entities, businesses or operations listed on
Schedule 1.1(b)(y); or
(z) any and all Assets that are expressly contemplated by
this Agreement or any Ancillary Agreement (or the
Schedules hereto or thereto) as Assets to be retained by
any member of the D&B Group or the Cognizant Group.
In the event of any inconsistency or conflict which may arise
in the application or interpretation of any of the foregoing
provisions, for the purpose of determining what is and is not
an ACNielsen Asset, any item explicitly included on a Schedule
referred to in this Section 1.1(b) shall take priority over
any provision of the text hereof, and clause (i) shall take
priority over clause (v) of this paragraph (b) and over clause
(v) of paragraph (w) of this Section 1.1.
(c) "ACNielsen Balance Sheet" shall mean the combined balance sheet
of the ACNielsen Group, including the notes thereto, as of June 30, 1996, set
forth as Schedule 1.1(c) hereto.
(d) "ACNielsen Business" shall mean (i) the Nielsen Marketing
Business and the Non-U.S. Media Business, (ii) the businesses of the members of
the ACNielsen Group, (iii) any other business conducted primarily through the
use of the ACNielsen Assets, and (iv) the businesses of Business Entities
acquired or established by or for ACNielsen or any of its Subsidiaries after the
date of this Agreement.
(e) "ACNielsen Common Shares" shall have the meaning as defined in
the recitals hereto.
(f) "ACNielsen Contracts" shall mean the following contracts and
agreements to which D&B or any of its Affiliates is a party or by which it or
any of its Affiliates or any of their respective Assets is bound, whether or not
in writing, except for any such contract or agreement (i) that is not expressly
contemplated to be transferred or assigned by any member of the D&B Group or
(ii) that is expressly contemplated to be transferred or assigned to any member
of the Cognizant Group, in
<PAGE>
5
each case, pursuant to any provision of this Agreement or any Ancillary
Agreement:
(i) any contracts or agreements listed or described on Schedule
1.1(f)(i);
(ii) any contract or agreement entered into in the name of, or expressly
on behalf of, any division, business unit or member of the ACNielsen
Group;
(iii) any contract or agreement that relates primarily to the ACNielsen
Business;
(iv) federal, state and local government and other contracts and
agreements that are listed or described on Schedule 1.1(f)(iv) and
any other government contracts or agreements entered into after the
date hereof and prior to the Distribution Date that relate primarily
to the ACNielsen Business;
(v) any contract or agreement representing capital or operating
equipment lease obligations reflected on the ACNielsen Balance
Sheet, including obligations as lessee under those contracts or
agreements listed on Schedule 1.1(f)(v);
(vi) any contract or agreement that is otherwise expressly contemplated
pursuant to this Agreement or any of the Ancillary Agreements to be
assigned to any member of the ACNielsen Group; and
(vii) any guarantee, indemnity, representation or warranty of the
ACNielsen Group.
(g) "ACNielsen Group" shall mean ACNielsen and each Business Entity
which is contemplated to remain or become a Subsidiary of ACNielsen hereunder,
which shall include those identified as such on Schedule 1.1(g) hereto, which
Schedule shall also indicate the amount of ACNielsen's direct or indirect
ownership interest therein.
(h) "ACNielsen Indemnitees" shall mean each member of the ACNielsen
Group, each of their respective directors, officers, employees and agents and
each of the heirs, executors, successors and assigns of any of the foregoing.
(i) "ACNielsen Liabilities" shall mean:
(i) any and all Liabilities that are expressly contemplated by this
Agreement or any Ancillary Agreement (or the Schedules hereto or
thereto, including Schedule 1.1(i)(i) hereto) as Liabilities to be
assumed by any member of the
<PAGE>
6
ACNielsen Group, and all agreements, obligations and Liabilities of
any member of the ACNielsen Group under this Agreement or any of the
Ancillary Agreements;
(ii) all Liabilities (other than Taxes and any employee-related
Liabilities), primarily relating to, arising out of or resulting
from:
(A) the operation of the ACNielsen Business, as conducted at
any time prior to, on or after the Distribution Date (including any
Liability relating to, arising out of or resulting from any act or
failure to act by any director, officer, employee, agent or
representative (whether or not such act or failure to act is or was
within such person's authority));
(B) the operation of any business conducted by any member of
the ACNielsen Group at any time after the Distribution Date
(including any Liability relating to, arising out of or resulting
from any act or failure to act by any director, officer, employee,
agent or representative (whether or not such act or failure to act
is or was within such person's authority)); or
(C) any ACNielsen Assets; whether arising before, on or after
the Distribution Date;
(iii) all Liabilities reflected as liabilities or obligations on the
ACNielsen Balance Sheet or the accounting records supporting such
balance sheet, and all Liabilities arising or assumed after the date
of such balance sheet which, had they arisen or been assumed on or
before such date and been retained as of such date, would have been
reflected on such balance sheet if prepared on a consistent basis,
subject to any discharge of such Liabilities subsequent to the date
of the ACNielsen Balance Sheet.
Notwithstanding the foregoing, the ACNielsen Liabilities shall not
include:
(x) any Liabilities that are expressly contemplated by this
Agreement or any Ancillary Agreement (or the Schedules hereto
or thereto) as Liabilities to be retained or assumed by any
member of the D&B Group or by any member of the Cognizant
Group, including any Liabilities set forth on Schedule
1.1(i)(x);
<PAGE>
7
(y) any Liabilities primarily relating to, arising out of or
resulting from any terminated or divested Business Entity,
business or operation formerly owned or managed by or
associated with ACNielsen or any ACNielsen Business (except
for Liabilities primarily relating to, arising out of or
resulting from those Business Entities, businesses or
operations listed on Schedule 1.1(i)(y)); any Liabilities
which are excluded by this clause (y) from the ACN Liabilities
shall be deemed to be D&B Liabilities; or
(z) all agreements and obligations of any member of the D&B Group
or the Cognizant Group under this Agreement or any of the
Ancillary Agreements.
(j) "ACNielsen Policies" shall mean all Policies, current or past,
which are owned or maintained by or on behalf of D&B or any Subsidiary of D&B,
which relate to the ACNielsen Business but do not relate to the D&B Business or
the Cognizant Business, and which Policies are either maintained by ACNielsen or
a member of the ACNielsen Group or assignable to ACNielsen or a member of the
ACNielsen Group.
(k) "ACNielsen Shared Policies" shall mean all Policies, current or
past, which are owned or maintained by or on behalf of D&B or any Subsidiary of
D&B which relate to the ACNielsen Business, other than ACNielsen Policies.
(l) "Action" shall mean any action, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any governmental or other
regulatory or administrative agency, body or commission or any arbitration
tribunal.
(m) "Affiliate" shall mean, when used with respect to a specified
person, another person that controls, is controlled by, or is under common
control with the person specified. As used herein, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person, whether through the
ownership of voting securities or other interests, by contract or otherwise.
(n) "Agent" shall have the meaning as defined in
Section 2.1(b).
(o) "Agreement Disputes" shall have the meaning as
defined in Section 6.1.
(p) "Ancillary Agreements" shall mean all of the written agreements,
instruments, assignments or other arrangements (other than this Agreement)
entered into in connection with the transactions contemplated hereby, including,
without limitation, the Conveyancing and Assumption Instruments,
<PAGE>
8
the Data Services Agreements, the Employee Benefits Agreement, the Indemnity and
Joint Defense Agreement, the Intellectual Property Agreement, the Shared
Transaction Services Agreements, the TAM Master Agreement, the Tax Allocation
Agreement and the Transition Services Agreement.
(q) "Assets" shall mean assets, properties and rights (including
goodwill), wherever located (including in the possession of vendors or other
third parties or elsewhere), whether real, personal or mixed, tangible,
intangible or contingent, in each case whether or not recorded or reflected or
required to be recorded or reflected on the books and records or financial
statements of any person, including, without limitation, the following:
(i) all accounting and other books, records and files whether in
paper, microfilm, microfiche, computer tape or disc, magnetic
tape or any other form;
(ii) all apparatus, computers and other electronic data processing
equipment, fixtures, machinery, equipment, furniture, office
equipment, automobiles, trucks, aircraft and other
transportation equipment, special and general tools, test
devices, prototypes and models and other tangible personal
property;
(iii) all inventories of materials, parts, raw materials, supplies,
work-in-process and finished goods and products;
(iv) all interests in real property of whatever nature, including
easements, whether as owner, mortgagee or holder of a Security
Interest in real property, lessor, sublessor, lessee,
sublessee or otherwise;
(v) all interests in any capital stock or other equity interests
of any Subsidiary or any other person, all bonds, notes,
debentures or other securities issued by any Subsidiary or any
other person, all loans, advances or other extensions of
credit or capital contributions to any Subsidiary or any other
person and all other investments in securities of any person;
(vi) all license agreements, leases of personal property, open
purchase orders for raw materials, supplies, parts or
services, unfilled orders for the manufacture and sale of
products and other contracts, agreements or commitments;
(vii) all deposits, letters of credit and performance and surety
bonds;
<PAGE>
9
(viii) all written technical information, data, specifications,
research and development information, engineering drawings,
operating and maintenance manuals, and materials and analyses
prepared by consultants and other third parties;
(ix) all domestic and foreign patents, copyrights, trade names,
trademarks, service marks and registrations and applications
for any of the foregoing, mask works, trade secrets,
inventions, data bases, other proprietary information and
licenses from third persons granting the right to use any of
the foregoing;
(x) all computer applications, programs and other software,
including operating software, network software, firmware,
middleware, design software, design tools, systems
documentation and instructions;
(xi) all cost information, sales and pricing data, customer
prospect lists, supplier records, customer and supplier lists,
customer and vendor data, correspondence and lists, product
literature, artwork, design, development and manufacturing
files, vendor and customer drawings, formulations and
specifications, quality records and reports and other books,
records, studies, surveys, reports, plans and documents;
(xii) all prepaid expenses, trade accounts and other accounts and
notes receivables;
(xiii) all rights under contracts or agreements, all claims or
rights against any person arising from the ownership of any
asset, all rights in connection with any bids or offers and
all claims, chooses in action or similar rights, whether
accrued or contingent;
(xiv) all rights under insurance policies and all rights in the
nature of insurance, indemnification or contribution;
(xv) all licenses (including radio and similar licenses), permits,
approvals and authorizations which have been issued by any
Governmental Authority;
(xvi) cash or cash equivalents, bank accounts, lock boxes and other
deposit arrangements; and
<PAGE>
10
(xvii) interest rate, currency, commodity or other swap, collar, cap
or other hedging or similar agreements or arrangements.
(r) "Assignee" shall have the meaning as defined in Section 2.1(f).
(s) "Business Entity" shall mean any corporation, partnership,
limited liability company or other entity which may legally hold title to
Assets.
(t) "Claims Administration" shall mean the processing of claims made
under the Shared Policies, including, without limitation, the reporting of
claims to the insurance carriers, management and defense of claims and providing
for appropriate releases upon settlement of claims.
(u) "Code" shall mean the Internal Revenue Code of 1986, as amended,
and the Treasury regulations promulgated thereunder, including any successor
legislation.
(v) "Cognizant" shall mean Cognizant Corporation, a Delaware
corporation.
(w) "Cognizant Assets" shall mean:
(i) any and all Assets that are expressly contemplated by this
Agreement, including the list of pre-Distribution
reorganization steps attached as Schedule 1.1(b)(i)(1) hereto,
or any Ancillary Agreement (or included on Schedule 1.1(w)(i)
or any other Schedule hereto or thereto) as Assets which have
been or are to be transferred to Cognizant or any other member
of the Cognizant Group;
(ii) the ownership interests in those Business Entities listed on
Schedule 1.1(w)(ii);
(iii) subject to Article VII, any rights of any member of the
Cognizant Group under any of the Policies, including any
rights thereunder arising after the Distribution Date in
respect of any Policies that are occurrence policies;
(iv) any Cognizant Contracts, any rights or claims arising
thereunder, and any other rights or claims or contingent
rights or claims primarily relating to or arising from any
Cognizant Asset or the Cognizant Business;
(v) any Assets reflected on the Cognizant Balance Sheet or the
accounting records supporting such balance sheet and any
Assets acquired by or for
<PAGE>
11
Cognizant or any member of the Cognizant Group subsequent to
the date of such balance sheet which, had they been so
acquired on or before such date and owned as of such date,
would have been reflected on such balance sheet if prepared on
a consistent basis, subject to any dispositions of any of such
Assets subsequent to the date of such balance sheet; and
(vi) any and all Assets owned or held immediately prior to the
Distribution Date by D&B or any of its Subsidiaries (including
ACNielsen or any of its Subsidiaries) primarily relating to or
used in the Cognizant Business. The intention of this clause
(vi) is only to rectify any inadvertent omission of transfer
or conveyance of any Asset that, had the parties given
specific consideration to such Asset as of the date hereof,
would have otherwise been classified as a Cognizant Asset. No
Asset shall be deemed to be a Cognizant Asset solely as a
result of this clause (vi) if such Asset is within the
category or type of Asset expressly covered by the subject
matter of an Ancillary Agreement. In addition, no Asset shall
be deemed a Cognizant Asset solely as a result of this clause
(vi) unless a claim with respect thereto is made by Cognizant
on or prior to the first anniversary of the Distribution Date.
Notwithstanding the foregoing, the Cognizant Assets
shall not in any event include:
(x) the Assets listed or described on Schedule 1.1(w)(x); or
(y) any Assets primarily relating to or used in any
terminated or divested Business Entity, business or
operation formerly owned or managed by or associated
with Cognizant or any Cognizant Business, except for
those Assets primarily relating to or used in those
Business Entities, businesses or operations listed on
Schedule 1.1(w)(y); or
(z) any and all Assets that are expressly contemplated by
this Agreement or any Ancillary Agreement (or the
Schedules hereto or thereto) as Assets to be retained by
any member of the D&B Group or the ACNielsen Group.
In the event of any inconsistency or conflict which may arise
in the application or interpretation of any of the foregoing
provisions,
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12
for the purpose of determining what is and is not a Cognizant
Asset, any item explicitly included on a Schedule referred to
in this Section 1.1(w) shall take priority over any provision
of the text hereof, and clause (i) shall take priority over
clause (v) hereof of this paragraph (w) and over clause (v) of
paragraph (b) of this section 1.1.
(x) "Cognizant Balance Sheet" shall mean the combined balance
sheet of the Cognizant Group, including the notes thereto, as
of June 30, 1996, set forth as Schedule 1.1(x) hereto.
(y) "Cognizant Business" shall mean (i) the IMS Business, the
Nielsen Media Research Business, the Gartner Business, the
Pilot Business, the Erisco Business, the Saytam Software
Business, the DBHC Business, the DBTA Business and the
Cognizant Enterprises Business, (ii) the businesses of the
members of the Cognizant Group, (iii) any other business
conducted primarily through the use of the Cognizant Assets,
and (iv) the businesses of Business Entities acquired or
established by or for Cognizant or any of its Subsidiaries
after the date of this Agreement.
(z) "Cognizant Common Shares" shall have the meaning as defined in
the recitals hereto.
(aa) "Cognizant Contracts" shall mean the following contracts and
agreements to which D&B or any of its Affiliates is a party or by which it or
any of its Affiliates or any of their respective Assets is bound, whether or not
in writing, except for any such contract or agreement (i) that is not expressly
contemplated to be transferred or assigned by any member of the D&B Group or
(ii) that is expressly contemplated to be transferred or assigned to any member
of the ACNielsen Group, in each case, pursuant to any provision of this
Agreement or any Ancillary Agreement:
(i) any contracts or agreements listed or described on Schedule
1.1(aa)(i);
(ii) any contract or agreement entered into in the name of, or
expressly on behalf of, any division, business unit or member
of the Cognizant Group;
(iii) any contract or agreement that relates primarily to the
Cognizant Business;
(iv) federal, state and local government and other contracts and
agreements that are listed or described on Schedule
1.1(aa)(iv) and any other government contracts or agreements
entered into
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13
after the date hereof and prior to the Distribution Date that
relate primarily to the Cognizant Business;
(v) any contract or agreement representing capital or operating
equipment lease obligations reflected on the Cognizant Balance
Sheet, including obligations as lessee under those contracts
or agreements listed on Schedule 1.1(aa)(v);
(vi) any contract or agreement that is otherwise expressly
contemplated pursuant to this Agreement or any of the
Ancillary Agreements to be assigned to Cognizant or any member
of the Cognizant Group; and
(vii) any guarantee, indemnity, representation or warranty of any
member of the Cognizant Group.
(ab) "Cognizant Enterprises Business" shall have the meaning as
defined in the recitals hereto.
(ac) "Cognizant Group" shall mean Cognizant and each Business Entity
which is contemplated to remain or become a Subsidiary of Cognizant hereunder,
which shall include those identified as such on Schedule 1.1(ac) hereto, which
Schedule shall also indicate the amount of Cognizant's direct or indirect
ownership interest therein.
(ad) "Cognizant Indemnitees" shall mean Cognizant, each member of
the Cognizant Group, each of their respective directors, officers, employees and
agents and each of the heirs, executors, successors and assigns of any of the
foregoing.
(ae) "Cognizant Liabilities" shall mean:
(i) any and all Liabilities that are expressly contemplated by
this Agreement or any Ancillary Agreement (or the Schedules
hereto or thereto, including Schedule 1.1(ae)(i) hereto) as
Liabilities to be assumed by Cognizant or any member of the
Cognizant Group, and all agreements, obligations and
Liabilities of any member of the Cognizant Group under this
Agreement or any of the Ancillary Agreements;
(ii) all Liabilities (other than Taxes and any employee-related
Liabilities), primarily relating to, arising out of or
resulting from:
(A) the operation of the Cognizant Business, as
conducted at any time prior to, on or after the Distribution
Date (including any Liability relating to, arising out of or
resulting from any
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14
act or failure to act by any director, officer, h employee,
agent or representative (whether or not such act or failure to
act is or was within such person's authority));
(B) the operation of any business conducted by Cognizant
or any Subsidiary of Cognizant at any time after the
Distribution Date (including any Liability relating to,
arising out of or resulting from any act or failure to act by
any director, officer, employee, agent or representative
(whether or not such act or failure to act is or was within
such person's authority)); or
(C) any Cognizant Assets; whether arising before, on
or after the Distribution Date;
(iii) all Liabilities reflected as liabilities or obligations on the
Cognizant Balance Sheet or the accounting records supporting
such balance sheet, and all Liabilities arising or assumed
after the date of such balance sheet which, had they arisen or
been assumed on or before such date and been retained as of
such date, would have been reflected on such balance sheet,
subject to any discharge of such Liabilities subsequent to the
date of the Cognizant Balance Sheet.
Notwithstanding the foregoing, the Cognizant Liabilities shall not
include:
(x) any Liabilities that are expressly contemplated by this
Agreement or any Ancillary Agreement (or the Schedules hereto
or thereto) as Liabilities to be retained or assumed by D&B or
any member of the D&B Group or by ACNielsen or any member of
the ACNielsen Group, including any Liabilities set forth in
Schedule 1.1(ae)(x);
(y) any Liabilities primarily relating to, arising out of or
resulting from any terminated or divested Business Entity,
business or operation formerly owned or managed by or
associated with Cognizant or any Cognizant Business (except
for Liabilities primarily relating to, arising out of or
resulting from those Business Entities, businesses or
operations listed in Schedule 1.1(ae)(y)); any Liabilities
which are excluded by this clause (y) from the definition of
Cognizant Liabilities shall be deemed to be D&B Liabilities;
or
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15
(z) all agreements and obligations of any member of the D&B Group
or the ACNielsen Group under this Agreement or any of the
Ancillary Agreements.
(af) "Cognizant Policies" shall mean all Policies, current or past,
which are owned or maintained by or on behalf of D&B or any Subsidiary of D&B,
which relate to the Cognizant Business but do not relate to the D&B Business or
the ACNielsen Business, and which Policies are either maintained by Cognizant or
a member of the Cognizant Group or assignable to Cognizant or a member of the
Group.
(ag) "Cognizant Shared Policies" shall mean all Policies, current or
past, which are owned or maintained by or on behalf of D&B or any Subsidiary of
D&B which relate to the Cognizant Business, other than Cognizant Policies.
(ah) "Commission" shall have the meaning as defined in Section
4.2(b).
(ai) "Conveyancing and Assumption Instruments" shall mean,
collectively, the various agreements, instruments and other documents heretofore
entered into and to be entered into to effect the transfer of Assets and the
assumption of Liabilities in the manner contemplated by this Agreement, or
otherwise arising out of or relating to the transactions contemplated by this
Agreement, which shall be in substantially the forms attached hereto as Schedule
1.1(ai) for transfers to be effected pursuant to New York law or the laws of one
of the other states of the United States, or, if not appropriate for a given
transfer, and for transfers to be effected pursuant to non-U.S. laws, shall be
in such other form or forms as the parties agree and as may be required by the
laws of such non-U.S. jurisdictions.
(aj) "Data Services Agreements" shall mean the Data Services
Agreements between and among D&B, Cognizant and ACNielsen.
(ak) "D&B" shall mean The Dun & Bradstreet Corporation, a Delaware
corporation.
(al) "D&B Assets" shall mean, collectively, all the rights and
Assets owned or held by D&B or any Subsidiary of D&B, except the Cognizant
Assets and ACNielsen Assets.
(am) "D&B Business" shall mean each and every business conducted at
any time by D&B or any Subsidiary of D&B except a Cognizant Business or an
ACNielsen Business.
(an) "D&B Common Stock" shall have the meaning as defined in the
recitals hereto.
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16
(ao) "D&B Contracts" shall mean all the contracts and agreements to
which D&B or any of its Affiliates is a party or by which it or any of its
Affiliates is bound, except the Cognizant Contracts and the ACNielsen Contracts.
(ap) "D&B Group" shall mean D&B and each person (other than any
member of the Cognizant Group or the ACNielsen Group) that is a Subsidiary of
D&B.
(aq) "D&B Indemnitees" shall mean D&B, each member of the D&B Group,
each of their respective directors, officers, employees and agents and each of
the heirs, executors, successors and assigns of any of the foregoing, except the
Cognizant Indemnitees and ACNielsen Indemnitees.
(ar) "D&B Liabilities" shall mean collectively, all obligations and
Liabilities of D&B or any Subsidiary of D&B, except the Cognizant Liabilities
and ACNielsen Liabilities.
(as) "D&B Policies" shall mean all Policies, current or past, which
are owned or maintained by or on behalf of D&B or any Subsidiary of D&B which do
not relate to the Cognizant Business or the ACNielsen Business.
(at) "DBHC Business" shall have the meaning as defined in the
recitals hereto.
(au) "DBTA Business" shall have the meaning as defined in the
recitals hereto.
(av) "Distribution" shall mean the distribution on the Distribution
Date to holders of record of shares of D&B Common Stock as of the Distribution
Record Date of (i) the Cognizant Common Shares owned by D&B on the basis of one
Cognizant Common Share for each outstanding share of D&B Common Stock and (ii)
the ACNielsen Common Shares owned by D&B on the basis of one ACNielsen Common
Share for each three outstanding shares of D&B Common Stock.
(aw) "Distribution Date" shall mean November 1, 1996.
(ax) "Distribution Record Date" shall mean such date as may be
determined by D&B's Board of Directors as the record date for the Distribution.
(ay) "Effective Time" shall mean immediately after the midnight, New
York time, ending the 24-hour period comprising October 31, 1996.
(az) "Employee Benefits Agreement" shall mean the Employee Benefits
Agreement among D&B, Cognizant and ACNielsen.
(ba) "Erisco Business" shall have the meaning as defined in the
recitals hereto.
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17
(bb) "Gartner Group Business" shall have the meaning as defined in
the recitals hereto.
(bc) "Governmental Authority" shall mean any federal, state, local,
foreign or international court, government, department, commission, board,
bureau, agency, official or other regulatory, administrative or governmental
authority.
(bd) "IMS Business" shall have the meaning as defined in the
recitals hereto.
(be) "Indemnifiable Losses" shall mean any and all losses,
liabilities, claims, damages, demands, costs or expenses (including, without
limitation, reasonable attorneys' fees and any and all out-of-pocket expenses)
reasonably incurred in investigating, preparing for or defending against any
Actions or potential Actions or in settling any Action or potential Action or in
satisfying any judgment, fine or penalty rendered in or resulting from any
Action.
(bf) "Indemnifying Party" shall have the meaning as defined in
Section 3.4.
(bg) "Indemnitee" shall have the meaning as defined in Section 3.4.
(bh) "Indemnity and Joint Defense Agreement" shall mean the
Indemnity and Joint Defense Agreement by and among D&B, Cognizant and ACNielsen.
(bi) "Information Statement" shall mean the Information Statement
sent to the holders of shares of D&B Common Stock in connection with the
Distribution, including any amendment or supplement thereto.
(bj) "Insurance Administration" shall mean, with respect to each
Shared Policy, the accounting for premiums, retrospectively-rated premiums,
defense costs, indemnity payments, deductibles and retentions, as appropriate,
under the terms and conditions of each of the Shared Policies; and the reporting
to excess insurance carriers of any losses or claims which may cause the
per-occurrence, per claim or aggregate limits of any Shared Policy to be
exceeded, and the distribution of Insurance Proceeds as contemplated by this
Agreement.
(bk) "Insurance Proceeds" shall mean those monies (i) received by an
insured from an insurance carrier or (ii) paid by an insurance carrier on behalf
of an insured, in either case net of any applicable premium adjustment,
retrospectively-rated premium, deductible, retention, or cost of reserve paid or
held by or for the benefit of such insured.
(bl) "Insured Claims" shall mean those Liabilities that,
individually or in the aggregate, are covered within the
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18
terms and conditions of any of the Shared Policies, whether or not subject to
deductibles, co-insurance, uncollectibility or retrospectively-rated premium
adjustments.
(bm) "Intellectual Property Agreement" shall mean the Intellectual
Property Agreement among D&B, Cognizant and ACNielsen.
(bn) "Liabilities" shall mean any and all losses, claims, charges,
debts, demands, actions, causes of action, suits, damages, obligations,
payments, costs and expenses, sums of money, accounts, reckonings, bonds,
specialties, indemnities and similar obligations, exonerations, covenants,
contracts, controversies, agreements, promises, doings, omissions, variances,
guarantees, make whole agreements and similar obligations, and other
liabilities, including all contractual obligations, whether absolute or
contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising, and including those arising under
any law, rule, regulation, Action, threatened or contemplated Action (including
the costs and expenses of demands, assessments, judgments, settlements and
compromises relating thereto and attorneys' fees and any and all costs and
expenses, whatsoever reasonably incurred in investigating, preparing or
defending against any such Actions or threatened or contemplated Actions), order
or consent decree of any governmental or other regulatory or administrative
agency, body or commission or any award of any arbitrator or mediator of any
kind, and those arising under any contract, commitment or undertaking, including
those arising under this Agreement or any Ancillary Agreement, in each case,
whether or not recorded or reflected or required to be recorded or reflected on
the books and records or financial statements of any person.
(bo) "Nielsen Marketing Business" shall have the meaning as defined
in the recitals hereto.
(bp) "Nielsen Media Research Business" shall have the meaning as
defined in the recitals hereto.
(bq) "Non-U.S. Media Business" shall have the meaning as defined in
the recitals hereto.
(br) "person" shall mean any natural person, corporation, business
trust, joint venture, association, company, partnership or government, or any
agency or political subdivision thereof.
(bs) "Pilot Business" shall have the meaning as defined in the
recitals hereto.
(bt) "Policies" shall mean insurance policies and insurance
contracts of any kind (other than life and benefits policies or contracts),
including, without limitation, primary,
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19
excess and umbrella policies, comprehensive general liability policies, director
and officer liability, fiduciary liability, automobile, aircraft, property and
casualty, workers' compensation and employee dishonesty insurance policies,
bonds and self-insurance and captive insurance company arrangements, together
with the rights, benefits and privileges thereunder.
(bu) "Provider" shall have the meaning as defined in Section 5.1.
(bv) "Recipient" shall have the meaning as defined in Section 5.1.
(bw) "Records" shall have the meaning as defined in Section 4.1.
(bx) "Rules" shall have the meaning as defined in Section 6.2.
(by) "Security Interest" shall mean any mortgage, security interest,
pledge, lien, charge, claim, option, right to acquire, voting or other
restriction, right-of-way, covenant, condition, easement, encroachment,
restriction on transfer, or other encumbrance of any nature whatsoever.
(bz) "Shared Policies" shall mean all Policies, current or past,
which are owned or maintained by or on behalf of D&B or any of its Subsidiaries
which relate to one or more of the D&B Business, the Cognizant Business or the
ACNielsen Business.
(ca) "Shared Transaction Services Agreements" shall mean the Shared
Transaction Services Agreements among D&B, Cognizant and ACNielsen or
Subsidiaries thereof.
(cb) "Subsidiary" shall mean any corporation, partnership or other
entity of which another entity (i) owns, directly or indirectly, ownership
interests sufficient to elect a majority of the Board of Directors (or persons
performing similar functions) (irrespective of whether at the time any other
class or classes of ownership interests of such corporation, partnership or
other entity shall or might have such voting power upon the occurrence of any
contingency) or (ii) is a general partner or an entity performing similar
functions (e.g., a trustee).
(cc) "TAM Master Agreement" shall mean the master agreement between
Cognizant and ACNielsen, including any agreements ancillary thereto, relating to
the conduct of the television audience measurement business after the
Distribution.
(cd) "Tax" shall have the meaning set forth in the Tax Allocation
Agreement.
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(ce) "Tax Allocation Agreement" shall mean the Tax Allocation
Agreement among D&B, Cognizant and ACNielsen.
(cf) "Third Party Claim" shall have the meaning as defined in
Section 3.5.
(cg) "Transition Services Agreement" shall mean the Transition
Services Agreement among D&B, Cognizant and ACNielsen.
SECTION 1.2. References; Interpretation. References in this
Agreement to any gender include references to all genders, and references to the
singular include references to the plural and vice versa. The words "include",
"includes" and "including" when used in this Agreement shall be deemed to be
followed by the phrase "without limitation". Unless the context otherwise
requires, references in this Agreement to Articles, Sections, Exhibits and
Schedules shall be deemed references to Articles and Sections of, and Exhibits
and Schedules to, such Agreement. Unless the context otherwise requires, the
words "hereof", "hereby" and "herein" and words of similar meaning when used in
this Agreement refer to this Agreement in its entirety and not to any particular
Article, Section or provision of this Agreement.
ARTICLE II. DISTRIBUTION AND OTHER TRANSACTIONS; CERTAIN
COVENANTS
SECTION 2.1. The Distribution and Other Transactions.
(a) Certain Transactions. On or prior to the Distribution Date:
(i) D&B shall, on behalf of itself and its Subsidiaries, transfer
or cause to be transferred to Cognizant or another member of the Cognizant
Group effective prior to or as of the Effective Time all of D&B's and its
Subsidiaries' right, title and interest in the Cognizant Assets. D&B
shall, on behalf of itself and its Subsidiaries, transfer or cause to be
transferred to ACNielsen or another member of the ACNielsen Group
effective prior to or as of the Effective Time all of D&B's and its
Subsidiaries' right, title and interest in the ACNielsen Assets.
(ii) Cognizant shall, on behalf of itself and its Subsidiaries,
transfer or cause to be transferred to D&B or another member of the D&B
Group effective prior to or as of the Effective Time all of Cognizant's
and its Subsidiaries' right, title and interest in the D&B Assets.
Cognizant shall, on behalf of itself and its Subsidiaries, transfer or
cause to be transferred to ACNielsen or another member of the ACNielsen
Group effective prior to or as of the
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21
Effective Time all of Cognizant's and its Subsidiaries' right, title and
interest in the ACNielsen Assets.
(iii) ACNielsen shall, on behalf of itself and its Subsidiaries,
transfer or cause to be transferred to Cognizant or another member of the
Cognizant Group effective prior to or as of the Effective Time all of
ACNielsen's and its Subsidiaries' right, title and interest in the
Cognizant Assets. ACNielsen shall, on behalf of itself and its
Subsidiaries, transfer or cause to be transferred to D&B or another member
of the D&B Group effective prior to or as of the Effective Time all of
ACNielsen's and its Subsidiaries' right, title and interest in the D&B
Assets.
(iv) To the extent not indicated by Schedule 1.1(b)(i)(1) or
otherwise agreed by the parties hereto, D&B, Cognizant or ACNielsen, as
applicable, shall be entitled to designate the Business Entity within such
party's respective Group to which any Assets are to be transferred
pursuant to this Section 2.1(a).
(b) Stock Dividends to D&B. On or prior to the Distribution Date:
(i) Cognizant shall issue to D&B as a stock dividend such number
of Cognizant Common Shares as will be required to effect the Distribution,
as certified by D&B's stock transfer agent (the "Agent"). In connection
therewith D&B shall deliver to Cognizant for cancellation the share
certificate held by it representing Cognizant Common Shares and shall
receive a new certificate representing the total number of Cognizant
Common Shares to be owned by D&B after giving effect to such stock
dividend.
(ii) ACNielsen shall issue to D&B as a stock dividend such number
of ACNielsen Common Shares as will be required to effect the Distribution,
as certified by the Agent. In connection therewith D&B shall deliver to
ACNielsen for cancellation the share certificate held by it representing
ACNielsen Common Shares and shall receive a new certificate representing
the total number of ACNielsen Common Shares to be owned by D&B after
giving effect to such stock dividend.
(c) Charters; By-laws; Rights Plans. On or prior to the Distribution
Date:
(i) All necessary actions shall have been taken to provide for
the adoption of the form of Certificate of Incorporation and By-laws and
the execution and delivery of the form of Rights Agreement filed by
Cognizant with the Commission as exhibits to Cognizant's Registration
Statement on Form 10.
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(ii) All necessary actions shall have been taken to provide for
the adoption of the form of Certificate of Incorporation, By-laws and the
execution and delivery of the form of Rights Agreement filed by ACNielsen
with the Commission as exhibits to ACNielsen's Registration Statement
on Form 10.
(d) Directors. On or prior to the Distribution Date, D&B, as the
sole stockholder of Cognizant and ACNielsen, shall have taken all necessary
action on or prior to the Distribution Date to cause the Board of Directors of
Cognizant and the Board of Directors of ACNielsen to consist of the individuals
identified in the Information Statement as directors of Cognizant and ACNielsen,
respectively.
(e) Certain Licenses and Permits. Without limiting the generality of
the obligations set forth in Section 2.1(a), on or prior to the Distribution
Date or as soon as reasonably practicable thereafter:
(i) all transferable licenses, permits and authorizations issued
by any Governmental Authority which relate primarily to the Cognizant
Business or the ACNielsen Business but which are held in the name of any
member of the D&B Group, or in the name of any employee, officer,
director, stockholder or agent of any such member, or otherwise, on behalf
of a member of the Cognizant Group or the ACNielsen Group, as applicable,
shall be duly and validly transferred or caused to be transferred by D&B
to the appropriate member of the Cognizant Group or the ACNielsen Group,
as applicable;
(ii) all transferable licenses, permits and authorizations issued
by Governmental Authorities which relate primarily to the D&B Business or
the ACNielsen Business but which are held in the name of any member of the
Cognizant Group, or in the name of any employee, officer, director,
stockholder, or agent of any such member, or otherwise, on behalf of a
member of the D&B Group or the ACNielsen Group, as applicable, shall be
duly and validly transferred or caused to be transferred by Cognizant to
the appropriate member of the D&B Group or the ACNielsen Group, as
applicable; and
(iii) all transferable licenses, permits and authorizations issued
by Governmental Authorities which relate primarily to the Cognizant
Business or the D&B Business but which are held in the name any member of
the ACNielsen Group, or any employee, officer, director, stockholder, or
agent of any such member, or otherwise, on behalf of a member of the
Cognizant Group or the D&B Group, as applicable, shall be duly and validly
transferred or caused to be transferred by ACNielsen to the appropriate
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23
member of the Cognizant Group or the D&B Group, as applicable.
(f) Transfer of Agreements. Without limiting the generality of the
obligations set forth in Section 2.1(a):
(i) D&B hereby agrees that on or prior to the Distribution Date
or as soon as reasonably practicable thereafter, subject to the
limitations set forth in this Section 2.1(f), it will, and it will cause
each member of the D&B Group to, assign, transfer and convey (A) to the
appropriate member of the Cognizant Group all of D&B's or such member of
the D&B Group's respective right, title and interest in and to any and all
Cognizant Contracts, and (B) to the appropriate member of the ACNielsen
Group all of D&B's or such member of the D&B Group's respective right,
title and interest in and to any and all ACNielsen Contracts.
(ii) Cognizant hereby agrees that on or prior to the Distribution
Date or as soon as reasonably practicable thereafter, subject to the
limitations set forth in this Section 2.1(f), it will, and it will cause
each member of the Cognizant Group to, assign, transfer and convey (A) to
the appropriate member of the D&B Group all of Cognizant's or such member
of the Cognizant Group's respective right, title and interest in and to
any and all D&B Contracts, and (B) to the appropriate member of the
ACNielsen Group all of Cognizant's or such member of the Cognizant Group's
respective right, title and interest in and to any and all ACNielsen
Contracts.
(iii) ACNielsen hereby agrees that on or prior to the Distribution
Date or as soon as reasonably practicable thereafter, subject to the
limitations set forth in this Section 2.1(f), it will, and it will cause
each member of the ACNielsen Group to, assign, transfer and convey (A) to
the appropriate member of the D&B Group all of ACNielsen's or such member
of the ACNielsen Group's respective right, title and interest in and to
any and all D&B Contracts, and (B) to the appropriate member of the
Cognizant Group all of ACNielsen's or such member of the ACNielsen Group's
respective right, title and interest in and to any and all Cognizant
Contracts.
(iv) Subject to the provisions of this Section 2.1(f), any
agreement to which any of the parties hereto or any of their Subsidiaries
is a party that inures to the benefit of more than one of the D&B
Business, Cognizant Business and ACNielsen Business shall be assigned in
part so that each party shall be entitled to the rights and benefits
inuring to its business under such agreement.
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(v) The assignee of any agreement assigned, in whole or in part,
hereunder (an "Assignee") shall assume and agree to pay, perform, and
fully discharge all obligations of the assignor under such agreement or,
in the case of a partial assignment under paragraph (f)(iv), such
Assignee's related portion of such obligations as determined in accordance
with the terms of the relevant agreement, where determinable on the face
thereof, and otherwise as determined in accordance with the practice of
the parties prior to the Distribution.
(vi) Notwithstanding anything in this Agreement to the contrary,
this Agreement shall not constitute an agreement to assign any agreement,
in whole or in part, or any rights thereunder if the agreement to assign
or attempt to assign, without the consent of a third party, would
constitute a breach thereof or in any way adversely affect the rights of
the assignor or Assignee thereof. Until such consent is obtained, or if an
attempted assignment thereof would be ineffective or would adversely
affect the rights of any party hereto so that the intended Assignee would
not, in fact, receive all such rights, the parties will cooperate with
each other in any arrangement designed to provide for the intended
Assignee the benefits of, and to permit the intended Assignee to assume
liabilities under, any such agreement.
(g) Consents. The parties hereto shall use their commercially
reasonable efforts to obtain required consents to transfer and/or assignment of
licenses, permits and authorizations of Governmental Authorities and of
agreements hereunder.
(h) Delivery of Shares to Agent. D&B shall deliver to the Agent the
share certificates representing the Cognizant Common Shares and the ACNielsen
Common Shares issued to D&B by Cognizant and ACNielsen, respectively, pursuant
to Section 2.1(b) and shall instruct the Agent to distribute, on or as soon as
practicable following the Distribution Date, such Common Shares to holders of
record of shares of D&B Common Stock on the Distribution Record Date as further
contemplated by the Information Statement and herein. Cognizant and ACNielsen
shall provide all share certificates that the Agent shall require in order to
effect the Distribution.
(i) Certain Liabilities. For purposes of this Agreement, including
Article III hereof, D&B agrees with each of Cognizant and ACNielsen that any and
all Liabilities arising from or based upon misstatements in or omissions from
the Form 10 filed by either such party shall be deemed to be D&B Liabilities and
not Cognizant Liabilities or ACNielsen Liabilities, as the case may be.
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25
(j) Certain Contingencies.
(i) ACNielsen and Cognizant shall observe and comply with the
provisions of Schedule 2.1(j)(i) pursuant to which, under the
circumstances described therein, certain contributions to the capital of
ACNielsen may be made.
(ii) Cognizant shall be liable for a portion of the liabilities
related to certain prior business transactions to the extent and in the
circumstances described in Schedule 2.1(j)(ii).
(iii) (A) D&B and Cognizant agree that to the extent the aggregate
cash proceeds received by D&B upon the disposition of the businesses
known as Dun & Bradstreet Software, NCH Promotional Services and
American Credit Indemnity are higher or lower than the aggregate
amount set forth on Schedule 2.1(j)(iii)(A), 50% of any such excess
shall be deemed to be a Cognizant Asset and be payable by D&B to
Cognizant immediately upon the consummation of the disposition of
the last of such businesses remaining with D&B, and 50% of any such
deficit shall be deemed to be a Cognizant Liability and be payable
by Cognizant to D&B immediately upon the consummation of the
disposition of the last of such businesses remaining with D&B.
(B) In addition, Cognizant and D&B shall each be entitled to
receive 50% of the aggregate operating cash flow, if any, of each
such business from the Distribution Date to the date of the
disposition of such business (where operating cash flow shall be
determined by the accounting procedures that had been applied by D&B
prior to the Distribution for determining operating cash flow,
applied on a consistent basis), and shall each be liable for 50% of
any liabilities arising in connection with such disposition to the
extent such liabilities exceed the amount set forth in Schedule
2.1(j)(iii)(B).
(C) Cognizant shall have primary responsibility for marketing,
negotiating and consummating the disposition of the business known
as Dun & Bradstreet Software; Cognizant and ACNielsen shall have
primary responsibility for marketing, negotiating and consummating
the disposition of the business known as NCH Promotional Services;
and D&B shall have primary responsibility for marketing, negotiating
and consummating the disposition of the business known as American
Credit Indemnity. D&B shall enter into an agreement to sell the
business known as NCH Promotional Services on such terms as may be
recommended by Cognizant.
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26
(iv) D&B and Cognizant shall be liable for the portions of
certain Liabilities described in Schedule 2.1(j)(iv) to the extent and in
circumstances described in such Schedule.
(v) If ACNielsen Company of Canada Limited ("ACN Canada") does
not receive C$ 13,675,000 from The D&B Companies of Canada, Ltd. ("D&B
Canada") with respect to amounts held in the accounts of D&B Canada
pending the final accounting for the restructuring of D&B's operations in
Canada by the Toronto office of Coopers & Lybrand L.L.P., then D&B will
promptly pay ACNielsen an amount equal to the U.S. dollar equivalent of C$
13,675,000 less the amount received by ACN Canada from D&B Canada, and if
ACN-Canada receives more than C$ 13,675,000 from D&B Canada, then
ACNielsen will promptly pay D&B an amount equal to the U.S. dollar
equivalent of the amount received by ACN-Canada in excess of C$
13,675,000. For purposes of the foregoing, the U.S. dollar equivalent
shall be based on the rate published by the Wall Street Journal for
purchasing U.S. dollars with Canadian dollars on the date the final
accounting is made.
(vi) If D&B is required to pay an aggregate amount to discharge
the several categories of expenses set forth on Schedule 2.1 (j)(vi)
hereto in excess of the total estimated amount of such expenses as set
forth on such Schedule, then Cognizant shall be liable for 50% of any such
excess amount, provided, however, that Cognizant shall not be liable for
any expenses incurred by D&B after June 30, 1997, and shall only share in
the responsibility to pay such expenses if such expenses are incurred in
order to consummate the Distribution or the several transactions
contemplated by this Agreement or by any Ancillary Agreement.
(k) Matters Relating to Certain Partnerships.
(i) The interest in Duns Licensing Associates L.P. held by
members of the D&B Group will be retired prior to or as promptly as
practicable after the Distribution in exchange for (x) those assets of
Duns Licensing Associates L.P. that are currently licensed to members of
the D&B Group and (y) the stock of a subsidiary currently held by Duns
Licensing Associates L.P. all as more fully set forth in Schedule
2.1(k)(i). The parties also agree to take the further actions set forth on
Schedule 2.1(k)(i).
(ii) Prior to the Distribution Record Date, IMS America, Ltd.
shall withdraw as a partner of D&B Investors, L.P. (the "Partnership")
and, in connection with such withdrawal, shall receive from the
Partnership 800,000 shares of D&B Common Stock from the Partnership and a
warrant (the "Warrant") to purchase up to 3,000,000 shares of D&B Common
Stock. Cognizant agrees that it will not sell, and will not permit the
sale, to any non-affiliated
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27
third-party of any of the D&B Common Stock so received from the
Partnership, the Warrant, any shares of D&B Common Stock received upon
exercise of the Warrant, or any shares of ACNielsen Common Stock received
as a result of being the holder of record of D&B Common Stock on the
Distribution Record Date. D&B agrees that Cognizant or any of its
Subsidiaries may at any time after the Distribution Date sell any of such
D&B Common Stock or the Warrant to D&B at the market value thereof on such
sale date (calculated as described below) by giving D&B written notice of
such proposed sale five business days in advance thereof. ACNielsen agrees
that Cognizant or any of its Subsidiaries may at any time after the
Distribution Date sell any of such ACNielsen Common Stock to ACNielsen at
the market value thereof on such sale date (calculated as described below)
by giving ACNielsen written notice of such proposed sale five business
days in advance thereof. Any such notice to D&B or ACNielsen shall be
irrevocable. For purposes of the foregoing, the market value of the D&B
Common Stock or the ACNielsen Common stock on any date on which any such
securities are to be sold pursuant hereto shall be equal to the average of
the closing prices therefore on the New York Stock Exchange on each of the
five trading days preceding such date, and the market value of the Warrant
on any date shall be equal to the amount determined by Merrill Lynch & Co.
based upon the Black-Scholes option-pricing model as the market value of
such Warrant.
(l) Other Transactions. On or prior to the Distribution Date, each
of D&B, Cognizant and ACNielsen shall consummate those other transactions in
connection with the Distribution that are contemplated by the ruling request
submissions by D&B to the Internal Revenue Service in respect of the ruling
granted on August 6, 1996, and not specifically referred to in subparagraphs
(a)-(k) above. After the Distribution Date, each of D&B, Cognizant and ACNielsen
will exercise good faith commercially reasonable efforts to consummate as
promptly as practicable all other transactions which must be consummated in
order fully to complete the Distribution and any of the transactions
contemplated hereby or by any of the Ancillary Agreements.
SECTION 2.2. Intercompany Accounts.
All intercompany receivables, payables and loans (other than
receivables, payables and loans otherwise specifically provided for hereunder or
under any Ancillary Agreement, including payables created or required hereby or
by any Ancillary Agreement), including, without limitation, in respect of any
cash balances, any cash balances representing deposited checks or drafts for
which only a provisional credit has been allowed or any cash held in any
centralized cash management system, (i) between any member of the Cognizant
Group, on the one hand, and any member of the D&B Group, on the other hand, (ii)
between any
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28
member of the ACNielsen Group, on the one hand, and any member of the D&B Group,
on the other hand, or (iii) between any member of the Cognizant Group, on the
one hand, and any member of the ACNielsen Group, on the other hand, in each
case, which exist and are reflected in the accounting records of the relevant
parties as of October 31, 1996 or which arise on or after November 1, 1996 shall
be paid or settled in the ordinary course of business in a manner consistent
with the payment or settlement of similar accounts arising from transactions
with third parties.
