-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U6ANdztgBkcWRN35C7vomSLVXQ+Gs5Ymvi2IOd6+wFrizTEj+SrSzwlQQldSALCt gGHDMoAv37xKIaUsD4RV6w== 0000950110-98-000930.txt : 19980819 0000950110-98-000930.hdr.sgml : 19980819 ACCESSION NUMBER: 0000950110-98-000930 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: IMS HEALTH INC CENTRAL INDEX KEY: 0001058083 STANDARD INDUSTRIAL CLASSIFICATION: 7374 IRS NUMBER: 061506026 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14049 FILM NUMBER: 98689179 BUSINESS ADDRESS: STREET 1: 200 NYALA FARMS CITY: WESTPORT STATE: CT ZIP: 06880 BUSINESS PHONE: 2032224523 MAIL ADDRESS: STREET 1: 200 NYALA FARMS ROAD CITY: WESTPORT STATE: CT ZIP: 06880 10-Q 1 FORM 10-Q ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 ------------------- FORM 10-Q ------------------- (Mark one) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JUNE 30, 1998 ------------- OR (_) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________________ to ____________________ Commission file number 001-14049 --------- IMS HEALTH INCORPORATED ------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 06-1506026 ------------------------ ------------------- (State of Incorporation) (I.R.S. Employer Identification No.) 200 NYALA FARMS, WESTPORT, CT 06880 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (203) 222-4200 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: TITLE OF CLASS SHARES OUTSTANDING COMMON STOCK, AT JUNE 30, 1998 ------------------------ ------------------ par value $.01 per share 166,812,695 ================================================================================ IMS HEALTH INCORPORATED INDEX TO FORM 10-Q PART I. FINANCIAL INFORMATION PAGE(S) - - ----------------------------- ------- Item 1. Financial Statements Condensed Consolidated Statements of Income (Unaudited) Three Months Ended June 30, 1998 and 1997 ............................ 3 Six Months Ended June 30, 1998 and 1997 .............................. 4 Condensed Consolidated Statements of Comprehensive Income (Unaudited) Three Months Ended June 30, 1998 and 1997 ............................ 5 Six Months Ended June 30, 1998 and 1997 .............................. 5 Condensed Consolidated Statements of Financial Position (Unaudited) June 30, 1998 and December 31, 1997 .................................. 6 Condensed Consolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30, 1998 and 1997 .............................. 7 Notes to Condensed Consolidated Financial Statements (Unaudited) ........ 8-17 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ............................. 18-24 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K ................................ 25 SIGNATURE ............................................................... 26 2 PART I. FINANCIAL INFORMATION - - ----------------------------- ITEM I. FINANCIAL STATEMENTS IMS HEALTH INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED JUNE 30, ----------------------------------- 1998 1997 ----- ----- Operating Revenue ...................................................................... $ 270,496 $ 251,076 Operating Costs ........................................................................ 151,362 107,765 Selling and Administrative Expenses .................................................... 89,639 81,232 In-Process Research and Development .................................................... 57,000 0 Depreciation and Amortization ......................................................... 21,507 22,724 ------------- ------------- Operating (Loss)/Income ................................................................ (49,012) 39,355 Interest Income ........................................................................ 4,771 1,666 Interest Expense ....................................................................... (212) (131) Gartner Equity Income .................................................................. 17,320 15,137 Gain from Stock Sale by Gartner ........................................................ 5,392 0 Gain on Issuance of Subsidiary Stock ................................................... 12,777 0 Other Expense - Net .................................................................... (2,477) (1,331) ------------- ------------- Non-Operating Income - Net ............................................................. 37,571 15,341 (Loss)/Income from Continuing Operations, Before Provision for Taxes ............................................................. (11,441) 54,696 Provision for Income Taxes ............................................................. (22,107) (14,629) ------------- ------------- (Loss)/Income from Continuing Operations ............................................... (33,548) 40,067 Income from Discontinued Operations, Net of Income Tax Provision of $7,960 and $7,367 for June 30, 1998 and 1997, respectively .......................... 21,088 19,988 ------------- ------------- Net (Loss)/Income ...................................................................... $ (12,460) $ 60,055 ============= ============= (Loss)/Earnings Per Share of Common Stock: Basic (Loss)/Income from Continuing Operations ............................................... $ (0.21) $ 0.24 Income from Discontinued Operations .................................................... 0.13 0.12 ------------- ------------- Basic (Loss)/Earnings Per Share ........................................................ $ (0.08) $ 0.36 Diluted (Loss)/Income from Continuing Operations ............................................... $ (0.20) $ 0.24 Income from Discontinued Operations .................................................... 0.13 0.12 ------------- ------------- Diluted (Loss)/Earnings Per Share ...................................................... $ (0.07) $ 0.36 Average Number of Shares Outstanding - Basic ........................................... 163,305,000 165,526,000 Dilutive Effect of Shares Issuable as of June 30, 1998 Under Stock Option Plans ........ 4,739,000 435,000 Adjustment of Shares to Reflect Options Exercised and Cancelled During the Period ...... 1,043,000 93,000 ============= ============= Average Number of Shares Outstanding - Diluted ......................................... 169,087,000 166,054,000 ============= =============
See accompanying notes to the condensed consolidated financial statements (unaudited) 3 IMS HEALTH INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED JUNE 30, ---------------------------------- 1998 1997 ---- ---- Operating Revenue ........................................................................ $ 511,464 $ 480,381 Operating Costs .......................................................................... 270,954 216,465 Selling and Administrative Expenses ...................................................... 170,593 153,918 In-Process Research and Development ...................................................... 57,000 0 Depreciation and Amortization ............................................................ 43,201 49,035 ------------- ------------- Operating (Loss)/Income .................................................................. (30,284) 60,963 Interest Income .......................................................................... 8,869 5,276 Interest Expense ......................................................................... (412) (581) Gartner Equity Income .................................................................... 32,894 30,671 Gain from Stock Sale by Gartner........................................................... 13,379 0 Gain on Issuance of Subsidiary Stock ..................................................... 12,777 0 Gains from Dispositions, Net ............................................................. 10,415 5,436 Other Expense - Net ...................................................................... (5,247) (2,094) ------------- ------------- Non-Operating Income - Net ............................................................... 72,675 38,708 Income from Continuing Operations, Before Provision for Taxes ............................................................... 42,391 99,671 Provision for Income Taxes ............................................................... (36,857) (26,233) ------------- ------------- Income from Continuing Operations ........................................................ 5,534 73,438 Income from Discontinued Operations, Net of Income Tax Provision of $15,887 and $14,118 for six months ended June 30, 1998 and 1997, respectively ........................................................................... 42,093 39,522 ------------- ------------- Net Income ............................................................................... $ 47,627 $ 112,960 ============= ============= Earnings Per Share of Common Stock: Basic Income from Continuing Operations ........................................................ $ 0.03 $ 0.44 Income from Discontinued Operations ...................................................... 0.26 0.23 ------------- ------------- Basic Earnings Per Share ................................................................. $ 0.29 $ 0.67 Diluted Income from Continuing Operations ........................................................ $ 0.03 $ 0.44 Income from Discontinued Operations ...................................................... 0.25 0.23 ------------- ------------- Diluted Earnings Per Share ............................................................... $ 0.28 $ 0.67 Average Number of Shares Outstanding - Basic ............................................. 162,843,000 167,610,000 Dilutive Effect of Shares Issuable as of June 30, 1998 Under Stock Option Plans .......... 4,347,000 197,000 Adjustment of Shares to Reflect Options Exercised and Cancelled During the Period ........ 1,734,000 108,000 ============= ============= Average Number of Shares Outstanding - Diluted ........................................... 168,924,000 167,915,000 ============= =============
See accompanying notes to the condensed consolidated financial statements (unaudited) 4 IMS HEALTH INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (DOLLAR AMOUNTS IN THOUSANDS)
THREE MONTHS ENDED JUNE 30, ------------------------- 1998 1997 ---- ----- Net (Loss)/Income .............................................................................. $(12,460) $ 60,055 Other Comprehensive Income/(Loss), net of tax: Foreign Currency Translation Adjustments .................................................... (10,499) (13,649) Unrealized Gains on Securities: Unrealized Holding Gains Arising During the Period (Net of tax expense of ($1,690) and ($1,604) in 1998 and 1997, respectively) ........................................................................... 4,478 4,392 -------- -------- Net Unrealized Gains ........................................................................ 4,478 4,392 -------- -------- Other Comprehensive Loss ....................................................................... (6,021) (9,257) -------- -------- Comprehensive (Loss)/Income .................................................................... $(18,481) $ 50,798 ======== ========
SIX MONTHS ENDED JUNE 30, ------------------------- Net Income ................................................................................... $ 47,627 $ 112,960 Other Comprehensive Income/(Loss), net of tax: Foreign Currency Translation Adjustments .................................................. (9,596) (42,484) Unrealized Gains/(Losses) on Securities: Unrealized Holding Gains/(Losses) Arising During the Period (Net of tax (expense)/benefit of ($1,717) and $785 in 1998 and 1997, respectively) ......................................................................... 4,549 (2,197) Less: Reclassification Adjustment for Realized Gains included in Net Income (net of tax benefit of $2,910 in 1998) ........................................... (7,710) 0 --------- --------- Net Unrealized Losses ..................................................................... (3,161) (2,197) --------- --------- Other Comprehensive Loss ..................................................................... (12,757) (44,681) --------- --------- Comprehensive Income ......................................................................... $ 34,870 $ 68,279 ========= =========
5 IMS HEALTH INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED) (DOLLAR AMOUNTS IN THOUSANDS) JUNE 30, DECEMBER 31, 1998 1997 -------- ----------- ASSETS Current Assets Cash and Cash Equivalents .............. $ 702,550 $ 312,442 Accounts Receivable-Net ................ 261,267 251,623 Other Current Assets ................... 72,678 65,692 ---------- ---------- Total Current Assets ............... 1,036,495 629,757 ---------- ---------- Investment in Gartner Group ............... 228,674 195,695 Marketable Securities and Other Investments 109,708 109,712 Property, Plant and Equipment-Net ......... 175,304 178,533 Other Assets-Net Computer Software ...................... 103,927 99,175 Goodwill ............................... 219,420 87,430 Other Assets ........................... 92,540 79,009 ---------- ---------- Total Other Assets-Net ............. 415,887 265,614 ---------- ---------- Net Assets from Discontinued Operations ... 0 122,778 ---------- ---------- Total Assets .............................. $1,966,068 $1,502,089 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts and Notes Payable ............. $ 46,659 44,441 Accrued and Other Current Liabilities .. 249,927 189,384 Accrued Income Taxes ................... 60,235 52,696 Deferred Revenues ...................... 130,068 110,768 ---------- ---------- Total Current Liabilities .......... 486,889 397,289 Postretirement and Postemployment Benefits 43,539 38,082 Deferred Income Taxes ..................... 93,946 92,153 Minority Interests ........................ 112,063 101,209 Other Liabilities ......................... 81,773 71,786 ---------- ---------- Total Liabilities ......................... 818,210 700,519 ---------- ---------- Shareholders' Equity ...................... 1,147,858 801,570 ---------- ---------- Total Liabilities and Shareholders' Equity $1,966,068 $1,502,089 ========== ========== See accompanying notes to the condensed consolidated financial statements (unaudited). 6 IMS HEALTH INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (DOLLAR AMOUNTS IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, ----------------------- 1998 1997 -------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income ........................................................ $ 47,627 $ 112,960 Less Income from Discontinued Operations .......................... (42,093) (39,522) --------- --------- Income from Continuing Operations ................................. 5,534 73,438 Reconciliation of Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization ................................. 43,201 49,035 Gains on Issuance of Subsidiary Stock ......................... (12,777) Gains from Sale of Investments, Net ........................... (10,415) (5,436) Write-off of Purchased in Process Research & Development ...... 57,000 0 Postemployment Benefit Payments ............................... (2,083) (4,059) Non-recurring Payments ........................................ (1,910) (2,750) Net Decrease (Increase) in Accounts Receivable ................ 3,696 (11,626) Net Increase in Deferred Revenues ............................. 16,673 34,024 Gartner Group Equity Income, Net of Taxes ..................... (19,600) (17,760) Gain from Stock Sale by Gartner ............................... (13,379) 0 Minority Interest Expense ..................................... 4,183 712 Deferred Income Taxes ......................................... 7,889 5,869 Net Increase (Decrease) in Accrued Income Taxes ............... 8,916 (13,261) Net (Increase) in Other Working Capital Items ................. (8,569) (21,246) - - -------------------------------------------------------------------------------------------- Net Cash Provided by Operating Activities ......................... 78,359 86,940 - - -------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Payments for Acquisitions of Businesses ........................... (2,938) 0 Cash of Companies Acquired in Stock Purchases ..................... 9,480 0 Proceeds from Sale of Investments ................................. 23,165 7,004 Capital Expenditures .............................................. (18,201) (21,990) Additions to Computer Software .................................... (21,060) (19,992) Additions to Other Assets ......................................... (13,829) (10,936) Increase in Investments ........................................... (12,604) (14,349) Other ............................................................. 16,671 13,946 - - --------------------------------------------------------------------------------------------- Net Cash (Used in) Investing Activities ........................... (19,316) (46,317) - - --------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments for Purchase of Treasury Shares .......................... (7,809) (204,564) Proceeds from Exercise of Stock Options ........................... 43,232 4,345 Proceeds from Issuance of Subsidiary Stock ........................ 27,128 Payments of Dividends ............................................. (9,813) (10,092) Employee Stock Purchase Plan ...................................... 2,607 0 Proceeds from Debt assumed by Nielsen Media Research .............. 300,000 0 Minority Interest Financing ....................................... 0 100,000 Other ............................................................. (199) (490) - - --------------------------------------------------------------------------------------------- Net Cash Provided by/(Used in) Financing Activities ............... 355,146 (110,801) - - --------------------------------------------------------------------------------------------- Change of Gartner Group to Equity Basis ........................... 0 (123,697) Effect of Exchange Rate Changes on Cash and Cash Equivalents ...... (6,908) (5,073) Cash Flow from Discontinued Operations ............................ (17,173) 23,360 - - -------------------------------------------------------------------------------------------- Increase (Decrease) in Cash and Cash Equivalents .................. 390,108 (175,588) Cash and Cash Equivalents, Beginning of Period .................... 312,442 422,963 - - -------------------------------------------------------------------------------------------- Cash and Cash Equivalents, End of Period .......................... $ 702,550 $ 247,375 ============================================================================================ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest .......................... $ 412 $ 581 Cash paid during the period for income taxes ...................... $ 49,324 $ 45,830 Non-Cash Investing Activities: Stock Issued in Connection with Walsh and Chinametrik Aquisitions $ 168,937 $ 0
See accompanying notes to the condensed consolidated financial statements (unaudited). 7 IMS HEALTH INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED) DOLLAR AMOUNTS IN THOUSANDS NOTE 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for the interim financial information and Article 10 of Regulation S-X under the Securities and Exchange Act of 1934, as amended. The condensed financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes of IMS Health Incorporated (the "Company" or "IMS Health") on the Form 8K/A-2 filed July 22, 1998. Accordingly, the accompanying condensed consolidated financial statements do not include all the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of financial position, results of operations and cash flows for the periods presented have been included. Certain prior-period amounts have been reclassified to conform with the 1998 presentation. NOTE 2. BASIS OF PRESENTATION This document relates to IMS Health. The Common Stock of IMS Health was distributed by Cognizant Corporation ("Cognizant") to its shareholders on June 30, 1998. Simultaneously with the distribution ("the Distribution") Cognizant changed its name to Nielsen Media Research, Inc. ("Nielsen Media Research"). Notwithstanding the legal form of the distribution, whereby Cognizant spun off IMS Health, for accounting purposes the transaction is accounted for as if Cognizant spun off Nielsen Media Research and IMS Health has been deemed the "accounting successor" to Cognizant. The separation created IMS Health as the premier global provider of information solutions to the pharmaceutical and healthcare industries, and established an independent Nielsen Media Research, the leader in electronic audience measurement services. IMS Health consists of IMS ("IMS"), Erisco, Inc. ("Erisco"), Enterprises Associates, Inc. ("Enterprises"), Cognizant Technology Solutions Corporation ("CTS"), SSJ K.K. ("Super Systems Japan"), and an equity investment in Gartner Group, Inc. ("Gartner"). Cognizant received a favorable ruling from the Internal Revenue Service with respect to the tax-free treatment of the transaction in May 1998. Cognizant's Board of Directors on June 15, 1998 approved the final plan, terms and conditions relating to the separation of the company including distribution, tax allocation, employee benefits and other agreements and authorized management to execute the plan of distribution. The Board of Directors declared a dividend to shareholders of record as of the close of business on June 25, 1998 consisting of one share of IMS Health Common Stock for each share of Cognizant Common Stock. The Distribution was effective June 30, 1998. Pursuant to Accounting Principles Board ("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 Nielsen Media Research as discontinued operations. In connection with the Distribution, Cognizant borrowed $300 million on June 24, 1998, which was used to repay existing intercompany liabilities. This debt remained the obligation of Nielsen Media Research following the spin-off. In connection with the Distribution, Cognizant contributed to IMS Health all cash in Cognizant's accounts other than (i) cash required by Cognizant (renamed Nielsen Media Research) to satisfy certain specified obligations and (ii) such 8 IMS HEALTH INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED) DOLLAR AMOUNTS IN THOUSANDS NOTE 2. BASIS OF PRESENTATION (CONTINUED) additional cash as was necessary for the net borrowings of Cognizant (renamed Nielsen Media Research) to equal $300 million as of the Distribution. Prior to the Distribution, Cognizant and IMS Health entered into certain agreements that will govern the relationship between Nielsen Media Research and IMS Health subsequent to the Distribution and provide for the allocation of tax, employee benefits and certain other liabilities and obligations arising from periods prior to the Distribution. Among other things, the agreements set forth principles to be applied in allocating certain Distribution-related costs and specify portions of contingent liabilities to be shared if certain amounts are exceeded. Following the Distribution, IMS Health does not have any ownership interest in Nielsen Media Research (other than 800,000 shares of Nielsen Media Research Common Stock which IMS Health owns as a result of Cognizant Stock held by a subsidiary of IMS Health and which IMS Health intends to sell). The Consolidated Financial Statements have been restated to present Nielsen Media Research as discontinued operations and reflect the Distribution which occurred at June 30, 1998. Summarized data for discontinued operations is as follows (dollar amounts in thousands):
Results of Operations (Unaudited) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, --------------------------- -------------------------- 1998 1997 1998 1997 -------- -------- -------- -------- Operating Revenue ......................... $ 97,932 $ 87,184 $193,996 $173,455 Income Before Provision for Income Taxes .. 29,048 27,355 57,980 53,640 ======== ======== ======== ======== Income from Discontinued Operations, Net of Income Taxes ......................... $ 21,088 $ 19,988 $ 42,093 $ 39,522 ======== ======== ======== ========
Net Assets of Discontinued Operations December 31, 1997 ----------------- Current Assets ........................... $ 64,655 Property Plant & Equipment ............... 55,050 Computer Software ........................ 43,093 Deferred Charges ......................... 16,299 Other Assets ............................. 21,112 Current Liabilities ...................... (43,921) Other Liabilities ........................ (33,510) =========== Net Assets of Discontinued Operations .... $ 122,778 =========== NOTE 3. INVESTMENTS In the third quarter of 1997, the Company's voting interest in Gartner fell below 50% as a result of the exercise of Gartner employee stock options and employee stock purchases. Accordingly, effective January 1, 1997, the Company has deconsolidated Gartner and is accounting for its ownership interest under the equity basis. 9 IMS HEALTH INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED) DOLLAR AMOUNTS IN THOUSANDS NOTE 3. INVESTMENTS (CONTINUED) The Company recognizes as income any gains or losses related to the sale or issuance of stock by a consolidated subsidiary or a company accounted for under the equity basis ("SAB 51 Gain"). In the second quarter of 1998, proceeds from the issuance of shares to Gartner employees, including associated tax benefits, increased Gartner's equity by $14,147 and reduced the Company's ownership interest by less than 1% to 46.9% at June 30, 1998. Accordingly, the Company recognized a pre-tax unrealized gain on Gartner stock of $5,392 corresponding to the net increase in the value of its underlying investment in Gartner. NOTE 4. PUBLIC OFFERING OF A SUBSIDIARY CTS effected an initial public offering ("the CTS IPO") of 2,917,000 shares of Class A Common Stock, par value $0.01 per share, of CTS (3,354,550 including the underwriters' over-allotment option granted by Cognizant) on June 19, 1998. Of such shares, 2,500,000 were offered by CTS and 417,000 shares were offered by Cognizant. Of the total proceeds, CTS used approximately $6.5 million to repay intercompany debt owed to Cognizant. Cognizant's interest in CTS was transferred to the Company in the Distribution. After completion of the offering, the Company holds 66.7% of the outstanding stock of CTS and accordingly, will continue to consolidate CTS results within its financial statements. Any minority interest is captured on the Statement of Financial Position in the minority interest line. The transaction (other than the over-allotment option) closed on June 24, 1998 and resulted in a gain of $12,777, which is a SAB 51 gain, representing the Company's portion due to the Distribution. The underwriters over-allotment option was exercised during the third quarter. The Company expects to recognize a gain from this sale resulting in a reduction of its ownership to 61.9%. CTS's Class A Common Stock is listed on the NASDAQ National Market under the symbol "CTSH". NOTE 5. ACQUISITIONS Cognizant acquired Walsh International, Inc. ("Walsh") on June 24, 1998. The total purchase price of the acquisition was $194,123, including $167,523 of common stock, $9,521 of stock options to be issued and $17,079 of accrued acquisition and integration costs. Under terms of the Walsh acquisition agreement, Walsh shareholders received .3041 shares of Cognizant common stock per Walsh share (or, based on a Cognizant share price of $51.79, consideration of approximately $167,523). Walsh had 10.6 million of shares outstanding. Cognizant issued 3,234,533 shares from treasury stock to consummate the Walsh acquisition. The acquisition and integration costs consist of severance of $3,276, lease terminations of $2,569, and other direct acquisition and integration costs of $11,234. These acquisition and integration costs are incremental to other costs and were incurred as a direct result of the plan to exit certain activities as part of the overall integration effort (i.e., severance costs related to Walsh employees) and certain contractual cancellation costs (i.e., Walsh leases). The impact of the acquisition on results of operations, other than the charge for In-Process research and development, had it occurred January 1, 1998 or 1997 would be immaterial. The preliminary allocation of the Company's aggregate purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed was based primarily on independent appraisals of estimates of fair value and is summarized as follows: 10 IMS HEALTH INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED) DOLLAR AMOUNTS IN THOUSANDS NOTE 5. ACQUISITIONS - (CONTINUED) In-process R&D write-off ....................... $ 57,000 Net assets acquired ............................ 734 Other intangibles, net of deferred taxes ....... 11,616 Goodwill ....................................... 124,773 --------------------------------------------------------- Total Purchase Price ........................... $194,123 --------------------------------------------------------- The Company does not believe that the final purchase price allocation will differ significantly from this preliminary purchase price allocation. The projects identified as in-process research and development at Walsh include enhancement of Walsh's Windows based sales management information system, enhancement of its pharmaceutical marketing database and development of a next-stage integrated and enhanced sales management information system. These projects were identified as underway at Walsh and would require additional effort to establish technological feasibility at the date of the acquisition. It is expected that IMS Health will begin realizing the benefits from these various projects through product introductions at launch dates ranging from January 1999 through June 2000. An income method approach was utilized to estimate the approximate value of the Walsh in-process research and development. This method uses a projection of product line revenues and expenses, which are based upon experience with similar products. The projected growth rate on a compounded annualized basis for these product enhancements and new products range from approximately 10% to 20% for product enhancements and approximately 25% for new product introductions. The growth rates reflect the anticipated product life cycles. It is estimated that the benefits will be realized by IMS Health as a result of increased revenue and cash flows through the year 2005 for product enhancements and the year 2008 for new products. The estimated incremental future cash flows that are expected to be realized as a result of successful completion of the projects under development were reduced by amounts that represent the necessary investment in fixed and working capital and other collateral assets and a fair return on those assets, including income from existing product lines, and the estimated cost of completion effort. These net incremental future cash flows for these projects were discounted at a rate of 20% reflecting the risks of possible failure to complete the individual projects and for potential changes in target markets. The excess of the purchase price over the fair value of the net assets acquired has been recorded as goodwill, which is being amortized on a straight-line basis over a period of 15 years. NOTE 6. INVESTMENT PARTNERSHIP Two of the Company's subsidiaries have contributed assets to, and participate in, a limited partnership. One subsidiary serves as general partner, and all other partners hold limited partnership interests. The partnership, which is a separate and distinct legal entity, is in the business of licensing database assets and computer software. In the second quarter of 1997, third-party investors contributed $100,000 to the partnership in exchange for limited partnership interests. For financial reporting purposes, the assets, liabilities, results of operations and cash flows of the partnership are included in the Company's consolidated financial statements because the Company and its subsidiaries maintain a controlling (84%) interest in the partnership. The third-parties' investments in this partnership are reflected in minority interests. 11 IMS HEALTH INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED) DOLLAR AMOUNTS IN THOUSANDS NOTE 7. LITIGATION 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 such current legal proceedings and litigation, if decided adversely, could have a material effect on quarterly or annual operating results or cash flows when resolved in a future period. However, in the opinion of management, these matters will not materially affect the Company's consolidated financial position. In addition, on July 29, 1996, Information Resources, Inc. ("IRI") filed a complaint in the United States District Court for the Southern District of New York, naming as defendants the Dun & Bradstreet Corporation ("D&B"), A.C. Nielsen Company and IMS (the "IRI Action"). The complaint alleges various violations of the United States antitrust laws, including alleged violations of Sections 1 and 2 of the Sherman Act. The complaint also alleges a claim of tortious interference with a contract and a claim of tortious interference with a prospective business relationship. These latter claims relate to the acquisition by defendants of Survey Research Group Limited ("SRG"). IRI alleges that SRG violated an alleged agreement with IRI when it agreed to be acquired by defendants and that the defendants induced SRG to breach that agreement. IRI's complaint alleges damages in excess of $350,000, which amount IRI has asked to be trebled under the antitrust laws. IRI also seeks punitive damages in an unspecified amount. On October 15, 1996, defendants moved for an order dismissing all claims in the complaint. On May 6, 1997 the United States District Court for the Southern District of New York issued a decision dismissing IRI's claim of attempted monopolization in the United States, with leave to replead within sixty days. The Court denied defendants' motion with respect to the remaining claims in the complaint. On June 3, 1997, defendants filed an answer denying the material allegations in IRI's complaint, and A.C. Nielsen Company filed a counterclaim alleging that IRI has made false and misleading statements about its services and commercial activities. On July 7, 1997, IRI filed an amended and restated complaint repleading its alleged claim of attempted monopolization in the United States and realleging its other claims. On August 18, 1997, defendants moved for an order dismissing the amended claims. On December 1, 1997, the court denied the motion and, on December 16, 1997, defendants filed a supplemental answer denying the remaining material allegations of the amended complaint. In light of the potentially significant liabilities which could arise from the IRI Action and in order to facilitate the distribution by D&B of shares of Cognizant and ACNielsen in 1996, D&B, ACNielsen ("ACNielsen"; the parent company of A.C. Nielsen Company) and Cognizant entered into an Indemnity and Joint Defense Agreement pursuant to which they agreed (i) to certain arrangements allocating liabilities that may arise out of or in connection with the IRI Action, and (ii) to conduct a joint defense of such action. In particular, the Indemnity and Joint Defense Agreement provides that ACNielsen will assume exclusive liability for liabilities up to a maximum amount to be calculated at the time such liabilities, if any, become payable (" the ACN Maximum Amount") and that Cognizant and D&B will share liability equally for any amounts in excess of the ACN Maximum Amount. The ACN Maximum Amount will be determined by an investment banking firm as the maximum amount which ACNielsen will be able to pay after giving effect to (i) any plan submitted by such investment bank which is designed to maximize the claims paying 12 IMS HEALTH INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED) DOLLAR AMOUNTS IN THOUSANDS NOTE 7. LITIGATION (CONTINUED) ability of ACNielsen without impairing the investment banking firm's ability to deliver a viability opinion (but which will not require any action requiring shareholder 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. Under the terms of the Distribution Agreement dated October 28, 1996 among D&B, Cognizant and ACNielsen ("the 1996 Distribution Agreement"), as a condition to the Distribution, IMS Health and Nielsen Media Research are required to undertake to be a jointly and severally liable to D&B and ACNielsen for Cognizant's obligations under the 1996 Distribution Agreement. IMS Health and Nielsen Media Research have agreed that, as between themselves, IMS Health will assume 75%, and Nielsen Media Research will assume 25%, of any payments to be made in respect of the IRI Action under the Indemnity and Joint Defense Agreement or otherwise, including any legal fees and expenses related thereto incurred in 1999 or thereafter. IMS Health has agreed to be fully responsible for any legal fees and expenses incurred during 1998. Nielsen Media Research's aggregate liability to IMS Health for payments in respect of the IRI Action and certain other contingent liabilities shall not exceed $125 million. Management of the Company is unable to predict at this time the final outcome of this matter or whether the resolution of this matter could materially affect the Company's results of operations, cash flows or financial position. NOTE 8. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK The Company transacts business in virtually every part of the world and is subject to risks associated with changing foreign exchange rates. The Company's objective is to reduce earnings and cash flow volatility associated with foreign exchange rate changes to allow management to focus its attention on its core business activities. Accordingly the Company enters into various contracts which change in value as foreign exchange rates change to protect the value of a portion of committed and anticipated foreign currency revenues and non-functional currency assets and liabilities. By policy, the Company maintains hedge coverage between minimum and maximum percentages of its anticipated foreign exchange exposures over the next year. The gains and losses on these hedges offset changes in the value of the related exposures. It is the Company's policy to enter into foreign currency transactions only to the extent necessary to meet its objectives as stated above. The Company does not enter into foreign currency transactions for speculative purposes. The Company uses forward contracts and purchased currency options to hedge committed and anticipated foreign currency denominated revenues, respectively. The principal currencies hedged are the Japanese yen, Swiss franc, German mark and Italian lira. The Company also uses forward contracts to hedge non-functional currency assets and liabilities. 13 IMS HEALTH INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED) DOLLAR AMOUNTS IN THOUSANDS NOTE 8. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (CONTINUED) Gains and losses on contracts hedging anticipated and committed foreign currency revenues are deferred until such revenues are recognized, and offset changes in the value of such revenues. At May 31, 1998, the notional amount hedged was $112,000. In addition, at May 31, 1998, IMS had approximately $63,000 in foreign exchange forward contracts outstanding with various expiration dates through November 1998. Gains and losses on contracts hedging non-functional currency assets and liabilities are not deferred and are included in current income in other income/expense--net. NOTE 9. ADOPTION OF STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 is effective for all fiscal quarters for all fiscal years beginning after June 15, 1999 (January 1, 2000 for the Company). SFAS No. 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. For fair-value hedge transactions in which the Company is hedging changes in an asset's, liability's, or firm commitment's fair value, changes in the fair value of the derivative instrument will generally be offset in the income statement by changes in the hedged item's fair value. For cash-flow hedge transactions, in which the Company is hedging the variability of cash flows related to a variable-rate asset, liability, or a forecasted transaction, changes in the fair value of the derivative instrument will be reported in other comprehensive income. The gains and losses on the derivative instrument that are reported in other comprehensive income will be reclassified as earnings in the periods in which earnings are impacted by the variability of the cash flows of the hedged item. The ineffective portion of all hedges will be recognized in current period earnings. Management has not evaluated the effects of this change on the Company's financial statements. NOTE 10. OPERATIONS BY BUSINESS SEGMENT In 1997, the Company adopted Statement of Financial Accounting Standard No. 131 "Disclosures About Segments of an Enterprise and Related Information". As required, the Company has restated prior period segment results in order to conform to the new statement. The Company, operating globally in approximately 80 countries, delivers information, software and related services principally through the strategic business segments referenced below. IMS is the leading global provider of market information and decision-support services to the pharmaceutical and healthcare industries. Emerging Markets includes Erisco, a leading supplier of software-based administrative and analytical solutions to the managed care industry; CTS, a provider of software applications and development services and Year 2000 and Eurocurrency compliance services; Super Systems Japan, a marketer of financial application software products to the Japanese market; Enterprises, the Company's venture capital unit focused on investments in emerging healthcare businesses; and Pilot Software Inc.("Pilot"), which was sold as of July 31, 1997. 14 IMS HEALTH INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED) DOLLAR AMOUNTS IN THOUSANDS NOTE 10. OPERATIONS BY BUSINESS SEGMENT (CONTINUED) The accounting policies of these reportable segments are the same as those described for the consolidated entity. The Company evaluates the performance of its operating segments based on revenue and operating income.