SECTION 2.3. Cash Balances. In addition to any other obligations
hereunder or under any Ancillary Agreement or otherwise, on the Distribution
Date, D&B shall deliver, in immediately available funds, $62.0 million to
ACNielsen and $200.6 million to Cognizant. If, by October 31, 1996, any business
referred to in Section 2.1(j)(iii) has not been sold, the amount payable to
Cognizant pursuant to the preceding sentence shall be reduced by the amount of
cash expected to be received upon such sale, as set forth on Schedule
2.1(j)(iii)(A), and, if and when such business is actually sold, Cognizant shall
be entitled to the cash proceeds received upon such sale, subject, however, to
the adjustments required by Section 2.1(j)(iii).
SECTION 2.4. Assumption and Satisfaction of Liabilities. Except as
otherwise specifically set forth in any Ancillary Agreement, and subject to
Section 2.3 hereof, from and after the Effective Time, (i) D&B shall, and shall
cause each member of the D&B Group to, assume, pay, perform and discharge all
D&B Liabilities, (ii) Cognizant shall, and shall cause each member of the
Cognizant Group to, assume, pay, perform and discharge all Cognizant
Liabilities, and (iii) ACNielsen shall, and shall cause each member of the
ACNielsen Group to, assume, pay, perform and discharge all ACNielsen
Liabilities. To the extent reasonably requested to do so by another party
hereto, each party hereto agrees to sign such documents, in a form reasonably
satisfactory to such party, as may be reasonably necessary to evidence the
assumption of any Liabilities hereunder.
SECTION 2.5. Resignations. (a) Subject to Section 2.5(d), D&B shall
cause all its employees to resign, effective as of the Distribution Date, from
all positions as officers or directors of any member of the Cognizant Group in
which they serve, and Cognizant shall cause all its employees to resign,
effective as of the Effective Time, from all positions as officers or directors
of any members of the D&B Group in which they serve.
(b) Subject to Section 2.5(d), D&B shall cause all its employees to
resign, effective as of the Distribution Date, from all positions as officers or
directors of any member of the ACNielsen Group in which they serve, and
ACNielsen shall cause all its employees to resign, effective as of the Effective
Time,
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29
from all positions as officers or directors of any members of the D&B Group in
which they serve.
(c) Subject to Section 2.5(d), ACNielsen shall cause all its
employees to resign, effective as of the Distribution Date, from all positions
as officers or directors of any member of the Cognizant Group in which they
serve, and Cognizant shall cause all its employees to resign, effective as of
the Effective Time, from all positions as officers or directors of any member of
the ACNielsen Group in which they serve.
(d) No person shall be required by any party hereto to resign from
any position or office with another party hereto if such person is disclosed in
the Information Statement as the person who is to hold such position or office
following the Distribution.
SECTION 2.6. Further Assurances. In case at any time after the
Effective Time any further action is reasonably necessary or desirable to carry
out the purposes of this Agreement and the Ancillary Agreements, the proper
officers of each party to this Agreement shall take all such necessary action.
Without limiting the foregoing, D&B, Cognizant and ACNielsen shall use their
commercially reasonable efforts promptly to obtain all consents and approvals,
to enter into all amendatory agreements and to make all filings and applications
that may be required for the consummation of the transactions contemplated by
this Agreement and the Ancillary Agreements, including, without limitation, all
applicable governmental and regulatory filings.
SECTION 2.7. Limited Representations or Warranties. Each of the
parties hereto agrees that no party hereto is, in this Agreement or in any other
agreement or document contemplated by this Agreement or otherwise, making any
representation or warranty whatsoever, as to title or value of Assets being
transferred. It is also agreed that, notwithstanding anything to the contrary
otherwise expressly provided in the relevant Conveyancing and Assumption
Instrument, all Assets either transferred to or retained by the parties, as the
case may be, shall be "as is, where is" and that (subject to Section 2.6) the
party to which such Assets are to be transferred hereunder shall bear the
economic and legal risk that such party's or any of the Subsidiaries' title to
any such Assets shall be other than good and marketable and free from
encumbrances. Similarly, each party hereto agrees that, except as otherwise
expressly provided in the relevant Conveyancing and Assumption Instrument, no
party hereto is representing or warranting in any way that the obtaining of any
consents or approvals, the execution and delivery of any amendatory agreements
and the making of any filings or applications contemplated by this Agreement
will satisfy the provisions of any or all applicable agreements or the
requirements of any or all applicable laws or judgments, it being agreed that
the party to which any Assets are transferred shall
<PAGE>
30
bear the economic and legal risk that any necessary consents or approvals are
not obtained or that any requirements of laws or judgments are not complied
with.
SECTION 2.8. Guarantees. (a) Except as otherwise specified in any
Ancillary Agreement, D&B, Cognizant and ACNielsen shall use their commercially
reasonable efforts to have, on or prior to the Distribution Date, or as soon as
practicable thereafter, any member of the D&B Group removed as guarantor of or
obligor for any Cognizant Liability or ACNielsen Liability, including, without
limitation, in respect of those guarantees set forth on Schedule 2.8(a) to the
extent that they relate to Cognizant Liabilities or ACNielsen Liabilities.
(b) Except as otherwise specified in any Ancillary Agreement, D&B,
Cognizant and ACNielsen shall use their commercially reasonable efforts to have,
on or prior to the Distribution Date, or as soon as practicable thereafter, any
member of the Cognizant Group removed as guarantor of or obligor for any D&B
Liability or ACNielsen Liability, including, without limitation, in respect of
those guarantees set forth on Schedule 2.8(b) to the extent that they relate to
D&B Liabilities or ACNielsen Liabilities.
(c) Except as otherwise specified in any Ancillary Agreement, D&B,
Cognizant and ACNielsen shall use their commercially reasonable efforts to have,
on or prior to the Distribution Date, or as soon as practicable thereafter, any
member of the ACNielsen Group removed as guarantor of or obligor for any D&B
Liability or Cognizant Liability, including, without limitation, in respect of
those guarantees set forth on Schedule 2.8(c) to the extent that they relate to
D&B Liabilities or Cognizant Liabilities.
(d) If D&B, Cognizant or ACNielsen is unable to obtain, or to cause
to be obtained, any such required removal as set forth in clauses (a)-(c) of
this Section 2.8, the applicable guarantor or obligor shall continue to be bound
as such and, unless not permitted by law or the terms thereof, the relevant
beneficiary shall or shall cause one of its Subsidiaries, as agent or
subcontractor for such guarantor or obligor to pay, perform and discharge fully
all the obligations or other liabilities of such guarantor or obligor thereunder
from and after the date hereof.
SECTION 2.9. Witness Services. At all times from and after the
Distribution Date, each of D&B, Cognizant and ACNielsen shall use their
commercially reasonable efforts to make available to the other, upon reasonable
written request, its and its Subsidiaries' officers, directors, employees and
agents as witnesses to the extent that (i) such persons may reasonably be
required in connection with the prosecution or defense of any Action in which
the requesting party may from time to time be involved and (ii) there is no
conflict in the Action between the
<PAGE>
31
requesting party and D&B, Cognizant or ACNielsen, as applicable. A party
providing witness services to the other party under this Section shall be
entitled to receive from the recipient of such services, upon the presentation
of invoices therefor, payments for such amounts, relating to disbursements and
other out-of-pocket expenses (which shall be deemed to exclude the costs of
salaries and benefits of employees who are witnesses), as may be reasonably
incurred in providing such witness services.
SECTION 2.10. Certain Post-Distribution Transactions. (a)(i) D&B
shall comply and shall cause its Subsidiaries to comply with and otherwise not
take action inconsistent with each representation and statement made to the
Internal Revenue Service in connection with the request by D&B for a ruling
letter in respect of the Distribution as to certain tax aspects of the
Distribution and (ii) until two years after the Distribution Date, D&B will
maintain its status as a company engaged in the active conduct of a trade or
business, as defined in Section 355(b) of the Code.
(b)(i) Cognizant shall comply and shall cause its Subsidiaries to
comply with and otherwise not take action inconsistent with each representation
and statement made to the Internal Revenue Service in connection with the
request by D&B for a ruling letter in respect of the Distribution as to certain
tax aspects of the Distribution and (ii) until two years after the Distribution
Date, Cognizant will maintain its status as a company engaged in the active
conduct of a trade or business, as defined in Section 355(b) of the Code.
(c)(i) ACNielsen shall comply and shall cause its Subsidiaries to
comply with and otherwise not take action inconsistent with each representation
and statement made with respect to ACNielsen to the Internal Revenue Service in
connection with the request by D&B for a ruling letter in respect of the
Distribution as to certain tax aspects of the Distribution and (ii) until two
years after the Distribution Date, ACNielsen will maintain its status as a
company engaged in the active conduct of a trade or business, as defined in
Section 355(b) of the Code.
SECTION 2.11. Transfers Not Effected Prior to the Distribution;
Transfers Deemed Effective as of the Distribution Date. To the extent that any
transfers contemplated by this Article II shall not have been consummated on or
prior to the Distribution Date, the parties shall cooperate to effect such
transfers as promptly following the Distribution Date as shall be practicable.
Nothing herein shall be deemed to require the transfer of any Assets or the
assumption of any Liabilities which by their terms or operation of law cannot be
transferred; provided, however, that the parties hereto and their respective
Subsidiaries shall cooperate to seek to obtain any necessary consents or
approvals for the transfer of all Assets and Liabilities contemplated to be
transferred pursuant to this
<PAGE>
32
Article II. In the event that any such transfer of Assets or Liabilities has not
been consummated, from and after the Distribution Date the party retaining such
Asset or Liability shall hold such Asset in trust for the use and benefit of the
party entitled thereto (at the expense of the party entitled thereto) or retain
such Liability for the account of the party by whom such Liability is to be
assumed pursuant hereto, as the case may be, and take such other action as may
be reasonably requested by the party to whom such Asset is to be transferred, or
by whom such Liability is to be assumed, as the case may be, in order to place
such party, insofar as is reasonably possible, in the same position as would
have existed had such Asset or Liability been transferred as contemplated
hereby. As and when any such Asset or Liability becomes transferable, such
transfer shall be effected forthwith. The parties agree that, as of the
Distribution Date, each party hereto shall be deemed to have acquired complete
and sole beneficial ownership over all of the Assets, together with all rights,
powers and privileges incident thereto, and shall be deemed to have assumed in
accordance with the terms of this Agreement all of the Liabilities, and all
duties, obligations and responsibilities incident thereto, which such party is
entitled to acquire or required to assume pursuant to the terms of this
Agreement.
SECTION 2.12. Conveyancing and Assumption Instruments. In connection
with the transfers of Assets and the assumptions of Liabilities contemplated by
this Agreement, the parties shall execute or cause to be executed by the
appropriate entities the Conveyancing and Assumption Instruments in
substantially the form contemplated hereby for transfers to be effected pursuant
to New York law or the laws of one of the other states of the United States or,
if not appropriate for a given transfer, and for transfers to be effected
pursuant to non-U.S. laws, in such other form as the parties shall reasonably
agree, including the transfer of real property with deeds as may be appropriate.
The transfer of capital stock shall be effected by means of delivery of stock
certificates and executed stock powers and notation on the stock record books of
the corporation or other legal entities involved, or by such other means as may
be required in any non- U.S. jurisdiction to transfer title to stock and, to the
extent required by applicable law, by notation on public registries.
SECTION 2.13. Ancillary Agreements. Prior to the Distribution Date,
each of D&B, Cognizant and ACNielsen shall enter into, and/or (where applicable)
shall cause members of their respective Groups to enter into, the Ancillary
Agreements and any other agreements in respect of the Distribution reasonably
necessary or appropriate in connection with the transactions contemplated hereby
and thereby.
SECTION 2.14. Corporate Names. (a) Except as otherwise specifically
provided in any Ancillary Agreement:
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33
(i) as soon as reasonably practicable after the Distribution
Date but in any event within six months thereafter, Cognizant and
ACNielsen will each, at their own expense, remove (or, if necessary, on an
interim basis, cover up) any and all exterior signs and other identifiers
located on any of their respective property or premises or on the property
or premises used by them or their respective Subsidiaries (except property
or premises to be shared with D&B or its Subsidiaries after the
Distribution) which refer or pertain to D&B or which include the D&B name,
logo or other trademark or other D&B intellectual property;
(ii) as soon as reasonably practicable after the Distribution
Date but in any event within six months thereafter, Cognizant and
ACNielsen will, and will cause their respective Subsidiaries to, remove
from all letterhead, envelopes, invoices and other communications media of
any kind, all references to D&B, including the "Dun & Bradstreet" name,
logo and any other trademark or other D&B intellectual property (except
that neither Cognizant nor ACNielsen shall be required to take any such
action with respect to materials in the possession of customers), and
neither Cognizant, ACNielsen nor any of their respective Subsidiaries
shall use or display the "Dun & Bradstreet" name, logo or other trademarks
or D&B intellectual property without the prior written consent of D&B; and
(iii) as soon as reasonably practicable after the Distribution
Date, but in any event within six months thereafter, Cognizant and
ACNielsen will, and will cause their respective Subsidiaries to, change
their corporate names to the extent necessary to remove and eliminate any
reference to D&B, including the "Dun & Bradstreet" name; provided,
however, that notwithstanding the foregoing requirements of this Section
2.14(a), if Cognizant or ACNielsen has exercised good faith efforts to
comply with this clause (iii) but is unable, due to regulatory or other
circumstance beyond its control, to effect a corporate name change in
compliance with applicable law, then the relevant party or its Subsidiary
will not be deemed to be in breach hereof if it continues to exercise good
faith efforts to effectuate such name change and does effectuate such name
change within nine months after the Distribution Date, and, in such
circumstances, such party may continue to include in exterior signs and
other identifiers and in letterhead, envelopes, invoices and other
communications references to the name which includes references to D&B,
but only to the extent necessary to identify such party and only until
such party's corporate name can be changed to remove and eliminate such
references.
(b) Except as otherwise specifically provided in any Ancillary
Agreement:
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34
(i) as soon as reasonably practicable after the Distribution
Date but in any event within six months thereafter, D&B and Cognizant will
each, at their own expense, remove (or, if necessary, on an interim basis,
cover up) any and all exterior signs and other identifiers located on any
of their respective property or premises owned or used by them or their
respective Subsidiaries (except property or premises to be shared with
ACNielsen or its Subsidiaries after the Distribution) which refer or
pertain to ACNielsen or which include the "ACNielsen" or "A.C. Nielsen"
name, logo or other trademark or other ACNielsen intellectual property;
(ii) as soon as reasonably practicable after the Distribution
Date but in any event within six months thereafter, D&B and Cognizant will
each, and will cause their respective Subsidiaries to, remove from all
letterhead, envelopes, invoices and other communications media of any
kind, all references to ACNielsen, including the "ACNielsen" and "A.C.
Nielsen" name, logo and any other trademark or other ACNielsen
intellectual property (except that neither D&B nor Cognizant shall be
required to take any such action with respect to materials in the
possession of customers), and neither D&B nor any of its Subsidiaries
shall use or display the "ACNielsen" or "A.C. Nielsen" name, logo or other
trademarks or ACNielsen intellectual property without the prior written
consent of ACNielsen; and
(iii) as soon as reasonably practicable after the Distribution
Date but in any event within six months thereafter, D&B and Cognizant
will, and will cause their respective Subsidiaries to, change their
corporate names to the extent necessary to remove and eliminate any
reference to ACNielsen, including the "ACNielsen" or "A.C. Nielsen" name;
provided, however, (i) that nothing in this Section 2.14(b) shall be
construed to modify any other agreement of the parties concerning
intellectual property set forth in any Ancillary Agreement, including any
provision thereof concerning the use of a name incorporating, referring to
or derived from the "Nielsen" name, and (ii) that notwithstanding the
foregoing requirements of this Section 2.14(b), if D&B or Cognizant has
exercised good faith efforts to comply with this clause (iii) but is
unable, due to regulatory or other circumstance beyond its control, to
effect a corporate name change in compliance with applicable law, then the
relevant party or its Subsidiary will not be deemed to be in breach hereof
if it continues to exercise good faith efforts to effectuate such name
change and does effectuate such name change within nine months after the
Distribution Date, and, in such circumstances, such party may continue to
include in exterior signs and other identifiers and in letterhead,
envelopes, invoices and other communications references to the name which
includes references to ACNielsen, but only to the extent necessary to
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35
identify such party and only until such party's corporate name can be
changed to remove and eliminate such references.
(c) Each of D&B and ACNielsen acknowledges that they have no
interest in nor any right to use or display the Cognizant name or any Cognizant
trademark or intellectual property in any way, except to the extent specifically
set forth in the Intellectual Property Agreement and the TAM Master Agreement.
ARTICLE III. INDEMNIFICATION
SECTION 3.1. Indemnification by D&B. Except as otherwise
specifically set forth in any provision of this Agreement or of any Ancillary
Agreement, D&B shall indemnify, defend and hold harmless the Cognizant
Indemnitees and the ACNielsen Indemnitees from and against any and all
Indemnifiable Losses of the Cognizant Indemnitees and the ACNielsen Indemnitees,
respectively, arising out of, by reason of or otherwise in connection with the
D&B Liabilities or alleged D&B Liabilities, including any breach by D&B of any
provision of this Agreement or any Ancillary Agreement.
SECTION 3.2. Indemnification by Cognizant. Except as otherwise
specifically set forth in any provision of this Agreement or of any Ancillary
Agreement, Cognizant shall indemnify, defend and hold harmless the D&B
Indemnitees and the ACNielsen Indemnitees from and against any and all
Indemnifiable Losses of the D&B Indemnitees and the ACNielsen Indemnitees,
respectively, arising out of, by reason of or otherwise in connection with the
Cognizant Liabilities or alleged Cognizant Liabilities, including any breach by
Cognizant of any provision of this Agreement or any Ancillary Agreement.
SECTION 3.3. Indemnification by ACNielsen. Except as otherwise
specifically set forth in any provision of this Agreement or of any Ancillary
Agreement, ACNielsen shall indemnify, defend and hold harmless the D&B
Indemnitees and the Cognizant Indemnitees from and against any and all
Indemnifiable Losses of the D&B Indemnitees and the Cognizant Indemnitees,
respectively, arising out of, by reason of or otherwise in connection with the
ACNielsen Liabilities or alleged ACNielsen Liabilities, including any breach by
ACNielsen of any provision of this Agreement or any Ancillary Agreement.
SECTION 3.4. Procedures for Indemnification.
(a) Third Party Claims. If a claim or demand is made against an
ACNielsen Indemnitee, a Cognizant Indemnitee or a D&B Indemnitee (each, an
"Indemnitee") by any person who is not a party to this Agreement (a "Third Party
Claim") as to which such Indemnitee is entitled to indemnification pursuant to
this Agreement, such Indemnitee shall notify the party which is or may be
required pursuant to Section 3.1, Section 3.2 or Section 3.3
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36
hereof to make such indemnification (the "Indemnifying Party") in writing, and
in reasonable detail, of the Third Party Claim promptly (and in any event within
15 business days) after receipt by such Indemnitee of written notice of the
Third Party Claim; provided, however, that failure to give such notification
shall not affect the indemnification provided hereunder except to the extent the
Indemnifying Party shall have been actually prejudiced as a result of such
failure (except that the Indemnifying Party shall not be liable for any expenses
incurred during the period in which the Indemnitee failed to give such notice).
Thereafter, the Indemnitee shall deliver to the Indemnifying Party, promptly
(and in any event within five business days) after the Indemnitee's receipt
thereof, copies of all notices and documents (including court papers) received
by the Indemnitee relating to the Third Party Claim.
If a Third Party Claim is made against an Indemnitee, the
Indemnifying Party shall be entitled to participate in the defense thereof and,
if it so chooses and acknowledges in writing its obligation to indemnify the
Indemnitee therefor, to assume the defense thereof with counsel selected by the
Indemnifying Party; provided that such counsel is not reasonably objected to by
the Indemnitee. Should the Indemnifying Party so elect to assume the defense of
a Third Party Claim, the Indemnifying Party shall, within 30 days (or sooner if
the nature of the Third Party Claim so requires), notify the Indemnitee of its
intent to do so, and the Indemnifying Party shall thereafter not be liable to
the Indemnitee for legal or other expenses subsequently incurred by the
Indemnitee in connection with the defense thereof; provided, that such
Indemnitee shall have the right to employ counsel to represent such Indemnitee
if, in such Indemnitee's reasonable judgment, a conflict of interest between
such Indemnitee and such Indemnifying Party exists in respect of such claim
which would make representation of both such parties by one counsel
inappropriate, and in such event the fees and expenses of such separate counsel
shall be paid by such Indemnifying Party. If the Indemnifying Party assumes such
defense, the Indemnitee shall have the right to participate in the defense
thereof and to employ counsel, subject to the proviso of the preceding sentence,
at its own expense, separate from the counsel employed by the Indemnifying
Party, it being understood that the Indemnifying Party shall control such
defense. The Indemnifying Party shall be liable for the fees and expenses of
counsel employed by the Indemnitee for any period during which the Indemnifying
Party has failed to assume the defense thereof (other than during the period
prior to the time the Indemnitee shall have given notice of the Third Party
Claim as provided above). If the Indemnifying Party so elects to assume the
defense of any Third Party Claim, all of the Indemnitees shall cooperate with
the Indemnifying Party in the defense or prosecution thereof, including by
providing or causing to be provided, Records and witnesses as soon as reasonably
practicable after receiving any request therefor from or on behalf of the
Indemnifying Party.
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If the Indemnifying Party acknowledges in writing responsibility for
a Third Party Claim, then in no event will the Indemnitee admit any liability
with respect to, or settle, compromise or discharge, any Third Party Claim
without the Indemnifying Party's prior written consent; provided, however, that
the Indemnitee shall have the right to settle, compromise or discharge such
Third Party Claim without the consent of the Indemnifying Party if the
Indemnitee releases the Indemnifying Party from its indemnification obligation
hereunder with respect to such Third Party Claim and such settlement, compromise
or discharge would not otherwise adversely affect the Indemnifying Party. If the
Indemnifying Party acknowledges in writing liability for a Third Party Claim,
the Indemnitee will agree to any settlement, compromise or discharge of a Third
Party Claim that the Indemnifying Party may recommend and that by its terms
obligates the Indemnifying Party to pay the full amount of the liability in
connection with such Third Party Claim and releases the Indemnitee completely in
connection with such Third Party Claim and that would not otherwise adversely
affect the Indemnitee; provided, however, that the Indemnitee may refuse to
agree to any such settlement, compromise or discharge if the Indemnitee agrees
that the Indemnifying Party's indemnification obligation with respect to such
Third Party Claim shall not exceed the amount that would be required to be paid
by or on behalf of the Indemnifying Party in connection with such settlement,
compromise or discharge. If an Indemnifying Party elects not to assume the
defense of a Third Party Claim, or fails to notify an Indemnitee of its election
to do so as provided herein, such Indemnitee may compromise, settle or defend
such Third Party Claim.
Notwithstanding the foregoing, the Indemnifying Party shall not be
entitled to assume the defense of any Third Party Claim (and shall be liable for
the fees and expenses of counsel incurred by the Indemnitee in defending such
Third Party Claim) if the Third Party Claim seeks an order, injunction or other
equitable relief or relief for other than money damages against the Indemnitee
which the Indemnitee reasonably determines, after conferring with its counsel,
cannot be separated from any related claim for money damages. If such equitable
relief or other relief portion of the Third Party Claim can be so separated from
that for money damages, the Indemnifying Party shall be entitled to assume the
defense of the portion relating to money damages.
(b) In the event of payment by an Indemnifying Party to any
Indemnitee in connection with any Third-Party Claim, such Indemnifying Party
shall be subrogated to and shall stand in the place of such Indemnitee as to any
events or circumstances in respect of which such Indemnitee may have any right
or claim relating to such Third-Party Claim against any claimant or plaintiff
asserting such Third-Party Claim. Such Indemnitee shall cooperate with such
Indemnifying Party in a reasonable manner, and at the cost and expense of such
Indemnifying Party, in prosecuting any subrogated right or claim.
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(c) The remedies provided in this Article III shall be cumulative
and shall not preclude assertion by any Indemnitee of any other rights or the
seeking of any and all other remedies against any Indemnifying Party.
SECTION 3.5. Indemnification Payments. Indemnification required by
this Article III shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received or
loss, liability, claim, damage or expense is incurred.
ARTICLE IV. ACCESS TO INFORMATION
SECTION 4.1. Provision of Corporate Records.
(a) Other than in circumstances in which indemnification is sought
pursuant to Article III (in which event the provisions of such Article will
govern), after the Distribution Date, upon the prior written request by
Cognizant or ACNielsen for specific and identified agreements, documents, books,
records or files (collectively, "Records") which relate to (x) Cognizant or
ACNielsen or the conduct of the Cognizant Business or ACNielsen Business, as the
case may be, up to the Effective Time, or (y) any Ancillary Agreement to which
D&B and Cognizant and/or ACNielsen are parties, as applicable, D&B shall
arrange, as soon as reasonably practicable following the receipt of such
request, for the provision of appropriate copies of such Records (or the
originals thereof if the party making the request has a reasonable need for such
originals) in the possession or control of D&B or any of its Subsidiaries, but
only to the extent such items are not already in the possession or control of
the requesting party.
(b) Other than in circumstances in which indemnification is sought
pursuant to Article III (in which event the provisions of such Article will
govern), after the Distribution Date, upon the prior written request by D&B or
ACNielsen for specific and identified Records which relate to (x) D&B or
ACNielsen or the conduct of the D&B Business or the ACNielsen Business, as the
case may be, up to the Effective Time, or (y) any Ancillary Agreement to which
Cognizant and D&B and/or ACNielsen are parties, as applicable, Cognizant shall
arrange, as soon as reasonably practicable following the receipt of such
request, for the provision of appropriate copies of such Records (or the
originals thereof if the party making the request has a reasonable need for such
originals) in the possession or control of Cognizant or any of its Subsidiaries,
but only to the extent such items are not already in the possession or control
of the requesting party.
(c) Other than in circumstances in which indemnification is sought
pursuant to Article III (in which event the provisions of such Article will
govern), after the
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39
Distribution Date, upon the prior written request by D&B or Cognizant for
specific and identified Records which relate to D&B or Cognizant or the conduct
of the D&B Business or the Cognizant Business, as the case may be, up to the
Effective Time, or any Ancillary Agreement to which ACNielsen and D&B and/or
Cognizant are parties, as applicable, ACNielsen shall arrange, as soon as
reasonably practicable following the receipt of such request, for the provision
of appropriate copies of such Records (or the originals thereof if the party
making the request has a reasonable need for such originals) in the possession
or control of ACNielsen or any of its Subsidiaries, but only to the extent such
items are not already in the possession or control of the requesting party.
SECTION 4.2. Access to Information. Other than in circumstances in
which indemnification is sought pursuant to Article III (in which event the
provisions of such Article will govern), from and after the Distribution Date,
each of D&B, Cognizant and ACNielsen shall afford to the other and its
authorized accountants, counsel and other designated representatives reasonable
access during normal business hours, subject to appropriate restrictions for
classified, privileged or confidential information, to the personnel,
properties, books and records of such party and its Subsidiaries insofar as such
access is reasonably required by the other party and relates to (x) such other
party or the conduct of its business prior to the Effective Time or (y) any
Ancillary Agreement to which each of the party requesting such access and the
party requested to grant such access are parties.
SECTION 4.3. Reimbursement; Other Matters. Except to the extent
otherwise contemplated by any Ancillary Agreement, a party providing Records or
access to information to the other party under this Article IV shall be entitled
to receive from the recipient, upon the presentation of invoices therefor,
payments for such amounts, relating to supplies, disbursements and other
out-of-pocket expenses, as may be reasonably incurred in providing such Records
or access to information.
SECTION 4.4. Confidentiality. Each of (i) D&B and its Subsidiaries,
(ii) Cognizant and its Subsidiaries and (iii) ACNielsen and its Subsidiaries
shall not use or permit the use of (without the prior written consent of the
other) and shall keep, and shall cause its consultants and advisors to keep,
confidential all information concerning the other parties in its possession, its
custody or under its control (except to the extent that (A) such information has
been in the public domain through no fault of such party or (B) such information
has been later lawfully acquired from other sources by such party or (C) this
Agreement or any other Ancillary Agreement or any other agreement entered into
pursuant hereto permits the use or disclosure of such information) to the extent
such information (w) relates to or was acquired during the period up to the
Effective Time, (x) relates to any Ancillary Agreement, (y) is
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40
obtained in the course of performing services for the other party pursuant to
any Ancillary Agreement, or (z) is based upon or is derived from information
described in the preceding clauses (w), (x) or (y), and each party shall not
(without the prior written consent of the other) otherwise release or disclose
such information to any other person, except such party's auditors and
attorneys, unless compelled to disclose such information by judicial or
administrative process or unless such disclosure is required by law and such
party has used commercially reasonable efforts to consult with the other
affected party or parties prior to such disclosure.
SECTION 4.5. Privileged Matters. The parties hereto recognize that
legal and other professional services that have been and will be provided prior
to the Distribution Date have been and will be rendered for the benefit of each
of the members of the D&B Group, the members of the Cognizant Group, and the
members of the ACNielsen Group, and that each of the members of the D&B Group,
the members of the Cognizant Group, and the members of the ACNielsen Group
should be deemed to be the client for the purposes of asserting all privileges
which may be asserted under applicable law. To allocate the interests of each
party in the information as to which any party is entitled to assert a
privilege, the parties agree as follows:
(a) D&B shall be entitled, in perpetuity, to control the assertion
or waiver of all privileges in connection with privileged information which
relates solely to the D&B Business, whether or not the privileged information is
in the possession of or under the control of D&B, Cognizant or ACNielsen. D&B
shall also be entitled, in perpetuity, to control the assertion or waiver of all
privileges in connection with privileged information that relates solely to the
subject matter of any claims constituting D&B Liabilities, now pending or which
may be asserted in the future, in any lawsuits or other proceedings initiated
against or by D&B, whether or not the privileged information is in the
possession of or under the control of D&B, Cognizant or ACNielsen.
(b) Cognizant shall be entitled, in perpetuity, to control the
assertion or waiver of all privileges in connection with privileged information
which relates solely to the Cognizant Business, whether or not the privileged
information is in the possession of or under the control of D&B, Cognizant or
ACNielsen. Cognizant shall also be entitled, in perpetuity, to control the
assertion or waiver of all privileges in connection with privileged information
which relates solely to the subject matter of any claims constituting Cognizant
Liabilities, now pending or which may be asserted in the future, in any lawsuits
or other proceedings initiated against or by Cognizant, whether or not the
privileged information is in the possession of Cognizant or under the control of
D&B, Cognizant or ACNielsen.
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41
(c) ACNielsen shall be entitled, in perpetuity, to control the
assertion or waiver of all privileges in connection with privileged information
which relates solely to the ACNielsen Business, whether or not the privileged
information is in the possession of or under the control of D&B, Cognizant or
ACNielsen. ACNielsen shall also be entitled, in perpetuity, to control the
assertion or waiver of all privileges in connection with privileged information
which relates solely to the subject matter of any claims constituting ACNielsen
Liabilities, now pending or which may be asserted in the future, in any lawsuits
or other proceedings initiated against or by ACNielsen, whether or not the
privileged information is in the possession of ACNielsen or under the control of
D&B, Cognizant or ACNielsen.
(d) The parties hereto agree that they shall have a shared
privilege, with equal right to assert or waive, subject to the restrictions in
this Section 4.5, with respect to all privileges not allocated pursuant to the
terms of Sections 4.5(a), (b) and (c). All privileges relating to any claims,
proceedings, litigation, disputes, or other matters which involve two or more of
D&B, Cognizant or ACNielsen in respect of which two or more of such parties
retain any responsibility or liability under this Agreement, shall be subject to
a shared privilege among them.
(e) No party hereto may waive any privilege which could be asserted
under any applicable law, and in which any other party hereto has a shared
privilege, without the consent of the other party, except to the extent
reasonably required in connection with any litigation with third-parties or as
provided in subsection (f) below. Consent shall be in writing, or shall be
deemed to be granted unless written objection is made within twenty (20) days
after notice upon the other party requesting such consent.
(f) In the event of any litigation or dispute between or among any
of the parties hereto, any party and a Subsidiary of another party hereto, or a
Subsidiary of one party hereto and a Subsidiary of another party hereto, either
such party may waive a privilege in which the other party has a shared
privilege, without obtaining the consent of the other party, provided that such
waiver of a shared privilege shall be effective only as to the use of
information with respect to the litigation or dispute between the relevant
parties and/or their Subsidiaries, and shall not operate as a waiver of the
shared privilege with respect to third parties.
(g) If a dispute arises between or among the parties hereto or their
respective Subsidiaries regarding whether a privilege should be waived to
protect or advance the interest of any party, each party agrees that it shall
negotiate in good faith, shall endeavor to minimize any prejudice to the rights
of the other parties, and shall not unreasonably withhold consent to any request
for waiver by another party. Each party hereto
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42
specifically agrees that it will not withhold consent to waiver for any purpose
except to protect its own legitimate interests.
(h) Upon receipt by any party hereto or by any Subsidiary thereof of
any subpoena, discovery or other request which arguably calls for the production
or disclosure of information subject to a shared privilege or as to which
another party has the sole right hereunder to assert a privilege, or if any
party obtains knowledge that any of its or any of its Subsidiaries' current or
former directors, officers, agents or employees have received any subpoena,
discovery or other requests which arguably calls for the production or
disclosure of such privileged information, such party shall promptly notify the
other party or parties of the existence of the request and shall provide the
other party or parties a reasonable opportunity to review the information and to
assert any rights it or they may have under this Section 4.5 or otherwise to
prevent the production or disclosure of such privileged information.
(i) The transfer of all Records and other information pursuant to
this Agreement is made in reliance on the agreement of D&B, Cognizant and
ACNielsen, as set forth in Sections 4.4 and 4.5, to maintain the confidentiality
of privileged information and to assert and maintain all applicable privileges.
The access to information being granted pursuant to Sections 4.1 and 4.2 hereof,
the agreement to provide witnesses and individuals pursuant to Sections 2.9 and
3.4 hereof, the furnishing of notices and documents and other cooperative
efforts contemplated by Section 3.4 hereof, and the transfer of privileged
information between and among the parties and their respective Subsidiaries
pursuant to this Agreement shall not be deemed a waiver of any privilege that
has been or may be asserted under this Agreement or otherwise.
SECTION 4.6. Ownership of Information. Any information owned by one
party or any of its Subsidiaries that is provided to a requesting party pursuant
to Article III or this Article IV shall be deemed to remain the property of the
providing party. Unless specifically set forth herein, nothing contained in this
Agreement shall be construed as granting or conferring rights of license or
otherwise in any such information.
SECTION 4.7. Limitation of Liability. (a) No party shall have any
liability to any other party in the event that any information exchanged or
provided pursuant to this Agreement which is an estimate or forecast, or which
is based on an estimate or forecast, is found to be inaccurate.
(b) No party or any Subsidiary thereof shall have any liability or
claim against any other party or any Subsidiary of any other party based upon,
arising out of or resulting from any agreement, arrangement, course of dealing
or understanding existing on or prior to the Distribution Date (other than this
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43
Agreement or any Ancillary Agreement or any agreement entered into in connection
herewith or in order to consummate the transactions contemplated hereby or
thereby), unless such agreement, arrangement, course of dealing or understanding
is listed on Schedule 4.7(b) hereto, and any such liability or claim, whether or
not in writing, which is not reflected on such Schedule, is hereby irrevocably
cancelled, released and waived.
SECTION 4.8. Other Agreements Providing for Exchange of Information.
The rights and obligations granted under this Article IV are subject to any
specific limitations, qualifications or additional provisions on the sharing,
exchange or confidential treatment of information set forth in any Ancillary
Agreement.
ARTICLE V. ADMINISTRATIVE SERVICES
SECTION 5.1. Performance of Services. Beginning on the Distribution
Date, each party will provide, or cause one or more of its Subsidiaries to
provide, to the other party and its Subsidiaries such services on such terms as
may be set forth in the Transition Services Agreement. Except as otherwise set
forth in the Transition Services Agreement or any Schedule thereto, the party
that is to provide the services (the "Provider") will use (and will cause its
Subsidiaries to use) commercially reasonable efforts to provide such services to
the other party (the "Recipient") and its Subsidiaries in a satisfactory and
timely manner and as further specified in such Transition Services Agreement.
SECTION 5.2. Independence. Unless otherwise agreed in writing, all
employees and representatives of the Provider providing the scheduled services
to the Recipient will be deemed for purposes of all compensation and employee
benefits matters to be employees or representatives of the Provider and not
employees or representatives of the Recipient. In performing such services, such
employees and representatives will be under the direction, control and
supervision of the Provider (and not the Recipient) and the Provider will have
the sole right to exercise all authority with respect to the employment
(including, without limitation, termination of employment), assignment and
compensation of such employees and representatives.
SECTION 5.3. Non-exclusivity. Nothing in this Agreement precludes
any party from obtaining, in whole or in part, services of any nature that may
be obtainable from the other parties from its own employees or from providers
other than the other parties.
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ARTICLE VI. DISPUTE RESOLUTION
SECTION 6.1. Negotiation. In the event of a controversy, dispute or
claim arising out of, in connection with, or in relation to the interpretation,
performance, nonperformance, validity or breach of this Agreement or otherwise
arising out of, or in any way related to this Agreement or the transactions
contemplated hereby, including, without limitation, any claim based on contract,
tort, statute or constitution (but excluding any controversy, dispute or claim
arising out of any agreement relating to the use or lease of real property if
any third party is a party to such controversy, dispute or claim) (collectively,
"Agreement Disputes"), the general counsels of the relevant parties shall
negotiate in good faith for a reasonable period of time to settle such Agreement
Dispute, provided such reasonable period shall not, unless otherwise agreed by
the parties in writing, exceed 30 days from the time the relevant parties began
such negotiations; provided further that in the event of any arbitration in
accordance with Section 6.2 hereof, the relevant parties shall not assert the
defenses of statute of limitations and laches arising for the period beginning
after the date the relevant parties began negotiations hereunder, and any
contractual time period or deadline under this Agreement or any Ancillary
Agreement to which such Agreement Dispute relates shall not be deemed to have
passed until such Agreement Dispute has been resolved.
SECTION 6.2. Arbitration. If after such reasonable period such
general counsels are unable to settle such Agreement Dispute (and in any event,
unless otherwise agreed in writing by the relevant parties, after 60 days have
elapsed from the time the relevant parties began such negotiations), such
Agreement Dispute shall be determined, at the request of any relevant party, by
arbitration conducted in New York City, before and in accordance with the
then-existing International Arbitration Rules of the American Arbitration
Association (the "Rules"). In any dispute between two of the parties hereto, the
number of arbitrators shall be three, and in any dispute among all three parties
hereto, the number of arbitrators shall be one. Any judgment or award rendered
by the arbitrator shall be final, binding and nonappealable (except upon grounds
specified in 9 U.S.C. ss.10(a) as in effect on the date hereof). If the parties
are unable to agree on an arbitrator or arbitrators, the arbitrator or
arbitrators shall be selected in accordance with the Rules. Any controversy
concerning whether an Agreement Dispute is an arbitrable Agreement Dispute,
whether arbitration has been waived, whether an assignee of this Agreement is
bound to arbitrate, or as to the interpretation of enforceability of this
Article VI shall be determined by the arbitrator or arbitrators. In resolving
any dispute, the parties intend that the arbitrator or arbitrators apply the
substantive laws of the State of New York, without regard to the choice of law
principles thereof. The parties intend that the provisions to arbitrate set
forth herein be valid, enforceable and irrevocable. The
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45
undersigned agree to comply with any award made in any such arbitration
proceedings that has become final in accordance with the Rules and agree to
enforcement of or entry of judgment upon such award, by any court of competent
jurisdiction, including (a) the Supreme Court of the State of New York, New York
County, or (b) the United States District Court for the Southern District of New
York, in accordance with Section 8.18 hereof. The arbitrator or arbitrators
shall be entitled, if appropriate, to award any remedy in such proceedings,
including, without limitation, monetary damages, specific performance and all
other forms of legal and equitable relief; provided, however, the arbitrator or
arbitrators shall not be entitled to award punitive damages. Without limiting
the provisions of the Rules, unless otherwise agreed in writing by or among the
relevant parties or permitted by this Agreement, the undersigned shall keep
confidential all matters relating to the arbitration or the award, provided such
matters may be disclosed (i) to the extent reasonably necessary in any
proceeding brought to enforce the award or for entry of a judgment upon the
award and (ii) to the extent otherwise required by law. Notwithstanding Article
32 of the Rules, the party other than the prevailing party in the arbitration
shall be responsible for all of the costs of the arbitration, including legal
fees and other costs specified by such Article 32. Nothing contained herein is
intended to or shall be construed to prevent any party, in accordance with
Article 22(3) of the Rules or otherwise, from applying to any court of competent
jurisdiction for interim measures or other provisional relief in connection with
the subject matter of any Agreement Disputes.
SECTION 6.3. Continuity of Service and Performance. Unless otherwise
agreed in writing, the parties will continue to provide service and honor all
other commitments under this Agreement and each Ancillary Agreement during the
course of dispute resolution pursuant to the provisions of this Article VI with
respect to all matters not subject to such dispute, controversy or claim.
SECTION 6.4. Indemnity and Joint Defense Agreement. In no event or
circumstances will any arbitrator or arbitrators appointed hereunder have any
right, authority or jurisdiction to determine the "ACN Maximum Amount" under the
Indemnity and Joint Defense Agreement, or otherwise relating to any dispute
which may arise in connection with Article II thereof, or to prevent, delay or
otherwise interfere with such dispute arbitration or determination.
ARTICLE VII. INSURANCE
SECTION 7.1. Policies and Rights Included Within Assets. (a) The
Cognizant Assets shall include (i) any and all rights of an insured party under
each of the Cognizant Shared Policies, subject to the terms of such Cognizant
Shared Policies and any limitations or obligations of Cognizant contemplated by
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46
this Article VII, specifically including rights of indemnity and the right to be
defended by or at the expense of the insurer, with respect to all claims, suits,
actions, proceedings, injuries, losses, liabilities, damages and expenses
incurred or claimed to have been incurred prior to the Distribution Date by any
party in or in connection with the conduct of the Cognizant Business or, to the
extent any claim is made against Cognizant or any of its Subsidiaries, the
conduct of the D&B Business or the ACNielsen Business, and which claims, suits,
actions, proceedings, injuries, losses, liabilities, damages and expenses may
arise out of an insured or insurable occurrence under one or more of such
Cognizant Shared Policies; provided, however, that nothing in this clause shall
be deemed to constitute (or to reflect) an assignment of such Cognizant Shared
Policies, or any of them, to Cognizant, and (ii) the Cognizant Policies.
(b) The ACNielsen Assets shall include (i) any and all rights of an
insured party under each of the ACNielsen Shared Policies, subject to the terms
of such ACNielsen Shared Policies and any limitations or obligations of
ACNielsen contemplated by this Article VII, specifically including rights of
indemnity and the right to be defended by or at the expense of the insurer, with
respect to all claims, suits, actions, proceedings, injuries, losses,
liabilities, damages and expenses incurred or claimed to have been incurred
prior to the Distribution Date by any party in or in connection with the conduct
of the ACNielsen Business or, to the extent any claim is made against ACNielsen
or any of its Subsidiaries, the conduct of the D&B Business or the Cognizant
Business, and which claims, suits, actions, proceedings, injuries, losses,
liabilities, damages and expenses may arise out of an insured or insurable
occurrence under one or more of such ACNielsen Shared Policies; provided,
however, that nothing in this clause shall be deemed to constitute (or to
reflect) an assignment of such ACNielsen Shared Policies, or any of them, to
ACNielsen, and (ii) the ACNielsen Policies.
SECTION 7.2. Post-Distribution Date Claims. (a) If, subsequent to
the Distribution Date, any person shall assert a claim against Cognizant or any
of its Subsidiaries (including, without limitation, where Cognizant or its
Subsidiaries are joint defendants with other persons) with respect to any claim,
suit, action, proceeding, injury, loss, liability, damage or expense incurred or
claimed to have been incurred prior to the Distribution Date in or in connection
with the conduct of the Cognizant Business or, to the extent any claim is made
against Cognizant or any of its Subsidiaries (including, without limitation,
where Cognizant or its Subsidiaries are joint defendants with other persons),
the conduct of the D&B Business or the ACNielsen Business, and which claim,
suit, action, proceeding, injury, loss, liability, damage or expense may arise
out of an insured or insurable occurrence under one or more of the Cognizant
Shared Policies, D&B shall, at the time such claim is asserted, to the extent
any such Policy may require that Insurance Proceeds thereunder be collected
directly by the named
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insured or anyone other than the party against whom the Insured Claim is
asserted, be deemed to designate, without need of further documentation,
Cognizant as the agent and attorney-in-fact to assert and to collect any related
Insurance Proceeds under such Cognizant Shared Policy, and shall further be
deemed to assign, without need of further documentation, to Cognizant any and
all rights of an insured party under such Cognizant Shared Policy with respect
to such asserted claim, specifically including rights of indemnity and the right
to be defended by or at the expense of the insurer and the right to any
applicable Insurance Proceeds thereunder; provided, however, that nothing in
this Section 7.2(a) shall be deemed to constitute (or to reflect) an assignment
of the Cognizant Shared Policies, or any of them, to Cognizant.
(b) If, subsequent to the Distribution Date, any person shall assert
a claim against ACNielsen or any of its Subsidiaries (including, without
limitation, where ACNielsen or its Subsidiaries are joint defendants with other
persons) with respect to any claim, suit, action, proceeding, injury, loss,
liability, damage or expense incurred or claimed to have been incurred prior to
the Distribution Date in or in connection with the conduct of the ACNielsen
Business or, to the extent any claim is made against ACNielsen or any of its
Subsidiaries (including, without limitation, where ACNielsen or its Subsidiaries
are joint defendants with other persons), the conduct of the D&B Business or the
Cognizant Business, and which claim, suit, action, proceeding, injury, loss,
liability, damage or expense may arise out of an insured or insurable occurrence
under one or more of the ACNielsen Shared Policies, D&B shall, at the time such
claim is asserted, to the extent such Policy may require that Insurance Proceeds
thereunder be collected directly by the named insured or anyone other than the
party against whom the Insured Claim is asserted, be deemed to designate,
without need of further documentation, ACNielsen as the agent and
attorney-in-fact to assert and to collect any related Insurance Proceeds under
such ACNielsen Shared Policy, and shall further be deemed to assign, without
need of further documentation, to ACNielsen any and all rights of an insured
party under such ACNielsen Shared Policy with respect to such asserted claim,
specifically including rights of indemnity and the right to be defended by or at
the expense of the insurer and the right to any applicable Insurance Proceeds
thereunder; provided, however, that nothing in this Section 7.2(b) shall be
deemed to constitute (or to reflect) an assignment of the ACNielsen Shared
Policies to ACNielsen.
SECTION 7.3. Administration; Other Matters. (a) Administration.
Except as otherwise provided in Section 7.2 hereof, from and after the
Distribution Date, D&B shall be responsible for (i) Insurance Administration of
the Shared Policies and (ii) Claims Administration under such Shared Policies
with respect to D&B Liabilities, Cognizant Liabilities and ACNielsen
Liabilities; provided that the retention of such responsibilities by D&B is in
no way intended to limit, inhibit
<PAGE>
48
or preclude any right to insurance coverage for any Insured Claim of a named
insured under such Policies as contemplated by the terms of this Agreement; and
provided further that D&B's retention of the administrative responsibilities for
the Shared Policies shall not relieve the party submitting any Insured Claim of
the primary responsibility for reporting such Insured Claim accurately,
completely and in a timely manner or of such party's authority to settle any
such Insured Claim within any period permitted or required by the relevant
Policy. D&B may discharge its administrative responsibilities under this Section
7.3 by contracting for the provision of services by independent parties. Each of
the parties hereto shall administer and pay any costs relating to defending its
respective Insured Claims under Shared Policies to the extent such defense costs
are not covered under such Policies and shall be responsible for obtaining or
reviewing the appropriateness of releases upon settlement of its respective
Insured Claims under Shared Policies. The disbursements, out-of-pocket expenses
and direct and indirect costs of employees or agents of D&B relating to Claims
Administration and Insurance Administration contemplated by this Section 7.3(a)
shall be treated in accordance with the terms of the Transition Services
Agreement, if still in effect with respect to insurance and risk management, or,
if the Transition Services Agreement shall no longer be in effect with respect
to insurance and risk management, then each of D&B, Cognizant and ACNielsen
shall be responsible for its own Claims Administration and Insurance
Administration.
(b) Exceeding Policy Limits.
(i) Where Cognizant Liabilities or ACNielsen Liabilities, as
applicable, are specifically covered under the same Shared Policy for
periods prior to the Distribution Date, or covering claims made after the
Distribution Date with respect to an occurrence prior to the Distribution
Date, then from and after the Distribution Date Cognizant and ACNielsen
may claim coverage for Insured Claims under such Shared Policy as and to
the extent that such insurance is available up to the full extent of the
applicable limits of liability of such Shared Policy (and may receive any
Insurance Proceeds with respect thereto as contemplated by Section 7.2 or
Section 7.3(c) hereof), subject to the terms of this Section 7.3.
(ii) Except as set forth in this Section 7.3(b), D&B, Cognizant
and ACNielsen shall not be liable to one another for claims not reimbursed
by insurers for any reason not within the control of D&B, Cognizant or
ACNielsen, as the case may be, including, without limitation, coinsurance
provisions, deductibles, quota share deductibles, self-insured retentions,
bankruptcy or insolvency of an insurance carrier, Shared Policy
limitations or restrictions, any coverage disputes, any failure to timely
claim by D&B, Cognizant or ACNielsen or any defect in such claim or its
<PAGE>
49
processing, provided that D&B shall be responsible for the amount of the
difference, if any, between the deductible set forth in any Shared Policy
and the deductible allocable to Cognizant and/or ACNielsen as set forth in
Schedule 7.3(b) hereto.
(c) Allocation of Insurance Proceeds. Except as otherwise provided
in Section 7.2, Insurance Proceeds received with respect to claims, costs and
expenses under the Shared Policies shall be paid to D&B, which shall thereafter
administer the Shared Policies by paying the Insurance Proceeds, as appropriate,
to D&B with respect to D&B Liabilities, to Cognizant with respect to Cognizant
Liabilities and to ACNielsen with respect to the ACNielsen Liabilities. Payment
of the allocable portions of indemnity costs of Insurance Proceeds resulting
from such Policies will be made by D&B to the appropriate party upon receipt
from the insurance carrier. In the event that the aggregate limits on any Shared
Policies are exceeded by the aggregate of outstanding Insured Claims by two or
more of the relevant parties hereto, such parties agree to allocate the
Insurance Proceeds received thereunder based upon their respective percentage of
the total of their bona fide claims which were covered under such Shared Policy
(their "allocable portion of Insurance Proceeds"), and any party who has
received Insurance Proceeds in excess of such party's allocable portion of
Insurance Proceeds shall pay to the other party or parties the appropriate
amount so that each party will have received its allocable portion of Insurance
Proceeds pursuant hereto. Each of the parties agrees to use commercially
reasonable efforts to maximize available coverage under those Shared Policies
applicable to it, and to take all commercially reasonable steps to recover from
all other responsible parties in respect of an Insured Claim to the extent
coverage limits under a Shared Policy have been exceeded or would be exceeded as
a result of such Insured Claim.
(d) Allocation of Deductibles. In the event that two or more parties
have bona fide claims under any Shared Policy for which a deductible is payable,
the parties agree that the aggregate amount of the deductible paid shall be
borne by the parties in the same proportion which the Insurance Proceeds
received by each such party bears to the total Insurance Proceeds received under
the applicable Shared Policy (their "allocable share of the deductible"), and
any party who has paid more than such share of the deductible shall be entitled
to receive from any other party or parties an appropriate amount so that each
party has borne its allocable share of the deductible pursuant hereto. For
purposes of this paragraph 7.3(d), the amount of the relevant deductible under
any Shared Policy shall be that set forth in Schedule 7.3(b) hereto.
(e) Effective as of the Distribution Date, Cognizant and ACNielsen
shall be responsible for the full amount of the
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50
deductible for workers' compensation, general liability and automobile liability
claims as set forth in Schedule 7.3(e).
SECTION 7.4. Agreement for Waiver of Conflict and Shared Defense. In
the event that Insured Claims of more than one of the parties hereto exist
relating to the same occurrence, the relevant parties shall jointly defend and
waive any conflict of interest necessary to the conduct of the joint defense.
Nothing in this Article VII shall be construed to limit or otherwise alter in
any way the obligations of the parties to this Agreement, including those
created by this Agreement, by operation of law or otherwise.
SECTION 7.5. Cooperation. The parties agree to use their
commercially reasonable efforts to cooperate with respect to the various
insurance matters contemplated by this Agreement.
ARTICLE VIII. MISCELLANEOUS
SECTION 8.1. Complete Agreement; Construction. This Agreement,
including the Exhibits and Schedules, and the Ancillary Agreements shall
constitute the entire agreement between the parties with respect to the subject
matter hereof and shall supersede all previous negotiations, commitments and
writings with respect to such subject matter. In the event of any inconsistency
between this Agreement and any Schedule hereto, the Schedule shall prevail.
Other than Section 2.1(j)(i), Section 2.1(j)(ii), Section 2.1(j)(iv), Section
2.7, Section 4.5 and Article VI, which shall prevail over any inconsistent or
conflicting provisions in any Ancillary Agreement other than the Indemnity and
Joint Defense Agreement (the provisions of which shall prevail), notwithstanding
any other provisions in this Agreement to the contrary, in the event and to the
extent that there shall be a conflict between the provisions of this Agreement
and the provisions of any Ancillary Agreement, such Ancillary Agreement shall
control.
SECTION 8.2. Ancillary Agreements. Subject to the last sentence of
Section 8.1, this Agreement is not intended to address, and should not be
interpreted to address, the matters specifically and expressly covered by the
Ancillary Agreements. D&B, Cognizant and ACNielsen acknowledge and agree that
except to the extent that the Indemnity and Joint Defense Agreement expressly
states otherwise, the provisions of such agreement are independent of the
provisions hereof, and, subject to the foregoing exception, none of the
agreements herein or in any other Ancillary Agreement are intended to govern in
any way any of the matters which are the subject of such Indemnity and Joint
Defense Agreement.
SECTION 8.3. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective
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51
when one or more such counterparts have been signed by each of the parties and
delivered to the other parties.
SECTION 8.4. Survival of Agreements. Except as otherwise
contemplated by this Agreement, all covenants and agreements of the parties
contained in this Agreement shall survive the Distribution Date.
SECTION 8.5. Expenses. Except as otherwise set forth in this
Agreement or any Ancillary Agreement, all costs and expenses incurred on or
prior to the Distribution Date (whether or not paid on or prior to the
Distribution Date) in connection with the preparation, execution, delivery and
implementation of this Agreement and any Ancillary Agreement, the Information
Statement (including any registration statement on Form 10 of which such
Information Statement may be a part) and the Distribution and the consummation
of the transactions contemplated thereby shall be charged to and paid by D&B.
Except as otherwise set forth in this Agreement or any Ancillary Agreement, all
costs and expenses incurred after the Distribution Date in connection with the
implementation of this Agreement or any Ancillary Agreement, the consummation of
the Distribution or the consummation of the transactions contemplated by this
Agreement or any Ancillary Agreement shall be charged to and paid by D&B. Except
as otherwise set forth in this Agreement or any Ancillary Agreement, each party
shall bear its own costs and expenses incurred after the Distribution Date. Any
amount or expense to be paid or reimbursed by any party hereto to any other
party hereto shall be so paid or reimbursed promptly after the existence and
amount of such obligation is determined and demand therefor is made.
SECTION 8.6. Notices. All notices and other communications hereunder
shall be in writing and hand delivered or mailed by registered or certified mail
(return receipt requested) or sent by any means of electronic message
transmission with delivery confirmed (by voice or otherwise) to the parties at
the following addresses (or at such other addresses for a party as shall be
specified by like notice) and will be deemed given on the date on which such
notice is received:
To The Dun & Bradstreet Corporation:
One Diamond Hill Road
Murray Hill, NJ 07974
Telecopy: (908) 665-5803
Attn: General Counsel
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52
To Cognizant Corporation:
200 Nyala Farms
Westport, Connecticut 06880
Telecopy: (203) 222-4201
Attn: General Counsel
To ACNielsen Corporation:
177 Broad Street
Stamford, Connecticut 06901
Telecopy: (203) 961-3179
Attn: General Counsel
SECTION 8.7. Waivers. The failure of any party to require strict
performance by any other party of any provision in this Agreement will not waive
or diminish that party's right to demand strict performance thereafter of that
or any other provision hereof.
SECTION 8.8. Amendments. Subject to the terms of Section 8.11
hereof, this Agreement may not be modified or amended except by an agreement in
writing signed by each of the parties hereto.
SECTION 8.9. Assignment. (a) This Agreement shall not be assignable,
in whole or in part, directly or indirectly, by any party hereto without the
prior written consent of the other parties hereto, and any attempt to assign any
rights or obligations arising under this Agreement without such consent shall be
void.
(b) D&B will not distribute to its stockholders any interest in any
D&B Business Entity, by way of a spin-off distribution, split-off or other
exchange of interests in a D&B Business Entity for any interest in D&B held by
D&B stockholders, or any similar transaction or transactions, unless the
distributed D&B Business Entity undertakes to each of Cognizant and ACNielsen to
be jointly and severally liable for all D&B Liabilities hereunder.
(c) Cognizant will not distribute to its stockholders any interest
in any Cognizant Business Entity, by way of a spin-off distribution, split-off
or other exchange of interests in a Cognizant Business Entity for any interest
in Cognizant held by Cognizant stockholders, or any similar transaction or
transactions, unless the distributed Cognizant Business Entity undertakes to
each of D&B and ACNielsen to be jointly and severally liable for all Cognizant
Liabilities hereunder.
<PAGE>
53
(d) ACNielsen will not distribute to its stockholders any interest
in any ACNielsen Business Entity, by way of a spin-off distribution, split-off
or other exchange of interests in an ACNielsen Business Entity for any interest
in ACNielsen held by ACNielsen stockholders, or any similar transaction or
transactions, unless the distributed ACNielsen Business Entity undertakes to
each of D&B and Cognizant to be jointly and severally liable for all ACNielsen
Liabilities hereunder.
SECTION 8.10. Successors and Assigns. The provisions to this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and permitted assigns.
SECTION 8.11. Termination. This Agreement (including, without
limitation, Article III hereof) may be terminated and the Distribution may be
amended, modified or abandoned at any time prior to the Distribution by and in
the sole discretion of D&B without the approval of Cognizant or ACNielsen or the
shareholders of D&B. In the event of such termination, no party shall have any
liability of any kind to any other party or any other person. After the
Distribution, this Agreement may not be terminated except by an agreement in
writing signed by the parties; provided, however, that Article III shall not be
terminated or amended after the Distribution in respect of the third party
beneficiaries thereto without the consent of such persons.
SECTION 8.12. Subsidiaries. Each of the parties hereto shall cause
to be performed, and hereby guarantees the performance of, all actions,
agreements and obligations set forth herein to be performed by any Subsidiary of
such party or by any entity that is contemplated to be a Subsidiary of such
party on and after the Distribution Date.
SECTION 8.13. Third Party Beneficiaries. Except as provided in
Article III relating to Indemnitees, this Agreement is solely for the benefit of
the parties hereto and their respective Subsidiaries and Affiliates and should
not be deemed to confer upon third parties any remedy, claim, liability,
reimbursement, claim of action or other right in excess of those existing
without reference to this Agreement.
SECTION 8.14. Title and Headings. Titles and headings to sections
herein are inserted for the convenience of reference only and are not intended
to be a part of or to affect the meaning or interpretation of this Agreement.
SECTION 8.15. Exhibits and Schedules. The Exhibits and Schedules
shall be construed with and as an integral part of this Agreement to the same
extent as if the same had been set forth verbatim herein.
<PAGE>
54
SECTION 8.16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK.
SECTION 8.17. Consent to Jurisdiction. Without limiting the
provisions of Article VI hereof, each of the parties irrevocably submits to the
exclusive jurisdiction of (a) the Supreme Court of the State of New York, New
York County, and (b) the United States District Court for the Southern District
of New York, for the purposes of any suit, action or other proceeding arising
out of this Agreement or any transaction contemplated hereby. Each of the
parties agrees to commence any action, suit or proceeding relating hereto either
in the United States District Court for the Southern District of New York or if
such suit, action or other proceeding may not be brought in such court for
jurisdictional reasons, in the Supreme Court of the State of New York, New York
County. Each of the parties further agrees that service of any process, summons,
notice or document by U.S. registered mail to such party's respective address
set forth above shall be effective service of process for any action, suit or
proceeding in New York with respect to any matters to which it has submitted to
jurisdiction in this Section 8.17. Each of the parties irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby in (i) the Supreme Court of the State of New York, New York County, or
(ii) the United States District Court for the Southern District of New York, and
hereby further irrevocably and unconditionally waives and agrees not to plead or
claim in any such court that any such action, suit or proceeding brought in any
such court has been brought in an inconvenient forum.
SECTION 8.18. Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
<PAGE>
55
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the day and year first above written.
THE DUN & BRADSTREET CORPORATION
by
----------------------
Name:
Title:
COGNIZANT CORPORATION
by
----------------------
Name:
Title:
ACNIELSEN CORPORATION
by
----------------------
Name:
Title:
TAX ALLOCATION AGREEMENT
This TAX ALLOCATION AGREEMENT is dated as of October 28, 1996, among
THE DUN & BRADSTREET CORPORATION, a Delaware corporation ("D&B"), COGNIZANT
CORPORATION, a Delaware corporation ("Cognizant"), and ACNIELSEN CORPORATION, a
Delaware corporation ("ACNielsen") (collectively, the "Parties").
WHEREAS, as of the date hereof, D&B is the common parent of an
affiliated group of domestic corporations within the meaning of Section 1504(a)
of the Code, including members of the Cognizant Group (as defined below) and
members of the ACNielsen Group (as defined below), and the members of the
affiliated group have heretofore joined in filing consolidated federal income
tax returns;
WHEREAS, D&B proposes to distribute all of the outstanding stock of
Cognizant and ACNielsen to its stockholders (the "Distribution") and, as a
result of the Distribution, the Cognizant Group and the ACNielsen Group will not
be included in the consolidated Federal income tax return of D&B for the portion
of the year following the Distribution or in future years;
WHEREAS, D&B, Cognizant and ACNielsen have entered into an agreement
(the "Distribution Agreement") to, among other things, allocate certain assets
and to allocate and assign responsibility for certain liabilities of the present
D&B and its present and former subsidiaries; and
WHEREAS, D&B, Cognizant and ACNielsen desire to allocate the tax
burdens and benefits of transactions which occurred on or prior to the
Distribution Date and to provide for certain other tax matters, including the
assignment of responsibility for the preparation and filing of tax returns, the
payment of taxes, and the prosecution and defense of any tax controversies;
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained in this Agreement, the parties hereby agree
as follows:
ARTICLE I. DEFINITIONS
SECTION 1.1. General. As used in this Agreement, the following terms
shall have the following meanings:
(a) "ACNielsen" shall mean ACNielsen Corporation, a Delaware
corporation.
(b) "ACNielsen Business" shall mean the businesses of the members of
the ACNielsen Group, as conducted at any time
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2
prior to, on or after the Distribution Date. Notwithstanding the foregoing, the
ACNielsen Businesses shall not include (i) any activities or operations
primarily related to, arising out of or resulting from any business terminated
or divested prior to the Distribution Date; or (ii) any of the businesses listed
on Schedule 1.1(b).
(c) "ACNielsen Common Shares" shall mean all the outstanding shares
of common stock of ACNielsen, together with the appurtenant share purchase
rights.
(d) "ACNielsen Group" shall mean ACNielsen and each corporation,
partnership, limited liability company, or other entity contemplated to remain
or become a Subsidiary of ACNielsen pursuant to the Distribution Agreement.
(e) "Ancillary Agreements" shall mean all of the written agreements,
instruments, assignments or other arrangements (other than this Agreement)
entered into in connection with the transactions contemplated hereby, including,
without limitation, the Distribution Agreement, the Conveyancing and Assumption
Instruments, the Employee Benefits Services and Liability Agreement, the Shared
Transaction Services Agreement, the Transition Services Agreement, the Data
Processing Agreement and the Intellectual Property Agreements.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended,
and the Treasury regulations promulgated thereunder, including any successor
legislation.
(g) "Cognizant" shall mean Cognizant Corporation, a Delaware
corporation.
(h) "Cognizant Business" shall mean the businesses of the members of
the Cognizant Group, as conducted at any time prior to, on or after the
Distribution Date. Notwithstanding the foregoing, the Cognizant Businesses shall
not include (i) any activities or operations primarily related to, arising out
of or resulting from any business terminated or divested prior to the
Distribution Date; or (ii) any of the businesses listed on Schedule 1.1(h).
(i) "Cognizant Common Shares" shall mean all the outstanding shares
of common stock of Cognizant, together with the appurtenant share purchase
rights.
(j) "Cognizant Group" shall mean Cognizant and each corporation,
partnership, limited liability company, or other entity contemplated to remain
or become a Subsidiary of Cognizant pursuant to the Distribution Agreement.
(k) "Consolidated Return" shall mean the consolidated federal income
tax return of D&B for the period commencing on
<PAGE>
3
January 1, 1996, and including the members of the ACNielsen Group and the
members of the Cognizant Group through October 31, 1996.
(l) "Controlled Entity" shall mean any corporation, partnership or
other entity of which another entity (i) owns, directly or indirectly, ownership
interests sufficient to elect a majority of the Board of Directors (or persons
performing similar functions) (irrespective of whether at the time any other
class or classes of ownership interests of such corporation, partnership or
other entity shall or might have such voting power upon the occurrence of any
contingency) or (ii) is a general partner or an entity performing similar
functions (e.g., a trustee).
(m) "D&B" shall mean The Dun & Bradstreet Corporation, a Delaware
corporation.
(n) "D&B Business" shall mean each and every business conducted at
any time by D&B or any Subsidiary of D&B except a Cognizant Business or an
ACNielsen Business.
(o) "D&B Common Stock" shall mean the shares of common stock, par
value $1.00 per share, of D&B.
(p) "D&B Group" shall mean D&B and each person (other than a member
of the Cognizant Group or the ACNielsen Group) that is a Subsidiary of D&B.
(q) "Deferred Compensation Deduction" shall mean a deduction with
respect to deferred compensation payments and/or the exercise of stock options
in D&B by any former employee of the Old D&B Group if such deduction is
disallowed for a member of the D&B Group and may be claimed by any member of the
Cognizant Group or any member of the ACNielsen Group.
(r) "Distribution" shall mean the distribution on the Distribution
Date to holders of record of shares of D&B Common Stock as of the Distribution
Record Date of (i) the Cognizant Common Shares owned by D&B on the basis of one
Cognizant Common Share for each outstanding share of D&B Common Stock and (ii)
the ACNielsen Common Shares owned by D&B on the basis of one ACNielsen Common
Share for each three outstanding shares of D&B Common Stock.
(s) "Distribution Agreement" shall have the meaning as defined in
the recitals hereto.
(t) "Distribution Date" shall mean such date as may hereafter be
determined by D&B's Board of Directors as the date as of which the Distribution
shall be effected.
(u) "Distribution Record Date" shall mean such date as may hereafter
be determined by D&B's Board of Directors as the record date for the
Distribution.
<PAGE>
4
(v) "Final Determination" shall mean the final resolution of
liability for any Tax for any taxable period, including any related interest or
penalties, by or as a result of: (i) a final and unappealable decision,
judgment, decree or other order by any court of competent jurisdiction; (ii) a
closing agreement or accepted offer in compromise under Section 7121 or 7122 of
the Code, or comparable agreement under the laws of other jurisdictions which
resolves the entire Tax liability for any taxable period; (iii) any allowance of
a refund or credit in respect of an overpayment of Tax, but only after the
expiration of all periods during which such refund may be recovered by the
jurisdiction imposing the Tax; or (iv) any other final disposition, including by
reason of the expiration of the applicable statute of limitations.
(w) "Foreign Tax Agreement" shall have the meaning as defined in
Section 6.2.
(x) "Governmental Authority" shall mean any federal, state, local,
foreign or international court, government, department, commission, board,
bureau, agency, official or other regulatory, administrative or governmental
authority.
(y) "Included Party" shall have the meaning as defined in Section
2.1.
(z) "Income Taxes" shall mean any federal, state or local Taxes
determined by reference to income or imposed in lieu of income Taxes, such as
Taxes based on net worth or gross receipts.
(aa) "Indemnifying Party" shall have the meaning as defined in
Section 3.6.
(ab) "Indemnitee" shall have the meaning as defined in Section 3.6.
(ac) "IRS" shall mean the Internal Revenue Service.
(ad) "Nonperforming Party" shall have the meaning as defined in
Section 5.2.
(ae) "Old D&B Consolidated Group" shall mean D&B and all of the
direct and indirect Subsidiaries of D&B prior to the Distribution Date that
joined in or were eligible to join the Consolidated Return or any Prior Period
Consolidated Return.
(af) "Old D&B Group" shall mean D&B and all of its Subsidiaries
(direct and indirect, domestic and foreign) prior to the Distribution.
(ag) "Other Taxes" shall mean any federal, state or local Taxes
other than Income Taxes.
<PAGE>
5
(ah) "Parties" shall have the meaning as defined in the recitals
hereto.
(ai) "Person" shall mean any natural person, corporation, business
trust, joint venture, association, company, partnership or government, or any
agency or political subdivision thereof.
(aj) "Preparing Party" shall have the meaning as defined in Section
2.1.
(ak) "Prior Period Consolidated Return" shall mean any consolidated
Tax Return of D&B filed, or to be filed, for years prior to the Consolidated
Return year.
(al) "Reorganization Tax Payment" shall mean the payment of any Tax
for which Cognizant or D&B is liable pursuant to Section 3.3 of this Agreement
and the imposition and/or payment of which will permit another Party or any
Subsidiary to increase deductions, losses or Tax credits or decrease income,
gains or recapture of Tax credits for any taxable period or periods beginning
after or including but not ending on October 31, 1996.
(am) "Reorganizations" shall mean the series of contributions and
distributions of Controlled Entities and assets, transfers and assumptions of
liabilities, and other transactions whereby the D&B Group, the ACNielsen Group
and the Cognizant Group are formed and all other Controlled Entities of D&B
prior to the Distribution are placed under the control of the appropriate parent
corporation(s) in preparation for the Distribution.
(an) "Separate Business Foreign Taxes" shall have the meaning as
defined in Section 3.1(d).
(ao) "Separate Company Income Tax Item" shall mean any item or
position reported or reportable on a state or local Income Tax Return other than
those items determined by the D&B corporate office and allocated by the
corporate office to the operating division or entity to which such Income Tax
Return relates.
(ap) "Subpart F Income" shall have the meaning as defined in Section
3.5.
(aq) "Subsidiary" shall mean any entity of which another entity's
ownership satisfies the 80-percent voting and value test defined in Section
1504(a)(2) of the Code, whether directly or indirectly.
(ar) "Tax" or "Taxes" whether used in the form of a noun or
adjective, shall mean taxes on or measured by income, franchise, gross receipts,
sales, use, excise, payroll, personal
<PAGE>
6
property, real property, ad-valorem, value-added, leasing, leasing use or other
taxes, levies, imposts, duties, charges or withholdings of any nature. Whenever
the term "Tax" or "Taxes" is used (including, without limitation, regarding any
duty to reimburse another party for indemnified taxes or refunds or credits of
taxes) it shall include penalties, fines, additions to tax and interest thereon.
(as) "Tax Benefit" shall mean the sum of the amount by which the Tax
liability (after giving effect to any alternative minimum or similar Tax) of a
corporation or group of affiliated corporations to the appropriate taxing
authority is reduced (including, without limitation, by deduction, entitlement
to refund, credit or otherwise, whether available in the current taxable year,
as an adjustment to taxable income in any other taxable year or as a
carryforward or carryback, as applicable) plus any interest from such government
or jurisdiction relating to such Tax liability.
(at) "Tax Item" shall mean any item of income, capital gain, net
operating loss, capital loss, deduction, credit or other Tax attribute relevant
to the calculation of a Tax liability.
(au) "Tax Returns" shall mean all reports or returns (including
information returns) required to be filed or that may be filed for any period
with any taxing authority (whether domestic or foreign) in connection with any
Tax or Taxes (whether domestic or foreign).
(av) "Timing Adjustment" shall mean any adjustment which (x)
decreases deductions, losses or credits or increases income (including any
increases in income where no income was previously reported), gains or recapture
of Tax credits for the period in question, and for which D&B is liable pursuant
to this Agreement, and (y) will permit any member of the ACNielsen Group or any
member of the Cognizant Group to increase deductions, losses or Tax credits or
decrease income, gains or recapture of Tax credits for any taxable period or
periods beginning after or including but not ending on October 31, 1996.
SECTION 1.2. References; Interpretation. References in this
Agreement to any gender include references to all genders, and references to the
singular include references to the plural and vice versa. The words "include",
"includes" and "including" when used in this Agreement shall be deemed to be
followed by the phrase "without limitation". Unless the context otherwise
requires, references in this Agreement to Articles, Sections, Exhibits and
Schedules shall be deemed references to Articles and Sections of, and Exhibits
and Schedules to, such Agreement. Unless the context otherwise requires, the
words "hereof", "hereby" and "herein" and words of similar meaning when used in
this Agreement refer to this Agreement in its entirety
<PAGE>
7
and not to any particular Article, Section or provision of this Agreement.
ARTICLE II. PREPARATION AND FILING OF TAX RETURNS
SECTION 2.1. Manner of Preparation.
(a) All Tax Returns filed on or after the Distribution Date shall be
prepared on a basis that is consistent with the rulings obtained from the IRS or
any other Governmental Authority in connection with the Reorganizations or
Distribution (in the absence of a controlling change in law or circumstances)
and shall be filed on a timely basis (including pursuant to extensions) by the
party responsible for such filing under this Agreement. In the absence of a
controlling change in law or circumstances and unless deviation from past
practice would have no adverse effect on any of the Parties, all Tax Returns
filed after the date of this Agreement shall be prepared on a basis consistent
with the elections, accounting methods, conventions, assumptions and principles
of taxation used for the most recent taxable periods for which Tax Returns
involving similar Tax Items have been filed; provided, however, that a party
filing any Tax Return that does not conform to such past practices shall not be
liable for any additional Tax liability imposed, in whole or in part, as a
result of such deviation from past practice if: (i) for Tax Returns filed within
three years of the Distribution Date, 30 days prior to the filing of such Tax
Return, the party filing such Tax Return notifies all parties that may be
adversely affected; and (ii) the party filing such Tax Return establishes that
conformity with past practice involves a significant risk of the imposition of a
penalty. Subject to the provisions of this Agreement, all decisions relating to
the preparation of Tax Returns shall be made in the sole discretion of the party
responsible under this Agreement for its preparation; provided, however, that to
the extent a party (or any of its businesses) is included in a Tax Return
prepared by another party (the "Preparing Party"), the party not responsible for
preparing the Tax Return (the "Included Party") shall have the right to review
and comment on such Tax Return prior to the filing thereof in the following
manner:
(i) The Preparing Party shall submit any part of such Tax Return
relating to the Included Party to the Included Party at least 21 days prior to
the date on which such Tax Return is due (including extensions). The Included
Party shall submit its comments to the Preparing Party within 10 days of receipt
of the relevant portions of such Tax Return. The Preparing Party shall alter
such Tax Return to reflect the comments of the Included Party unless the
Preparing Party reasonably believes that such alteration would have an adverse
impact upon the Preparing Party.
(b) Unless otherwise required by the IRS, any Governmental Authority
or a court, the Parties hereby agree to file all Tax Returns, and to take all
other actions, in a manner
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8
consistent with the position that the last day on which any member of the
ACNielsen Group and any member of the Cognizant Group was included in the Old
D&B Group is October 31, 1996. For any period that includes but does not end on
October 31, 1996, to the extent permitted by law or administrative practice, the
taxable year of each member of the Old D&B Group and any group of such members
shall be treated as ending on October 31, 1996. If a taxable year of any member
of the Old D&B Group or any group or other combination of such members that
begins on or before and ends after October 31, 1996, is not treated under the
previous sentence as closing on October 31, 1996, it will be treated for
purposes of this Agreement as if the member or group had a taxable year that
ended on October 31, 1996, except that Tax Items that are calculated on an
annual basis shall be apportioned on a time basis.
SECTION 2.2. Predistribution Tax Returns.
(a) All consolidated federal Income Tax Returns of the Old D&B
Consolidated Group, as well as any separate, non-consolidated federal Income Tax
Returns of any member of the Old D&B Group, that are required to be filed for
periods beginning before the Distribution Date shall be prepared and filed by
D&B.
(b) All state and local Income Tax Returns of any member of the Old
D&B Consolidated Group that may be or are required to be filed for periods
beginning before the Distribution Date shall be prepared and filed by D&B.
(c) All Tax Returns for Other Taxes of any member of the Old D&B
Consolidated Group that may be or are required to be filed for any period
beginning before the Distribution Date shall be prepared and filed by ACNielsen
if they relate to an ACNielsen Business, by Cognizant if they relate to a
Cognizant Business, and by D&B if they relate to a D&B Business. If any such Tax
Return relates to businesses of more than one of the Parties, then the entity
that filed the corresponding Tax Return for the most recent period for which
such a Tax Return has been filed, or, if no such corresponding Tax Return has
been filed, the appropriate entity in accordance with local law or custom, shall
prepare and file such Tax Return.
(d) All foreign Tax Returns that are required to be filed by or
relating to any member of the Old D&B Group for periods beginning before the
Distribution Date shall be prepared and filed by the entity that filed the
corresponding Tax Return for the most recent period for which such a Tax Return
has been filed, or, if no such corresponding Tax Return has been filed, by the
appropriate entity in accordance with local law or custom.
<PAGE>
9
SECTION 2.3. Post-Distribution Tax Returns.
(a) The filing of all Tax Returns for periods beginning on or after
the Distribution Date shall be the responsibility of D&B if they relate to the
D&B Group or any member thereof, shall be the responsibility of ACNielsen if
they relate to the ACNielsen Group or any member thereof, and shall be the
responsibility of Cognizant if they relate to the Cognizant Group or any member
thereof.
(b) In the case of any partnership in which a member of the Old D&B
Consolidated Group is the designated tax matters partner, such entity shall
continue to be responsible for the preparation and filing of such partnership's
Tax Returns.
ARTICLE III. PAYMENT OF TAXES
SECTION 3.1. Predistribution Taxes.
(a) D&B shall be liable for and shall pay all Taxes due (or receive
all refunds) in connection with the filing of the Old D&B Consolidated Group's
consolidated federal Income Tax Return, as well as any separate,
non-consolidated federal Income Taxes of any member of the Old D&B Group, for
all taxable periods beginning before the Distribution Date.
(b) Except to the extent provided below, D&B shall be liable for and
shall pay to the relevant taxing authority all state and local Income Taxes (or
receive all refunds) for any taxable periods for which D&B has filing
responsibility under Section 2.2(b) of this Agreement, including any audit
adjustments to such Taxes. To the extent that any Tax Return for such state and
local Income Taxes includes Income Taxes relating to a business of Cognizant or
ACNielsen, the Included Party shall prepare and deliver to D&B, at least 90 days
prior to the due date (including extensions) of such Tax Return, a true and
correct accounting of all relevant Tax Items relating to the Included Party's
business.
(i) Straddle Periods.
(A) In the case of any such taxable period that does not end on or
before October 31, 1996, ACNielsen shall also provide D&B, at least 90 days
prior to the due date (including extensions) of the relevant Tax Return, with a
true and correct accounting of all relevant Tax Items and corresponding Taxes of
each member of the ACNielsen Group as if the taxable period for such entity
began immediately after October 31, 1996 (using the principles provided in
Section 2.1(b) of this Agreement), and ACNielsen shall be liable for and shall
pay to D&B any such Taxes attributable to such period, including any audit
adjustments to such Taxes.
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10
(B) In the case of any such taxable period that does not end on or
before October 31, 1996, Cognizant shall also provide D&B, at least 90 days
prior to the due date (including extensions) of the relevant Tax Return, with a
true and correct accounting of all relevant Tax Items and corresponding Taxes of
each member of the Cognizant Group as if the taxable period for such entity
began immediately after October 31, 1996 (using the principles provided in
Section 2.1(b) of this Agreement), and Cognizant shall be liable for and shall
pay to D&B any such Taxes attributable to such period, including any audit
adjustments to such Taxes.
(ii) Adjustments to Separate Company Income Tax Items.
(A) If an audit adjustment to any separate, non-consolidated state
or local Income Tax Return of a member of the ACNielsen Group for any period
beginning prior to the Distribution Date is made by the state or local
governmental authority and relates to a Separate Company Income Tax Item, then
ACNielsen shall be liable for such audit adjustment.
(B) If an audit adjustment to any separate, non-consolidated state
or local Income Tax Return of a member of the Cognizant Group for any period
beginning prior to the Distribution Date is made by the state or local
governmental authority and relates to a Separate Company Income Tax Item, then
Cognizant shall be liable for such audit adjustment.
(c) The entity responsible for the filing of any Tax Return for
Other Taxes pursuant to Section 2.2(c) shall pay to the relevant taxing
authority all Other Taxes due or payable (or receive all refunds) in connection
therewith; provided, however, that each of the Parties shall be liable for all
Other Taxes (or be entitled to receive all refunds) for all periods beginning
prior to the Distribution Date, including audit adjustments thereto, relating to
such Party's businesses. To the extent any Tax Return for such Other Taxes
includes Other Taxes relating to a business other than the Preparing Party's
businesses, the Included Party shall prepare and deliver to the Preparing Party,
at least 90 days prior to the due date (including extensions) of such Tax
Return, a true and correct accounting of all relevant Tax Items and
corresponding Taxes relating to the Included Party's business and shall pay the
Preparing Party the amount of any such Other Taxes attributable to the Included
Party's business at that time.
(d) Except as provided in Schedule 3.1(d), the entity responsible
for the filing of any foreign Tax Return pursuant to Section 2.2(d) shall pay to
the relevant taxing authority all Taxes due or payable (or receive all refunds)
in connection therewith; provided, however, that each of the Parties shall be
liable for all foreign Taxes (or be entitled to receive all refunds) for all
taxable periods beginning prior to the Distribution Date, including audit
adjustments thereto, relating
<PAGE>
11
to such Party's businesses. To the extent any foreign Tax Return includes Taxes
relating to a business other than the Preparing Party's business, the Included
Party shall prepare and deliver to the Preparing Party, at least 90 days prior
to the due date (including extensions) of such foreign Tax Return, a true and
correct accounting of all relevant Tax Items and corresponding Taxes relating to
the Included Party's business for the taxable period ("Separate Business Foreign
Taxes") and shall pay the Preparing Party the amount of any such Separate
Business Foreign Taxes at that time.
(i) Separate Business Foreign Taxes shall be calculated as if the
Included Party's business were a separate taxpayer for the relevant taxable
period. All such calculations shall be based upon the business's actual Tax
attributes for the relevant taxable period, including the use of the business's
Tax attributes (such as losses or credits) from prior periods that are not
otherwise utilized and that are carried over to the relevant taxable period
under local law.
(ii) Tax items that relate to or arise out of the Tax planning of
the group of entities or businesses included in the relevant foreign Tax Return
as a whole rather than any separate entity or business shall not be included in
the calculation of Separate Business Foreign Taxes.
(iii) If the total liability for Taxes reported as due and payable
on the relevant foreign Tax Return exceeds or is less than the total of the
Separate Business Foreign Taxes for all businesses included in such foreign Tax
Return, then the cost or benefit of any net difference shall be allocated to
each business in proportion to the amount of taxable income generated by such
business.
(iv) Notwithstanding any statement to the contrary in this Section
3.1(d), the Separate Business Foreign Taxes of any entity shall not exceed the
total liability for Taxes reported as due and payable on the relevant foreign
Tax Return.
(v) In the event of any Final Determination upholding an audit
adjustment to the amount of foreign Taxes reported as due and payable on the
relevant foreign Tax Return, Separate Business Foreign Taxes shall be
recalculated to incorporate any such adjustment.
SECTION 3.2. Post-Distribution Taxes. Unless otherwise provided in
this Agreement:
(a) D&B shall pay all Taxes and shall be entitled to receive and
retain all refunds of Taxes with respect to periods beginning on or after the
Distribution Date that are attributable to the D&B Group or any member thereof;
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12
(b) Cognizant shall pay all Taxes and shall be entitled to receive
and retain all refunds of Taxes with respect to periods beginning on or after
the Distribution Date that are attributable to the Cognizant Group or any member
thereof;
(c) ACNielsen shall pay all Taxes and shall be entitled to receive
and retain all refunds of Taxes with respect to periods beginning on or after
the Distribution Date that are attributable to the ACNielsen Group or any member
thereof.
SECTION 3.3. Restructuring Taxes. Notwithstanding any statement to
the contrary in this Agreement and except as otherwise provided in the
Distribution Agreement, to the extent that any Taxes are found to arise out of
the Reorganizations, then any such Tax liability incurred by the Parties (or any
of their Subsidiaries) shall be the responsibility of D&B; provided, however,
that to the extent specific cash allocations for such Taxes are made in
connection with the Distribution, D&B shall be relieved of its liability for
such Taxes.
SECTION 3.4. Gain Recognition Agreements.
(a) In the event that the Cognizant Group transfers, liquidates or
otherwise disposes of the stock or assets of any entity listed on Schedule
3.4(a) and such transfer, liquidation or disposition results in the D&B Group
recognizing gain pursuant to a gain recognition agreement under Section 367(a)
of the Code, then Cognizant shall be liable for any resulting Taxes, including
interest, that any member of the D&B Group is required to pay.
(b) In the event that the ACNielsen Group transfers, liquidates or
otherwise disposes of the stock or assets of any entity listed on Schedule
3.4(b) and such transfer, liquidation or disposition results in the D&B Group
recognizing gain pursuant to a gain recognition agreement under Section 367(a)
of the Code, then ACNielsen shall be liable for any resulting Taxes, including
interest, that any member of the D&B Group is required to pay.
SECTION 3.5. Subpart F Inclusions.
(a) If income earned by any foreign member of the Cognizant Group is
required to be included in the United States federal income tax return of any
member of the Cognizant Group pursuant to Subpart F of the Code ("Subpart F
Income"), then D&B shall be liable for the Taxes attributable to the portion of
such income generated while such foreign member of the Cognizant Group was a
member of the Old D&B Group. The portion of such income which shall be
considered attributable to the period in which such foreign member was a member
of the Old D&B Group shall be computed as if the foreign member's taxable year
ended on October 31, 1996.
(b) If income earned by any foreign member of the ACNielsen Group
constitutes Subpart F Income of any member of the
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13
ACNielsen Group, then D&B shall be liable for the Taxes attributable to the
portion of such income generated while such foreign member of the ACNielsen
Group was a member of the Old D&B Group. The portion of such income which shall
be considered attributable to the period in which such foreign member was a
member of the Old D&B Group shall be computed as if the foreign member's taxable
year ended on October 31, 1996.
(c) The amount payable by D&B pursuant to this Section 3.5 shall not
exceed the actual Taxes payable with respect to such Subpart F Income minus any
foreign Tax credits attributable to such Subpart F Income.
SECTION 3.6. Indemnification.
(a) Indemnification by D&B. D&B shall indemnify, defend and hold
harmless Cognizant and ACNielsen (and their respective affiliates) from and
against any and all Tax liabilities allocated to D&B by this Agreement.
(b) Indemnification by Cognizant. Cognizant shall indemnify, defend
and hold harmless D&B and ACNielsen (and their respective affiliates) from and
against any and all Tax liabilities allocated to Cognizant by this Agreement.
(c) Indemnification by ACNielsen. ACNielsen shall indemnify, defend
and hold harmless D&B and Cognizant (and their respective affiliates) from and
against any and all Tax liabilities allocated to ACNielsen by this Agreement.
(d) Indemnity Payments.
(i) To the extent that one party (the "Indemnifying Party") owes
money to another party (the "Indemnitee") pursuant to this Section 3.6, the
Indemnitee shall, within 14 days after receiving the Indemnifying Party's
calculations (as specified in Sections 3.1(b), 3.1(c) and 3.1(d)), submit to the
Indemnifying Party the Indemnitee's calculations of the amount required to be
paid pursuant to this Section 3.6, showing such calculations in sufficient
detail so as to permit the Indemnifying Party to understand the calculations.
The Indemnifying Party shall pay the Indemnitee, no later than 30 days prior to
the due date (including extensions) of the relevant Tax Returns or 14 days after
the Indemnifying Party receives the Indemnitee's calculations, the amount for
which the Indemnifying Party is required to pay or indemnify the Indemnitee
under this Section 3.6. The Indemnifying Party shall have the right to disagree
with the Indemnitee's calculations. Any dispute regarding such calculations
shall be resolved in accordance with Section 5.4 of this Agreement.
(ii) All indemnity payments shall be calculated on a pre-Tax basis
and shall be treated as contributions to capital and/or dividends immediately
prior to the Distribution.
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14
ARTICLE IV. TAX ATTRIBUTES, TIMING ADJUSTMENTS AND REORGANIZATION TAX PAYMENTS
SECTION 4.1. Carrybacks. In the event of the realization of any
deduction, loss or credit by a party for any taxable period beginning on or
after the Distribution Date, the party realizing such deduction, loss or credit
may, in its sole discretion, and to the extent permitted under applicable Tax
law, elect not to carry back such deduction, loss or credit. To the extent any
amount is carried back and used by D&B for a taxable period beginning prior to
the Distribution Date, D&B shall not be obligated to make any payment regarding
such carryback.
SECTION 4.2. Deductions or Credits. Except as provided in Section
4.3, none of the Parties shall be obligated to make a payment to another party
as a result of utilizing a net operating loss, credit or similar Tax attribute
arising in a period beginning prior to the Distribution Date.
SECTION 4.3. Timing Adjustments, Reorganization Tax Payments, and
Deferred Compensation Deductions.
(a) If an audit or other examination of any federal, state or local
Tax Return (x) for any period beginning prior to the Distribution Date shall
result (by settlement or otherwise) in a Timing Adjustment in favor of the
ACNielsen Group or any member thereof or the Cognizant Group or any member
thereof, or (y) for any taxable period shall result (by settlement or otherwise)
in a Deferred Compensation Deduction in favor of the ACNielsen Group or any
member thereof or the Cognizant Group or any member thereof, or if any
Reorganization Tax Payment in favor of the ACNielsen Group or any member thereof
or the Cognizant Group or any member thereof is made by D&B, then:
(i) D&B shall notify ACNielsen or Cognizant, as the case may be, and
shall provide ACNielsen or Cognizant with adequate information so that it can
reflect on the appropriate Tax Returns any resulting increases in deductions,
losses or Tax credits or decreases in income, gains or recapture of Tax credits;
(ii) ACNielsen or Cognizant, as the case may be, shall pay D&B the
amount of any Tax Benefit that results from such Timing Adjustment,
Reorganization Tax Payment, or Deferred Compensation Deduction within 30 days of
the date such Tax Benefits are realized;
(iii) Notwithstanding the foregoing, ACNielsen or Cognizant, as the
case may be, shall only be required to take steps to obtain such Tax Benefit or
to pay D&B if, in the opinion of ACNielsen's or Cognizant's tax counsel, which
counsel shall be reasonably acceptable to D&B, the reporting of such Tax Benefit
shall not subject ACNielsen or Cognizant to the imposition of a penalty.
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15
(b) If any Reorganization Tax Payment in favor of the ACNielsen
Group or any member thereof or the D&B Group or any member thereof is made by
Cognizant, then:
(i) Cognizant shall notify ACNielsen or D&B, as the case may be, and
shall provide ACNielsen or D&B with adequate information so that it can reflect
on the appropriate Tax Returns any resulting increases in deductions, losses or
Tax credits or decreases in income, gains or recapture of Tax credits;
(ii) ACNielsen or D&B, as the case may be, shall pay Cognizant the
amount of any Tax Benefit that results from such Reorganization Tax Payment
within 30 days of the date such Tax Benefits are realized.
(iii) Notwithstanding the foregoing, ACNielsen or D&B, as the case
may be, shall only be required to take steps to obtain such Tax Benefit or to
pay Cognizant if, in the opinion of ACNielsen's or D&B's tax counsel, which
counsel shall be reasonably acceptable to Cognizant, the reporting of such Tax
Benefit shall not subject ACNielsen or D&B to the imposition of a penalty.
(c) Realization of Tax Benefits.
(i) For purposes of this Section 4.3, a Tax Benefit shall be deemed
to have been realized at the time any refund of Taxes is received or applied
against other Taxes due, or at the time of filing of a Tax Return (including any
Tax Return relating to estimated Taxes) on which a loss, deduction or credit is
applied in reduction of Taxes which would otherwise be payable; provided,
however, that where a party has other losses, deductions, credits or similar
items available to it, such deductions, credits or similar items of such party
may be applied prior to the use of any Timing Adjustment, Reorganization Tax
Payment, or Deferred Compensation Deduction.
(ii) The party in receipt of a Tax Benefit may, at its election, pay
the amount of any Tax Benefit to D&B or Cognizant, as the case may be, rather
than filing amended returns or otherwise reflecting adjustments or taking
positions on its Tax Returns. If such an election is made, the party will be
treated as having realized a Tax Benefit at the time it would have realized a
Tax Benefit had it chosen to file amended returns or otherwise to reflect
adjustments or to take positions on its Tax Returns.