-------------------------------------- ----------------------------------------- Period Ended June 30, 1998 Three Months Six Months - - -------------------------- --------------------------------------- ----------------------------------------- Emerging Emerging IMS Markets (1) Total IMS Markets (1) Total --------------------------------------- ---------------------------------------- Operating Revenue $249,422 $21,074 $270,496 $472,823 $38,641 $511,464 Segment Operating (Loss)/Income (2) $(6,914) $1,685 $(5,229) $24,012 $2,587 $26,599 General Corporate Expenses (3) $(43,783) $(56,883) Interest Income (4) $2,270 $48 $2,318 $4,400 $80 $4,480 Interest Expense (5) $(196) $(196) $(380) $(380) Non-Operating Income/(Expense) - Net Gartner Equity Income $17,320 $32,894 Gain on Gartner Stock (SAB 51) $5,392 $13,379 Gains from Dispositions - Net $12,777 $12,777 $23,192 $23,192 Other Expense - Net $(40) $(890) - - ----------------------------------------------------------------------------------------------------------------------------------- (Loss)/Income from Continuing Operations Before Provision for Income Taxes $(11,441) $42,391 Provision for Income Taxes $(22,107) $(36,857) - - ------------------------------------------------------------------------------------------------------------------------------------ (Loss)/Income from Continuing Operations $(33,548) $5,534 Income from Discontinued Operations, Net of Income Taxes $21,088 $42,093 - - ------------------------------------------------------------------------------------------------------------------------------------ Net (Loss)/Income $(12,460) $47,627 - - ------------------------------------------------------------------------------------------------------------------------------------ --------------------------------------- ------------------------------------------ Period Ended June 30, 1997 Three Months Six Months - - -------------------------- --------------------------------------- ----------------------------------------- Emerging Emerging IMS Markets (1) Total IMS Markets (1) Total ------------- -------------- ------------ ------------ -------------- ------------ Operating Revenue $229,364 $21,712 $251,076 $439,186 $41,195 $480,381 Segment Operating Income/(Loss) $56,356 $(9,912) $46,444 $93,672 $(18,720) $74,952 General Corporate Expenses $(7,089) $(13,989) Interest Income (4) $785 $(51) $734 $1,882 $10 $1,892 Interest Expense (5) $(141) $115 $(26) $(362) $(14) $(376) Non-Operating Income/(Expense) - Net Gartner Equity Income $15,137 $30,671 Gains from Dispositions - Net $5,436 $5,436 Other (Expense)/Income - Net $(504) $1,085 - - ------------------------------------------------------------------------------------------------------------------------------------ Income from Continuing Operations Before Provision for Income Taxes $54,696 $99,671 Provision for Income Taxes $(14,629) $(26,233) - - ------------------------------------------------------------------------------------------------------------------------------------ Income from Continuing Operations $40,067 $73,438 Income from Discontinued Operations, Net of Income Taxes $19,988 $39,522 - - ------------------------------------------------------------------------------------------------------------------------------------ Net Income $60,055 $112,960 - - ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Operations by Business Segments on next page) 15 IMS HEALTH INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED) DOLLAR AMOUNTS IN THOUSANDS NOTE 10. OPERATIONS BY BUSINESS SEGMENT (CONTINUED) Notes to Operations by Business Segments: (1) Excludes intersegment sales in 1998 of $4,173, and $7,907 for the three and six month periods presented, respectively. Excludes intersegment sales in 1997 of $3,267, and $5,754 for the three and six month periods presented, respectively. These sales, primarily from CTS to IMS, are accounted for on a time and materials basis and recognized as the service is performed. (2) Segment operating income in 1998 includes a one-time in-process research and development write-off of $57,000 for both the three and six months periods presented. (3) General Corporate Expenses in 1998 include one-time spin-related charges of $30,125 and $35,025 for the three and six month periods presented, respectively. In addition, General Corporate Expenses in 1998 include one-time Walsh acquisition costs of $5,000 for both the three and six month periods presented. (4) Interest income in 1998 excludes amounts recorded at corporate of $2,453 and $4,389 for the three and six month periods presented, respectively. Interest income in 1997 excludes amounts recorded at corporate of $932 and $3,384 for the three and six month periods presented, respectively. (5) Interest expense in 1998 excludes amounts recorded at corporate of $16 and $32 for the three and six month periods presented, respectively. Interest expense in 1997 excludes amounts recorded at corporate of $105 and $205 for the three and six month periods presented, respectively. NOTE 11. COMPREHENSIVE INCOME In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income", which requires that changes in comprehensive income be shown in a financial statement that is displayed with the same prominence as other financial statements. This statement, which the Company adopted in the first quarter of 1998, establishes standards for reporting and displaying comprehensive income and its components in a full set of general purpose financial statements. Where applicable, earlier periods have been restated to conform to the standards set forth in SFAS No. 130. The Company's Comprehensive Income consists of net income, foreign currency translation adjustments and unrealized holding gains/(losses) on securities (see Condensed Consolidated Statements of Comprehensive Income). Accumulated balances of Cumulative Translation Adjustments and Unrealized Gains/(Losses) on Investments, as of June 30, 1998 are as follows:
Cumulative Unrealized Total Other Translation Gains/(Losses) Comprehensive Adjustment on Investments(1) Items ----------- ----------------- ------------- Balance December 31, 1997 ............... $(76,771) $32,650 $(44,121) Current Period Change ................... (9,596) (3,161) (12,757) -------- ------- -------- Balance June 30, 1998 ................... $(86,367) $29,489 $(56,878) ======== ======= ========
(1) Current period change is principally due to the sale of Enterprises' investments in Aspect Development, Inc. and Pegasus Systems Inc. 16 IMS HEALTH INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED) DOLLAR AMOUNTS IN THOUSANDS NOTE 12. SUBSEQUENT EVENT On July 22, 1998, the Company announced the signing of an agreement in principle to acquire the non-U.S. assets of Pharmaceutical Marketing Services Inc. ("PMSI"), which provides information services to pharmaceutical and healthcare companies in the U.S., Europe and Japan. The agreement supercedes the previous agreement dated March 23, 1998. PMSI will remain an independent company retaining PMSI Scott-Levin and all of its non-operating assets. The transaction which closed on August 5, 1998, is expected to be tax-free to PMSI. Under the terms of the agreement PMSI received approximately 1.2 million shares of IMS Health common stock, valued at approximately $75,000. It is expected that the Company will incur an In-process research and development charge as a result of this transaction. 17 IMS HEALTH INCORPORATED ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) This document relates to IMS Health Incorporated ("IMS Health"). The Common stock of IMS Health was distributed by Cognizant Corporation ("Cognizant") to its shareholders on June 30, 1998. Simultaneously with the distribution ("the Distribution") Cognizant changed its name to Nielsen Media Research, Inc. ("Nielsen Media Research"). Notwithstanding the legal form of the distribution, whereby Cognizant spun off IMS Health, for accounting purposes the transaction is accounted for as if Cognizant spun off Nielsen Media Research, Inc. and IMS Health has been deemed the "accounting successor" to Cognizant. The separation created IMS Health as the premier global provider of information solutions to the pharmaceutical and healthcare industries, and established an independent Nielsen Media Research, the leader in electronic audience measurement services. IMS Health consists of IMS ("IMS"), Erisco, Inc. ("Erisco"), Enterprises Associates, Inc. ("Enterprises"), Cognizant Technology Solutions Corporation ("CTS"), SSJ K.K. ("Super Systems Japan"), and an equity investment in Gartner Group, Inc. ("Gartner"). Cognizant received a favorable ruling from the Internal Revenue Service with respect to the tax-free treatment of the transaction in May 1998. Cognizant's Board of Directors on June 15, 1998 approved the final plan, terms and conditions relating to the separation of the company including distribution, tax allocation, employee benefits and other agreements and authorized management to execute the plan of distribution. The Board of Directors declared a dividend to shareholders of record as of the close of business on June 25, 1998 consisting of one share of IMS Health Common Stock for each share of Cognizant Common Stock. The Distribution was effective June 30, 1998. Pursuant to Accounting Principles Board ("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 Nielsen Media Research as discontinued operations. In connection with the Distribution, Cognizant borrowed $300 million on June 24, 1998, which was used to repay existing intercompany liabilities. This debt remained the obligation of Nielsen Media Research following the spin off. In connection with the Distribution, Cognizant contributed to IMS Health all cash in Cognizant's accounts other than (i) cash required by Cognizant (renamed Nielsen Media Research) to satisfy certain specified obligations and (ii) such additional cash as was necessary for the net borrowings of Cognizant (renamed Nielsen Media Research) to equal $300 million as of the Distribution. Prior to the Distribution, Cognizant and IMS Health entered into certain agreements that will govern the relationship between Nielsen Media Research and IMS Health subsequent to the Distribution and provide for the allocation of tax, employee benefits and certain other liabilities and obligations arising from periods prior to the Distribution. Among other things, the agreements set forth principles to be applied in allocating certain Distribution-related costs and specify portions of contingent liabilities to be shared if certain amounts are exceeded. 18 IMS HEALTH INCORPORATED ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) Following the Distribution, IMS Health does not have any ownership interest in Nielsen Media Research (other than 800,000 shares of Nielsen Media Research Common Stock which IMS Health will own as a result of Cognizant Stock held by a subsidiary of IMS Health and which IMS Health intends to sell). Cognizant acquired Walsh International, Inc. ("Walsh") on June 24, 1998. The total purchase price of the acquisition was $194,123, including $167,523 of common stock, $9,521 of stock options to be issued and $17,079 of accrued acquisition and integration costs. Under terms of the Walsh acquisition agreement, Walsh shareholders received .3041 shares of Cognizant Corporation common stock per Walsh share (or, based on a Cognizant share price of $51.79, consideration of approximately $167,523). Walsh had 10.6 million of shares outstanding. Cognizant issued 3,234,533 shares from treasury stock to consummate the Walsh acquisition. The acquisition and integration costs consist of severance of $3,276, lease terminations of $2,569 and other direct acquisition and integration costs of $11,234. These acquisition and integration costs are incremental to other costs and were incurred as a direct result of the plan to exit certain activities as part of the overall integration effort (i.e., severance costs related to Walsh employees) and certain contractual cancellation costs (i.e., Walsh leases). The impact of the acquisition on results of operations, other than the charge for In-Process Research and Development, had it occurred January 1, 1998 or 1997 would be immaterial. CTS effected an initial public offering ("the CTS IPO") of 2,917,000 shares of Class A Common Stock, par value $0.01 per share, of CTS (3,354,550 including the underwriters' over-allotment option granted by Cognizant) on June 19, 1998. Of such shares, 2,500,000 were offered by CTS and 417,000 shares were offered by Cognizant. Of the total proceeds, CTS used approximately $6.5 million to repay intercompany debt owed to Cognizant. Cognizant's interest in CTS was transferred to the Company in the Distribution. After completion of the offering, the Company holds 66.7% of the outstanding stock of CTS and accordingly, will continue to consolidate CTS results within its financial statements. Any minority interest is captured on the Statement of Financial Position in the minority interest line. The transaction (other than the over-allotment option) closed on June 24, 1998 and resulted in a one-time gain of $12,777, which is a SAB 51 gain, representing the Company's portion due to the Distribution. The underwriters over-allotment option was exercised during the third quarter. The Company expects to recognize a gain from the this sale, which reduces ownership to 61.9%. CTS's Class A Common Stock is listed on the NASDAQ National Market under the symbol "CTSH". In September 1997, the Company's voting interest in Gartner fell below 50% as a result of the exercise of Gartner employee stock options and employee stock purchases. Accordingly, effective January 1, 1997, the Company has deconsolidated Gartner (the "Gartner Deconsolidation") and is accounting for its ownership interest under the equity basis. Revenue for the second quarter increased by 7.7% to $270,496 from $251,076 for the second quarter of the prior year. Consolidated first-half revenue increased 6.5% to $511,464 from $480,381 for the comparable period a year ago. Revenue growth for the quarter and the first-half was held down by the absence of revenues from Pilot Software Inc. ("Pilot") since its divestiture and the impact of a stronger U.S. dollar. Adjusting for these items, revenue for the second 19 IMS HEALTH INCORPORATED ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) quarter and first half of 1998 increased by 14.2% and 14.4%, respectively. This increase reflected double-digit constant dollar revenue growth at IMS, Erisco and CTS. The impact of a stronger U.S. dollar decreased reported revenue by approximately 3% in the second quarter and 4% for the first-half, including the impact of gains related to the Company's hedging strategy. Operating losses for the second quarter were ($49,012), a decrease of 224.5% from operating income of $39,355 for the second quarter of the prior year. Operating losses in the second quarter include Year 2000 costs of $12,330; one-time spin-related charges of $30,125; and an in-process research and development write-off of $57,000 and one-time charge of $5,000 related to the Walsh acquisition. Consolidated first-half operating losses were ($30,284), a decrease of 149.7% from operating income of $60,963 for the comparable period a year ago. First-half operating losses include Year 2000 costs of $22,301; one-time spin-related charges of $35,025; and a research and development write-off of $57,000 and one-time charge of $5,000 related to the Walsh acquisition. Adjusting for these items and the impact of a stronger U.S. dollar, operating income for the second quarter and the first-half of 1998 increased by 54.0% and 59.7%, respectively. Adjusted operating income growth outpaced revenue growth primarily due to the absence of Pilot operating losses since its divestiture. The impact of a stronger U.S. dollar decreased adjusted operating income growth by approximately 13% in the second quarter and 14% for the first-half, including the impact of gains related to the Company's hedging strategy. Non-operating income-net for the second quarter was $37,571 compared with $15,341 for the second quarter of the prior year. This increase is primarily related to realizing gains in 1998 related to the CTS IPO gain of $12,777, and recording a pre-tax unrealized gain on Gartner stock of $5,392 corresponding to the net increase in the value of the Company's investment in Gartner ("SAB 51 Gain"). Non-operating income-net for the first-half was $72,675 compared with $38,708 for the comparable period a year ago. This increase is primarily related to realizing higher gains in 1998 on the sale of Enterprises' investments of $10,415 compared with 1997 gains of $5,436, the CTS IPO gain of $12,777, and recording a pre-tax SAB 51 gain on Gartner stock of $13,379 corresponding to the net increase in the value of the Company's investment in Gartner ; partially offset by recording, within Gartner equity income, the Company's share of an in-process research and development write-off at Gartner of $2,998. The Company's effective tax rate was 193.2% for the second quarter of 1998, compared with an effective tax rate of 26.8% in the comparable period of the prior year. The second quarter 1998 effective tax rate was impacted by a one-time spin-related charge of $30,125 and a research and development write-off of $57,000 and one-time charge of $5,000 related to the Walsh acquisition. These items did not give rise to a tax benefit. Excluding these items, the Company's effective tax rate was 27.4% for the second quarter of 1998. 20 IMS HEALTH INCORPORATED ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) The Company's effective tax rate was 87.0% for the first-half of 1998, compared with an effective tax rate of 26.3% in the comparable period of the prior year. Excluding the after-tax impact of the one-time spin-related charges and a research and development write-off and one-time charge related to the Walsh acquisition, the effective tax rate from operations for the first-half of 1998 was 27.4%. Losses from continuing operations in the second quarter of 1998 were ($33,548), compared with income from continuing operations of $40,067 in the second quarter of the prior year, a decrease of 183.7%. Excluding the after-tax impact of the SAB51 Gain, the CTS IPO gain, Year 2000 costs, the one-time spin-related charges the in-process research and development write-off and one-time charges related to the Walsh acquisition, income from continuing operations increased 35.6% to $54,338 in 1998. Income from continuing operations for the first-half of 1998 was $5,534, compared with $73,438 in the first-half of the prior year, a decrease of 92.5%. Excluding the after-tax impact of gains associated with Enterprises' investments, the SAB51 Gain, the CTS IPO gain, Year 2000 costs, the one-time spin-related charges and the in-process research and development write-off and one-time charges related to the Walsh acquisition, income from continuing operations increased 34.0% to $93,034 in 1998. Income from discontinued operations net of income taxes in the second quarter of 1998 was $21,088, compared with $19,988 in the second quarter of the prior year. Income from discontinued operations net of income taxes in the first-half of 1998 was $42,093, compared with $39,522 in the first-half of the prior year. Income from discontinued operations net of income taxes represents the results of Nielsen Media Research. The Company's net loss for the second quarter of 1998 was ($12,460), a decrease of 120.7% from net income of $60,055 in the second quarter of the prior year. Excluding the after-tax impact of Year 2000 costs, the one-time spin-related charges, the in-process research and development write-off, the one-time acquisition costs, the SAB 51 Gain, and the CTS IPO gain, net income for the quarter increased 25.6%. The Company's net income for the first-half of 1998 decreased 57.8% to $47,627 from $112,960 in the first-half of the prior year. Excluding the after-tax impact of Year 2000 costs, the one-time spin-related charges, the in-process research and development write-off, the one time acquisition costs, the SAB 51 Gain, and gains associated with Enterprises' investments and the CTS IPO gain, net income for the quarter increased 24.1%. Basic loss per share from continuing operations in the second quarter of 1998 was ($.21), a decrease of 187.5% from earnings per share of $.24 in the second quarter of the prior year. Excluding the after-tax impact of the previously identified one-time items, basic earnings per share for the quarter increased 37.5%. 21 IMS HEALTH INCORPORATED ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) Basic earnings per share from continuing operations in the first-half of 1998 decreased 93.2% to $.03 from $.44 in the first-half of the prior year. Excluding the after-tax impact of the previously identified one-time items, basic earnings per share for the quarter increased 39.0%. RESULTS BY BUSINESS SEGMENT As discussed in Note 10, in 1997 the Company adopted SFAS No. 131 "Disclosures About Segments of an Enterprise and Related Information" which changes the way public companies report information about segments. As required, the Company has restated the prior period in order to conform to the 1998 presentation. IMS is the leading global provider of market information and decision-support services to the pharmaceutical and healthcare industries. IMS revenue for the second quarter of 1998 increased 8.7% to $249,422 from $229,364 in the second quarter of the prior year. Adjusting for the impact of a stronger U.S. dollar, revenue for the second quarter 1998 increased by 11.6%. IMS revenue growth benefited from strong performance of its sales management products in North America, and from increased usage of the Global Services Midas database by international pharmaceutical companies. Losses from IMS for the second quarter were ($6,914), a decrease of 112.3% from operating income of $56,356 in the second quarter of the prior year. Operating income in the second quarter of 1998 includes $12,330 of costs related to Year 2000 and a research and development write-off of $57,000. Excluding these costs and the impact of a stronger U.S. dollar, operating income for the second quarter of 1998 increased 17.4%. IMS revenue for the first-half of 1998 increased 7.7% to $472,823 from $439,186 in the first-half of the prior year. Adjusting for the impact of a stronger U.S. dollar, revenue for the first-half of 1998 increased by 12.1%. IMS operating income for the first-half of 1998 decreased 74.4% to $24,012 from $93,672 in the first-half of the prior year. Operating income in the first-half of 1998 includes $22,301 of costs related to Year 2000 and a research and development write-off of $57,000. Excluding these costs and the impact of a stronger U.S. dollar, operating income for the first-half of 1998 increased 17.3%. Emerging Markets includes Erisco, a leading supplier of software-based administrative and analytical solutions to the managed care industry; CTS, a provider of software applications and development services and Year 2000 and Eurocurrency compliance services; Super Systems Japan, a marketer of financial application software products to the Japanese market; Enterprises, the Company's venture capital unit, focused on investments in emerging healthcare businesses; and Pilot which was sold as of July 31, 1997. Emerging Markets revenue for the second quarter of 1998 decreased 2.9% to $21,074 from $21,712 in the second quarter of the prior year. This decrease was primarily due to the absence of revenues from Pilot since its divestiture. Excluding the effect of Pilot and the impact of a stronger U.S. dollar, revenue for the second quarter of 1998 increased 56.9%, primarily due to strong 22 IMS HEALTH INCORPORATED ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) RESULTS BY BUSINESS SEGMENT (CONTINUED) growth at CTS and Erisco. Emerging Markets operating income for the second quarter of 1998 increased to $1,685 from an operating loss of $9,912 in the second quarter of the prior year. This increase was primarily due to the absence of losses from Pilot since its divestiture. Emerging Markets revenue for the first-half of 1998 decreased 6.2% to $38,641 from $41,195 in the first-half of the prior year. This decrease was primarily due to the absence of revenues from Pilot since its divestiture. Excluding the effect of Pilot and the impact of a stronger U.S. dollar, revenue for the first-half of 1998 increased 54.1%. Emerging Markets operating income for the first-half of 1998 increased to $2,587 from an operating loss of $18,720 in the first half of the prior year. This increase was primarily due to the absence of losses from Pilot since its divestiture. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 1998 AND 1997 Net cash provided by operating activities totaled $78,359 for the six months ended June 30, 1998 compared with $86,940 for the comparable period in 1997. The decrease of $8,581 principally reflects lower net income in 1998 and a lower increase in deferred revenues ($17,351). These decreases were partially offset by a decrease in accounts receivable in 1998 compared with an increase in 1997 ($15,322), an increase in accrued income taxes in 1998 compared with a decrease in 1997 ($22,177), and a lower increase in Other Working Capital items ($12,677). Net cash (used in) investing activities totaled $(19,316) for 1998 compared with ($46,317) for the comparable period in 1997. The increase of $27,001 is principally due to higher proceeds from the sale of investments in 1998 as compared with 1997 ($16,161) and cash from companies acquired in stock purchases ($9,480). Net cash provided by/(used in) financing activities totaled $355,146 for the six months ended June 30, 1998 compared with ($110,801) for the comparable period in 1997. The increase in cash provided by financing activities of $465,947 was primarily due to proceeds from the debt assumed by Nielsen Media Research ($300,000), lower cash payments for the purchase of treasury shares ($196,755) and higher proceeds from the exercise of stock options in 1998 ($43,232), as compared with 1997 ($4,345). These increases were partially offset by the absence of minority interest financing in 1998 ($100,000). CHANGES IN FINANCIAL POSITION AT JUNE 30, 1998 COMPARED TO DECEMBER 31, 1997 CASH & CASH EQUIVALENTS increased to $702,550 at June 30, 1998, from $312,442 at December 31, 1997, primarily reflecting the proceeds from bank borrowings assumed by Nielsen Media Research ($300,000), proceeds from the sale of investments ($23,165), proceeds from the CTS IPO ($27,128), and proceeds from exercise of stock options ($43,232). 23 IMS HEALTH INCORPORATED ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) CHANGES IN FINANCIAL POSITION AT JUNE 30, 1998 COMPARED TO DECEMBER 31, 1997 (CONTINUED) INVESTMENT IN GARTNER GROUP increased to $228,674 at June 30, 1998, from $195,695 at December 31, 1997, reflecting equity income-net of taxes ($19,600) and a gain on the sale of Gartner stock ($13,379). GOODWILL increased to $219,420 at June 30, 1998, from $87,430 at December 31, 1997, primarily reflecting the Walsh acquisition ($124,773). ASSETS FROM DISCONTINUED OPERATIONS decreased to $0 at June 30, 1998, from $122,778 at December 31, 1997, due to the distribution of Nielsen Media Research. ACCRUED INCOME TAXES increased to $60,235 at June 30, 1998, from $52,696 at December 31, 1997, primarily reflecting a higher tax provision in 1998. DEFERRED REVENUE increased to $130,068 at June 30, 1998, from $110,768 at December 31, 1997, primarily reflecting higher sales at IMS and the inclusion of Walsh. SHAREHOLDERS' EQUITY increased to $1,147,858 at June 30, 1998, from $801,570 at December 31, 1997, primarily reflecting the issuance of stock in connection with acquisitions ($168,937), the proceeds of bank borrowings net of the dividend of Nielsen Media Research's net liability ($112,000), net income ($47,627), and proceeds from stock option exercises ($43,232). These increases were partially offset by cash dividends paid ($9,813), currency translation adjustments ($9,596) and treasury share repurchases (7,809). ADOPTION OF STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS 133 is effective for all fiscal quarters for all fiscal years beginning after June 15, 1999 (January 1, 2000 for the Company). SFAS 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. For fair-value hedge transactions in which the Company is hedging changes in an asset's, liability's, or firm commitment's fair value, changes in the fair value of the derivative instrument will generally be offset in the income statement by changes in the hedged item's fair value. For cash-flow hedge transactions, in which the Company is hedging the variability of cash flows related to a variable-rate asset, liability, or a forecasted transaction, changes in the fair value of the derivative instrument will be reported in other comprehensive income. The gains and losses on the derivative instrument that are reported in other comprehensive income will be reclassified as earnings in the periods in which earnings are impacted by the variability of the cash flows of the hedged item. The ineffective portion of all hedges will be recognized in current period earnings. Management has not evaluated the effects of this change on the Company's financial statements. 24 IMS HEALTH INCORPORATED PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits: 10 Material Contracts: .1 Distribution Agreement between Cognizant and IMS Health Incorporated dated as of June 30, 1998. .2 Tax Allocation Agreement between Cognizant and IMS Health Incorporated dated as of June 30, 1998. .3 Employee Benefits Agreement between Cognizant Corporation and IMS Health Incorporated dated as of June 30, 1998. .4 Amended and Restated Transition Services Agreement between The Dun & Bradstreet Corporation, The New Dun & Bradstreet Corporation, Cognizant Corporation, IMS Health Incorporated, ACNielsen Corporation, and Gartner Group, Inc. dated as of June 30, 1998. .5 Undertaking of IMS Health Incorporated dated as of June 29, 1998. .6 Distribution Agreement among Cognizant Corporation, The Dun & Bradstreet Corporation and ACNielsen Corporation dated as of October 28, 1996 (incorporated by reference to Exhibit 10.1 to Cognizant's Annual Report on Form 10-K for the year ended December 31, 1996, filed March 27, 1997, file number 001-12275). .7 Tax Allocation Agreement among Cognizant Corporation, The Dun & Bradstreet Corporation and ACNielsen Corporation dated as of October 28, 1996 (incorporated by reference to Exhibit 10.2 to Cognizant's Annual Report on Form 10-K for the year ended December 31, 1996, filed March 27, 1997, file number 001-12275). .8 Employee Benefits Agreement among Cognizant Corporation, The Dun & Bradstreet Corporation and ACNielsen Corporation dated as of October 28, 1996 (incorporated by reference to Exhibit 10.3 to Cognizant's Annual Report on Form 10-K for the year ended December 31, 1996, filed March 27, 1997, file number 001-12275). .9 Indemnity and Joint Defense Agreement among Cognizant Corporation, The Dun & Bradstreet Corporation and ACNielsen Corporation dated as of October 28, 1996 (incorporated by reference to Exhibit 10.4 to Cognizant's Annual Report on Form 10-K for the year ended December 31, 1996, filed March 27, 1997, file number 001-12275). .10 TAM Master Agreement between Cognizant Corporation and ACNielsen Corporation dated as of October 28, 1996 (incorporated by reference to Exhibit 10.5 to Cognizant's Annual Report on Form 10-K for the year ended December 31, 1996, filed March 27, 1997, file number 001-12275). 27 Financial Data Schedules. (b) Reports on 8-K: A report on Form 8-K was filed on June 30, 1998 to report under Item 5, Other Events, pursuant to Accounting Principles Board ("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; and Item 7, Financial Statements to present the consolidated financial statements and associated notes of the Company to reflect Nielsen Media as a discontinued operation. A report on Form 8-K/A was filed on June 30, 1998 to report under Item 5, Other Events, and Item 7, Financial Statements A report on Form 8-K/A-1 was filed on July 23, 1998 to report under Item 5, Other Events, and Item 7, Financial Statements A report on Form 8-K/A-2 was filed on July 23, 1998 to report under Item 5, Other Events, and Item 7, Financial Statements 25 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. IMS Health Incorporated Date: August 13, 1998 By: /s/ JAMES C. MALONE ------------------------------------------ James C. Malone Senior Vice President - Finance & Controller EX-10.1 2 DISTRIBUTION AGREEMENT/COGNIZANT/IMS DISTRIBUTION AGREEMENT between COGNIZANT CORPORATION and IMS HEALTH INCORPORATED Dated as of June 30, 1998 TABLE OF CONTENTS Page ----- ARTICLE I. DEFINITIONS................................................... 2 SECTION 1.1. General.................................................. 2 SECTION 1.2. References; Interpretation............................... 14 ARTICLE II. DISTRIBUTION AND OTHER TRANSACTIONS; CERTAIN COVENANTS............................................. 14 SECTION 2.1. The Distribution and Other Transactions.................. 14 SECTION 2.2. Intercompany Accounts.................................... 20 SECTION 2.3. Cash Balances............................................ 20 SECTION 2.4. Assumption and Satisfaction of Liabilities............... 20 SECTION 2.5. Resignations............................................. 20 SECTION 2.6. Further Assurances....................................... 20 SECTION 2.7. Limited Representations or Warranties.................... 21 SECTION 2.8. Guarantees............................................... 21 SECTION 2.9. Witness Services......................................... 22 SECTION 2.10. Certain Post-Distribution Transactions.................. 22 SECTION 2.11. Transfers Not Effected Prior to the Distribution; Transfers Deemed Effective as of the Distribution Date ...................................... 23 SECTION 2.12. Conveyancing and Assumption Instruments ................. 23 SECTION 2.13. Ancillary Agreements .................................... 24 SECTION 2.14. Corporate Names ......................................... 24 ARTICLE III. INDEMNIFICATION.............................................. 26 SECTION 3.1. Indemnification by the Corporation....................... 26 SECTION 3.2. Indemnification by IMS HEALTH............................ 26 SECTION 3.3. Procedures for Indemnification........................... 26 SECTION 3.4. Indemnification Payments................................. 28 ARTICLE IV. ACCESS TO INFORMATION......................................... 28 SECTION 4.1. Provision of Corporate Records........................... 28 SECTION 4.2. Access to Information.................................... 29 SECTION 4.3. Reimbursement; Other Matters............................. 29 SECTION 4.4. Confidentiality.......................................... 29 SECTION 4.5. Privileged Matters....................................... 29 SECTION 4.6. Ownership of Information................................. 31 SECTION 4.7. Limitation of Liability.................................. 31 SECTION 4.8. Other Agreements Providing for Exchange of Information... 32 ARTICLE V. ADMINISTRATIVE SERVICES........................................ 32 SECTION 5.1. Performance of Services.................................. 32 SECTION 5.2. Independence............................................. 32 SECTION 5.3. Non-exclusivity.......................................... 32 i ARTICLE VI. DISPUTE RESOLUTION............................................ 32 SECTION 6.1. Negotiation.............................................. 32 SECTION 6.2. Arbitration.............................................. 33 SECTION 6.3. Continuity of Service and Performance.................... 34 ARTICLE VII. INSURANCE.................................................... 34 SECTION 7.1. Policies and Rights Included Within Assets; Assignment of Policies .................................. 34 SECTION 7.2. Post-Distribution Date Claims............................ 34 SECTION 7.3. Administration; Other Matters............................ 35 SECTION 7.4. Agreement for Waiver of Conflict and Shared Defense...... 36 SECTION 7.5. Cooperation.............................................. 36 ARTICLE VIII. MISCELLANEOUS............................................... 36 SECTION 8.1. Complete Agreement; Construction......................... 36 SECTION 8.2. Ancillary Agreements..................................... 37 SECTION 8.3. Counterparts............................................. 37 SECTION 8.4. Survival of Agreements................................... 37 SECTION 8.5. Expenses................................................. 37 SECTION 8.6. Notices.................................................. 37 SECTION 8.7. Waivers.................................................. 38 SECTION 8.8. Amendments............................................... 38 SECTION 8.9. Assignment............................................... 38 SECTION 8.10. Successors and Assigns .................................. 38 SECTION 8.11. Termination ............................................. 38 SECTION 8.12. Subsidiaries ............................................ 39 SECTION 8.13. Third Party Beneficiaries ............................... 39 SECTION 8.14. Title and Headings ...................................... 39 SECTION 8.15. Exhibits and Schedules .................................. 39 SECTION 8.16. GOVERNING LAW ........................................... 39 SECTION 8.17. Consent to Jurisdiction ................................. 39 SECTION 8.18. Severability ............................................ 