(d) Tax Benefits Subsequently Denied. If any Tax Benefit realized
pursuant to Section 4.3(c)(i) is subsequently denied, then D&B or Cognizant, as
the case may be, shall refund the amount of any payment for such Tax Benefit
within 30 days of its notification by D&B, ACNielsen or Cognizant, as the case
may be, that a Final Determination has been reached denying the claimed Tax
Benefit.
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16
SECTION 4.4. Competent Authority Relief. If as a result of any audit
of a taxable period beginning prior to the Distribution Date, a Party (or
Subsidiary) is required to adjust its income, deductions, credits or allowances
under Section 482 of the Code or under similar principles in a foreign
jurisdiction, and the payment of additional Taxes in accordance with such a
determination allows another Party (or Subsidiary) to obtain competent authority
relief as a result thereof, then the Party eligible to obtain such relief shall:
(a) execute or cause to be executed any powers of attorney or other documents
necessary to enable the other Party to pursue such relief at its own expense;
and (b) cooperate with the other Party and the competent authorities in seeking
such relief. If a mutual agreement is reached among the competent authorities,
then the Party (or Subsidiary) realizing a Tax Benefit as a result thereof shall
pay the amount of such Tax Benefit to the Party (or Subsidiary) for which the
Tax liability is correspondingly increased within 30 days of the date such Tax
Benefit is realized (within the meaning of Section 4.3(c) of this Agreement). If
any Tax Benefit so realized is subsequently denied, then the Party in receipt of
payment therefor shall refund the amount of any such payment within 30 days of
its notification by the payor that a Final Determination has been reached
denying the claimed Tax Benefit.
ARTICLE V. TAX AUDITS, TRANSACTIONS AND OTHER MATTERS
SECTION 5.1. Tax Audits and Controversies. In the case of any audit,
examination or other proceeding ("Proceeding") brought against any Party (or
Subsidiary) with respect to Taxes for which another Party is or may be liable
pursuant to this Agreement, the Party subject to such Proceeding shall promptly
inform the other Party and shall execute or cause to be executed any powers of
attorney or other documents necessary to enable the other Party to take all
actions desired with respect to such Proceeding to the extent such Proceeding
may affect the amount of Taxes for which the other Party is liable pursuant to
this Agreement. Each Party shall have the right to control, at its own expense,
the portion of any such Proceeding that relates to Taxes for which such Party is
or may be liable pursuant to this Agreement; provided, however, that such Party
shall consult with the other Parties with respect to any issue that may affect
another Party (or Subsidiary). The Party in control of such Proceeding or any
part thereof shall not enter into any final settlement or closing agreement that
may adversely affect another Party (or Subsidiary) without the consent of such
other Party, which consent may not unreasonably be withheld. Where consent to
any final settlement or closing agreement is withheld, the Party withholding
consent shall continue or initiate further proceedings, at its own expense, and
the liability of the Party in control of such Proceeding shall not exceed the
liability that would have resulted from the proposed closing agreement or final
settlement (including interest, additions to Tax and penalties which have
accrued at that time).
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SECTION 5.2. Cooperation. D&B, ACNielsen and Cognizant shall
cooperate with each other in the filing of any Tax Returns and the conduct of
any audit or other proceeding and each shall execute and deliver such powers of
attorney and other documents and make available such information and documents
as are necessary to carry out the intent of this Agreement. To the extent such
cooperation involves the services of officers, directors, employees, or agents
of a Party, such services shall be made available in accordance with Section 2.9
of the Distribution Agreement. Each party agrees to notify the other parties of
any audit adjustment that does not result in Tax liability but can reasonably be
expected to affect Tax Returns of the other parties or any of their
Subsidiaries. Notwithstanding any other provision of this Agreement, if a party
(the "Nonperforming Party") fails to give its full cooperation and use its best
efforts in the conduct of an audit or other proceeding as provided by this
Section 5.2, and such failure results in the imposition of additional Taxes for
the period or periods involved in the audit or other proceeding, the
Nonperforming Party shall be liable in full for such additional Taxes.
SECTION 5.3. Retention of Records; Access. Beginning on the
Distribution Date, D&B, ACNielsen and Cognizant shall, and shall cause each of
their Controlled Entities to:
(a) retain adequate records, documents, accounting data and other
information (including computer data) necessary for the preparation and filing
of all Tax Returns required to be filed by any member of the Old D&B Group or
any combination of such members and for any audits and litigation relating to
such Tax Returns or to any Taxes payable by any member of the Old D&B Group or
any combination of such members; and
(b) give to the other parties reasonable access to such records,
documents, accounting data and other information (including computer data) and
to its personnel and premises, for the purpose of the review or audit of such
reports or returns to the extent relevant to an obligation or liability of a
party under this Agreement and in accordance with the procedures provided in
Article IV of the Distribution Agreement. The obligations set forth in these
paragraphs 5.3(a) and 5.3(b) shall continue until the final conclusion of any
litigation to which the records and information relate or until expiration of
all applicable statutes of limitations, whichever is longer.
SECTION 5.4. Dispute Resolution. Any dispute or claim arising out
of, in connection with, or in relation to the interpretation, performance,
nonperformance, validity or breach of this Agreement or otherwise arising out
of, or in any way related to this Agreement, shall be resolved in the manner set
forth in Article VI of the Distribution Agreement.
SECTION 5.5. Confidentiality; Ownership of Information; Privileged
Information. The provisions of Article
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IV of the Distribution Agreement relating to confidentiality of information,
ownership of information, privileged information and related matters shall apply
with equal force to any records and information prepared and/or shared by and
among the Parties in carrying out the intent of this Agreement.
ARTICLE VI. MISCELLANEOUS
SECTION 6.1. Complete Agreement; Construction. This Agreement,
including the Exhibits and Schedules, and the Ancillary Agreements shall
constitute the entire agreement between the parties with respect to the subject
matter hereof and shall supersede all previous negotiations, commitments and
writings with respect to such subject matter. In the event of any inconsistency
between this Agreement and any Schedule hereto, the Schedule shall prevail.
SECTION 6.2. Master Tax Allocation Agreement. This Agreement,
including the Exhibits and Schedules, shall take precedence over any and all
agreements with respect to foreign Taxes among members of the D&B Group, the
ACNielsen Group, and the Cognizant Group (a "Foreign Tax Agreement"). In the
event that any payment is made or other action taken by a member of the D&B
Group, the ACNielsen Group, or the Cognizant Group pursuant to any Foreign Tax
Agreement and contrary to the terms of this Agreement, then an offsetting
indemnity payment shall be made by the appropriate Party to the injured Party to
conform with the provisions of this Agreement.
SECTION 6.3. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been signed
by each of the parties and delivered to the other parties.
SECTION 6.4. Survival of Agreements. Except as otherwise
contemplated by this Agreement, all covenants and agreements of the parties
contained in this Agreement shall survive the Distribution Date.
SECTION 6.5. Expenses. Except as otherwise set forth in this
Agreement, all costs and expenses incurred on or prior to the Distribution Date
(whether or not paid on or prior to the Distribution Date) in connection with
the preparation, execution, delivery and implementation of this Agreement shall
be charged to and paid by D&B. Except as otherwise set forth in this Agreement,
each party shall bear its own costs and expenses incurred after the Distribution
Date.
SECTION 6.6. Notices. All notices and other communications hereunder
shall be in writing and hand delivered or mailed by registered or certified mail
(return receipt requested) or sent by any means of electronic message
transmission with delivery confirmed (by voice or otherwise) to
<PAGE>
19
the parties at the following addresses (or at such other addresses for a party
as shall be specified by like notice) and will be deemed given on the date on
which such notice is received:
To The Dun & Bradstreet Corporation:
One Diamond Hill Road
Murray Hill, NJ 07974
Telecopy: (908) 665-5803
Attn: General Counsel
To Cognizant Corporation:
200 Nyala Farms
Westport, CT 06880
Telecopy: (203) 222-4201
Attn: General Counsel
To ACNielsen Corporation:
177 Broad Street
Stamford, CT 06901
Telecopy: (203) 961-3179
Attn: General Counsel
SECTION 6.7. Waivers. The failure of any party to require strict
performance by any other party of any provision in this Agreement will not waive
or diminish that party's right to demand strict performance thereafter of that
or any other provision hereof.
SECTION 6.8. Amendments. This Agreement may not be modified or
amended except by an agreement in writing signed by each of the parties hereto.
SECTION 6.9. Assignment. This Agreement shall not be assignable, in
whole or in part, directly or indirectly, by any party hereto without the prior
written consent of the other parties hereto, and any attempt to assign any
rights or obligations arising under this Agreement without such consent shall be
void.
SECTION 6.10. Successors and Assigns. The provisions to this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and permitted assigns.
SECTION 6.11. Termination. This Agreement may be
terminated, amended, modified or abandoned at any time prior to
the Distribution by and in the sole discretion of D&B without the
<PAGE>
20
approval of Cognizant or ACNielsen or the stockholders of D&B. In the event of
such termination, no party shall have any liability of any kind to any other
party or any other person. After the Distribution, this Agreement may not be
terminated except by an agreement in writing signed by the parties.
SECTION 6.12. Controlled Entities. Each of the parties hereto shall
cause to be performed, and hereby guarantees the performance of, all actions,
agreements and obligations set forth herein to be performed by any Controlled
Entity of such party or by any entity that is contemplated to be a Controlled
Entity of such party on and after the Distribution Date.
SECTION 6.13. Third Party Beneficiaries. This Agreement is solely
for the benefit of the parties hereto and their respective Subsidiaries and
should not be deemed to confer upon third parties any remedy, claim, liability,
reimbursement, claim of action or other right in excess of those existing
without reference to this Agreement.
SECTION 6.14. Title and Headings. Titles and headings to sections
herein are inserted for the convenience of reference only and are not intended
to be a part of or to affect the meaning or interpretation of this Agreement.
SECTION 6.15. Exhibits and Schedules. The Exhibits and Schedules
shall be construed with and as an integral part of this Agreement to the same
extent as if the same had been set forth verbatim herein.
SECTION 6.16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK.
SECTION 6.17. Consent to Jurisdiction. Without limiting the
provisions of Section 5.4 hereof, each of the parties irrevocably submits to the
exclusive jurisdiction of (a) the Supreme Court of the State of New York, New
York County, and (b) the United States District Court for the Southern District
of New York, for the purposes of any suit, action or other proceeding arising
out of this Agreement or any transaction contemplated hereby. Each of the
parties agrees to commence any action, suit or proceeding relating hereto either
in the United States District Court for the Southern District of New York or if
such suit, action or other proceeding may not be brought in such court for
jurisdictional reasons, in the Supreme Court of the State of New York, New York
County. Each of the parties further agrees that service of any process, summons,
notice or document by U.S. registered mail to such party's respective address
set forth above shall be effective service of process for any action, suit or
proceeding in New York with respect to any matters to which it has submitted to
jurisdiction in this Section 6.17. Each of the parties irrevocably and
unconditionally waives any
<PAGE>
21
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement or the transactions contemplated hereby in (i) the Supreme
Court of the State of New York, New York County, or (ii) the United States
District Court for the Southern District of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.
SECTION 6.18. Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the day and year first above written.
THE DUN & BRADSTREET CORPORATION
by
----------------------
Name:
Title:
COGNIZANT CORPORATION
by
----------------------
Name:
Title:
ACNIELSEN CORPORATION
by
----------------------
Name:
Title:
EMPLOYEE BENEFITS AGREEMENT
This EMPLOYEE BENEFITS AGREEMENT is dated as of October 28,
1996 (the "Agreement"), among THE DUN & BRADSTREET CORPORATION, a Delaware
corporation ("D&B"), COGNIZANT CORPORATION, a Delaware corporation,
("Cognizant"), and ACNIELSEN CORPORATION, a Delaware corporation ("ACNielsen").
WHEREAS, the Board of Directors of D&B has determined that it
is appropriate, desirable and in the best interests of the holders of shares of
common stock, par value $1.00 per share, of D&B (the "D&B Common Stock") to take
certain steps to reorganize D&B's Subsidiaries (as defined herein) and
businesses and then to distribute to the holders of the D&B Common Stock all the
outstanding shares of common stock of Cognizant, together with the appurtenant
share purchase rights (the "Cognizant Common Shares"), and all the outstanding
shares of common stock of ACNielsen, together with the appurtenant share
purchase rights (the "ACNielsen Common Shares"); and
WHEREAS, each of D&B, Cognizant and ACNielsen has determined
that it is necessary and desirable to allocate and assign responsibility for
certain employee benefit matters in respect of such entities on and after the
Effective Time (as defined herein).
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, D&B, Cognizant and ACNielsen agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. Capitalized terms used in
this Agreement shall have the following meanings:
"ACNielsen" shall mean ACNielsen Corporation, a
Delaware corporation.
"ACNielsen Bifurcated Savings Plan Employees" shall have the
meaning set forth in Section 3.3(a) of this Agreement.
"ACNielsen Common Shares" shall have the meaning set forth in
the recitals hereto.
"ACNielsen Employees" shall mean persons who, immediately
after the Effective Time, are employed by the ACNielsen Group (including persons
who are absent from work by reason of layoff or leave of absence and inactive
employees treated as such by agreement therewith).
<PAGE>
2
"ACNielsen Group" shall mean ACNielsen and each Business
Entity which is contemplated to remain or become a Subsidiary of ACNielsen
pursuant to the Distribution Agreement.
"ACNielsen Lump-Sum Savings Plan Employees" shall have the
meaning set forth in Section 3.3(a) of this Agreement.
"ACNielsen Replacement Plan" shall mean the replacement plan
to be adopted by ACNielsen pursuant to Section 6.1(c) of this Agreement.
"ACNielsen Retirement Eligible Employees" shall have the
meaning set forth in Section 5.6 of this Agreement.
"ACNielsen Retirement Plan" shall mean the defined benefit
plan to be adopted by ACNielsen pursuant to Section 2.3(a) of this Agreement.
"ACNielsen Retirement Plan Effective Date" shall have the
meaning set forth in Section 2.3(a) of this Agreement.
"ACNielsen Retirement Plan Segregation Ratio" shall equal a
fraction, the numerator of which is the Present Value of the accrued vested and
nonvested benefits (as defined in ERISA Section 4044(a)(1)-(6)) of the ACNielsen
Transferred Retirement Plan Employees under the D&B Retirement Plan at the
Effective Time, and the denominator of which is the Present Value of the accrued
vested and nonvested benefits (as defined in ERISA Section 4044(a)(1)-(6)) of
the D&B Pre-Distribution Employees under the D&B Retirement Plan at the
Effective Time.
"ACNielsen Retirement Plan Transfer Date" shall have the
meaning set forth in Section 2.3(b) of this Agreement.
"ACNielsen Savings Plan" shall mean the defined contribution
plan to be adopted by ACNielsen pursuant to Section 3.3(a) of this Agreement.
"ACNielsen Savings Plan Transfer Date" shall have the meaning
set forth in Section 3.3(b) of this Agreement.
"ACNielsen Transferred Retirement Plan Employees" shall have
the meaning set forth in Section 2.3(a) of this Agreement.
"ACNielsen Transferred Savings Plan Employees" shall have the
meaning set forth in Section 3.3(a) of this Agreement.
"Action" shall mean any action, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any governmental or other
regulatory or administrative agency, body or commission or any arbitration
tribunal.
"Affiliate" shall mean, when used with respect to a specified
person, another person that controls, is controlled by,
<PAGE>
3
or is under common control with the person specified. As used herein, "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such person, whether through the
ownership of voting securities or other interests, by contract or otherwise.
"Ancillary Agreements" shall mean all of the written
agreements, instruments, assignments or other written arrangements (other than
this Agreement and the Distribution Agreement) entered into in connection with
the transactions contemplated by this Agreement and the Distribution Agreement,
including, without limitation, the Conveyancing and Assumption Instruments, the
Data Services Agreements, the Intellectual Property Agreement, the Shared
Transaction Services Agreements, the Tax Allocation Agreement and the Transition
Services Agreement.
"Assets" shall have the meaning set forth in Section 1.1(q) of
the Distribution Agreement.
"Board of Directors" shall mean, when used with respect to a
specified corporation, the board of directors of the corporation so specified.
"Business Entity" shall mean any corporation, partnership,
limited liability company or other entity which may legally hold title to
Assets.
"COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, and the regulations promulgated
thereunder, including any successor legislation.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder, including any successor
legislation.
"Cognizant" shall mean Cognizant Corporation, a Delaware
corporation.
"Cognizant and ACNielsen Nonqualified Plan Participants" shall
have the meaning as set forth in Section 4.2 of this Agreement.
"Cognizant Bifurcated Savings Plan Employees" shall have the
meaning set forth in Section 3.2(a) of this Agreement.
"Cognizant Common Shares" shall have the meaning set
forth in the recitals hereto.
"Cognizant Employees" shall mean persons who, immediately
after the Effective Time, are employed by the Cognizant Group (including persons
who are absent from work by reason of layoff or leave of absence and inactive
employees treated as such by agreement therewith).
<PAGE>
4
"Cognizant Group" shall mean Cognizant and each Business
Entity which is contemplated to remain or become a Subsidiary of Cognizant
pursuant to the Distribution Agreement.
"Cognizant Lump-Sum Savings Plan Employees" shall have the
meaning set forth in Section 3.2(a) of this Agreement.
"Cognizant Replacement Plans" shall mean the replacement plans
(including, without limitation, the replacement plan for certain IMS employees)
to be adopted by Cognizant pursuant to Section 6.1(b) of this Agreement.
"Cognizant Retirement Eligible Employees" shall have the
meaning set forth in Section 5.6 of this Agreement.
"Cognizant Retirement Plan" shall mean the defined benefit
plan to be adopted by Cognizant pursuant to Section 2.2(a) of this Agreement.
"Cognizant Retirement Plan Effective Date" shall have the
meaning set forth in Section 2.2(a) of this Agreement.
"Cognizant Retirement Plan Segregation Ratio" shall equal a
fraction, the numerator of which is the Present Value of the accrued vested and
nonvested benefits (as defined in ERISA Section 4044(a)(1)-(6)) of the Cognizant
Transferred Retirement Plan Employees under the D&B Retirement Plan at the
Effective Time, and the denominator of which is the Present Value of the accrued
vested and nonvested benefits (as defined in ERISA Section 4044(a)(1)-(6)) of
the D&B Pre-Distribution Employees under the D&B Retirement Plan at the
Effective Time.
"Cognizant Retirement Plan Transfer Date" shall have the
meaning set forth in Section 2.2(b) of this Agreement.
"Cognizant Savings Plan" shall mean the defined contribution
plan to be adopted by Cognizant pursuant to Section 3.2(a) of this Agreement.
"Cognizant Savings Plan Transfer Date" shall have the meaning
set forth in Section 3.2(b) of this Agreement.
"Cognizant Transferred Retirement Plan Employees" shall have
the meaning set forth in Section 2.2(a) of this Agreement.
"Cognizant Transferred Savings Plan Employees" shall have the
meaning set forth in Section 3.2 of this Agreement.
<PAGE>
5
"Conveyancing and Assumption Instruments" shall mean,
collectively, the various agreements, instruments and other documents heretofore
entered into and to be entered into to effect the transfer of Assets and the
assumption of Liabilities in the manner contemplated by the Distribution
Agreement, or otherwise arising out of or relating to the transactions
contemplated in the Distribution Agreement.
"D&B" shall mean The Dun & Bradstreet Corporation, a Delaware
corporation.
"D&B Career Transition Plan" shall mean The Dun &
Bradstreet Career Transition Plan.
"D&B Committee" shall mean the Executive Compensation and
Stock Option Committee of the Board of Directors of D&B.
"D&B Common Stock" shall have the meaning set forth in
the recitals hereto.
"D&B Disabled Employees" shall mean all D&B PreDistribution
Employees who are receiving benefits under the D&B Long-Term Disability Plan as
of the Effective Time.
"D&B Group" shall mean D&B and each Business Entity (other
than any member of the Cognizant Group or the ACNielsen Group) that is a
Subsidiary of D&B.
"D&B Long-Term Disability Plan" shall mean The Dun &
Bradstreet Corporation Long Term Disability Plan or any other long-term
disability plan sponsored by D&B or any Subsidiary of D&B prior to the Effective
Time.
"D&B LSARs" shall have the meaning set forth in Section 6.2 of
this Agreement.
"D&B Nonqualified Plans" shall have the meaning as set forth
in Section 4.1 of this Agreement.
"D&B Pension BEP" shall mean the Pension Benefit Equalization
Plan of The Dun & Bradstreet Corporation, as amended effective December 21,
1994.
"D&B Pension BEP Trust" shall mean the trust established in
connection with the D&B Pension BEP and made as of December 15, 1995.
"D&B Post-Distribution Employees" shall mean persons who,
immediately after the Effective Time, are employed by the D&B Group (including
persons who are absent from work by reason of layoff or leave of absence and
inactive employees treated as such by agreement therewith).
<PAGE>
6
"D&B Pre-Distribution Employees" shall mean persons who, at
any time prior to the Effective Time, were employed by D&B or its Subsidiaries.
"D&B Retirees" shall mean persons who (i) were D&B
Pre-Distribution Employees, (ii) terminated employment from D&B prior to the
Effective Time and (iii) are neither Cognizant Employees nor ACNielsen Employees
immediately after the Effective Time.
"D&B Retirement Plan" shall mean the Master Retirement Plan of
The Dun & Bradstreet Corporation, as amended and restated effective January 1,
1994, with certain earlier effective dates.
"D&B Savings BEP" shall mean the Profit Participation
Benefit Equalization Plan of The Dun & Bradstreet Corporation, as amended and
restated effective January 1, 1995.
"D&B Savings Plan" shall mean the Profit Participation Plan of
The Dun & Bradstreet Corporation, as in effect on January 1, 1994, with certain
earlier effective dates.
"D&B Stock Option" shall have the meaning set forth in Section
6.1 of this Agreement.
"D&B Stock Option Plans" shall mean (i) the 1982 Key Employees
Stock Option Plan for The Dun & Bradstreet Corporation and Subsidiaries and (ii)
the 1991 Key Employees Stock Option Plan for The Dun & Bradstreet Corporation
and Subsidiaries.
"D&B Supplemental EBP" shall mean the Supplemental
Executive Benefit Plan of The Dun & Bradstreet Corporation, as amended effective
December 21, 1994.
"D&B Supplemental EBP Trust" shall mean the trust established
in connection with the D&B Supplemental EBP and made as of December 15, 1995.
"Daily Average Trading Price" of a given stock on a given day
shall mean the average of the high and low trading prices for such stock on such
date.
"Data Services Agreements" shall mean the Data Services
Agreements to be entered into by D&B, Cognizant and ACNielsen.
"Distribution" shall mean the distribution on the Distribution
Date to holders of record of shares of D&B Common Stock as of the Distribution
Record Date of (i) the Cognizant Common Shares owned by D&B on the basis of one
Cognizant Common Share for each outstanding share of D&B Common Stock and (ii)
the ACNielsen Common Shares owned by D&B on the basis of one share of ACNielsen
Common Share for each three outstanding shares of D&B Common Stock.
<PAGE>
7
"Distribution Agreement" shall mean the Distribution Agreement
among D&B, Cognizant and ACNielsen.
"Distribution Date" shall mean such date as may hereafter be
determined by D&B's Board of Directors as the date as of which the Distribution
shall be effected.
"Distribution Record Date" shall mean such date as may
hereafter be determined by D&B's Board of Directors as the record date for the
Distribution.
"Effective Time" shall mean 12:01 a.m., New York time, on the
Distribution Date.
"Employee Benefit Dispute" shall include any controversy,
dispute or claim arising out of, in connection with, or in relation to the
interpretation, performance, nonperformance, validity or breach of this
Agreement or otherwise arising out of, or in any way related to this Agreement
or the transactions contemplated hereby, including, without limitation, any
claim based on contract, tort, statute or constitution.
"Employee Benefit Litigation Liability" shall mean, with
respect to a Business Entity, a Liability relating to a controversy, dispute or
claim arising out of, in connection with or in relation to the interpretation,
performance, nonperformance, validity or breach of an Employee Benefit Plan of
such Business Entity or otherwise arising out of, or in any way related to such
Employee Benefit Plan, including, without limitation, any claim based on
contract, tort, statute or constitution.
"Employee Benefit Plans" shall mean, with respect to a
Business Entity, all "employee benefit plans" (within the meaning of Section
3(3) of ERISA), "multiemployer plans" (within the meaning of Section 3(37) of
ERISA), retirement, pension, savings, profit-sharing, welfare, stock purchase,
stock option, equitybased, severance, employment, change-in-control, fringe
benefit, collective bargaining, bonus, incentive, deferred compensation and all
other employee benefit plans, agreements, programs, policies or other
arrangements (including any funding mechanisms therefor), whether or not subject
to ERISA, whether formal or informal, oral or written, legally binding or not,
under which (i) any past, present or future employee of the Business Entity or
its Subsidiaries has a right to benefits and (ii) the Business Entity or its
Subsidiaries has any Liability.
"Employee Benefit Records" shall mean all agreements,
documents, books, records or files relating to the Employee Benefit Plans of
D&B, Cognizant and ACNielsen.
"Employee Benefit Welfare Plans" shall mean, with respect to a
Business Entity, all Employee Benefit Plans that are "welfare plans" within the
meaning of Section 3(1) of ERISA.
<PAGE>
8
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and the regulations promulgated thereunder, including any
successor legislation.
"ESOP" shall mean an "employee stock ownership plan" within
the meaning of Section 4975(e)(7) of the Code.
"FSA Coverage Period" shall have the meaning set forth in
Section 5.4 of this Agreement.
"IMS" shall mean I.M.S. International, Inc., a Delaware
corporation.
"Information Statement" shall mean the Information Statement
sent to the holders of shares of D&B Common Stock in connection with the
Distribution, including any amendment or supplement thereto.
"Intellectual Property Agreement" shall mean the intellectual
property and licensing agreement among D&B, Cognizant and ACNielsen.
"Liabilities" shall mean any and all losses, claims, charges,
debts, demands, actions, causes of action, suits, damages, obligations,
payments, costs and expenses, sums of money, accounts, reckonings, bonds,
specialties, indemnities and similar obligations, exonerations, covenants,
contracts, controversies, agreements, promises, doings, omissions, variances,
guarantees, make whole agreements and similar obligations, and other
liabilities, including all contractual obligations, whether absolute or
contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising, and including those arising under
any law, rule, regulation, Action, threatened or contemplated Action (including
the costs and expenses of demands, assessments, judgments, settlements and
compromises relating thereto and attorneys' fees and any and all costs and
expenses (including allocated costs of in-house counsel and other personnel),
whatsoever reasonably incurred in investigating, preparing or defending against
any such Actions or threatened or contemplated Actions), order or consent decree
of any governmental or other regulatory or administrative agency, body or
commission or any award of any arbitrator or mediator of any kind, and those
arising under any contract, commitment or undertaking, including those arising
under this Agreement, the Distribution Agreement or any Ancillary Agreement, in
each case, whether or not recorded or reflected or required to be recorded or
reflected on the books and records or financial statements of any person.
"Participant Election Period" shall mean the period during
which the elections described in Sections 3.2 and 3.3 are permitted (such
period, in no event, to be less than 30 days
<PAGE>
9
following notice thereof to persons who are eligible to make the election).
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any successor entity thereto.
"PBGC Assumptions" shall mean the actuarial assumptions
set forth in 29 C.F.R. Part 2619, et seq.
"Person" shall mean any natural person, corporation, business
trust, joint venture, association, company, partnership or government, or any
agency or political subdivision thereof.
"Present Value" shall mean the single sum value of a series of
future payments, determined utilizing PBGC Assumptions in effect as of the
measurement date.
"Service" shall mean the Internal Revenue Service or any
successor entity thereto.
"Shared Transaction Services Agreements" shall mean the
Shared Transaction Services Agreements among D&B, Cognizant and
ACNielsen.
"Subsidiary" shall mean any corporation, partnership or other
entity of which another entity (i) owns, directly or indirectly, ownership
interests sufficient to elect a majority of the Board of Directors (or persons
performing similar functions) (irrespective of whether at the time any other
class or classes of ownership interests of such corporation, partnership or
other entity shall or might have such voting power upon the occurrence of any
contingency) or (ii) is a general partner or an entity performing similar
functions (e.g., a trustee).
"Tax Allocation Agreement" shall mean the Tax Allocation
Agreement among D&B, Cognizant and ACNielsen.
"Transition Services Agreement" shall mean the Transition
Services Agreement among D&B, Cognizant and ACNielsen.
ARTICLE II
DEFINED BENEFIT PLANS
SECTION 2.1. D&B Retirement Plan. From and after the Effective
Time, D&B shall continue to sponsor the D&B Retirement Plan for the benefit of
D&B Post-Distribution Employees, D&B Retirees and D&B Disabled Employees. Active
participation of Cognizant Employees and ACNielsen Employees in the D&B
Retirement Plan shall cease immediately after the Effective Time.
SECTION 2.2. Cognizant Retirement Plan. (a) As soon as
practicable after the Effective Time, but not later than the first day of the
fourth calendar month that begins after the
<PAGE>
10
Effective Time (herein referred to as the "Cognizant Retirement Plan Effective
Date"), Cognizant shall establish the Cognizant Retirement Plan for the benefit
of Cognizant Employees who were participants in the D&B Retirement Plan
immediately prior to the Effective Time (the "Cognizant Transferred Retirement
Plan Employees"). As soon as practicable after the Effective Time, D&B shall
cause the trustee of the D&B Retirement Plan to segregate the assets of the D&B
Retirement Plan allocable to Cognizant Transferred Retirement Plan Employees in
an amount equal to the sum of (i) and (ii), as follows:
(i) the amount allocable to Cognizant Transferred Retirement Plan
Employees under ERISA Section 4044 as of the Effective Time,
determined using PBGC Assumptions; and
(ii) the excess (if any) of the fair market value of assets of the D&B
Retirement Plan over the Present Value of the vested and nonvested
benefits accrued thereunder for all the D&B Pre-Distribution
Employees as of the Effective Time, multiplied by the Cognizant
Retirement Plan Segregation Ratio.
(b) As soon as practicable after the Effective Time, the
assets allocable to the Cognizant Transferred Retirement Plan Employees shall be
transferred to a separate trust established under the Cognizant Retirement Plan
(such date herein referred to as the "Cognizant Retirement Plan Transfer Date");
provided, however, that in no event shall such transfer take place until (i) D&B
has made all required filings and submissions to the appropriate governmental
agencies and (ii) Cognizant has furnished to D&B (A) a favorable determination
letter that the Cognizant Retirement Plan is qualified under Section 401(a) of
the Code or (B) an opinion letter from Simpson Thacher & Bartlett to the effect
that the Cognizant Retirement Plan is qualified under Section 401(a) of the
Code. The value of such assets to be transferred shall equal the value of
segregated assets determined under Section 2.2(a) of this Agreement, adjusted as
follows:
(i) reduced by the amount of benefit payments made under the D&B
Retirement Plan with respect to Cognizant Transferred Retirement
Plan Employees from the Effective Time to the Cognizant Retirement
Plan Transfer Date; and
(ii) increased (or decreased) by the share of the net investment income
(or loss) from the Effective Time to the Cognizant Retirement Plan
Transfer Date attributable to the value of such segregated assets.
(c) Unless otherwise agreed to by D&B and Cognizant (as well
as ACNielsen if it has assets in the D&B Retirement Plan on the Cognizant
Retirement Plan Transfer Date), the form of the assets to be transferred shall
consist of an undivided percentage
<PAGE>
11
interest in each asset that is held by the D&B Retirement Plan on the Cognizant
Retirement Plan Transfer Date, such undivided percentage interest being equal to
the value of assets allocable to the Cognizant Transferred Retirement Plan
Employees, divided by the fair market value of plan assets.
(d) Prior to the Cognizant Retirement Plan Transfer Date, all
benefit payments to Cognizant Transferred Retirement Plan Employees shall be
made from the D&B Retirement Plan.
SECTION 2.3 ACNielsen Retirement Plan. (a) As soon as
practicable after the Effective Time, but not later than the first day of the
fourth calendar month that begins after the Effective Time (herein referred to
as the "ACNielsen Retirement Plan Effective Date"), ACNielsen shall establish
the ACNielsen Retirement Plan for the benefit of ACNielsen Employees who were
participants in the D&B Retirement Plan immediately prior to the Effective Time
(the "ACNielsen Transferred Retirement Plan Employees"). As soon as practicable
after the Effective Time, D&B shall cause the trustee of the D&B Retirement Plan
to segregate the assets of the D&B Retirement Plan allocable to ACNielsen
Transferred Retirement Plan Employees in an amount equal to the sum of (i) and
(ii), as follows:
(i) the amount allocable to ACNielsen Transferred Retirement Plan
Employees under ERISA Section 4044 as of the Effective Time,
determined using PBGC Assumptions; and
(ii) the excess (if any) of the fair market value of assets of the D&B
Retirement Plan over the Present Value of the vested and nonvested
benefits accrued thereunder for all the D&B Pre-Distribution
Employees as of the Effective Time, multiplied by the ACNielsen
Retirement Plan Segregation Ratio.
(b) As soon as practicable after the Effective Time, the
assets allocable to the ACNielsen Transferred Retirement Plan Employees shall be
transferred to a separate trust established under the ACNielsen Retirement Plan
(such date herein referred to as the "ACNielsen Retirement Plan Transfer Date");
provided, however, that in no event shall such transfer take place until (i) D&B
has made all required filings and submissions to the appropriate governmental
agencies and (ii) ACNielsen has furnished to D&B (A) a favorable determination
letter that the ACNielsen Retirement Plan is qualified under Section 401(a) of
the Code or (B) an opinion letter from Simpson Thacher & Bartlett to the effect
that the ACNielsen Retirement Plan is qualified under Section 401(a) of the
Code. The value of such assets to be transferred shall equal the value of
segregated assets determined under Section 2.3(a) of this Agreement, adjusted as
follows:
(i) reduced by the amount of benefit payments made under the D&B
Retirement Plan with respect to ACNielsen
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12
Transferred Retirement Plan Employees from the Effective Time to the
ACNielsen Retirement Plan Transfer Date; and
(ii) increased (or decreased) by the share of the net investment income
(or loss) from the Effective Time to the ACNielsen Retirement Plan
Transfer Date attributable to the value of such segregated assets.
(c) Unless otherwise agreed to by D&B and ACNielsen (as well
as Cognizant if it has assets in the D&B Retirement Plan on the ACNielsen
Retirement Plan Transfer Date), the form of the assets to be transferred shall
consist of an undivided percentage interest in each asset that is held by the
D&B Retirement Plan on the ACNielsen Retirement Plan Transfer Date, such
undivided percentage interest being equal to the value of assets allocable to
the ACNielsen Transferred Retirement Plan Employees, divided by the fair market
value of plan assets.
(d) Prior to the ACNielsen Retirement Plan Transfer Date, all
benefit payments to ACNielsen Transferred Retirement Plan Employees shall be
made from the D&B Retirement Plan.
SECTION 2.4. Allocation of Liabilities. The Cognizant Group
shall assume all Liabilities relating to the participation of Cognizant
Transferred Retirement Plan Employees in the D&B Retirement Plan and in the
Cognizant Retirement Plan. The ACNielsen Group shall assume all Liabilities
relating to the participation of ACNielsen Transferred Retirement Plan Employees
in the D&B Retirement Plan and in the ACNielsen Retirement Plan. The D&B Group
shall retain all other Liabilities relating to the D&B Retirement Plan.
ARTICLE III
DEFINED CONTRIBUTION PLANS
SECTION 3.1. D&B Savings Plan. From and after the Effective
Time, D&B shall continue to sponsor the D&B Savings Plan for the benefit of D&B
Post-Distribution Employees, D&B Retirees, D&B Disabled Employees, Cognizant
Bifurcated Savings Plan Employees (as defined in Section 3.2(a) below) and
ACNielsen Bifurcated Savings Plan Employees (as defined in Section 3.3(a)
below). Active participation of Cognizant Employees and ACNielsen Employees in
the D&B Savings Plan shall cease immediately after the Effective Time.
SECTION 3.2. Cognizant Savings Plan. (a) As of the Effective
Time, Cognizant shall adopt the Cognizant Savings Plan for the benefit of
Cognizant Employees who were participants in the D&B Savings Plan immediately
prior to the Effective Time. Prior to the Effective Time, Cognizant Employees
shall be given the right to elect one of the following options with respect to
their D&B Savings Plan account balances: (i) Cognizant Employees may keep their
balances in the D&B Savings Plan (such employees being known as "Cognizant
Bifurcated Savings Plan Employees"); (ii) Cognizant Employees
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13
may keep their balances in the D&B Savings Plan (such employees being known as
"Cognizant Bifurcated Savings Plan Employees"); (ii) Cognizant Employees
may receive a lump-sum payment (in cash and/or stock) of their balances (such
employees being known as "Cognizant Lump-Sum Savings Plan Employees") or (iii)
Cognizant Employees may transfer their balances to the Cognizant Savings Plan
(such employees being known as "Cognizant Transferred Savings Plan Employees").
If a Cognizant Employee fails to elect any of the foregoing options prior to the
end of the Participant Election Period, (i) his or her balance shall remain in
the D&B Savings Plan, and (ii) such employee shall be treated as a Cognizant
Bifurcated Savings Plan Employee.
(b) Prior to the date on which the transfer of assets and
liabilities to the Cognizant Savings Plan shall occur (the "Cognizant Savings
Plan Transfer Date"), which date shall occur as promptly as practicable
following the Participant Election Period, (i) D&B shall (A) cause the trustee
of the D&B Savings Plan to segregate, in accordance with the spinoff provisions
set forth under Section 414(l) of the Code, the assets of the D&B Savings Plan
representing the full account balances of Cognizant Transferred Savings Plan
Employees for all periods of participation through the Effective Time
(including, as applicable, all contributions and all earnings attributable
thereto); (B) make all required filings and submissions to the appropriate
governmental agencies; and (C) make all required amendments to the D&B Savings
Plan and related trust agreement necessary to provide for the segregation and
transfer of assets described in this Section 3.2, and (ii) Cognizant shall
furnish to D&B (A) a favorable determination letter that the Cognizant Savings
Plan is qualified under Section 401(a) of the Code or (B) an opinion letter from
Simpson Thacher & Bartlett to the effect that the Cognizant Savings Plan is
qualified under Section 401(a) of the Code.
(c) On the Cognizant Savings Plan Transfer Date, D&B shall
cause the trustee of the D&B Savings Plan to transfer to the trustee of the
Cognizant Savings Plan the full account balances (inclusive of loans) of
Cognizant Transferred Savings Plan Employees in kind based on those investment
funds in which such account balances are then invested (including, but not
limited to, the pooled stock fund); provided, however, that loans to Cognizant
Transferred Savings Plan Employees shall be transferred in the form of notes and
amounts in the D&B stock fund shall be transferred in the form of cash. In
consideration of the segregation and transfer of assets described herein, the
Cognizant Savings Plan shall, as of the Cognizant Savings Plan Transfer Date,
assume all Liabilities attributable to such assets.
(d) Notwithstanding anything in this Agreement to the
contrary, (i) a Cognizant Employee may not elect to be treated as a Cognizant
Bifurcated Savings Plan Employee if his or her account balance in the D&B
Savings Plan is $3,500 or less (in
<PAGE>
14
which case such Cognizant Employee shall be treated as a Cognizant Lump-Sum
Savings Plan Employee) and (ii) a Cognizant Bifurcated Savings Plan Employee
may, prior to the second anniversary of the Distribution Date, elect to receive
a distribution of his or her account balance in the D&B Savings Plan.
SECTION 3.3. ACNielsen Savings Plan. (a) As of the Effective
Time, ACNielsen shall adopt the ACNielsen Savings Plan for the benefit of
ACNielsen Employees who were participants in the D&B Savings Plan immediately
prior to the Effective Time. Prior to the Effective Time, ACNielsen Employees
shall be given the right to elect one of the following options with respect to
their D&B Savings Plan account balances: (i) ACNielsen Employees may keep their
balances in the D&B Savings Plan (such employees being known as "ACNielsen
Bifurcated Savings Plan Employees"); (ii) ACNielsen Employees may receive a
lump-sum payment (in cash and/or stock) of their balances (such employees being
known as "ACNielsen Lump-Sum Savings Plan Employees") or (iii) ACNielsen
Employees may transfer their balances to the ACNielsen Savings Plan (such
employees being known as "ACNielsen Transferred Savings Plan Employees"). If an
ACNielsen Employee fails to elect any of the foregoing options prior to the end
of the Participant Election Period, (i) his or her balance shall remain in the
D&B Savings Plan, and (ii) such employee shall be treated as a ACNielsen
Bifurcated Savings Plan Employee.
(b) Prior to the date on which the transfer of assets and
liabilities to the ACNielsen Savings Plan shall occur (the "ACNielsen Savings
Plan Transfer Date"), which date shall occur as promptly as practicable
following the Participant Election Period, (i) D&B shall (A) cause the trustee
of the D&B Savings Plan to segregate, in accordance with the spinoff provisions
set forth under Section 414(l) of the Code, the assets of the D&B Savings Plan
representing the full account balances of ACNielsen Transferred Savings Plan
Employees for all periods of participation through the Effective Time
(including, as applicable, all contributions and all earnings attributable
thereto); (B) make all required filings and submissions to the appropriate
governmental agencies; and (C) make all required amendments to the D&B Savings
Plan and related trust agreement necessary to provide for the segregation and
transfer of assets described in this Section 3.3, and (ii) ACNielsen shall
furnish to D&B (A) a favorable determination letter that the ACNielsen Savings
Plan is qualified under Section 401(a) of the Code or (B) an opinion letter from
Simpson Thacher & Bartlett to the effect that the ACNielsen Savings Plan is
qualified under Section 401(a) of the Code.
(c) On the ACNielsen Savings Plan Transfer Date, D&B shall
cause the trustee of the D&B Savings Plan to transfer to the trustee of the
ACNielsen Savings Plan the full account balances (inclusive of loans) of
ACNielsen Transferred Savings Plan Employees in kind based on those investment
funds in which
<PAGE>
15
such account balances are then invested (including, but not limited to, the
pooled stock fund); provided, however, that loans to ACNielsen Transferred
Savings Plan Employees shall be transferred in the form of notes and amounts in
the D&B stock fund shall be transferred in the form of cash. In consideration of
the segregation and transfer of assets described herein, the ACNielsen Savings
Plan shall, as of the ACNielsen Savings Plan Transfer Date, assume all
Liabilities attributable to such assets.
(d) Notwithstanding anything in this Agreement to the
contrary, (i) an ACNielsen employee may not elect to be treated as an ACNielsen
Bifurcated Savings Plan Employee if his or her account balance in the D&B
Savings Plan is $3,500 or less (in which case such ACNielsen Employee shall be
treated as an ACNielsen Lump-Sum Savings Plan Employee) and (ii) an ACNielsen
Bifurcated Savings Plan Employee may, prior to the second anniversary of the
Distribution Date, elect to receive a distribution of his or her account balance
in the D&B Savings Plan.
SECTION 3.4. Vesting. As of the Effective Time, the account
balances of Cognizant Employees and ACNielsen Employees in the D&B Savings Plan
shall fully vest.
SECTION 3.5. Outstanding Loans. During their employment with
Cognizant or ACNielsen (as the case may be), Cognizant Transferred Savings Plan
Employees and ACNielsen Transferred Savings Plan Employees who have outstanding
loans originally made from the D&B Savings Plan shall be permitted to repay such
loans by way of regular deductions from their paychecks, and, prior to the
Cognizant Savings Plan Transfer Date or ACNielsen Savings Plan Transfer Date (as
the case may be), D&B, Cognizant or ACNielsen (as the case may be) shall cause
all such deductions to be forwarded to the D&B Savings Plan as promptly as
practicable. No such deductions by Cognizant or ACNielsen shall be made in
respect of Cognizant Bifurcated Savings Plan Employees and ACNielsen Bifurcated
Savings Plan Employees who have outstanding loans from the D&B Savings Plan, and
all such employees shall be required to repay their loans directly to the D&B
Savings Plan in accordance with the existing terms thereof. Notwithstanding the
foregoing, prior to the end of the Participant Election Period, and for such
period thereafter as may be reasonably determined by D&B, Cognizant Employees
and ACNielsen Employees who have outstanding loans from the D&B Savings Plan
shall be permitted to repay such loans by way of regular deductions from their
paychecks.
SECTION 3.6. Employer Stock Fund. Participants in the D&B
Savings Plan who, immediately prior to the Effective Time, have balances in the
D&B Common Stock fund shall have such balances converted, as of the Effective
Time, to units in a pooled stock fund consisting of D&B Common Stock, Cognizant
Common Shares and ACNielsen Common Shares. The initial ratio of
<PAGE>
16
stock in the pooled stock fund shall be one share of D&B Common Stock to one
share of Cognizant Common Shares to 1/3 share of ACNielsen Common Shares. The
percentage interest of each participant in the pooled stock fund as of the
Effective Time shall equal such participant's percentage interest in the D&B
Common Stock fund immediately prior to the Effective Time. Each of the Cognizant
Savings Plan and ACNielsen Savings Plan shall maintain a pooled stock fund, to
which the pooled stock fund assets of Cognizant Transferred Savings Plan
Employees and ACNielsen Transferred Savings Plan Employees in the D&B Savings
Plan shall be transferred on the Cognizant Savings Plan Transfer Date and the
ACNielsen Savings Plan Transfer Date (as the case may be). From and after the
Effective Time, a participant may liquidate his or her units in the pooled stock
fund and invest the proceeds thereof in any other investment option available
under the applicable plan. A participant may not acquire additional units in the
pooled stock fund from or after the Effective Time.
SECTION 3.7. Matching Contributions. D&B shall make its
regular monthly matching contributions to the D&B Savings Plan accounts of
Cognizant Employees and ACNielsen Employees for all periods of service on or
prior to the Effective Time.
SECTION 3.8. Allocation of Liabilities. The Cognizant Group
shall assume all Liabilities relating to the participation of (a) Cognizant
Transferred Savings Plan Employees in the D&B Savings Plan and in the Cognizant
Savings Plan and (b) Cognizant Bifurcated Savings Plan Employees in the
Cognizant Savings Plan. The ACNielsen Group shall assume all Liabilities
relating to the participation of (a) ACNielsen Employees in the D&B Savings Plan
and in the ACNielsen Savings Plan and (b) ACNielsen Bifurcated Savings Plan
Employees in the ACNielsen Savings Plan. The D&B Group shall retain all other
Liabilities relating to the D&B Savings Plan.
ARTICLE IV
NONQUALIFIED PLANS
SECTION 4.1. D&B Nonqualified Plans. From and after the
Effective Time, D&B shall continue to sponsor the D&B Supplemental EBP, the D&B
Supplemental EBP Trust, the D&B Pension BEP, the D&B Pension BEP Trust and the
D&B Savings BEP (collectively, the "D&B Nonqualified Plans") for the benefit of
persons who, prior to the Effective Time, were participants thereunder;
provided, however, that, with respect to Cognizant Employees and ACNielsen
Employees, D&B shall retain only those Liabilities for benefits under the D&B
Nonqualified Plans that, prior to the Effective Time, were accrued and to which
such participants had earned vested rights thereunder.
SECTION 4.2. Service Credit. Cognizant Employees and ACNielsen
Employees who were participants in the D&B Nonqualified
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17
Plans immediately prior to the Effective Time (the "Cognizant and ACNielsen
Nonqualified Plan Participants") shall continue to receive service credit under
such plans for their service with the Cognizant Group or the ACNielsen Group (as
the case may be) from and after the Effective Time, but solely for purposes of
satisfying the one-year waiting requirement for a valid election under the D&B
Nonqualified Plans.
SECTION 4.3. Consent to Termination. Solely with respect to
determining the level of benefits payable under the D&B Nonqualified Plans,
Cognizant and ACNielsen shall have the authority to consent to the termination
of employment prior to age 60 of a Cognizant or ACNielsen Nonqualified Plan
Participant from the Cognizant Group or the ACNielsen Group (as the case may
be).
SECTION 4.4. Termination of Employment. Benefits under the D&B
Nonqualified Plans shall not become payable to a Cognizant or ACNielsen
Nonqualified Plan Participant until such participant terminates employment from
the Cognizant Group or the ACNielsen Group (as the case may be).
SECTION 4.5. Noncompetition. Solely with respect to the
noncompetition clauses of the D&B Nonqualified Plans, D&B hereby consents to the
employment of the Cognizant and ACNielsen Nonqualified Plan Participants by the
Cognizant Group or the ACNielsen Group (as the case may be) after the Effective
Time, whether or not such employment would otherwise trigger such noncompetition
clauses.
SECTION 4.6. Distributions; Lump-Sum Elections. Cognizant and
ACNielsen Nonqualified Plan Participants who participated in the D&B Savings BEP
immediately prior to the Effective Time shall receive a distribution thereunder,
based on their notional elective deferrals through the Effective Time, at the
time distributions are otherwise made under such plan.
SECTION 4.7. Guarantees; Subrogation. The Cognizant Group
agrees that, in the event the D&B Group is unable to satisfy its obligations in
respect of the benefits of any Cognizant Employee that have accrued under the
D&B Nonqualified Plans prior to the Effective Time, the Cognizant Group shall
make payment when due with respect to such obligations of the D&B Group. The
ACNielsen Group agrees that, in the event the D&B Group is unable to satisfy its
obligations in respect of the benefits of any ACNielsen Employee that have
accrued under the D&B Nonqualified Plans prior to the Effective Time, the
ACNielsen Group shall make payment when due with respect to such obligations of
the D&B Group. In the event that the Cognizant Group or the ACNielsen Group is
required to make any payment pursuant to this Section 4.7, the Cognizant Group
or the ACNielsen Group (as the case may be) shall have full rights of
subrogation against the D&B Group.
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18
SECTION 4.8. Third-Party Beneficiaries. It is the intention of
the parties to this Agreement that the provisions of Section 4.7 shall be
enforceable by (a) the Cognizant and ACNielsen Nonqualified Plan Participants
and (b) their respective surviving beneficiaries.
ARTICLE V
WELFARE PLANS
SECTION 5.1. Employee Benefit Welfare Plans. Except as
provided in Section 5.4 and Section 5.5 below, from and after the Effective
Time, D&B shall sponsor its Employee Benefit Welfare Plans solely for the
benefit of D&B Post-Distribution Employees, D&B Retirees and D&B Disabled
Employees. From and after the Effective Time, Cognizant shall sponsor its
Employee Benefit Welfare Plans solely for the benefit of Cognizant Employees.
From and after the Effective Time, ACNielsen shall sponsor its Employee Benefit
Welfare Plans solely for the benefit of ACNielsen Employees. Notwithstanding the
foregoing, none of D&B, Cognizant or ACNielsen shall have any obligation to
sponsor any Employee Benefit Welfare Plan from or after the Effective Time.
SECTION 5.2. Pre-Existing Conditions; Dollar Limits. With
respect to any medical plan that may be sponsored by Cognizant or ACNielsen
after the Effective Time, Cognizant and ACNielsen (a) shall cause there to be
waived any pre-existing condition limitations and (b) shall give effect, in
determining any deductible and maximum out-of-pocket limitations, to claims
incurred, and amounts paid by, and amounts reimbursed to, (in each case during
1996 prior to the Effective Time) ACNielsen Employees and Cognizant Employees
under similar plans maintained by D&B (or any Affiliate thereof) for their
benefit immediately prior to the Effective Time.
SECTION 5.3. Severance Plans. The Cognizant Group shall retain
all Liabilities with respect to severance payments made or to be made to
employees of the Cognizant Group who terminated employment prior to the
Effective Time. The ACNielsen Group shall retain all Liabilities with respect to
severance payments made or to be made to employees of the ACNielsen Group who
terminated employment prior to the Effective Time. The D&B Group shall retain
all Liabilities with respect to severance payments made or to be made to all
other D&B Pre-Distribution Employees who terminated employment prior to the
Effective Time. For purposes of this Section 5.3, the term "severance payments"
shall include any welfare benefit coverage provided under severance plans.
SECTION 5.4. Flexible Spending Accounts. From the Effective
Time until December 31, 1996 (the "FSA Coverage Period"), D&B shall continue to
sponsor its flexible spending accounts for all D&B Pre-Distribution Employees;
provided,
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19
however, that Cognizant and ACNielsen shall cause all deductions from
participant paychecks to be forwarded to D&B as promptly as practicable.
SECTION 5.5. Allocation of Liabilities. (a) The D&B Group
shall retain responsibility for and continue to pay all expenses and benefits
relating to the D&B Employee Benefit Welfare Plans with respect to (i) claims
incurred prior to the Effective Time by D&B Pre-Distribution Employees and their
covered dependents and (ii) claims incurred from and after the Effective Time by
D&B Post-Distribution Employees, D&B Retirees and D&B Disabled Employees. The
Cognizant Group shall be responsible for and pay expenses and benefits relating
to all Employee Benefit Welfare Plan claims incurred by Cognizant Employees and
their covered dependents from and after the Effective Time. The ACNielsen Group
shall be responsible for and pay expenses and benefits relating to all Employee
Benefit Welfare Plan claims incurred by ACNielsen Employees and their covered
dependents from and after the Effective Time. For purposes of this paragraph, a
claim is deemed incurred when the services that are the subject of the claim are
performed; in the case of life insurance, when the death occurs; in the case of
long-term disability, when the disability occurs; and, in the case of a hospital
stay, when the employee first enters the hospital. Notwithstanding the
foregoing, claims incurred by any employee of a pre-Distribution Subsidiary of
D&B or their covered dependents under any welfare plan maintained by such
Subsidiary solely for the benefit of its employees and their dependents shall,
whether incurred prior to, on or after the Effective Time, be the sole
responsibility and liability of that Subsidiary.
(b) The Cognizant Group shall be responsible for all COBRA
coverage for any employee of the Cognizant Group and his or her covered
dependents who participated in a D&B Employee Benefit Welfare Plan and who had
or have a loss of health care coverage due to a qualifying event occurring prior
to the Effective Time. The ACNielsen Group shall be responsible for all COBRA
coverage for any employee of the ACNielsen Group and his or her covered
dependents who participated in a D&B Employee Benefit Welfare Plan and who had
or have a loss of health care coverage due to a qualifying event occurring prior
to the Effective Time. The D&B Group shall be responsible for all COBRA coverage
for any other D&B Pre-Distribution Employee and his or her covered dependents
who participated in a D&B Employee Benefit Welfare Plan and who had or have a
loss of health care coverage due to a qualifying event occurring prior to the
Effective Time. Notwithstanding the foregoing, a pre-Distribution Subsidiary of
D&B shall be responsible for all COBRA coverage for its former employees and
covered dependents who participated in a plan maintained solely for their
benefit whether the applicable event occurs prior to, on or after the Effective
Time. COBRA coverage to which a Cognizant Employee or ACNielsen Employee is
entitled as a result of a qualifying event occurring at or after the Effective
Time
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20
shall be the responsibility of the Cognizant Group or the ACNielsen Group,
respectively.
SECTION 5.6. Retiree Welfare Plans. The Cognizant Group shall
be responsible for providing retiree welfare benefits to those D&B
Pre-Distribution Employees who are Cognizant Employees and who, immediately
prior to the Effective Time, are (i) eligible to retire and (ii) eligible to
elect such coverage under the D&B Employee Benefit Welfare Plans (but who do not
in fact elect such coverage) (the "Cognizant Retirement Eligible Employees");
provided, however, that in the event the Cognizant Group fails to provide to a
Cognizant Retirement Eligible Employee one or more components of retiree welfare
coverage (such components consisting of medical, dental and life benefits), the
D&B Group shall be responsible for the missing component(s), but only to the
same extent it provides such component(s) to its retirees from and after the
time when such Cognizant Retirement Eligible Employee retires or loses his or
her coverage. In the event the D&B Group must provide the benefits described
hereunder, it shall have full rights of reimbursement from the Cognizant Group.
The ACNielsen Group shall be responsible for providing retiree welfare benefits
to those D&B Pre-Distribution Employees who are ACNielsen Employees and who,
immediately prior to the Effective Time, are (i) eligible to retire and (ii)
eligible to elect such coverage under the D&B Employee Benefit Welfare Plans
(but who do not in fact elect such coverage) (the "ACNielsen Retirement Eligible
Employees"); provided, however, that in the event the ACNielsen Group fails to
provide to an ACNielsen Retirement Eligible Employee one or more components of
retiree welfare coverage (such components consisting of medical, dental and life
benefits), the D&B Group shall be responsible for the missing component(s), but
only to the same extent it provides such component(s) to its retirees from and
after the time when such ACNielsen Retirement Eligible Employee retires or loses
his or her coverage. In the event the D&B Group must provide the benefits
described hereunder, it shall have full rights of reimbursement from the
ACNielsen Group. Notwithstanding the provisions of Sections 10.2, 10.3 or 10.4
hereof, in the event any D&B Pre-Distribution Employee elects to retire on or
prior to the Effective Time and receive retiree welfare coverage under the D&B
Employee Welfare Benefit Plans, neither the Cognizant Group nor the ACNielsen
Group shall provide such employee with past service credit under their
respective Employee Benefit Plans, nor shall any assets and liabilities be
transferred in respect of such employee under Article II hereof, upon any
subsequent employment of such individual by the Cognizant Group or the ACNielsen
Group.
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21
ARTICLE VI
EQUITY-BASED PLANS
SECTION 6.1. D&B Stock Options. Stock options awarded under
the D&B Stock Option Plans ("D&B Stock Options") shall be treated as follows:
(a) D&B Retirees; D&B Disabled Employees; D&B PostDistribution
Employees. From and after the Effective Time, each unexercised D&B Stock Option
held by D&B Post-Distribution Employees, D&B Retirees and D&B Disabled Employees
shall remain outstanding pursuant to the terms of the award agreements and the
D&B Stock Option Plans; provided, however, that from and after such time, each
unexercised D&B Stock Option shall be adjusted as follows: (i) the exercise
price of the adjusted stock option shall be determined by multiplying the
exercise price of the D&B Stock Option by a fraction, the numerator of which is
the average of the Daily Average Trading Prices of D&B Common Stock for the five
consecutive trading days starting on the first date on which D&B Common Stock is
traded ex-dividend, and the denominator of which is the average of the Daily
Average Trading Prices of D&B Common Stock for the five consecutive trading days
immediately preceding the first date on which D&B Common Stock is traded
exdividend and (ii) the number of shares of D&B Common Stock covered by the
adjusted stock option shall be determined by (A) multiplying the number of
shares of D&B Common Stock covered by the D&B Stock Option by a fraction, the
numerator of which is the average of the Daily Average Trading Prices of D&B
Common Stock for the five consecutive trading days immediately preceding the
first date on which D&B Common Stock is traded ex-dividend, and the denominator
of which is the average of the Daily Average Trading Prices of D&B Common Stock
for the five consecutive trading days starting on the first date on which D&B
Common Stock is traded ex-dividend and (B) rounding down the result to a whole
number of shares.
(b) Cognizant Employees. As of the Effective Time, (i) each
unexercised D&B Stock Option held by Cognizant Employees shall be cancelled and
(ii) such individuals shall receive replacement stock options awarded under the
Cognizant Replacement Plans, which shall be adopted by Cognizant prior to the
Effective Time. The exercise price of each replacement stock option shall be
determined by multiplying the exercise price of the cancelled D&B Stock Option
by a fraction, the numerator of which is the average of the Daily Average
Trading Prices of Cognizant Common Shares for the five consecutive trading days
starting on the first date on which Cognizant Common Shares are traded regular
way, and the denominator of which is the average of the Daily Average Trading
Prices of D&B Common Stock for the five consecutive trading days immediately
preceding the first date on which D&B Common Stock is traded ex-dividend. The
number of shares of Cognizant Common Shares covered by each replacement stock
option shall be determined by (i) multiplying the number of shares of D&B Common
Stock covered by the cancelled D&B Stock
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22
Option by a fraction, the numerator of which is the average of the Daily Average
Trading Prices of D&B Common Stock for the five consecutive trading days
immediately preceding the first date on which D&B Common Stock is traded
ex-dividend, and the denominator of which is the average of the Daily Average
Trading Prices of Cognizant Common Shares for the five consecutive trading days
starting on the first date on which Cognizant Common Shares are traded regular
way and (ii) rounding down the result to a whole number of shares. Except as
otherwise provided in the Cognizant Replacement Plans, all other terms of the
replacement stock options shall remain substantially identical to the terms of
the cancelled D&B Stock Options.
(c) ACNielsen Employees. As of the Effective Time, (i) each
unexercised D&B Stock Option held by ACNielsen Employees shall be cancelled and
(ii) such individuals shall receive replacement stock options awarded under the
ACNielsen Replacement Plan, which shall be adopted by ACNielsen prior to the
Effective Time. The exercise price of each replacement stock option shall be
determined by multiplying the exercise price of the cancelled D&B Stock Option
by a fraction, the numerator of which is the average of the Daily Average
Trading Prices of ACNielsen Common Shares for the five consecutive trading days
starting on the first date on which ACNielsen Common Shares are traded regular
way, and the denominator of which is the average of the Daily Average Trading
Prices of D&B Common Stock for the five consecutive trading days immediately
preceding the first date on which D&B Common Stock is traded ex-dividend. The
number of shares of ACNielsen Common Shares covered by each replacement stock
option shall be determined by multiplying the number of shares of D&B Common
Stock covered by the cancelled D&B Stock Option by a fraction, the numerator of
which is the average of the Daily Average Trading Prices of D&B Common Stock for
the five consecutive trading days immediately preceding the first date on which
D&B Common Stock is traded ex-dividend, and the denominator of which is the
average of the Daily Average Trading Prices of ACNielsen Common Shares for the
five consecutive trading days starting on the first date on which ACNielsen
Common Shares are traded regular way and (ii) rounding down the result to a
whole number of shares. Except as otherwise provided in the ACNielsen
Replacement Plan, all other terms of the replacement stock options shall remain
substantially identical to the terms of the cancelled D&B Stock Options.
SECTION 6.2. D&B LSARs. All limited stock appreciation rights
awarded under the D&B Stock Option Plans ("D&B LSARs") shall be adjusted or
substituted (as the case may be) in substantially the same manner as the D&B
Stock Options described in Section 6.1 above.
SECTION 6.3. Allocation of Liabilities. The Cognizant Group
shall assume all Liabilities with respect to awards granted to Cognizant
Employees pursuant to the Cognizant Replacement Option Plan. The ACNielsen Group
shall assume all Liabilities
<PAGE>
23
with respect to awards granted to ACNielsen Employees pursuant to the ACNielsen
Replacement Option Plan. The D&B Group shall retain all other Liabilities with
respect to awards granted pursuant to the D&B Stock Option Plans (including, but
not limited to, awards granted to D&B Post-Distribution Employees, D&B Retirees
and D&B Disabled Employees).
ARTICLE VII
FOREIGN EMPLOYEE BENEFIT PLANS
SECTION 7.1. UK Pensions. D&B, Cognizant and ACNielsen shall
use their best efforts to ensure that the relevant employers may continue to
participate in The Dun & Bradstreet (UK) Pension Plan (the "D&B UK Plan") on the
terms and for the period following the Effective Time set forth in Schedule 7.1.
Cognizant and ACNielsen shall cause the relevant employers to establish or
nominate replacement pension arrangements which comply with the provisions of
Schedule 7.1 and which are capable of receiving a transfer of assets and
liabilities from the D&B UK Plan.
ARTICLE VIII
EMPLOYEE STOCK OWNERSHIP PLAN
SECTION 8.1. Employee Stock Ownership Plan. After the
Effective Time, D&B, Cognizant and ACNielsen shall each establish an ESOP for
the benefit of their respective employees, but only to the extent required by
any letter ruling issued by the Service with respect to the Distribution.
ARTICLE IX
OTHER EMPLOYEE BENEFIT ISSUES
SECTION 9.1. Employee Benefit Litigation Liabilities. Except
as otherwise expressly provided in this agreement or with respect to Articles
II, III and VI hereof, the D&B Group shall retain all Employee Benefit
Litigation Liabilities that are asserted by D&B Pre-Distribution Employees prior
to the Effective Time.
SECTION 9.2. Workers' Compensation. The D&B Group shall retain
all Liabilities relating to workers' compensation claims that were incurred (a)
prior to the Effective Time with respect to D&B Pre-Distribution Employees who
were employed by the D&B Group and (b) on and after the Effective Time with
respect to D&B Post-Distribution Employees. The Cognizant Group shall retain all
Liabilities relating to workers' compensation claims that were incurred (a)
prior to the Effective Time with respect to D&B Pre-Distribution Employees who
were employed by the Cognizant Group and (b) on and after the Effective Time
with respect to Cognizant Employees. The ACNielsen Group shall retain
<PAGE>
24
all Liabilities relating to workers' compensation claims that were incurred (a)
prior to the Effective Time with respect to D&B Pre-Distribution Employees who
were employed by the ACNielsen Group and (b) on and after the Effective Time
with respect to ACNielsen Employees. For purposes of this paragraph, a claim is
deemed incurred when the injury that is the subject of the claim occurs.
ARTICLE X
BENEFIT PLAN PARTICIPATION
SECTION 10.1. D&B Plans. Except as specifically provided
herein, all Cognizant Employees and ACNielsen Employees shall cease
participation in all domestic D&B Employee Benefit Plans as of the Effective
Time.
SECTION 10.2. Cognizant Plans. Except as provided in Section
5.6 herein, (a) with respect to any Employee Benefit Plan sponsored by the
Cognizant Group after the Effective Time, the Cognizant Group shall cause to be
recognized (to the extent applicable) each Cognizant Employee's (i) past service
with the D&B Group to the extent recognized under similar plans maintained by
the D&B Group immediately prior to the Effective Time and (ii) accrued but
unused vacation time and sick days, and (b) any Cognizant Employee who
participated in a D&B Employee Benefit Plan immediately prior to the Effective
Time shall be entitled to immediate participation in a similar Employee Benefit
Plan sponsored by the Cognizant Group.
SECTION 10.3. ACNielsen Plans. Except as provided in Section
5.6 herein, (a) with respect to any Employee Benefit Plan sponsored by the
ACNielsen Group after the Effective Time, the ACNielsen Group shall cause to be
recognized (to the extent applicable) each ACNielsen Employee's (i) past service
with the D&B Group to the extent recognized under similar plans maintained by
the D&B Group immediately prior to the Effective Time and (ii) accrued but
unused vacation time and sick days, and (b) any ACNielsen Employee who
participated in a D&B Employee Benefit Plan immediately prior to the Effective
Time shall be entitled to immediate participation in a similar Employee Benefit
Plan sponsored by ACNielsen.
SECTION 10.4. Subsequent Employer. Except as provided in
Section 5.6 herein, if, during the one-year period following the Effective Time,
a D&B Post-Distribution Employee, a Cognizant Employee or ACNielsen Employee
terminates employment with his or her employer and then immediately commences
employment with one of the D&B Group, the Cognizant Group or the ACNielsen
Group, the subsequent employer shall cause to be recognized (to the extent
applicable) such employee's past service with the D&B Group, the Cognizant Group
or the ACNielsen Group to the extent recognized under similar plans maintained
by the prior employer. Notwithstanding the foregoing, no past service shall be
<PAGE>
25
recognized with respect to pension accruals under the defined benefit plans of
the subsequent employer.
SECTION 10.5. Right to Amend or Terminate. Except as
specifically provided herein, nothing in this Agreement shall be construed or
interpreted to restrict the D&B Group's, the Cognizant Group's or the ACNielsen
Group's right or authority to amend or terminate any of their Employee Benefit
Plans following the Effective Time.
ARTICLE XI
ACCESS TO INFORMATION
SECTION 11.1. Access to Information. Article IV of the
Distribution Agreement shall govern the rights of the D&B Group, the Cognizant
Group and the ACNielsen Group with respect to access to information. The term
"Records" in that Article shall be read to include all Employee Benefit Records.
ARTICLE XII
INDEMNIFICATION
SECTION 12.1. Indemnification. Article III of the Distribution
Agreement shall govern the rights of the D&B Group, the Cognizant Group and the
ACNielsen Group with respect to indemnification. The term "D&B Liabilities" in
that Article shall be read to include all Liabilities assumed by the D&B Group
pursuant to this Agreement. The term "Cognizant Liabilities" in that Article
shall be read to include all Liabilities assumed by the Cognizant Group pursuant
to this Agreement. The term "ACNielsen Liabilities" in that Article shall be
read to include all Liabilities assumed by the ACNielsen Group pursuant to this
Agreement.
ARTICLE XIII
DISPUTE RESOLUTION
SECTION 13.1. Dispute Resolution. Article VI of the
Distribution Agreement shall govern the rights of the D&B Group, the Cognizant
Group and the ACNielsen Group with respect to dispute resolution. The term
"Agreement Dispute" in that Article shall be read to include all Employee
Benefit Disputes.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1. Complete Agreement; Construction. This
Agreement, including the Exhibits and Schedules (if any), and the Distribution
Agreement shall constitute the entire agreement between the parties with respect
to the subject matter hereof and
<PAGE>
26
shall supersede all previous negotiations, commitments and writings with respect
to such subject matter. In the event of any inconsistency between this Agreement
and any Schedule hereto, the Schedule shall prevail. Other than Sections 2.7 and
4.5 and Article VI of the Distribution Agreement, which shall prevail over any
inconsistent or conflicting provisions in this Agreement, notwithstanding any
other provisions in this Agreement to the contrary, in the event and to the
extent that there shall be a conflict between the provisions of this Agreement
and the provisions of the Distribution Agreement, this Agreement shall control.
SECTION 14.2. Ancillary Agreements. This Agreement is not
intended to address, and should not be interpreted to address, the matters
specifically and expressly covered by the Ancillary Agreements.
SECTION 14.3. Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more such counterparts have
been signed by each of the parties and delivered to the other parties.
SECTION 14.4. Survival of Agreements. Except as otherwise
contemplated by this Agreement, all covenants and agreements of the parties
contained in this Agreement shall survive the Distribution Date.
SECTION 14.5. Expenses. Except as otherwise set forth in this
Agreement, the Distribution Agreement or any Ancillary Agreement, all costs and
expenses incurred on or prior to the Distribution Date (whether or not paid on
or prior to the Distribution Date) in connection with the preparation,
execution, delivery and implementation of this Agreement, the Distribution
Agreement, any Ancillary Agreement, the Information Statement (including any
registration statement on Form 10 of which such Information Statement may be a
part) and the Distribution and the consummation of the transactions contemplated
thereby shall be charged to and paid by D&B. Except as otherwise set forth in
this Agreement, the Distribution Agreement or any Ancillary Agreement, each
party shall bear its own costs and expenses incurred after the Distribution
Date. Any amount or expense to be paid or reimbursed by any party hereto to any
other party hereto shall be so paid or reimbursed promptly after the existence
and amount of such obligation is determined and demand therefor is paid.
SECTION 14.6. Notices. All notices and other communications
hereunder shall be in writing and hand delivered or mailed by registered or
certified mail (return receipt requested) or sent by any means of electronic
message transmission with delivery confirmed (by voice or otherwise) to the
parties at the following addresses (or at such other addresses for a party as
shall be specified by like notice) and
<PAGE>
27
will be deemed given on the date on which such notice is received:
To The Dun & Bradstreet Corporation:
One Diamond Hill Road
Murray Hill, NJ 07974
Telecopy: (908) 665-5803
Attn: General Counsel
To Cognizant Corporation:
200 Nyala Farms
Westport, CT 06880
Telecopy: (203) 222-4201
Attn: General Counsel
To ACNielsen Corporation:
177 Broad Street
Stamford, CT 06901
Telecopy: (203) 961-3179
Attn: General Counsel
SECTION 14.7. Waivers. The failure of any party to require
strict performance by any other party of any provision in this Agreement will
not waive or diminish that party's right to demand strict performance thereafter
of that or any other provision hereof.
SECTION 14.8. Amendments. Subject to the terms of Section
14.11 hereof, this Agreement may not be modified or amended except by an
agreement in writing signed by each of the parties hereto.
SECTION 14.9. Assignment. This Agreement shall not be
assignable, in whole or in part, directly or indirectly, by any party hereto
without the prior written consent of the other parties hereto, and any attempt
to assign any rights or obligations arising under this Agreement without such
consent shall be void.
SECTION 14.10. Successors and Assigns. The provisions to this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and permitted assigns.
SECTION 14.11. Termination. This Agreement (including, without
limitation, Section 4.8 and Article XII hereof) may be terminated and may be
amended, modified or abandoned at any time prior to the Distribution by and in
the sole discretion of D&B without the approval of Cognizant or ACNielsen or the
shareholders of D&B. In the event of such termination, no party shall have any
liability of any kind to any other party or any other person. After the
Distribution, this
<PAGE>
28
Agreement may not be terminated except by an agreement in writing signed by the
parties; provided, however, that Section 4.8 and Article XII shall not be
terminated or amended after the Distribution in respect of the third party
beneficiaries thereto without the consent of such persons.
SECTION 14.12. Subsidiaries. Each of the parties hereto shall
cause to be performed, and hereby guarantees the performance of, all actions,
agreements and obligations set forth herein to be performed by any Subsidiary of
such party or by any entity that is contemplated to be a Subsidiary of such
party on and after the Distribution Date.
SECTION 14.13. Third Party Beneficiaries. Except as provided
in Section 4.8 and Article XII, this Agreement is solely for the benefit of the
parties hereto and their respective Subsidiaries and Affiliates and should not
be deemed to confer upon third parties any remedy, claim, liability,
reimbursement, claim of action or other right in excess of those existing
without reference to this Agreement.
SECTION 14.14. Title and Headings. Titles and headings to
sections herein are inserted for the convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
SECTION 14.15. Exhibits and Schedules. The Exhibits and
Schedules, if any, shall be construed with and as an integral part of this
Agreement to the same extent as if the same had been set forth verbatim herein.
SECTION 14.16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK.
SECTION 14.17. Consent to Jurisdiction. Without limiting the
provisions of Article XIII hereof, each of the parties irrevocably submits to
the exclusive jurisdiction of (a) the Supreme Court of the State of New York,
New York County, and (b) the United States District Court for the Southern
District of New York, for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby. Each of
the parties agrees to commence any action, suit or proceeding relating hereto
either in the United States District Court for the Southern District of New York
or if such suit, action or other proceeding may not be brought in such court for
jurisdictional reasons, in the Supreme Court of the State of New York, New York
County. Each of the parties further agrees that service of any process, summons,
notice or document by U.S. registered mail to such party's respective address
set forth above shall be effective service of process for any action, suit or
proceeding in New York with respect to any matters to which it has submitted to
jurisdiction in this Section 14.17.
<PAGE>
29
Each of the parties irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby in (i) the Supreme Court of the State of
New York, New York County, or (ii) the United States District Court for the
Southern District of New York, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
SECTION 14.18. Severability. In the event any one or more of
the provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
SECTION 14.19. Governmental Notices; Cooperation.
Notwithstanding anything in this Agreement to the contrary, all actions
contemplated herein with respect to Employee Benefit Plans which are to be
consummated pursuant to this Agreement shall be subject to such notices to,
and/or approvals by, the Service or the PBGC (or any other governmental agency
or entity) as are required or deemed appropriate by such Employee Benefit Plan's
sponsor. Each of D&B, Cognizant and ACNielsen agrees to use its commercially
reasonable efforts to cause all such notices and/or approvals to be filed or
obtained, as the case may be. Each party hereto shall reasonably cooperate with
the other parties with respect to any government filings, employee notices or
any other actions reasonably necessary to maintain and implement the Employee
Benefit Plans covered by this Agreement.
SECTION 14.20. Further Assurances. From time to time, as and
when reasonably requested by any other party hereto, each party hereto shall
execute and deliver, or cause to be executed and delivered, all such documents
and instruments and shall take, or cause to be taken, all such further or other
actions as such other party may reasonably deem necessary or desirable to effect
the purposes of this Agreement and the transactions contemplated hereunder.
<PAGE>
30
IN WITNESS WHEREOF, the parties have duly executed and entered
into this Agreement, as of the date first above written.
THE DUN & BRADSTREET CORPORATION
by
-----------------------
Name:
Title:
COGNIZANT CORPORATION
by
-----------------------
Name:
Title:
ACNIELSEN CORPORATION
by
-----------------------
Name:
Title:
INDEMNITY AND JOINT DEFENSE AGREEMENT
This INDEMNITY AND JOINT DEFENSE AGREEMENT is dated as of
October 28, 1996 (the "Agreement"), among THE DUN & BRADSTREET CORPORATION, a
Delaware corporation ("D&B"), COGNIZANT CORPORATION, a Delaware corporation,
("Cognizant"), and ACNIELSEN CORPORATION, a Delaware corporation ("ACNielsen").
WHEREAS, the Board of Directors of D&B has determined that it
is appropriate, desirable and in the best interests of the holders of shares of
common stock, par value $1.00 per share, of D&B (the "D&B Common Stock") to take
certain steps to reorganize D&B's Subsidiaries (as defined herein) and
businesses and then to distribute to the holders of the D&B Common Stock all the
outstanding shares of common stock of Cognizant, together with the appurtenant
share purchase rights, and all the outstanding shares of common stock of
ACNielsen, together with the appurtenant share purchase rights; and
WHEREAS, D&B, A.C. Nielsen Company and I.M.S. International,
Inc. ("IMS") have been named as defendants in an action commenced by Information
Resources, Inc. ("IRI") by the filing of its complaint dated July 29, 1996 in
the action captioned Information Resources, Inc. v. The Dun & Bradstreet
Corporation, A.C. Nielsen Co. and IMS International, Inc. (S.D.N.Y.) 96 Civ.
5716 (this action and any amended complaint or action arising out of the same or
substantially similar factual allegations by IRI or any successor or affiliate
thereof are referred to herein as the "Lawsuit");
WHEREAS, the reorganization of D&B's Subsidiaries and
businesses as contemplated by the Distribution Agreement (as defined herein)
could be potentially affected by the commencement of the Lawsuit, and in order
to consummate such reorganization in a timely fashion and in substantially the
manner contemplated prior to the commencement of the Lawsuit, the parties hereto
have determined that it is desirable to enter into this Agreement, and each
party hereto expressly acknowledges that the execution and delivery of this
Agreement does not in any manner constitute an admission that the Lawsuit has
any merit;
WHEREAS, pursuant to the terms and subject to the limitations
hereof, (x) ACNielsen has agreed, inter alia, to indemnify D&B and Cognizant
against IRI Liabilities (as defined below), up to a certain amount, which may be
incurred directly or indirectly by D&B or Cognizant, and (y) D&B and Cognizant
have agreed, inter alia, to indemnify ACNielsen against IRI Liabilities, in
excess of such amount, if any, which may be incurred directly or indirectly by
ACNielsen;
WHEREAS, the parties believe that they have a mutuality of
interest in a joint defense in connection with the Lawsuit and any additional
actions, investigations or proceedings that have
<PAGE>
2
arisen or may arise in connection with the subject matter of the Lawsuit;
WHEREAS, it is the intention and understanding of the parties
that communications between and among them as provided herein and any joint
interviews of prospective witnesses for the purpose of a joint defense are
confidential and are protected from disclosure to any third party by the
attorney-client privilege, the work product doctrine and any other applicable
privileges;
WHEREAS, in order to pursue a joint defense effectively, the
parties have also concluded that, from time to time, their mutual interests will
be best served by sharing privileged material, mental impressions, memoranda,
interview reports and other work products and information, including the
confidences of each party;
WHEREAS, it is a purpose of this Agreement to insure that the
exchanges and disclosures of privileged materials contemplated herein do not
diminish or constitute a waiver of any privilege that may otherwise be available
by virtue of any prior agreement, conduct, operation of law or otherwise;
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, D&B, Cognizant and ACNielsen agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. Capitalized terms used in this
Agreement and not defined herein shall have the meanings set forth in the
Distribution Agreement (as defined herein) and the following terms shall have
the following meanings:
"ACN Maximum Amount" means the maximum amount which, at the
time any IRI Liability becomes payable, a hypothetical investment banking firm
would determine that ACNielsen would be able to pay (assuming the amount of the
ACN Payment is zero) after giving effect to (i) any recapitalization or similar
corporate transaction, including, without limitation, asset dispositions and/or
increased borrowings or other capital raising transactions, which would be
recommended by such hypothetical investment bank in order to maximize the claims
paying ability of ACNielsen (a "Hypothetical Recapitalization Plan"), and (ii)
the payment of interest which would be reasonably expected to be incurred on any
ACN Notes and the payment of investment banking, legal and other fees and
expenses which would be reasonably expected to be incurred in connection with
such Hypothetical Recapitalization Plan, without impairing the financial
viability of ACNielsen or A.C. Nielsen Company as either such company would
<PAGE>
3
exist after consummation of such Hypothetical Recapitalization Plan and the
payment of such interest, fees and expenses.
"ACN Note" shall have the meaning set forth in Section 2.1(c)
hereto.
"ACN Payment" shall have the meaning set forth in Section
2.1(b).
"ACNielsen" shall have the meaning set forth in the preamble
hereto.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of Voting Stock, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Ancillary Agreements" shall mean all of the written
agreements, instruments, assignments or other written arrangements (other than
this Agreement and the Distribution Agreement) entered into in connection with
the transactions contemplated by this Agreement and the Distribution Agreement,
including, without limitation, the Conveyancing and Assumption Instruments, the
Data Services Agreement, the Employee Benefits Agreement, the Intellectual
Property Agreement, the Shared Transaction Services Agreements, the TAM Master
Agreement, the Tax Allocation Agreement and the Transition Services Agreement.
"Board of Directors" shall mean, when used with respect to a
specified corporation, the board of directors of the corporation so specified.
"Business Combination" means, with respect to any Person, any
consolidation or merger or any sale, conveyance, assignment, transfer, lease or
other disposition of all or substantially all of the properties and assets of
such Person as an entirety in one transaction or series of transactions.
"Capital Lease Obligations" of a Person means any obligation
which is required to be classified and accounted for as a capital lease on the
balance sheet of such Person prepared in accordance with GAAP; the amount of
such obligations shall be the capitalized amount thereof, determined in
accordance with GAAP.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights to purchase, warrants, options, or
other equivalents (however designated) of capital stock of a corporation, and
any and all equivalent
<PAGE>
4
ownership interests in a Person other than a corporation, in each case whether
now outstanding or hereafter issued.
"Cash Equivalents" means, at any time, (a) any evidence of
Indebtedness with a maturity of 180 days or less from the date of acquisition
issued or directly and fully guaranteed or insured by the United States of
America or any agency or instrumentality thereof (provided that the full faith
and credit of the United States of America is pledged in support thereof); (b)
certificates of deposit, money market deposit accounts and acceptances with a
maturity of 180 days or less from the date of acquisition of any financial
institution that is a member of the Federal Reserve System having combined
capital and surplus and undivided profits of not less than $500 million; (c)
commercial paper with a maturity of 180 days or less from the date of
acquisition issued by a corporation that is not an Affiliate of ACNielsen and is
organized under the laws of any state of the United States or the District of
Columbia whose debt rating, at the time as of which such investment is made, is
at least "A-1" by Standard & Poor's Corporation or at least "P-1" by Moody's
Investors Service, Inc. or rated at least an equivalent rating category of
another nationally recognized securities rating agency; (d) repurchase
agreements and reverse repurchase agreements having a term of not more than 30
days for underlying securities of the types described in clause (a) above
entered into with a financial institution meeting the qualifications described
in clause (b) above; (e) any security, maturing not more than 180 days after the
date of acquisition, backed by standby or direct pay letters of credit issued by
a bank meeting the qualifications described in clause (b) above; and (f) any
security, maturing not more than 180 days after the date of acquisition, issued
or fully guaranteed by any state, commonwealth, or territory of the United
States of America, or by any political subdivision thereof, and rated at least
"A" by Standard & Poor's Corporation or at least "A" by Moody's Investors
Service, Inc. or rated at least an equivalent rating category of another
nationally recognized securities rating agency.
"Cognizant" shall have the meaning set forth in the preamble
hereto.
"Cognizant Counsel" shall have the meaning set forth in
Section 4.1(b) hereto.
"Cognizant/D&B Payment" shall have the meaning set forth in
Section 2.1(b) hereto.
"Consolidated Earnings Before Interest, Taxes, Depreciation
and Amortization" means for any period the sum of Consolidated Net Income plus,
to the extent deducted in computing Consolidated Net Income, Consolidated
Interest Expense, Consolidated Tax Expense, all depreciation and, without
duplication, all amortization, in each case, for such period, of
<PAGE>
5
the Relevant Party and its Subsidiaries on a consolidated basis, all as
determined in accordance with GAAP.
"Consolidated Interest Expense" means for any period the sum
of (a) the aggregate of the interest expense on Indebtedness of the Relevant
Party and its Subsidiaries for such period, on a consolidated basis as
determined in accordance with GAAP (excluding the amortization of costs relating
to original debt issuances but including the amortization of debt discount) plus
(b) without duplication, that portion of Capital Lease Obligations of the
Relevant Party and its Subsidiaries representing the interest factor for such
period as determined in accordance with GAAP plus (c) without duplication,
dividends paid in respect of preferred stock of Subsidiaries or Disqualified
Stock of the Relevant Party to Persons other than the Relevant Party or a wholly
owned Subsidiary.
"Consolidated Net Income" means for any period the net income
or loss of the Relevant Party and its Subsidiaries for such period on a
consolidated basis as determined in accordance with GAAP, adjusted by excluding
the after-tax effect of (a) any gains (but not losses) from currency exchange
transactions not in the ordinary course of business; (b) the net income of any
Person which is not a Subsidiary or is accounted for by the equity method of
accounting except to the extent of the amount of dividends or distributions
actually paid in cash by such Person to the Relevant Party or a Subsidiary of
the Relevant Party during such period; (c) except to the extent includible
pursuant to clause (b), the net income of any Person accrued prior to the date
it becomes a Subsidiary of the Relevant Party or is merged into or consolidated
with the Relevant Party or any of its Subsidiaries or such Person's assets are
acquired by the Relevant Party or any of its Subsidiaries; (d) net gains
attributable to write-ups (determined after taking into account losses
attributable to write-downs) of assets or liabilities other than in the ordinary
course of business; (e) the cumulative effect of a change in accounting
principles; and (f) net income from discontinued operations.
"Consolidated Net Worth" of a Person and its Subsidiaries
means as of any date all amounts that would be included under stockholders'
equity on a consolidated balance sheet of such Person and its Subsidiaries
determined in accordance with GAAP.
"Consolidated Tax Expense" means for any period the aggregate
of the federal, state, local and foreign income tax expense of the Relevant
Party and its Subsidiaries for such period, on a consolidated basis as
determined in accordance with GAAP, to the extent deducted in computing
Consolidated Net Income.
"Counsel of Record" shall have the meaning set forth in
Section 4.1(a).
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6
"D&B" shall have the meaning set forth in the preamble hereto.
"D&B Common Stock" shall have the meaning set forth in the
recitals hereto.
"D&B Counsel" shall have the meaning set forth in Section
4.1(b) hereto.
"Defense Costs" shall have the meaning set forth in Section
4.1(h).
"Defense Materials" shall have the meaning set forth in
Section 4.1(c) hereto.
"Disqualified Firm" shall have the meaning set forth in
Section 2.2(a) hereto.
"Disqualified Stock" means any Capital Stock which pays a
mandatory dividend (other than in Capital Stock) or which, by its terms (or by
the terms of any security into which it is convertible or exchangeable), or upon
the happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part or is exchangeable for debt securities of ACNielsen
or its Subsidiaries.
"Distribution Agreement" shall mean the Distribution Agreement
among D&B, Cognizant and ACNielsen.
"Fixed Charge Coverage Ratio" means for any period the ratio
of Consolidated Earnings Before Interest, Taxes, Depreciation and Amortization
to Consolidated Interest Expense for such period; provided, however, that in
making such computation, the interest expense on any Indebtedness to be incurred
and computed on a pro forma basis and bearing a floating interest rate shall be
computed as if the rate in effect on the date of computation had been the
applicable rate for the entire period.
"GAAP" means the generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession in the United States, in each case applied on a
consistent basis.
"Hypothetical Recapitalization Plan" shall have the meaning
set forth in the definition of "ACN Maximum Amount", above.
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7
"IMS" shall have the meaning set forth in the recitals hereto.
"IMS Counsel" shall have the meaning set forth in Section
4.1(b) hereto.
"Indebtedness" means, with respect to any Person, without
duplication, (a) the principal of and premium (if any) in respect of (i)
indebtedness of such Person for money borrowed and (ii) indebtedness evidenced
by notes, indentures, bonds, other similar instruments for the payment of which
such Person is responsible or liable; (b) all Capital Lease Obligations of such
Person; (c) all obligations of such Person issued or assumed as the deferred
purchase price of property; (d) all obligations of such Person for the
reimbursement of any obligor on any letter of credit or similar credit
transaction; (e) all dividends on Capital Stock issued by third parties for the
payment of which such Person is responsible; (f) all obligations of the type
referred to in clauses (a) through (e) above of third parties secured by any
Lien on any property or asset of such Person, the amount of such obligation
being deemed to be the lesser of the value of such property or assets or the
amount of the obligation so secured; (g) indebtedness secured by any Lien
existing on property acquired by such Person subject to such Lien, whether or
not the indebtedness secured thereby shall have been assumed, provided that if
such Person has not assumed such Indebtedness the amount of Indebtedness of such
Person shall be deemed to be the lesser of the value of such acquired property
or the amount of the indebtedness secured; (h) guarantees, endorsements and
other obligations, whether or not contingent, in respect of, or agreements to
purchase or otherwise acquire, Indebtedness of other Persons; (i) all
Disqualified Stock issued by such Person valued at the greater of its voluntary
or involuntary maximum fixed repurchase price plus accrued and unpaid dividends;
(j) preferred stock issued by any Subsidiary valued at the greater of its
voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid
dividends; and (k) all obligations under or in respect of Interest Rate
Protection or other Hedging Agreements.
For purposes of this definition, "maximum fixed repurchase
price" of any preferred stock issued by any Subsidiary and of any Disqualified
Stock which does not have a fixed repurchase price shall be calculated in
accordance with the terms of such preferred stock or such Disqualified Stock as
if such preferred stock or such Disqualified Stock were purchased on any date on
which Indebtedness shall be required to be determined pursuant to the Indenture,
and if such price is based upon, or measured by, the fair market value of such
preferred stock or Disqualified Stock, such fair market value shall be
determined in good faith by the board of directors of the issuer of such
preferred stock or such Disqualified Stock.
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8
"Interest Rate Protection and Other Hedging Agreements" means
one or more of the following agreements entered into by one or more financial
institutions: (a) interest rate protection agreements (including, without
limitation, interest rate swaps, caps, floors, collars and similar agreements),
(b) foreign exchange contracts, currency swap agreements or other, similar
agreements or arrangements designed to protect against fluctuations in currency
values and/or (c) other types of hedging agreements from time to time.
"IRI" shall have the meaning set forth in the recitals hereto.
"IRI Liabilities" shall have the meaning set forth in Section
2.1(a) hereto.
"Lawsuit" shall have the meaning set forth in the recitals
hereto.
"Lien" means any mortgage, lien, pledge, security interest,
conditional sale or other title retention agreement or other security interest
or encumbrance of any kind (including any agreement to give any security
interest).
"Note Amount" shall have the meaning set forth in Section
2.1(c) hereto.
"Parent" of a Person means any other Person with the power to
direct the management and policies of such Person, directly or indirectly,
whether through ownership of Voting Stock, by contract or otherwise.
"Party Counsel" shall have the meaning set forth in Section
4.1(b) hereto.
"Payment Date" shall mean the day on which the IRI
Liabilities, if any, are ultimately required to be paid.
"Person" shall mean any natural person, corporation, business
trust, joint venture, association, company, partnership or government, or any
agency or political subdivision thereof.
"Recapitalization Plan" shall have the meaning set forth in
Section 2.2(c) hereto.
"Related Person" means (a) any Affiliate of ACNielsen, (b) any
Person who directly or indirectly holds 5% or more of any class of Voting Stock
of ACNielsen, (c) any Person who is an executive officer or director of
ACNielsen and (d) any Affiliate of or any relative by blood, marriage or
adoption not more remote than first cousin of any such Person referred to in
clause (b) or (c) above.
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9
"Relevant Party" shall have the meaning set forth in Section
3.4 hereto.
"Restricted Payment" means, with respect to ACNielsen and its
Subsidiaries, (a) any declaration or payment of any dividend on, or any
distribution in respect of, or any purchase, redemption or retirement for value
of, any Capital Stock of ACNielsen or such Subsidiary or any deposit with
respect to the foregoing (other than (i) through the issuance of Capital Stock
of ACNielsen, other than Disqualified Stock or rights to Disqualified Stock, and
(ii) dividends or distributions payable solely to ACNielsen or a wholly owned
Subsidiary), other than dividends or repurchases contemplated by the
Distribution Agreement or any Ancillary Agreement, (b) any charitable
contribution, (c) any voluntary payments to pension or other benefit plans, or
(d) any accelerated payment of any accounts payable or any cancellation or
discounting of, or delay or extension in the collection of, any accounts
receivable, unless such acceleration, cancellation, discounting, delay or
extension, as the case may be, is in the ordinary course of ACNielsen's
business.
"Service" shall mean the Internal Revenue Service or any
successor entity thereto.
"Strategic Transaction" shall mean any acquisition or
disposition of any business or of any assets comprising a business, or any
acquisition or disposition of any interest in a joint venture or other equity
investment in any business.
"Subsidiary" shall mean any corporation, partnership or other
entity of which another entity (a) owns, directly or indirectly, ownership
interests sufficient to elect a majority of the Board of Directors (or persons
performing similar functions) (irrespective of whether at the time any other
class or classes of ownership interests of such corporation, partnership or
other entity shall or might have such voting power upon the occurrence of any
contingency) or (b) is a general partner or an entity performing similar
functions (e.g., a trustee).
"Viability Opinion" shall have the meaning set forth in
Section 2.2(c) hereto.
"Voting Stock" means all outstanding classes of Capital Stock
of any entity entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof.
"Withdrawing Party" shall have the meaning set forth in
Section 4.1(g).