40 Exhibits Exhibit 2.1(m) Undertaking of IMS Health Incorporated ii Schedules to Distribution Agreement Schedules 1.1(m) Conveyance and assumption instruments 1.1(au)(i) Certain Business Entities and Subsidiaries to be included in the NMR Group 1.1(au)(ii) Pre-Distribution reorganization transactions to transfer assets to the Corporation or the NMR Group 1.1(au)(x) Certain assets not to be included as NMR Assets 1.1(au)(y) Certain Business Entities or businesses holding assets from divested, terminated or former businesses which are to be included as NMR Assets 1.1(av) Combined balance sheet of the NMR Group as of March 31, 1998 1.1(ax)(i) Certain contracts to be included as NMR Contracts 1.1(ax)(ii) Certain contracts in the name of the Corporation or NMR to be included as IMS HEALTH Contracts 1.1(ax)(iv) Certain federal, state and local government contracts to be included as NMR Contracts 1.1(ax)(v) Capital or operating lease obligations to be included as NMR Contracts 1.1(ba)(i) Certain liabilities to be included as NMR Liabilities 1.1(ba)(x) Certain liabilities not to be included as NMR Liabilities 1.1(ba)(y) Certain Business Entities or businesses holding liabilities from divested, terminated or former businesses which are to be included as NMR Liabilities 2.1(i) Liabilities from 1996 Distribution to be included as NMR Liabilities 2.1(j)(i) Allocation of Liabilities for certain prior business transactions 2.3 Cash Balances 2.8(a) Guarantees of IMS HEALTH Liabilities from which NMR Group members are to be removed 2.8(b) Guarantees of NMR Liabilities from which IMS HEALTH Group members are to be removed 4.7(b) Pre-existing agreements between the parties which continue after the Distribution iii DISTRIBUTION AGREEMENT DISTRIBUTION AGREEMENT, dated as of June 30, 1998, between COGNIZANT CORPORATION, a Delaware corporation (the "Corporation") and IMS HEALTH INCORPORATED, a Delaware corporation ("IMS HEALTH"). WHEREAS, the Corporation acting through its direct and indirect subsidiaries, currently conducts a number of businesses, including, without limitation, (i) providing television audience measurement services (the "Nielsen Media Research Business"), (ii) providing information and decision support services to the pharmaceutical and healthcare industries (the "IMS Business"), (iii) providing software-based administrative and analytical solutions to the managed care industry (the "ERISCO Business"), (iv) making venture capital investments in emerging healthcare businesses (the "Enterprises Business") and (v) providing software application and development services specializing in Year 2000 conversion services (the "Technology Solutions Business"). WHEREAS, the Board of Directors of the Corporation has determined that it is appropriate, desirable and in the best interests of the holders of shares of common stock, par value $0.01 per share, of the Corporation (the "Cognizant Common Stock"), as well as of the Corporation and its businesses, to reorganize the Corporation to separate from the Corporation all businesses currently conducted by the Corporation other than the Nielsen Media Research Business and to cause such businesses to be owned and conducted, directly or indirectly, by IMS HEALTH; WHEREAS, in order to effect the separation, the Board of Directors of the Corporation has determined that it is appropriate, desirable and in the best interests of the holders of Cognizant Common Stock, as well as of the Corporation and its businesses, for the Corporation (i) to take certain steps to reorganize the Corporation's Subsidiaries (as defined herein) and businesses, including prior to the Distribution (as defined herein) (A) causing Media Licensing Associates, Inc. ("Media Licensing") to withdraw its interest in Cognizant Licensing Associates, L.P. ("Licensing Associates"), and, in connection therewith, to receive the shares of common stock of Gartner Group, Inc. ("Gartner") held by Licensing Associates, (B) upon the completion of the transaction described in (A), causing Media Licensing to merge with and into NMR, with NMR as the surviving corporation, (C) upon the completion of the transaction described in (B), to cause NMR to merge with and into the Corporation, with the Corporation as the surviving corporation renamed "Nielsen Media Research, Inc.", (D) causing I.M.S. International, Inc. to merge with and into IMS HEALTH, with IMS HEALTH as the surviving corporation, (E) upon the completion of the transaction described in (D), causing IMS America Ltd. to merge with and into IMS HEALTH, with IMS HEALTH as the surviving corporation, (F) upon the completion of the transaction described in (E), causing the Corporation to contribute all of the non-stock assets and liabilities held directly by the Corporation (other than assets specified herein to remain with the Corporation after the Distribution) to IMS HEALTH, (G) upon the completion of the transaction described in (F), causing the Corporation to contribute all the capital stock held by the Corporation in Cognizant Technology Solutions Corporation, Cognizant Enterprises Inc., Gartner, Erisco, Inc., I.M.S. Services Nederland B.V., IMS Italia 2 S.p.A., IMS Japan K.K., Cognizant India Holdings Corporation, IMS ChinaMetrik Incorporated, Cognizant Transportation Services Corporation, DBHC Inc., IMS Holdings (UK) Limited, Sales Technologies, Inc., Walsh International, Inc. and any other first tier subsidiary of the Corporation not related to the NMR Business and (ii) upon the completion of such reorganization to distribute to the holders of the Cognizant Common Stock all the outstanding shares of common stock of IMS HEALTH (the "IMS HEALTH Common Shares"), together with the associated Rights (as defined herein), as set forth herein; WHEREAS, each of the Corporation and IMS HEALTH has determined that it is necessary and desirable, on or prior to the Distribution Date (as defined herein), to allocate and transfer those assets and to allocate and assign responsibility for those liabilities in respect of the activities of the businesses of such entities and those assets and liabilities in respect of other businesses and activities of the Corporation and its current and former Subsidiaries and other matters; and WHEREAS, each of the Corporation and IMS HEALTH has determined that it is necessary and desirable to set forth the principal corporate transactions required to effect such Distribution and to set forth other agreements that will govern certain other matters following the Distribution. NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, the parties hereby agree as follows: ARTICLE I. DEFINITIONS SECTION 1.1. General. As used in this Agreement, the following terms shall have the following meanings: (a) "Action" shall mean any action, suit, arbitration, inquiry, proceeding or investigation by or before any court, any governmental or other regulatory or administrative agency, body or commission or any arbitration tribunal. (b) "Affiliate" shall mean, when used with respect to a specified person, another person that controls, is controlled by, or is under common control with the person specified. As used herein, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities or other interests, by contract or otherwise. (c) "Agent" shall have the meaning set forth in Section 2.1(b). (d) "Agreement Disputes" shall have the meaning set forth in Section 6.1. (e) "Ancillary Agreements" shall mean all of the written agreements, instruments, assignments or other arrangements (other than this Agreement) entered into in connection with the transactions contemplated hereby, including, without limitation, the 3 Conveyancing and Assumption Instruments, the Employee Benefits Agreement, the Tax Allocation Agreement and the Transition Services Agreement. (f) "Assets" shall mean assets, properties and rights (including goodwill), wherever located (including in the possession of vendors or other third parties or elsewhere), whether real, personal or mixed, tangible, intangible or contingent, in each case whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of any person, including, without limitation, the following: (i) all accounting and other books, records and files whether in paper, microfilm, microfiche, computer tape or disc, magnetic tape or any other form; (ii) all apparatus, computers and other electronic data processing equipment, fixtures, machinery, equipment, furniture, office equipment, automobiles, trucks, aircraft and other transportation equipment, special and general tools, test devices, prototypes and models and other tangible personal property; (iii) all inventories of materials, parts, raw materials, supplies, work-in-process and finished goods and products; (iv) all interests in real property of whatever nature, including easements, whether as owner, mortgagee or holder of a Security Interest in real property, lessor, sublessor, lessee, sublessee or otherwise; (v) all interests in any capital stock or other equity interests of any Subsidiary or any other person, all bonds, notes, debentures or other securities issued by any Subsidiary or any other person, all loans, advances or other extensions of credit or capital contributions to any Subsidiary or any other person and all other investments in securities of any person; (vi) all license agreements, leases of personal property, open purchase orders for raw materials, supplies, parts or services, unfilled orders for the manufacture and sale of products and other contracts, agreements or commitments; (vii) all deposits, letters of credit and performance and surety bonds; (viii) all written technical information, data, specifications, research and development information, engineering drawings, operating and maintenance manuals, and materials and analyses prepared by consultants and other third parties; (ix) all domestic and foreign patents, copyrights, trade names, trademarks, service marks and registrations and applications for any of the foregoing, 4 mask works, trade secrets, inventions, data bases, other proprietary information and licenses from third persons granting the right to use any of the foregoing; (x) all computer applications, programs and other software, including operating software, network software, firmware, middleware, design software, design tools, systems documentation and instructions; (xi) all cost information, sales and pricing data, customer prospect lists, supplier records, customer and supplier lists, customer and vendor data, correspondence and lists, product literature, artwork, design, development and manufacturing files, vendor and customer drawings, formulations and specifications, quality records and reports and other books, records, studies, surveys, reports, plans and documents; (xii) all prepaid expenses, trade accounts and other accounts and notes receivable; (xiii) all rights under contracts or agreements, all claims or rights against any person arising from the ownership of any asset, all rights in connection with any bids or offers and all claims, choses in action or similar rights, whether accrued or contingent; (xiv) all rights under insurance policies and all rights in the nature of insurance, indemnification or contribution; (xv) all licenses, permits, approvals and authorizations which have been issued by any Governmental Authority; (xvi) cash or cash equivalents, bank accounts, lock boxes and other deposit arrangements; and (xvii) interest rate, currency, commodity or other swap, collar, cap or other hedging or similar agreements or arrangements. (g) "Assignee" shall have the meaning set forth in Section 2.1(f). (h) "Business Entity" shall mean any corporation, partnership, limited liability company or other entity which may legally hold title to Assets. (i) "Claims Administration" shall mean the processing of claims made under the Shared Policies, including, without limitation, the reporting of claims to the insurance carriers and the management of the defense of claims. (j) "Code" shall mean the Internal Revenue Code of 1986, as amended, and the Treasury regulations promulgated thereunder, including any successor legislation. 5 (k) "Cognizant Common Stock" shall have the meaning set forth in the recitals hereto. (l) "Commission" shall mean the U.S. Securities and Exchange Commission. (m) "Conveyancing and Assumption Instruments" shall mean, collectively, the various agreements, instruments and other documents heretofore entered into and to be entered into to effect the transfer of Assets and the assumption of Liabilities in the manner contemplated by this Agreement, or otherwise arising out of or relating to the transactions contemplated by this Agreement, which shall be in substantially the forms attached hereto as Schedule 1.1(m) for transfers to be effected pursuant to New York law or the laws of one of the other states of the United States, or, if not appropriate for a given transfer, and for transfers to be effected pursuant to non-U.S. laws, shall be in such other form or forms as the parties agree and as may be required by the laws of such non-U.S. jurisdictions. (n) the "Corporation" or "Cognizant" shall mean Cognizant Corporation, a Delaware corporation, which will change its name in connection with the Distribution to "Nielsen Media Research, Inc.". (o) "Corporation Debt" shall mean have the meaning set forth in Section 2.1(n). (p) "Distribution" shall mean the distribution on the Distribution Date to holders of record of shares of Cognizant Common Stock as of the Distribution Record Date of the IMS HEALTH Common Shares owned by the Corporation on the basis of one IMS HEALTH Common Share for each outstanding share of Cognizant Common Stock. (q) "Distribution Date" shall mean June 30, 1998. (r) "Distribution Record Date" shall mean June 25, 1998. (s) "Effective Time" shall mean immediately prior to the midnight, New York time, that ends the 24-hour period comprising June 30, 1998. (t) "Employee Benefits Agreement" shall mean the Employee Benefits Agreement between the Corporation and IMS HEALTH. (u) "Enterprises Business" shall have the meaning set forth in the recitals hereto. (v) "ERISCO Business" shall have the meaning set forth in the recitals hereto. (w) "Governmental Authority" shall mean any federal, state, local, foreign or international court, government, department, commission, board, bureau, agency, official or other regulatory, administrative or governmental authority. (x) "IMS Business" shall have the meaning set forth in the recitals hereto. 6 (y) "IMS HEALTH Assets" shall mean, collectively, all the rights and Assets owned or held by the Corporation or any Subsidiary of the Corporation immediately prior to the Effective Time, except the NMR Assets. (z) "IMS HEALTH Business" shall mean each and every business conducted at any time by the Corporation or any Subsidiary of the Corporation prior to the Effective Time (including, without limitation, the IMS Business, the ERISCO Business, the Enterprises Business and the Technology Solutions Business), except an NMR Business. (aa) "IMS HEALTH Common Shares" shall have the meaning set forth in the recitals hereto. (ab) "IMS HEALTH Contracts" shall mean all the contracts and agreements to which the Corporation or any of its Affiliates who are not individuals is a party or by which it or any of its Affiliates who are not individuals is bound immediately prior to the Effective Time, except the NMR Contracts. (ac) "IMS HEALTH Group" shall mean IMS HEALTH and each person (other than any member of the NMR Group) that is a Subsidiary of the Corporation immediately prior to the Effective Time. (ad) "IMS HEALTH Indemnitees" shall mean IMS HEALTH, each member of the IMS HEALTH Group, each of their respective present and former directors, officers, employees and agents and each of the heirs, executors, successors and assigns of any of the foregoing, except the NMR Indemnitees, as well as any present and former directors, officers, employees and agents of the Corporation prior to the Effective Time and each of their heirs, executors, successors and assigns. (ae) "IMS HEALTH Liabilities" shall mean collectively, all obligations and Liabilities of the Corporation or any Subsidiary of the Corporation immediately prior to the Effective Time, except the NMR Liabilities. (af) "IMS HEALTH Policies" shall mean all Policies, current or past, which are owned or maintained by or on behalf of the Corporation or any Subsidiary of the Corporation immediately prior to the Effective Time which do not relate to the NMR Business and which Policies are either maintained by IMS HEALTH or a member of the IMS HEALTH Group or are assignable to IMS HEALTH or a member of the IMS HEALTH Group. (ag) "Indemnifiable Losses" shall mean any and all losses, liabilities, claims, damages, demands, costs or expenses (including, without limitation, reasonable attorneys' fees and any and all out-of-pocket expenses) reasonably incurred in investigating, preparing for or defending against any Actions or potential Actions or in settling any Action or potential Action or in satisfying any judgment, fine or penalty rendered in or resulting from any Action. (ah) "Indemnifying Party" shall have the meaning set forth in Section 3.3. 7 (ai) "Indemnitee" shall have the meaning set forth in Section 3.3. (aj) "Indemnity and Joint Defense Agreement" shall mean the Indemnity and Joint Defense Agreement dated as of October 28, 1996 by and among the Corporation, The Dun & Bradstreet Corporation and ACNielsen Corporation. (ak) "Information Statement" shall mean the Information Statement sent to the holders of shares of Cognizant Common Stock in connection with the Distribution, including any amendment or supplement thereto. (al) "Insurance Administration" shall mean, with respect to each Shared Policy, the accounting for premiums, retrospectively-rated premiums, defense costs, indemnity payments, deductibles and retentions, as appropriate, under the terms and conditions of each of the Shared Policies; and the reporting to excess insurance carriers of any losses or claims which may cause the per-occurrence, per claim or aggregate limits of any Shared Policy to be exceeded, and the distribution of Insurance Proceeds as contemplated by this Agreement. (am) "Insurance Proceeds" shall mean those monies (i) received by an insured from an insurance carrier or (ii) paid by an insurance carrier on behalf of an insured, in either case net of any applicable premium adjustment, retrospectively-rated premium, deductible, retention, or cost of reserve paid or held by or for the benefit of such insured. (an) "Insured Claims" shall mean those Liabilities that, individually or in the aggregate, are covered within the terms and conditions of any of the Shared Policies, whether or not subject to deductibles, co-insurance, uncollectibility or retrospectively-rated premium adjustments. (ao) "IRI Action" shall mean the complaint filed in the United States District Court for the Southern District of New York on July 29, 1996 by Information Resources, Inc. naming as defendants The Dun & Bradstreet Corporation, A. C. Nielsen Company and IMS International, Inc. (ap) "Liabilities" shall mean any and all losses, claims, charges, debts, demands, actions, causes of action, suits, damages, obligations, payments, costs and expenses, sums of money, accounts, reckonings, bonds, specialties, indemnities and similar obligations, exonerations, covenants, contracts, controversies, agreements, promises, doings, omissions, variances, guarantees, make whole agreements and similar obligations, and other liabilities, including all contractual obligations, whether absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever arising, and including those arising under any law, rule, regulation, Action, threatened or contemplated Action (including the costs and expenses of demands, assessments, judgments, settlements and compromises relating thereto and attorneys' fees and any and all costs and expenses, whatsoever reasonably incurred in investigating, preparing or defending against any such Actions or threatened or contemplated Actions), order or consent decree of any governmental or other regulatory or administrative agency, body or commission or any award of any arbitrator or mediator of any kind, and those arising under any contract, commitment or undertaking, including those arising under this 8 Agreement or any Ancillary Agreement, in each case, whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of any person. (aq) "Nielsen Media Research Business" shall have the meaning set forth in the recitals hereto. (ar) "1996 Distribution" shall mean the distribution described in the 1996 Distribution Agreement. (as) "1996 Distribution Agreement" shall mean the Distribution Agreement among the Corporation, The Dun & Bradstreet Corporation and ACNielsen Corporation dated as of October 28, 1996. (at) "NMR" shall mean Nielsen Media Research, Inc., a Delaware corporation and a wholly-owned subsidiary of the Corporation. (au) "NMR Assets" shall mean: (i) the ownership interests in those Business Entities listed on Schedule 1.1(au)(i); (ii) any and all Assets that are expressly contemplated by this Agreement, including those on the list of pre-Distribution reorganization transactions attached as Schedule 1.1(au)(ii) hereto, or any Ancillary Agreement (or included on any Schedule hereto or thereto) as Assets which have been or are to be transferred to the Corporation, NMR or any other member of the NMR Group prior to the Effective Time or are to remain with the Corporation, NMR or any member of the NMR Group subsequent to the Effective Time; (iii) any Assets reflected on the NMR Balance Sheet or the accounting records supporting such balance sheet and any Assets acquired by or for NMR or any member of the NMR Group subsequent to the date of such balance sheet which, had they been so acquired on or before such date and owned as of such date, would have been reflected on such balance sheet if prepared on a consistent basis, subject to any dispositions of any of such Assets subsequent to the date of such balance sheet; (iv) subject to Article VII, any rights of any member of the NMR Group under any of the Policies, including any rights thereunder arising from and after the Effective Time in respect of any Policies that are occurrence policies; (v) any NMR Contracts, any rights or claims arising thereunder, and any other rights or claims or contingent rights or claims primarily relating to or arising from any NMR Asset or the NMR Business; 9 (vi) the minute books and similar corporate records of the Corporation; and (vii) any and all Assets of the Corporation from and after the Effective Time. Notwithstanding the foregoing, the NMR Assets shall not in any event include: (v) the Corporation's rights arising from or related to the Corporation's agreements to acquire Walsh International Inc. ("Walsh") or Pharmaceutical Marketing Services Inc. ("PMSI"), or any of the assets of Walsh or PMSI; or (w) any rights of the Corporation under (i) the 1996 Distribution Agreement or (ii) the Tax Allocation Agreement, Employee Benefits Agreement or any Ancillary Agreement referred to in the 1996 Distribution Agreement (except in each case to the extent provided in this Agreement or any Ancillary Agreement to this Agreement); or (x) the Corporation's interest in the capital stock of the Gartner Group, Inc. and any other Assets listed or described on Schedule 1.1(au)(x); or (y) any Assets primarily relating to or used in any terminated or divested Business Entity, business or operation formerly owned or managed by or associated with the Corporation, NMR or any NMR Business, except for those Assets primarily relating to or used in those Business Entities, businesses or operations listed on Schedule 1.1(au)(y); or (z) any and all Assets that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Assets to be transferred or conveyed to any member of the IMS HEALTH Group. In the event of any inconsistency or conflict which may arise in the application or interpretation of any of the foregoing provisions, for the purpose of determining what is and is not an NMR Asset, any item explicitly included on a Schedule referred to in this Section 1.1(au) shall take priority over any provision of the text hereof, and clause (ii) shall take priority over clause (iii) hereof of this Section 1.1(au). (av) "NMR Balance Sheet" shall mean the consolidated balance sheet of the NMR Group, including the notes thereto, as of March 31, 1998, set forth as Schedule 1.1(av) hereto. 10 (aw) "NMR Business" shall mean (i) the Nielsen Media Research Business, (ii) the businesses of the members of the NMR Group, (iii) any other business conducted by the Corporation or any Subsidiary of the Corporation primarily through the use of the NMR Assets, (iv) the businesses of Business Entities acquired or established by or for NMR or any of its Subsidiaries after the date of this Agreement and (v) the business of the Corporation from and after the Effective Time. (ax) "NMR Contracts" shall mean the following contracts and agreements to which the Corporation or any of its Affiliates who are not individuals is a party or by which it or any of its Affiliates who are not individuals or any of their respective Assets is bound, whether or not in writing, except for any such contract or agreement that is not expressly contemplated to be transferred or assigned to the Corporation, NMR or any other member of the NMR Group prior to the Effective Time, or to remain with the Corporation, NMR or any other member of the NMR Group subsequent to the Effective Time, pursuant to any provision of this Agreement or any Ancillary Agreement: (i) the TAM Master Agreement (as defined herein), the Intellectual Property Agreement referred to in the 1996 Distribution Agreement (except to the extent it relates to intellectual property used by the IMS HEALTH Group) and any contracts or agreements listed or described on Schedule 1.1(ax)(i); (ii) any contract or agreement entered into in the name of the Corporation, or in the name of, or expressly on behalf of, any division, business unit or member of the NMR Group except for those contracts listed or described on Schedule 1.1(ax)(ii) or which are primarily for the benefit of any division, business unit or member of the IMS HEALTH Group; (iii) any contract or agreement that relates primarily to the NMR Business; (iv) federal, state and local government and other contracts and agreements that are listed or described on Schedule 1.1(ax)(iv) and any other government contracts or agreements entered into after the date hereof and prior to the Effective Time that relate primarily to the NMR Business; (v) any contract or agreement representing capital or operating equipment lease obligations reflected on the NMR Balance Sheet, and obligations as lessee under those contracts or agreements listed on Schedule 1.1(ax)(v); (vi) any contract or agreement that is otherwise expressly contemplated pursuant to this Agreement or any of the Ancillary Agreements to be transferred or assigned to the Corporation or any member of the NMR Group prior to the Effective Time or to remain with the Corporation or any member of the NMR Group subsequent to the Effective Time; and (vii) any guarantee, indemnity, representation or warranty of any member of the NMR Group. 11 (ay) "NMR Group" shall mean (i) NMR, (ii) each Business Entity which is contemplated to become a Subsidiary of the Corporation or NMR hereunder prior to the Effective Time or to remain a Subsidiary of the Corporation or NMR hereunder subsequent to the Effective Time, which shall include those identified as such on Schedule 1.1(au)(i) hereto, which Schedule shall also indicate the amount of the Corporation's or NMR's direct or indirect ownership interest therein, and (iii) the Corporation from and after the Effective Time. (az) "NMR Indemnitees" shall mean NMR, each member of the NMR Group, each of their respective present and former directors, officers, employees and agents and each of the heirs, executors, successors and assigns of any of the foregoing. (ba) "NMR Liabilities" shall mean: (i) any and all Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto, including Schedule 1.1(ba) hereto) as Liabilities to be assumed by the Corporation or any member of the NMR Group prior to the Effective Time or to remain with the Corporation or any member of the NMR Group subsequent to the Effective Time, and all agreements, obligations and Liabilities of the Corporation or any member of the NMR Group under this Agreement or any of the Ancillary Agreements; (ii) all Liabilities (other than Taxes and any employee-related Liabilities which are subject to the provisions of the Tax Allocation Agreement and the Employee Benefits Agreement, respectively), primarily relating to, arising out of or resulting from: (A) the operation of the NMR Business, as conducted at any time prior to, on or after the Effective Time (including any Liability relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative (whether or not such act or failure to act is or was within such person's authority)); (B) the operation of any business conducted by the Corporation or any Subsidiary of the Corporation at any time from and after the Effective Time (including any Liability relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative (whether or not such act or failure to act is or was within such person's authority)); or (C) any NMR Assets; whether arising before, on or after the Effective Time; (iii) all Liabilities reflected as liabilities or obligations on the NMR Balance Sheet or the accounting records supporting such balance sheet, and all 12 Liabilities arising or assumed after the date of such balance sheet which, had they arisen or been assumed on or before such date and been retained as of such date, would have been reflected on such balance sheet, subject to any discharge of such Liabilities subsequent to the date of the NMR Balance Sheet; and (iv) the Corporation Debt. Notwithstanding the foregoing, the NMR Liabilities shall not include: (x) any Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Liabilities to be assumed by IMS HEALTH or any member of the IMS HEALTH Group, including any Liabilities set forth in Schedule 1.1(ba)(x); (y) any Liabilities primarily relating to, arising out of or resulting from any terminated or divested Business Entity, business or operation formerly owned or managed by or associated with the Corporation or any NMR Business except for Liabilities primarily relating to, arising out of or resulting from those Business Entities, businesses or operations listed in Schedule 1.1(ba)(y); or (z) all agreements and obligations of any member of the IMS HEALTH Group under this Agreement or any of the Ancillary Agreements. (bb) "NMR Policies" shall mean all Policies, current or past, which are owned or maintained by or on behalf of the Corporation or any Subsidiary of the Corporation immediately prior to the Effective Time, which do not relate to the IMS HEALTH Business. (bc) "person" shall mean any natural person, Business Entity, corporation, business trust, joint venture, association, company, partnership, other entity or government, or any agency or political subdivision thereof. (bd) "Policies" shall mean insurance policies and insurance contracts of any kind (other than life and benefits policies or contracts), including, without limitation, primary, excess and umbrella policies, comprehensive general liability policies, director and officer liability, fiduciary liability, automobile, aircraft, property and casualty, workers' compensation and employee dishonesty insurance policies, bonds and self-insurance and captive insurance company arrangements, together with the rights, benefits and privileges thereunder. (be) "Provider" shall have the meaning set forth in Section 5.1. (bf) "Recipient" shall have the meaning set forth in Section 5.1. (bg) "Records" shall have the meaning set forth in Section 4.1. 13 (bh) "Rights" shall have the meaning set forth in Section 2.1(c). (bi) "Rules" shall have the meaning set forth in Section 6.2. (bj) "Security Interest" shall mean any mortgage, security interest, pledge, lien, charge, claim, option, right to acquire, voting or other restriction, right-of-way, covenant, condition, easement, encroachment, restriction on transfer, or other encumbrance of any nature whatsoever. (bk) "Shared Policies" shall mean all Policies, current or past, which are owned or maintained by or on behalf of the Corporation or any Subsidiary of the Corporation immediately prior to the Effective Time which relate to the IMS HEALTH Business and the NMR Business. (bl) "Shared Transaction Services Agreement" shall mean the Shared Transaction Services Agreement between the Corporation and IMS HEALTH. (bm) "Subsidiary" shall mean any corporation, partnership or other entity of which another entity (i) owns, directly or indirectly, ownership interests sufficient to elect a majority of the Board of Directors (or persons performing similar functions) (irrespective of whether at the time any other class or classes of ownership interests of such corporation, partnership or other entity shall or might have such voting power upon the occurrence of any contingency) or (ii) is a general partner or an entity performing similar functions (e.g., a trustee). (bn) "TAM Master Agreement" shall mean the master agreement between the Corporation and ACNielsen Corporation dated as of October 28, 1996, including any agreements ancillary thereto, relating to the conduct of the television audience measurement business after the 1996 Distribution. (bo) "Tax" shall have the meaning set forth in the Tax Allocation Agreement. (bp) "Tax Allocation Agreement" shall mean the Tax Allocation Agreement between the Corporation and IMS HEALTH. (bq) "Technology Solutions Business" shall have the meaning set forth in the recitals hereto. (br) "Third Party Claim" shall have the meaning set forth in Section 3.3. (bs) "Transition Services Agreement" shall mean the Amended and Restated Transition Services Agreement among the Corporation, IMS HEALTH, The Dun & Bradstreet Corporation, The New Dun & Bradstreet Corporation, ACNielsen Corporation and Gartner Group, Inc. 14 SECTION 1.2. References; Interpretation. References in this Agreement to any gender include references to all genders, and references to the singular include references to the plural and vice versa. The words "include", "includes" and "including" when used in this Agreement shall be deemed to be followed by the phrase "without limitation". Unless the context otherwise requires, references in this Agreement to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, such Agreement. Unless the context otherwise requires, the words "hereof", "hereby" and "herein" and words of similar meaning when used in this Agreement refer to this Agreement in its entirety and not to any particular Article, Section or provision of this Agreement. ARTICLE II. DISTRIBUTION AND OTHER TRANSACTIONS; CERTAIN COVENANTS SECTION 2.1. The Distribution and Other Transactions. (a) Certain Transactions. On or prior to the Distribution Date: (i) the Corporation shall, on behalf of itself and its Subsidiaries, transfer or cause to be transferred to IMS HEALTH or another member of the IMS HEALTH Group, effective prior to or as of the Effective Time, all of the Corporation's and its Subsidiaries' right, title and interest in the IMS HEALTH Assets. (ii) IMS HEALTH shall to the extent not already held by the Corporation or a member of the NMR Group, on behalf of itself and its Subsidiaries, transfer or cause to be transferred to the Corporation or a member of the NMR Group, effective prior to or as of the Effective Time, all of IMS HEALTH's and its Subsidiaries' right, title and interest in the NMR Assets. (iii) the Corporation or IMS HEALTH, as applicable, shall be entitled to designate the Business Entity within the NMR Group or the IMS HEALTH Group, as applicable, to which any Assets are to be transferred pursuant to this Section 2.1(a). (b) Stock Dividend to the Corporation. On or prior to the Distribution Date, IMS HEALTH shall issue to the Corporation as a stock dividend (i) such number of IMS HEALTH Common Shares as will be required to effect the Distribution, as certified by the Corporation's stock transfer agent (the "Agent"). In connection therewith the Corporation shall deliver to IMS HEALTH for cancellation the share certificate held by it representing IMS HEALTH Common Shares and shall receive a new certificate or certificates representing the total number of IMS HEALTH Common Shares to be owned by the Corporation after giving effect to such stock dividend. (c) Charters; By-laws; Rights Plans. On or prior to the Distribution Date, all necessary actions shall have been taken to provide for the adoption of the form of Certificate of Incorporation and By-laws and the execution and delivery of the form of Rights Agreement, relating to the preferred share purchase rights relating to the IMS HEALTH Common Shares (the 15 "Rights"), filed by IMS HEALTH with the Commission as exhibits to IMS HEALTH's Registration Statement on Form 10 (or any amendment thereto). (d) Directors. On or prior to the Distribution Date, the Corporation as the sole stockholder of IMS HEALTH, shall have taken all necessary action to cause the Board of Directors of IMS HEALTH to consist of the individuals identified in the Information Statement as directors of IMS HEALTH. (e) Certain Licenses and Permits. Without limiting the generality of the obligations set forth in Section 2.1(a), on or prior to the Distribution Date or as soon as reasonably practicable thereafter: (i) all transferable licenses, permits and authorizations issued by any Governmental Authority which do not relate primarily to the NMR Business but which are held in the name of the Corporation or any member of the NMR Group, or in the name of any employee, officer, director, stockholder or agent of the Corporation or any such member, or otherwise, on behalf of a member of the IMS HEALTH Group shall be duly and validly transferred or caused to be transferred by the Corporation to the appropriate member of the IMS HEALTH Group; and (ii) all transferable licenses, permits and authorizations issued by Governmental Authorities which relate primarily to the NMR Business but which are held in the name of any member of the IMS HEALTH Group, or in the name of any employee, officer, director, stockholder, or agent of any such member, or otherwise, on behalf of a member of the NMR Group shall be duly and validly transferred or caused to be transferred by IMS HEALTH to the Corporation or the appropriate member of the NMR Group. (f) Transfer of Agreements. Without limiting the generality of the obligations set forth in Section 2.1(a): (i) the Corporation hereby agrees that on or prior to the Distribution Date or as soon as reasonably practicable thereafter, subject to the limitations set forth in this Section 2.1(f), it will, and it will cause each member of the NMR Group to, assign, transfer and convey to the appropriate member of the IMS HEALTH Group all of the Corporation's or such member of the NMR Group's respective right, title and interest in and to any and all IMS HEALTH Contracts; (ii) IMS HEALTH hereby agrees that on or prior to the Distribution Date or as soon as reasonably practicable thereafter, subject to the limitations set forth in this Section 2.1(f), it will, and it will cause each member of the IMS HEALTH Group to, assign, transfer and convey to the Corporation or the appropriate member of the NMR Group all of IMS HEALTH's or such member of the IMS HEALTH Group's respective right, title and interest in and to any and all NMR Contracts; 16 (iii) subject to the provisions of this Section 2.1(f), any agreement to which any of the parties hereto or any of their Subsidiaries is a party that inures to the benefit of both the NMR Business and the IMS HEALTH Business shall be assigned in part so that each party shall be entitled to the rights and benefits inuring to its business under such agreement; (iv) the assignee of any agreement assigned, in whole or in part, hereunder (an "Assignee") shall assume and agree to pay, perform, and fully discharge all obligations of the assignor under such agreement or, in the case of a partial assignment under paragraph (f)(iii), such Assignee's related portion of such obligations as determined in accordance with the terms of the relevant agreement, where determinable on the face thereof, and otherwise as determined in accordance with the practice of the parties prior to the Distribution; and (v) notwithstanding anything in this Agreement to the contrary, this Agreement shall not constitute an agreement to assign any agreement, in whole or in part, or any rights thereunder if the agreement to assign or attempt to assign, without the consent of a third party, would constitute a breach thereof or in any way adversely affect the rights of the assignor or Assignee thereof. Until such consent is obtained, or if an attempted assignment thereof would be ineffective or would adversely affect the rights of any party hereto so that the intended Assignee would not, in fact, receive all such rights, the parties will cooperate with each other in any arrangement designed to provide for the intended Assignee the benefits of, and to permit the intended Assignee to assume liabilities under, any such agreement. (g) Consents. The parties hereto shall use their commercially reasonable efforts to obtain required consents to transfer and/or assignment of licenses, permits and authorizations of Governmental Authorities and of agreements hereunder. (h) Delivery of Shares to Agent. The Corporation shall deliver to the Agent the share certificates representing the IMS HEALTH Common Shares issued to the Corporation by IMS HEALTH pursuant to Section 2.1(b) which are to be distributed to the holders of Cognizant Common Stock in the Distribution and shall instruct the Agent to distribute, on or as soon as practicable following the Distribution Date, certificates representing such IMS HEALTH Common Shares to holders of record of shares of Cognizant Common Stock on the Distribution Record Date as further contemplated by the Information Statement and herein. IMS HEALTH shall provide all share certificates that the Agent shall require in order to effect the Distribution. (i) Certain Liabilities. For purposes of this Agreement, including Article III hereof, IMS HEALTH agrees with the Corporation that: (i) any and all Liabilities arising from or related to Cognizant's agreements to acquire Walsh and PMSI or any filings with the Commission or any other governmental or regulatory authority related thereto shall be deemed to be IMS HEALTH Liabilities and not NMR Liabilities; 17 (ii) any and all Liabilities arising from or based upon "controlling person" liability relating to the Form 10 (or any amendment thereto) filed by IMS HEALTH shall be deemed to be IMS HEALTH Liabilities and not NMR Liabilities; and (iii) notwithstanding Section 2.1(m) below, any and all Liabilities arising from or related to the spin-off of the Corporation and ACNielsen Corporation from The Dun & Bradstreet Corporation pursuant to the 1996 Distribution Agreement, other than those set forth on Schedule 2.1(i) or allocated to NMR pursuant to Section 2.1(j), shall be deemed to be IMS HEALTH Liabilities and not NMR Liabilities. (j) Certain Contingencies. For purposes of this Agreement, including Article III hereof, each of IMS HEALTH and the Corporation agrees that: (i) notwithstanding anything to the contrary herein or in the Tax Allocation Agreement, each of the Corporation and IMS HEALTH shall be liable for a portion of the liabilities related to certain prior business transactions to the extent and in the circumstances described in Schedule 2.1(j)(i); (ii) subject to Section 2.1(p), any and all Liabilities of Cognizant under the Indemnity and Joint Defense Agreement or otherwise related to the IRI Action, including legal fees and expenses related thereto, shall be allocated 75% to the IMS HEALTH Group (and thereby become IMS HEALTH Liabilities hereunder) and 25% to the NMR Group (and thereby become NMR Liabilities hereunder); provided that (X) any such legal fees and expenses incurred prior to January 1, 1999 shall be IMS HEALTH Liabilities and not NMR Liabilities and (Y) any such legal fees and expenses incurred during 1999 that are NMR Liabilities will be reimbursed to IMS HEALTH on the first business day after January 1, 2000 with respect to fees incurred through November 30, 1999 and notified to the Corporation, and within 10 business days after notice to the Corporation of other such fees incurred in 1999; and provided further that the aggregate amount of NMR Liabilities under Section 2.1(j)(i) and this Section 2.1(j)(ii) shall be limited to $125 million, and any amounts in excess of $125 million shall be IMS HEALTH Liabilities; and (iii) notwithstanding anything to the contrary herein or in the Tax Allocation Agreement, each of the Corporation and IMS HEALTH agree that the Corporation's interests in certain prior business transactions described on Schedule 2.1(j)(i) of the 1996 Distribution Agreement shall be held by IMS HEALTH or a member of the IMS HEALTH Group and not by NMR or any member of the NMR Group and any rights or Liabilities arising in connection with such interests and any transactions relating thereto shall be IMS HEALTH rights and Liabilities and not NMR rights and Liabilities. (k) Matters Relating to Certain Partnerships. Each of the Corporation and IMS HEALTH agrees that the interests in Cognizant Licensing Associates, L.P. held by members of the NMR Group will be retired prior to the Distribution. 18 (l) Certain Acquisitions. The Corporation shall contribute to IMS HEALTH any Assets relating to Walsh and PMSI which the Corporation acquires pursuant to its agreements to acquire such companies. (m) Undertaking of IMS HEALTH. On or prior to the Distribution Date, IMS HEALTH will undertake to each of The Dun & Bradstreet Corporation and ACNielsen Corporation to be jointly and severally liable for all "Cognizant Liabilities" (as defined in the 1996 Distribution Agreement) under the 1996 Distribution Agreement pursuant to an undertaking substantially in the form of Exhibit 2.1(m) hereto. (n) Corporation Debt. In connection with the Distribution, the Corporation shall borrow an aggregate of $300 million, the proceeds of which will be used to pay expenses of the Distribution and to repay existing intercompany indebtedness to certain members of the IMS HEALTH Group. This $300 million of debt shall be an obligation of the Corporation after the Distribution. (o) Cognizant Common Stock Held by IMSA. IMS HEALTH agrees that promptly after the Distribution Date IMS HEALTH will sell the 800,000 shares of Cognizant Common Stock which IMS HEALTH will own as a result of Cognizant Common Stock currently held by IMS America Ltd. (p) 1996 Distribution. The Corporation agrees that it will not take any action it is required or permitted to take pursuant to the terms of (i) the 1996 Distribution Agreement or (ii) the Indemnity and Joint Defense Agreement, the Tax Allocation Agreement, the Employee Benefits Agreement or any Ancillary Agreement referred to in the 1996 Distribution Agreement (other than the TAM Master Agreement and the Intellectual Property Agreement (to the extent such action relates to intellectual property used by the NMR Group)), in each such case without the prior written consent of IMS HEALTH. The Corporation agrees that it will take any action pursuant to the terms of the agreements referred to in clauses (i) and (ii) of the preceding sentence that it is requested to take by IMS HEALTH; provided that IMS HEALTH agrees to consult with the Corporation regarding the terms and conditions of any settlement agreement relating to the IRI Action which would require the Corporation to contribute to the amount of the settlement thereunder; and provided further that if the Corporation reasonably asserts that such settlement would cause financial hardship to the Corporation then the obligations of the Corporation under this Agreement with respect to the payment of its portion of such settlement shall be adjusted as follows: (I) if the payment date for the settlement (the "Payment Date") occurs prior to the second anniversary of the Distribution Date, then (A) the Corporation shall pay 50% of the amount that it would otherwise be obligated to pay hereunder in respect of such settlement on the Payment Date, (B) IMS HEALTH shall pay the remaining 50% of such amount on behalf of the Corporation on the Payment Date and (C) the Corporation shall reimburse IMS HEALTH for the amount IMS HEALTH pays pursuant to clause (B) (plus interest thereon at the prevailing three-month 19 treasury rate) in two equal installments to be paid on each of the first and second anniversaries of the Payment Date; and (II) if the Payment Date occurs on or after the second anniversary of the Distribution Date but prior to the third anniversary of the Distribution Date, then (A) the Corporation shall pay 66 2/3% of the amount that it would otherwise be obligated to pay hereunder in respect of such settlement on the Payment Date, (B) IMS HEALTH shall pay the remaining 33 1/3% of such amount on behalf of the Corporation on the Payment Date and (C) the Corporation shall reimburse IMS HEALTH for the amount IMS HEALTH pays pursuant to clause (B) (plus interest thereon at the prevailing three-month treasury rate) on the first anniversary of the Payment Date. Notwithstanding the foregoing, if the Payment Date occurs on or after the third anniversary of the Distribution Date, then no adjustment shall be made to the obligations of the Corporation under this Agreement with respect to the payment of its portion of such settlement. (q) Cognizant Restricted Stock. At the time of the Distribution, the Corporation shall contribute to IMS HEALTH any IMS HEALTH Common Shares received by the Corporation as a result of the forfeiture of restricted Cognizant Common Stock by employees of the Corporation in connection with the Distribution. (r) New Assistance Agreement. As soon as reasonably practicable after the Distribution Date, the Corporation and IMS HEALTH shall enter into an amendment to the Assistance Agreement (the "1996 Assistance Agreement") among the State of Connecticut, acting by the Department of Economic and Community Development, The Dun & Bradstreet Corporation, ACNielsen Corporation and the Corporation dated October 30, 1996 pursuant to which the Corporation will be released from its obligations under the 1996 Assistance Agreement in consideration for (i) the Corporation's agreement to maintain no less than 170 Full Time Positions (as defined in the 1996 Assistance Agreement) and (ii) IMS HEALTH's agreement to maintain no less than 17 Full Time Positions (as defined in the 1996 Assistance Agreement), in each such case for the remainder of the term of the 1996 Assistance Agreement. The Corporation and IMS HEALTH shall cooperate with one another in negotiating such amendment and shall use their respective reasonable efforts to conclude such negotiations on or prior to July 15, 1998. (s) Other Transactions. On or prior to the Distribution Date, each of the Corporation and IMS HEALTH shall consummate those other transactions in connection with the Distribution that are contemplated by the ruling request submissions by the Corporation to the Internal Revenue Service in respect of the ruling granted on May 21, 1998, and not specifically referred to in subparagraphs (a)-(r) above. After the Distribution Date, each of the Corporation and IMS HEALTH will exercise good faith commercially reasonable efforts to consummate as promptly as practicable all other transactions which must be consummated in order fully to complete the Distribution and any of the transactions contemplated hereby or by any of the Ancillary Agreements. 20 SECTION 2.2. Intercompany Accounts. The parties acknowledge that the Corporation has transferred $417 million to IMS HEALTH to repay intercompany indebtedness to certain members of the IMS HEALTH Group existing as of May 31, 1998. On the Distribution Date, the Corporation shall transfer the remaining cash balances referred to in Section 2.3 below to IMS HEALTH as a contribution of capital. If there is a net amount due and payable from either party to the other for intercompany receivables, payables and loans with respect to the month of June, 1998, the amount characterized as a capital contribution by the Corporation to IMS HEALTH shall be adjusted by such net amount due and no cash payment in respect thereof shall be made. SECTION 2.3. Cash Balances. In addition to any other obligations hereunder or under any Ancillary Agreement or otherwise, on the Distribution Date, the Corporation shall contribute to IMS HEALTH all cash in the Corporation's accounts other than the estimated cash amounts set forth on Schedule 2.3. Promptly after the Distribution Date, but no later than July 31, 1998, the Corporation and IMS HEALTH shall determine the actual amounts for each item on Schedule 2.3. Any net variance between such actual amounts and the estimated amounts set forth on Schedule 2.3 shall be paid by the appropriate party to the other party on or promptly after July 31, 1998 (including the closing market price on June 30, 1998 of the APAC Teleservices, Inc. shares held pursuant to the Escrow Agreement identified in Schedule 1.1(ax)(ii)). If additional variances are discovered thereafter and prior to December 31, 1998, the appropriate party shall pay the amount thereof promptly to the other party. SECTION 2.4. Assumption and Satisfaction of Liabilities. Except as otherwise specifically set forth in any Ancillary Agreement, and subject to Section 2.3 hereof, from and after the Effective Time, (i) the Corporation shall, and shall cause each member of the NMR Group to, assume, pay, perform and discharge all NMR Liabilities and (ii) IMS HEALTH shall, and shall cause each member of the IMS HEALTH Group to, assume, pay, perform and discharge all IMS HEALTH Liabilities. To the extent reasonably requested to do so by another party hereto, each party hereto agrees to sign such documents, in a form reasonably satisfactory to such party, as may be reasonably necessary to evidence the assumption of any Liabilities hereunder. SECTION 2.5. Resignations. (a) Subject to Section 2.5(b), the Corporation and NMR shall cause all their employees to resign or be terminated, effective not later than the Effective Time, from all positions as officers or directors of any member of the IMS HEALTH Group in which they serve, and IMS HEALTH shall cause all its employees to resign or be terminated, effective not later than the Effective Time, from all positions as officers or directors of the Corporation or any members of the NMR Group in which they serve. (b) No person shall be required by any party hereto to resign from any position or office with another party hereto if such person is disclosed in the Information Statement as the person who is to hold such position or office following the Distribution. SECTION 2.6. Further Assurances. In case at any time after the Effective Time any further action is reasonably necessary or desirable to carry out the purposes of this Agreement and the Ancillary Agreements, the proper officers of each party to this Agreement 21 shall take all such necessary action. Without limiting the foregoing, the Corporation and IMS HEALTH shall use their commercially reasonable efforts promptly to obtain all consents and approvals, to enter into all amendatory agreements and to make all filings and applications that may be required for the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements, including, without limitation, all applicable governmental and regulatory filings. SECTION 2.7. Limited Representations or Warranties. Each of the parties hereto agrees that no party hereto is, in this Agreement or in any other agreement or document contemplated by this Agreement or otherwise, making any representation or warranty whatsoever, as to title or value of Assets being transferred. It is also agreed that, notwithstanding anything to the contrary otherwise expressly provided in the relevant Conveyancing and Assumption Instrument, all Assets either transferred to or retained by the parties, as the case may be, shall be "as is, where is" and that (subject to Section 2.6) the party to which such Assets are to be transferred hereunder shall bear the economic and legal risk that such party's or any of the Subsidiaries' title to any such Assets shall be other than good and marketable and free from encumbrances. Similarly, each party hereto agrees that, except as otherwise expressly provided in the relevant Conveyancing and Assumption Instrument, no party hereto is representing or warranting in any way that the obtaining of any consents or approvals, the execution and delivery of any amendatory agreements and the making of any filings or applications contemplated by this Agreement will satisfy the provisions of any or all applicable agreements or the requirements of any or all applicable laws or judgments, it being agreed that the party to which any Assets are transferred shall bear the economic and legal risk that any necessary consents or approvals are not obtained or that any requirements of laws or judgments are not complied with. SECTION 2.8. Guarantees. (a) Except as otherwise specified in any Ancillary Agreement, the Corporation and IMS HEALTH shall use their commercially reasonable efforts to have, on or prior to the Distribution Date, or as soon as practicable thereafter, the Corporation and any member of the NMR Group removed as guarantor of or obligor for any IMS HEALTH Liability, including, without limitation, in respect of those guarantees set forth on Schedule 2.8(a) to the extent that they relate to IMS HEALTH Liabilities. (b) Except as otherwise specified in any Ancillary Agreement, the Corporation and IMS HEALTH shall use their commercially reasonable efforts to have, on or prior to the Distribution Date, or as soon as practicable thereafter, any member of the IMS HEALTH Group removed as guarantor of or obligor for any NMR Liability, including, without limitation, in respect of those guarantees set forth on Schedule 2.8(b) to the extent that they relate to NMR Liabilities. (c) If the Corporation or IMS HEALTH is unable to obtain, or to cause to be obtained, any such required removal as set forth in clauses (a) or (b) of this Section 2.8, the applicable guarantor or obligor shall continue to be bound as such and, unless not permitted by law or the terms thereof, the relevant beneficiary shall or shall cause one of its Subsidiaries, as agent or subcontractor for such guarantor or obligor to pay, perform and discharge fully all the obligations or other liabilities of such guarantor or obligor thereunder from and after the date hereof. 22 SECTION 2.9. Witness Services. At all times from and after the Distribution Date, each of the Corporation and IMS HEALTH shall use their commercially reasonable efforts to make available to the other, upon reasonable written request, its and its Subsidiaries' officers, directors, employees and agents as witnesses to the extent that (i) such persons may reasonably be required in connection with the prosecution or defense of any Action in which the requesting party may from time to time be involved and (ii) there is no conflict in the Action between the requesting party and the Corporation or IMS HEALTH as applicable. A party providing witness services to the other party under this Section shall be entitled to receive from the recipient of such services, upon the presentation of invoices therefor, payments for such amounts, relating to disbursements and other out-of-pocket expenses (which shall be deemed to exclude the costs of salaries and benefits of employees who are witnesses), as may be reasonably incurred in providing such witness services. SECTION 2.10. Certain Post-Distribution Transactions. (a)(i) The Corporation shall comply and shall cause its Subsidiaries to comply with and otherwise not take action inconsistent with each representation and statement made to the Internal Revenue Service in connection with the request by the Corporation for a ruling letter in respect of the Distribution as to certain tax aspects of the Distribution and (ii) until two years after the Distribution Date, the Corporation will maintain its status as a company engaged in the active conduct of a trade or business, as defined in Section 355(b) of the Code. (b)(i) IMS HEALTH shall comply and shall cause its Subsidiaries to comply with and otherwise not take action inconsistent with each representation and statement made to the Internal Revenue Service in connection with the request by the Corporation for a ruling letter in respect of the Distribution as to certain tax aspects of the Distribution and (ii) until two years after the Distribution Date, IMS HEALTH will maintain its status as a company engaged in the active conduct of a trade or business, as defined in Section 355(b) of the Code. (c) The Corporation agrees that until two years after the Distribution Date, it will not (i) merge or consolidate with or into any other corporation, (ii) liquidate or partially liquidate, (iii) sell or transfer all or substantially all of its assets (within the meaning of Rev. Proc. 77-37, 1977 - - - 2 C.B. 568) in a single transaction or series of related transactions, (iv) redeem or otherwise repurchase any Cognizant Common Stock (other than as described in Section 4.05(1)(b) of Rev. Proc. 96-30, 1996-1 C.B. 696), or (v) take any other action or actions which in the aggregate would have the effect of causing or permitting one or more persons to acquire directly or indirectly stock representing a 50 percent or greater interest (within the meaning of Section 355(e) of the Code) in the Corporation, unless prior to taking such action the Corporation has obtained (and provided to IMS HEALTH) a written opinion of a law firm reasonably acceptable to IMS HEALTH, or a supplemental ruling from the Internal Revenue Service, that such action or actions will not result in (i) the Distribution failing to qualify under Section 355(a) of the Code or (ii) the IMS HEALTH Common Shares failing to qualify as qualified property for purposes of Section 355(c)(2) of the Code by reason of Section 355(e) of the Code. (d) Notwithstanding anything to the contrary herein or in the Tax Allocation Agreement, if the Corporation or IMS HEALTH (or any of their respective Subsidiaries) fails to comply with any of its obligations under Sections 2.10(a), 2.10(b) and 2.10(c) above or takes or 23 fails to take any action on or after the Distribution Date, and such failure to comply, action or omission contributes to a determination that (i) the Distribution fails to qualify under Section 355(a) of the Code or (ii) the IMS HEALTH Common Shares fail to qualify as qualified property for purposes of Section 355(c)(2) of the Code by reason of Section 355(e) of the Code, then such party shall indemnify and hold harmless the other party and each member of the consolidated group of which the other party is a member from and against any and all federal, state and local taxes, including any interest, penalties or additions to tax, imposed upon or incurred by such other party, any member of its group or any stockholder of either party as a result of the failure of the Distribution to qualify under Section 355(a) of the Code or the application of Section 355(e). The obligation of the Corporation to indemnify IMS HEALTH pursuant to the preceding sentence shall not be affected by the delivery of any legal opinion or supplemental ruling under Section 2.10(c). SECTION 2.11. Transfers Not Effected Prior to the Distribution; Transfers Deemed Effective as of the Distribution Date. To the extent that any transfers contemplated by this Article II shall not have been consummated on or prior to the Distribution Date, the parties shall cooperate to effect such transfers as promptly following the Distribution Date as shall be practicable. Nothing herein shall be deemed to require the transfer of any Assets or the assumption of any Liabilities which by their terms or operation of law cannot be transferred; provided, however, that the parties hereto and their respective Subsidiaries shall cooperate to seek to obtain any necessary consents or approvals for the transfer of all Assets and Liabilities contemplated to be transferred pursuant to this Article II. In the event that any such transfer of Assets or Liabilities has not been consummated, from and after the Distribution Date the party retaining such Asset or Liability shall hold such Asset in trust for the use and benefit of the party entitled thereto (at the expense of the party entitled thereto) or retain such Liability for the account of the party by whom such Liability is to be assumed pursuant hereto, as the case may be, and take such other action as may be reasonably requested by the party to whom such Asset is to be transferred, or by whom such Liability is to be assumed, as the case may be, in order to place such party, insofar as is reasonably possible, in the same position as would have existed had such Asset or Liability been transferred as contemplated hereby. As and when any such Asset or Liability becomes transferable, such transfer shall be effected forthwith. The parties agree that, as of the Distribution Date, each party hereto shall be deemed to have acquired complete and sole beneficial ownership over all of the Assets, together with all rights, powers and privileges incident thereto, and shall be deemed to have assumed in accordance with the terms of this Agreement all of the Liabilities, and all duties, obligations and responsibilities incident thereto, which such party is entitled to acquire or required to assume pursuant to the terms of this Agreement. SECTION 2.12. Conveyancing and Assumption Instruments. In connection with the transfers of Assets and the assumptions of Liabilities contemplated by this Agreement, the parties shall execute or cause to be executed by the appropriate entities the Conveyancing and Assumption Instruments in substantially the form contemplated hereby for transfers to be effected pursuant to New York law or the laws of one of the other states of the United States or, if not appropriate for a given transfer, and for transfers to be effected pursuant to non-U.S. laws, in such other form as the parties shall reasonably agree, including the transfer of real property with deeds as may be appropriate. The transfer of capital stock shall be effected by means of delivery 24 of stock certificates and executed stock powers and notation on the stock record books of the corporation or other legal entities involved, or by such other means as may be required in any non-U.S. jurisdiction to transfer title to stock and, to the extent required by applicable law, by notation on public registries. SECTION 2.13. Ancillary Agreements. On or prior to the Distribution Date, each of the Corporation and IMS HEALTH shall enter into, and/or (where applicable) shall cause members of the NMR Group or the IMS HEALTH Group, as applicable, to enter into, the Ancillary Agreements and any other agreements in respect of the Distribution reasonably necessary or appropriate in connection with the transactions contemplated hereby and thereby. SECTION 2.14. Corporate Names. (a) Except as otherwise specifically provided in any Ancillary Agreement: (i) on or prior to the Distribution Date, the Corporation shall change its name to remove any reference to "Cognizant" therein; (ii) as soon as reasonably practicable after the Distribution Date but in any event within six months thereafter, the Corporation will, at its own expense, remove (or, if necessary, on an interim basis, cover up) any and all exterior signs and other identifiers located on any of its property or premises or on the property or premises used by it or its Subsidiaries (except property or premises to be shared with IMS HEALTH or its Subsidiaries after the Distribution) which refer or pertain to Cognizant or which include the Cognizant name, logo or other trademark or other intellectual property utilizing Cognizant; (iii) as soon as reasonably practicable after the Distribution Date but in any event within six months thereafter, the Corporation will, and will cause its Subsidiaries to, remove from all letterhead, envelopes, invoices and other communications media of any kind, all references to Cognizant, including the "Cognizant" name, logo and any other trademark or other intellectual property utilizing Cognizant (except that the Corporation shall not be required to take any such action with respect to materials in the possession of customers), and neither the Corporation nor its Subsidiaries shall use or display the "Cognizant" name, logo or other trademarks or intellectual property utilizing Cognizant without the prior written consent of any assignee of the Corporation's rights to the "Cognizant" name, logo or other trademarks or intellectual property utilizing Cognizant; (iv) as soon as reasonably practicable after the Distribution Date, but in any event within six months thereafter, the Corporation will cause its Subsidiaries to change their corporate names to the extent necessary to remove and eliminate any reference to Cognizant, including the "Cognizant" name; provided, however, that notwithstanding the foregoing requirements of this Section 2.14(a), if the Corporation has exercised good faith efforts to comply with this clause (iv) but is unable, due to regulatory or other circumstance beyond its control, to effect a corporate name change in compliance with applicable law, then the Corporation or its Subsidiary will not be deemed to be in breach hereof if it continues to exercise good faith efforts to effectuate such name change and 25 does effectuate such name change within nine months after the Distribution Date, and, in such circumstances, such party may continue to include in exterior signs and other identifiers and in letterhead, envelopes, invoices and other communications references to the name which includes references to Cognizant, but only to the extent necessary to identify such party and only until such party's corporate name can be changed to remove and eliminate such references; and (v) notwithstanding the foregoing clauses (i) through (iv), nothing herein or in any Ancillary Agreement shall require the Corporation to take any action to remove any reference to Cognizant, including the "Cognizant" name, from any stock certificate relating to shares of Cognizant Common Stock outstanding on or prior to the Effective Time; provided that from and after the Effective Time, any newly issued stock certificates representing Cognizant Common Stock (which at the Effective Time will become NMR Common Stock) shall not have any reference to Cognizant, including the "Cognizant" name. (b) Except as otherwise specifically provided in any Ancillary Agreement: (i) as soon as reasonably practicable after the Distribution Date but in any event within six months thereafter, IMS HEALTH will, at its own expense, remove (or, if necessary, on an interim basis, cover up) any and all exterior signs and other identifiers located on any of their respective property or premises owned or used by them or their respective Subsidiaries (except property or premises to be shared with the Corporation or its Subsidiaries after the Distribution) which refer or pertain to NMR or which include the "Nielsen Media Research" or "Nielsen" name, logo or other trademark or other NMR intellectual property; (ii) as soon as reasonably practicable after the Distribution Date but in any event within six months thereafter, IMS HEALTH will, and will cause its respective Subsidiaries to, remove from all letterhead, envelopes, invoices and other communications media of any kind, all references to NMR, including the "Nielsen Media Research" or "Nielsen" name, logo and any other trademark or other NMR intellectual property (except that IMS HEALTH shall not be required to take any such action with respect to materials in the possession of customers), and neither IMS HEALTH nor any of its Subsidiaries shall use or display the "Nielsen Media Research" or "Nielsen" name, logo or other trademarks or NMR intellectual property without the prior written consent of the Corporation; and (iii) as soon as reasonably practicable after the Distribution Date but in any event within six months thereafter, IMS HEALTH will, and will cause its Subsidiaries to, change their corporate names to the extent necessary to remove and eliminate any reference to NMR, including the "Nielsen Media Research" or "Nielsen" name; provided, however, that notwithstanding the foregoing requirements of this Section 2.14(b), if IMS HEALTH has exercised good faith efforts to comply with this clause (iii) but is unable, due to regulatory or other circumstance beyond its control, to effect a corporate name change in compliance with applicable law, then IMS HEALTH or its Subsidiary will not 26 be deemed to be in breach hereof if it continues to exercise good faith efforts to effectuate such name change and does effectuate such name change within nine months after the Distribution Date, and, in such circumstances, such party may continue to include in exterior signs and other identifiers and in letterhead, envelopes, invoices and other communications references to the name which includes references to NMR but only to the extent necessary to identify such party and only until such party's corporate name can be changed to remove and eliminate such references. ARTICLE III. INDEMNIFICATION SECTION 3.1. Indemnification by the Corporation. Except as otherwise specifically set forth in any provision of this Agreement or of any Ancillary Agreement, the Corporation shall indemnify, defend and hold harmless the IMS HEALTH Indemnitees from and against any and all Indemnifiable Losses of the IMS HEALTH Indemnitees arising out of, by reason of or otherwise in connection with the NMR Liabilities or alleged NMR Liabilities, including any breach by the Corporation of any provision of this Agreement or any Ancillary Agreement. SECTION 3.2. Indemnification by IMS HEALTH. Except as otherwise specifically set forth in any provision of this Agreement or of any Ancillary Agreement, IMS HEALTH shall indemnify, defend and hold harmless the NMR Indemnitees from and against any and all Indemnifiable Losses of the NMR Indemnitees arising out of, by reason of or otherwise in connection with the IMS HEALTH Liabilities or alleged IMS HEALTH Liabilities, including any breach by IMS HEALTH of any provision of this Agreement or any Ancillary Agreement. SECTION 3.3. Procedures for Indemnification. (a) Third Party Claims. If a claim or demand is made against an NMR Indemnitee or a IMS HEALTH Indemnitee (each, an "Indemnitee") by any person who is not a party to this Agreement (a "Third Party Claim") as to which such Indemnitee is entitled to indemnification pursuant to this Agreement, such Indemnitee shall notify the party which is or may be required pursuant to Section 3.1 or Section 3.2 hereof to make such indemnification (the "Indemnifying Party") in writing, and in reasonable detail, of the Third Party Claim promptly (and in any event within 15 business days) after receipt by such Indemnitee of written notice of the Third Party Claim; provided, however, that failure to give such notification shall not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall have been actually prejudiced as a result of such failure (except that the Indemnifying Party shall not be liable for any expenses incurred during the period in which the Indemnitee failed to give such notice). Thereafter, the Indemnitee shall deliver to the Indemnifying Party, promptly (and in any event within five business days) after the Indemnitee's receipt thereof, copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third Party Claim. If a Third Party Claim is made against an Indemnitee, the Indemnifying Party shall be entitled to participate in the defense thereof and, if it so chooses and acknowledges in writing its obligation to indemnify the Indemnitee therefor, to assume the defense thereof with counsel 27 selected by the Indemnifying Party; provided that such counsel is not reasonably objected to by the Indemnitee. Should the Indemnifying Party so elect to assume the defense of a Third Party Claim, the Indemnifying Party shall, within 30 days (or sooner if the nature of the Third Party Claim so requires), notify the Indemnitee of its intent to do so, and the Indemnifying Party shall thereafter not be liable to the Indemnitee for legal or other expenses subsequently incurred by the Indemnitee in connection with the defense thereof; provided, that such Indemnitee shall have the right to employ counsel to represent such Indemnitee if, in such Indemnitee's reasonable judgment, a conflict of interest between such Indemnitee and such Indemnifying Party exists in respect of such claim which would make representation of both such parties by one counsel inappropriate, and in such event the fees and expenses of such separate counsel shall be paid by such Indemnifying Party. If the Indemnifying Party assumes such defense, the Indemnitee shall have the right to participate in the defense thereof and to employ counsel, subject to the proviso of the preceding sentence, at its own expense, separate from the counsel employed by the Indemnifying Party, it being understood that the Indemnifying Party shall control such defense. The Indemnifying Party shall be liable for the fees and expenses of counsel employed by the Indemnitee for any period during which the Indemnifying Party has failed to assume the defense thereof (other than during the period prior to the time the Indemnitee shall have given notice of the Third Party Claim as provided above). If the Indemnifying Party so elects to assume the defense of any Third Party Claim, all of the Indemnitees shall cooperate with the Indemnifying Party in the defense or prosecution thereof, including by providing or causing to be provided, Records and witnesses as soon as reasonably practicable after receiving any request therefor from or on behalf of the Indemnifying Party. If the Indemnifying Party acknowledges in writing responsibility for a Third Party Claim, then in no event will the Indemnitee admit any liability with respect to, or settle, compromise or discharge, any Third Party Claim without the Indemnifying Party's prior written consent; provided, however, that the Indemnitee shall have the right to settle, compromise or discharge such Third Party Claim without the consent of the Indemnifying Party if the Indemnitee releases the Indemnifying Party from its indemnification obligation hereunder with respect to such Third Party Claim and such settlement, compromise or discharge would not otherwise adversely affect the Indemnifying Party. If the Indemnifying Party acknowledges in writing liability for a Third Party Claim, the Indemnitee will agree to any settlement, compromise or discharge of a Third Party Claim that the Indemnifying Party may recommend and that by its terms obligates the Indemnifying Party to pay the full amount of the liability in connection with such Third Party Claim and releases the Indemnitee completely in connection with such Third Party Claim and that would not otherwise adversely affect the Indemnitee; provided, however, that the Indemnitee may refuse to agree to any such settlement, compromise or discharge if the Indemnitee agrees that the Indemnifying Party's indemnification obligation with respect to such Third Party Claim shall not exceed the amount that would be required to be paid by or on behalf of the Indemnifying Party in connection with such settlement, compromise or discharge. If an Indemnifying Party elects not to assume the defense of a Third Party Claim, or fails to notify an Indemnitee of its election to do so as provided herein, such Indemnitee may compromise, settle or defend such Third Party Claim. Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to assume the defense of any Third Party Claim (and shall be liable for the fees and expenses of 28 counsel incurred by the Indemnitee in defending such Third Party Claim) if the Third Party Claim seeks an order, injunction or other equitable relief or relief for other than money damages against the Indemnitee which the Indemnitee reasonably determines, after conferring with its counsel, cannot be separated from any related claim for money damages. If such equitable relief or other relief portion of the Third Party Claim can be so separated from that for money damages, the Indemnifying Party shall be entitled to assume the defense of the portion relating to money damages. (b) In the event of payment by an Indemnifying Party to any Indemnitee in connection with any Third-Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnitee as to any events or circumstances in respect of which such Indemnitee may have any right or claim relating to such Third-Party Claim against any claimant or plaintiff asserting such Third-Party Claim. Such Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right or claim. (c) The remedies provided in this Article III shall be cumulative and shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against any Indemnifying Party. SECTION 3.4. Indemnification Payments. Indemnification required by this Article III shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or loss, liability, claim, damage or expense is incurred. ARTICLE IV. ACCESS TO INFORMATION SECTION 4.1. Provision of Corporate Records. (a) Other than in circumstances in which indemnification is sought pursuant to Article III (in which event the provisions of such Article will govern), after the Distribution Date, upon the prior written request by IMS HEALTH for specific and identified agreements, documents, books, records or files (collectively, "Records") which relate to (x) IMS HEALTH or the conduct of the IMS HEALTH Business up to the Effective Time, or (y) any Ancillary Agreement to which the Corporation and IMS HEALTH are parties, as applicable, the Corporation shall arrange, as soon as reasonably practicable following the receipt of such request, for the provision of appropriate copies of such Records (or the originals thereof if IMS HEALTH has a reasonable need for such originals) in the possession or control of the Corporation or any of its Subsidiaries, but only to the extent such items are not already in the possession or control of IMS HEALTH. (b) Other than in circumstances in which indemnification is sought pursuant to Article III (in which event the provisions of such Article will govern), after the Distribution Date, upon the prior written request by the Corporation for specific and identified Records which relate to (x) the Corporation, NMR or the conduct of the NMR Business up to the Effective 29 Time, or (y) any Ancillary Agreement to which IMS HEALTH and the Corporation are parties, as applicable, IMS HEALTH shall arrange, as soon as reasonably practicable following the receipt of such request, for the provision of appropriate copies of such Records (or the originals thereof if the Corporation has a reasonable need for such originals) in the possession or control of IMS HEALTH or any of its Subsidiaries, but only to the extent such items are not already in the possession or control of the Corporation. SECTION 4.2. Access to Information. Other than in circumstances in which indemnification is sought pursuant to Article III (in which event the provisions of such Article will govern), from and after the Distribution Date, each of the Corporation and IMS HEALTH shall afford to the other and its authorized accountants, counsel and other designated representatives reasonable access during normal business hours, subject to appropriate restrictions for classified, privileged or confidential information, to the personnel, properties, books and records of such party and its Subsidiaries insofar as such access is reasonably required by the other party and relates to (x) such other party or the conduct of its business prior to the Effective Time or (y) any Ancillary Agreement to which each of the party requesting such access and the party requested to grant such access are parties. SECTION 4.3. Reimbursement; Other Matters. Except to the extent otherwise contemplated by any Ancillary Agreement, a party providing Records or access to information to the other party under this Article IV shall be entitled to receive from the recipient, upon the presentation of invoices therefor, payments for such amounts, relating to supplies, disbursements and other out-of-pocket expenses, as may be reasonably incurred in providing such Records or access to information. SECTION 4.4. Confidentiality. Each of (i) the Corporation and its Subsidiaries and (ii) IMS HEALTH and its Subsidiaries shall not use or permit the use of (without the prior written consent of the other) and shall keep, and shall cause its consultants and advisors to keep, confidential all information concerning the other parties in its possession, its custody or under its control (except to the extent that (A) such information has been in the public domain through no fault of such party or (B) such information has been later lawfully acquired from other sources by such party or (C) this Agreement or any other Ancillary Agreement or any other agreement entered into pursuant hereto permits the use or disclosure of such information) to the extent such information (w) relates to or was acquired during the period up to the Effective Time, (x) relates to any Ancillary Agreement, (y) is obtained in the course of performing services for the other party pursuant to any Ancillary Agreement, or (z) is based upon or is derived from information described in the preceding clauses (w), (x) or (y), and each party shall not (without the prior written consent of the other) otherwise release or disclose such information to any other person, except such party's auditors and attorneys, unless compelled to disclose such information by judicial or administrative process or unless such disclosure is required by law and such party has used commercially reasonable efforts to consult with the other affected party or parties prior to such disclosure. SECTION 4.5. Privileged Matters. The parties hereto recognize that legal and other professional services that have been and will be provided on or prior to the Distribution Date have been and will be rendered for the benefit of each of the Corporation, the members of 30 the NMR Group and the members of the IMS HEALTH Group, and that each of the Corporation, the members of the NMR Group and the members of the IMS HEALTH Group should be deemed to be the client for the purposes of asserting all privileges which may be asserted under applicable law. To allocate the interests of each party in the information as to which any party is entitled to