ARTICLE II
ALLOCATION OF LIABILITIES/ARBITRATION OF ACN MAXIMUM AMOUNT
<PAGE>
10
SECTION 2.1. Allocation of Liabilities. The parties agree that
in the event that liabilities are incurred by any party hereto or any Subsidiary
thereof directly relating to, arising out of or resulting from a final,
non-appealable judgment being entered, or any settlement permitted hereby being
entered into, in connection with the Lawsuit, such liabilities ("IRI
Liabilities") shall be allocated among the parties as follows:
(i) ACNielsen agrees to assume exclusive liability for the IRI
Liabilities up to the ACN Maximum Amount; and
(ii) Cognizant and D&B each agree to assume exclusive liability for 50%
of any IRI Liabilities not payable by ACNielsen pursuant to this
Agreement.
(b) No later than five business days after the date on which
any IRI Liabilities are incurred, ACNielsen shall give notice to each of
Cognizant and D&B of the amount of such IRI Liabilities which ACNielsen will
then pay (such amount, the "ACN Payment") and of the amount which ACNielsen has
determined to be the ACN Maximum Amount, and ACNielsen will deliver the ACN
Payment to Counsel of Record for delivery to the plaintiff in the Lawsuit. Each
of Cognizant and D&B agrees to pay to the plaintiff in the Lawsuit on the
Payment Date an amount equal to 50% of the excess (if any) of (x) the aggregate
amount of the IRI Liabilities over (y) the ACN Payment (such amount, the
"Cognizant/D&B Payment"). In the event Cognizant or D&B disputes or disagrees
with ACNielsen's determination of the ACN Maximum Amount, the dispute shall be
resolved and the ACN Maximum Amount determined as described in Section 2.2.
(c) Upon the payment of the Cognizant/D&B Payment pursuant to
the immediately preceding sentence, ACNielsen shall issue a note (an "ACN Note")
to each of Cognizant and D&B. The principal amount of each ACN Note shall be
equal to the Note Amount, as defined below, and each such ACN Note shall be in
the form of Schedule A hereto. Interest on the Note Amount as finally determined
for each ACN Note shall accrue at a rate equal to the rate of interest per annum
publicly announced from time to time by The Chase Manhattan Bank as its prime
rate in effect at the Cognizant/D&B Payment, provided, however, (i) that upon
the determination of the ACN Maximum Amount, if the Note Amount is greater than
50% of the difference between the ACN Maximum Amount and the ACN Payment, then
the Note Amount shall be reduced to and shall equal 50% of such difference, and
(ii) that upon receipt of the aggregate amount of proceeds generated by any
Recapitalization Plan (as defined below) upon completion thereof in accordance
with the first sentence of Section 2.2(g), if the Note Amount (after giving
effect to any adjustment pursuant to clause (i)) is greater than
<PAGE>
11
50% of the amount of such proceeds, then the Note Amount shall be reduced to and
shall equal 50% of the amount of such proceeds. The Note Amount, together with
accrued and unpaid interest thereon, shall be payable upon the earlier of (x)
the completion of the Recapitalization Plan, provided, however, that if the
Recapitalization Plan is structured to generate proceeds which are receivable by
ACNielsen at different times without being contingent upon the completion of any
other aspect of the Recapitalization Plan, then at each time that proceeds are
so received, 50% of such proceeds shall be payable to each of Cognizant and D&B,
and the receipt by Cognizant and D&B of their respective share of such proceeds
shall reduce the then applicable Note Amount accordingly, and (y) the
declaration by the Payee of an ACN Note (as defined therein) that such Note
Amount and interest thereon are immediately due and payable in accordance with
the terms of such ACN Note upon determination being made under Section 2.2(g)
hereof that ACNielsen has not exercised its good faith best efforts to implement
the Recapitalization Plan as soon as practicable, or as otherwise provided by
such ACN Note.
(d) Immediately after the Payment Date, ACNielsen agrees to
grant to, and to cause each of its Subsidiaries to grant to, Cognizant and D&B,
as collateral security for the payment and performance of ACNielsen's
obligations under the ACN Notes and otherwise to indemnify Cognizant and D&B
against any IRI Liabilities as required by this Article II, a perfected first
priority security interest in all of its tangible and intangible assets
(including, without limitation, intellectual property, real property and all of
the capital stock of each of its direct and indirect domestic subsidiaries and
first-tier foreign subsidiaries), to the extent permitted by any other bona fide
security or other similar agreements with third-parties not controlled by
ACNielsen or any of its Affiliates, pursuant to such documents (the "Security
Documents") as Cognizant and D&B shall deem reasonably necessary or advisable to
grant to them a perfected first priority lien on such assets. Each of the
Security Documents shall be in form and substance reasonably satisfactory to
Cognizant and D&B, shall contain terms and conditions which are usual and
customary for similar documents delivered in secured financings and shall
include guarantees executed and delivered by each of ACNielsen's Subsidiaries
which shall be secured by the security interests granted by such Subsidiaries
pursuant to the Security Documents. Without limiting the foregoing, ACNielsen
agrees to take, and to cause each of its Subsidiaries to take, all actions
necessary or advisable to cause the liens granted pursuant to the Security
Documents to be duly perfected in accordance with all applicable requirements of
law, including, without limitation, the filing of financing statements in such
jurisdictions as may be requested by Cognizant and D&B and the delivery to
Cognizant and D&B (or their representative) of any certificates representing
pledged stock, together with undated stock powers executed and delivered in
<PAGE>
12
blank by a duly authorized officer of ACNielsen or the relevant Subsidiary.
SECTION 2.2. Arbitration of ACN Maximum Amount. (a) Cognizant,
D&B and ACNielsen expressly agree that any dispute or disagreement concerning
the ACN Maximum Amount shall be submitted to binding arbitration and agree that
disputes concerning the ACN Maximum Amount shall be resolved by an
internationally recognized investment banking firm, as arbitrator, pursuant to
the procedures and instructions set forth below. Such arbitrator shall be chosen
by ACNielsen, Cognizant and D&B, unless the parties cannot agree within two
business days of the determination of the Cognizant/D&B Payment, in which case
the arbitrator shall be selected through a random drawing, conducted jointly by
the parties, in which each party selects and enters the name of one of the firms
listed on Schedule B hereto and the firm whose name is picked in such drawing
shall be the arbitrator, provided, however, that if the firm picked is a
"Disqualified Firm", the process shall be repeated until the firm picked is not
a Disqualified Firm. A "Disqualified Firm" shall be any firm which could
reasonably be expected to be partial to one or more parties hereto within the
meaning of Section 10(b) of the Federal Arbitration Act. Any firm picked by such
drawing shall, within two business days, disclose to each of the parties hereto
any and all potential conflicts of interest with respect to any of the parties.
The parties shall have two business days from receiving such disclosure to
dispute such firm's impartiality. The parties agree that failure to dispute any
such firm's impartiality within such period shall constitute a waiver of any
right to challenge such firm's impartiality based on facts known or disclosed at
such time. Any dispute concerning whether or not a firm is a Disqualified Firm
shall be resolved by a single arbitrator, who shall be a lawyer, selected by the
parties or, if the parties are unable to agree on an arbitrator within two
business days, then one shall be selected by the American Arbitration
Association in accordance with its most expeditious procedures. The arbitrator
selected to resolve any dispute concerning the impartiality of a proposed
investment banking firm shall be instructed to resolve such dispute within ten
business days pursuant to the dispute resolution procedures set forth in Section
6.2 of the Distribution Agreement. The place of any such arbitration shall be in
New York City, New York.
(b) Cognizant, D&B and ACNielsen agree that any arbitrator or
arbitrators appointed to resolve any dispute pursuant to Article VI of the
Distribution Agreement shall have no right, authority or jurisdiction to
determine the ACN Maximum Amount, to resolve any dispute concerning the
determination of the ACN Maximum Amount, to resolve any other dispute arising
under this Article II, or to prevent, delay or otherwise interfere with any such
dispute arbitration or determination, and that any dispute concerning the
determination of the ACN Maximum Amount shall only be resolved by an investment
banking firm
<PAGE>
13
appointed as arbitrator pursuant hereto. The determination of the ACN Maximum
Amount and the resolution of any other dispute arising under this Article II by
such investment banking firm shall be made without any party hereto asserting
any other claims, offsets, defenses or counterclaims. Each of Cognizant, D&B and
ACNielsen agrees that notwithstanding any other disputes between or among any of
them or any of their respective Subsidiaries under the Distribution Agreement,
any Ancillary Agreement or otherwise, such party will not take any action to
prevent or delay the arbitration contemplated hereby or claim any right to
offset any claim or amount payable hereunder. The parties hereto intend the
provisions to arbitrate set forth in this Article II to be valid, enforceable
and irrevocable. Any award rendered by the arbitrator shall be final and binding
on the parties and their respective Subsidiaries, and judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof in accordance with Section 5.15 hereof.
(c) The investment banking firm chosen as arbitrator to
resolve any disputes concerning the ACN Maximum Amount may perform such
financial analyses and studies and consider such historical and projected
financial information and other data as it deems relevant, and shall afford each
party with an opportunity to be heard and to present financial information and
other data relevant to the determination of the ACN Maximum Amount. Such
investment banking firm shall be directed to make an award determining the ACN
Maximum Amount as the maximum amount which, at the time any such IRI Liabilities
become payable, ACNielsen is able to pay (assuming the amount of the ACN Payment
is zero) after giving effect to (i) any recapitalization or similar corporate
transaction, including, without limitation, asset dispositions and/or increased
borrowings or other capital raising transactions, that may be submitted pursuant
to paragraph (e) below in order to maximize the claims paying ability of
ACNielsen (a "Recapitalization Plan"), and (ii) the payment of interest on the
ACN Notes and investment banking, legal and other fees and expenses reasonably
expected to be incurred in connection with such Recapitalization Plan, without
impairing the financial viability of ACNielsen or A.C. Nielsen Company as either
such company would exist after consummation of the Recapitalization Plan and the
payment of such interest, fees and expenses. The award made by such investment
banking firm shall also allocate the IRI Liabilities based on the ACN Maximum
Amount, as determined by such investment banking firm, strictly in accordance
with Section 2.1 (a) hereof. Such investment banking firm shall consider the
amount of any proceeds to be received by ACNielsen pursuant to any counterclaim
against IRI in connection with the Lawsuit. In addition to the award required by
this paragraph (c), such investment banking firm shall deliver a written opinion
addressed to the Boards of Directors of each of ACNielsen, Cognizant, D&B and
A.C. Nielsen Company (a) confirming any determination of the ACN Maximum Amount
and (b) to the effect that, after taking into account the Recapitalization Plan,
the
<PAGE>
14
payment of interest on the ACN Notes, the payment of related fees and expenses
and the payment of the ACN Maximum Amount as so determined, each of ACNielsen
and A.C. Nielsen Company will be financially viable as described below (the
"Viability Opinion").
(d) Notwithstanding any amount determined by an investment
banking firm as contemplated hereby, the ACN Maximum Amount may never exceed an
amount which would require the portion of the ACN Maximum Amount payable by A.C.
Nielsen Company to exceed an amount which, if paid by A.C. Nielsen Company
immediately prior to the Distribution, would have prevented A.C. Nielsen Company
from immediately after the Distribution paying $1.00 of dividends out of surplus
in compliance with Delaware law.
(e) In connection with the award required by paragraph (c)
above, such investment banking firm shall be directed to prepare and submit to
the parties a Recapitalization Plan which shall be designed to give effect to
the goal of the parties to maximize the ACN Maximum Amount without preventing
such investment banking firm from delivering the Viability Opinion, but which
shall not require any action requiring shareholder approval pursuant to the
Delaware General Corporation Law or the Certificate of Incorporation or By-Laws
of ACNielsen as in effect on the date hereof or any transaction which, in the
sole discretion of such investment banking firm, is not reasonably practicable
in the circumstances.
(f) For purposes of this Section 2.2 and of the Viability
Opinion, financial viability of each of ACNielsen and A.C. Nielsen Company shall
mean the ability of ACNielsen and A.C. Nielsen Company, respectively, after
giving effect to the Recapitalization Plan, the payment of interest on the ACN
Notes, the payment of related fees and expenses and the payment by ACNielsen of
the ACN Maximum Amount and the payment by A.C. Nielsen Company of the portion,
if any, of the ACN Maximum Amount payable by A.C. Nielsen Company, (i) to pay
its debts as they become due and payable and (ii) to finance the current and
anticipated operating and capital requirements of its business, as
reconstituted, for two years from the date any such Recapitalization Plan is
expected to be implemented.
(g) ACNielsen agrees (i) to cause its management to cooperate
with such investment banking firm and (ii) to exercise its good faith best
efforts, and to cause its Board of Directors and management to use good faith
best efforts, to implement the Recapitalization Plan as soon as practicable and
to take all actions which may be necessary or appropriate in connection
therewith. Cognizant and D&B agree that notwithstanding Section 2.1(a), if
ACNielsen has used its good faith best efforts to implement the Recapitalization
Plan as soon as practicable but the sum of the aggregate proceeds generated
thereby and the ACN Payment are less than the ACN Maximum Amount, then, upon
payment of such proceeds to Cognizant and D&B, any such deficit shall be
<PAGE>
15
forgiven, and ACNielsen's obligation to assume the IRI Liabilities up to the ACN
Maximum Amount hereunder shall be deemed discharged. In no event will the
failure of ACNielsen to take the action provided for in the first sentence of
this Section 2.2(g) relieve ACNielsen of its obligation to pay the ACN Maximum
Amount, and ACNielsen agrees that if a determination is made pursuant to the
next succeeding sentence that ACNielsen has not used its good faith best efforts
to implement the Recapitalization Plan as soon as practicable, then (x)
ACNielsen shall remain liable for the full ACN Maximum Amount (less the amount
of any ACN Payment), and (y) immediately after receiving the investment banking
firm's determination referred to in the succeeding sentence, Cognizant and D&B
shall be entitled (a) to enforcement of or entry of a judgment upon the award of
the ACN Maximum Amount (less the amount of any ACN Payment) by the Supreme Court
of the State of New York, New York County, or the United States District Court
for the Southern District of New York in accordance with Section 5.15 hereof or
(b) to declare the Note Amount and interest thereon to be immediately due and
payable in accordance with the terms of such ACN Note. Any dispute concerning
whether or not ACNielsen has used its good faith best efforts to implement the
Recapitalization Plan as promptly as practicable shall be submitted to and
finally determined by the investment banking firm which prepared and submitted
such Recapitalization Plan, in the sole discretion of such investment banking
firm, after giving each of the parties hereto an opportunity to be heard, and
based on its knowledge of the Recapitalization Plan, the manner and degree to
which such plan has actually been implemented and the goal of the parties to
maximize ACN Maximum Amount pursuant hereto. Any such determination shall be
made in writing and delivered to the parties hereto promptly (i) upon the
completion of such Recapitalization Plan or (ii) in response to a request by any
party hereto that such a determination be made.
(h) Without prejudice to such arbitral immunity to which the
arbitrator shall be entitled, each of ACNielsen, Cognizant and D&B agrees to
enter into an indemnification agreement with the investment banking firm engaged
to act as arbitrator to determine the ACN Maximum Amount, to deliver the
Viability Opinion and to make the determination contemplated by Section 2.2(g)
hereof in such form as such investment banking firm may reasonably request and
as may be reasonably customary in the circumstances. Each of the parties further
acknowledges that the fees and expenses of such investment banking firm shall be
included in the expenses used in determining the ACN Maximum Amount, and that
such firm shall look to ACNielsen as the primary obligor for payment of such
fees and expenses and to Cognizant and D&B as secondary obligors. Each of the
parties further agrees that such investment banking firm may retain its own
counsel (the reasonable fees of such counsel to be included in the expenses used
in determining the ACN Maximum Amount) and that such investment banking firm may
rely on such counsel for legal advice and may rely on financial information,
including
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16
projections, provided by ACNielsen management and may assume the accuracy and
reasonableness of any such projections.
SECTION 2.3. Other Agreements Relating to Allocation of IRI
Liabilities. (a) Each of ACNielsen, Cognizant and D&B agrees not to amend or
waive any provision of this Agreement which would have the effect of releasing
Cognizant or D&B of their obligations under Section 2.1 (a)(ii) above unless, at
such time, A.C. Nielsen Company could pay the maximum possible amount of any IRI
Liabilities and immediately thereafter pay $1.00 of dividends out of surplus in
compliance with Delaware law.
(b) If either D&B or Cognizant acquires beneficial ownership
of 20% or more of the outstanding Voting Stock of IRI or any successor thereof
(an "IRI Investor"), then such IRI Investor shall be deemed to be Withdrawing
Party for purposes of and with the consequences set forth in Section 4.1 (g).
(c) Cognizant and D&B agree that if it shall be necessary to
post any bond pending any appeal of the Lawsuit or otherwise in connection
therewith, Cognizant and D&B shall promptly procure such a bond, and each shall
pay 50% of the cost thereof, provided that such cost shall be added to and be
deemed to be part of the IRI Liabilities hereunder.
(d) The directors of A.C. Nielsen Company immediately prior to
the Distribution shall be third-party beneficiaries of the agreements set forth
in Article II.
ARTICLE III
COVENANTS OF ACNIELSEN
SECTION 3.1. Limitation on Restricted Payments. ACNielsen will
not, directly or indirectly, and will not permit any Subsidiary to, make any
Restricted Payment if, at the time of such Restricted Payment, and giving effect
thereto, the aggregate amount of all Restricted Payments (the amount of such
payments, if other than in cash, having been determined in good faith by the
ACNielsen Board of Directors, whose determination shall be conclusive and
evidenced by a Board resolution certified and delivered to each of Cognizant and
D&B) declared and made after the Distribution Date would exceed the sum of:
(a) $15 million; and
(b) 20% of the aggregate Consolidated Net Income (or, if such
Consolidated Net Income is a negative number, 100% of such consolidated net
loss) of ACNielsen accrued on a cumulative basis during the period beginning on
the Distribution Date and ending on the last day of ACNielsen's last fiscal
quarter ending prior to the date of such proposed Restricted Payment (except
that the amount, if any, of consolidated net loss shall not
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17
reduce the $15 million amount available pursuant to clause (a) above); provided,
however, that the foregoing provisions will not prevent the payment of a
dividend within 60 days after the date of its declaration if at the date of
declaration such payment was permitted by the foregoing provisions.
SECTION 3.2. Limitation on Transactions with Related Persons.
At any time when the Voting Stock of ACNielsen is not listed and traded on The
New York Stock Exchange, The American Stock Exchange or the National Market
System of the National Association of Securities Dealers Automated Quotation
System, ACNielsen will not, and will not permit any of its Subsidiaries to,
directly or indirectly, enter into or suffer to exist any transaction or series
of related transactions (including, without limitation, the sale, purchase,
exchange or lease of assets, property or services) with any Related Person
(other than a wholly owned Subsidiary) unless such transaction or series of
transactions is on terms that are no less favorable to ACNielsen or such
Subsidiary, as the case may be, than would be available in a comparable
transaction with an unrelated third party and (a) where such transaction or
series of transactions involves aggregate consideration (including, without
limitation, the assumption of indebtedness) in excess of 2.5% of ACNielsen's
Consolidated Net Worth as of the end of the prior fiscal year, such transaction
or series of transactions is approved by a majority of the Board of Directors of
ACNielsen, including the approval of a majority of the independent,
disinterested directors, and (b) where such transaction or series of
transactions involves aggregate consideration (including, without limitation,
the assumption of indebtedness) in excess of 7.5% of ACNielsen's Consolidated
Net Worth as of the end of the prior fiscal year, ACNielsen also delivers to
Cognizant and D&B an opinion from an internationally recognized investment
banking firm as to the fairness of such transaction or series of transactions to
ACNielsen or such Subsidiary from a financial point of view (without
considering, for purposes of such fairness opinion, any impact which such
transaction may have on the ACN Maximum Amount). For purposes of the foregoing,
a series of related transactions will be deemed to include, without limitation,
a series of transactions if, within six months of closing one transaction,
another transaction is entered into with the same Person or with a successor or
affiliate thereof. Notwithstanding the foregoing, this provision will not apply
to (i) any transactions contemplated by the Distribution Agreement or any
Ancillary Agreement; (ii) compensation or employee benefit arrangements with any
officer or director of ACNielsen; and (iii) any transaction entered into in the
ordinary course of business by ACNielsen or a wholly owned Subsidiary with a
wholly owned Subsidiary.
SECTION 3.3. Merger and Consolidation. ACNielsen may not
engage in any Business Combination with any Person, unless
<PAGE>
18
(a) either (i) ACNielsen shall be the continuing corporation and the Persons
who were ACNielsen stockholders immediately prior to transaction or series of
transactions continue to hold more than 50% of the Voting Stock of the
continuing corporation upon consummation of such transaction or series of
transactions, or (ii) (A) such Person and such Person's Parent, if any, (x)
shall be a corporation, partnership or trust organized and validly existing
under the laws of the United States or any State thereof or the District of
Columbia or (y) shall duly execute and deliver a consent to jurisdiction in
substantially the form of Schedule C hereto, (B) such Person and, if such Person
has a Parent, such Parent shall expressly assume all of ACNielsen's obligations
hereunder, (C) such Person, or such Person's Parent, if any, shall be included
with ACNielsen for purposes of determining the ACN Maximum Amount and (D) in the
event clause (ii)(y) is applicable, a certificate signed by ACNielsen's Chief
Executive Officer and by its General Counsel is delivered to each of Cognizant
and D&B at least 30 days prior to the consummation of the proposed transaction
which certifies that the consent to jurisdiction contemplated by such clause
(ii)(y) has been executed and will take effect on the consummation of such
transaction and which certificate attaches thereto a duly executed copy of such
consent to jurisdiction; (b) immediately after such transaction or each element
of such series, ACNielsen and its Subsidiaries or such Person, or such Person's
Parent, if any, and its Subsidiaries shall have a Consolidated Net Worth equal
to or greater than the Consolidated Net Worth of ACNielsen and its Subsidiaries
immediately prior to such transaction or element; and (c) such transaction or
series of transactions is permitted under Section 3.4 below.
SECTION 3.4. Limitation on Certain Transactions. (a) ACNielsen
will not enter into any Strategic Transaction or engage in any Business
Combination unless the Chief Executive Officer or the Chief Financial Officer of
ACNielsen delivers a certificate to Cognizant and D&B certifying that, after
giving pro forma effect to such Strategic Transaction or Business Combination,
the Fixed Charge Coverage Ratio of ACNielsen, or, in the case of a Business
Combination, the Fixed Charge Coverage Ratio of the continuing corporation
following such Business Combination (ACNielsen or such continuing corporation,
as the case may be, referred to as the "Relevant Party"), in each case
calculated as set forth in Section 3.4(c) below, is greater than 4 to 1, which
certificate shall be accompanied by a letter from the Relevant Party's
independent accountants confirming that such Fixed Charge Coverage Ratio has
been correctly calculated in accordance with the requirements hereof and based
on financial statements prepared in accordance with U.S. generally accepted
accounting principles.
(b) In addition, ACNielsen will not enter into any Strategic
Transaction or engage in any Business Combination involving aggregate
consideration (including, without limitation,
<PAGE>
19
the assumption of indebtedness) in excess of $50 million, unless the following
conditions are met:
(i) the Board of Directors of each of ACNielsen,
Cognizant and D&B has received an opinion in writing from an
internationally recognized investment bank chosen by ACNielsen, to the
effect that such transaction is fair, from a financial point of view,
to ACNielsen (without considering, for purposes of such fairness
opinion, any impact which such transaction may have on the ACN Maximum
Amount); and
(ii) in the case of a disposition of a business, an
equity interest in a business or the disposition of assets comprising a
business, which disposition does not involve the simultaneous equity
investment in a joint venture entity which is the acquirer of such
business, equity investment or assets, the consideration therefor is
limited to cash, Cash Equivalents and/or marketable securities which
are freely tradable on a public stock exchange or inter-dealer
quotation system.
(c) The Fixed Charge Coverage Ratio shall be for the most
recent four consecutive full fiscal quarters ending prior to such certification,
taken as one period, and calculated on the assumptions that (i) any Indebtedness
to be incurred in connection with an acquisition or Business Combination had
been incurred on the first day of such four-quarter period, (ii) any other
Indebtedness incurred, repaid or retired by the Relevant Party and its
Subsidiaries since the beginning of such four-quarter period was incurred,
repaid or retired, as the case may be, on the first day of such four-quarter
period (except that, in making such computation, the amount of Indebtedness
under any revolving credit facility outstanding on the date of such calculation
shall be computed based on (A) the average daily balance of such Indebtedness
during such four-quarter period or during such shorter included period when such
facility was outstanding or (B) if such facility was created after the end of
such four-quarter period, the average daily balance of such Indebtedness during
the period from the date of creation of such facility to the date of the
calculation) and (iii) any acquisition or disposition by the Relevant Party or
its Subsidiaries of any assets out of the ordinary course of business or of any
company, division or line of business, in each case since the first day of its
last four completed fiscal quarters, had been consummated on such first day of
such four-quarter period.
(d) For purposes of the foregoing, any issuance or transfer of
any Capital Stock of a wholly owned Subsidiary which is a holder of obligations
of a Subsidiary that constitute Indebtedness shall be deemed an incurrence of
Indebtedness if such issuance or transfer results in such wholly owned
Subsidiary no longer being a wholly owned Subsidiary.
<PAGE>
20
(e) Paragraphs (a) and (b) above shall not apply to any
transaction which is contemplated by the Distribution Agreement or any Ancillary
Agreement.
SECTION 3.5. Limitation on Reincorporation. ACNielsen will
not, without the prior written consent of each of Cognizant and D&B,
re-incorporate or re-organize its corporate form under the laws of a
jurisdiction other than the State of Delaware unless ACNielsen, as
re-incorporated or re-organized under the laws of such other jurisdiction, could
take substantially the same actions without stockholder (or equity holder)
consent or approval under the laws of such jurisdiction and ACNielsen's then
applicable certificate of incorporation, charter, by-laws or other
organizational documents as ACNielsen could take without stockholder consent or
approval under the General Corporation Law of the State of Delaware and
ACNielsen's certificate of incorporation and by-laws as of the date hereof, and
counsel reasonably satisfactory to Cognizant and D&B confirms the foregoing in
writing to the reasonable satisfaction of Cognizant and D&B.
ARTICLE IV
JOINT DEFENSE PROVISIONS
SECTION 4.1. Counsel. (a) ACNielsen shall select counsel of
record to represent ACNielsen, D&B and Cognizant (which reference to Cognizant
shall be deemed to include I.M.S. International, Inc.) in the Lawsuit ("Counsel
of Record"). Counsel of Record shall communicate and consult with all parties in
connection with the defense of the Lawsuit, but shall be subject to direction
only from ACNielsen.
(b) D&B and Cognizant shall be free to retain at their own
expense counsel to monitor the Lawsuit ("D&B Counsel" and "Cognizant Counsel"
respectively, and, collectively, "Party Counsel"). Counsel of Record shall
communicate and consult with any Party Counsel. Neither D&B Counsel nor any
other counsel retained by D&B shall appear in the Lawsuit unless D&B shall have
become a Withdrawing Party under Section 4.1(g) hereof. Neither Cognizant
Counsel nor any other counsel retained by Cognizant shall appear in the Lawsuit
unless Cognizant shall have become a Withdrawing Party under Section 4.1(g)
hereof.
(c) Counsel of Record and Party Counsel shall make available
to other such counsel and any party confidential oral information and memoranda
or other documents related to the defense of the Lawsuit ("Defense Materials")
to the extent that they deem it prudent and consistent with the objectives of
the joint defense provided for herein.
(d) The Defense Materials obtained by counsel for any party
shall remain confidential and shall be protected from disclosure to any third
party except as provided herein.
<PAGE>
21
(e) Counsel of Record and Party Counsel shall not disclose
Defense Materials or the contents thereof to anyone except their respective
clients, expert witnesses and consultants, counsel for other parties to the
Agreement, or attorneys, paralegals and staff within their firms, without first
obtaining the consent of Counsel of Record and Party Counsel whose clients (or
who themselves) may be entitled to claim any privilege with respect to such
materials. All persons permitted access to Defense Materials shall be
specifically advised that the Defense Materials are privileged and subject to
the terms of this Agreement.
(f) If any other person or entity requests or demands, by
subpoena or otherwise, any Defense Materials from any of the parties or their
counsel, the recipient of the request will immediately notify Counsel of Record
and Party Counsel, and each such counsel shall take all steps necessary to
permit the assertion of all applicable rights and privileges with respect to
such Defense Materials and shall cooperate fully with such other counsel in any
proceeding relating to the disclosure of Defense Materials.
(g) If D&B or Cognizant decides that it no longer wishes to
engage in a joint defense (a "Withdrawing Party"), the Withdrawing Party
immediately shall notify the other parties to the Agreement in writing and shall
simultaneously return to Counsel of Record the originals and all copies of
Defense Materials provided to it. In such event, the Withdrawing Party shall no
longer have any rights to obtain Defense Materials, but shall retain other
rights and obligations set forth in the Agreement, including the obligations to
share Defense Costs pursuant to Section 4.1(h) below, unless otherwise
specifically provided. The Withdrawing Party shall lose its right, if any, to
indemnification by ACNielsen under this Agreement and shall be liable for one
third of the amount of any IRI Liabilities incurred in the Lawsuit. The
Withdrawing Party shall continue to be obligated to pay 50% of any IRI
Liabilities in excess of the amount payable by ACNielsen pursuant to this
Agreement. ACNielsen shall have the absolute right to continue to be represented
in all matters in and affecting the Lawsuit by Counsel of Record. All parties
expressly agree that Counsel of Record may continue to represent parties that
have not withdrawn, and all parties agree and acknowledge that receipt and use
of Defense Materials by Counsel of Record or any action taken or knowledge
gained by Counsel of Record in connection with its representation of a
Withdrawing Party shall not be grounds for disqualification of Counsel of Record
as counsel for any other party to this Agreement in the Lawsuit.
(h) It is the intention of the parties that ACNielsen, D&B and
Cognizant shall share equally the costs of defending the Lawsuit, including
attorneys' fees, expert witness and consultants fees and all other costs and
expenses for the defense of the Lawsuit (or prosecution of any counterclaim to
the
<PAGE>
22
Lawsuit) duly incurred by ACNielsen or Counsel of Record ("Defense Costs").
ACNielsen shall forward on a monthly basis a statement of the Defense Costs
incurred in the preceding month and D&B and Cognizant shall each reimburse
ACNielsen for one third of such Defense Costs promptly thereafter. In the event
that ACNielsen obtains reimbursement for Defense Costs from IRI in accordance
with a certain Settlement Agreement and Release between ACNielsen and IRI, dated
as of July 1, 1985, or for any other reason, ACNielsen shall repay to each of
D&B and Cognizant one third of such reimbursement up to the extent of their
respective payments.
(i) No party may enter into any settlement agreement in the
Lawsuit without express consent in writing of the other parties, except that
ACNielsen may, if it so chooses, enter into a full and final settlement of the
Lawsuit if ACNielsen agrees to pay the full amount of the settlement and obtains
a full and final release of D&B and Cognizant with respect to the Lawsuit. Such
a settlement shall impose no obligation on any other party to this Agreement
without the party's express consent in writing. In the event that any party
receives a settlement proposal with respect to the Lawsuit, it shall immediately
communicate the substance of the offer to the Counsel of Record.
(j) All other parties to this Agreement shall cooperate with
ACNielsen in the defense of the Lawsuit and the prosecution of any counterclaim
therein, including providing, or causing to be provided, records or witnesses as
soon as practicable after receipt of any request therefor from or on behalf of
ACNielsen.
ARTICLE V
MISCELLANEOUS
SECTION 5.1. Complete Agreement; Construction. This Agreement,
including the Exhibit hereto, shall constitute the entire agreement between the
parties with respect to the subject matter hereof and shall supersede all
previous negotiations, commitments and writings with respect to such subject
matter. In the event and to the extent that there shall be a conflict between
the provisions of this Agreement and the provisions of the Distribution
Agreement or any other agreement, this Agreement shall control.
SECTION 5.2. Ancillary Agreements. This Agreement is not
intended to address, and should not be interpreted to address, the matters
specifically and expressly covered by the Ancillary Agreements.
SECTION 5.3. Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective
<PAGE>
23
when one or more such counterparts have been signed by each of the parties and
delivered to the other parties.
SECTION 5.4. Survival of Agreements. Except as otherwise
contemplated by this Agreement, all covenants and agreements of the parties
contained in this Agreement shall survive the Distribution Date.
SECTION 5.5. Notices. All notices and other communications
hereunder shall be in writing and hand delivered or mailed by registered or
certified mail (return receipt requested) or sent by any means of electronic
message transmission with delivery confirmed (by voice or otherwise) to the
parties at the following addresses (or at such other addresses for a party as
shall be specified by like notice) and will be deemed given on the date on which
such notice is received:
To The Dun & Bradstreet Corporation:
One Diamond Hill Road
Murray Hill, NJ 07974
Telecopy: (908) 665-5803
Attn: General Counsel
To Cognizant Corporation:
200 Nyala Farms
Westport, Connecticut 06880
Telecopy: (203) 222-4201
Attn: General Counsel
To ACNielsen Corporation:
177 Broad Street
Stamford, Connecticut 06901
Telecopy: (203) 961-3179
Attn: General Counsel
SECTION 5.6. Waivers. The failure of any party to require
strict performance by any other party of any provision in this Agreement will
not waive or diminish that party's right to demand strict performance thereafter
of that or any other provision hereof.
SECTION 5.7. Amendments. Subject to the terms of Sections
2.3(a) and 5.10 hereof, this Agreement may not be modified or amended except by
an agreement in writing signed by each of the parties hereto.
<PAGE>
24
SECTION 5.8. Assignment. This Agreement shall not be
assignable, in whole or in part, directly or indirectly, by any party hereto
without the prior written consent of the other parties hereto, and any attempt
to assign any rights or obligations arising under this Agreement without such
consent shall be void.
SECTION 5.9. Successors and Assigns. The provisions to this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and permitted assigns.
SECTION 5.10. Termination. Subject to the terms of Section
2.3(a), this Agreement may be terminated and may be amended, modified or
abandoned at any time prior to the Distribution by and in the sole discretion of
D&B. In the event of such termination, no party shall have any liability of any
kind to any other party or any other person. Subject to Section 2.3(a), after
the Distribution, this Agreement may not be terminated except by an agreement in
writing signed by the parties.
SECTION 5.11. Third Party Beneficiaries. Except as provided in
Article II, this Agreement is solely for the benefit of the parties hereto and
their respective Subsidiaries and Affiliates and should not be deemed to confer
upon third parties any remedy, claim, liability, reimbursement, claim of action
or other right in excess of those existing without reference to this Agreement.
SECTION 5.12. Title and Headings. Titles and headings to
sections herein are inserted for the convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
SECTION 5.13. Exhibits. The Exhibit shall be construed with
and as an integral part of this Agreement to the same extent as if the same had
been set forth verbatim herein.
SECTION 5.14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK.
SECTION 5.15. Consent to Jurisdiction. Each of the parties
irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of
the State of New York, New York County, and (b) the United States District Court
for the Southern District of New York, for the purposes of any suit, action or
other proceeding arising out of this Agreement or any transaction contemplated
hereby. Each of the parties agrees to commence any action, suit or proceeding
relating hereto either in the United States District Court for the Southern
District of New York or if such suit, action or other proceeding may not be
brought in such
<PAGE>
25
court for jurisdictional reasons, in the Supreme Court of the State of New York,
New York County. Each of the parties further agrees that service of any process,
summons, notice or document by U.S. registered mail to such party's respective
address set forth above shall be effective service of process for any action,
suit or proceeding in New York with respect to any matters to which it has
submitted to jurisdiction in this Section 5.15. Each of the parties irrevocably
and unconditionally waives any objection to the laying of venue of any action,
suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in (i) the Supreme Court of the State of New York, New York
County, or (ii) the United States District Court for the Southern District of
New York, and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum. This
consent to jurisdiction shall not be construed to be and is not in any way an
exception to the agreement of the parties to resolve any dispute concerning the
determination ACN Maximum Amount exclusively through the arbitration procedures
set forth in Article II hereof.
SECTION 5.16. Dispute Resolution. The investment banking firm
engaged pursuant to Section 2.2 shall have the authority to act as an arbitrator
to resolve any dispute concerning the ACN Maximum Amount or any other provision
contained in Article II. Any dispute or disputes arising out of or in connection
with Articles III, IV or V of this Agreement shall be settled in accordance with
the dispute resolution mechanisms set forth in Article VI of the Distribution
Agreement.
SECTION 5.17. Severability. In the event any one or more of
the provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
SECTION 5.18. Further Assurances. From time to time, as and
when reasonably requested by any other party hereto, each party hereto shall
execute and deliver, or cause to be executed and delivered, all such documents
and instruments and shall take, or cause to be taken, all such further or other
actions as such other party may reasonably deem necessary or desirable to effect
the purposes of this Agreement and the transactions contemplated hereunder.
IN WITNESS WHEREOF, the parties have duly executed and entered
into this Agreement, as of the date first above written.
<PAGE>
26
THE DUN & BRADSTREET CORPORATION
by
-----------------------
Name:
Title:
COGNIZANT CORPORATION
by
-----------------------
Name:
Title:
ACNIELSEN CORPORATION
by
-----------------------
Name:
Title:
<TABLE>
<CAPTION>
EXHIBIT 11
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
ON A FULLY DILUTED BASIS
AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA 1996 1995 1994
---- ---- ----
(AVERAGE SHARE DATA IN THOUSANDS)
<S> <C> <C> <C>
Weighted average number of shares............................................... 170,017 169,522 169,946
Dilutive effect of shares issuable as of year-end under stock option
plans, stock appreciation rights and restricted stock plan................... 1,430 2,061 1,668
Adjustment of shares applicable to stock options and stock
appreciation rights exercised during the year................................ 129 25 50
---------- ----------- -------------
Weighted average number of shares on a fully diluted basis...................... 171,576 171,608 171,664
========== =========== =============
Income(Loss) from Continuing Operations......................................... $(27.3) $217.5 $368.6
Income(Loss) from Discontinued Operations....................................... (17.1) 103.3 260.9
------------------------------------------------
Net Income(Loss)................................................................ $(44.4) $320.8 $629.5
================================================
Earnings(Loss) Per Share of Common Stock on a Fully Diluted Basis:
Continuing Operations.......................................................... $(0.16) $1.27 $2.15
Discontinued Operations........................................................ (0.10) 0.60 1.52
-- --
------------------------------------------------
Earnings(Loss) Per Share of Common Stock........................................ $(0.26) $1.87 $3.67
================================================
</TABLE>
A-1
The Dun & Bradstreet Corporation and Subsidiaries
FINANCIAL REVIEW
- - --------------------------------------------------------------------------------
OVERVIEW
On November 1, 1996, The Dun & Bradstreet Corporation (the "Company")
reorganized into three publicly traded independent companies by spinning off
through a tax-free distribution two of its businesses to shareholders (the
"Distribution"). The Distribution resulted in the following three companies: 1)
The Dun & Bradstreet Corporation, consisting of Dun & Bradstreet, the operating
company ("D&B"), Moody's Investors Service ("Moody's") and Reuben H. Donnelley
("RHD"); 2) ACNielsen Corporation ("ACNielsen"); and 3) Cognizant Corporation
("Cognizant"), consisting of IMS International, Inc. ("IMS"), Gartner Group,
Nielsen Media Research, Pilot Software, Cognizant Technology Solutions
Corporation, Cognizant Enterprises and Erisco. In connection with the
reorganization, Dun & Bradstreet Software ("DBS"), NCH Promotional Services
("NCH") and American Credit Indemnity ("ACI") were divested. On October 10,
1996, following receipt of a ruling from the Internal Revenue Service that the
transaction would be tax-free to the Company and its U.S. shareholders, the
Company's Board of Directors declared a dividend distribution to shareholders of
record on October 21, 1996, consisting of one share of Cognizant common stock
for each share of the Company's common stock and one share of ACNielsen common
stock for every three shares of the Company's common stock held on such record
date. The Distribution was effected on November 1, 1996. These transactions
resulted in a noncash dividend which reduced shareholders' equity by $1,240.9
million.
For purposes of effecting the transaction and governing certain of the
on-going relationships among the Company, Cognizant and ACNielsen after the
Distribution and to provide for an orderly transition, the three new companies
have entered into various agreements, as described in Note 2 to the Consolidated
Financial Statements.
Pursuant to Accounting Principles Board Opinion No. 30, "Reporting the
Results of Operations-Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions," the consolidated financial statements of the Company have been
reclassified to reflect the dispositions of the companies that comprised the
Company's Marketing Information Services, Software Services and Other Business
Services business segments. These segments include the businesses that made up
Cognizant and ACNielsen, along with DBS and NCH. Accordingly, the revenues,
costs and expenses, assets and liabilities and cash flows of Cognizant,
ACNielsen, DBS and NCH have been excluded from the respective captions in the
Consolidated Statements of Operations, Consolidated Balance Sheets and
Consolidated Statements of Cash Flows. The net operating results of these
entities have been reported, net of applicable income taxes, as "Income (Loss)
from Discontinued Operations"; the net assets of these entities have been
reported as "Net Assets of Discontinued Operations"; and the net cash flows of
these entities have been reported as "Net Cash (Used in) Provided by
Discontinued Operations."
RESULTS OF OPERATIONS
1996 VERSUS 1995
Consolidated Results
The Company incurred a loss from continuing operations of $27.3 million or $.16
per share compared with earnings of $217.5 million or $1.28 per share in 1995.
These results include all corporate overhead expenses associated with the
Company prior to the Distribution and certain transaction-related expenses.
Operating revenues from continuing operations for the year ended December
31, 1996 of $2,159.2 million were essentially unchanged from $2,158.2 million
for 1995. Excluding the results of divested businesses, revenues from continuing
operations increased 5.2% from $1,989.0 million in 1995 to $2,092.3 million in
1996.
Operating income in 1996 of $197.6 million decreased from $398.6 million in
the prior year. Included in operating income in 1996 was $161.2 million in
transaction costs incurred in connection with the Company's reorganization.
These costs included $75.0 million for professional and consulting fees and
$86.2 million primarily for settlement of executive compensation plans and
retention bonuses. Also included in 1996 operating income are the losses
incurred as a result of the sales of the Proprietary West operations in Southern
California of RHD ("P-West") and ACI . The sales were completed in May and
October of 1996, respectively. In connection with these divestitures, the
Company recorded within operating costs a charge of $96.7 million ($68.2 million
for ACI and $28.5 million for P-West). 1995 operating costs included gains on
both the sales of Interactive Data
F-1
<PAGE>
- - --------------------------------------------------------------------------------
Corporation ("IDC") of $90.0 million and warrants received in connection with
the previous divestiture of Donnelley Marketing of $28.0 million, offset by a
non-recurring charge of $206.2 million recorded in the fourth quarter of 1995,
described below.
Operating costs and selling and administrative expenses, excluding the
effects of divestitures, transaction costs associated with the reorganization
and the fourth quarter non-recurring charge increased 9.7% in 1996 compared with
1995. The increase reflects the Company's investments in new products and
services.
The Company reported 1996 non-operating expense-net of $71.2 million
compared with non-operating expense-net of $68.0 million in 1995. The increase
was attributable, in part, to lower interest income earned due to the high cash
requirements of the reorganization and the sale of ACI, which held $111.5
million of marketable securities at the date of the sale. Despite lower reported
pre-tax income, the provision for income taxes was $153.7 million, 35.9% higher
than the prior year. The Company's effective tax rate was 121.6% in 1996 and
34.2% in 1995. In 1996, the higher effective tax rate primarily reflects the
non-deductibility of certain transaction costs, lower tax benefits on losses
from the sales of divested businesses, and certain foreign taxes incurred in
connection with the reorganization. The underlying effective tax rate excluding
these one-time items for 1996 was approximately 34%.
Income from discontinued operations, net of taxes was $141.1 million in
1996 compared with $103.3 million in the prior year. The Company also reported a
loss on the disposition of DBS which was completed in the fourth quarter of 1996
of $220.6 million ($158.2 million after-tax). The Company also sold NCH in the
fourth quarter of 1996, with no resulting gain or loss recorded on the
disposition. The 1995 results were impacted by the fourth quarter non-recurring
charge of $188.6 million after-tax.
Segment Results
Risk Management Services reported 1996 revenue growth of 2.7% to $1,781.7
million from $1,734.1 million in 1995. Excluding the results of divested
businesses, revenue growth would have been up 6.6% from 1995. Moody's reported
revenues of $385.3 million in 1996, up 16.9% from 1995, driven by strong
corporate and municipal bond market volumes during the year. D&B 's 1996
revenues were up 4.0% to $1,331.5 million. Domestic revenues were up 4.0%,
including increases in Marketing Information Services of 9.7% and Receivable
Management Services of 12.2%. Europe and other regions were up 3.1% and 7.8%,
respectively. Operating income for the segment was $327.1 million in 1996
compared with $449.5 million in 1995. Operating income in 1996 included a $68.2
million loss on the sale of ACI , while in 1995 the operating income included a
$90.0 million gain on the sale of IDC offset by $45.6 million attributable to
the fourth quarter non-recurring charge.
Directory Information Services reported a 10.9% decrease in operating
revenues to $377.5 million from $423.7 million in 1995. Excluding the results of
P-West, operating revenues would have been flat. Operating income decreased
24.3% to $141.1 million from $186.3 million in 1995 due to a reduction in the
contractual share of earnings in the DonTech partnership and lower commission
rates. Included in 1996 operating income was a $28.5 million loss on the sale of
P-West. Additionally, higher costs associated with the transition to the new
Raleigh production facility have negatively affected 1996 operating income.
Operating income in 1995 included $17.7 million of the fourth quarter
non-recurring charge.
1995 versus 1994
Consolidated Results
The Company's earnings per share from continuing operations in 1995 were $1.28,
down from $2.17 reported in 1994. Included in 1995 was a non-recurring charge of
$206.2 million ($135.6 million after-tax) or $.80 per share recorded in the
fourth quarter. Income from continuing operations in 1995 decreased to $217.5
million from $368.6 million in 1994, primarily as a result of the charge noted
above.
In the fourth quarter of 1995, the Company recorded within operating costs
a charge of $206.2 million. This charge primarily reflected an impairment loss
in connection with the adoption of the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No. 121"),
($100.9 million); a provision for postemployment benefits ($58.1 million) under
the Company's severance plan; an accrual for contractual obligations that have
no future economic benefits and for penalties to cancel certain contracts ($23.1
million); and other asset revaluations ($24.1 million).
This non-recurring charge evolved from the Company's annual budget and
strategic planning process in the fall of
F-2
<PAGE>
The Dun & Bradstreet Corporation and Subsidiaries
Financial Review continued
- - --------------------------------------------------------------------------------
1995, which indicated, based on preliminary results, that the Company's
consolidated long-term profitability objectives would not be achieved.
Accordingly, a more comprehensive review was undertaken to review the Company's
underlying cost structure, products and services and assets used in the
business. Based upon such analysis, management, having the authority to approve
such business decisions, committed in December 1995 to a plan to discontinue
certain product lines and dispose of certain other assets, resulting in the
charge. These decisions were not reversed or modified as a result of the
Company's reorganization plan, which was reviewed and approved by the Board of
Directors on January 9, 1996.