assert a privilege, the parties agree as follows: (a) The Corporation shall be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information which relates solely to the NMR Business, whether or not the privileged information is in the possession of or under the control of the Corporation or IMS HEALTH. The Corporation shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information that relates solely to the subject matter of any claims constituting NMR Liabilities, now pending or which may be asserted in the future, in any lawsuits or other proceedings initiated against or by the Corporation, whether or not the privileged information is in the possession of or under the control of the Corporation or IMS HEALTH. (b) IMS HEALTH shall be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information which relates solely to the IMS HEALTH Business, whether or not the privileged information is in the possession of or under the control of the Corporation or IMS HEALTH. IMS HEALTH shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information which relates solely to the subject matter of any claims constituting IMS HEALTH Liabilities, now pending or which may be asserted in the future, in any lawsuits or other proceedings initiated against or by IMS HEALTH whether or not the privileged information is in the possession of or under the control of the Corporation or IMS HEALTH. (c) The parties hereto agree that they shall have a shared privilege, with equal right to assert or waive, subject to the restrictions in this Section 4.5, with respect to all privileges not allocated pursuant to the terms of Sections 4.5(a) and (b). All privileges relating to any claims, proceedings, litigation, disputes, or other matters which involve both the Corporation and IMS HEALTH in respect of which both parties retain any responsibility or liability under this Agreement, shall be subject to a shared privilege among them. (d) No party hereto may waive any privilege which could be asserted under any applicable law, and in which the other party hereto has a shared privilege, without the consent of the other party, except to the extent reasonably required in connection with any litigation with third-parties or as provided in subsection (e) below. Consent shall be in writing, or shall be deemed to be granted unless written objection is made within twenty (20) days after notice upon the other party requesting such consent. (e) In the event of any litigation or dispute between or among any of the parties hereto, any party and a Subsidiary of another party hereto, or a Subsidiary of one party hereto and a Subsidiary of another party hereto, either such party may waive a privilege in which the other party has a shared privilege, without obtaining the consent of the other party, provided that such waiver of a shared privilege shall be effective only as to the use of information with respect 31 to the litigation or dispute between the parties and/or their Subsidiaries, and shall not operate as a waiver of the shared privilege with respect to third parties. (f) If a dispute arises between or among the parties hereto or their respective Subsidiaries regarding whether a privilege should be waived to protect or advance the interest of any party, each party agrees that it shall negotiate in good faith, shall endeavor to minimize any prejudice to the rights of the other parties, and shall not unreasonably withhold consent to any request for waiver by another party. Each party hereto specifically agrees that it will not withhold consent to waiver for any purpose except to protect its own legitimate interests. (g) Upon receipt by any party hereto or by any Subsidiary thereof of any subpoena, discovery or other request which arguably calls for the production or disclosure of information subject to a shared privilege or as to which another party has the sole right hereunder to assert a privilege, or if any party obtains knowledge that any of its or any of its Subsidiaries' current or former directors, officers, agents or employees have received any subpoena, discovery or other requests which arguably calls for the production or disclosure of such privileged information, such party shall promptly notify the other party or parties of the existence of the request and shall provide the other party or parties a reasonable opportunity to review the information and to assert any rights it or they may have under this Section 4.5 or otherwise to prevent the production or disclosure of such privileged information. (h) The transfer of all Records and other information pursuant to this Agreement is made in reliance on the agreement of the Corporation and IMS HEALTH, as set forth in Sections 4.4 and 4.5, to maintain the confidentiality of privileged information and to assert and maintain all applicable privileges. The access to information being granted pursuant to Sections 4.1 and 4.2 hereof, the agreement to provide witnesses and individuals pursuant to Sections 2.9 and 3.3 hereof, the furnishing of notices and documents and other cooperative efforts contemplated by Section 3.3 hereof, and the transfer of privileged information between and among the parties and their respective Subsidiaries pursuant to this Agreement shall not be deemed a waiver of any privilege that has been or may be asserted under this Agreement or otherwise. SECTION 4.6. Ownership of Information. Any information owned by one party or any of its Subsidiaries that is provided to a requesting party pursuant to Article III or this Article IV shall be deemed to remain the property of the providing party. Unless specifically set forth herein, nothing contained in this Agreement shall be construed as granting or conferring rights of license or otherwise in any such information. SECTION 4.7. Limitation of Liability. (a) No party shall have any liability to any other party in the event that any information exchanged or provided pursuant to this Agreement which is an estimate or forecast, or which is based on an estimate or forecast, is found to be inaccurate. (b) Other than in connection with Section 2.2, no party or any Subsidiary thereof shall have any liability or claim against any other party or any Subsidiary of any other party based upon, arising out of or resulting from any agreement, arrangement, course of dealing or 32 understanding existing on or prior to the Distribution Date (other than this Agreement or any Ancillary Agreement or any agreement entered into in connection herewith or in order to consummate the transactions contemplated hereby or thereby), unless such agreement, arrangement, course of dealing or understanding is listed on Schedule 4.7(b) hereto, and any such liability or claim, whether or not in writing, which is not reflected on such Schedule, is hereby irrevocably cancelled, released and waived. SECTION 4.8. Other Agreements Providing for Exchange of Information. The rights and obligations granted under this Article IV are subject to any specific limitations, qualifications or additional provisions on the sharing, exchange or confidential treatment of information set forth in any Ancillary Agreement. ARTICLE V. ADMINISTRATIVE SERVICES SECTION 5.1. Performance of Services. Beginning on the Distribution Date, each party will provide, or cause one or more of its Subsidiaries to provide, to the other party and its Subsidiaries such services on such terms as may be set forth in the Shared Transaction Services Agreement. Except as otherwise set forth in such agreement or any Schedule thereto, the party that is to provide the services (the "Provider") will use (and will cause its Subsidiaries to use) commercially reasonable efforts to provide such services to the other party (the "Recipient") and its Subsidiaries in a satisfactory and timely manner and as further specified in such agreement. SECTION 5.2. Independence. Unless otherwise agreed in writing, all employees and representatives of the Provider providing the scheduled services to the Recipient will be deemed for purposes of all compensation and employee benefits matters to be employees or representatives of the Provider and not employees or representatives of the Recipient. In performing such services, such employees and representatives will be under the direction, control and supervision of the Provider (and not the Recipient) and the Provider will have the sole right to exercise all authority with respect to the employment (including, without limitation, termination of employment), assignment and compensation of such employees and representatives. SECTION 5.3. Non-exclusivity. Nothing in this Agreement precludes any party from obtaining, in whole or in part, services of any nature that may be obtainable from the other party from its own employees or from providers other than the other party. ARTICLE VI. DISPUTE RESOLUTION SECTION 6.1. Negotiation. In the event of a controversy, dispute or claim arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, validity or breach of this Agreement or otherwise arising out of, or in any way related to this Agreement or the transactions contemplated hereby, including, without limitation, any claim based on contract, tort, statute or constitution (but excluding any controversy, dispute 33 or claim arising out of any agreement relating to the use or lease of real property if any third party is a party to such controversy, dispute or claim) (collectively, "Agreement Disputes"), the general counsels of the parties shall negotiate in good faith for a reasonable period of time to settle such Agreement Dispute, provided such reasonable period shall not, unless otherwise agreed by the parties in writing, exceed 30 days from the time the parties began such negotiations; provided further that in the event of any arbitration in accordance with Section 6.2 hereof, the parties shall not assert the defenses of statute of limitations and laches arising for the period beginning after the date the parties began negotiations hereunder, and any contractual time period or deadline under this Agreement or any Ancillary Agreement to which such Agreement Dispute relates shall not be deemed to have passed until such Agreement Dispute has been resolved. SECTION 6.2. Arbitration. If after such reasonable period such general counsels are unable to settle such Agreement Dispute (and in any event, unless otherwise agreed in writing by the parties, after 60 days have elapsed from the time the parties began such negotiations), such Agreement Dispute shall be determined, at the request of any party, by arbitration conducted in New York City, before and in accordance with the then-existing International Arbitration Rules of the American Arbitration Association (the "Rules"). In any dispute between the parties hereto, the number of arbitrators shall be one. Any judgment or award rendered by the arbitrator shall be final, binding and nonappealable (except upon grounds specified in 9 U.S.C. ss.10(a) as in effect on the date hereof). If the parties are unable to agree on the arbitrator, the arbitrator shall be selected in accordance with the Rules; provided that the arbitrator shall be a U.S. national. Any controversy concerning whether an Agreement Dispute is an arbitrable Agreement Dispute, whether arbitration has been waived, whether an assignee of this Agreement is bound to arbitrate, or as to the interpretation of enforceability of this Article VI shall be determined by the arbitrator. In resolving any dispute, the parties intend that the arbitrator apply the substantive laws of the State of New York, without regard to the choice of law principles thereof. The parties intend that the provisions to arbitrate set forth herein be valid, enforceable and irrevocable. The parties agree to comply with any award made in any such arbitration proceeding that has become final in accordance with the Rules and agree to enforcement of or entry of judgment upon such award, by any court of competent jurisdiction, including (a) the Supreme Court of the State of New York, New York County, or (b) the United States District Court for the Southern District of New York, in accordance with Section 8.17 hereof. The arbitrator shall be entitled, if appropriate, to award any remedy in such proceedings, including, without limitation, monetary damages, specific performance and all other forms of legal and equitable relief; provided, however, the arbitrator shall not be entitled to award punitive damages. Without limiting the provisions of the Rules, unless otherwise agreed in writing by or among the parties or permitted by this Agreement, the parties shall keep confidential all matters relating to the arbitration or the award, provided such matters may be disclosed (i) to the extent reasonably necessary in any proceeding brought to enforce the award or for entry of a judgment upon the award and (ii) to the extent otherwise required by law. Notwithstanding Article 32 of the Rules, the party other than the prevailing party in the arbitration shall be responsible for all of the costs of the arbitration, including legal fees and other costs specified by such Article 32. Nothing contained herein is intended to or shall be construed to prevent any party, in accordance with Article 22(3) of the Rules or otherwise, from applying to any court of competent jurisdiction for 34 interim measures or other provisional relief in connection with the subject matter of any Agreement Disputes. SECTION 6.3. Continuity of Service and Performance. Unless otherwise agreed in writing, the parties will continue to provide service and honor all other commitments under this Agreement and each Ancillary Agreement during the course of dispute resolution pursuant to the provisions of this Article VI with respect to all matters not subject to such dispute, controversy or claim. ARTICLE VII. INSURANCE SECTION 7.1. Policies and Rights Included Within Assets; Assignment of Policies. (a) Policy Rights. The IMS HEALTH Assets shall include (i) any and all rights of an insured party under each of the Shared Policies, subject to the terms of such Shared Policies and any limitations or obligations of IMS HEALTH contemplated by this Article VII, specifically including rights of indemnity and the right to be defended by or at the expense of the insurer, with respect to all claims, suits, actions, proceedings, injuries, losses, liabilities, damages and expenses incurred or claimed to have been incurred on or prior to the Distribution Date by any party in or in connection with the conduct of the IMS HEALTH Business or, to the extent any claim is made against IMS HEALTH or any of its Subsidiaries, the conduct of the NMR Business, and which claims, suits, actions, proceedings, injuries, losses, liabilities, damages and expenses may arise out of an insured or insurable occurrence under one or more of such Shared Policies. (b) Assignment of Shared Policies. Subject to the terms and conditions hereof, the Corporation hereby assigns, transfers and conveys to IMS HEALTH all of the Corporation's right, title and interest in and to any and all of the Shared Policies, including, without limitation, the right of indemnity, the right to be defended by or at the expense of the insurer and the right to any applicable Insurance Proceeds thereunder; and the Corporation and IMS HEALTH shall use their commercially reasonable efforts to obtain any required consents of insurers to the assignment contemplated by this paragraph. SECTION 7.2. Post-Distribution Date Claims. If, subsequent to the Distribution Date, any person shall assert a claim against IMS HEALTH or any of its Subsidiaries (including, without limitation, where IMS HEALTH or its Subsidiaries are joint defendants with other persons) with respect to any claim, suit, action, proceeding, injury, loss, liability, damage or expense incurred or claimed to have been incurred on or prior to the Distribution Date in or in connection with the conduct of the IMS HEALTH Business or, to the extent any claim is made against IMS HEALTH or any of its Subsidiaries (including, without limitation, where IMS HEALTH or its Subsidiaries are joint defendants with other persons), in connection with the conduct of the NMR Business, and which claim, suit, action, proceeding, injury, loss, liability, damage or expense may arise out of an insured or insurable occurrence under one or more of the Shared Policies, the Corporation shall, at the time such claim is asserted, to the extent any such Policy may require that Insurance Proceeds thereunder be collected directly by the named insured or anyone other than the party against whom the Insured Claim is asserted, be deemed to 35 designate, without need of further documentation, IMS HEALTH as the agent and attorney-in-fact to assert and to collect any related Insurance Proceeds under such Shared Policy. SECTION 7.3. Administration; Other Matters. (a) Administration. After the Distribution Date, IMS HEALTH shall be responsible for (i) Insurance Administration of the Shared Policies and (ii) Claims Administration under such Shared Policies with respect to NMR Liabilities and IMS HEALTH Liabilities; provided that the assumption of such responsibilities by IMS HEALTH is in no way intended to limit, inhibit or preclude any right to insurance coverage for any Insured Claim of a named insured under such Policies as contemplated by the terms of this Agreement; provided further that IMS HEALTH's assumption of the administrative responsibilities for the Shared Policies shall not relieve the party submitting any Insured Claim of the primary responsibility for reporting such Insured Claim accurately, completely and in a timely manner or of such party's authority to settle any such Insured Claim within any period permitted or required by the relevant Policy; and provided further that all direct or indirect communication with insurers relating to the Shared Policies shall be conducted by IMS HEALTH. IMS HEALTH may discharge its administrative responsibilities under this Section 7.3 by contracting for the provision of services by independent parties. Each of the parties hereto shall administer and pay any costs relating to defending its respective Insured Claims under Shared Policies to the extent such defense costs are not covered under such Policies and shall be responsible for obtaining or reviewing the appropriateness of releases upon settlement of its respective Insured Claims under Shared Policies. The disbursements, out-of-pocket expenses and direct and indirect costs of employees or agents of IMS HEALTH relating to Claims Administration and Insurance Administration contemplated by this Section 7.3(a) shall be treated in accordance with the terms of the Transition Services Agreement, if still in effect with respect to insurance and risk management, or, if the Transition Services Agreement shall no longer be in effect with respect to insurance and risk management, then each of the Corporation and IMS HEALTH shall be responsible for its own Claims Administration and Insurance Administration. (b) Exceeding Policy Limits. The Corporation and IMS HEALTH shall not be liable to one another for claims not reimbursed by insurers for any reason not within the control of the Corporation or IMS HEALTH, as the case may be, including, without limitation, coinsurance provisions, deductibles, quota share deductibles, self-insured retentions, bankruptcy or insolvency of an insurance carrier, Shared Policy limitations or restrictions, any coverage disputes, any failure to timely claim by the Corporation or IMS HEALTH or any defect in such claim or its processing. (c) Allocation of Insurance Proceeds. Insurance Proceeds received with respect to claims, costs and expenses under the Shared Policies shall be paid to IMS HEALTH, which shall thereafter administer the Shared Policies by paying the Insurance Proceeds, as appropriate, to the Corporation with respect to NMR Liabilities and to IMS HEALTH with respect to IMS HEALTH Liabilities. Payment of the allocable portions of indemnity costs of Insurance Proceeds resulting from such Policies will be made by IMS HEALTH to the appropriate party upon receipt from the insurance carrier. In the event that the aggregate limits on any Shared Policies are exceeded by the aggregate of outstanding Insured Claims by both of the parties hereto, the parties agree to allocate the Insurance Proceeds received thereunder based upon their respective percentage of the total of their bona fide claims which were covered under such Shared Policy 36 (their "allocable portion of Insurance Proceeds"), and any party who has received Insurance Proceeds in excess of such party's allocable portion of Insurance Proceeds shall pay to the other party the appropriate amount so that each party will have received its allocable portion of Insurance Proceeds pursuant hereto. Each of the parties agrees to use commercially reasonable efforts to maximize available coverage under those Shared Policies applicable to it, and to take all commercially reasonable steps to recover from all other responsible parties in respect of an Insured Claim to the extent coverage limits under a Shared Policy have been exceeded or would be exceeded as a result of such Insured Claim. (d) Allocation of Deductibles. In the event that both parties have bona fide claims under any Shared Policy for which an aggregate deductible is reached, the parties agree that the aggregate amount of the deductible paid shall be borne by the parties in the same proportion which the Insurance Proceeds received by each such party bears to the total Insurance Proceeds received under the applicable Shared Policy (their "allocable share of the deductible"), and any party who has paid more than such share of the deductible shall be entitled to receive from the other party an appropriate amount so that each party has borne its allocable share of the deductible pursuant hereto. (e) After the Distribution Date, each of IMS HEALTH and the Corporation shall be responsible for its applicable deductible for workers' compensation, general liability and automobile liability claims. SECTION 7.4. Agreement for Waiver of Conflict and Shared Defense. In the event that Insured Claims of both of the parties hereto exist relating to the same occurrence, the parties shall jointly defend and waive any conflict of interest necessary to the conduct of the joint defense. Nothing in this Article VII shall be construed to limit or otherwise alter in any way the obligations of the parties to this Agreement, including those created by this Agreement, by operation of law or otherwise. SECTION 7.5. Cooperation. The parties agree to use their commercially reasonable efforts to cooperate with respect to the various insurance matters contemplated by this Agreement. ARTICLE VIII. MISCELLANEOUS SECTION 8.1. Complete Agreement; Construction. This Agreement, including the Exhibits and Schedules, and the Ancillary Agreements shall constitute the entire agreement between the parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. In the event of any inconsistency between this Agreement and any Schedule hereto, the Schedule shall prevail. Other than Section 2.1(j), Section 2.7, Section 4.5 and Article VI, which shall prevail over any inconsistent or conflicting provisions in any Ancillary Agreement, notwithstanding any other provisions in this Agreement to the contrary, in the event and to the extent that there shall be a conflict between the provisions of this Agreement and the provisions of any Ancillary Agreement, such Ancillary Agreement shall control. 37 SECTION 8.2. Ancillary Agreements. Subject to the last sentence of Section 8.1, this Agreement is not intended to address, and should not be interpreted to address, the matters specifically and expressly covered by the Ancillary Agreements. SECTION 8.3. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other parties. SECTION 8.4. Survival of Agreements. Except as otherwise contemplated by this Agreement, all covenants and agreements of the parties contained in this Agreement shall survive the Distribution Date. SECTION 8.5. Expenses. Except as set forth on Schedule 8.5 or as otherwise set forth in this Agreement or any Ancillary Agreement, all costs and expenses incurred and for which invoices have been submitted on or prior to the Distribution Date in connection with the preparation, execution, delivery and required implementation of this Agreement and any Ancillary Agreement, the Information Statement (including any registration statement on Form 10 (or any amendment thereto) of which such Information Statement may be a part) and the Distribution and the consummation of the transactions contemplated thereby shall be charged to and paid by the Corporation; provided that if such costs and expenses are not paid by the Corporation prior to the Effective Time, they shall be charged to and paid by IMS HEALTH. Except as set forth on Schedule 8.5 or as otherwise set forth in this Agreement or any Ancillary Agreement, all costs and expenses incurred or for which invoices are submitted after the Distribution Date in connection with the required implementation of this Agreement or any Ancillary Agreement, the consummation of the Distribution or the consummation of the transactions contemplated by this Agreement or any Ancillary Agreement shall be charged to and paid by IMS HEALTH. Except as set forth on Schedule 8.5 or as otherwise set forth in this Agreement or any Ancillary Agreement, each party shall bear its own costs and expenses incurred after the Distribution Date. Any amount or expense to be paid or reimbursed by any party hereto to any other party hereto shall be so paid or reimbursed promptly after the existence and amount of such obligation is determined and demand therefor is made. SECTION 8.6. Notices. All notices and other communications hereunder shall be in writing and hand delivered or mailed by registered or certified mail (return receipt requested) or sent by any means of electronic message transmission with delivery confirmed (by voice or otherwise) to the parties at the following addresses (or at such other addresses for a party as shall be specified by like notice) and will be deemed given on the date on which such notice is received: To the Corporation: Nielsen Media Research, Inc. 299 Park Avenue New York, NY 10171 Telecopy: (212) 708-6927 38 Attn: Chief Legal Officer To IMS HEALTH: IMS Health Incorporated 200 Nyala Farms Westport, CT 06880 Telecopy: (203) 222-4313 Attn: General Counsel SECTION 8.7. Waivers. The failure of any party to require strict performance by any other party of any provision in this Agreement will not waive or diminish that party's right to demand strict performance thereafter of that or any other provision hereof. SECTION 8.8. Amendments. Subject to the terms of Section 8.11 hereof, this Agreement may not be modified or amended except by an agreement in writing signed by each of the parties hereto. SECTION 8.9. Assignment. (a) This Agreement shall not be assignable, in whole or in part, directly or indirectly, by any party hereto without the prior written consent of the other parties hereto, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be void. (b) The Corporation will not distribute to its stockholders any interest in any NMR Business Entity, by way of a spin-off distribution, split-off or exchange of interests in a NMR Business Entity for any interest in the Corporation held by NMR stockholders, or any similar transaction or transactions, unless the distributed NMR Business Entity undertakes to IMS HEALTH to be jointly and severally liable for all NMR Liabilities hereunder. (c) IMS HEALTH will not distribute to its stockholders any interest in any IMS HEALTH Business Entity, by way of a spin-off distribution, split-off or exchange of interests in a IMS HEALTH Business Entity for any interest in IMS HEALTH held by IMS HEALTH stockholders, or any similar transaction or transactions, unless the distributed IMS HEALTH Business Entity undertakes to the Corporation to be jointly and severally liable for all IMS HEALTH Liabilities hereunder. SECTION 8.10. Successors and Assigns. The provisions to this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and permitted assigns. SECTION 8.11. Termination. This Agreement (including, without limitation, Article III hereof) may be terminated and the Distribution may be amended, modified or abandoned at any time prior to the Distribution by and in the sole discretion of the Corporation without the approval of IMS HEALTH or the shareholders of the Corporation. In the event of 39 such termination, no party shall have any liability of any kind to any other party or any other person. After the Distribution, this Agreement may not be terminated except by an agreement in writing signed by the parties; provided, however, that Article III shall not be terminated or amended after the Distribution in respect of the third party beneficiaries thereto without the consent of such persons. SECTION 8.12. Subsidiaries. Each of the parties hereto shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Subsidiary of such party or by any entity that is contemplated to be a Subsidiary of such party on or after the Distribution Date. SECTION 8.13. Third Party Beneficiaries. Except as provided in Article III relating to Indemnitees, this Agreement is solely for the benefit of the parties hereto and their respective Subsidiaries and Affiliates and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement. SECTION 8.14. Title and Headings. Titles and headings to sections herein are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. SECTION 8.15. Exhibits and Schedules. The Exhibits and Schedules shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein. SECTION 8.16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK. SECTION 8.17. Consent to Jurisdiction. Without limiting the provisions of Article VI hereof, each of the parties irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of the State of New York, New York County, and (b) the United States District Court for the Southern District of New York, for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each of the parties agrees to commence any action, suit or proceeding relating hereto either in the United States District Court for the Southern District of New York or if such suit, action or other proceeding may not be brought in such court for jurisdictional reasons, in the Supreme Court of the State of New York, New York County. Each of the parties further agrees that service of any process, summons, notice or document by U.S. registered mail to such party's respective address set forth above shall be effective service of process for any action, suit or proceeding in New York with respect to any matters to which it has submitted to jurisdiction in this Section 8.17. Each of the parties irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in (i) the Supreme Court of the State of New York, New York County, or (ii) the United States District Court for the Southern District of New York, and hereby further irrevocably and 40 unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. SECTION 8.18. Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. COGNIZANT CORPORATION By: /s/ Robert E. Weissman ------------------------------------ Name: Robert E. Weissman Title: Chairman and Chief Executive Officer IMS HEALTH INCORPORATED By: /s/ Victoria R. Fash ------------------------------------ Name: Victoria R. Fash Title: President and Chief Operating Officer EXHIBIT 2.1(m) IMS Health Incorporated 200 Nyala Farms Westport, CT 06880 June 29, 1998 Nancy Henry, Esq. The Dun & Bradstreet Corporation One Diamond Hill Road Murray Hill, NJ 07974 Earl Doppelt, Esq. ACNielsen Corporation 177 Broad Street Stamford, CT 06901 Dear Ms. Henry and Mr. Doppelt: Reference is made to the Distribution Agreement (the "1996 Distribution Agreement"), dated as of October 28, 1996, among Cognizant Corporation ("Cognizant"), The Dun & Bradstreet Corporation ("D&B") and ACNielsen Corporation ("ACNielsen"). Cognizant has announced its intention to separate into two separate companies through a distribution (the "IMS HEALTH Distribution") to its stockholders of all of the shares of common stock of its subsidiary IMS Health Incorporated ("IMS HEALTH"). In Section 8.9(c) of the 1996 Distribution Agreement, Cognizant agreed not to make a distribution such as the IMS HEALTH Distribution unless it caused the distributed entity to undertake to both D&B and ACNielsen to be jointly and severally liable for all Cognizant Liabilities (as defined in the 1996 Distribution Agreement). Therefore, in accordance with Section 8.9(c) of the 1996 Distribution Agreement and intending to be legally bound hereby, from and after the effective time of the IMS HEALTH Distribution, IMS HEALTH undertakes to each of D&B and ACNielsen to be jointly and severally liable with Cognizant for all Cognizant Liabilities under the 1996 Distribution Agreement. Very truly yours, IMS HEALTH INCORPORATED By:_____________________________ Name: Title: EX-10.2 3 TAX ALLOCATION AGREEMENT TAX ALLOCATION AGREEMENT This TAX ALLOCATION AGREEMENT is dated as of June 30, 1998, between COGNIZANT CORPORATION, a Delaware corporation (the "Corporation") and IMS HEALTH INCORPORATED, a Delaware corporation ("IMS HEALTH") (collectively, the "Parties"). WHEREAS, the Corporation acting through its direct and indirect subsidiaries, currently conducts a number of businesses, including, without limitation, providing television audience measurement services (the "Nielsen Media Research Business"); WHEREAS, the Board of Directors of the Corporation has determined that it is appropriate, desirable and in the best interests of the holders of shares of common stock, par value $0.01 per share, of the Corporation (the "Cognizant Common Stock"), as well as of the Corporation and its businesses, to reorganize the Corporation to separate from the Corporation all businesses currently conducted by the Corporation other than the Nielsen Media Research Business and to cause such businesses to be owned and conducted, directly or indirectly, by IMS HEALTH; WHEREAS, in order to effect the separation, the Board of Directors of the Corporation has determined that it is appropriate, desirable and in the best interests of the holders of Cognizant Common Stock, as well as of the Corporation and its businesses, for the Corporation (i) to take certain steps to reorganize the Corporation's Subsidiaries (as defined herein) and businesses, including prior to the Distribution (as defined herein) merging I.M.S. International, Inc. and IMS America, Inc. with and into IMS HEALTH and (ii) upon the completion of such reorganization to distribute to the holders of the Cognizant Common Stock all the outstanding shares of common stock of IMS HEALTH (the "IMS HEALTH Common Shares"), together with the associated Rights; WHEREAS, as of the date hereof, the Corporation is the common parent of an affiliated group of domestic corporations within the meaning of Section 1504(a) of the Code (as defined herein), including members of the IMS HEALTH Group (as defined herein), and the members of the affiliated group have heretofore joined in filing consolidated federal Income Tax Returns (as defined herein); WHEREAS, as a result of the Distribution, the IMS HEALTH Group will not be included in the consolidated federal Income Tax Return of the Corporation for the portion of the year following the Distribution and in future years; and WHEREAS, the Corporation and IMS HEALTH desire to allocate the Tax (as defined herein) burdens and benefits of transactions which occurred on or prior to the Distribution Date (as defined herein) and to provide for certain other Tax matters, including the assignment of responsibility for the preparation 2 and filing of Tax Returns (as defined herein), the payment of Taxes, and the prosecution and defense of any Tax controversies. NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, the Parties hereby agree as follows: ARTICLE I. DEFINITIONS SECTION 1.1. General. Capitalized terms used in this Agreement and not defined herein shall have the meanings that such terms have in the Distribution Agreement. As used in this Agreement, the following terms shall have the following meanings: (a) "Code" shall mean the Internal Revenue Code of 1986, as amended, and the Treasury regulations promulgated thereunder, including any successor legislation. (b) "Combined Returns" shall mean all state Income Tax Returns with respect to which the Corporation files on a combined or unitary basis with some or all of its Subsidiaries for taxable periods beginning November 1, 1996, January 1, 1997 and January 1, 1998. (c) "Consolidated Returns" shall mean all consolidated federal Income Tax Returns of the affiliated group of which the Corporation is the common parent for taxable periods beginning November 1, 1996, January 1, 1997 and January 1, 1998. (d) "Controlled Entity" shall mean any corporation, partnership or other entity of which another entity (i) owns, directly or indirectly, ownership interests sufficient to elect a majority of the Board of Directors (or persons performing similar functions) (irrespective of whether at the time any other class or classes of ownership interests of such corporation, partnership or other entity shall or might have such voting power upon the occurrence of any contingency) or (ii) is a general partner or an entity performing similar functions (e.g., a trustee). (e) "D&B Tax Allocation Agreement" shall mean the Tax Allocation Agreement dated October 28, 1996 among The Dun & Bradstreet Corporation, the Corporation and ACNielsen Corporation. (f) "Deferred Compensation Deduction" shall mean any deduction with respect to (i) compensation payments made by any member of the IMS HEALTH Group or the NMR Group, as the case may be, if such deduction is disallowed for any member of the payor's group and may be claimed by any member of the other group and/or (ii) the exercise of stock options in IMS HEALTH or the Corporation, as the case may be, by any former employee of the Pre-Distribution Cognizant Group if such deduction is disallowed 3 for any member of the IMS HEALTH Group or the NMR Group, as the case may be, and may be claimed by any member of the other group. (g) "Distribution" shall mean the distribution on the Distribution Date to holders of record of shares of Cognizant Common Stock as of the Distribution Record Date of the IMS HEALTH Common Shares owned by the Corporation on the basis of one IMS HEALTH Common Share for each outstanding share of Cognizant Common Stock. (h) "Distribution Agreement" shall mean the distribution agreement, dated as of June 30, 1998, between the Corporation and IMS HEALTH. (i) "Distribution Date" shall mean June 30, 1998. (j) "Final Determination" shall mean the final resolution of liability for any Tax for any taxable period, including any related interest or penalties, by or as a result of: (i) a final and unappealable decision, judgment, decree or other order by any court of competent jurisdiction; (ii) a closing agreement or accepted offer in compromise under Section 7121 or 7122 of the Code, or comparable agreement under the laws of other jurisdictions which resolves the entire Tax liability for any taxable period; (iii) any allowance of a refund or credit in respect of an overpayment of Tax, but only after the expiration of all periods during which such refund may be recovered by the jurisdiction imposing the Tax; or (iv) any other final disposition, including by reason of the expiration of the applicable statute of limitations. (k) "Franchise Tax Returns" shall mean all franchise Tax Returns of the Pre-Distribution Cognizant Group or any member thereof for taxable periods beginning November 1, 1996, January 1, 1997, January 1, 1998 and, solely for purposes of Sections 2.1(a) and 2.2(a), on or the day after the Distribution Date. (l) "Governmental Authority" shall mean any federal, state, local, foreign or international court, government, department, commission, board, bureau, agency, official or other regulatory, administrative or governmental authority. (m) "IMS HEALTH Business" shall mean each and every business conducted at any time by the Corporation or any Subsidiary of the Corporation prior to the Effective Time, including, without limitation, (i) providing information and decision support services to the pharmaceutical and healthcare industries (the "IMS Business"), (ii) providing software-based administrative and analytical solutions to the managed care industry (the "ERISCO Business"), (iii) making venture capital investments in emerging healthcare businesses (the "Enterprises Business"), (iv) supplying research and analysis to the information technology industry (the "Gartner Business") and (v) providing software applications and development services 4 specializing in Year 2000 conversion services (the "Technology Solutions Business"), but excluding the NMR Business. (n) "IMS HEALTH Group" shall mean IMS HEALTH and each Business Entity (other than any member of the NMR Group) that is a Subsidiary of the Corporation immediately prior to the Effective Time. (o) "Included Party" shall have the meaning as defined in Section 2.3. (p) "Income Tax Return" shall mean any Tax Return relating to Income Taxes. (q) "Income Taxes" shall mean any federal, state or local Taxes determined by reference to income or imposed in lieu of income Taxes, such as Taxes based on net worth or gross receipts. (r) "Indemnifying Party" shall have the meaning as defined in Section 3.5(c). (s) "Indemnitee" shall have the meaning as defined in Section 3.5(c). (t) "IRS" shall mean the Internal Revenue