SFAS No. 121 requires that long-lived assets and certain intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. In connection with
this review, the Company recorded an impairment loss of $100.9 million
reflecting the revaluation of certain revenue, administrative and production
systems, notes receivable and other intangibles that were replaced or no longer
used at the Company.
The provision for postemployment benefits of $58.1 million represents the
cost of workforce reductions. The accrual of $23.1 million is for contractual
obligations that have no future economic benefits and penalties to cancel
certain contracts. In addition, the Company recognized a charge of $24.1 million
principally related to the write-off of fixed assets.
Revenues from continuing operations increased 1.6% in 1995 to $2,158.2
million from $2,124.9 million in 1994.
Operating income from continuing operations in 1995 decreased to $398.6
million from $594.9 million in 1994, primarily as a result of the non-recurring
charge of $206.2 million previously described. Included in operating income in
1995 was a $28.0 million gain related to the sale of warrants received in
connection with the divestiture of Donnelley Marketing and a gain of $90.0
million relating to the sale of IDC . Operating income in 1994 included several
non-recurring gains and charges described as follows. The assets of DunsNet were
sold for a pre-tax gain of $36.0 million, and Thomson Directories Ltd. ("TDL")
was sold for a pre-tax gain of $33.2 million. The Company took measures to
improve future performance by accelerating the introduction of newer
technologies and to restructure certain operations and businesses, which
resulted in an expense of $67.9 million. In addition, a change in eligibility
requirements for the Company's postretirement medical plan resulted in a
curtailment gain of $13.7 million, which was largely offset by a substantial
increase in spending for new-product development.
Operating costs and selling and administrative expenses, excluding the
effect of divestitures, the non-recurring charge and restructuring expense,
increased 14.7% in 1995 compared with 1994, reflecting the Company's investments
in new revenue growth initiatives and the impact of inflation in Latin America.
The Company reported 1995 non-operating expense-net of $68.0 million
compared with non-operating expense- net of $35.0 million in 1994. The increase
in non-operating expense-net in 1995 was due, in part, to higher U.S. interest
expense from higher average borrowings and higher rates. Other expense-net
included benefits from tax sharing agreements with an Alaska Native Corporation
of $6.0 million and $9.8 million in 1995 and 1994, respectively.
Income from discontinued operations, net of income taxes, was $103.3
million in 1995, down from $260.9 million in the prior year. The decline was a
result of the 1995 fourth quarter non-recurring after-tax charge of $188.6
million attributable to the discontinued operations, as well as the decline in
operating performance at several of the discontinued businesses.
Segment Results
Risk Management Services reported 1995 revenue growth of 8.0% to $1,734.1
million from $1,605.7 million in 1994. Moody's reported a 4.9% increase in 1995
revenue to $329.7 million, principally due to weakness in corporate-bond volumes
and public-debt refundings in the first half of the year. D&B 's 1995 revenue
was up 8.2% to $1,280.5 million. Revenues at D&B U.S. increased 6.1% to $753.2
million, including increases in Marketing Information Services of 13.5% and
Receivable Management Services of 7.7%. D&B Europe and other regions reported
11.8% and 8.9% revenue growth, respectively. Operating income for the segment
was essentially unchanged at $449.5 million, compared with $447.0 million in
1994. Segment profits in 1995 also were dampened by weakness in D&B 's
international operations, including the impact of integrating certain
acquisitions and the effects of weak economic conditions in Latin America.
F-3
<PAGE>
- - --------------------------------------------------------------------------------
Directory Information Services reported a 3.7% decrease in 1995 revenue to
$423.7 million from $440.1 million in 1994 as a result of changes in contractual
arrangements with telephone companies. Operating income for the segment
decreased by 24.9% to $186.3 million from $248.0 million in 1994. In 1995,
operating income was negatively affected by the non-recurring charge in the
fourth quarter. Additionally, 1994 operating income included a $33.2 million
gain on the sale of TDL .
ADOPTION OF STATEMENTS OF FINANCIAL
ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"), which
requires that companies with stock-based compensation plans either recognize
compensation expense based on new fair value accounting methods or disclose
pro-forma income and earnings per share data, assuming the fair value method had
been applied. The Company adopted the disclosure option of SFAS No. 123 in 1996
and has disclosed pro-forma income and earnings per share, assuming the fair
value method had been applied. (See Note 8 to the Consolidated Financial
Statements.)
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share" ("SFAS
No. 128"), which simplifies existing computational guidelines, revises
disclosure requirements and increases the comparability of earnings per share
data on an international basis. The Company is currently evaluating the new
statement; however, the impact of adoption of SFAS No. 128 on the Company's
financial statements is not expected to be significant. This statement is
effective for financial statements for periods ending after December 15, 1997
and requires restatement of all prior-period earnings per share data presented.
RESTRUCTURING
During 1993 and 1994, the Company initiated several restructuring actions to
improve operating performance. During 1996, the Company substantially completed
these restructuring actions. At December 31, 1996, the remaining accruals were
not significant. (See Note 4 to the Consolidated Financial Statements.)
NON-U.S. OPERATING AND MONETARY ASSETS
The Company has operations in 37 countries. The Company's non-U.S. operations
generated approximately 28% of total revenues, including approximately 22% from
European operations. Thirty-four percent of the Company's assets are located
outside of the U.S. and no one country had a significant concentration of cash.
The Company enters into foreign exchange forward contracts to hedge against
the effects of exchange rate movements on cross-border transactions denominated
in foreign currencies. At December 31, 1996, the Company had approximately $114
million in foreign exchange forward contracts outstanding with various
expiration dates through March 1997. (See Note 6 to the Consolidated Financial
Statements.)
LIQUIDITY AND FINANCIAL POSITION
The Company generates significant, predictable cash flows from its business
operations. Management believes that these cash flows are sufficient to fund its
operating needs, service debt and pay dividends. At December 31, 1996, cash and
cash equivalents totaled $127.9 million, a decrease from $147.1 million in 1995.
Net cash provided by operating activities decreased 15.8% to $196.3 million in
1996, due to the high cash requirements of the reorganization.
Net cash used in investing activities totaled $27.7 million in 1996
compared with net cash provided by investing activities of $42.6 million in
1995. In 1996, the Company received proceeds from sales of ACI and P-West of
$115.2 million that were offset by capital expenditures and additions to
computer software and other intangibles of $170.1 million. In 1995, proceeds
received from the sales of IDC and Donnelley Marketing warrants were $230.0
million, and expenditures for capital additions, computer software and other
intangibles totaled $235.2 million.
In the fourth quarter of 1996, in conjunction with the Distribution, the
Company redeemed $575.0 million of redeemable partnership interests in cash and
$50.0 million of redeemable partnership interests (included in the net assets of
discontinued operations at December 31, 1995) were assumed by Cognizant. This
redemption eliminated the third-parties' interest in the Company's investment
partnerships. (See Note 11 to the Consolidated Financial Statements.) To finance
the redemption, the Company increased its short-term borrowings.
F-4
<PAGE>
The Dun & Bradstreet Corporation and Subsidiaries
Financial Review continued
- - --------------------------------------------------------------------------------
The Company obtained two committed bank facilities during 1996. One of the
facilities permits borrowings of up to $1 billion and matures in August 2001.
The second facility permits borrowings of up to $200 million and matures in
August 1997. The Company has the ability to borrow under such facilities at
prevailing short-term interest rates. The Company also has available uncommitted
lines of credit of $305 million. At December 31, 1996, the Company had $880.0
million outstanding under its committed bank facilities and $240.7 million
outstanding under its uncommitted lines of credit. The borrowings under the
committed bank facilities and uncommitted lines of credit were used, in part, to
replace commercial paper borrowing of $405 million at December 31, 1995.
The Company entered into interest rate swap agreements, which effectively
fix interest rates on $600.0 million of variable rate debt through January 2005,
at a weighted average fixed rate of 6.94%. (See Note 6 to the Consolidated
Financial Statements.) The Company does not expect interest rate movements to
significantly affect its operating results in the near term.
Over the next year, the Company anticipates replacing a significant portion
of the short-term bank debt with longer-term financing. The Company also plans
to reenter the commercial paper market as an additional source of short-term
financing.
During 1996, the Company repurchased 923,199 shares of its common stock for
$25.6 million including 800,000 shares issued to Cognizant in connection with
the Distribution. In January 1997, the Company announced a continuation of its
systematic stock repurchase plan, authorizing the purchase of up to 9.8 million
shares of common stock. The stock will be held in treasury and issued upon
exercise of employee stock options and for compensation plans. The repurchase
plan will allow the Company to maintain the current level of approximately 171
million shares outstanding. The Company also paid dividends of $310.8 million
during 1996.
Like most corporations, the Company is heavily reliant on technology to
deliver services. As the millennium approaches, the Company is preparing all of
its computer systems to be Year 2000 compliant. A company-wide taskforce has
been assembled to review all systems to ensure that they do not malfunction as a
result of the Year 2000. In this process, the Company expects to both replace
some systems and upgrade others. The current cost of this effort is still being
evaluated. While this is a substantial effort, it will give the Company the
benefit of new technology and functionality for many of its operational and
back-office systems.
DIVIDENDS
The regular quarterly dividend of $.66 was maintained through the first half of
1996. On July 17, 1996, the Company declared a third-quarter 1996 dividend of
$.25 per share, reflecting the revised dividend policies of each of the three
companies. The $.25 dividend was continued in the fourth quarter of 1996,
resulting in full-year dividends per share of $1.82, a decline of 30.8% from the
$2.63 paid in 1995.
As announced in 1996, the dividend policies of each of the three independent
public companies were formulated to be consistent with comparable businesses. Of
the $.25 per share dividend declared for the third and fourth quarters of 1996,
$.22 was attributable to the Company and $.03 was attributable to Cognizant. On
January 15, 1997, the Board of Directors approved a first quarter 1997 dividend
of $.22 per share, payable March 10, 1997 to shareholders of record at the close
of business February 20, 1997.
COMMON STOCK INFORMATION
The Company's common stock (symbol DNB ) is listed on the New York, London and
Swiss stock exchanges. The number of shareholders of record was 12,690 at
January 31, 1997.
The following table summarizes price and cash dividend information for the
Company's common stock as reported in the periods shown. The decline in price
per share during the fourth quarter of 1996 reflects the special stock dividend
of shares of Cognizant and ACNielsen.
Per Share ($) Dividends
--------------------------- Paid
1996 1995 Per Share ($)
--------------------------- ------------
High Low High Low 1996 1995
---- --- ---- --- ---- ----
First Quarter 69 59-3/8 55-1/4 48-1/2 .66 .65
Second Quarter 65-3/4 57-3/4 55-1/2 50-1/2 .66 .66
Third Quarter 62-5/8 56-1/4 59-1/8 51 .25 .66
Fourth Quarter 62-7/8 20-7/8 65-1/2 57 .25 .66
- - ------------------------------------------------------------------
Year 69 20-7/8 65-1/2 48-1/2 1.82 2.63
==================================================================
F-5
<PAGE>
- - --------------------------------------------------------------------------------
REPORT OF INDEPENDENT
ACCOUNTANTS
TO THE SHAREHOLDERS AND THE BOARD OF
DIRECTORS OF THE DUN & BRADSTREET CORPORATION:
We have audited the accompanying consolidated balance sheets of The Dun &
Bradstreet Corporation and Subsidiaries at December 31, 1996 and 1995, and the
related consolidated statements of operations, shareholders' equity and cash
flows for the years ended December 31, 1996, 1995 and 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of The Dun &
Bradstreet Corporation and Subsidiaries at December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for the years
ended December 31, 1996, 1995 and 1994, in conformity with generally accepted
accounting principles.
As discussed in Note 3 to the consolidated financial statements, in 1995,
the Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of."
COOPER & LYBRAND LLP
New York, New York
February 26, 1997
STATEMENT OF MANAGEMENT
RESPONSIBILITY FOR
FINANCIAL STATEMENTS
TO THE SHAREHOLDERS OF
THE DUN & BRADSTREET CORPORATION:
Management has prepared and is responsible for the consolidated financial
statements and related information that appear on pages 20 to 46. The
consolidated financial statements, which include amounts based on the estimates
of management, have been prepared in conformity with generally accepted
accounting principles. Other financial information in the annual report is
consistent with that in the consolidated financial statements.
Management believes that the Company's internal control systems provide
reasonable assurance at reasonable cost that assets are safeguarded against loss
from unauthorized use or disposition, and that the financial records are
reliable for preparing financial statements and maintaining accountability for
assets. These systems are augmented by written policies, an organizational
structure providing division of responsibilities, careful selection and training
of qualified financial personnel and a program of internal audits.
The independent accountants are engaged to conduct an audit of and render
an opinion on the financial statements in accordance with generally accepted
auditing standards. These standards include an assessment of the systems of
internal controls and tests of transactions to the extent considered necessary
by them to support their opinion.
The Board of Directors, through its Audit Committee consisting solely of
outside directors of the Company, is responsible for reviewing and monitoring
the Company's financial reporting and accounting practices. Coopers & Lybrand
L.L.P. and the internal auditors each have full and free access to the Audit
Committee and meet with it regularly, with and without management.
/S/ VOLNEY TAYLOR
- - --------------------------------------------------
Volney Taylor
Chairman and Chief Executive Officer
/s/ FRANK S. SOWINSKI
- - --------------------------------------------------
Frank S. Sowinski
Senior Vice President and Chief Financial Officer
F-6
<PAGE>
The Dun & Bradstreet Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31 ,
<TABLE>
<CAPTION>
Dollar amounts in millions, except per share data 1996 1995 1994
- - ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES $2,159.2 $2,158.2 $2,124.9
- - ------------------------------------------------------------------------------------------------
Operating Costs 693.6 708.3 569.8
Selling and Administrative Expenses 949.4 886.8 816.7
Depreciation and Amortization 157.4 164.5 143.5
Reorganization Costs 161.2 -- --
- - ------------------------------------------------------------------------------------------------
OPERATING INCOME 197.6 398.6 594.9
- - ------------------------------------------------------------------------------------------------
Interest Income 4.4 10.2 10.3
Interest Expense (37.1) (37.3) (24.6)
Other Expense--Net (38.5) (40.9) (20.7)
- - ------------------------------------------------------------------------------------------------
Non-Operating Expense--Net (71.2) (68.0) (35.0)
- - ------------------------------------------------------------------------------------------------
Income from Continuing Operations before
Provision for Income Taxes 126.4 330.6 559.9
Provision for Income Taxes 153.7 113.1 191.3
- - ------------------------------------------------------------------------------------------------
Income (Loss) from Continuing Operations (27.3) 217.5 368.6
- - ------------------------------------------------------------------------------------------------
Discontinued Operations:
Income from Discontinued Operations,
Net of Income Taxes of $155.9, $9.7 and
$58.4 for 1996, 1995 and 1994, respectively 141.1 103.3 260.9
Loss on Disposal, Net of Income Tax Benefit
of $62.4 for 1996 (158.2) -- --
- - ------------------------------------------------------------------------------------------------
Income (Loss) from Discontinued Operations (17.1) 103.3 260.9
- - ------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $(44.4) $320.8 $629.5
================================================================================================
EARNINGS (LOSS) PER SHARE OF COMMON STOCK:
Continuing Operations $(0.16) $1.28 $2.17
Discontinued Operations (0.10) 0.61 1.53
================================================================================================
NET EARNINGS (LOSS) PER SHARE OF COMMON STOCK $(0.26) $1.89 $3.70
================================================================================================
Weighted Average Number of Shares Outstanding 170,017,000 169,522,000 169,946,000
================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE>
The Dun & Bradstreet Corporation and Subsidiaries
Consolidated Balance Sheets
December 31,
<TABLE>
<CAPTION>
Dollar amounts in millions, except per share data 1996 1995
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS CURRENT ASSETS
Cash and Cash Equivalents $ 127.9 $ 147.1
Accounts Receivable--Net of Allowance of $38.1 in 1996 and $35.7 in 1995 600.7 588.9
Other Current Assets 188.8 280.2
---------------------------------------------------------------------------------------------------
Total Current Assets 917.4 1,016.2
---------------------------------------------------------------------------------------------------
NON-CURRENT ASSETS
Investments and Notes Receivable 292.2 223.7
Property, Plant and Equipment 373.1 382.9
Prepaid Pension Costs 172.1 212.6
Computer Software 150.7 100.7
Goodwill 218.4 295.6
Other Non-Current Assets 170.3 284.1
---------------------------------------------------------------------------------------------------
Total Non-Current Assets 1,376.8 1,499.6
---------------------------------------------------------------------------------------------------
Net Assets of Discontinued Operations -- 1,207.3
---------------------------------------------------------------------------------------------------
TOTAL ASSETS $2,294.2 $3,723.1
===================================================================================================
- - -----------------------------------------------------------------------------------------------------------------------
LIABILITIES CURRENT LIABILITIES
AND Notes Payable $1,120.7 $ 407.1
SHAREHOLDERS' Accrued and Other Current Liabilities 599.9 573.3
EQUITY Redeemable Partnership Interests -- 575.0
Unearned Subscription Income 297.0 319.6
---------------------------------------------------------------------------------------------------
Total Current Liabilities 2,017.6 1,875.0
Postretirement and Postemployment Benefits 354.1 393.0
Other Non-Current Liabilities 354.2 272.6
---------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 2,725.9 2,540.6
---------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Preferred Stock, par value $1 per share, authorized--10,000,000 shares;
outstanding--none
Common Stock, par value $1 per share, authorized--400,000,000
shares; issued--188,420,996 shares for 1996 and 1995 188.4 188.4
Capital Surplus 72.6 70.0
Retained Earnings 480.3 2,208.7
Treasury Stock, at cost, 17,612,776 and 19,031,922 shares
for 1996 and 1995, respectively (1,019.7) (1,107.3)
Cumulative Translation Adjustment (153.3) (177.3)
---------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY (431.7) 1,182.5
---------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,294.2 $3,723.1
===================================================================================================
F-8 The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
The Dun & Bradstreet Corporation and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended December 31 ,
<TABLE>
<CAPTION>
Dollar amounts in millions 1996 1995 1994
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (44.4) $ 320.8 $ 629.5
Less: Income (Loss) from Discontinued Operations (17.1) 103.3 260.9
-------------------------------------------------------------------------------------------------
Income (Loss) from Continuing Operations (27.3) 217.5 368.6
Reconciliation of Net Income (Loss) to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 157.4 164.5 143.5
Losses (Gains) from Sales of Businesses, Net of Taxes 82.2 (118.0) (70.9)
Equity Earnings in Excess of Dividends Received (14.9) (10.4) (33.8)
Increase in Note Receivable (41.2) -- --
Restructuring Provisions -- -- 39.0
Non-Recurring Charge -- 206.2 --
Restructuring Payments (50.7) (68.9) (71.0)
Postemployment Benefit Expense (Curtailment Gain) -- 9.0 (29.9)
Postemployment Benefit Payments (50.3) (60.0) (75.1)
Net Increase in Accounts Receivable (47.5) (60.4) (13.0)
Deferred Income Taxes 118.1 (66.3) (15.1)
Accrued Income Taxes 50.4 (57.6) (22.9)
Net Decrease (Increase) in Other Working Capital Items 33.3 55.0 (26.6)
Other (13.2) 22.4 (28.9)
-------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 196.3 233.0 163.9
-------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Marketable Securities 17.6 34.1 189.1
Payments for Marketable Securities (2.4) (22.9) (230.1)
Proceeds from Sale of Businesses 115.2 230.0 103.9
Payments for Acquisition of Businesses -- (3.0) (52.7)
Capital Expenditures (73.9) (116.8) (122.5)
Additions to Computer Software and Other Intangibles (96.2) (118.4) (78.9)
Other 12.0 39.6 (5.0)
-------------------------------------------------------------------------------------------------
Net Cash (Used in) Provided by Investing Activities (27.7) 42.6 (196.2)
-------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of Dividends (310.8) (446.1) (435.2)
Payments for Purchase of Treasury Shares (25.6) (72.3) (70.0)
Net Proceeds from Exercise of Stock Options 63.7 42.2 29.3
(Decrease) Increase in Commercial Paper Borrowings (405.0) (38.7) 360.8
Increase in Short-term Borrowings 1,116.2 -- --
Payment of Redeemable Partnership Interests (575.0) -- --
Payment of Alaska Native Corp. Obligations -- -- (166.2)
Other 1.6 (1.6) (5.9)
-------------------------------------------------------------------------------------------------
Net Cash Used in Financing Activities (134.9) (516.5) (287.2)
-------------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents (2.1) 4.0 (5.0)
-------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents 31.6 (236.9) (324.5)
Net Cash (Used In) Provided by Discontinued Operations (50.8) 261.9 155.0
Cash and Cash Equivalents, Beginning of Year 147.1 122.1 291.6
-------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Year $ 127.9 $ 147.1 $ 122.1
=================================================================================================
The accompanying notes are an integral part of the consolidated financial statements F-9
</TABLE>
<PAGE>
The Dun & Bradstreet Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Dollar amounts in millions, except per share data
- - -------------------------------------------------------------------------------------------------------------------------
Common Cumulative Total
Stock Capital Retained Treasury Translation Shareholders'
($1 Par Value) Surplus Earnings Stock Adjustment Equity
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 $ 188.4 $ 64.2 $2,135.7 $(1,036.5) $(240.5) $1,111.3
Net Income 629.5 629.5
Cash Dividends ($2.56 per share) (435.2) (435.2)
Treasury Shares Reissued Under
Stock Options and Deferred Compensation
Plans (552,805) 3.0 23.4 26.4
Treasury Shares Reissued Under Restricted
Stock Plan (114,930) 5.9 5.9
Treasury Shares Acquired (1,193,631) (70.0) (70.0)
Change in Cumulative Translation Adjustment 57.0 57.0
Unrealized Losses on Investments (6.3) (6.3)
- - -------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 188.4 67.2 2,323.7 (1,077.2) (183.5) 1,318.6
- - -------------------------------------------------------------------------------------------------------------------------
Net Income 320.8 320.8
Cash Dividends ($2.63 per share) (446.1) (446.1)
Treasury Shares Reissued Under
Stock Options and Deferred Compensation
Plans (741,526) 2.8 34.2 37.0
Treasury Shares Reissued Under Restricted
Stock Plan (174,100) 8.0 8.0
Treasury Shares Acquired (1,297,138) (72.3) (72.3)
Change in Cumulative Translation Adjustment 6.2 6.2
Unrealized Gains on Investments 10.3 10.3
- - -------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 188.4 70.0 2,208.7 (1,107.3) (177.3) 1,182.5
- - -------------------------------------------------------------------------------------------------------------------------
Net Loss (44.4) (44.4)
Cash Dividends ($1.82 per share) (310.8) (310.8)
Stock Dividend to Shareholders of Cognizant
and ACNielsen, Including 800,000
Treasury Shares (1,370.2) 49.5 79.8 (1,240.9)
Treasury Shares Reissued Under
Stock Options and Deferred Compensation
Plans (1,525,935) 2.6 59.0 61.6
Treasury Shares Reissued Under Restricted
Stock Plan (16,410) 4.7 4.7
Treasury Shares Acquired (923,199) (25.6) (25.6)
Change in Cumulative Translation Adjustment (55.8) (55.8)
Unrealized Losses on Investments (3.0) (3.0)
- - -------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 $ 188.4 $ 72.6 $ 480.3 $(1,019.7) $(153.3) $ (431.7)
=========================================================================================================================
F-10 The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
The Dun & Bradstreet Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The consolidated financial statements include those
of The Dun & Bradstreet Corporation (the "Company"), its subsidiaries and
partnerships in which the Company has a controlling interest. Investments in
companies over which the Company has significant influence but not a controlling
interest are carried on the equity basis. The effects of all significant
intercompany transactions have been eliminated.
The financial statements of subsidiaries outside the United States and
Canada reflect a fiscal year ending November 30 to facilitate timely reporting
of the Company's consolidated financial results.
As discussed more thoroughly in Note 2, Cognizant Corporation
("Cognizant"), ACNielsen Corporation ("ACNielsen"), Dun & Bradstreet Software
("DBS") and NCH Promotional Services ("NCH" ) are presented as discontinued
operations.
Cash Equivalents. Marketable securities that mature within 90 days of purchase
date are considered cash equivalents and are stated at cost, which approximates
fair value.
Marketable Securities. In accordance with Statement of Financial Accounting
Standards ("SFAS" ) No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," marketable securities at December 31, 1996 and 1995, are
classified as "available for sale," and are reported at fair value, with net
unrealized gains and losses reported in shareholders' equity.
The fair value of current and non-current marketable securities was
estimated based on quoted market prices. Realized gains and losses on marketable
securities are determined on the specific identification method.
Property, Plant and Equipment. Buildings, machinery and equipment are
depreciated over their estimated useful lives using principally the
straight-line method. Leasehold improvements are amortized on a straight-line
basis over the shorter of the term of the lease or the estimated useful life of
the improvement.
Computer Software, Goodwill and Intangible Assets. Certain computer software
costs are capitalized in accordance with SFAS No. 86, "Accounting for the Costs
of Computer Software to be Sold, Leased or Otherwise Marketed," and are reported
at the lower of unamortized cost or net realizable value. Other intangibles
result from acquisitions and database development. Computer software and other
intangibles are being amortized, using principally the straight-line method,
over three to five years and five to 15 years, respectively. Goodwill represents
the excess purchase price over the fair value of identifiable net assets of
businesses acquired and is amortized on a straight-line basis over five to 40
years.
The Company adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
("SFAS No. 121") in 1995. This statement requires that long-lived assets and
certain identifiable intangibles held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In general, this statement
requires recognition of an impairment loss when the sum of undiscounted expected
future cash flows is less than the carrying amount of such assets. The
measurement for such an impairment loss is then based on the fair value of the
asset. (See Note 3.)
At each balance sheet date, the Company reviews the recoverability of
goodwill, not identified with long-lived assets, based on estimated undiscounted
future cash flows from operating activities compared with the carrying value of
goodwill, and recognizes any impairment on the basis of such comparison. The
recognition and measurement of goodwill impairment is assessed at the business
unit level.
Revenue Recognition. The Company recognizes revenue as earned, which is
generally over the contract period or as the information is delivered or related
services are performed. Amounts billed for service and subscriptions are
credited to unearned subscription income and reflected in operating revenue over
the subscription term, which is generally one year. Revenues from the
publication of directories are recognized when the directories are published.
(See Note 17.)
Foreign Currency Translation. For all operations outside the United States where
the Company has designated the local currency as the functional currency, assets
and liabilities are translated using the end-of-year exchange rates, and
revenues and expenses are translated using average exchange rates for the year.
For these countries, currency translation adjustments are accumulated in a
separate component of shareholders' equity, whereas realized transaction gains
and losses are recognized in other expense-net. For operations in countries that
are considered to be highly inflationary, where the U.S. dollar is designated as
the functional currency, monetary assets and liabilities are translated using
end-of-year exchange rates, nonmonetary accounts are translated using historical
exchange rates, and all translation and transaction adjustments are recognized
in other expense-net.
F-11
<PAGE>
- - --------------------------------------------------------------------------------
Note 1. Summary of Significant Accounting Policies (continued)
Earnings Per Share of Common Stock. Earnings per share are based on the weighted
average number of shares of common stock outstanding during the year. The
inclusion of shares issuable under stock options in the calculation of earnings
per share would not result in material dilution.
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share," which simplifies existing computational guidelines,
revises disclosure requirements and increases the comparability of earnings per
share data on an international basis. The Company is currently evaluating the
new statement; however, the impact of adoption of SFAS No. 128 on the Company's
financial statements is not expected to be significant. This statement is
effective for financial statements for periods ending after December 15, 1997
and requires restatement of all prior-period earnings per share data presented.
Financial Instruments. The Company is a party to financial instruments with
off-balance sheet risk, that are entered into in the normal course of business
to reduce exposure to fluctuations in interest and foreign exchange rates. The
counterparties to these instruments are major international financial
institutions. The fair value of foreign exchange forward contracts is determined
by market quotes and the fair value of interest rate swap agreements is
determined by gains or losses to terminate agreements. (See Note 6.)
Estimates. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates. Estimates are used in the
determination of allowances for doubtful accounts, depreciation and
amortization, computer software, employee benefit plans, taxes and contingencies
among others.
Reclassifications. As discussed in Note 2, the consolidated financial statements
for 1995 and 1994 have been reclassified to identify separately the results of
operations, net assets and cash flows of the Company's discontinued operations.
In addition, certain prior-year amounts have been reclassified to conform with
the 1996 presentation.
- - --------------------------------------------------------------------------------
NOTE 2. REORGANIZATION AND DISCONTINUED OPERATIONS
On November 1, 1996, the Company reorganized into three publicly traded
independent companies by spinning off through a tax-free distribution two of its
businesses to shareholders (the "Distribution"). The Distribution resulted in
the following three companies: 1) The Dun & Bradstreet Corporation, consisting
of Dun & Bradstreet, the operating company ("D&B" ), Moody's Investors Service
and Reuben H. Donnelley ("RHD" ); 2) ACNielsen; and 3) Cognizant, consisting of
IMS International, Inc. ("IMS" ), Gartner Group, Nielsen Media Research, Pilot
Software, Cognizant Technology Solutions Corporation, Cognizant Enterprises and
Erisco. In connection with the reorganization, DBS and NCH were sold. On October
10, 1996, following receipt of a ruling from the Internal Revenue Service that
the transaction would be tax-free to the Company and U.S. shareholders, the
Company's Board of Directors declared a dividend distribution to shareholders of
record on October 21, 1996, consisting of one share of Cognizant common stock
for each share of the Company's common stock and one share of ACNielsen common
stock for every three shares of the Company's common stock held on such record
date. The Distribution was effected on November 1, 1996. These transactions
resulted in a noncash dividend which reduced shareholders' equity by $1,240.9
million.
For purposes of governing certain of the on-going relationships among the
Company, Cognizant and ACNielsen, the three new companies entered into various
agreements, including a Distribution Agreement, Tax Allocation Agreement,
Employee Benefits Agreement, Indemnity and Joint Defense Agreement, Intellectual
Property Agreement, Shared Transaction Services Agreement, Data Services
Agreement and a Transaction Services Agreement. These agreements set forth the
principles to be applied in allocating certain related costs and specified
portions of contingent liabilities to be shared if certain amounts are exceeded.
Pursuant to Accounting Principles Board Opinion ("APB" ) No. 30, "Reporting
the Results of Operations-Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions," the consolidated financial statements of the Company have been
reclassified to reflect the dispositions of the companies that comprised the
Company's Marketing Information Services, Software Services and Other Business
Services business segments. These segments include the companies that made up
Cognizant and ACNielsen, along with DBS and NCH. Accordingly, the revenues,
costs and expenses, assets and liabilities, and cash flows of Cognizant,
ACNielsen, DBS and NCH have been excluded from the respective captions in the
Consolidated Statements
F-12
<PAGE>
The Dun & Bradstreet Corporation and Subsidiaries
Notes to Consolidated Financial Statements continued
Tabular dollar amounts in millions, except per share data
- - --------------------------------------------------------------------------------
Note 2. Reorganization and Discontinued Operations (continued)
of Operations, Consolidated Balance Sheets and Consolidated Statements of Cash
Flows. The net operating results of these entities have been reported, net of
applicable income taxes, as "Income (Loss) from Discontinued Operations"; the
net assets of these entities have been reported as "Net Assets of Discontinued
Operations"; and the net cash flows of these entities have been reported as "Net
Cash (Used in) Provided by Discontinued Operations."
Summarized financial information for the discontinued operations, were as
follows:
For the years ended
December 31 1996* 1995 1994
- - --------------------------------------------------------------------------------
Operating Revenues $2,761.6 $3,256.9 $2,770.9
Income before
Provision for Income
Taxes $297.0 $113.0 $319.3
- - --------------------------------------------------------------------------------
Income from
Discontinued
Operations, Net
of Income Taxes $141.1 $103.3 $260.9
================================================================================
* Includes the results of Cognizant, ACNielsen and DBS for the ten months ended
October 31, 1996 and the results of NCH for the full year.
At December
31, 1995
- - --------------------------------------------------------------------------------
Current Assets $1,312.7
Total Assets $3,030.5
- - --------------------------------------------------------------------------------
Current Liabilities $1,308.6
Total Liabilities $1,823.2
- - --------------------------------------------------------------------------------
Net Assets of Discontinued Operations $1,207.3
================================================================================
The Company completed the sale of DBS on November 1, 1996 for proceeds of $191.3
million, including a note of $41.2 million resulting in a pre-tax loss of $220.6
million ($158.2 million after-tax). Pursuant to the Distribution Agreement, the
cash proceeds from the sale were transferred to Cognizant.
The sale of NCH was completed on December 31, 1996. Pursuant to the
Distribution Agreement between the Company and Cognizant, the proceeds of $20.5
million from the sale of NCH which includes a note of $8.5 million will be
transferred to Cognizant. At December 31, 1996, the Company has recorded a
receivable of $20.5 million from the buyer of NCH and a corresponding payable to
Cognizant. The Company did not record a gain or loss on the sale.
The 1996 results for the Company reflect after-tax non-recurring charges of
$492.0 million, incurred as a result of the Distribution and the sales of DBS ,
NCH , American Credit Indemnity ("ACI") and the Proprietary West operations of
RHD ("P-West"). Income from continuing operations included $284.7 million of
these costs, while $207.3 million was recorded within income from discontinued
operations, net of income taxes. Of the $284.7 million included in continuing
operations, $257.9 million was recorded in pre-tax income and a net tax cost of
$26.8 million was recorded in the provision for income taxes. The $257.9 million
represents reorganization costs of $161.2 million (professional and consulting
fees of $75.0 million and settlement of executive compensation plans and
retention bonuses of $86.2 million) and $96.7 million resulting from the losses
incurred on the sales of P-West and ACI . The sales of P-West and ACI were
completed in May and October of 1996, respectively. The $207.3 million included
within discontinued operations consists of the net loss on the disposal of DBS
and tax costs allocated to discontinued operations of $49.1 million.
- - --------------------------------------------------------------------------------
NOTE 3. NON-RECURRING CHARGES
In the fourth quarter of 1995, the Company recorded within operating costs a
charge of $206.2 million. This charge primarily reflected an impairment loss in
connection with the adoption of the provisions of SFAS No. 121 ($100.9 million),
a provision for postemployment benefits ($58.1 million) under the Company's
severance plan, an accrual for contractual obligations that have no future
economic benefits and for penalties to cancel certain contracts ($23.1 million)
and other asset revaluations ($24.1 million).
This non-recurring charge evolved from the Company's annual budget and
strategic planning process, which included a review of the Company's underlying
cost structure, products and services, and assets used in the business. Based
upon such analysis, management, having the authority to approve such business
decisions, committed in December 1995 to a plan to discontinue certain product
lines and dispose of certain other assets, resulting in the charge. These
decisions were not reversed or modified as a result of the Company's
reorganization plan, which was reviewed and approved by the Board of Directors
on January 9, 1996.
SFAS No. 121 requires that long-lived assets and certain intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. In connection with
this
F-13
<PAGE>
- - --------------------------------------------------------------------------------
Note 3. Non-Recurring Charges (continued)
review, the Company recorded an impairment loss of $100.9 million reflecting the
revaluation of certain revenue, administrative and production systems, notes
receivable and other intangibles that were replaced or no longer used at the
Company.
The provision for postemployment benefits of $58.1 million, represents the
cost of workforce reductions. The accrual of $23.1 million is for contractual
obligations that have no future economic benefits and penalties to cancel
certain contracts. In addition, the Company recognized a charge of $24.1 million
principally related to the write-off of fixed assets.
Also in 1995, the Company recorded in operating costs a $28.0 million gain
related to the sale of warrants received in connection with the divestiture of
Donnelley Marketing and a $90.0 million gain relating to the sale of Interactive
Data Corporation.
In 1994, several non-recurring gains and charges were included in the
Company's operating results. As a result of the decision to outsource
communications services, the assets of DunsNet were sold for a pre-tax gain of
$36.0 million. Thomson Directories Ltd. was sold for a pre-tax gain of $33.2
million, and Dun & Bradstreet Plan Services was divested with no gain or loss
recorded.
Also in 1994, the Company took measures to improve future performance by
accelerating the introduction of newer technologies, which resulted in a charge
of $28.9 million. The charge principally reflected the revaluation of certain
computer software and other intangible assets that have been replaced or are no
longer used at D&B . In addition, a change in eligibility requirements for the
Company's postretirement medical plan resulted in a curtailment gain of
approximately $13.7 million, which was largely offset by increases in spending
for new-product development.
- - --------------------------------------------------------------------------------
NOTE 4. RESTRUCTURING
In the second quarter of 1994, the Company initiated actions to restructure
certain operations and businesses and to reduce costs and increase operating
efficiencies. These restructuring measures included office consolidations, the
discontinuance of certain production and data-collection systems and products,
as well as additional steps to complete certain actions initiated in the fourth
quarter of 1993. The pre-tax costs associated with these restructuring actions
were $39.0 million. During 1996, the Company substantially completed these
restructuring actions. At December 31, 1996, the remaining restructuring
reserves were not significant.
- - --------------------------------------------------------------------------------
NOTE 5. MARKETABLE SECURITIES
The amounts disclosed below represent marketable securities of the Company and
the assets of the grantor trusts established to pay benefits for U.S.
supplemental pension plans. These amounts are classified in the Consolidated
Balance Sheets as other current assets and other non-current assets. Cash
equivalents of $59.6 million and $46.1 million at December 31, 1996 and 1995,
respectively, have been excluded from these disclosures. All securities have
been classified as "available for sale."
A summary of cost (amortized cost of debt instruments) and fair values at
December 31 follows:
1996 1995
------------------ -------------------
Cost Fair Value Cost Fair Value
- - -------------------------------------------------------------------------------
Equity securities $ -- $ -- $ 8.8 $ 10.8
Debt securities
of the U.S.
Government and
its agencies 43.6 45.1 71.8 75.2
Debt securities of
states and other
subdivisions of
the U.S.
Government -- -- 99.0 101.7
Debt securities
of non-U.S.
governments 2.4 2.4 6.3 6.6
Corporate debt securities -- -- 4.8 4.7
Other .1 .1 .1 .1
- - -------------------------------------------------------------------------------
$46.1 $47.6 $190.8 $199.1
===============================================================================
F-14
<PAGE>
The Bun & Bradstreet Corporation and Subsidiaries
Notes to Consolidated Financial Statements continued
Tabular dollar amounts in millions, except per share data
- - --------------------------------------------------------------------------------
Note 5. Marketable Securities (continued)
At December 31, 1996 and 1995, gross unrealized gains were $1.8 million and
$8.9 million, respectively, and unrealized losses were $.3 million and $.6
million, respectively.
Gross realized gains and losses were not material for the years ended
December 31, 1996, 1995 and 1994, respectively.
At December 31, 1996, cost and fair values of debt securities by
contractual maturity were as follows:
Cost Fair Value
- - --------------------------------------------------------------------------------
Due in one year or less $ 5.4 $ 5.5
Due after one year through five years 36.7 38.2
Due after five years through ten years 4.0 3.9
- - --------------------------------------------------------------------------------
$46.1 $47.6
================================================================================
- - --------------------------------------------------------------------------------
NOTE 6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISKS
The Company uses various financial instruments, including interest rate swap
agreements and foreign exchange forward contracts to reduce exposure to
fluctuations in interest and foreign exchange rates. The Company does not use
derivative financial instruments for speculative purposes. Collateral is
generally not required for these types of instruments.
By their nature, all such instruments involve risk, including the credit
risk of nonperformance by counterparties. However, at December 31, 1996 and
1995, in management's opinion, there was no significant risk of loss in the
event of nonperformance of the counterparties to these financial instruments.
The Company controls its exposure to credit risk through monitoring procedures.
Interest Rate Swap Agreements
The Company enters into interest rate swap agreements to manage exposure to
changes in interest rates. Interest rate swaps also allow the Company to raise
funds at floating rates and effectively swap them into fixed rates that are
lower than those available to it if fixed-rate borrowings were made directly.
These agreements involve the exchange of floating-rate for fixed-rate payments
without the exchange of the underlying principal amount. Fixed interest rate
payments are at rates ranging from 6.25% to 7.68%. Floating-rate received are
based on rates tied to prevailing short-term interest rates. If the Company
terminates a swap agreement, the gain or loss is recorded as an adjustment to
the basis of the underlying asset or liability. At December 31, 1996, the
unrealized fair value of the interest rate swaps was a loss of $15.8 million.
The following table indicates the type of swaps in use at December 31, 1996
and 1995 and their weighted average interest rates. Average variable rates are
those in effect at the reporting date and may change significantly over the
lives of the contracts.
1996 1995
- - --------------------------------------------------------------------------------
Variable to fixed swaps--
Notional amount $600.0 $400.0
Average pay (fixed) rate 6.94% 7.07%
Average receive (variable) rate 5.57% 6.31%
================================================================================
The swap contracts expire from October 1, 1998 through January 15, 2005.
Foreign Exchange
Foreign exchange forward contracts are entered into as hedges against currency
risk resulting from cross-border transactions denominated in foreign currencies.
Gains or losses on these forward contracts are reported in the income statement
and are offset by gains or losses on the underlying foreign currency
transactions. At December 31, 1996, the Company had approximately $114 million
in foreign exchange forward contracts outstanding with various expiration dates
through March 1997. At December 31, 1996, unrealized gains on these contracts
were $3.5 million and the unrealized losses were $1.3 million.
F-15
<PAGE>
- - --------------------------------------------------------------------------------
NOTE 7. PENSION AND POSTRETIREMENT BENEFITS
Pension Plans
The Company has defined benefit pension plans covering substantially all
associates in the United States. The benefits to be paid to associates under
these plans were based on years of credited service and average final
compensation. Pension costs are determined actuarially and funded in accordance
with the Internal Revenue Code. Supplemental and excess plans in the United
States are maintained to provide retirement benefits in excess of levels allowed
by ERISA .
Effective January 1, 1997, the D&B Retirement Plan was amended to provide
retirement income based on a percentage of annual compensation, rather than
final pay. The percentage of compensation allocated annually to a retirement
account ranges from 3% to 12.5%, based on age and service. Amounts allocated
under the plan also receive interest credits based on 30-year Treasury Bonds
with a minimum interest credit rate of 3%. Associates close to or eligible for
retirement as of January 1, 1997, will receive the higher of benefits provided
by the final pay formula or retirement account formula.
The Company has retained the obligation for pension benefits for personnel
who retired prior to November 1, 1996 from the businesses that comprise
discontinued operations.
The Company's non-U.S. subsidiaries provide retirement benefits for
associates consistent with local practices, primarily using defined benefit or
termination indemnity plans.
The components of net periodic pension costs for the years ended December
31, which includes both continuing and discontinued operations, are summarized
as follows:
1996 1995 1994
- - --------------------------------------------------------------------------------
Service cost $ 34.8 $ 43.1 $ 50.3
Interest cost 87.4 108.5 93.8
Actual return on plan assets (173.2) (248.1) (7.2)
Net amortization and deferral 67.3 126.8 (111.1)
- - --------------------------------------------------------------------------------
Net periodic pension cost $ 16.3 $ 30.3 $ 25.8
================================================================================
Discontinued operations were allocated pension expense of $10.4 million, $11.1
million and $17.2 million in 1996, 1995 and 1994, respectively.
The status of defined benefit pension plans at December 31, 1996 and 1995 (1995
includes both continuing and discontinued operations) is as follows:
<TABLE>
<CAPTION>
Funded Unfunded
------------------------ ------------------------------------------
U.S.(1) Non-U.S.
------------------- ------------------
1996 1995 1996 1995 1996 1995
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fair value of plan assets $1,146.5 $1,366.3 $ -- $ -- $ -- $ --
- - -----------------------------------------------------------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Vested benefits 811.8 1,065.6 95.8 140.3 7.1 68.6
Non-vested benefits 35.7 42.1 4.6 3.7 -- --
- - -----------------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligations 847.5 1,107.7 100.4 144.0 7.1 68.6
Effect of projected future salary increases 89.7 133.9 60.5 59.4 -- .1
- - -----------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligations 937.2 1,241.6 160.9 203.4 7.1 68.7
- - -----------------------------------------------------------------------------------------------------------------------------------
Plan assets in excess of (less than) projected
benefit obligations 209.3 124.7 (160.9) (203.4) (7.1) (68.7)
Unrecognized net loss .5 154.1 30.2 55.4 -- --
Unrecognized prior service cost 6.7 13.3 22.8 30.3 -- .6
Unrecognized net transition (asset) obligation (44.4) (79.5) 1.6 2.0 -- --
Adjustment to recognize minimum liability -- -- (6.4) (28.3) -- (.5)
- - -----------------------------------------------------------------------------------------------------------------------------------
Prepaid (accrued) pension cost $ 172.1 $ 212.6 $ (112.7) $(144.0) $(7.1) $(68.6)
===================================================================================================================================
</TABLE>
(1) Represents supplemental and excess plans for which grantor trusts (with
assets of $58.9 million and $71.0 million at December 31, 1996 and 1995,
respectively) have been established to pay plan benefits.
F-16
<PAGE>
The Dun & Bradstreet Corporation and Subsidiarie
Notes to Consolidated Financial Statements continued
Tabular dollar amounts in millions, except per share data
- - --------------------------------------------------------------------------------
Note 7. Pension and Postretirement Benefits (continued)
The weighted average expected long-term rate of return on pension plan assets
was 9.75% for 1996, 1995 and 1994. At December 31, 1996 and 1995, the projected
benefit obligations were determined using weighted average discount rates of
7.77% and 7.16%, respectively, and weighted average rates of increase in future
compensation levels of 5.15% and 4.70%, respectively. Plan assets are invested
in diversified portfolios that consist primarily of equity and debt securities.
Postretirement Benefits
In addition to providing pension benefits, the Company provides various
health-care and life-insurance benefits for retired associates. Substantially
all of the Company's associates in the United States become eligible for these
benefits if they reach normal retirement age while working for the Company.
Certain of the Company's subsidiaries outside the United States have
postretirement benefit plans, although most participants are covered by
government sponsored or administered programs. The cost of Company sponsored
postretirement benefit plans outside the U.S. is not significant.
The Company has retained the obligation for postretirement benefits for
personnel who retired prior to November 1, 1996 from the businesses that
comprise discontinued operations.
The components of net periodic postretirement benefit cost other than
pensions for the years ended December 31, for both continuing and discontinued
operations are summarized as follows:
1996 1995 1994
- - --------------------------------------------------------------------------------
Service cost $ 5.9 $ 5.1 $ 4.5
Interest cost 15.4 16.0 15.8
Net amortization and
deferral (4.8) (5.0) (4.3)
- - --------------------------------------------------------------------------------
Net periodic postretirement
benefit cost $16.5 $16.1 $16.0
================================================================================
Discontinued operations were allocated net periodic postretirement benefit cost
of $4.4 million, $4.8 million, and $4.5 million in 1996, 1995 and 1994,
respectively.
The status of postretirement benefit plans other than pensions at December
31, 1996 and 1995 (1995 includes both continuing and discontinued operations) is
as follows:
1996 1995
- - --------------------------------------------------------------------------------
Actuarial present value of benefit obligation:
Retirees and dependents $(165.9) $(170.0)
Active associates--eligible (15.7) (25.7)
Active associates--not yet eligible (15.0) (35.6)
- - --------------------------------------------------------------------------------
Accumulated postretirement benefit
obligation (196.6) (231.3)
Unrecognized net (gain) loss (.2) 26.2
Unrecognized prior service credit (11.9) (18.1)
================================================================================
Accrued postretirement benefit obligation $(208.7) $(223.2)
================================================================================
Benefits are paid as incurred from general corporate assets.
The accumulated postretirement benefit obligation at December 31, 1996 and
1995 was determined using discount rates of 7.75% and 7.0%, respectively. The
assumed rate of future increases in per capita cost of covered health-care
benefits is 8.0% in 1997, decreasing gradually to 5.0% for the year 2021 and
remaining constant thereafter. Increasing the assumed health-care cost trend
rate by one percentage point in each year would increase the accumulated
postretirement benefit obligation by $18.4 million and would increase annual
aggregate service and interest costs by $2.8 million.
- - --------------------------------------------------------------------------------
NOTE 8. EMPLOYEE STOCK PLANS
The Company has granted options to certain associates, under its Key Employees
Stock Option Plans, to purchase shares of its common stock at the market price
on the date of the grant. Under the plans, the options vest ratably over a four
year period and expire ten years from the date of the grant. The 1991 Key
Employees Stock Option Plan provides for the granting of up to 17 million
shares.
In November 1996, in conjunction with the Distribution, those individuals
who became employees of Cognizant or ACNielsen were granted substitute awards in
the stock of their new employer, and any stock awards or options held by them in
respect of the Company were reflected as surrendered in the following table. For
the remaining holders of unexercised options, including employees of the
Company, retirees and certain other former employees of the Company, the number
of shares subject to options and the option exercise price was adjusted
immediately following the Distribution to preserve, as closely as possible, the
economic value of the options that existed prior to the Distribution, pursuant
to the plans.
F-17
<PAGE>
- - --------------------------------------------------------------------------------
Note 8. Employee Stock Plans (continued)
The Company applies APB No. 25, "Accounting for Stock Issued to Employees,"
and related interpretations in accounting for its plans. Accordingly, no
compensation cost has been recognized for the stock option plans. The Company
has adopted the disclosure-only provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123"). Had compensation cost for the
Company's stock option plan been determined based on the fair value at the grant
date for awards in 1996 and 1995 consistent with the provisions of SFAS No. 123,
the Company's income (loss) from continuing operations and earnings (loss) per
share would have been reduced to the pro-forma amounts indicated below:
1996 1995
- - --------------------------------------------------------------------------------
Income (loss) from continuing operations
As reported $(27.3) $217.5
Pro-forma $(31.2) $217.5
Earnings (loss) per share of common stock
from continuing operations
As reported $ (.16) $ 1.28
Pro-forma $ (.18) $ 1.28
================================================================================
The pro-forma disclosures shown are not representative of the effects on income
(loss) and earnings (loss) per share in future years.
The fair value of the Company's stock options used to compute pro-forma
income (loss) and earnings (loss) per share disclosures is the estimated present
value at grant date using the Black-Scholes option-pricing model. The following
weighted average assumptions were used to value grants made prior to the
Distribution: dividend yield of 4.7%; expected volatility of 15%; a risk-free
interest rate of 6.08%; and an expected holding period of five years. The
incremental fair value of the Company's options converted on October 31, 1996,
used to compute pro-forma income (loss) and earnings (loss) per share
disclosures and the value of new grants after November 1, 1996 was determined
using the Black-Scholes option-pricing model with the following weighted average
assumptions: dividend yield of 3.7%; expected volatility of 17%; a risk-free
interest rate of 5.85%; and an expected holding period of 4.5 years.
Options outstanding at December 31, 1996 were granted during the years 1987
through 1996 and are exercisable over periods ending not later than 2006. At
December 31, 1996, 1995 and 1994, options for 8,313,166, 4,859,596 and 4,306,119
shares of common stock were exercisable and 4,240,772, 10,306,592 and 1,567,393
shares were available for future grants under the plans.
Changes in stock options for the three years ended December 31, 1996, are
summarized as follows:
Weighted
Average
Shares Exercise Price ($)
- - --------------------------------------------------------------------------------
Options outstanding,
January 1, 1994 7,444,166 52.73
Granted 2,158,258 54.09
Exercised (547,668) 42.16
Surrendered or expired (321,584) 56.85
- - --------------------------------------------------------------------------------
Options outstanding,
December 31, 1994 8,733,172 53.57
Granted 1,821,780 63.35
Exercised (736,145) 46.11
Surrendered or expired (671,079) 56.63
- - --------------------------------------------------------------------------------
Options outstanding,
December 31, 1995 9,147,728 55.90
Granted 10,704 60.25
Exercised (977,042) 51.09
Surrendered or expired (689,297) 59.10
- - --------------------------------------------------------------------------------
Options outstanding,
October 31, 1996 7,492,093 56.23
Attributable to discontinued
operations (2,958,686) 57.08
- - --------------------------------------------------------------------------------
Options outstanding,
October 31, 1996 4,533,407 55.68
- - --------------------------------------------------------------------------------
Options converted at
November 1, 1996 11,958,980 21.10
Granted 4,452,250 22.96
Exercised (543,354) 21.02
Surrendered or expired (451,416) 22.87
================================================================================
OPTIONS OUTSTANDING,
DECEMBER 31, 1996 15,416,460 21.59
================================================================================
The weighted average fair value of options granted during 1996 and 1995 was
$3.32 and $7.61, respectively.
F-18
<PAGE>
The Dun & Bradstreet Corporation and Subsidiaries
Notes to Consolidated Financial Statements continued
Tabular dollar amounts in millions, except per share data
- - --------------------------------------------------------------------------------
Note 8. Employee Stock Plans (continued)
The following table summarizes information about stock options outstanding at
December 31, 1996:
<TABLE>
<CAPTION>
Stock Options Outstanding Stock Options Exercisable
--------------------------------------------------- ----------------------------------
Weighted Average
Remaining Weighted Average Weighted Average
Range of Exercise Prices Shares Contractual Life Exercise Price Shares Exercise Price
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$15.73-$20.98 5,639,214 3.9 Years $19.01 4,679,802 $18.71
$21.51-$24.16 9,777,246 7.6 Years $23.08 3,633,364 $22.83
- - --------------------------------------------------------------------------------------------------------------------
15,416,460 8,313,166
====================================================================================================================
</TABLE>
The plans also provide for the granting of stock appreciation rights and
limited stock appreciation rights in tandem with stock options to certain key
employees. At December 31, 1996, there were no stock appreciation rights
attached to stock options; however, 887,295 limited stock appreciation rights
were outstanding, which are exercisable only if, and to the extent that, the
related option is exercisable and only upon the occurrence of specified
contingent events.
Under the 1989 Key Employees Restricted Stock Plan, key associates may be
granted restricted shares of the Company's stock. The plan provides for the
granting of up to 1,800,000 shares of the Company's common stock prior to
December 31, 1998. In October 1996, in conjunction with the Distribution, all
outstanding restricted shares became vested and were released to participants of
the plan. During November and December 1996, 19,779 shares of restricted stock
were awarded under the plan. During 1995 and 1994, 184,465 and 117,262
restricted shares, respectively, were awarded under the plan. Forfeitures in
1996 (prior to the Distribution), 1995 and 1994 totaled 6,877, 10,365 and 2,332,
respectively. The restrictions on the majority of such shares lapse over a
period of three years from the date of the grant and the cost is charged to
compensation expense ratably.
- - --------------------------------------------------------------------------------
NOTE 9. INCOME TAXES
Income (loss) from continuing operations before provision for income taxes
consisted of:
1996 1995 1994
- - --------------------------------------------------------------------------------
U.S. $125.1 $356.4 $531.3
Non-U.S. 1.3 (25.8) 28.6
- - --------------------------------------------------------------------------------
$126.4 $330.6 $559.9
================================================================================
The provision (benefit) for income taxes consisted of:
1996 1995 1994
- - --------------------------------------------------------------------------------
Current tax provision:
U.S. Federal $ 43.3 $121.3 $158.5
State and local (21.6) 29.2 31.8
Non-U.S. 13.9 28.9 16.1
- - --------------------------------------------------------------------------------
Total current tax provision 35.6 179.4 206.4
- - --------------------------------------------------------------------------------
Deferred tax provision (benefit):
U.S. Federal 86.9 (30.6) (27.3)
State and local 15.7 (23.8) 4.5
Non-U.S. 15.5 (11.9) 7.7
- - --------------------------------------------------------------------------------
Total deferred tax
provision (benefit) 118.1 (66.3) (15.1)
- - --------------------------------------------------------------------------------
Provision for income taxes $153.7 $113.1 $191.3
================================================================================
The following table summarizes the significant differences between the U.S.
Federal statutory tax rate and the Company's effective tax rate for financial
statement purposes.
1996 1995 1994
- - --------------------------------------------------------------------------------
Statutory tax rate 35.0% 35.0% 35.0%
State and local taxes, net of
U.S. Federal tax
benefit (3.0) 1.7 6.5
Non-U.S. taxes 12.8 5.1 4.3
Recognition of capital
and ordinary losses (14.3) (13.2) (12.1)
Reorganization costs 34.9 -- --
Non-deductible capital
losses 24.0 -- --
Repatriation of foreign
earnings 30.1 -- --
Other 2.1 5.6 .5
- - --------------------------------------------------------------------------------
Effective tax rate 121.6% 34.2% 34.2%
================================================================================
Income taxes paid were $170.2 million, $119.9 million and $191.4 million in
1996, 1995 and 1994, respectively. Income taxes refunded were $140.9 million,
$17.8 million and $10.8 million in 1996, 1995 and 1994, respectively.
F-19
<PAGE>
- - --------------------------------------------------------------------------------
Note 9. Income Taxes (continued)
Deferred tax assets (liabilities) consisted of the following at December
31:
1996 1995
- - --------------------------------------------------------------------------------
Deferred tax assets:
Operating losses $ 34.6 $117.6
Postretirement benefits 83.6 71.7
Postemployment benefits 24.1 37.7
Reorganization and restructuring costs 13.1 40.3
Bad debts 11.2 20.6
Other 18.0 13.6
- - --------------------------------------------------------------------------------
Total deferred tax assets 184.6 301.5
Valuation allowance (34.6) (16.4)
- - --------------------------------------------------------------------------------
Net deferred tax assets 150.0 285.1
- - --------------------------------------------------------------------------------
Deferred tax liabilities:
Intangibles (63.3) (51.2)
Revenue recognition (65.4) (59.2)
Tax leasing transactions (37.8) (68.9)
Depreciation (1.1) (5.3)
- - --------------------------------------------------------------------------------
Total deferred tax liabilities (167.6) (184.6)
- - --------------------------------------------------------------------------------
Net deferred tax (liability) asset $(17.6) $100.5
================================================================================
During 1996, $467.9 million of non-U.S. earnings, primarily from the Cognizant
and ACNielsen businesses, were repatriated by the Company in order to facilitate
its reorganization. At December 31, 1996, undistributed earnings of non-U.S.
subsidiaries totaled $123.4 million. Deferred tax liabilities have not been
recognized for these undistributed earnings because it is management's intention
to reinvest such undistributed earnings outside the U.S. If all undistributed
earnings were remitted to the U.S. , the amount of incremental U.S. Federal and
foreign income taxes payable, net of foreign tax credits, would be approximately
$23 million.
During the three-year period ended December 31, 1983, the Company invested
$304.4 million in tax-leasing transactions, varying in length from 4.5 to 25
years. These leases provided the Company with benefits from tax deductions in
excess of taxable income for Federal income tax purposes. These amounts are
included in deferred income taxes.
- - --------------------------------------------------------------------------------
NOTE 10. NOTES PAYABLE
Notes payable consisted of the following at December 31:
1996 1995
- - --------------------------------------------------------------------------------
Commercial paper $ -- $405.0
Bank notes 1,120.7 1.3
Other -- .8
- - --------------------------------------------------------------------------------
$1,120.7 $407.1
================================================================================
The Company has two committed bank facilities that provide funding for the
Company. One of the facilities permits borrowings of up to $1 billion and
matures in August 2001. The second facility permits borrowings of up to $200
million and matures in August 1997. Under these facilities the Company has the
ability to borrow at prevailing short-term interest rates and is required to pay
commitment fees of $1.0 million per year. At December 31, 1996, $880.0 million
was borrowed against these facilities. The Company also had non-committed lines
of credit of $305 million at December 31, 1996. At year-end 1996, $240.7 million
was borrowed against these non-committed facilities. None of these arrangements
had material commitment fees or compensating balance requirements.
The weighted average interest rates on notes payable at December 31, 1996
and 1995, respectively, were 5.78% and 7.11%.
NOTE 11. INVESTMENT PARTNERSHIPS
During 1993, three of the Company's former and current subsidiaries contributed
assets and third-party investors contributed cash ($125.0 million) to a limited
partnership. One of the Company's former subsidiaries served as general partner.
All of the other partners, including the third-party investors, held limited
partner interests. The partnership, which was a separate and distinct legal
entity, was in the business of licensing database assets and computer software.
In addition, during 1993, the Company participated in the formation of a
limited partnership to invest in various securities including those of the
Company. One of the Company's subsidiaries serves as managing general partner.
Third-party investors held limited partner and special investors interests
totaling $500.0 million. The special investors were entitled to a specified
return on their investments. Funds raised by the partnership provided a source
of financing for the Company's repurchase in 1993 of 8.3 million shares of its
common stock.
F-20
<PAGE>
The Dun & Bradstreet Corporation and Subsidiaries
Notes to Consolidated Financial Statements continued
Tabular dollar amounts in millions, except per share data
- - --------------------------------------------------------------------------------
Note 11. Investment Partnerships (continued)
For financial reporting purposes, the results of operations, the assets,
liabilities, and cash flows of the partnerships described previously are
included in the Company's consolidated financial statements. The third-party
investments in these partnerships at December 31, 1995, totaled $575.0 million
and are reflected as redeemable partnership interests. These third-party
investments were redeemed in full during 1996. Third-parties share of
partnerships results of operations, including specified returns, is reflected in
other expense-net.
During the fourth quarter of 1996, in conjunction with the Distribution,
the Company redeemed $575.0 million of redeemable partnership interests. This
redemption was financed with bank notes.
In November 1996, in conjunction with the Distribution, a Cognizant
subsidiary assumed $50.0 million in redeemable partnership interests (as well as
D&B stock and warrants) in redemption from one of the partnerships described
above. This amount is included in net assets of discontinued operations at
December 31, 1995.
- - --------------------------------------------------------------------------------
NOTE 12. CAPITAL STOCK
In October 1988, the Company adopted a Shareholders' Rights Plan. The plan is
intended to protect the shareholders' interests in the event of an unsolicited
attempt to acquire the Company. The plan is not intended to prevent a takeover
of the Company on terms that are favorable and fair to all shareholders and will
not interfere with a merger approved by the Board of Directors.
Under the plan, each share of the Company's common stock has a right which
trades with the stock until the right becomes exercisable. Each right entitles
the shareholders to buy 1/100 of a share of Series A participating preferred
stock at a purchase price of $230, subject to adjustment. The rights will not be
exercisable until a person or group ("Acquiring Person") acquires beneficial
ownership of, or commences a tender offer for, 20% or more of the Company's
outstanding common stock.
In the event the Company is acquired in a merger or other business
combination, or subject to other transactions, as described in the Shareholders'
Rights Plan, each right will entitle its holder (other than the Acquiring
Person) to receive upon exercise, stock with a value of two times the exercise
price in the form of the Company's common stock or, where appropriate, the
Acquiring Person's common stock. The Company may redeem the rights, which expire
in October 1998, for $.01 per right, under certain circumstances.
The shareholders have authorized the issuance of 10.0 million shares of $1
par value preferred stock. The preferred stock can be issued with varying terms,
as determined by the Board of Directors.
- - --------------------------------------------------------------------------------
NOTE 13. LEASE COMMITMENTS
Certain of the Company's operations are conducted from leased facilities, which
are under operating leases that expire over the next ten years. The Company also
leases certain computer and other equipment under operating leases that expire
over the next five years. These leases are frequently renegotiated or otherwise
changed as advancements in computer technology produce opportunities to lower
costs and improve performance. Additionally, the Company has agreements with
various third-parties to purchase certain data processing and telecommunications
services extending beyond one year. Rental expenses under operating leases were
$117.6 million, $121.9 million and $117.1 million for the years ended December
31, 1996, 1995 and 1994, respectively. Future minimum lease payments under
non-cancelable leases at December 31, 1996 are as follows:
1997 1998 1999 2000 2001 Thereafter Total
- - --------------------------------------------------------------------------------
$96.5 $78.7 $60.4 $30.1 $18.4 $54.6 $338.7
================================================================================
- - --------------------------------------------------------------------------------
NOTE 14. LITIGATION
The Company and its subsidiaries are involved in legal proceedings, claims and
litigation arising in the ordinary course of business. In the opinion of
management, the outcome of such current legal proceedings, claims and litigation
could have a material effect on quarterly or annual operating results or cash
flows when resolved in a future period. However, in the opinion of management,
these matters will not materially affect the Company's consolidated financial
position.
F-21
<PAGE>
- - --------------------------------------------------------------------------------
Note 14. Litigation (continued)
Information Resources
Additionally, on July 29, 1996, Information Resources, Inc. ("IRI" ) filed
a complaint in the United States District Court for the Southern District of New
York, naming as defendants the Company, A.C. Nielsen Company (a subsidiary of
ACNielsen) and IMS (a subsidiary of Cognizant).
The complaint ("IRI Action") alleges various violations of United States
antitrust laws, including alleged violations of Section 1 and 2 of the Sherman
Act. The complaint also alleges a claim of tortious interference with a contract
and a claim of tortious interference with a prospective business relationship.
These claims relate to the acquisition by defendants of Survey Research Group
Limited ("SRG" ) prior to the Distribution. IRI alleges SRG violated an alleged
agreement with IRI when it agreed to be acquired by the defendants and that the
defendants induced SRG to breach that agreement.
IRI's complaint alleges damages in excess of $350 million, which amount
IRI asked to be trebled under antitrust laws. IRI also seeks punitive damages in
an unspecified amount.
In connection with the IRI Action, Cognizant, ACNielsen and the Company
have entered into the Indemnity and Joint Defense Agreement pursuant to which
they agreed (i) to certain arrangements allocating potential liabilities ("IRI
Liabilities") that may arise out of or in connection with the IRI Action and
(ii) to conduct a joint defense of such action. In particular, the Indemnity and
Joint Defense Agreement will provide that ACNielsen will assume exclusive
liability for IRI Liabilities up to a maximum amount to be calculated at such
time such liabilities, if any, become payable (the "ACN Maximum Amount"), and
that the Company and Cognizant will share liability equally for any amounts in
excess of the ACN Maximum Amount. The ACN Maximum Amount will be determined by
an investment banking firm as the maximum amount that ACNielsen is able to pay
after giving effect to (i) any plan submitted by such investment bank that is
designed to maximize the claims paying ability of ACNielsen without impairing
the investment banking firm's ability to deliver a viability opinion (but which
will not require any action requiring stockholder approval), and (ii) payment of
related fees and expenses. For these purposes, financial viability means the
ability of ACNielsen, after giving effect to such plan, the payment of related
fees and expenses, and the payment of the ACN Maximum Amount, to pay its debts
as they become due and to finance the current and anticipated operating and
capital requirements of its business, as reconstituted by such plan, for two
years from the date any such plan is expected to be implemented.
Management is unable to predict at this time the final outcome of the IRI
Action or whether the resolution of the matter could materially affect the
Company's results of operations, cash flows or financial position.
NOTE 15. SUPPLEMENTAL FINANCIAL DATA
Other Current Assets:
At December 31, 1996 1995
- - --------------------------------------------------------------------------------
Deferred taxes $ 27.3 $158.3
Prepaid expenses 136.5 73.2
Other 25.0 48.7
- - --------------------------------------------------------------------------------
$188.8 $280.2
================================================================================
Property, Plant and Equipment--Net, carried at cost:
At December 31, 1996 1995
- - --------------------------------------------------------------------------------
Buildings $199.3 $200.2
Machinery and equipment 499.9 496.9
- - --------------------------------------------------------------------------------
699.2 697.1
Less: accumulated depreciation 390.7 382.2
- - --------------------------------------------------------------------------------
308.5 314.9
Leasehold improvements, less:
accumulated amortization
of $49.2 and $40.0 35.6 34.7
Land 29.0 33.3
- - --------------------------------------------------------------------------------
$373.1 $382.9
================================================================================
Computer Software and Goodwill:
Computer
Software Goodwill
- - --------------------------------------------------------------------------------
January 1, 1995 $ 88.8 $403.8
Additions at cost 80.4 --
Amortization (24.8) (16.8)
Other deductions and reclassifications (43.7)(1) (91.4)(2)
- - --------------------------------------------------------------------------------
December 31, 1995 100.7 295.6
Additions at cost 84.5 .8
Amortization (37.9) (16.5)
Other deductions and reclassifications 3.4 (61.5)(2)
- - --------------------------------------------------------------------------------
December 31, 1996 $150.7 $218.4
================================================================================
(1) Includes fourth quarter non-recurring charge for impairment of assets.
(2) Primarily sale of Interactive Data Corporation in 1995 and ACI in 1996.
F-22
<PAGE>
The Dun & Bradstreet Corporation and Subsidiaries
Notes to Consolidated Financial Statements continued
Tabular dollar amounts in millions, except per share data
- - --------------------------------------------------------------------------------
NOTE 16. SEGMENT INFORMATION
The Company, operating in 37 countries, delivers information services
principally through two business segments referenced below. Risk Management
Services provides commercial credit and business marketing information,
receivable management services, debt rating and financial information for
investors. Directory Information Services provides sales, marketing and
publishing services for yellow pages and other directory products. Intersegment
sales are immaterial.
BUSINESS SEGMENTS
Years Ended December 31,
----------------------------------------
1996 1995 1994
- - --------------------------------------------------------------------------------
OPERATING REVENUES:
Risk Management Services $1,781.7 $1,734.1 $1,605.7
Directory Information Services 377.5 423.7 440.1
Corporate and Other -- .4 79.1
- - --------------------------------------------------------------------------------
Total $2,159.2 $2,158.2 $2,124.9
================================================================================
OPERATING INCOME (LOSS):
Risk Management Services(1) $327.1 $449.5 $447.0
Directory Information Services(2) 141.1 186.3 248.0
Corporate and Other(3) (270.6) (237.2) (100.1)
- - --------------------------------------------------------------------------------
Total 197.6 398.6 594.9
Non-Operating Expense--Net (71.2) (68.0) (35.0)
- - --------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAXES $ 126.4 $ 330.6 $ 559.9
================================================================================
DEPRECIATION AND AMORTIZATION:(4)
Risk Management Services $ 130.5 $ 113.6 $ 102.6
Directory Information Services 16.8 16.6 15.6
Corporate and Other 10.1 34.3 25.3
- - --------------------------------------------------------------------------------
Total $ 157.4 $ 164.5 $ 143.5
================================================================================
CAPITAL EXPENDITURES:
Risk Management Services $ 50.7 $ 75.0 $ 71.9
Directory Information Services 16.0 19.3 8.2
Corporate and Other 7.2 22.5 42.4
- - --------------------------------------------------------------------------------
Total $ 73.9 $ 116.8 $ 122.5
================================================================================
ASSETS:
Risk Management Services $1,272.9 $1,491.7 $1,574.0
Directory Information Services 527.9 539.7 514.9
Corporate and Other 493.4 484.4 418.0
Discontinued Operations -- 1,207.3 1,342.3
- - --------------------------------------------------------------------------------
Total $2,294.2 $3,723.1 $3,849.2
================================================================================
(1) 1996 Operating Income (Loss) includes a loss on the divestiture of ACI of
$68.2 million and 1995 includes a fourth quarter non-recurring charge of
$45.6 million offset by a gain on the sale of Interactive Data Corporation
of $90.0 million. 1994 includes $5.1 million of restructuring expense and a
non-recurring charge.
(2) 1996 Operating Income (Loss) includes a loss on the sale of P-West of $28.5
million, 1995 includes a fourth quarter non-recurring charge of $17.7
million and 1994 includes a gain on the sale of Thomson Directories Ltd. of
$33.2 million partially offset by $1.2 million of restructuring expense and
a non-recurring charge.
(3) 1996 Operating Income (Loss) includes reorganization costs of $161.2
million. 1995, includes a fourth quarter non-recurring charge of $142.9
million partially offset by a $28.0 million gain on the sale of warrants
received in connection with the divestiture of Donnelley Marketing and 1994
includes $61.6 millon of restructuring expense and a non-recurring charge
partially offset by the gain on the sale of DunsNet of $36.0 million.
(4) Includes depreciation and amortization of Property, Plant and Equipment,
Computer Software, Goodwill and Other Intangibles.
F-23
<PAGE>
- - --------------------------------------------------------------------------------
Note 16. Segment Information (continued)
GEOGRAPHIC SEGMENTS
Years Ended December 31,
-----------------------------------------
1996 1995 1994
- - --------------------------------------------------------------------------------
OPERATING REVENUES:
United States $1,564.0 $1,582.6 $1,638.1
Europe 481.6 465.5 378.0
Other Non-U.S. 113.6 110.1 108.8
- - --------------------------------------------------------------------------------
Total $2,159.2 $2,158.2 $2,124.9
================================================================================
OPERATING INCOME (LOSS):
United States(1) $ 182.2 $ 406.4 $ 526.0
Europe(2) 12.9 3.5 63.4
Other Non-U.S.(3) 2.5 (11.3) 5.5
- - --------------------------------------------------------------------------------
Total 197.6 398.6 594.9
Non-Operating Expense--Net (71.2) (68.0) (35.0)
- - --------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAXES $ 126.4 $ 330.6 $ 559.9
================================================================================
ASSETS:
United States $1,511.2 $1,691.4 $1,688.9
Europe 660.0 774.1 622.6
Other Non-U.S. 123.0 50.3 195.4
Discontinued Operations -- 1,207.3 1,342.3
- - --------------------------------------------------------------------------------
Total $2,294.2 $3,723.1 $3,849.2
================================================================================
(1) 1996 Operating Income (Loss) includes losses on the sales of ACI and P-West
of $68.2 million and $28.5 million, respectively, and reorganization costs
of $161.2 million. 1995 includes a fourth quarter non-recurring charge of
$184.7 million partially offset by gains on the sale of Interactive Data
Corporation of $90.0 million and the sale of warrants received in connection
with the divestiture of Donnelley Marketing of $28.0 million. 1994 includes
$55.7 million of restructuring expense and a non-recurring charge partially
offset by a gain on the sale of DunsNet of $36.0 million.
(2) 1995 includes a fourth quarter non-recurring charge of $8.4 million and 1994
includes a gain on the sale of Thomson Directories Ltd. of $33.2 million
partially offset by $10.7 million of restructuring expense and a
non-recurring charge.
(3) 1995 includes a fourth quarter non-recurring charge of $13.1 million and
1994 includes $1.5 millon of restructuring expense and a non-recurring
charge.
The Directory Information Services segment includes the results of DonTech, a
partnership between RHD and Ameritech Advertising Services. The Company's share
of partnership earnings which is included in operating revenues was $122.4
million, $127.7 million and $121.2 million in 1996, 1995 and 1994, respectively.
At December 31, 1996, DonTech's assets and liabilities were as follows: current
assets $408.4 million, other assets $6.6 million and current liabilities $29.1
million. DonTech's December 31, 1995 assets and liabilities were as follows:
current assets $387.9 million, other assets $9.2 million and current liabilities
$27.1 million. DonTech's gross revenues totaled $468.5 million, $472.8 million
and $462.2 million for 1996, 1995 and 1994, respectively. Pre-tax income was
$226.7 million, $232.2 million and $216.4 million for 1996, 1995 and 1994,
respectively. At December 31, 1996 and 1995, the Company's investment in DonTech
was $215.3 million and $197.2 million, respectively.
F-24
<PAGE>
The Dun & Bradstreet Corporation and Subsidiaries
Notes to Consolidated Financial Statements continued
Tabular dollar amounts in millions, except per share data
- - --------------------------------------------------------------------------------
NOTE 17. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------------
March 31 June 30 September 30 December 31 Year
- - ---------------------------------------------------------------------------------------------------------------------------
1996(1)(2)
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES $450.4 $505.1 $509.8 $ 693.9 $2,159.2
- - ---------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS)(3) $ 52.3 $(14.2) $ 76.0 $ 83.5 $ 197.6
- - ---------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS):
CONTINUING OPERATIONS, NET OF INCOME TAXES $ 21.9 $(43.9) $ 24.3 $ (29.6) $ (27.3)
DISCONTINUED OPERATIONS, NET OF INCOME TAXES 42.3 .3 26.6 (86.3) (17.1)
- - ---------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 64.2 $(43.6) $ 50.9 $(115.9) $ (44.4)
- - ---------------------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) PER SHARE OF COMMON STOCK:
CONTINUING OPERATIONS $ .13 $ (.26) $ .14 $ (.17) $ (.16)
DISCONTINUED OPERATIONS .25 -- .16 (.51) (.10)
- - ---------------------------------------------------------------------------------------------------------------------------
NET EARNINGS (LOSS) PER SHARE OF COMMON STOCK $ .38 $ (.26) $ .30 $ (.68) $ (.26)
===========================================================================================================================
1995(1)(2)
- - ---------------------------------------------------------------------------------------------------------------------------
Operating Revenues $486.5 $515.7 $530.7 $ 625.3 $2,158.2
- - ---------------------------------------------------------------------------------------------------------------------------
Operating Income (Loss)(4) $119.5 $116.5 $212.6 $ (50.0) $ 398.6
- - ---------------------------------------------------------------------------------------------------------------------------
Income (Loss):
Continuing Operations, Net of Income Taxes $ 67.6 $ 63.5 $127.6 $ (41.2) $ 217.5
Discontinued Operations, Net of Income Taxes 41.3 82.6 43.9 (64.5) 103.3
- - ---------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $108.9 $146.1 $171.5 $(105.7) $ 320.8
- - ---------------------------------------------------------------------------------------------------------------------------
Earnings (Loss) Per Share of Common Stock:
Continuing Operations $ .40 $ .37 $ .75 $ (.24) $ 1.28
Discontinued Operations .24 .49 .26 (.38) .61
- - ---------------------------------------------------------------------------------------------------------------------------
Net Earnings (Loss) Per Share of Common Stock $ .64 $ .86 $ 1.01 $ (.62) $ 1.89
===========================================================================================================================
</TABLE>
(1) Previously filed Forms 10-Q for the quarters ended March 31 and June 30,
1996, have been reclassified to reflect certain of the Company's businesses
as discontinued operations.
(2) In the fourth quarter of 1996, the Company changed its revenue recognition
accounting policy in connection with its Directory Information Services
segment, effective January 1, 1996. The Company changed to the predominant
industry practice of recognizing revenue and related expenses at the time
the yellow page directories are published. Previously, revenue and related
expenses were reported ratably during the year consistent with historic
publishing patterns. This accounting change had no impact on the full-year
results. As a result of this accounting change, results for the first three
quarters of 1996 have been restated. In accordance with APB No. 20,
"Accounting Changes," 1995 results have not been restated.
(3) Includes reorganization costs of $1.4 million, $7.6 million, $18.9 million
and $133.3 million incurred in the quarters ended March 31, June 30,
September 30 and December 31, 1996, respectively, loss on the sale of ACI of
$63.8 million and $4.4 million in the quarters ended June 30 and September
30, 1996, respectively, and loss on the sale of P-West of $25.0 million and
$3.5 million in the quarters ended June 30 and September 30, 1996,
respectively.
(4) Includes a non-recurring charge of $206.2 million in the quarter ended
December 31, 1995, partially offset by gains of $28.0 million in the quarter
ended March 31, 1995, on the sale of warrants received in connection with
the divestiture of Donnelley Marketing and $90.0 million in the quarter
ended September 30, 1995, associated with the sale of Interactive Data
Corporation.
F-25
<PAGE>
- - --------------------------------------------------------------------------------
Note 17. Quarterly Financial Data (Unaudited) (continued)
SUPPLEMENTAL INFORMATION
The following supplemental information is provided to present 1995 quarterly
results on a comparable basis to 1996. 1995 results have been restated as if the
revenue recognition change described previously was effective as of January 1,
1995.
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------------------------
March 31 June 30 September 30 December 31 Year
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995
Operating Revenues $441.2 $494.5 $525.2 $697.3 $2,158.2
- - ----------------------------------------------------------------------------------------------------------------------------
Operating Income (Loss)(1) $ 85.4 $ 91.3 $211.3 $ 10.6 $ 398.6
- - ----------------------------------------------------------------------------------------------------------------------------
Income (Loss):
Continuing Operations, Net of Income Taxes $ 45.0 $ 46.9 $126.8 $ (1.2) $ 217.5
Discontinued Operations, Net of Income Taxes 41.3 82.6 43.9 (64.5) 103.3
- - ----------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $ 86.3 $129.5 $170.7 $(65.7) $ 320.8
- - ----------------------------------------------------------------------------------------------------------------------------
Earnings (Loss) Per Share of Common Stock:
Continuing Operations $ .27 $ .27 $ .75 $ (.01) $ 1.28
Discontinued Operations .24 .49 .26 (.38) .61
- - ----------------------------------------------------------------------------------------------------------------------------
Net Earnings (Loss) Per Share of Common Stock $ .51 $ .76 $ 1.01 $ (.39) $ 1.89
============================================================================================================================
</TABLE>
(1) Includes a non-recurring charge of $206.2 million in the quarter ended
December 31, 1995, offset by gains of $28.0 million in the quarter ended
March 31, 1995, on the sale of warrants received in connection with the
divestiture of Donnelley Marketing and $90.0 million in the quarter ended
September 30, 1995, associated with the sale of Interactive Data
Corporation.
F-26
<PAGE>
FIVE-YEAR SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Tabular amounts in millions, except per share data 1996 1995 1994 1993 1992
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Operating Revenues $2,159.2 $2,158.2 $2,124.9 $2,127.0 $2,151.9
Costs and Expenses(1) 1,961.6 1,759.6 1,530.0 1,794.2 1,627.3
- - ---------------------------------------------------------------------------------------------------------------------------------
Operating Income 197.6 398.6 594.9 332.8 524.6
Non-Operating (Expense) Income--Net (71.2) (68.0) (35.0) 1.8 (7.4)
- - ---------------------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations before
Provision for Income Taxes 126.4 330.6 559.9 334.6 517.2
Provision for Income Taxes 153.7 113.1 191.3 122.7 158.5
- - ---------------------------------------------------------------------------------------------------------------------------------
Income (Loss):
Continuing Operations (27.3) 217.5 368.6 211.9 358.7
Discontinued Operations, Net of Income Taxes(2) (17.1) 103.3 260.9 72.6 194.8
- - ---------------------------------------------------------------------------------------------------------------------------------
Income (Loss) before Cumulative Effect
of Accounting Changes (44.4) 320.8 629.5 284.5 553.5
Cumulative Effect of Accounting Changes(3) -- -- -- (246.4) --
- - ---------------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $ (44.4) $ 320.8 $ 629.5 $ 38.1 $ 553.5
=================================================================================================================================
EARNINGS (LOSS) PER SHARE OF COMMON STOCK:
Continuing Operations $ (0.16) $ 1.28 $ 2.17 $ 1.20 $ 2.01
Discontinued Operations (0.10) 0.61 1.53 0.41 1.09
- - ---------------------------------------------------------------------------------------------------------------------------------
Earnings (Loss) before Cumulative Effect
of Accounting Changes (0.26) 1.89 3.70 1.61 3.10
Cumulative Effect of Accounting Changes(3) -- -- -- (1.38) --
- - ---------------------------------------------------------------------------------------------------------------------------------
Net Earnings (Loss) Per Share of Common Stock $(0.26) $ 1.89 $ 3.70 $ 0.23 $ 3.10
=================================================================================================================================
Dividends Per Share $ 1.82 $ 2.63 $ 2.56 $ 2.40 $ 2.25
Dividends Paid $310.8 $ 446.1 $ 435.2 $ 423.0 $ 401.3
Weighted Average Number of Shares Outstanding 170.0 169.5 169.9 177.2 178.3
=================================================================================================================================
BALANCE SHEET:
Total Assets(4) $2,294.2 $3,723.1 $3,849.2 $3,651.2 $3,845.6
=================================================================================================================================
Shareholders' Equity $(431.7) $1,182.5 $1,318.6 $1,111.3 $2,156.0
=================================================================================================================================
</TABLE>
(1) 1996 includes one-time charges of $161.2 million for reorganization costs
and losses on divestitures of $68.2 million and $28.5 million for ACI and
P-West, respectively. 1995 includes a fourth quarter non-recurring charge of
$206.2 million partially offset by gains of $90.0 million and $28.0 million
for the sale of Interactive Data Corporation and warrants received in
connection with the divestiture of Donnelley Marketing, respectively. 1994
includes restructuring expense and a non-recurring charge of $67.9 million
offset by gains on the sales of Thomson Directories Ltd. and DunsNet of
$33.2 million and $36.0 million, respectively. 1993 includes restructuring
expense of $173.8 million partially offset by gains of $13.6 million for the
redemption of preferred shares received from the 1991 sale of Donnelley
Marketing, $9.5 million on the sale of Donnelley Marketing and $8.9 million
for the redemption of notes related to the 1992 sale of Datastream
International. 1992 includes gains of $90.0 million on the sale of
Datastream International and Information Associates partially offset by
restructuring expense of $55.8 million.
(2) Income taxes on Discontinued Operations was $93.5 million, $9.7 million,
$58.4 million, $36.7 million and $83.3 million in 1996, 1995, 1994, 1993 and
1992, respectively.
(3) Includes impact of $130.9 million or $.73 per share for the adoption of SFAS
No. 112 and $115.5 million or $.65 per share for the adoption of SFAS No.
106 in 1993.
(4) Includes Net Assets of Discontinued Operations of $1,207.3 million, $1,342.3
million, $1,186.4 million and $1,686.9 million in 1995, 1994, 1993 and 1992,
respectively.
F-27
EXHIBIT 21
THE DUN & BRADSTREET CORPORATION
LIST OF ACTIVE SUBSIDIARIES AS OF JANUARY 31, 1997
<TABLE>
<CAPTION>
% OWNERSHIP
STATE OR OTHER 100% EXCEPT
NAME JURISDICTION OF AS NOTED
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
D&B ESPANA S.A. Spain
DUN & BRADSTREET (SWITZERLAND) AG Switzerland
ICM Institute fur Credit Management AG Switzerland
DUN & BRADSTREET COMPUTER LEASING, INC. Delaware
Fillupar Leasing Partnership Delaware 98.00
DUN & BRADSTREET HOLDINGS, INC. Delaware
DUN & BRADSTREET, INC. Delaware
D&B Investors L.P. Delaware 99.00
Dun & Bradstreet Life Insurance Company Arizona
Dun & Bradstreet Program Management Services, Inc. Delaware
Dun & Bradstreet RMS Franchise Corporation Delaware
Duns Holding, Inc. Delaware
D&B Acquisition Corp. Delaware
DUN & BRADSTREET INTERNATIONAL, LTD. Delaware
Dun & Bradstreet S.A. Argentina
Dun & Bradstreet (Australia) Holdings Pty. Australia
Dun & Bradstreet (Australia) Group Pty. Ltd. Australia
Arrebnac Pty. Ltd. Australia
D&B Pty. Ltd. (Australia) Australia
College Mercantile Pty. Ltd. Australia
Dun & Bradstreet (Australia)
Pty. Limited. Australia
Dun & Bradstreet (Nominees) Pty. Ltd. Australia
Dun & Bradstreet Unit Trust Australia
Australia Pty. Limited
Moody's Investors Service Pty. Limited Australia
Dun & Bradstreet Canada Holding, Ltd. Canada
The D&B Companies of Canada Ltd. Canada
Credit Guard Corporation Canada
Dun & Bradstreet Finance Inc. Canada
Dun & Bradstreet Do Brasil, Ltda. Delaware
N.V. Dun & Bradstreet-Eurinform S.A. Belgium
Dun & Bradstreet Ltda. Chile
Dun & Bradstreet International Consultant (Shanghai) Co. Ltd. China
D&B Group, Ltd. Delaware
Dun & Bradstreet Europe, Limited England
Dun & Bradstreet Limited England
Dun & Bradstreet Limited Ireland
Dataquest Europe Ltd. England
Dun & Bradstreet Finance Ltd. England
B-1
<PAGE>
<CAPTION>
% OWNERSHIP
STATE OR OTHER 100% EXCEPT
NAME JURISDICTION OF AS NOTED
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DUN & BRADSTREET INTERNATIONAL, LTD. (CONTINUED)
D&B Group, Ltd. (continued) Delaware
D&B Europe Limited (continued) England
Dun & Bradstreet (U.K.) Ltd. England
Dun & Bradstreet (U.K.) Pension Plan England
Trustee Company Ltd.
Moody's Investors Service Limited England
Dun & Bradstreet Credit Control, Ltd. Delaware
Dun & Bradstreet (HK) Limited Hong Kong
Dunbrad, Inc. Delaware
Dun & Bradstreet Deutschland Holding GmbH Germany
D&B Information Services GmbH Germany
D&B Unterstutzungskasse GmbH Germany
Dun & Bradstreet Information Solutions GmbH Germany
Dun & Bradstreet (Israel) Ltd. Israel
Dun & Bradstreet Japan Ltd. Japan
D&B Information Services (M) Sdn. Bhd. Malaysia
Dun & Bradstreet S.A. de C.V. Mexico
Dun & Bradstreet (New Zealand) Limited New Zealand
Dun & Bradstreet S.A. Peru
Dun & Bradstreet Portugal, Ltda. Portugal
Dun & Bradstreet (Singapore) Pte. Ltd. Singapore
Dun & Bradstreet Nordic AB Sweden
Dun & Bradstreet Finland OY Finland
Dun & Bradstreet Soliditet AB Sweden
Ifico-Burgel AG Switzerland
Dun & Bradstreet Information Services Ges.mbH Austria
Dun & Bradstreet B.V. The Netherlands
Dun & Bradstreet Holding (Norway) AS Norway
Dun & Bradstreet Norge AS Norway
Dun & Bradstreet Soliditet AS Norway
Dun & Bradstreet (C&EE) Holding B.V. The Netherlands 80.00
Dun & Bradstreet spol s r.o. Czech Republic 80.00
Dun & Bradstreet Hungaria Informacio Szogaltato Hungary 80.00
Korlatolt Felelosegu Tarasag
Dun & Bradstreet Poland sp. z o.o. Poland 80.00
Dun & Bradstreet S.A. France
D&B Management S.A.S. France
Moody's France S.A. France
S&W S.N.R.C. - Wys Muller France
S&W S.A. Belgium
Perfect Data International N.V. The Netherlands Antilles
Perfect Data Services B.V. The Netherlands
Dun & Bradstreet Danmark Holding A/S Denmark
D&B International A/S Denmark
B-2
<PAGE>
<CAPTION>
% OWNERSHIP
STATE OR OTHER 100% EXCEPT
NAME JURISDICTION OF AS NOTED
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DUN & BRADSTREET INTERNATIONAL, LTD. (CONTINUED)
Wiri Beleggingen B.V. The Netherlands
Dun & Bradstreet Kosmos S.p.A. Italy
Argus Situaziono Aziendali S.r.l. Italy
Data Tech S.r.l. Italy
Orefro L'Informazione S.p.A. Italy
Consorzio Manifatturieri S.r.l. Italy
Ore. Tel S.r.L. Italy
Orefro Data S.r.l. Italy
TemaTel S.r.l. Italy
Dun & Bradstreet S.A. Uruguay
Dun & Bradstreet C.A. Venezuela
Dun & Bradstreet Zimbabwe (Private) Limited Zimbabwe
DUN & BRADSTREET INVESTMENTS LTD. England
DUN & BRADSTREET SOFTWARE HOLDINGS, INC. Delaware
DUNS INVESTING CORPORATION Delaware
DUNS INVESTING VII CORPORATION Delaware
DUNSNET INC. Delaware
Dun & Bradstreet Marketing Pty. Ltd. Australia
MOODY'S INVESTORS SERVICE, INC. Delaware
Financial Proformas, Inc. Delaware
Moody's Asia Pacific Limited Hong Kong
Moody's Canada Inc. Canada
Moody's Deutschland GmbH Germany
Moody's Emerging Market Services, Inc. Delaware
Moody's Investors Service Espana, S.A. Spain
Moody's Japan Kabushiki Kaisha Japan
Moody's Overseas Holdings, Inc. Delaware
Moody's Interbank Credit Services Limited Cyprus
Moody's Singapore Pte Ltd. Singapore
OAK INVESTMENTS LTD. Bermuda
PALMETTO ASSURANCE LTD. Bermuda
THE REUBEN H. DONNELLEY CORPORATION Delaware
Am-Don Partnership Illinois 50.00
CenDon Partnership Illinois 50.00
C-Don Partnership Pennsylvania 50.00
Uni-Don Partnership Florida 50.00
</TABLE>
B-3
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of The Dun & Bradstreet Corporation on Forms S-8 (File Nos. 2-53006,
33-21719, 33-25774, 33-27144, 33-44551, 33-49060, 33-51005, 33-56289 and
33-64317) of our reports dated February 26, 1997, on our audits of the
consolidated financial statements and financial statement schedule of The Dun &
Bradstreet Corporation at December 31, 1996 and 1995 and for the years ended
December 31, 1996, 1995 and 1994, which reports are incorporated by reference or
included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
New York, New York
March 26, 1997
Exhibit 23 (b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of The Dun & Bradstreet Corporation on Forms S-8 (File Nos. 2-53006,
33-21719, 33-25774, 33-27144, 33-44551, 33-49060, 33-51005, 33-56289 and
33-64317) of our report dated January 3, 1997, on our audits of the financial
statements of DonTech as of December 31, 1996 and 1995 and for the years
ended December 31, 1996, 1995 and 1994, which report is included in this
Annual Report on Form 10-K.
Chicago, Illinois
March 26, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 127,894
<SECURITIES> 1,306
<RECEIVABLES> 600,748
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 187,421
<PP&E> 813,043
<DEPRECIATION> 439,957
<TOTAL-ASSETS> 2,294,169
<CURRENT-LIABILITIES> 2,017,557
<BONDS> 0
0
0
<COMMON> 188,421
<OTHER-SE> (620,137)
<TOTAL-LIABILITY-AND-EQUITY> 2,294,169
<SALES> 0
<TOTAL-REVENUES> 2,159,245
<CGS> 0
<TOTAL-COSTS> 1,961,599
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,709
<INCOME-PRETAX> 126,459
<INCOME-TAX> 153,721
<INCOME-CONTINUING> (27,262)
<DISCONTINUED> (17,114)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (44,376)
<EPS-PRIMARY> (0.26)
<EPS-DILUTED> (0.26)
</TABLE>