Service. (u) "NMR" shall mean Nielsen Media Research, Inc., a Delaware corporation. (v) "NMR Assets" shall have the same meaning as such term has in the Distribution Agreement. (w) "NMR Business" shall mean (i) the Nielsen Media Research Business, (ii) the businesses of the members of the NMR Group, (iii) any other business conducted by the Corporation or any Subsidiary of the Corporation primarily through the use of the NMR Assets, (iv) the businesses of any Business Entity acquired or established by or for NMR or any of its Subsidiaries after the date of this Agreement and (v) the business of the Corporation from and after the Effective Time. (x) "NMR Group" shall mean NMR, each Business Entity which is contemplated to remain or become a Subsidiary of the Corporation or NMR hereunder, which shall include those identified as such on Schedule 1.1(au)(i) to the Distribution Agreement, and the Corporation from and after the Effective Time. (y) "Non-Combined Returns" shall mean all state and local Income Tax Returns (other than Combined Returns and any foreign Tax Returns), of the Pre-Distribution Cognizant Group or any member thereof for taxable periods beginning November 1, 1996, January 1, 1997, January 1, 1998 and, solely for purposes 5 of Sections 2.1(a) and 2.2(a), on or the day after the Distribution Date. (z) "Nonperforming Party" shall have the meaning as defined in Section 5.2. (aa) "Other Taxes" shall mean all Taxes other than Taxes covered by a Consolidated Return, a Combined Return, a Non- Combined Return or a Franchise Tax Return. (ab) "Parties" shall have the meaning as defined in the recitals hereto. (ac) "Person" shall mean any natural person, corporation, business trust, joint venture, association, company, partnership or government, or any agency or political subdivision thereof. (ad) "Post-Distribution Expense Deduction" shall mean any deduction with respect to an expense or indemnity paid by a member of the IMS HEALTH Group or the NMR Group after the Distribution Date if such deduction is disallowed or not allowable for any member of the payor's group and may be claimed by any member of the other group. (ae) "Pre-Distribution Cognizant Group" shall mean the Corporation and all of its Subsidiaries (direct and indirect, domestic and foreign) prior to the Distribution. (af) "Preparing Party" shall have the meaning as defined in Section 2.3. (ag) "Reorganization Tax Payment" shall mean the payment of any Tax for which IMS HEALTH is liable pursuant to Section 3.3(a) of this Agreement. (ah) "Reorganizations" shall mean the series of contributions and distributions of Controlled Entities and assets, transfers and assumptions of liabilities, and other transactions whereby the NMR Group and the IMS HEALTH Group are formed and all other Controlled Entities of the Corporation prior to the Distribution are placed under the control of the appropriate parent corporation(s) in preparation for the Distribution. (ai) "Subsidiary" shall mean any entity of which another entity's ownership satisfies the 80-percent voting and value test defined in Section 1504(a)(2) of the Code, whether directly or indirectly. (aj) "Tax" or "Taxes" whether used in the form of a noun or adjective, shall mean taxes on or measured by income, franchise, gross receipts, sales, use, excise, payroll, personal property, real property, ad-valorem, value-added, leasing, 6 leasing use or other taxes, levies, imposts, duties, charges or withholdings of any nature. Whenever the term "Tax" or "Taxes" is used (including, without limitation, regarding any duty to reimburse another Party for indemnified taxes or refunds or credits of taxes) it shall include penalties, fines, additions to tax and interest thereon. (ak) "Tax Benefit" shall mean the sum of the amount by which the Tax liability (after giving effect to any alternative minimum or similar Tax) of a corporation or group of affiliated corporations to the appropriate taxing authority is reduced (including, without limitation, by deduction, entitlement to refund, credit or otherwise, whether available in the current taxable year, as an adjustment to taxable income in any other taxable year or as a carryforward or carryback, as applicable) plus any interest from such government or jurisdiction relating to such Tax liability. (al) "Tax Item" shall mean any item of income, capital gain, net operating loss, capital loss, deduction, credit or other Tax attribute relevant to the calculation of a Tax liability. (am) "Tax Matters Partner" shall mean the tax matters partner as defined in section 6231(a)(7) of the Code. (an) "Tax Returns" shall mean all reports or returns (including information returns) required to be filed or that may be filed for any period with any taxing authority (whether domestic or foreign) in connection with any Tax or Taxes (whether domestic or foreign). SECTION 1.2. References; Interpretation. References in this Agreement to any gender include references to all genders, and references to the singular include references to the plural and vice versa. The words "include", "includes" and "including" when used in this Agreement shall be deemed to be followed by the phrase "without limitation". Unless the context otherwise requires, references in this Agreement to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, such Agreement. Unless the context otherwise requires, the words "hereof", "hereby" and "herein" and words of similar meaning when used in this Agreement refer to this Agreement in its entirety and not to any particular Article, Section or provision of this Agreement. ARTICLE II. PREPARATION AND FILING OF TAX RETURNS SECTION 2.1. Predistribution Tax Returns. (a) IMS HEALTH (or its relevant Controlled Entity) shall prepare, and the Corporation (or its relevant Controlled Entity) shall file, (i) all Consolidated Returns, Combined 7 Returns, Non-Combined Returns, and Franchise Tax Returns that are not filed prior to the Distribution Date and (ii) any Tax Returns of any partnership (other than NMR Licensing Associates LP) of which the Corporation or any Subsidiary is the Tax Matters Partner if a distributive share of partnership income or loss is included in any such Return. (b) All Tax Returns for Other Taxes for periods beginning prior to the Distribution Date that are not subject to the D&B Tax Allocation Agreement shall be prepared and filed by IMS HEALTH if they relate to any member of the IMS HEALTH Group and, otherwise, by the Corporation. SECTION 2.2. Post-Distribution Tax Returns. (a) The filing of all Tax Returns for periods beginning on or after the Distribution Date (other than Non- Combined Returns and Franchise Tax Returns covered by Section 2.1(a)) shall be the responsibility of the Corporation if they relate to the NMR Group or any member thereof and shall be the responsibility of IMS HEALTH if they relate to the IMS HEALTH Group or any member thereof. (b) In the case of any partnership in which a member of the Pre-Distribution Cognizant Group is the designated Tax Matters Partner, such entity shall continue to be responsible for the preparation and filing of such partnership's Tax Returns. SECTION 2.3. Manner of Preparation. (a) To the extent any Tax Return includes Taxes relating to a Party (or any of its Subsidiaries) other than the Party preparing such Tax Return (the "Preparing Party"), the Party not responsible for preparing the Tax Return (the "Included Party"), shall prepare and deliver to the Preparing Party, at least 120 days prior to the due date (including extensions) of such Tax Return, a true and correct accounting of all relevant Tax Items relating to the Included Party (and any of its Subsidiaries) for the taxable period. (b) All Tax Returns filed on or after the Distribution Date shall be prepared on a basis that is consistent with the rulings obtained from the IRS or any other Governmental Authority in connection with the Reorganizations or Distribution (in the absence of a controlling change in law or circumstances) and shall be filed on a timely basis (including pursuant to extensions) by the Party responsible for such filing under this Agreement. In the absence of a controlling change in law or circumstances and unless deviation from past practice would have no adverse effect on the other Party, all Tax Returns filed within three years after the Distribution Date shall be prepared on a basis consistent with the elections, accounting methods, conventions, assumptions and principles of taxation used for the most recent taxable periods for which Tax Returns involving 8 similar Tax Items have been filed; provided, however, that a Party preparing any Tax Return that does not conform to such past practices shall not be liable for any additional Tax liability imposed, in whole or in part, as a result of such deviation from past practice if: (i) 30 days prior to the filing of such Tax Return, the Party preparing such Tax Return notifies the other Party if such other Party may be adversely affected; and (ii) the Party preparing such Tax Return establishes that conformity with past practice involves a significant risk of the imposition of a penalty. Subject to the provisions of this Agreement, all decisions relating to the preparation of Tax Returns shall be made in the sole discretion of the Party responsible under this Agreement for its preparation; provided, however, that the "Included Party" shall have the right to review and comment on such Tax Return prior to the filing thereof in the following manner: The Preparing Party shall submit any part of such Tax Return relating to the Included Party (or any of its Subsidiaries) to the Included Party at least 28 days prior to the date on which such Tax Return is due (including extensions). The Included Party shall submit its comments to the Preparing Party within 14 days of receipt of the relevant portions of such Tax Return. The Preparing Party shall alter such Tax Return to reflect the reasonable comments of the Included Party unless the Preparing Party reasonably believes that such alteration would have an adverse impact upon the Preparing Party. (c) Unless otherwise required by the IRS, any Governmental Authority or a court, the Parties hereby agree to file all Tax Returns, and to take all other actions, in a manner consistent with the position that the Distribution Date is the last day on which any member of the IMS HEALTH Group was included in the Pre-Distribution Cognizant Group. For any period that includes but does not end on the Distribution Date, to the extent permitted by law or administrative practice, the taxable year of each member of the Pre-Distribution Cognizant Group and any group of such members shall be treated as ending on the Distribution Date. ARTICLE III. PAYMENT OF TAXES SECTION 3.1. Predistribution Taxes (a) The Party responsible for the filing of any Tax Return pursuant to Sections 2.1 and 2.2 shall pay to the relevant taxing authority all Taxes due or payable in connection therewith; provided, that if, pursuant to this Article III, one Party is liable for any Taxes relating to a Tax Return filed by the other Party, such non-filing Party shall pay the filing Party the amount of such Taxes at least 5 days prior to the due date (including extensions) of such Tax Return. 9 (b) With respect to any Consolidated Return, Combined Return, Non-Combined Return or Franchise Tax Return for a taxable period ending before January 1, 1998 that is not filed prior to the Distribution Date, IMS HEALTH shall be liable for all Taxes payable with such Return and shall be entitled to any refund or credit for an overpayment of Taxes shown on such Return. With respect to any Consolidated Return, Combined Return, Non-Combined Return or Franchise Tax Return for a taxable period beginning on or after January 1, 1998, IMS HEALTH (i) shall only be liable for Taxes payable with such Return that are attributable to the portion of such taxable period up to and including the Distribution Date and that exceed the amount of Taxes paid in respect of such taxable period (as estimated Taxes or otherwise) on or prior to the Distribution Date and (ii) shall be entitled to any refund or credit of Taxes to the extent Taxes paid in respect of such taxable period (as estimated Taxes or otherwise) on or prior to the Distribution Date exceed the amount of Taxes attributable to the portion of the period up to and including the Distribution Date. The determination of the amount of Taxes attributable to the portion of such taxable period up to and including the Distribution Date shall be done on a closing of the books basis, except that Tax Items calculated on an annual basis shall be apportioned on a time basis. (c) In the event of any Final Determination adjusting the amount of any Taxes that are the subject of a Consolidated Return, Combined Return, Non-Combined Return or Franchise Tax Return, IMS HEALTH shall be liable for its share of any increases in Taxes and shall be entitled to its share of any refunds or credits of Taxes, and the Corporation shall be liable for all other increases in Taxes and shall be entitled to all other refunds or credits of Taxes. IMS HEALTH's share of any Taxes, credits or refunds shall be determined in accordance with the following principles: (i) IMS HEALTH shall be liable for any increase in Taxes, and shall be entitled to all refunds or credits of Taxes, that are attributable to a Tax Return that relates solely to the IMS HEALTH Business; and (ii) In the case of any Tax Return that relates to both the IMS HEALTH Business and the NMR Business, IMS HEALTH's share of any increase in Taxes, or refunds or credits of Taxes, shall be determined on a pro forma basis as if IMS HEALTH filed a separate Tax Return for the taxable period that (i) included only (x) the Tax Items attributable to the IMS HEALTH Business otherwise included in the Tax Return and (y) an appropriate allocation of Tax Items not specifically attributable to either the IMS HEALTH Business or the NMR Business (including, without limitation, corporate overhead) and (ii) credits IMS HEALTH with its share of Taxes previously paid by the Corporation or IMS HEALTH with respect to such taxable period; 10 provided, that, in the case of a Consolidated Return, Combined Return, Non-Combined Return or Franchise Tax Return, IMS HEALTH shall be liable for and shall pay all increases in Taxes, and shall be entitled to receive all refunds or credits of Taxes, that result from a Tax Item or position determined by the corporate office. (d) The Corporation shall be liable for all Other Taxes that are attributable to the NMR Business and IMS HEALTH shall be liable for all Other Taxes that are attributable to the IMS HEALTH Business. (e) In the case of any Consolidated Return, Combined Return, Non-Combined Return or Franchise Tax Return with respect to which IMS HEALTH has responsibility for any Taxes or is entitled to any refunds or credits of Taxes pursuant to Section 3.1(c) above, IMS HEALTH shall have the right to prepare an amended Tax Return. The Corporation shall have the right to review any such amended Tax Return and shall be required to sign and file any such amended Tax Return unless it reasonably determines that the filing of such amended Tax Return would create a significant risk of a material increase in the Taxes payable by the NMR Group or any member thereof for any taxable period beginning on or after the Distribution Date. IMS HEALTH shall be entitled to any refunds or credits of Taxes relating to any such amended Tax Return. (f) If the Corporation is liable for any Taxes or entitled to any refunds or credits of Taxes pursuant to the D&B Tax Allocation Agreement, such Taxes, refunds or credits shall be allocated between the Corporation and IMS HEALTH in accordance with the principles of this Section 3.1. (g) Notwithstanding any statement herein to the contrary, any Taxes covered by Section 2.1(j)(i) of the Distribution Agreement shall be governed by Schedule 2.1(j)(i) to the Distribution Agreement. SECTION 3.2. Post-Distribution Taxes. Unless otherwise provided in this Agreement: (a) The Corporation shall pay all Taxes and shall be entitled to receive and retain all refunds of Taxes attributable to the NMR Group or any member thereof: (i) with respect to a Consolidated Return, Combined Return, Non-Combined Return or Franchise Tax Return for a taxable period that begins prior to the Distribution Date and includes but does not end on the Distribution Date to the extent such Taxes or refunds are attributable to the portion of such period after the Distribution Date; and (ii) with respect to periods beginning on or after the Distribution Date. 11 (b) IMS HEALTH shall pay all Taxes and shall be entitled to receive and retain all refunds of Taxes with respect to periods beginning on or after the Distribution Date that are attributable to the IMS HEALTH Group or any member thereof. SECTION 3.3. Restructuring Taxes. (a) Notwithstanding any statement to the contrary in this Agreement and except as otherwise provided in the Distribution Agreement, to the extent that any Taxes are found to arise out of the Reorganizations, then any such Tax liability incurred by the Parties (or any of their Subsidiaries) shall be the responsibility of IMS HEALTH; provided, however, that to the extent specific cash allocations for such Taxes are made in connection with the Distribution, IMS HEALTH shall be relieved of its liability for such Taxes to the extent covered by such cash. (b) Notwithstanding any statement herein to the contrary, any Taxes relating to or arising out of the Distribution shall be governed by Section 2.10 of the Distribution Agreement. SECTION 3.4. Gain Recognition Agreements. IMS HEALTH shall assume all of the Corporation's responsibilities with respect to gain recognition agreements pursuant to the D&B Tax Allocation Agreement. SECTION 3.5. Indemnification. (a) Indemnification by the Corporation. The Corporation shall indemnify, defend and hold harmless IMS HEALTH (and its affiliates) from and against any and all Tax liabilities allocated to the Corporation by this Agreement. (b) Indemnification by IMS HEALTH. IMS HEALTH shall indemnify, defend and hold harmless the Corporation (and its affiliates) from and against any and all Tax liabilities allocated to IMS HEALTH by this Agreement. (c) Indemnity Payments. (i) To the extent that one Party (the "Indemnifying Party") owes money to another Party (the "Indemnitee") pursuant to this Section 3.5, the Party (the "Notifying Party") having knowledge of such obligation shall notify the other Party and shall provide such other Party with its calculations of such obligation (as specified in Article II and Article III). The other Party, within 14 days after receiving the Notifying Party's calculations, shall submit to the Notifying Party such other Party's calculations of the amount required to be paid pursuant to this Section 3.5, showing such calculations in sufficient detail so as to permit the Notifying Party to understand the calculations. The Indemnifying Party shall pay the Indemnitee, no later than the later of 5 days prior to the due date 12 (including extensions) of the relevant Tax Returns and 14 days after the Notifying Party receives the other Party's calculations, the amount for which the Indemnifying Party is required to pay or indemnify the Indemnitee under this Section 3.5. The Indemnifying Party shall have the right to disagree with the Indemnitee's calculations. Any dispute regarding such calculations shall be resolved in accordance with Section 5.4 of this Agreement. (ii) All indemnity payments shall be calculated on a pre-Tax basis and shall be treated as contributions to capital and/or reductions of assets previously contributed and/or dividends immediately prior to the Distribution. ARTICLE IV. TAX ATTRIBUTES AND REORGANIZATION TAX PAYMENTS SECTION 4.1. Carrybacks. In the event of the realization of any deduction, loss or credit by a Party for any taxable period beginning on or after the Distribution Date, the Party realizing such deduction, loss or credit may, in its sole discretion, and to the extent permitted under applicable Tax law, elect to either carry back or carry forward such deduction, loss or credit. Any refund attributable to such carryback shall be allocable to such Party. In the event both Parties elect to carry back an amount to the same taxable period beginning prior to the Distribution Date, any refund shall be apportioned between the Parties based on the relative carryback amounts. SECTION 4.2. Reorganization Tax Payments, Deferred Compensation Deductions and Post-Distribution Expense Deductions. (a) If an audit or other examination of any federal, state or local Tax Return for any taxable period shall result (by settlement or otherwise) in a Deferred Compensation Deduction or Post-Distribution Expense Deduction in favor of the NMR Group or any member thereof or if any Reorganization Tax Payment is made by IMS HEALTH, then: (i) If necessary, IMS HEALTH shall notify the Corporation and shall provide the Corporation with adequate information so that it can reflect on the appropriate Tax Returns any resulting increases in deductions, losses or Tax credits or decreases in income, gains or recapture of Tax credits; (ii) The Corporation shall pay IMS HEALTH the amount of any Tax Benefit that relates to any adjustments arising from or connected with such Reorganization Tax Payment or that results from such Deferred Compensation Deduction or Post-Distribution Expense Deduction within 30 days of the date such Tax Benefits are realized; (iii) Notwithstanding the foregoing, the Corporation shall only be required to take steps to obtain such Tax Benefit or to pay IMS HEALTH if, in the opinion of the Corporation's Tax 13 counsel, which counsel shall be reasonably acceptable to IMS HEALTH, the reporting of such Tax Benefit shall not subject the Corporation to the imposition of a penalty unless IMS HEALTH agrees to indemnify the Corporation for such penalty. (b) If an audit or other examination of any federal, state or local Tax Return for any taxable period shall result (by settlement or otherwise) in a Deferred Compensation Deduction or Post-Distribution Expense Deduction in favor of the IMS HEALTH Group or any member thereof, then: (i) If necessary, the Corporation shall notify IMS HEALTH and shall provide IMS HEALTH with adequate information so that it can reflect on the appropriate Tax Returns any resulting increases in deductions, losses or Tax credits or decreases in income, gains or recapture of Tax credits; (ii) IMS HEALTH shall pay the Corporation the amount of any Tax Benefit that results from such Deferred Compensation Deduction or Post-Distribution Expense Deduction within 30 days of the date such Tax Benefits are realized; (iii) Notwithstanding the foregoing, IMS HEALTH shall only be required to take steps to obtain such Tax Benefit or to pay the Corporation if, in the opinion of IMS HEALTH's Tax counsel, which counsel shall be reasonably acceptable to the Corporation, the reporting of such Tax Benefit shall not subject IMS HEALTH to the imposition of a penalty unless the Corporation agrees to indemnify IMS HEALTH for such penalty. (c) Realization of Tax Benefits. (i) For purposes of this Section 4.2, a Tax Benefit shall be deemed to have been realized at the time any refund of Taxes is received or applied against other Taxes due, or at the time of filing of a Tax Return (including any Tax Return relating to estimated Taxes) on which a loss, deduction or credit is applied in reduction of Taxes which would otherwise be payable; provided, however, that where a Party has other losses, deductions, credits or similar items available to it, such deductions, credits or similar items may be applied prior to the use of any adjustments relating to a Reorganization Tax Payment or any Deferred Compensation Deduction or Post-Distribution Expense Deduction. (ii) Either Party may, at its election, pay the amount of any Tax Benefit to the other Party rather than filing amended returns or otherwise reflecting adjustments or taking positions on its Tax Returns. If such an election is made, the Party will be treated as having realized a Tax Benefit at the time it would have realized a Tax Benefit had it chosen to file amended returns or otherwise to reflect adjustments or to take positions on its Tax Returns. 14 (d) Tax Benefits Subsequently Denied. If any Tax Benefit realized pursuant to Section 4.2(b)(i) is subsequently denied, then IMS HEALTH or the Corporation, as the case may be, shall refund the amount of any payment for such Tax Benefit within 30 days of its notification by the other Party that a Final Determination has been reached denying the claimed Tax Benefit. SECTION 4.3. Competent Authority Relief. If as a result of any audit of a taxable period beginning prior to the Distribution Date, a Party (or Subsidiary) is required to adjust its income, deductions, credits or allowances under Section 482 of the Code or under similar principles in a foreign jurisdiction, and the payment of additional Taxes in accordance with such a determination allows the other Party (or Subsidiary) to obtain competent authority relief as a result thereof, then the Party eligible to obtain such relief shall: (a) execute or cause to be executed any powers of attorney or other documents necessary to enable the other Party to pursue such relief at its own expense; and (b) cooperate with the other Party and the competent authorities in seeking such relief. ARTICLE V. TAX AUDITS, TRANSACTIONS AND OTHER MATTERS SECTION 5.1. Tax Audits and Controversies. In the case of any audit, examination or other proceeding ("Proceeding") brought against a Party (or Subsidiary) with respect to Taxes for which the other Party is or may be liable pursuant to this Agreement, the Party subject to such Proceeding shall promptly inform such other Party and shall execute or cause to be executed any powers of attorney or other documents necessary to enable the other Party to take all actions desired with respect to such Proceeding to the extent such Proceeding may affect the amount of Taxes for which the other Party is liable pursuant to this Agreement. Each Party shall have the right to control, at its own expense, the portion of any such Proceeding that relates to Taxes for which such Party is or may be liable pursuant to this Agreement; provided, however, that such Party shall consult with the other Party with respect to any issue that may affect the other Party (or Subsidiary). The Party in control of such Proceeding or any part thereof shall not enter into any final settlement or closing agreement that may adversely affect the other Party (or Subsidiary) without the consent of such other Party, which consent may not unreasonably be withheld. Where consent to any final settlement or closing agreement is withheld, the Party withholding consent shall continue or initiate further proceedings, at its own expense, and the liability of the Party in control of such Proceeding shall not exceed the liability that would have resulted from the proposed closing agreement or final settlement (including interest, additions to Tax and penalties which have accrued at that time). SECTION 5.2. Cooperation. The Corporation and IMS HEALTH shall cooperate with each other in the filing of any Tax 15 Returns and the conduct of any audit or other proceeding and each shall execute and deliver such powers of attorney and other documents and make available such information and documents as are necessary to carry out the intent of this Agreement. To the extent such cooperation involves the services of officers, directors, employees, or agents of a Party, such services shall be made available in accordance with Section 2.9 of the Distribution Agreement. Each Party agrees to notify the other Party of any audit adjustment that does not result in Tax liability but can reasonably be expected to affect Tax Returns of the other Party or any of its Subsidiaries. Notwithstanding any other provision of this Agreement, if a Party (the "Nonperforming Party") fails to give its full cooperation and use its best efforts in the conduct of an audit or other proceeding as provided by this Section 5.2, and such failure results in the imposition of additional Taxes for the period or periods involved in the audit or other proceeding, the Nonperforming Party shall be liable in full for such additional Taxes. SECTION 5.3. Retention of Records; Access. Beginning on the Distribution Date, the Corporation and IMS HEALTH shall, and shall cause each of their Controlled Entities to: (a) retain adequate records, documents, accounting data and other information (including computer data) necessary for the preparation and filing of all Tax Returns required to be filed by any member of the Pre-Distribution Cognizant Group or any combination of such members and for any audits and litigation relating to such Tax Returns or to any Taxes payable by any member of the Pre-Distribution Cognizant Group or any combination of such members; and (b) give to the other Party reasonable access to such records, documents, accounting data and other information (including computer data) and to its personnel and premises, for the purpose of the review or audit of such reports or returns to the extent relevant to an obligation or liability of a Party under this Agreement and in accordance with the procedures provided in Article IV of the Distribution Agreement. The obligations set forth in these paragraphs 5.3(a) and 5.3(b) shall continue until the final conclusion of any litigation to which the records and information relate or until expiration of all applicable statutes of limitations, whichever is longer. SECTION 5.4. Dispute Resolution. Any dispute or claim arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, validity or breach of this Agreement or otherwise arising out of, or in any way related to this Agreement, shall be resolved in the manner set forth in Article VI of the Distribution Agreement. SECTION 5.5. Confidentiality; Ownership of Information; Privileged Information. The provisions of Article IV of the Distribution Agreement relating to confidentiality of 16 information, ownership of information, privileged information and related matters shall apply with equal force to any records and information prepared and/or shared by and between the Parties in carrying out the intent of this Agreement. ARTICLE VI. MISCELLANEOUS SECTION 6.1. Complete Agreement; Construction. This Agreement, including the Exhibits and Schedules, shall constitute the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. In the event of any inconsistency between this Agreement and any Schedule hereto, the Schedule shall prevail. SECTION 6.2. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the Parties and delivered to the other Party. SECTION 6.3. Survival of Agreements. Except as otherwise provided by this Agreement, all covenants and agreements of the Parties contained in this Agreement shall survive the Distribution Date. SECTION 6.4. Expenses. Except as otherwise set forth in this Agreement, all costs and expenses in connection with the preparation, execution, delivery and required implementation of this Agreement shall be charged to and paid by the Parties in accordance with Section 8.5 of the Distribution Agreement. SECTION 6.5. Notices. All notices and other communications hereunder shall be in writing and hand delivered or mailed by registered or certified mail (return receipt requested) or sent by any means of electronic message transmission with delivery confirmed (by voice or otherwise) to the Parties at the following addresses (or at such other addresses for a Party as shall be specified by like notice) and will be deemed given on the date on which such notice is received: To the Corporation: Nielsen Media Research, Inc. 299 Park Avenue New York, NY 10171 Telecopy: Attn: Chief Legal Officer 17 To IMS HEALTH: 200 Nyala Farms Westport, CT 06880 Telecopy: (203) 222-4313 Attn: General Counsel and Vice President - Taxes SECTION 6.6. Waivers. The failure of any Party to require strict performance by any other Party of any provision in this Agreement will not waive or diminish that Party's right to demand strict performance thereafter of that or any other provision hereof. SECTION 6.7. Amendments. This Agreement may not be modified or amended except by an agreement in writing signed by each of the Parties hereto. SECTION 6.8. Assignment. This Agreement shall not be assignable, in whole or in part, directly or indirectly, by any Party hereto without the prior written consent of the other Party hereto, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be void. SECTION 6.9. Successors and Assigns. The provisions to this Agreement shall be binding upon, inure to the benefit of and be enforceable by the Parties and their respective successors and permitted assigns. SECTION 6.10. Termination. This Agreement may be terminated, amended, modified or abandoned at any time prior to the Distribution by and in the sole discretion of the Corporation without the approval of IMS HEALTH or the stockholders of the Corporation. In the event of such termination, neither Party shall have any liability of any kind to the Party or any other person. After the Distribution, this Agreement may not be terminated except by an agreement in writing signed by the Parties. SECTION 6.11. Controlled Entities. Each of the Parties hereto shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Controlled Entity of such Party or by any entity that is contemplated to be a Controlled Entity of such Party on and after the Distribution Date. SECTION 6.12. Third Party Beneficiaries. This Agreement is solely for the benefit of the Parties hereto and their respective Subsidiaries and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement. 18 SECTION 6.13. Title and Headings. Titles and headings to sections herein are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. SECTION 6.14. Exhibits and Schedules. The Exhibits and Schedules shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein. SECTION 6.15. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK. SECTION 6.16. Consent to Jurisdiction. Without limiting the provisions of Section 5.4 hereof, each of the Parties irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of the State of New York, New York County, and (b) the United States District Court for the Southern District of New York, for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each of the Parties agrees to commence any action, suit or proceeding relating hereto either in the United States District Court for the Southern District of New York or if such suit, action or other proceeding may not be brought in such court for jurisdictional reasons, in the Supreme Court of the State of New York, New York County. Each of the Parties further agrees that service of any process, summons, notice or document by U.S. registered mail to such Party's respective address set forth above shall be effective service of process for any action, suit or proceeding in New York with respect to any matters to which it has submitted to jurisdiction in this Section 6.17. Each of the Parties irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in (i) the Supreme Court of the State of New York, New York County, or (ii) the United States District Court for the Southern District of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. SECTION 6.17. Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The Parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the day and year first above written. COGNIZANT CORPORATION By: /s/ Robert E. Weissman ----------------------------------- Name: Robert E. Weissman Title: Chairman and Chief Executive Officer IMS HEALTH INCORPORATED By: /s/ Victoria R. Fash ----------------------------------- Name: Victoria R. Fash Title: President and Chief Operating Officer EX-10.3 4 EMPLOYEE BENEFITS AGREEMENT EMPLOYEE BENEFITS AGREEMENT This EMPLOYEE BENEFITS AGREEMENT is dated as of June 30, 1998 (the "Agreement"), between COGNIZANT CORPORATION, a Delaware corporation ("Corporation") and IMS HEALTH INCORPORATED, a Delaware corporation ("IMS Health"). WHEREAS, the Board of Directors of Corporation has determined that it is appropriate, desirable and in the best interests of the holders of shares of common stock, par value $.01 per share, of Corporation (the "Corporation Common Stock") to take certain steps to reorganize Corporation's Subsidiaries (as defined herein) and businesses and then to distribute to the holders of the Corporation Common Stock all the outstanding shares of common stock of IMS Health (the "IMS Health Common Stock"); and WHEREAS, Corporation and IMS Health have determined that it is necessary and desirable to allocate and assign responsibility for certain employee benefit matters in respect of such entities on and after the Effective Time (as defined herein). NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, Corporation and IMS Health agree as follows: ARTICLE I DEFINITIONS SECTION 1.1. Definitions. Capitalized terms used in this Agreement shall have the following meanings: "ACNielsen" shall mean ACNielsen Corporation, a Delaware corporation. "Action" shall mean any action, suit, arbitration, inquiry, proceeding or investigation by or before any court, any governmental or other regulatory or administrative agency, body or commission or any arbitration tribunal. "Affiliate" shall mean, when used with respect to a specified person, another person that controls, is controlled by, or is under common control with the person specified. As used herein, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities or other interests, by contract or otherwise. "Ancillary Agreements" shall mean all of the written agreements, instruments, assignments or other written arrangements (other than this Agreement and the Distribution Agreement) entered into in connection with the transactions 2 contemplated by this Agreement and the Distribution Agreement, including, without limitation, the Conveyancing and Assumption Instruments, the Shared Transaction Services Agreement, the Tax Allocation Agreement and the Transition Services Agreement. "Assets" shall have the meaning set forth in Section 1.1(f) of the Distribution Agreement. "Board of Directors" shall mean, when used with respect to a specified corporation, the board of directors of the corporation so specified. "Business Entity" shall mean any corporation, partnership, limited liability company or other entity which may legally hold title to Assets. "COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and the regulations promulgated thereunder, including any successor legislation. "Code" shall mean the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder, including any successor legislation. "Conveyancing and Assumption Instruments" shall mean, collectively, the various agreements, instruments and other documents heretofore entered into and to be entered into to effect the transfer of Assets and the assumption of Liabilities in the manner contemplated by the Distribution Agreement, or otherwise arising out of or relating to the transactions contemplated in the Distribution Agreement. "Cognizant" shall mean Cognizant Corporation, a Delaware corporation. "Corporate Staff Employees" shall mean Corporation Pre- Distribution Employees who performed administrative functions generally for the Corporation Group prior to the Effective Time and who were based at the Corporation headquarters in Westport, CT, aviation department in Purchase, NY or STS department in Allentown, PA. "Corporation" shall mean Cognizant Corporation, a Delaware corporation. "Corporation Committee" shall mean the Compensation and Benefits Committee of the Board of Directors of Corporation. "Corporation Common Stock" shall have the meaning set forth in the recitals hereto. 3 "Corporation Disabled Employees" shall mean all employees of the Corporation Group who are receiving benefits under the Corporation Long-Term Disability Plan as of the Effective Time, as in effect from time to time. "Corporation Employee Stock Purchase Plan" shall mean the 1997 Cognizant Corporation Employee Stock Purchase Plan, as in effect from time to time. "Corporation Executive Annual Incentive Plan" shall mean the Cognizant Corporation Executive Annual Incentive Plan, as in effect from time to time. "Corporation Group" shall mean Cognizant Corporation and each Business Entity that is a Subsidiary of Corporation, except that Corporation Group shall not include Walsh International Inc. or any of its Subsidiaries. "Corporation Long-Term Disability Plan" shall mean The Cognizant Long Term Disability Plan or any other long-term disability plan sponsored by Corporation or any Subsidiary of Corporation prior to the Effective Time. "Corporation LSARs" shall have the meaning set forth in Section 6.2 of this Agreement. "Corporation Nonqualified Plans" shall have the meaning as set forth in Section 4.1 of this Agreement. "Corporation Nonqualified Plan Participants" shall have the meaning set forth in Section 4.1. "Corporation Pension REP" shall mean the Cognizant Retirement Excess Plan, as in effect from time to time. "Corporation Post-Distribution Employees" shall mean persons who, immediately after the Effective Time, are employed by the Corporation Group (including persons who are absent from work by reason of layoff or leave of absence and inactive employees treated as such by agreement therewith) other than IMS Health Transitional Employees. "Corporation Pre-Distribution Employees" shall mean persons who, at any time prior to the Effective Time, were employed by the Corporation Group. "Corporation Ratio" shall have the meaning set forth in Section 6.1(a) of this Agreement. "Corporation Restricted Stock" shall have the meaning set forth in Section 6.3 of this Agreement. "Corporation Retirees" shall mean persons who (i) were Corporation Pre-Distribution Employees, (ii) terminated 4 employment from the Corporation Group prior to the Effective Time or, with respect to Corporate Staff Employees, terminated employment prior to or as a result of the Distribution, (iii) are not IMS Health Employees or IMS Health Transitional Employees after the Effective Time and (iv) would have been Corporation Post-Distribution Employees had they remained employed, after the Distribution, by the same employer from which they terminated employment or were Corporate Staff Employees; but shall not include any person on Schedule 1.1. "Corporation Retirement Plan" shall mean the Cognizant Retirement Plan, as in effect from time to time. "Corporation Savings BEP" shall mean the Cognizant Corporation Savings Benefit Equalization Plan, as in effect from time to time. "Corporation Savings Plan" shall mean the Cognizant Corporation Savings Plan, as in effect from time to time. "Corporation Stock Option" shall have the meaning set forth in Section 6.1 of this Agreement. "Corporation Stock Option Plans" shall mean the 1996 Key Employees' Stock Incentive Plan, the 1996 Replacement Plan for Certain Employees Holding The Dun & Bradstreet Corporation Equity-Based Awards or any other stock option plan established by the Corporation prior to the Effective Time. "Corporation SERP" shall mean the Cognizant Corporation Supplemental Executive Retirement Plan, as in effect from time to time. "Corporation Transition Plans" shall mean The Cognizant Corporation Executive Transition Plan and The Cognizant Corporation Career Transition Plan. "D&B" shall mean The Dun & Bradstreet Corporation, a Delaware corporation. "Distribution" shall mean the distribution on the Distribution Date to holders of record of shares of Corporation Common Stock as of the Distribution Record Date of the IMS Health Common Stock owned by Corporation on the basis of one IMS Health Common Share for each outstanding share of Corporation Common Stock. "Distribution Agreement" shall mean the Distribution Agreement between Corporation and IMS Health, dated as of June 30, 1998. "Distribution Date" shall mean June 30, 1998. 5 "Distribution Record Date" shall mean such date as may be determined by Corporation's Board of Directors as the record date for the Distribution. "Effective Time" shall mean immediately prior to the midnight, New York time, ending the 24-hour period comprising June 30, 1998. "Employee Benefit Dispute" shall include any controversy, dispute or claim arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, validity or breach of this Agreement or otherwise arising out of, or in any way related to this Agreement, including, without limitation, any claim based on contract, tort, statute or constitution. "Employee Benefit Litigation Liability" shall mean, with respect to a Business Entity, a Liability relating to a controversy, dispute or claim arising out of, in connection with or in relation to the interpretation, performance, nonperformance, validity or breach of an Employee Benefit Plan of such Business Entity or otherwise arising out of, or in any way related to such Employee Benefit Plan, including, without limitation, any claim based on contract, tort, statute or constitution. "Employee Benefit Plans" shall mean, with respect to a Business Entity, all "employee benefit plans" (within the meaning of Section 3(3) of ERISA), "multiemployer plans" (within the meaning of Section 3(37) of ERISA), retirement, pension, savings, profit-sharing, welfare, stock purchase, stock option, equity- based, severance, employment, change-in-control, fringe benefit, collective bargaining, bonus, incentive, deferred compensation, worker's compensation and all other employee benefit plans, agreements, programs, policies or other arrangements (including any funding mechanisms therefor), whether or not subject to ERISA, whether formal or informal, oral or written, legally binding or not, under which (i) any past, present or future employee of the Business Entity or its Subsidiaries has a right to benefits and (ii) the Business Entity or its Subsidiaries has any Liability. "Employee Benefit Records" shall mean all agreements, documents, books, records or files relating to the Employee Benefit Plans of Corporation and IMS Health. "Employee Benefit Welfare Plans" shall mean, with respect to a Business Entity, all Employee Benefit Plans that are "welfare plans" within the meaning of Section 3(1) of ERISA. "Employer Stock" shall mean, after the Distribution Date, IMS Health Common Stock credited to the account of an IMS Health Employee and Corporation Common Stock credited to the account of a Corporation Post-Distribution Employee in the pooled 6 stock fund of the respective savings plan in which such employee participates, pursuant to Section 3.4. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder, including any successor legislation. "Final IMS Health Retirement Plan Transfer Date" shall have the meaning set forth in Section 2.2(d) of this Agreement. "IMS Health" shall mean IMS Health Incorporated, a Delaware corporation. "IMS Health Committee" shall mean the Compensation and Benefits Committee of the Board of Directors of IMS Health. "IMS Health Common Stock" shall have the meaning set forth in the recitals hereto. "IMS Health Disabled Employees" shall mean all employees of the IMS Health Group who are receiving benefits or are in the waiting period to receive benefits under the Corporation Long-Term Disability Plan immediately prior to the Effective Time. "IMS Health Employees" shall mean persons who, immediately after the Effective Time, are employed by the IMS Health Group (including persons who are absent from work by reason of layoff or leave of absence and inactive employees treated as such by agreement therewith). "IMS Health Employee Stock Purchase Plan" shall mean the Employee Stock Purchase Plan to be adopted by IMS Health pursuant to Section 6.5. "IMS Health Group" shall mean IMS Health and each Business Entity which is contemplated to remain or become a Subsidiary of IMS Health pursuant to the Distribution Agreement. "IMS Health Nonqualified Plans" shall mean the nonqualified plans to be adopted by IMS Health pursuant to Section 4.2. "IMS Health Nonqualified Plan Participants" shall have the meaning set forth in Section 4.2. "IMS Health Pension REP" shall mean the IMS Health Retirement Excess Plan to be adopted by IMS Health pursuant to Section 4.2. "IMS Health Ratio" shall have the meaning set forth in Section 6.1(b) of this Agreement. 7 "IMS Health Replacement Plans" shall mean the replacement plans to be adopted by IMS Health pursuant to Section 6.1(b) of this Agreement. "IMS Health Restricted Stock" shall have the meaning set forth in Section 6.3 of this Agreement. "IMS Health Retirees" shall mean persons who (i) were Corporation Pre-Distribution Employees, (ii) terminated employment from the IMS Health Group prior to the Effective Time (iii) are not Corporation Post-Distribution Employees after the Effective Time and (iv) would have been IMS Health Employees had they remained employed, after the Distribution, by the same employer from which they terminated employment but shall not include Corporate Staff Employees included in the definition of Corporation Retirees; and shall include any person on Schedule 1.1. "IMS Health Retirement Plan" shall mean the defined benefit plan to be adopted by IMS Health pursuant to Section 2.2(a) of this Agreement. "IMS Health Retirement Plan Effective Date" shall have the meaning set forth in Section 2.2(a) of this Agreement. "IMS Health Retirement Plan Segregation Ratio" shall equal a fraction, the numerator of which is the Present Value of the accrued vested and nonvested benefits (as defined in ERISA Section 4044(a)(1)-(6)) of the IMS Health Transferred Retirement Plan Employees under the Corporation Retirement Plan at the Effective Time, and the denominator of which is the Present Value of the accrued vested and nonvested benefits (as defined in ERISA Section 4044(a)(1)-(6)) of the Corporation Pre-Distribution Employees under the Corporation Retirement Plan at the Effective Time. "IMS Health Savings BEP" shall mean the IMS Health Savings Benefit Equalization Plan to be adopted by IMS Health pursuant to Section 4.2. "IMS Health Savings Plan" shall mean the defined contribution plan to be adopted by IMS Health pursuant to Section 3.2(a) of this Agreement. "IMS Health Savings Plan Transfer Date" shall have the meaning set forth in Section 3.2(b) of this Agreement. "IMS Health SERP" shall mean the IMS Health Supplemental Executive Retirement Plan to be adopted by IMS Health pursuant to Section 4.2. "IMS Health Transferred Retirement Plan Employees" shall have the meaning set forth in Section 2.2(a) of this Agreement. 8 "IMS Health Transferred Savings Plan Employees" shall have the meaning set forth in Section 3.2(a) of this Agreement. "IMS Health Transitional Employees" shall mean Corporate Staff Employees who are under an agreement to remain employed by the Corporation after the Effective Time for a fixed period of time either to perform services in connection with the Distribution or to perform services primarily for the IMS Health Group. "Information Statement" shall mean the Information Statement sent to the holders of shares of Corporation Common Stock in connection with the Distribution, including any amendment or supplement thereto. "Initial IMS Health Retirement Plan Transfer Date" shall have the meaning set forth in Section 2.2(a) of this Agreement. "Initial Transferred Assets" shall have the meaning set forth in Section 2.2(b) of this Agreement. "Liabilities" shall mean any and all losses, claims, charges, debts, demands, actions, causes of action, suits, damages, obligations, payments, costs and expenses, sums of money, accounts, reckonings, bonds, specialties, indemnities and similar obligations, exonerations, covenants, contracts, controversies, agreements, promises, doings, omissions, variances, guarantees, make whole agreements and similar obligations, and other liabilities, including all contractual obligations, whether absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever arising, and including those arising under any law, rule, regulation, Action, threatened or contemplated Action (including the costs and expenses of demands, assessments, judgments, settlements and compromises relating thereto and attorneys' fees and any and all costs and expenses (including allocated costs of in-house counsel and other personnel), whatsoever reasonably incurred in investigating, preparing or defending against any such Actions or threatened or contemplated Actions), order or consent decree of any governmental or other regulatory or administrative agency, body or commission or any award of any arbitrator or mediator of any kind, and those arising under any contract, commitment or undertaking, including those arising under this Agreement, the Distribution Agreement or any Ancillary Agreement, in each case, whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of any person. "Nonemployer Stock" shall mean, after the Distribution Date, IMS Health Common Stock credited to the account of a Corporation Post-Distribution Employee and Corporation Common Stock credited to an account of an IMS Health Employee in the 9 pooled stock fund of the respective savings plan in which such employee participates, pursuant to Section 3.4. "PBGC" shall mean the Pension Benefit Guaranty Corporation or any successor entity thereto. "PBGC Assumptions" shall mean the actuarial assumptions set forth in 29 C.F.R. Part 2619, et seq. "person" shall mean any natural person, corporation, business trust, joint venture, association, company, partnership or government, or any agency or political subdivision thereof. "Present Value" shall mean the single sum value of a series of future payments, determined utilizing PBGC Assumptions in effect as of the measurement date. "Service" shall mean the Internal Revenue Service or any successor entity thereto. "Shared Transaction Services Agreements" shall mean the Shared Transaction Services Agreements between Corporation and IMS Health. "Subsidiary" shall mean any corporation, partnership or other entity of which another entity (i) owns, directly or indirectly, ownership interests sufficient to elect a majority of the Board of Directors (or persons performing similar functions) (irrespective of whether at the time any other class or classes of ownership interests of such corporation, partnership or other entity shall or might have such voting power upon the occurrence of any contingency) or (ii) is a general partner or an entity performing similar functions (e.g., a trustee). "Tax Allocation Agreement" shall mean the Tax Allocation Agreement between Corporation and IMS Health. "Transition Services Agreement" shall mean the Amended and Restated Transition Services Agreement among Corporation, IMS Health, ACNielsen, D&B and R.H. Donnelley Corporation. "Walsh" shall mean Walsh International Inc., a Delaware corporation. "Walsh Optionees" shall mean individuals whose options to purchase the common stock of Walsh were converted into options to purchase Corporation Common Stock (other than those individuals who are IMS Health Employees). 10 ARTICLE II CORPORATION RETIREMENT PLAN SECTION 2.1. Corporation Retirement Plan. From and after the Effective Time, Corporation shall continue to sponsor the Corporation Retirement Plan. Active participation of IMS Health Transferred Retirement Plan Employees in the Corporation Retirement Plan shall cease immediately after the Effective Time. Nothing contained in this Article II shall have the effect of accelerating the degree to which any individual has a vested interest in or eligibility for the Corporation Retirement Plan or the IMS Health Retirement Plan. SECTION 2.2. IMS Health Retirement Plan. (a) As of the Effective Time, (herein referred to as the "IMS Health Retirement Plan Effective Date"), IMS Health shall establish the IMS Health Retirement Plan for the benefit of IMS Health Employees, IMS Disabled Employees, IMS Health Retirees and IMS Health Transitional Employees who were participants in the Corporation Retirement Plan immediately prior to the Effective Time (the "IMS Health Transferred Retirement Plan Employees"). On the first business day after the Effective Time (the "Initial IMS Health Retirement Plan Transfer Date"), Corporation shall cause the trustee of the Corporation Retirement Plan to segregate, based on a good faith estimate made in accordance with the spinoff provisions set forth under Section 414(l) of the Code, the assets of the Corporation Retirement Plan allocable to IMS Health Transferred Retirement Plan Employees in an amount equal to the sum of (i) and (ii), as follows: (i) the amount allocable to IMS Health Transferred Retirement Plan Employees under ERISA Section 4044 as of the Effective Time, determined using PBGC Assumptions; and (ii) the excess (if any) of the fair market value of assets of the Corporation Retirement Plan over the Present Value of the vested and nonvested benefits accrued thereunder for all the Corporation Pre-Distribution Employees as of the Effective Time, multiplied by the IMS Health Retirement Plan Segregation Ratio. (b) On the Initial IMS Health Retirement Plan Transfer Date, 90% of the segregated assets determined under Section 2.2(a) of this Agreement (the "Initial Transferred Assets") shall be transferred to a separate trust established under the IMS Health Retirement Plan. (c) From the Effective Time until the Final IMS Health Retirement Transfer Date (as defined below), the remaining 10% of the segregated assets determined under Section 2.2(a) of this Agreement shall be invested by the trustee of the Corporation Retirement Plan with the same investment managers and in the same 11 proportions as such assets were invested immediately prior to the Effective Time, which are set forth in Schedule 2.2 hereof. (d) As soon as practicable after the Effective Time, the remaining assets allocable to the IMS Health Transferred Retirement Plan Employees shall be transferred to a separate trust established under the IMS Health Retirement Plan (such date herein referred to as the "Final IMS Health Retirement Plan Transfer Date"); provided, however, that in no event shall such transfer take place until Corporation shall make all required amendments to the Corporation Retirement Plan and related trust agreement necessary to provide for the segregation and transfer of assets described in this Section 2.2. The value of such assets to be transferred shall equal the value of segregated assets determined based on same methodology as in Section 2.2(a) of this Agreement, reduced by an amount equal to the Initial Transferred Assets, adjusted as follows: (i) reduced by the amount of benefit payments made under the Corporation Retirement Plan with respect to IMS Health Transferred Retirement Plan Employees from the Effective Time to the Final IMS Health Retirement Plan Transfer Date; and (ii) increased (or decreased) by the share of the net investment income (or loss) and expenses incurred or for which invoices are submitted after the Effective Time to the IMS Health Retirement Plan Transfer Date attributable to the value of such segregated assets. (e) Unless otherwise agreed to by Corporation and IMS Health, the form of the assets to be transferred shall consist of an undivided percentage interest in each asset that is held by the Corporation Retirement Plan on the IMS Health Retirement Plan Transfer Date, such undivided percentage interest being equal to the value of assets allocable to the IMS Health Transferred Retirement Plan Employees, divided by the fair market value of plan assets. (f) If the amount of the Initial Transferred Assets exceeds the value of the assets to be transferred as determined under Section 2.2(d) of this Agreement, such excess amount shall promptly be transferred from the IMS Health Retirement Plan trust to the Corporation Retirement Plan trust. SECTION 2.3. Allocation of Liabilities. The IMS Health Group shall assume all Liabilities relating to the participation of IMS Health Transferred Retirement Plan Employees in the Corporation Retirement Plan. The Corporation Group shall retain all other Liabilities relating to the Corporation Retirement Plan. 12 ARTICLE III CORPORATION SAVINGS PLAN SECTION 3.1. Corporation Savings Plan. From and after the Effective Time, Corporation shall continue to sponsor the Corporation Savings Plan. Active participation of IMS Health Transferred Savings Plan Employees in the Corporation Savings Plan shall cease immediately after the Effective Time. Nothing contained in this Article III shall have the effect of accelerating the degree to which any individual has a vested interest in the Corporation Savings Plan or the IMS Health Savings Plan. SECTION 3.2. IMS Health Savings Plan. (a) As of the Effective Time, IMS Health shall adopt the IMS Health Savings Plan for the benefit of IMS Health Employees, IMS Health Disabled Employees, IMS Health Transitional Employees and IMS Health Retirees who were participants in the Corporation Savings Plan immediately prior to the Effective Time (the "IMS Health Transferred Savings Plan Employees"). (b) Prior to the date on which the transfer of assets and liabilities to the IMS Health Savings Plan shall occur (the "IMS Health Savings Plan Transfer Date"), which date shall occur as promptly as practicable following the Effective Time, Corporation shall (A) cause the trustee of the Corporation Savings Plan to segregate, in accordance with the spinoff provisions set forth under Section 414(l) of the Code, the assets of the Corporation Savings Plan representing the full account balances of IMS Health Transferred Savings Plan Employees for all periods of participation through the Effective Time (including, as applicable, all contributions and all earnings attributable thereto); (B) make all required filings and submissions to the appropriate governmental agencies; and (C) make all required amendments to the Corporation Savings Plan and related trust agreement necessary to provide for the segregation and transfer of assets described in this Section 3.2. (c) On the IMS Health Savings Plan Transfer Date, IMS Health shall cause the trustee of the Corporation Savings Plan to transfer to the trustee of the IMS Health Savings Plan the full account balances (inclusive of loans) of IMS Health Transferred Savings Plan Employees in kind based on those investment funds in which such account balances are then invested (including, but not limited to, the pooled stock fund described in Section 3.4); provided, however, that loans to IMS Health Transferred Savings Plan Employees shall be transferred in the form of notes. In consideration of the segregation and transfer of assets described herein, the IMS Health Savings Plan shall, as of the IMS Health Savings Plan Transfer Date, assume all Liabilities attributable to such assets, whether incurred prior to or after the Effective Time. If the account balances of the IMS Health Transferred Savings Plan that are transferred on the IMS Health Savings Plan Transfer Date are thereafter determined to have been incorrect, 13 the parties agree to make appropriate payments or asset transfers to correct such error (appropriately adjusted for subsequent investment experience and expenses incurred). SECTION 3.3. Outstanding Loans. During their employment with Corporation, IMS Health Transferred Savings Plan Employees who have outstanding loans originally made from the Corporation Savings Plan shall be permitted to repay such loans by way of regular deductions from their paychecks, and, prior to the IMS Health Savings Plan Transfer Date, Corporation or IMS Health (as the case may be) shall cause all such deductions to be forwarded to the Corporation Savings Plan as promptly as practicable. SECTION 3.4. Employer Stock Fund. (a) Participants in the Corporation Savings Plan who, immediately prior to the Effective Time, have balances in the Corporation Common Stock fund shall have such balances converted, as of the Effective Time, to the extent applicable, to units in a pooled stock fund consisting of Corporation Common Stock and IMS Health Common Stock. The initial ratio of stock in the pooled stock fund shall be one share of Corporation Common Stock to one share of IMS Health Common Stock. The percentage interest of each participant in the pooled stock fund as of the Effective Time shall equal such participant's percentage interest in the Corporation Common Stock fund immediately prior to the Effective Time. The IMS Health Savings Plan shall maintain a pooled stock fund, to which the pooled stock fund assets of IMS Health Transferred Savings Plan Employees in the Corporation Savings Plan shall be transferred on the IMS Health Savings Plan Transfer Date. Notwithstanding the foregoing, the Corporation Savings Plan shall transfer the units of Corporation Common Stock from the pooled stock fund into the Corporation Common Stock fund and the IMS Health Savings Plan shall transfer the units of IMS Health Common Stock from the pooled stock fund into the IMS Health Common Stock fund. (b) Within nine months after the Distribution Date, each participant shall liquidate his or her units of Nonemployer Stock in the pooled stock fund and invest the proceeds thereof in any other investment option available under the applicable plan. If the participant does not liquidate such units, such units shall be liquidated and invested in a fixed income investment option available under the applicable plan. (c) A participant may not acquire additional units in the pooled stock fund from or after the Effective Time. SECTION 3.5. Allocation of Liabilities. The IMS Health Group shall assume all Liabilities relating to the participation of IMS Health Transferred Savings Plan Employees in the Corporation Savings Plan. The Corporation Group shall retain all other Liabilities relating to the Corporation Savings Plan. 14 ARTICLE IV NONQUALIFIED PLANS SECTION 4.1. Corporation Nonqualified Plans. From and after the Effective Time, Corporation shall continue to sponsor the Corporation SERP, the Corporation Pension REP and the Corporation Savings BEP (collectively, the "Corporation Nonqualified Plans") for the benefit of Corporation Post- Distribution Employees and Corporation Retirees who, prior to the Effective Time, were participants thereunder ("Corporation Nonqualified Plan Participants"). SECTION 4.2. IMS Health Nonqualified Plans. As of the Effective Time, IMS Health shall (i) adopt the IMS Health SERP, the IMS Health Pension REP and the IMS Health Savings BEP (collectively, the "IMS Health Nonqualified Plans") for the benefit of IMS Health Employees and IMS Health Retirees who were participants in the Corporation Nonqualified Plans immediately prior to the Effective Time ("IMS Health Nonqualified Plan Participants") and (ii) assume the Liabilities for benefits under the Corporation Nonqualified Plans with respect to such employees. SECTION 4.3. Joint and Several Liability. Corporation and IMS Health acknowledge joint and several liability under the Employee Benefits Agreement dated as of October 28, 1996 among D&B, Corporation and ACNielsen with respect to certain nonqualified plans maintained by D&B prior to such date. To the extent such joint and several liability is imposed on Corporation in respect of a liability assumed by IMS Health under this Agreement, Corporation shall be entitled to contribution from IMS Health for the amount of such liability imposed. To the extent joint and several liability is imposed on IMS Health in respect of a liability assumed by Corporation under this Agreement, IMS Health shall be entitled to contribution from Corporation for the amount of such liability imposed. SECTION 4.4. Third-Party Beneficiaries. It is the intention of the parties to this Agreement that the provisions of Section 4.3 shall be enforceable by (a) Corporation and IMS Health Nonqualified Plan Participants and (b) their respective surviving beneficiaries. ARTICLE V WELFARE PLANS SECTION 5.1. Employee Benefit Welfare Plans. Prior to the Effective Time, the Corporation shall continue to sponsor its Employee Benefit Welfare Plans for the benefit of Corporation Pre-Distribution Employees. Except as provided in Section 5.4 and Section 5.5 below, from and after the Effective Time, Corporation shall sponsor its Employee Benefit Welfare Plans solely for the benefit of Corporation Post-Distribution Employees, Corporation Disabled Employees and Corporation 15 Retirees. From and after Effective Time, IMS Health shall sponsor its Employee Benefit Welfare Plans solely for the benefit of IMS Health Employees, IMS Health Retirees and IMS Health Disabled Employees. Notwithstanding the foregoing, neither Corporation nor IMS Health shall have any obligation to sponsor any Employee Benefit Welfare Plan from or after Effective Time. SECTION 5.2. Dollar Limits. With respect to any medical and dental plan that may be sponsored by IMS Health after the Effective Time, IMS Health shall give effect, in determining any deductible, maximum out-of-pocket limitations and annual plan maximums, to claims incurred during 1998 prior to the Effective Time by IMS Health Employees, IMS Health Retirees and IMS Health Disabled Employees under similar plans maintained by Corporation (or any Affiliate thereof) for their benefit immediately prior to the Effective Time. SECTION 5.3. Severance Plans. The Corporation Group shall retain all Liabilities with respect to severance payments made or to be made to Corporation Retirees including any liabilities for severance payments under the Corporation Transition Plans. The IMS Health Group shall retain all Liabilities with respect to severance payments made or to be made to IMS Health Retirees including any liabilities for severance payments under the Corporation Transition Plans. For purposes of this Section 5.3, the term "severance payments" shall include any welfare benefit coverage provided under severance plans. SECTION 5.4. Flexible Spending Accounts. From the Effective Time until December 31, 1998, Corporation shall continue to sponsor its flexible spending accounts for all Corporation Pre-Distribution Employees; provided, however, that IMS Health shall cause all deductions from participant paychecks to be forwarded to Corporation within two business days thereafter; provided, further, that IMS Health shall reimburse Corporation for the administrative costs incurred with respect to IMS Health Employees. All unused funds remaining in the flexible spending accounts of IMS Health Employees after April 30, 1999 shall be paid to IMS Health. SECTION 5.5. Allocation of Liabilities. (a) The IMS Health Group shall retain responsibility for and continue to pay all claims relating to the Corporation self-insured Medical and Dental Plans with respect to claims incurred prior to the Effective Time, but which are paid after the Effective Time, by IMS Health Employees, IMS Health Disabled Employees, IMS Health COBRA participants, IMS Health Transitional Employees and IMS Health Retirees as well as their covered dependents. Any claims relating to the Corporation self-insured Medical and Dental Plans with respect to claims incurred prior to the Effective Time, but which are paid after the Effective Time, by Corporation Pre- Distribution Employees who are not IMS Health Employees will remain the responsibility of The Corporation Group. 16 (b) The Corporation Group shall retain responsibility for and continue to pay all premiums, expenses and benefits relating to the Corporation Employee Welfare Plans with respect to claims incurred (for self-insured plans) or premiums due (for insured plans) from and after the Effective Time by Corporation Post-Distribution Employees, Corporation Disabled Employees, Corporation COBRA participants and Corporation Retirees as well as their covered dependents. (c) The IMS Health Group shall retain responsibility for and continue to pay all premiums, expenses and benefits relating to the Employee Welfare Plans with respect to claims incurred (for self-insured plans) or premiums due (for insured plans) from and after the Effective Time by IMS Health Employees, IMS Health Disabled Employees, IMS Health COBRA participants, IMS Health Transitional Employees and IMS Health Retirees as well as their covered dependents. (d) For the purposes of this Section 5.5, a claim is deemed incurred when the services that are the subject of the claim are performed; in the case of life insurance, when the death occurs; in the case of long-term disability, when the disability occurs; and, in the case of a hospital stay, when the employee first enters the hospital. Notwithstanding the foregoing, claims incurred by any employee of a pre-Distribution Subsidiary of Corporation or their covered dependents under any welfare plan maintained by such Subsidiary solely for the benefit of its employees and their dependents shall, whether incurred prior to, on or after the Effective Time, be the sole responsibility and liability of that Subsidiary. (e) The Corporation Group shall be responsible for all COBRA coverage for any Corporation Retiree and his or her covered dependents who participated in a Corporation Employee Benefit Welfare Plan and who had or have a loss of health care coverage due to a qualifying event occurring prior to the Effective Time. The IMS Health Group shall be responsible for all COBRA coverage for any IMS Health Retiree and his or her covered dependents who participated in a Corporation Employee Benefit Welfare Plan and who had or have a loss of health care coverage due to a qualifying event occurring prior to the Effective Time. Notwithstanding the foregoing, a pre-Distribution Subsidiary of Corporation shall be responsible for all COBRA coverage for its former employees and covered dependents who participated in a plan maintained solely for their benefit whether the applicable event occurs prior to, on or after the Effective Time. COBRA coverage to which a Corporation Post-Distribution Employee is entitled as a result of a qualifying event occurring at or after the Effective Time shall be the responsibility of the Corporation Group. 17 SECTION 5.6. Allocation of the Corporation's Self- Insured Medical and Dental Plans Reserve for Claims Incurred But Not Yet Reported (IBNR). The IBNR reserve of which is estimated to be approximately $2.5 million as of June 30, 1998 will be allocated 61.9% to the Corporation Group and 38.1% to IMS Health. SECTION 5.7. Retiree Welfare Plans. The Corporation Group shall be responsible for providing retiree welfare benefits, where applicable, to Corporation Retirees and Corporation Post-Distribution Employees. The IMS Health Group shall be responsible for providing retiree welfare benefits, where applicable, to IMS Health Retirees and IMS Health Employees. ARTICLE VI EQUITY-BASED PLANS SECTION 6.1. Corporation Stock Options. Stock options awarded under the Corporation Stock Option Plans ("Corporation Stock Options") shall be treated as follows: (a) Corporation Post-Distribution Employees; and Corporation Disabled Employees. From and after the Effective Time, each unexercised Corporation Stock Option held by Corporation Post-Distribution Employees, Corporation Disabled Employees and the specified options held by the persons listed on Schedule 6.1 shall remain outstanding pursuant to the terms of the award agreements and the Corporation Stock Option Plans; provided, however, that from and after such time, each unexercised Corporation Stock Option shall be adjusted as follows: (i) the number of shares of Corporation Common Stock covered by the adjusted stock option shall be determined by (A) multiplying the number of shares of Corporation Common Stock covered by the Corporation Stock Option by a fraction, the numerator of which equals the average of high and low trading prices of a share of Corporation Common Stock for the five trading days immediately preceding the ex-dividend date, and the denominator of which equals the average of high and low trading prices of a share of Corporation Common Stock for the five trading days starting on the ex-dividend trading Date ("Corporation Ratio") and (B) rounding down the result to a whole number of shares and (ii) the exercise price of the adjusted stock option shall equal the original exercise price divided by the Corporation Ratio. (b) IMS Health Employees; IMS Health Transitional Employees; IMS Health Disabled Employees; and Walsh Optionees. As of the Effective Time, (i) each unexercised Corporation Stock Option held by IMS Health Employees, IMS Health Transitional Employees, IMS Health Disabled Employees and Walsh Optionees shall be cancelled except as provided in Schedule 6.1 and (ii) such individuals shall except as provided in Schedule 6.1 receive replacement stock options awarded under the IMS Health 18 Replacement Plans, which shall be adopted by IMS Health prior to the Effective Time. The number of shares of IMS Health Common Stock covered by each replacement stock option shall be determined by (i) multiplying the number of shares of Corporation Common Stock covered by the cancelled Corporation Stock Option by a fraction, the numerator of which equals the average of high and low trading prices of a share of Corporation Common Stock for the five trading days immediately preceding the ex-dividend date, and the denominator of which equals the average of high and low trading prices of an IMS Health Common Share for the five trading days starting on the regular way trading date ("IMS Health Ratio") and (ii) rounding down the result to a whole number of shares. The exercise price of each replacement stock option shall be determined by dividing the exercise price of the cancelled Corporation Stock Option by the IMS Health ratio. Except as otherwise provided in the IMS Health Replacement Plans, all other terms of the replacement stock options shall remain substantially identical to the terms of the cancelled Corporation Stock Options. (c) IMS Health Retirees; and Corporation Retirees. As of the Effective Time, (i) each unexercised Corporation Stock Option held by IMS Health Retirees and Corporation Retirees shall be adjusted in substantially the same manner as employees of the Corporation Group and (ii) IMS Health may offer to such IMS Health Retirees and Corporation Retirees, and the IMS Health Committee may determine, alternative adjustments or substitutions, provided such Retirees agree to surrender their adjusted Corporation Stock Options. SECTION 6.2. Corporation LSARs. All limited stock appreciation rights awarded under the Corporation Stock Option Plans ("Corporation LSARs") shall be adjusted or substituted (as the case may be) in substantially the same manner as the Corporation Stock Options described in Section 6.1 above. SECTION 6.3. Restricted Stock Plan. Restricted stock awarded under the Corporation Stock Option Plans ("Corporation Restricted Stock") and restricted stock received as a result of the Distribution ("IMS Health Restricted Stock") shall be treated as follows: (a) Corporation Post-Distribution Employees. As of Effective Time, IMS Health Restricted Stock credited to Corporation Post-Distribution Employees shall be adjusted pursuant to the Corporation Stock Option Plans and each such individual shall receive a number of additional shares of Corporation Restricted Stock, determined by multiplying the number of shares of forfeited IMS Health Restricted Stock by the Corporation Ratio and the reciprocal of the IMS Health Ratio, having the same terms as the Corporation Restricted Stock from which they arose. 19 (b) IMS Health Employees. As of the Effective Time, Corporation Restricted Stock and IMS Health Restricted Stock credited to IMS Health Employees and IMS Health Transitional Employees shall be forfeited and such individuals shall receive replacement IMS Health Restricted Stock equal to (i) the number of shares of forfeited IMS Health Restricted Stock plus (ii) the number of shares of forfeited Corporation Restricted Stock multiplied by the IMS Health Ratio and the reciprocal of the Corporation Ratio, such replacement shares of IMS Health Restricted Stock to have the same terms as the Corporation Restricted Stock from which they arose. SECTION 6.4. Executive Annual Incentive Plan. Outstanding awards under the Corporation Executive Annual Incentive Plan shall be treated as determined by the Corporation and IMS Health, respectively. SECTION 6.5. Corporation Employee Stock Purchase Plan. (a) From and after the Effective Time, Corporation shall continue to sponsor the Corporation Employee Stock Purchase Plan. (b) As of the Effective Time, IMS Health shall adopt the IMS Health Employee Stock Purchase Plan for the benefit of IMS Health Employees. SECTION 6.6. Allocation of Liabilities. The IMS Health Group shall assume all Liabilities with respect to awards granted to IMS Health Employees, IMS Health Retirees, Corporation Retirees and IMS Health Disabled Employees pursuant to the IMS Health Replacement Option Plan. The Corporation Group shall retain all other Liabilities with respect to awards granted pursuant to the Corporation Stock Option Plans (including, but not limited to, awards granted to Corporation Post-Distribution Employees). ARTICLE VII FOREIGN EMPLOYEE BENEFIT PLANS SECTION 7.1. Foreign Plans. Except as set forth in Schedule 7.1, Corporation and IMS Health shall continue to sponsor and retain liability for any Employee Benefits Plans maintained outside the United States with respect to their respective employees. ARTICLE VIII OTHER EMPLOYEE BENEFIT ISSUES SECTION 8.1. Employee Benefit Litigation Liabilities. Except as otherwise expressly provided in this agreement, the IMS Health Group shall assume all Employee Benefit Litigation Liabilities that are asserted by Corporation Pre-Distribution Employees who were employees of the IMS Health Group or Corporate 20 Staff Employees and the Corporation Group shall assume all Employee Benefit Litigation Liabilities that are asserted by all other Corporation Pre-Distribution Employees. SECTION 8.2. Indemnification. To the extent that any claim or litigation is asserted against Corporation by a Corporation Retiree who was a Corporate Staff Employee prior to the Distribution, Corporation shall be entitled to indemnification from IMS Health for the amount of any liability imposed. SECTION 8.3. Workers' Compensation. The Corporation Group shall retain all Liabilities relating to workers' compensation claims that were incurred (a) prior to the Effective Time with respect to Corporation Pre-Distribution Employees who were employed by the Corporation Group (not including the IMS Health Group) and Corporate Staff Employees allocated to Corporation as a result of the Distribution and (b) on and after the Effective Time with respect to Corporation Post-Distribution Employees. The IMS Health Group shall retain all Liabilities relating to workers' compensation claims that were incurred (a) prior to the Effective Time with respect to Corporation Pre- Distribution Employees who were employed by the IMS Health Group and Corporate Staff Employees allocated to IMS Health as a result of the Distribution and (b) on and after the Effective Time with respect to IMS Health Employees. For purposes of this paragraph, a claim is deemed incurred when the injury that is the subject of the claim occurs. SECTION 8.4. Cash Funding. Sufficient cash shall be left with Corporation upon the Distribution, based on a good faith estimate, to fund all severance (and related benefits) Liabilities of Corporate Staff Employees retained by Corporation Group pursuant to Section 5.3(a) hereof as well as the unfunded amounts payable by Corporation to Corporation Retirees hereunder who were Corporate Staff Employees (including the actuarially determined value of payments under non-qualified plans pursuant to Section 4.1 hereof and the value of retiree welfare benefits pursuant to Section 5.7 hereof). Such cash amount shall include amounts sufficient to fund all such payments as well as any related tax, social security and similar government-mandated payments and employee plan contributions, (i) without giving effect to any present-value calculation and (ii) with respect to severance (and related benefits) liabilities, net of tax benefits calculated at a 40% rate. If the estimated cash amounts result in an excess or deficit over or under the amounts actually expended by Corporation for such items, appropriate payments will be made between the parties to eliminate any such excess or deficit no later than December 31, 1998. 21 ARTICLE IX BENEFIT PLAN PARTICIPATION SECTION 9.1. Corporation Plans. Except as specifically provided herein, all IMS Health Employees shall cease participation in all Corporation Employee Benefit Plans as of the Effective Time. SECTION 9.2. IMS Health Plans. Except as provided in Section 5.7 herein, (a) with respect to any newly created Employee Benefit Plan sponsored by the IMS Health Group after the Effective Time, the IMS Health Group shall cause to be recognized (to the extent applicable) each IMS Health Employee's (i) past service with the Corporation Group to the extent recognized under similar plans maintained by the Corporation Group immediately prior to the Effective Time and (ii) accrued but unused vacation time and sick days, and (b) any IMS Health Employee who participated in a Corporation Employee Benefit Plan immediately prior to the Effective Time shall be entitled to immediate participation in a similar newly created Employee Benefit Plan sponsored by the IMS Health Group. SECTION 9.3. Subsequent Employer. Except as provided in Section 5.6 herein, if, during the one-year period following the Effective Time, a Corporation Post-Distribution Employee or a IMS Health Employee terminates employment with his or her employer and then immediately commences employment with the Corporation Group or the IMS Health Group, the subsequent employer shall cause to be recognized (to the extent applicable) such employee's past service with the Corporation Group or the IMS Health Group to the extent recognized under similar plans maintained by the prior employer. Notwithstanding the foregoing, no past service shall be recognized with respect to pension accruals under the defined benefit plans of the subsequent employer. SECTION 9.4. Right to Amend or Terminate. Except as specifically provided herein, nothing in this Agreement shall be construed or interpreted to restrict the Corporation Group's or the IMS Health Group's right or authority to amend or terminate any of their Employee Benefit Plans following the Effective Time. ARTICLE X ACCESS TO INFORMATION SECTION 10.1. Access to Information. Article IV of the Distribution Agreement shall govern the rights of the Corporation Group and the IMS Health Group with respect to access to information. The term "Records" in that Article shall be read to include all Employee Benefit Records. 22 ARTICLE XI INDEMNIFICATION SECTION 11.1. Indemnification. Article III of the Distribution Agreement shall govern the rights of the Corporation Group and the IMS Health Group with respect to indemnification. The term "Corporation Liabilities" in that Article shall be read to include all Liabilities assumed or retained by the Corporation Group pursuant to this Agreement. The term "IMS Health Liabilities" in that Article shall be read to include all Liabilities assumed or retained by the IMS Health Group pursuant to this Agreement. ARTICLE XII DISPUTE RESOLUTION SECTION 12.1. Dispute Resolution. Article VI of the Distribution Agreement shall govern the rights of the Corporation Group and the IMS Health Group with respect to dispute resolution. The term "Agreement Dispute" in that Article shall be read to include all Employee Benefit Disputes. ARTICLE XIII MISCELLANEOUS SECTION 13.1. Complete Agreement; Construction. This Agreement, including the Exhibits and Schedules (if any), and the Distribution Agreement shall constitute the entire agreement between the parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. In the event of any inconsistency between this Agreement and any Schedule hereto, the Schedule shall prevail. Other than Sections 2.7 and 4.5 and Article VI of the Distribution Agreement, which shall prevail over any inconsistent or conflicting provisions in this Agreement, notwithstanding any other provisions in this Agreement to the contrary, in the event and to the extent that there shall be a conflict between the provisions of this Agreement and the provisions of the Distribution Agreement, this Agreement shall control. SECTION 13.2. Ancillary Agreements. This Agreement is not intended to address, and should not be interpreted to address, the matters specifically and expressly covered by the Ancillary Agreements. SECTION 13.3. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other parties. 23 SECTION 13.4. Survival of Agreements. Except as otherwise contemplated by this Agreement, all covenants and agreements of the parties contained in this Agreement shall survive the Distribution Date. SECTION 13.5. Expenses. Except as otherwise set forth in this Agreement, the Distribution Agreement or any Ancillary Agreement, all costs and expenses incurred and for which invoices have been submitted on or prior to the Effective Time (whether or not paid on or prior to the Distribution Date) in connection with the preparation, execution, delivery and implementation of this Agreement, the Distribution Agreement, any Ancillary Agreement, the Information Statement (including any registration statement on Form 10 of which such Information Statement may be a part) and the Distribution and the consummation of the transactions contemplated thereby, as well as all administrative costs, fees or expenses relating to any Employee Benefit Plan, shall be charged to and paid by Corporation, provided that, if such expenses are not paid by Corporation prior to the Effective Time, they shall be charged to and paid by IMS Health. Except as otherwise set forth in this Agreement, the Distribution Agreement or any Ancillary Agreement, all such costs, fees and expenses incurred or for which invoices are submitted after the Effective Time shall be charged to and paid by IMS Health. Any amount or expense to be paid or reimbursed by any party hereto to any other party hereto shall be so paid or reimbursed promptly after the existence and amount of such obligation is determined and demand therefor is paid. SECTION 13.6. Notices. All notices and other communications hereunder shall be in writing and hand delivered or mailed by registered or certified mail (return receipt requested) or sent by any means of electronic message transmission with delivery confirmed (by voice or otherwise) to the parties at the following addresses (or at such other addresses for a party as shall be specified by like notice) and will be deemed given on the date on which such notice is received: To Nielsen Media Research, Inc.: 299 Park Avenue New York, NY 10171 Telecopy: (212) 708-6927 Attn: Chief Legal Officer To IMS Health Incorporated: 200 Nyala Farms Westport, CT 06880 Telecopy: (203) 222-4313 Attn: General Counsel 24 SECTION 13.7. Waivers. The failure of any party to require strict performance by any other party of any provision in this Agreement will not waive or diminish that party's right to demand strict performance thereafter of that or any other provision hereof. SECTION 13.8. Amendments. Subject to the terms of Section 13.11 hereof, this Agreement may not be modified or amended except by an agreement in writing signed by each of the parties hereto. SECTION 13.9. Assignment. This Agreement shall not be assignable, in whole or in part, directly or indirectly, by any party hereto without the prior written consent of the other parties hereto, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be void. SECTION 13.10. Successors and Assigns. The provisions to this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and permitted assigns. SECTION 13.11. Termination. This Agreement (including, without limitation, Section 4.4 and Article XI hereof) may be terminated and may be amended, modified or abandoned at any time prior to the Distribution by and in the sole discretion of Corporation without the approval of the shareholders of Corporation. In the event of such termination, no party shall have any liability of any kind to any other party or any other person. After the Distribution, this Agreement may not be terminated except by an agreement in writing signed by the parties; provided, however, that Section 4.4 and Article XI shall not be terminated or amended after the Distribution in respect of the third party beneficiaries thereto without the consent of such persons. SECTION 13.12. Subsidiaries. Each of the parties hereto shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Subsidiary of such party or by any entity that is contemplated to be a Subsidiary of such party on and after the Distribution Date. SECTION 13.13. Third Party Beneficiaries. Except as provided in Section 4.4 and Article XI, this Agreement is solely for the benefit of the parties hereto and their respective Subsidiaries and Affiliates and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement. SECTION 13.14. Title and Headings. Titles and headings to sections herein are inserted for the convenience of 25 reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. SECTION 13.15. Exhibits and Schedules. The Exhibits and Schedules, if any, shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein. SECTION 13.16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK. SECTION 13.17. Consent to Jurisdiction. Without limiting the provisions of Article XII hereof, each of the parties irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of the State of New York, New York County, and (b) the United States District Court for the Southern District of New York, for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each of the parties agrees to commence any action, suit or proceeding relating hereto either in the United States District Court for the Southern District of New York or if such suit, action or other proceeding may not be brought in such court for jurisdictional reasons, in the Supreme Court of the State of New York, New York County. Each of the parties further agrees that service of any process, summons, notice or document by U.S. registered mail to such party's respective address set forth above shall be effective service of process for any action, suit or proceeding in New York with respect to any matters to which it has submitted to jurisdiction in this Section 13.17. Each of the parties irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in (i) the Supreme Court of the State of New York, New York County, or (ii) the United States District Court for the Southern District of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. SECTION 13.18. Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. 26 SECTION 13.19. Governmental Notices; Cooperation. Notwithstanding anything in this Agreement to the contrary, all actions contemplated herein with respect to Employee Benefit Plans which are to be consummated pursuant to this Agreement shall be subject to such notices to, and/or approvals by, the Service or the PBGC (or any other governmental agency or entity) as are required or deemed appropriate by such Employee Benefit Plan's sponsor. Each of Corporation and IMS Health agrees to use its commercially reasonable efforts to cause all such notices and/or approvals to be filed or obtained, as the case may be. Each party hereto shall reasonably cooperate with the other parties with respect to any government filings, employee notices or any other actions reasonably necessary to maintain and implement the Employee Benefit Plans covered by this Agreement. SECTION 13.20. Further Assurances. From time to time, as and when reasonably requested by any other party hereto, each party hereto shall execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken, all such further or other actions as such other party may reasonably deem necessary or desirable to effect the purposes of this Agreement and the transactions contemplated hereunder. IN WITNESS WHEREOF, the parties have duly executed and entered into this Agreement, as of the date first above written. COGNIZANT CORPORATION by /s/ ROBERT E. WEISSMAN ------------------------------ Name: Robert E. Weissman Title: Chairman and Chief Executive Officer IMS HEALTH INCORPORATED by /s/ VICTORIA R. FASH -------------------------------- Name: Victoria R. Fash Title: Chief Operating Officer EX-10.4 5 AMENDED & RESTATED TRANSITION SERV AGREE AMENDED AND RESTATED TRANSITION SERVICES AGREEMENT This AMENDED AND RESTATED TRANSITION SERVICES AGREEMENT dated as of June 30, 1998, among THE DUN & BRADSTREET CORPORATION, a Delaware corporation (the "Corporation"), THE NEW DUN & BRADSTREET CORPORATION, a Delaware corporation ("New D&B"), COGNIZANT CORPORATION, a Delaware corporation ("Cognizant"), IMS HEALTH INCORPORATED, a Delaware corporation ("IMS Health"), ACNIELSEN CORPORATION, a Delaware corporation ("ACNielsen"), and GARTNER GROUP, INC., a Delaware Corporation ("Gartner") amends and restates in its entirety the Transition Services Agreement dated as of October 28, 1996 (the "1996 Transition Services Agreement") among the Corporation, Cognizant and ACNielsen. W I T N E S S E T H ------------------- WHEREAS, pursuant to a Distribution Agreement dated as of October 28, 1996 (the "1996 Distribution Agreement") among the Corporation, Cognizant and ACNielsen, each party agreed to provide to the other parties certain transitional, administrative and support services, including insurance and risk management services, on the terms set forth in the 1996 Transition Services Agreement and the Appendix thereto. WHEREAS, each of the Corporation, Cognizant and ACNielsen desires to amend and restate the 1996 Transition Services Agreement as set forth in this Agreement and to include New D&B, IMS Health and Gartner as parties hereto; and each of New D&B, IMS Health and Gartner desires to become a party to this Agreement. NOW, THEREFORE, in consideration of the agreements, covenants and provisions in this Agreement and intending to be legally bound hereby, each of the Corporation, New D&B, Cognizant, IMS Health, ACNielsen and Gartner mutually covenant and agree as follows: ARTICLE I SERVICES PROVIDED 1.1 Transition Services. New D&B (the "Provider") shall provide comprehensive insurance and risk management services to the Corporation, Cognizant, IMS Health, ACNielsen and Gartner (each a "Recipient"; collectively, the "Recipients"). Such services shall include risk identification, development of appropriate insurance programs, loss prevention initiatives, accounting for premiums, deductibles, retentions and defense costs, claims management (including coordination with insurance carriers), the collection and distribution of insurance proceeds and such other services as the Corporation's Risk 2 Management staff has been providing to the Corporation, Cognizant and ACNielsen as of the date hereof (all such services, collectively, the "Transition Services"). 1.2 Personnel. In providing the Transition Services, the Provider as it deems necessary or appropriate in its sole discretion, may (i) use the personnel of such Provider or its Affiliates, and (ii) employ the services of third parties to the extent such third party services are routinely utilized to provide similar services to other businesses of such Provider or are reasonably necessary for the efficient performance of any of such Transition Services. Each Recipient may retain at its own expense its own consultants and other professional advisers. 1.3 Representatives. Each of the Corporation, New D&B, Cognizant, IMS Health, ACNielsen and Gartner shall nominate a representative to act as its primary contact person for the provision of all of the Transition Services (collectively, the "Primary Coordinators"). The initial Primary Coordinators shall be Frank Colarusso, Treasurer, for the Corporation, John Riley, Director of Risk Management, for New D&B, Stuart Goldshein, Controller, for Cognizant, Matthew Friedman, Assistant Treasurer, for IMS Health, John Forster for ACNielsen and Andrea Tarbox for Gartner. Each party may treat an act of a Primary Coordinator of another party as being authorized by such other party without inquiring behind such act or ascertaining whether such Primary Coordinator had authority to so act. The Provider and the relevant Recipient of a Transition Service shall advise each other in writing of any change in the Primary Coordinators for such Transition Service, setting forth the name of the Primary Coordinator to be replaced and the name of the replacement, and certifying that the replacement Primary Coordinator is authorized to act for such party in all matters relating to this Agreement. Each of the Corporation, New D&B, Cognizant, IMS Health, ACNielsen and Gartner agree that all communications relating to the provision of the Transition Services shall be directed to the Primary Coordinators. 1.4 Level of Transition Services. (a) The Provider shall perform the Transition Services for which it is responsible hereunder following commonly accepted standards of care in the industry and exercising the same degree of care as it exercises in performing the same or similar services for its own account as of the date of this Agreement, with priority equal to that provided to its own businesses or those of any of its Affiliates, Subsidiaries or divisions. Nothing in this Agreement shall require the Provider to favor the businesses of any Recipient over its own businesses or those of any of its Affiliates, Subsidiaries or divisions. (b) The Provider shall not be required to provide any Recipient of such Transition Services with extraordinary levels of Transition Services, special studies, training, or the like or the advantage of systems, equipment, facilities, training, or improvements procured, obtained or made by the Provider. 3 (c) In addition to being subject to the terms and conditions of this Agreement for the provision of the Transition Services, each Recipient agrees that the Transition Services provided by third parties shall be subject to the terms and conditions of any agreements between the Provider and such third parties. The Provider shall consult with the relevant Recipient concerning the terms and conditions of any such agreements to be entered into, or proposed to be entered into, with third parties after the date hereof. 1.5 Limitation of Liability. In the absence of gross negligence or willful misconduct on the part of the Provider, and whether or not the Provider is negligent, such Provider shall not be liable for any claims, liabilities, damages, losses, costs, expenses (including, but not limited to, settlements, judgments, court costs and reasonable attorneys' fees), fines and penalties, arising out of any actual or alleged injury, loss or damage of any nature whatsoever in providing or failing to provide Transition Services for which it is responsible hereunder to the Recipient of such Transition Services. Notwithstanding anything to the contrary contained herein, in the event the Provider commits an error with respect to or incorrectly performs or fails to perform any Transition Service, at the relevant Recipient's request, the Provider shall use reasonable efforts and good faith to correct such error, re-perform or perform such Transition Service at no additional cost to such Recipient; provided, that the Provider shall have no obligation to recreate any lost or destroyed data to the extent the same cannot be cured by the re-performance of the Transition Service in question. 1.6 Force Majeure. Any failure or omission by a party in the performance of any obligation under this Agreement shall not be deemed a breach of this Agreement or create any liability, if the same arises from any cause or causes beyond the control of such party, including, but not limited to, the following, which, for purposes of this Agreement shall be regarded as beyond the control of each of the parties hereto: acts of God, fire, storm, flood, earthquake, governmental regulation or direction, acts of the public enemy, war, rebellion, insurrection, riot, invasion, strike or lockout; provided, however, that such party shall resume the performance whenever such causes are removed. Notwithstanding the foregoing, if such party cannot perform under this Agreement for a period of forty-five (45) days due to such cause or causes, the affected party may terminate the Agreement with the defaulting party by providing written notice thereto. 1.7 Modification of Procedures. The Provider may make changes from time to time in its standards and procedures for performing the Transition Services for which it is responsible hereunder. Notwithstanding the foregoing sentence, unless required by law, the Provider shall not implement any substantial changes affecting a Recipient of the relevant Transition Services unless: (a) the Provider has furnished such Recipient notice (which shall be the same notice the Provider shall provide its own businesses) thereof; 4 (b) the Provider changes such procedures for its own businesses at the same time; and (c) the Provider gives such Recipient a reasonable period of time for such Recipient (i) to adapt its operations to accommodate such changes or (ii) to reject the proposed changes. In the event such Recipient fails to accept or reject a proposed change on or before a date specified in such notice of change, such Recipient shall be deemed to have accepted such change. In the event such Recipient rejects a proposed change but does not terminate this Agreement, such Recipient agrees to pay any charges resulting from the Provider's need to maintain different versions of the same systems, procedures, technologies, or services or resulting from requirements of third party vendors or suppliers. 1.8 No Obligation to Continue to Use Services. No Recipient shall have any obligation to continue to use the Transition Services and may terminate the Transition Services that the Provider is providing to such Recipient by giving the Provider 180 days notice thereof. 1.9 Provider Access. To the extent reasonably required for personnel of the Provider to perform the Transition Services for which the Provider is responsible hereunder, the Recipient of such Transition Services shall provide personnel of the Provider with access to its equipment, office space, plants, telecommunications and computer equipment and systems, and any other areas and equipment. 1.10 Performance Reviews. The Primary Coordinators for each Recipient shall meet during the fourth quarter of each calendar year with the Primary Coordinator for the Provider for the purpose of reviewing the performance of the Provider's Risk Management staff. Any disputes relating to the quality of such performance shall be brought to the attention of the respective Chief Financial Officers (or person holding an equivalent title) of the Provider and the Recipients. ARTICLE II COMPENSATION 2.1 Consideration. As consideration for the Transition Services, each Recipient of Transition Services shall pay to the Provider a portion of the costs and expenses incurred by the Provider relating to the Risk Management staff as follows: each Recipient shall pay (i) a base charge of $50,000 per year plus (ii) a proportionate share of any additional costs and expenses (i.e., not covered by the total base charge) based on such Recipient's proportion of total revenue as a percentage of the aggregate total revenue of all parties to this Agreement. For purposes of calculating any additional amount payable pursuant to clause (ii) of the preceding sentence, a party's revenue shall be that set forth on its audited financial statements for the most recent fiscal year-end. Such costs and expenses shall be calculated in accordance with generally accepted accounting principles applied 5 consistently and billed in twelve monthly installments. Notwithstanding the foregoing, however, any services provided by the Provider's Risk Management staff to the Provider or the Recipients that are not in the ordinary course (all such services being "extraordinary services") shall be borne by the company or companies for whom such extraordinary service was provided. No extraordinary service shall be provided without the specific approval of the company to be charged. The costs and expenses to be borne by each Recipient will be in accordance with the annual Risk Management budget to be provided by the Primary Coordinator for the Provider during the preceding calendar year by May 1 of each year. The Risk Management budget may increase each year in an amount equal to 5% over the prior year's budget; increases in excess of 5% must be approved by the respective Primary Coordinators for each Recipient. 2.2 Invoices. After the end of each month, the Provider, together with its Affiliates or Subsidiaries providing Transition Services will submit one invoice to the Recipient of such Transition Services for all Transition Services provided to such Recipient and its Subsidiaries by the Provider during such month. Such monthly invoices shall be issued no later than the fifteenth day of each succeeding month. Each invoice shall include a summary list of the previously agreed upon Transition Service for which there are fixed dollar fees, together with documentation supporting each of the invoiced amounts that are not covered by the fixed fee agreements. The total amount set forth on such summary list and such supporting detail shall equal the invoice total, and will be provided under separate cover apart from the invoice. All invoices shall be sent to the attention of the Primary Coordinator of the applicable Recipient at the address set forth in Section 6.5 hereof or to such other address as such Recipient shall have specified by notice in writing to the Provider. 2.3 Payment of Invoices. (a) Payment of all invoices in respect of Transition Services shall be made by check or electronic funds transmission in U.S. Dollars, without any offset or deduction of any nature whatsoever, within thirty (30) days of the invoice date. All payments shall be made to the account designated by the Provider to the relevant Recipient, with written confirmation of payment sent by facsimile to the Primary Coordinator or other person designated thereby. (b) If any payment is not paid when due, the Provider shall have the right, without any liability to any Recipient of Transition Services, or anyone claiming by or through such Recipient, upon five days' notice, to cease providing any or all of the Transition Services provided by the Provider to such Recipient, which right may be exercised by the Provider in its sole and absolute discretion. 6 ARTICLE III CONFIDENTIALITY 3.1 Obligation. Each party and its Subsidiaries shall not use or permit the use of (without the prior written consent of the other parties) and shall keep, and shall cause its consultants and advisors to keep, confidential all information concerning the other parties received pursuant to or in connection with this Agreement. Additionally, any information which is identified by a party as being "highly sensitive" (in connection with a contemplated acquisition or otherwise) shall not be disclosed outside of the Provider's Risk Management staff. 3.2 Care and Inadvertent Disclosure. With respect to any confidential information, each party agrees as follows: (a) it shall use the same degree of care in safeguarding said information as it uses to safeguard its own information which must be held in confidence; and (b) upon the discovery of any inadvertent disclosure or unauthorized use of said information, or upon obtaining notice of such a disclosure or use from any other party, it shall take all necessary actions to prevent any further inadvertent disclosure or unauthorized use, and, subject to the provisions of Section 1.5 above, each such other party shall be entitled to pursue any other remedy which may be available to it. ARTICLE IV TERM AND TERMINATION 4.1 Term. This Agreement shall become effective on June 30, 1998 and shall remain in force for a period of three years (or in the case of ACNielsen, IMS Health and Gartner until November 1, 1999). After such initial period, this Agreement shall automatically be renewed for successive one-year periods as to each party unless such party provides at least 180-days notice to the other parties of its intention not to renew; provided that this Agreement may be terminated at such other times as are set forth in Sections 1.6, 1.8 and 4.3. 4.2 Reserved. 4.3 Default. If any party (hereafter called the "Defaulting Party") shall fail to perform or default in the performance of any of its obligations under this Agreement (other than a payment default), the party entitled to the benefit of such performance (hereinafter referred to as a "Non-Defaulting Party") may give written notice to the Defaulting Party 7 specifying the nature of such failure or default and stating that the Non-Defaulting Party intends to terminate this Agreement with respect to the Defaulting Party if such failure or default is not cured within fifteen days of such written notice. If any failure or default so specified is not cured within such fifteen day period, the Non-Defaulting Party may elect to immediately terminate this Agreement with respect to the Defaulting Party; provided, however, that if the failure or default relates to a dispute contested in good faith by the Defaulting Party, the Non-Defaulting Party may not terminate this Agreement pending the resolution of such dispute in accordance with Article V hereof. Such termination shall be effective upon giving a written notice of termination from the Non-Defaulting Party to the Defaulting Party and shall be without prejudice to any other remedy which may be available to the Non-Defaulting Party against the Defaulting Party. 4.4 Termination of Obligations. Each Recipient specifically agrees and acknowledges that all obligations of the Provider to provide the Transition Services shall immediately cease, with respect to such Recipient, upon the termination of this Agreement as to such Recipient. Upon the cessation of the Provider's obligation to provide any Transition Service to a Recipient, such Recipient shall immediately cease using, directly or indirectly, the Transition Services (including, without limitation, any and all software of the Provider or third party software provided through the Provider, telecommunications services or equipment, or computer systems or equipment). 4.5 Survival of Certain Obligations. Without prejudice to the survival of the other agreements of the parties, Sections 1.5, 2.1 (with respect to services provided prior to the effective time of the termination), 3.1, 3.2, 4.4, 4.5, 5.1, 6.10, 6.13 and 6.14 shall survive any termination of this Agreement. ARTICLE V DISPUTE RESOLUTION 5.1 Dispute Resolution. Any disputes arising out of or in connection with this Agreement shall be settled in accordance with the dispute resolution mechanisms set forth in Article VI of the 1996 Distribution Agreement, with each of the parties hereto being deemed a party to that agreement for this purpose. ARTICLE VI MISCELLANEOUS 6.1 Complete Agreement; Construction. This Agreement shall constitute the entire agreement between the parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. 8 6.2 Other Agreements. This Agreement is not intended to address, and should not be interpreted to address, the matters specifically and expressly covered by other agreements between or among the parties. 6.3 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts has been signed by each of the parties and delivered to the other parties. 6.4 Notices. All notices and other communications hereunder shall be in writing and hand delivered or mailed by registered or certified mail (return receipt requested) or sent by any means of electronic message transmission with delivery confirmed (by voice or otherwise) to the parties at the following addresses (or at such other addresses for a party as shall be specified by like notice) and will be deemed given on the date on which such notice is received: To the Corporation: R.H. Donnelley Corporation One Manhattanville Road Purchase, New York 10577 Telecopy: (914) 933-6899 Attn: Treasurer With a copy to: R.H. Donnelley Corporation One Manhattanville Road Purchase, New York 10577 Telecopy: (914) 933-6899 Attn: General Counsel To New D&B: The Dun & Bradstreet Corporation 220 East 42 Street New York, New York 10017 Telecopy: (212) 883-3403 Attn: Director of Risk Management 9 With a copy to: The Dun & Bradstreet Corporation One Diamond Hill Road Murray Hill, New Jersey 07974 Telecopy: (908) 665-5803 Attn: Chief Legal Counsel To Cognizant: Nielsen Media Research, Inc. 299 Park Avenue New York, New York 10171 Telecopy: (212) 708-7504 Attn: Controller With a copy to: Nielsen Media Research, Inc. 299 Park Avenue New York, New York 10171 Telecopy: 212-708-6927 Attn: Chief Legal Officer To IMS Health: IMS Health Incorporated 200 Nyala Farms Westport, Connecticut 06880 Telecopy: (203) 222-4201 Attn: Treasurer With a copy to: IMS Health Incorporated 200 Nyala Farms Westport, Connecticut 06880 Telecopy: (203) 222-4201 Attn: General Counsel 10 To ACNielsen: ACNielsen Corporation 177 Broad Street Stamford, Connecticut 06901 Telecopy: (203) 961-3177 Attn: John Forster With a copy to: ACNielsen Corporation 177 Broad Street Stamford, Connecticut 06901 Telecopy: (203) 961-3179 Attn: General Counsel To Gartner: Gartner Group, Inc. P.O. Box 10212 56 Top Gallant Road Stamford, Connecticut 06904 Telecopy: (203) 316-6525 Attn: Andrea Tarbox With a copy to: Gartner Group, Inc. P.O. Box 10212 56 Top Gallant Road Stamford, Connecticut 06904 Telecopy: (203) 316-6525 Attn: General Counsel 6.5 Waivers. The failure of any party to require strict performance by any other party of any provision in this Agreement will not waive or diminish that party's right to demand strict performance thereafter of that or any other provision hereof. 6.6 Amendments. This Agreement may not be modified or amended except by an agreement in writing signed by each of the parties hereto. 6.7 Assignment. This Agreement may not be assigned by any party, other than to an Affiliate of such party or pursuant to a corporate reorganization or merger, without 11 the consent of the other party. Any assignment in contravention of this Section 6.7 shall be void. 6.8 Successors and Assigns. The provisions to this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and permitted assigns. 6.9 Subsidiaries. Each of the parties hereto shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Subsidiary of such party or by any entity that is contemplated to be a Subsidiary of such party on and after the applicable Distribution Date. 6.10 Third Party Beneficiaries. This Agreement is solely for the benefit of the parties hereto and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement. 6.11 Title and Headings. Titles and headings to sections herein are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 6.12 Reserved. 6.13 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK. 6.14 Consent to Jurisdiction. Each of the parties irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of the State of New York, New York County, and (b) the United States District Court for the Southern District of New York, for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each of the parties agrees to commence any action, suit or proceeding relating hereto either in the United States District Court for the Southern District of New York or if such suit, action or other proceeding may not be brought in such court for jurisdictional reasons, in the Supreme Court of the State of New York, New York County. Each of the parties further agrees that service of any process, summons, notice or document by U.S. registered mail to such party's respective address set forth above shall be effective service of process for any action, suit or proceeding in New York with respect to any matters to which it has submitted to jurisdiction in this Section 6.14. Each of the parties irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in (i) the Supreme Court of the State of New York, New York County, or (ii) the United States District 12 Court for the Southern District of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. 6.15 Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. 6.16 Laws and Government Regulations. Each Recipient shall be responsible for (i) compliance with all laws and governmental regulations affecting its businesses and (ii) any use such Recipient may make of the Transition Services to assist it in complying with such laws and governmental regulations. While the Provider shall not have any responsibility for the compliance by the Recipient of such Transition Services with such laws and regulations, the Provider agrees to use reasonable efforts to cause the Transition Services to be provided by such party to be designed in such manner that such Transition Services shall be able to assist the Recipient of such Transition Services in complying with applicable legal and regulatory responsibilities. 6.17 Relationship of Parties. Nothing in this Agreement shall be deemed or construed by the parties or any third party as creating the relationship of principal and agent, partnership or joint venture between the parties, it being understood and agreed that no provision contained herein, and no act of the parties, shall be deemed to create any relationship between the parties other than the relationship of buyer and seller of services nor be deemed to vest any rights, interests or claims in any third parties. The parties do not intend to waive any privileges or rights to which they may be entitled. 6.18 Definitions. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the applicable Distribution Agreement governing the relevant parties. IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated Transition Services Agreement to be executed the day and year first above written. THE DUN & BRADSTREET CORPORATION By: /s/ Frank R. Noonan ------------------------------- Name: Frank R. Noonan Title: Senior Vice President THE NEW DUN & BRADSTREET CORPORATION By: /s/ Volney Taylor ------------------------------- Name: Volney Taylor Title: Chairman and Chief Executive Officer COGNIZANT CORPORATION By: /s/ Kenneth Siegel ------------------------------- Name: Kenneth Siegel Title: Senior Vice President, General Counsel and Secretary IMS HEALTH INCORPORATED By: /s/ Kenneth Siegel ------------------------------- Name: Kenneth Siegel Title: Senior Vice President, General Counsel and Secretary ACNIELSEN CORPORATION By: /s/ John A. Forster ------------------------------- Name: John A. Forster Title: Vice President and Treasurer GARTNER GROUP, INC. By: /s/ George C. Roy, Jr. ------------------------------- Name: George C. Roy, Jr. Title: Senior Vice President - Finance EX-10.5 6 LETTER TO MS. HENRY AND MR. DOPPELT IMS Health Incorporated 200 Nyala Farms Westport, CT 06880 June 29, 1998 Nancy Henry, Esq. The Dun & Bradstreet Corporation One Diamond Hill Road Murray Hill, NJ 07974 Earl Doppelt, Esq. ACNielsen Corporation 177 Broad Street Stamford, CT 06901 Dear Ms. Henry and Mr. Doppelt: Reference is made to the Distribution Agreement (the "1996 Distribution Agreement"), dated as of October 28, 1996, among Cognizant Corporation ("Cognizant"), The Dun & Bradstreet Corporation ("D&B") and ACNielsen Corporation ("ACNielsen"). Cognizant has announced its intention to separate into two separate companies through a distribution (the "IMS HEALTH Distribution") to its stockholders of all of the shares of common stock of its subsidiary IMS Health Incorporated ("IMS HEALTH"). In Section 8.9(c) of the 1996 Distribution Agreement, Cognizant agreed not to make a distribution such as the IMS HEALTH Distribution unless it caused the distributed entity to undertake to both D&B and ACNielsen to be jointly and severally liable for all Cognizant Liabilities (as defined in the 1996 Distribution Agreement). Therefore, in accordance with Section 8.9(c) of the 1996 Distribution Agreement and intending to be legally bound hereby, from and after the effective time of the IMS HEALTH Distribution, IMS HEALTH undertakes to each of D&B and ACNielsen to be jointly and severally liable with Cognizant for all Cognizant Liabilities under the 1996 Distribution Agreement. Very truly yours, IMS HEALTH INCORPORATED By: /s/ Kenneth S. Siegel -------------------------------- Name: Kenneth S. Siegel Title: Senior Vice President, General Counsel and Secretary EX-27 7 FDS
5 1000 6-Mos Dec-31-1998 Jun-30-1998 702,550 3,700 261,267 4,590 30,977 1,036,495 357,514 182,210 1,966,068 469,889 0 0 0 1,676 1,146,182 1,966,068 0 511,464 0 541,748 0 0 412 42,391 36,857 5,534 42,093 0 0 47,627 .29 .28
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